Castillo v. General Motors LLC (In Re Motors Liquidation Co.) , 578 F. App'x 43 ( 2014 )

13-4223-bk
Castillo v. General Motors LLC
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST
SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals
2 for the Second Circuit, held at the Thurgood Marshall United
3 States Courthouse, 40 Foley Square, in the City of New York,
4 on the 19th day of September, two thousand fourteen.
5
6 PRESENT: DENNIS JACOBS,
7 CHRISTOPHER F. DRONEY,
8 Circuit Judges,
9 LEWIS A. KAPLAN,*
10 District Judge.
11
12 - - - - - - - - - - - - - - - - - - - -X
13 In the Matter of: Motors Liquidation
14 Company,
15 Debtor.
16
17 Kelly Castillo, Nichole Brown, Brenda
18 Alexis Digiandomenico, Valerie Evans,
19 Barbara Allen, Stanley Ozarowski,
20 Donna Santi,
21 Appellants,
22
23 -v.- 13-4223-bk
*
Judge Lewis A. Kaplan, of the United States District
Court for the Southern District of New York, sitting by
designation.
1
1 General Motors LLC,
2 Appellee.
3 - - - - - - - - - - - - - - - - - - - -X
4
5 FOR APPELLANTS: ROBERT W. SCHMIEDER II (with
6 Mark L. Brown on the brief), SL
7 Chapman LLC, St. Louis, MO.
8
9 FOR APPELLEE: ARTHUR JAY STEINBERG (with
10 Gregory R. Oxford, Isaacs Clouse
11 Crose & Oxford LLP, Torrance, CA
12 on the brief), King & Spalding
13 LLP, New York, NY.
14
15 Appeal from a judgment of the United States District
16 Court for the Southern District of New York (Furman, J.).
17
18 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
19 AND DECREED that the judgment of the district court be
20 AFFIRMED.
21
22 This appeal arises out of an adversary proceeding
23 related to the Chapter 11 bankruptcy of Motors Liquidation
24 Company, formerly known as General Motors (“Old GM”). After
25 Old GM filed for bankruptcy, General Motors LLC (“New GM”)
26 purchased the majority of Old GM’s assets pursuant to
27 Section 363 of the Bankruptcy Code. Kelly Castillo et al.
28 (“Castillo”) appeal from the judgment of the United States
29 District Court for the Southern District of New York
30 (Furman, J.), affirming the order of the United States
31 Bankruptcy Court for the Southern District of New York
32 (Gerber, J.) holding that New GM did not assume liability
33 for a settlement reached between Castillo and Old GM
34 relating to a class action lawsuit filed in the Eastern
35 District of California. We assume the parties’ familiarity
36 with the underlying facts, the procedural history, and the
37 issues presented for review.
38
39 Castillo’s class action against Old GM alleged that the
40 transmissions of some 2002-2005 Saturn Vues and 2003-2004
41 Saturn Ions were defectively designed and had high failure
42 rates, and sought compensation for transmissions that failed
43 after the warranty period. The class pleaded claims for
44 relief based on alleged violations of state consumer
45 protection laws, breach of express warranty, breach of
46 implied warranty, and unjust enrichment. In settlement, Old
2
1 GM agreed to pay for repair of transmissions that
2 malfunctioned after the standard repair warranty and to pay
3 attorneys’ fees.
4
5 The Sale Agreement between Old GM and New GM specified
6 the “Assumed Liabilities” that would be taken on by New GM
7 as follows: “all Liabilities arising under express written
8 warranties of Sellers that are specifically identified as
9 warranties and delivered in connection with the sale of new,
10 certified used, or pre-owned vehicles or new or
11 remanufactured motor vehicle parts and equipment.”
12
13 “It is well established that ‘[s]ettlement agreements
14 are contracts and must therefore be construed according to
15 general principles of contract law.’” Collins v. Harrison-
16 Bode, 303 F.3d 429, 433 (2d Cir. 2002). “[P]rinciples of
17 state law govern the interpretation of contractual
18 provisions in bankruptcy.” In re Delta Air Lines, Inc., 608
19 F.3d 139, 146 (2d Cir. 2010). Under New York law, “[t]he
20 threshold question in a dispute over the meaning of a
21 contract is whether the contract terms are ambiguous. . . .
22 [T]he meaning of a contract that is unambiguous is a
23 question of law for the court to decide. . . . [T]he
24 meaning of an ambiguous contract where there is [extrinsic]
25 evidence is a question of fact for the factfinder.” Revson
26 v. Cinque & Cinque, P.C., 221 F.3d 59, 66 (2d Cir. 2000).
27 We review de novo a district court's determination of
28 whether a contract is ambiguous, id., and we review a
29 district court's interpretation of an ambiguous contract for
30 clear error, Tourangeau v. Uniroyal, Inc., 101 F.3d 300, 306
31 (2d Cir. 1996).
32
33 The Bankruptcy Court concluded that the Sale Agreement
34 is ambiguous and, upon consideration of extrinsic evidence,
35 found that the settlement agreement was not an Assumed
36 Liability. The District Court agreed, albeit finding
37 ambiguity in a different aspect of the Sale Agreement.
38
39 The “plain and ordinary meaning” of the phrase
40 “arising under” makes clear that Old GM’s obligations under
41 the settlement agreement do not arise under any express
42 warranty and are therefore not an Assumed Liability of New
43 GM. Fed. Ins. Co. v. Am. Home Assurance Co., 639 F.3d 557,
44 568 (2d Cir. 2011) (finding the phrase “arising out of”
45 unambiguous and observing that “[t]he New York Court of
46 Appeals has held that the phrase ‘arising out of’ is
3
1 ‘ordinarily understood to mean originating from, incident
2 to, or having connection with’”).
3
4 Even if there were some ambiguity in the Sale
5 Agreement, the extrinsic evidence clearly shows that the
6 settlement was not intended to be an Assumed Liability of
7 New GM.
8
9 First, “[l]awyers for [Old] GM and Auto Task Force
10 representatives understood and agreed that the goal was to
11 leave as many liabilities behind with Old GM and to take
12 those only that were commercially necessary along to New
13 GM.” In fact, the settlement was specifically identified
14 during a discussion between Old GM and the Auto Task Force
15 “as an example of a litigation liability that would be ‘left
16 behind’ with Old GM.”
17
18 Second, when responding to concerns raised by state
19 attorneys general, New GM agreed to take on liabilities
20 under state Lemon Laws but no other additional liabilities
21 so as to avoid “assuming the entire class action docket.”
22
23 Third, as the Bankruptcy Court concluded, the Sale
24 Order is “fairly strong evidence” in favor of New GM because
25 it provides that New GM “is assuming the obligations of [Old
26 GM] pursuant to and subject to conditions and limitations
27 contained in their express written warranties, which were
28 delivered in connection with the sale of vehicles and
29 vehicle components.” The obligations assumed in connection
30 with the settlement were not undertaken in warranties
31 “delivered in connection” with the Saturns.
32
33 Finally, the Sale Procedure Order did not list the
34 settlement as an Assumable Executory Contract to be assigned
35 to New GM.
36
37 For the foregoing reasons, and finding no merit in
38 Castillo’s other arguments, we hereby AFFIRM the judgment of
39 the district court.
40
41 FOR THE COURT:
42 CATHERINE O’HAGAN WOLFE, CLERK
43
4