Lender Liability

Experts on New ABI Podcast Examine the Second Circuit's Ruling on GM Successor Liability and Ramifications for Future "Free and Clear" 363 Sales

Alexandria, Va. — The latest American Bankruptcy Institute (ABI) podcast features ABI Editor-at-Large Bill Rochelle talking with Prof. Stephen Lubben of Seton Hall University School of Law about the ruling by the U.S. Court of Appeals for the Second Circuit denying General Motors’ escape from liability for ignition-switch defects that generated nationwide litigation. Prof. Lubben followed the case and has written extensively on GM’s bankruptcy on both Credit Slips and the New York Times DealBook blog.

Old GM, named General Motors Corp. before bankruptcy, was in severe financial distress and likely would have liquidated absent financial assistance from the federal government before and after its chapter 11 filing in June 2009. In the bankruptcy court’s 2009 sale approval order, New GM agreed to assume responsibility only for specified liabilities, including warranty claims, accidents occurring after the sale, and Lemon Law claims. Otherwise, the sale was supposedly free and clear of claims, thus broadly immunizing New GM from successor liability claims. In early 2014 – after plan confirmation in 2011 – New GM initiated recalls of millions of vehicles. It was later discovered that Old GM had known about a defect in its ignition switches for several years before bankruptcy. The bankruptcy court had held that pre-closing accident claims and claims for economic loss were barred by the sale order. The Second Circuit reversed that holding on due process grounds.

"The one clear lesson from this case is that if you want to have very good, clean 363 sale, you really have to push your client, especially on the debtor's side, to make sure that they are disclosing everything that they need to be disclosing," Lubben said.

Click here to listen to the podcast.

ABI’s podcast series features interviews with important figures or experts discussing timely bankruptcy topics or issues. ABI podcasts are freely available to members, the public and the press, and can be accessed on ABI’s Newsroom website.


ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 12,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/calendar-of-events