In re Motors Liquidation Co.
2015 WL 3577906, 533 B.R. 46, 2015 Bankr. LEXIS 1874 (2015)
Rule of Law:
A party who has unequivocally and completely assigned all rights, title, and interest in a legal claim to another entity no longer has standing to seek relief concerning that claim, as such an assignment extinguishes the assignor's rights and creates a risk of double recovery.
Facts:
- In October 2005, Adam Powledge and his four children died in an accident involving a 2004 Chevy Malibu.
- In September 2007, Doris Phillips (then Doris Powledge), Adam Powledge's widow, filed a lawsuit against Old GM relating to the accident.
- Old GM filed for Chapter 11 bankruptcy, which subjected Mrs. Phillips' lawsuit to the automatic stay, and her claims were classified as prepetition claims.
- Mrs. Phillips received notice of the 363 sale and the bar date, then filed a proof of claim (#44614) for $250 million against Old GM.
- In August 2010, Mrs. Phillips and Old GM settled her action, allowing her claim for approximately $2.7 million and providing that she waived any and all further claims against Old GM or its successors.
- Eleven days after the settlement, Mrs. Phillips sold and irrevocably assigned all her rights, title, and interest in her allowed claim to Dover Master Fund II (a hedge fund).
- Dover Fund subsequently received several distributions from Old GM's General Unsecured Creditors Trust on account of Mrs. Phillips' assigned claim.
Procedural Posture:
- Doris Phillips filed a lawsuit against Old GM in the 10th Judicial Court, Galveston County, Texas, alleging wrongful death related to a 2005 car accident.
- Old GM filed for Chapter 11 bankruptcy, which automatically stayed Mrs. Phillips' state court lawsuit.
- Mrs. Phillips filed a proof of claim (#44614) in Old GM's Chapter 11 bankruptcy case.
- Mrs. Phillips and Old GM engaged in mediation and subsequently reached a settlement agreement concerning her claim in August 2010.
- Mrs. Phillips then sold and assigned all her rights to her claim to Dover Master Fund II.
- Doris Phillips filed a motion in the United States Bankruptcy Court for the Southern District of New York, pursuant to Fed.R.Civ.P. 60(b)(6), or alternatively Rules 60(b)(3) or 60(d), seeking to be relieved of her earlier settlement.
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Issue:
Does a claimant, who has unequivocally and completely assigned all rights, title, and interest in a settled bankruptcy claim to a third-party, retain standing to seek Rule 60(b) relief from the earlier settlement based on alleged fraud?
Opinions:
Majority - Robert E. Gerber
No, a claimant who has unequivocally and completely assigned all rights, title, and interest in a settled bankruptcy claim to a third-party does not retain standing to seek Rule 60(b) relief from the earlier settlement based on alleged fraud. The court found that Doris Phillips lacked standing to seek Rule 60(b) relief and to recover on the underlying claim because she had "unconditionally and irrevocably" transferred "all rights, title and interest in and to" her claim to Dover Fund. Citing `In re Britannia Bulk Holdings Inc. Sec. Litig.`, the court noted that Rule 60(b) relief is only available to "a party or a party’s legal representative," and by assigning her claim, Mrs. Phillips was no longer a party sufficiently connected with it. Furthermore, relying on `Macondo’s Profit Corp. v. Motorola Commc’ns & Elec., Inc.`, the court established that an unequivocal and complete assignment extinguishes all rights against the obligor, leaving the assignor without standing to sue. The court emphasized that allowing Mrs. Phillips to prevail would lead to an illogical "double recovery" for the same claim, as she kept the proceeds from the sale to Dover Fund, which also continued to receive distributions.
Analysis:
This decision solidifies the principle that a complete assignment of a legal claim divests the assignor of both the procedural right to seek relief (e.g., under Rule 60(b)) and the substantive right to enforce the underlying claim. It serves as a critical precedent for the finality of claim assignments in bankruptcy and other contexts, preventing situations where an assignor might attempt to re-litigate a claim after having profited from its sale. The ruling reinforces the importance of Article III standing and aims to prevent double recovery, thereby providing certainty to purchasers of claims and maintaining the integrity of the claims resolution process.
