Campbell v. United States
Opinion
*1333
This case arises out of the 2009 bankruptcy of General Motors Corporation ("Old GM").
1
The plaintiffs compose a putative class of individuals who had asserted personal injury claims against Old GM, and whose successor liability claims were extinguished during bankruptcy. Relying on our decision in
A & D Auto Sales, Inc. v. United States
,
BACKGROUND
I
In
A & D
, a group of former automobile dealerships sued the United States, raising Fifth Amendment takings claims based on the extinguishment of the plaintiffs' franchise agreements with Old GM in a bankruptcy sale pursuant to
In
A & D
, the plaintiffs alleged that the government had conditioned its continued financial assistance to Old GM on the company's submission for approval of a proposed sale order that terminated the plaintiffs' franchise agreements.
On appeal, we held that the government may, in some circumstances, be liable for a regulatory taking of property where the government pressures a third party (there, allegedly Old GM) to take an "action that affects or eliminates the property rights of the plaintiff."
II
Relying on A & D , on July 9, 2015, the plaintiffs here sued the government in the Claims Court alleging that the government had coerced Old GM to include in its proposed bankruptcy sale order provisions extinguishing the plaintiffs' property interests pursuant to § 363 of the Bankruptcy Code.
The plaintiffs are a group of individuals who alleged that they are victims of accidents involving GM vehicles (or are the family members or estates of such individuals), and had personal injury claims against Old GM. The plaintiffs alleged that under Michigan law they possessed successor liability claims at the time the § 363 sale closed. Michigan law provides that where there is a sale of assets from one entity to another such that there exists "a continuity of enterprise between a successor and its predecessor[,] ... a successor [may be forced] to 'accept the liability with the benefits' of such continuity."
Foster v. Cone-Blanchard Mach. Co.
,
Under Michigan law,
a prima facie case of continuity of enterprise exists where the plaintiff establishes the following facts: (1) there is continuation of the seller corporation, so that there is a continuity of management, personnel, physical location, assets, and general business operations of the predecessor corporation; (2) the predecessor corporation ceases its ordinary business operations, liquidates, and dissolves as soon as legally and practically possible; and (3) the purchasing corporation assumes those liabilities and obligations of the seller ordinarily necessary for the uninterrupted continuation of normal business operations of the selling corporation.
Here, Old GM filed for bankruptcy on June 1, 2009, and filed a motion seeking court approval to sell substantially all its assets to a new corporation, referred to as "New GM," pursuant to
Because of the government's insistence, according to the complaint, the proposed sale order thus included "a number of provisions making explicit findings that New GM is not subject to [the plaintiffs'] successor liability [claims]."
Gen. Motors Corp.
,
Except for the Assumed Liabilities, ... the Purchased Assets shall be transferred to the Purchaser ... free and clear of all liens, claims, encumbrances, and other interests of any kind or nature whatsoever ... including rights or claims based on any successor or transferee liability ....
[A]ll persons and entities ... holding liens, claims, encumbrances, and other interests of any kind or nature whatsoever, including rights or claims based on any successor or transferee liability , ... are forever barred, estopped, and permanently enjoined ....
J.A. 449-50, ¶¶ 7, 8 (emphases added). Allegedly, the government's financing was "expressly conditioned upon approval of this motion [seeking approval of the proposed sale order] by July 10."
Gen. Motors Corp.
,
The bankruptcy court approved Old GM's proposed sale order on July 5, 2009, and "permit[ted] GM's assets to pass ... free and clear of successor liability claims."
Paragraph 70 of the sale order provided that the order "shall be effective as of 12:00 noon, EDT, on Thursday, July 9, 2009." J.A. 475. The § 363 sale closed thereafter on July 10, 2009.
III
The plaintiffs appealed the bankruptcy court's order to the United States District Court for the Southern District of New York.
See
In re Motors Liquidation Co.
,
IV
The Claims Court dismissed the plaintiffs' complaint on October 30, 2017, without deciding the question of whether the alleged class should be certified. The court held that the plaintiffs' complaint was not timely because it was not filed within the Tucker Act's six-year statute of limitations. In reaching this conclusion, the court stated that "[t]he complaint's specific references to government coercive action ... all point to activity that predates the Sale Order issued by the bankruptcy court." J.A. 7. In other words, the court determined that the plaintiffs' takings claim had accrued, at the latest, on July 5, 2009-more than six years before the date on which the plaintiffs filed their complaint in the Claims Court.
In the alternative, the Claims Court held that dismissal was proper because the plaintiffs had failed to identify a cognizable property interest. It characterized the plaintiffs' successor liability claims as being "too contingent" to compose a property interest that would be subject to a compensable taking under the Fifth Amendment. J.A. 18 The court explained that the plaintiffs' purported property interests were "entirely contingent upon two discretionary acts of the federal government: (1) a government financial intervention so that a New GM could be created; and[ ] (2) a government intervention so that Old GM could file for bankruptcy requesting a 363 sale." J.A. 18. The Claims Court also concluded that the plaintiffs lacked a cognizable property interest because § 363 predated the creation of the plaintiffs' purported property interests (the successor liability claims) and therefore that the possibility of extinguishment in bankruptcy "inhered" in the title to the plaintiffs' claims. J.A. 22. The court did not reach the question of whether the plaintiffs had sufficiently alleged a diminution in the value of their property as a result of the government's action.
On November 27, 2017, the plaintiffs filed in the Claims Court a combined motion for reconsideration, motion to amend the judgment, and motion for leave to file a second amended complaint. The proposed second amended complaint, in the words of the Claims Court, "reshaped[d] the description of plaintiffs' takings claims and the facts already alleged" and contained additional factual allegations. J.A. 24. The plaintiffs added facts purporting to demonstrate that government coercion continued after the bankruptcy court entered the § 363 sale order. The plaintiffs' complaint essentially added more detail about the government's claimed pressure on the bankruptcy court and the district court. The Claims Court considered the alleged facts presented in the plaintiffs' second amended complaint but determined that the revised allegations were insufficient to change the result and denied the motion, reaffirming both of its initial grounds for dismissing the plaintiffs' complaint.
The plaintiffs appealed to this court.
4
We have jurisdiction under
DISCUSSION
I
We agree with the Claims Court that the plaintiffs' complaint was untimely
*1337
insofar as the complaint alleged coercion of Old GM. The Tucker Act's statute of limitations provides that "[e]very claim of which the United States Court of Federal Claims has jurisdiction shall be barred unless the petition thereon is filed within six years after such claim first accrues."
The plaintiffs here filed their complaint alleging Fifth Amendment takings claims in the trial court on July 9, 2015. The question is when the alleged taking occurred. The plaintiffs alleged in their complaint, and reaffirmed during oral argument, that the primary conduct which caused the taking was the government's coercion of Old GM to secure approval from the bankruptcy court of a proposed sale order extinguishing the plaintiffs' successor liability claims. Specifically, the plaintiffs alleged that the government "directed" that the sale order "exclude all Personal Injury Products Liability Claims." J.A. 398, ¶ 83. In other words, that the government "condition[ed] the closing of the Sale on inclusion of a provision within the Sale Order that expressly extinguished the rights of any Personal Injury Claimant to assert successor liability claims against New GM." J.A. 403, ¶ 107. The plaintiffs contended that Old GM was "[l]eft with no option but to comply with the [g]overnment's mandate or face certain liquidation," and Old GM consequently filed for bankruptcy and submitted to the bankruptcy court a proposed sale order that "left behind the [plaintiffs'] Personal Injury Products Liability Claims." J.A. 399-400, ¶¶ 88, 98. In light of these allegations, we focus our accrual analysis on the government's alleged coercion of Old GM.
The parties present three possible dates on which the plaintiffs' takings claims may have accrued. The government argues that the claims accrued at least on July 5, 2009, when the bankruptcy court approved and entered the sale order ("Entry Date"). The plaintiffs argue to the contrary that their claims did not accrue until either July 9, 2009, the date on which the § 363 sale became effective ("Effective Date"), or July 10, 2009, the date on which the § 363 sale closed ("Closing Date"). The plaintiffs contend that the Entry Date cannot constitute the date on which their claims accrued because the value of the plaintiffs' successor liability claims had not yet been extinguished as of July 5, 2009. We conclude that under the plaintiffs' theory as to the coercion of Old GM, the alleged taking occurred on July 1, 2009-when Old GM filed the proposed sale order with the bankruptcy court.
The standards for claim accrual in physical takings and regulatory takings cases are distinct, and this distinction is important. As the Supreme Court has held, "it [is] inappropriate to treat cases involving physical takings as controlling precedents for the evaluation of a claim that there has been a 'regulatory taking', and vice versa."
Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'l Planning Agency
,
In the case of a physical taking, claim accrual is relatively simple to pinpoint. "A physical taking generally occurs when the government directly appropriates private property or engages in the functional equivalent of a 'practical ouster of [the owner's] possession.' "
Katzin v. United States
,
In the case of a regulatory taking, however, the taking may occur before the effect of the regulatory action is felt and actual damage to the property interest is entirely determinable. As the Supreme Court recently stated in a regulatory takings case, "a property owner has a claim for a violation of the Takings Clause as soon as [the] government takes his property for public use without paying for it" without regard to post-taking remedies that may be available.
Knick v. Township of Scott
, --- U.S. ----,
In
Goodrich v. United States
,
Notably, the court in
Goodrich
made clear that where a regulatory taking is alleged, it is the final decision of the government actor alleged to have caused the taking that triggers accrual of a takings claim, not the ultimate impact of that decision. In
Goodrich
, though "it took the Forest Service over three years to implement [the ROD] transferring Kennedy's cattle to the Whitetail Allotment"-i.e., for the government's decision to be implemented-the court nevertheless
*1339
determined that the issuance of the ROD, rather than the physical appropriation by cattle of water was "a better place to deem any taking occurred."
The plaintiffs argue that the government's pressure of Old GM was not complete (that is, not "final") at the Entry Date. According to the plaintiffs, the government could have changed its mind regarding the plaintiffs' successor liability claims at any point before the § 363 sale closed on July 10, 2009. But the plaintiffs do not cite any authority in support of their theory that a government actor's ability to change its mind prevents claim accrual. To the contrary, in
Ladd v. United States
,
Similarly, in
Cuban Truck & Equipment Co. v. United States
,
Such a takings theory, moreover, would be unworkable. Agencies generally have broad power to reconsider their decisions.
Medtronic, Inc. v. Robert Bosch Healthcare Sys., Inc.
,
The plaintiffs also contend that the Entry Date cannot serve as the date of accrual because the order "could have been overturned in advance of the 'Effective Date' by a 'higher body' (
i.e.
, the District Court at the July 9, 2009 hearing on whether to stay the effectiveness of the Sale Order[) ]." Appellant Br. 23. We disagree. This argument ignores the fact that the government action purported to have effected a taking is the government's coercion of Old GM, not the bankruptcy court's order. Any action by the bankruptcy court or any higher judicial body merely goes to the ultimate effect of the alleged government taking. Such collateral action does not alter the finality of the government's action for the purpose of accrual of a takings claim.
See
Palazzolo v. Rhode Island
,
II
The plaintiffs also argue that the government effected a taking by pressuring the bankruptcy court and the district court to approve the proposed sale order, citing colorful language from a book by Steve Rattner (the leader of the government team responsible for assessing the viability of Old GM's restructuring plans) that the government's threats were " 'the financial equivalent of holding a gun to the head' of the courts." Appellant Br. 5, 12. These actions allegedly occurred during the bankruptcy court's and district court's consideration of the proposed sale order, i.e., within the limitations period. But the coercion that could give rise to a regulatory takings claim does not include "coercion" of the court system by making an argument for a particular result. It is well established that the Claims Court "cannot entertain a taking[s] claim that requires the court to scrutinize the actions of another tribunal."
Petro-Hunt, L.L.C. v. United States
,
In
Allustiarte
, we considered a similar claim that several plaintiffs had suffered a "taking of their property at the hands of the bankruptcy trustees and courts."
The same reasoning applies here. The plaintiffs' allegations that the government coerced the bankruptcy court and the district court amount to no more than a mine-run challenge to the bases for those court's decisions regarding the sale order. The supposed coercion here was not extra-judicial, as was the case in A & D . The plaintiffs cannot maintain a collateral attack on the decisions of the bankruptcy court and district court on a takings theory. The proper forum for such a challenge is the judicial appellate process.
To the extent that the plaintiffs argue that there was a taking because § 363 did not permit the extinguishment of their successor liability claims, we disagree that
*1341
this is a cognizable takings action. As we held in
Lion Raisins, Inc. v. United States
,
III
The plaintiffs briefly contend that, at worst, they should now be permitted to amend their complaint to cure any deficiency identified by this court as the plaintiffs in A & D were permitted to do. But the plaintiffs here already amended their complaint once as of right and then sought leave to amend their complaint again in conjunction with their motion requesting that the Claims Court reconsider its dismissal of this case. The Claims Court denied the plaintiffs' request to amend their complaint, deeming it futile in attempting to overcome the deficiencies on which the Claims Court's dismissal was based. We agree with the Claims Court and therefore likewise decline the plaintiffs' request to amend. The proposed second amended complaint simply supplies additional detail about the extent and timing of the alleged pressure on the bankruptcy court and district court. There are no new allegations in the proposed second amended complaint that would alter the date of accrual concerning the claim based on coercion of Old GM or that bolster the plaintiffs' theory concerning coercion of the courts.
CONCLUSION
We conclude that the plaintiffs' takings claims based on the alleged coercion of Old GM accrued when Old GM submitted the proposed sale order to the bankruptcy court on July 1, 2009, and that the plaintiffs' complaint in this respect was untimely because it was filed more than six years after their claims accrued. With respect to the plaintiffs' claims that the government had coerced the bankruptcy court and the district court, we conclude that the plaintiffs'
*1342 claims are not within the Claims Court's jurisdiction. Under the circumstances, we need not decide the question of whether the plaintiffs have sufficiently alleged a loss of value of their alleged property interests. Accordingly, we affirm.
AFFIRMED
"Old GM" refers to the GM entity in existence prior to the sale of assets pursuant to
Even if coercion had been established, that would merely make the third party's action the equivalent of government action. The plaintiffs would still be required to engage in the
Penn Central
analysis and to establish a diminution in the value of their property.
See
Penn. Cent. Transp. Co. v. New York City
,
This is somewhat inconsistent with other allegations of the complaint stating that extinguishment of the plaintiffs' claims was not important to the government.
We note that the government's brief before this court does not comply with Federal Rule of Appellate Procedure 32(a)(1)(A) because it was filed double-, rather than single-sided.
This aspect of
Williamson
remains good law under
Knick
.
See
We note that the circuits appear to be split on the issue of whether a bankruptcy court has authority to extinguish successor liability claims pursuant to a § 363 sale.
Compare
Precision Indus., Inc. v. Qualitech Steel SBQ, LLC
,
Reference
- Full Case Name
- Callan CAMPBELL, James H. Chadwick, Judith Strode Chadwick, Kevin C. Chadwick, Individually and Through His Court-Appointed Administrators, James H. Chadwick and Judith Strode Chadwick, Kevin Junso, Niki Junso, Tyler Junso Estate, Through Kevin Junso, Its Personal Representative, Plaintiffs-Appellants v. UNITED STATES, Defendant-Appellee
- Cited By
- 21 cases
- Status
- Published