     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




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