IN RE MOTORS LIQUIDATION CO.

BENCH DECISION AND ORDER ON NEW GM'S MOTION TO ENFORCE JUDGMENT STAY ON MOTIONS TO WITHDRAW REFERENCE1

ROBERT E. GERBER, UNITED STATES BANKRUPTCY JUDGE:

In this contested matter in the chapter 11 case of Debtor Motors Liquidation Company, previously known as General Motors Corporation ("Old GM"), General Motors LLC ("New GM") moves for an order to enforce the stay imposed by the judgment dated June 1, 2015 order (the "Judgment") implementing my April 2015 decision2 addressing litigation flowing from New GM's announcement of a defect (the "Ignition Switch Defect") in ignition switches that had been installed in certain GM branded cars.

More specifically, New GM seeks to apply the Judgment's stay against litigation in other courts to enjoin the plaintiffs with whom it is litigating in the MDL and elsewhere from pursuing a withdrawal of the reference of matters that hereafter would come before me under the Judgment. New GM contends, among other things, that for so long as the Judgment remains in place, it must be construed only by me. The plaintiffs contend that the Judgment cannot preclude them from seeking to withdraw the reference.

Though elements of the language in the Judgment support New GM's position, the Judgment's most specific language, embodying the exclusive jurisdiction on which New GM relies, grants exclusive jurisdiction only "to the fullest extent permissible under law...."3 I thus need to construe the Judgment in a fashion to avoid the constitutional infirmity that would otherwise result — and that requires construing the Judgment so as not to block motions to withdraw the reference. Accordingly, while I can and will construe and enforce the Judgment upon request — as I will, for example, if anyone seeks to subject the Judgment to collateral attack, or to disregard it — I cannot construe it in the way New GM asks me to do. In the latter respect, New GM's motion is denied, and motions to withdraw the reference may proceed.

Facts

The facts underlying this dispute are undisputed. Background (and additional defined terms) can be found in the April Decision, familiarity with which is assumed.

In the respects relevant here, neither New GM nor the plaintiffs litigating against it prevailed in full under the April Decision. For reasons set forth in the April Decision and a second decision addressing the form of the Judgment,4 I held that the Sale Order's injunction against litigation against New GM premised on Old GM's conduct (including, most obviously, successor liability) would remain in place. But I held that to the extent that any claims against New GM were based solely on New GM's own conduct, plaintiffs could assert them.

That, perhaps inevitably, resulted in a situation where disputes would arise as to which side of the divide particular allegations in plaintiffs' complaints would fall — particularly in light of each side's natural inclination to push the envelope when applying the rules the Judgment would impose upon the litigation that would ensue.5 The Judgment included provisions to adjudicate disputes of that character. It provided for procedures ("No Strike Pleading Procedures"6) to gauge allegations in complaints pending in the MDL and elsewhere against the rules imposed under the Decision and Judgment. Pursuant to the No Strike Pleading Procedures — with disputes to be heard, at least initially, in the bankruptcy court — litigation elsewhere could proceed to the extent, but only the extent, that claims (or allegations supporting claims) weren't violative of the principles set forth in the Decision and Judgment.

To that end, the Judgment included language on which New GM relies. A key sentence provided:

Another sentence, which is ultimately less relevant to this controversy, provided:

With respect to the determinations to be made pursuant to the Judgment's No Strike Pleading Procedures, Designated Counsel (and counsel for the States of California and Arizona) (collectively here, the "Plaintiffs") moved to withdraw the reference. Shortly thereafter (and before the motions to withdraw the reference could be heard in the district court), New GM brought this motion, asking me to rule that the Plaintiffs could not, consistent with the original Sale Order and the Judgment, move to withdraw the reference with respect to the No Strike Pleading Procedures.9

Discussion

Determining this controversy requires me to determine two separate, but intertwined, issues:

I conclude that even though language in the Judgment supports New GM's position to the extent that it at least initially contemplates further proceedings in the bankruptcy court10 — and, more to the point, the Judgment's ¶ 16 provides that "the Court shall retain exclusive jurisdiction... to construe ... this Judgment and/or the Decision on which it was based" — the quoted language is not the only relevant language. And in my view, the language of the Judgment as a whole — including, especially, ¶ 16's additional language that its "exclusive jurisdiction" provision is only "to the fullest extent provided by law" (the "Savings Clause") — cannot be construed to limit motions to withdraw the reference.

I think it's highly unlikely that, consistent with statutory and constitutional law, a limit on litigants' rights to seek a withdrawal of the reference would be enforceable even in the absence of the Judgment's Savings Clause. But because of the way I answer the first question, I don't need to answer the second.

Preliminarily, I note that when parties debated the form of the Judgment, I was not asked to focus on whether it would bar motions to withdraw the reference. And when I signed the Judgment, I did not then have this issue in mind. But just as judges must construe statutes and apply them to issues when it is highly unlikely that anyone in Congress had the future question in mind, I must decide the question here — at least initially, by reference to the terms of the Judgment.

As New GM observes, the Judgment provides, in its ¶ 16 (subject to the Savings Clause), that "the Court shall retain exclusive jurisdiction ... to construe this Judgment and/or the Decision on which it was based." And New GM is right when it assumes that when I signed a judgment using the words "this Court" and "the Court," I was thinking of the United States Bankruptcy Court for the Southern District of New York. But that is not the end of the matter. Two additional important considerations need also to be taken into account.

First, by statute, the bankruptcy court is a unit of the district court.11 At least in instances where the context does not require otherwise (and I do not believe that the context requires otherwise here), one would think that references to "the Court" in a bankruptcy court order or judgment should not exclude the district court of which the bankruptcy court is a unit — at least when both are in the same district and the district court is exercising (or called upon to exercise) the power that § 151's second sentence12 grants.

Second, the exclusive jurisdiction given to "[t]he Court" under ¶ 16 of the Judgment is not absolute. It is only "to the fullest extent permissible under law." In determining the extent to which my jurisdiction is exclusive — so exclusive, in fact, that it precludes an exercise of jurisdiction by a district judge who has the power to withdraw the reference, even sua sponte,13 with respect to proceedings in the bankruptcy court — I need to consider whether that is "permissible under law."14 I think it's highly doubtful — if not also inconceivable — that an attempt to foreclose a party from invoking a district judge's power to withdraw the reference is "permissible under law." And I think it's even clearer that I should construe my order to avoid the constitutional issue that otherwise would result.15

Neither side has brought to my attention any case in which one party sought to enjoin another from moving to withdraw the reference. And I am aware of none. But the Supreme Court's most recent pronouncement on the division of labor between bankruptcy judges and district judges leaves little doubt, in my view, as to the outcome here.

When the Supreme Court determined, in its well known Wellness decision,16 that litigants' consent to the entry of final orders by bankruptcy judges would obviate problems that might otherwise exist under Stern,17 an important element of the Court's analysis was an underlying premise. The Court held that allowing Article I adjudicators to decide claims submitted to them by consent did not offend separation of powers principles "so long as Article III courts retain supervisory authority over the process."18 The Court observed, in this connection, that bankruptcy judges, like magistrate judges, "are appointed and subject to removal by Article III judges";19 that they "serve as judicial officers of the United States district court";20 and that they "collectively constitute a unit of the district court for that district."21 Importantly, the Supreme Court reasoned that separation of powers concerns would be diminished when the decision to invoke a non-Article III forum would be left entirely to the parties "and the power of the federal judiciary to take jurisdiction remains in place."22

The Court emphasized that "the entire process takes place under the district court's total control and jurisdiction,"23 and observed that

The many statements just noted were not, strictly speaking, the holding of Wellness, but I think that is only because they were already so established. The Supreme Court plainly took them as a given. If I were to deny access to a district judge for Article III consideration of whether withdrawal of the reference is appropriate,25 such a ruling would impair Article III judges' ability to exercise the control over the bankruptcy system that was such an important premise in Wellness. Depriving an Article III judge of the ability to exercise that control would raise substantial constitutional issues, as "the power of the federal judiciary to take jurisdiction," upon which the Wellness holding was so heavily based, would no longer "remain[] in place." Particularly since I never had a then-existing intention to deprive a district judge of the power to withdraw the reference when I signed the Judgment, I decline to construe the Judgment in so aggressive a fashion now. Though my reasoning might apply even in a situation where an order or judgment lacked the Savings Clause we have here, I need not decide any more of the second issue, given my determination as to the first.26

Conclusion

For these reasons, I grant New GM's request that I construe and enforce the Judgment, but decline to construe it in the way New GM advocates. Notwithstanding the Judgment's "exclusive jurisdiction" language, motions to withdraw the reference with respect to the No Strike Pleadings may proceed without interference by the bankruptcy court.

SO ORDERED.