General Motors: Protection Granted in Section 363 Sale Orders is Only as Good as the Notice Given

July 18, 2016

In a recent decision by the U.S. Court of Appeals for the Second Circuit in the General Motors case, the court held certain claimants were not afforded procedural due process with respect to the § 363 sale of General Motor Corporation’s assets in the bankruptcy case. As a result, the assets were not sold free and clear of these claims, and these claimants may now seek recovery against New GM. The decision found that the claimants were prejudiced by the inadequate notice because the claimants did not have an opportunity to be heard, even though the claimants were unable to articulate any objection to the sale order that had not been made by others and rejected by the bankruptcy court in approving the sale order.

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