Circuit Holds Parties to $1.5 Billion Filing Error
The Second Circuit held that it did not matter that neither GM, nor its counsel at Mayer Brown, nor JP Morgan or its counsel at Simpson Thacher, intended a filing mistake that rendered a secured loan unsecured, the error will allow a group of creditors to pursue a clawback of some $1.5 billion in the GM bankruptcy case.
January 22, 2015 at 05:42 AM
5 minute read
A filing mistake by attorneys that rendered a secured loan from JP Morgan to General Motors unsecured has left a group of creditors free to pursue a clawback of some $1.5 billion in the GM bankruptcy case.
The U.S. Court of Appeals for the Second Circuit held Wednesday that it did not matter that neither GM, nor its counsel at Mayer Brown, nor JP Morgan or its counsel at Simpson Thacher & Bartlett, intended a mistake that changed the secured status of a $1.5 billion loan to GM when preparing for and making a filing under the Uniform Commercial Code.
“We conclude that although the termination statement mistakenly identified for termination a security interest that the lender did not intend to terminate, the secured lender authorized the filing of the document, and the termination statement was effective to terminate the security interest,” the Second Circuit said in In Re Motors Liquidation Company, 13-2187.
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