This Monday, the U.S. Supreme Court rejected General Motors’ petition for a writ of certiorari, which GM filed in an attempt to overturn a ruling by the Second Circuit Court of Appeals related to the sale of substantially all of GM’s assets in bankruptcy. When we last visited the case in a prior blog post, GM’s petition to the Supreme Court was still pending. With no prospect of Supreme Court review, the exception to the “free and clear” provisions of a sale under Section 363 of the Bankruptcy Code, adopted in the Second Circuit’s opinion, remains the law of the land.
The Supreme Court’s denial of certiorari further reinforces the importance to parties and bankruptcy practitioners to fully disclose potential liabilities in the bankruptcy process. As the GM case demonstrates, failure to make complete disclosures and provide proper notice to all creditors may severely limit or even eliminate the protections a purchaser of the estate’s assets would otherwise enjoy under the “free and clear” provisions of Section 363. And the resulting post-sale liability for pre-sale conduct could be quite substantial.