A 10-year legal dispute over General Motors’ (GM) assets pledged as collateral was recently resolved in the U.S. Bankruptcy Court in New York. The plaintiff received a $231 million repayment, which was supported by the expert opinion of Stout’s David Goesling.

David, a Managing Director in the Machinery and Equipment Valuation Practice at Stout, along with Stout’s Kyle TenHuisen and Adam Bakula, served as an expert team to the plaintiff during the case’s last four years of active litigation. David provided expert testimony at multiple depositions and trial in Motors Liquidation Company Avoidance Action Trust v. JPMorgan Chase Bank, N.A., which centered on the scope and value of GM’s assets pledged as collateral.

The origin of the dispute dates back to 2009 after GM was forced into Chapter 11 bankruptcy and a mistake was discovered that resulted in liens being terminated on a $1.5 billion syndicated loan. An avoidance action was commenced to seek the return of nearly $1.5 billion used to pay off a term loan that had a large portion of the perfected security interest in certain collateral (fixtures and equipment) mistakenly canceled. A post-bankruptcy trust (plaintiff) representing unsecured creditors led the avoidance action, arguing that the remaining collateral value was inadequate to secure the $1.5 billion loan. Thus, identifying and valuing the remaining collateral was essential in the determination of an equitable clawback of the $1.5 billion at stake.

The plaintiff engaged David and his team as its primary expert to determine the scope and value of the collateral in dispute – over 250,000 assets across more than 30 GM manufacturing and assembly plants. David and his team provided review of thousands of discovery documents, inspection of eight multi-million square-foot manufacturing facilities, numerous depositions, an expert report, rebuttal reports, and collaboration with other experts.

Due to the volume of assets in dispute, the court decided to conduct a “Representative Asset Trial,” limiting the scope of the trial to 40 representative assets. David provided expert testimony at the two-week trial relying on his 35-plus years of machinery and equipment valuation experience and deep understanding of automotive production assets. His expert report and testimony provided a value opinion that the court deemed more reliable than the defendant’s equipment appraisal expert.^[1]

Furthermore, during the Representative Asset Trial, the court found David to be the more credible witness regarding the valuation of assets that were not sold to New GM as part of the Section 363 sale during the bankruptcy-resolution process.^[2]

Based on David and his team’s independent market research and analysis modeling, he ultimately concluded the term loan was significantly under-secured. The judge’s decision from the Representative Asset Trial was intended to provide guidance to settle the case in mediation. After nearly two years of mediation, in which David and his team were heavily involved providing equipment valuation support and case value modeling, the defendants agreed to issue a $231 million repayment to settle the case.

1. Motors Liquidation Company Avoidance Action Trust v. JPMorgan Chase Bank, N.A., Case No. 09-00504-mg, Doc 1015, page 185.
2. Id., page 195.