09-00504-mg Doc 1015 Filed 09/26/17 Entered 09/26/17 10:40:25 Main Document Pg 1 of 205 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK -----------------------------------------------------------------------x In re: FOR PUBLICATION MOTORS LIQUIDATION COMPANY, f/k/a Chapter 11 GENERAL MOTORS CORPORATION, et al., Case No. 09-50026 (MG) (Jointly Administered) Debtors. -----------------------------------------------------------------------x MOTORS LIQUIDATION COMPANY AVOIDANCE ACTION TRUST, by and through the Wilmington Trust Company, solely in its capacity as Trust Administrator and Trustee, Adversary Proceeding Plaintiff, Case No. 09-00504 (MG) against JPMORGAN CHASE BANK, N.A., et al., Defendants. -----------------------------------------------------------------------x MEMORANDUM OPINION REGARDING FIXTURE CLASSIFICATION AND VALUATION A P P E A R A N C E S: WACHTELL, LIPTON, ROSEN & KATZ Attorneys for Defendant and Cross-Claim Defendant JPMorgan Chase Bank, N.A. 51 West 52nd Street New York, New York 10019 By: Harold S. Novikoff, Esq. Marc Wolinsky, Esq. Amy R. Wolf, Esq. Emil A. Kleinhaus, Esq. Carrie M. Reilly, Esq. C. Lee Wilson, Esq. -and- KELLEY DRYE & WARREN LLP 101 Park Avenue New York, New York 10178 By: John M. Callagy, Esq. Nicholas J. Panarella, Esq. 09-00504-mg Doc 1015 Filed 09/26/17 Entered 09/26/17 10:40:25 Main Document Pg 2 of 205 BINDER & SCHWARTZ LLP Attorneys for Plaintiff 28 W. 44th Street, Suite 700 New York, New York 10036-4039 By: Eric B. Fisher, Esq. Neil S. Binder, Esq. Lindsay A. Bush, Esq. Lauren K. Handelsman, Esq. ii 09-00504-mg Doc 1015 Filed 09/26/17 Entered 09/26/17 10:40:25 Main Document Pg 3 of 205 TABLE OF CONTENTS I. Introduction ....................................................................................................................... 1 A. Fixtures ............................................................................................................................... 2 B. Valuation ............................................................................................................................. 3 II. Background ....................................................................................................................... 6 A. Brief History of Old GM..................................................................................................... 6 B. Events Leading to Bankruptcy ............................................................................................ 7 1. Term Loan Agreement and Collateral Agreement ........................................................ 7 2. Financial Difficulty at GM and the Automotive Industry Generally ............................ 9 3. Failed Efforts to Engage with the Private Market ...................................................... 10 4. Government Intervention ............................................................................................ 10 C. GM’s Bankruptcy, the DIP Financing Order, and the 363 Sale ....................................... 11 D. History of this Action........................................................................................................ 13 1. The Original Complaint and Summary Judgment Motions ........................................ 13 2. The Amended Complaint ............................................................................................ 14 E. The Court’s Site Visit to LDT and Warren Transmission ................................................ 15 F. GM’s eFAST Ledger ........................................................................................................ 16 III. Factual Background Regarding Relevant GM Plants ................................................. 17 A. GM Lansing Delta Township............................................................................................ 17 1. The LDT Plant ............................................................................................................ 17 2. The Eaton County Fixture Filing ................................................................................ 19 B. Warren Transmission Plant Overview .............................................................................. 21 C. The Lean Agile Flex System............................................................................................. 23 D. Defiance Foundry Overview ............................................................................................. 24 E. MFD Pontiac and Powertrain Engineering ....................................................................... 26 F. The Forty Representative Assets ...................................................................................... 27 1. Presses ......................................................................................................................... 29 2. Conveyor Systems ...................................................................................................... 34 3. Robots ......................................................................................................................... 42 4. Assets Located at the Warren Transmission Plant ...................................................... 45 5. Assets Located at the Defiance Foundry .................................................................... 53 6. Assets Located in the Paint Shop ................................................................................ 59 7. Miscellaneous Assets Located at Lansing Delta Township ........................................ 63 iii 09-00504-mg Doc 1015 Filed 09/26/17 Entered 09/26/17 10:40:25 Main Document Pg 4 of 205 8. Miscellaneous Assets .................................................................................................. 67 9. The Central Utility System: Representative Asset No. 11 .......................................... 70 10. Assets the Trust Concedes are Fixtures ...................................................................... 74 IV. Legal Standards Regarding Fixtures ............................................................................ 75 A. Michigan’s Three Part Fixture Test .................................................................................. 75 1. Attachment .................................................................................................................. 75 2. Adaptation ................................................................................................................... 76 3. Intent ........................................................................................................................... 78 B. Ohio’s Three-Part Fixture Test ......................................................................................... 79 1. Attachment .................................................................................................................. 80 2. Adaptation ................................................................................................................... 80 3. Intent ........................................................................................................................... 83 C. Burden of Proof................................................................................................................. 84 D. The Issue Whether, Under Ohio and Michigan law, in order to Satisfy the Adaptation Prong, the Asset in Question Benefits the Business or Realty ......................................... 84 V. Conclusions of Law Regarding Preliminary Issues ..................................................... 87 A. The “Relatedness” of the MFD Pontiac and Powertrain Engineering Facilities .............. 87 1. The Defendants’ Contentions ..................................................................................... 87 2. The Plaintiff’s Contentions ......................................................................................... 87 3. Discussion ................................................................................................................... 88 4. Conclusion .................................................................................................................. 89 B. The Timeliness of the Trust’s Challenge to the Eaton-County Fixture Filing ................. 89 1. The Defendants’ Contentions ..................................................................................... 89 2. The Plaintiff’s Contentions ......................................................................................... 90 3. Legal Standard ............................................................................................................ 91 4. Discussion ................................................................................................................... 92 5. Conclusion .................................................................................................................. 96 VI. Guiding Principles in Fixture Determinations ............................................................. 97 A. Concrete Pits, Trenches, Slabs, or Specialized Foundations are Strong Indications that an Asset is a Fixture ............................................................................................................... 97 B. An Asset’s Integration With Other Assets and the Assembly Process ............................. 99 C. Where There is a Deficiency in Objective Evidence Regarding Assets That are No Longer In Place, Proving that an Asset is a Fixture Will Be Difficult ........................... 101 D. Preliminary