General Motors LLC and OnStar LLC have filed an emergency motion asking a federal bankruptcy court to prevent the State of Texas from basing civil penalties on conduct that occurred before GM's 2009 bankruptcy restructuring, marking a significant clash between state enforcement powers and federal bankruptcy protections.
In documents filed June 5 with the U.S. Bankruptcy Court for the Southern District of New York, GM and OnStar claim Texas has transformed what was initially a consumer protection lawsuit about data collection practices into a sweeping attempt to penalize the companies for decades of alleged misconduct by the now-defunct General Motors Corporation (Old GM).
"The Texas Attorney General filed the Texas Lawsuit against Movants in August 2024 asserting claims under the Texas Deceptive Trade Practices Act," the motion states. "Until very recently, the claims were based exclusively on Movants' alleged collection and sharing of data from customer vehicles post-bankruptcy, and did not contain allegations about Old GM's conduct."
According to the motion, Texas dramatically altered its approach on May 20, 2025, when it filed a First Amended Petition that included dozens of paragraphs about Old GM's pre-bankruptcy actions, including allegations about tracking consumer advocate Ralph Nader in the 1960s, fuel tank fires from the 1970s through 1990s, ignition switch issues dating back to 2002, and even complaints about GM's 2009 bankruptcy and government bailout itself.
After GM and OnStar objected via letter on May 30, Texas filed a Second Amended Petition early on June 5, but the automaker claims the revised filing still violates bankruptcy protections.
"The Second Amended Petition still violates this Court's orders by repeatedly alleging that 'the jury must consider' various conduct of Old GM 'when determining the civil penalties to impose' against Movants," the motion states.
GM and OnStar argue that Texas's approach directly violates the July 5, 2009 Sale Order and Injunction that allowed GM to purchase Old GM's assets "free and clear" of most pre-bankruptcy liabilities. The motion also cites a December 2015 bankruptcy court judgment that explicitly barred states from holding GM LLC liable for violations of consumer protection statutes that occurred before the July 10, 2009 sale closing.
"For Texas to suggest GM LLC should be punished for Old GM's filing a bankruptcy petition and for its conduct during the bankruptcy proceeding is ludicrous—and barred by the Sale Order and Injunction," the motion states.
The dispute has significant implications for bankruptcy sales nationwide, as it tests whether state attorneys general can circumvent the liability protections granted in bankruptcy proceedings by seeking penalties based on pre-bankruptcy conduct while technically suing only for post-bankruptcy violations.
King & Spalding LLP attorney Scott Davidson, representing GM and OnStar, asked the bankruptcy court to order Texas to withdraw its Second Amended Petition and file a new complaint that complies with bankruptcy protections. The motion also seeks to halt discovery efforts related to Old GM's conduct.
What makes the case particularly notable is that Texas was aware of and participated in the 2009 bankruptcy proceedings. According to the motion, the state filed an objection to the sale (on different grounds), appeared at the sale hearing, and ultimately withdrew its objection after reaching a settlement with Old GM.
The motion is part of the long-running Motors Liquidation Company bankruptcy case (Case No. 09-50026) that has seen numerous disputes over the scope of GM's liability shield since the company's restructuring.
The Texas lawsuit, which initially focused on allegations that GM and OnStar improperly collected and shared data from customers' vehicles, is pending in the District Court of Montgomery County, Texas (Case No. 24-08-12392).
This article was prepared using Stretto Conductor, our new AI-powered assistant that's here to help. Stretto Conductor was able to create this summary of a 17 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Stretto Conductor may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.