General Motors LLC and OnStar, LLC (collectively, “New GM”) recently sought and obtained a notable order of enforcement (available here) from the United States Bankruptcy Court for the Southern District of New York. Specifically, New GM prevailed in its efforts to have the bankruptcy court specifically enforce certain provisions of the 2009 sale order entered by the court (“Sale Order”) authorizing the sale of substantially all assets from Chapter 11 debtor General Motors Corp. (“Old GM”) to New GM.
As typical in any bankruptcy sale, New GM acquired the assets under the Sale Order free and clear of all liens, claims, encumbrances and other interests of any kind or nature, except certain assumed liabilities. Further, as is typical, the Sale Order specifically provided that New GM as buyer was not liable for any claims against Old GM including any successor liability claims.
New GM sought the enforcement order earlier this year in response to an action commenced in August 2024, by the State of Texas in Texas state court.[1] In the state court lawsuit Texas challenged New GM’s collection and sale of certain consumer driving data to third parties.
The lawsuit resembled a prior action instituted by the Federal Trade Commission which also challenged the collection and use of drivers’ personal data obtained through the company’s “OnStar” service. The FTC action resulted in a contemplated resolution pursuant to a proposed order announced on January 16, 2025. Under that proposed order (available here), New GM agreed to a five-year ban on disclosing certain driver data to third parties and also agreed to provide greater transparency and choice to consumers regarding the collection, use, and disclosure of connected vehicle data.
Despite New GM’s agreement to the FTC’s proposed order, Texas maintained its separate litigation alleging that the collection and use violated the Texas Deceptive Trade Practices – Consumer Protection Act.
Texas alleged that the unlawful conduct began in 2011 and subjected Texas consumers to mass surveillance without disclosure or consent. Texas sought damages against New GM and, in so doing, referred to allegedly “prior bad acts” dating back decades before New GM became the owner of assets from Old GM pursuant to the Sale Order.
New GM believed that references to past conduct of Old GM in the Texas action violated the Sale Order. Therefore, New GM sought an order enforcing the Sale Order to preclude Texas from referencing historical acts of Old GM for purposes of attempting to increase the amount of potential damages against New GM. Texas, in turn, contended that that the bankruptcy court lacked subject matter jurisdiction and was otherwise powerless to interfere with the Texas action.
In a ruling issued on October 14, 2025, the Bankruptcy Court rejected all arguments of Texas ruling in favor of New GM as follows:
[T]his Court finds that it possesses jurisdiction over the Sale Order because the interpretation and enforcement of the Sale Order is within the Court's "core" jurisdiction. The Court further finds that sovereign immunity does not prevent this Court from exercising jurisdiction. Similarly, the Anti-Injunction Act, Younger, Burford, and both permissive and mandatory bankruptcy abstention do not require or encourage this Court to abstain. Moreover, New GM is not liable for the bad acts of Old GM in the context of civil penalties under the DTPA. The Court finds that the statutory scheme for calculating damages relying on Old GM's prior bad acts constitutes a form of successor liability, which is barred by the Sale Order. Texas has failed to demonstrate its usage of Old GM's acts nonetheless constitute an independent claim, that it uses Old GM as a comparator, has imputed knowledge of Old GM's conduct to New GM, or that justice requires a jury to hear these bad acts.
The bankruptcy court ordered Texas to strike allegation relating to the conduct of Old GM in its pending complaint against New GM in the Texas state court action.
The Texas action against New GM and the recently entered enforcement order are notable for three reasons:
- First, buyers of assets from bankruptcy rely on detailed language contained in sales orders – including language protecting the buyer from claims or damages relating to prior conduct of the seller. The decision serves as a reminder that a buyer can seek an enforcement order as needed (in this case – after 15 years) to protect pre-sale conduct of the seller from impacting the buyer. The decision also serves as a general reminder of the importance of the specific language in the sale order and the need for a buyer to ensure its offer for assets is conditioned on approval of a satisfactory order.
- Second, the action against New GM is a reminder that no single national law applies to claims arising out of consumer privacy issues. As noted above, New GM had agreed to a resolution with the FTC as part of a proposed order but still faced litigation from Texas. Other states too (Arkansas, Indiana and Nebraska) have also instituted litigation against New GM for its post-acquisition conduct in continuing the program. New GM should at least be able to use the enforcement order to ensure no other state seeks enhanced damages based on conduct of Old GM.
- Finally, it is worth noting that the power of a sale order to cut off claims will continue to force regulatory authorities and other parties to scrutinize fast moving bankruptcy sales even more aggressively to try to preserve rights. The intersection of insolvency and privacy remains fraught – with the expedited nature of proceedings further complicating the situation. Regulatory authorities and parties unaware of a privacy issue at the time of a sale order may try to raise due process issues when confronted with the enforceability of a sale order issued without notice to them.
We will continue to monitor the proceedings involving data privacy claims against New GM arising from the OnStar issues including any further developments regarding the impact of the 2009 bankruptcy of Old GM on claims asserted.
[1] Texas v. General Motors LLC, et al., Case No. 24-08-12392, in the District Court of Montgomery County, TX.
