Motors Liquidation Co. Avoidance Action Trust ex rel. Wilmington Trust Co. v. JPMorgan Chase Bank, N.A. (In re Motors Liquidation Co.)

MEMORANDUM OPINION REGARDING FIXTURE CLASSIFICATION AND VALUATION

TABLE OF CONTENTS

I. Introduction... 339

A. Fixtures .. .340

B. Valuation.. .341

II. Background.. .342

A. Brief History of Old GM... 342

B. Events Leading to Bankruptcy. . .342

1. Term Loan Agreement and Collateral Agreement.. .342

2. Financial Difficulty at GM and the Automotive Industry Generally.. .344

3. Failed Efforts to Engage with the Private Market.. .344

4. Government Intervention... 344

C. GM’s Bankruptcy, the DIP Financing Order, and the 363 Sale... 345

D. History of this Action... 346

1. The Original Complaint and Summary Judgment Motions... 346

2. The Amended Complaint.. .346

E. The Court’s Site Visit to LDT and Warren Transmission... 347

F. GM’s eFAST Ledger... 348

III. Factual Background Regarding Relevant GM Plants... 348

A. GM Lansing Delta Township.. .348

1. The LDT Plant... 348

2. The Eaton County Fixture Filing. . .350

B. Warren Transmission Plant Overview. . .350

C. The Lean Agile Flex System... 352

D. Defiance Foundry Overview.. .352

E. MFD Pontiac and Powertrain Engineering. . .354

F. The Forty Representative Assets... 355

1. Presses... 355

2. Conveyor Systems... 359

3. Robots... 362

4. Assets Located at the Warren.. .364

5. Assets Located at the Defiance Foundry.. .368

6. Assets Located in the Paint Shop...372

7. Miscellaneous Assets Located at Lansing Delta Township.. .374

8. Miscellaneous Assets... 376

9. The Central Utility System: Representative Asset No. 11.. .378

10. Assets the Trust Concedes are Fixtures ...381

IV. Legal Standards Regarding Fixtures ...382

A. Michigan’s Three Part Fixture Test... 382

1. Attachment.. .382

2. Adaptation... 383

3. Intent... 383

B. Ohio’s Three-Part Fixture Test... 385

1.Attachment.. .385

2. Adaptation... 385

3. Intent.. .387

C. Burden of Proof... 387

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.. .387

Y. Conclusions of Law Regarding Preliminary Issues... 389

A. The “Relatedness” of the MFD Pontiac and Powertrain Engineering Facilities. . .389

1. The Defendants’ Contentions... 389

2. The Plaintiffs Contentions... 389

3. Discussion.. .389

4. Conclusion.. .390

B. The Timeliness of the Trust’s Challenge to the Eaton-County Fixture Filing. . .390

1. The Defendants’ Contentions... 390

2. The Plaintiffs Contentions... 391

3. Legal Standard... 391

4. Discussion.. .392

5. Conclusion.. .394

VI. Guiding Principles in Fixture Determinations ...395

A. Concrete Pits, Trenches, Slabs, or Specialized Foundations are Strong Indications that an Asset is a Fixture... 395

B. An Asset’s Integration With Other Assets and the Assembly Process.. .396

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.. .397

D. Preliminary Discussion... 397

1. There is a Presumption of GM’s Intent for Permanence... 397

2. Goesling’s Movement of Assets is of Little Probative Value Here... 398

3. Goesling’s Secondary Market Analysis is also of Little Probative Value.,.399

4. Classification of Assets as Personal Property for Tax Purposes is of Little Probative Value... 400

VII. Conclusions of Law Regarding the 40 Representative Assets.. .400

A. The Presses.. .400

1. The Leased Presses Are Not Fixtures. . .400

2. The Remaining Three Presses are Fixtures...401

B. The Conveyor Systems... 402

1. The Modularity of the Conveyor Systems Does Not Suggest that the Conveyors are Not Fixtures.. .402

2. The Conveyors are Attached to the Realty.. .403

3. The Conveyors are Highly Integrated into the Assembly Process... 403

C. The Robots... 405

1. Representative Asset Nos. 39 and 12...405

2. Representative Asset No. 22... 406

D. Individual Assets Located Off the Production Line.. .407

1. Representative Asset No. 8... 407

2. Representative Asset No. 10.. .407

3. Representative Asset No. 19.. .408

■ E. The Warren Transmission Assets ...408

1. Representative Asset No. 14,.. 408

2. Representative Asset No. 24... 409

3. Representative Asset No. 25... 410

4. Representative Asset No. 36.. .410

5. Representative Asset No. 23... 411

6. Representative Asset No. 1... 411

F.The Paint Shop Assets... 412

1.Representative Asset No. 5.. .413

2.Representative Asset No. 9... 414

G. The Foundry Assets... 414

1. Representative Asset No. 27... 414

2. Representative Asset No. 38.,. 414

3. Representative Asset No. 40.., 415

H. Representative Asset No. 15-The Soap, Mount and Inflate System.. .416

. I. Miscellaneous Assets... 416

I. Representative Asset No. 13.., 416

2. Representative Asset No. 34.., 417

3. Representative Asset No. 37-the Courtyard Enclosure.. ,417

J. The CUC... 418

1. GM was Permitted to Grant a Lien on its Residual Interest,. .418

2. The Structure Housing the CUC Assets is Real Property.. .419

3. The CUC Systems are Fixtures. . .419

K; The Software,. ,420

L. Holding Furnace, Representative Asset No. 28,.. 421

M. The Court Need Not Make a Determination on Assets that the Parties Concede are or are not Fixtures.. .422

VIII. Legal Standards: Valuation ...422

A. Assets Must Be Valued According to Their Proposed Disposition as of the Valuation Date.. .423

1. Market Value Does Not Include the Amount of any Government Subsidy. . .424

B. The Cost Approach is Routinely Used by Courts to Value Collateral.. .424

C. The Bankruptcy Code Affords Significant Flexibility to the Court in Determining the Proper Method of Valuation .,.425

IX. Findings of Fact: Valuation.. .425

A. The KPMG Report... 425

1. KPMG’s Valuation Process... 426

2. Defendants’ Experts.. .432

3. Plaintiffs Experts... 434

B. The Expert Appraisals... 436

1. Goesling: Orderly Liquidation Value in Exchange,. ,436

2. Chrappa: Fair Market Value in Continued Use with Assumed Earnings. . ,440

3. Goesling: Orderly Liquidation Value in Place.. .441

C. KPMG’s Final Values are a Reliable Valuation of the Assets that were Sold to New GM.. .442

D. Goesling’s Orderly Liquidation Value in Exchange Analysis is a Reliable Valuation of the Assets that were not Sold to New GM...443

X. Conclusions of Law: Valuation ...444

A. The Assets Sold to New GM Should be Valued According to a Going Concern Premise of Value.. .444

1. The Proposed Disposition or Use of the Representative Assets Was to Be Sold to New GM as Part of a Going Concern Business., .444

2. The Public Policy Subsidy Should Be Excluded from the Valuation... 445

3. The KPMG Final Fair Value Amounts Are the Best Available Valuation of the Assets Sold to New GM.. .449

B. The Assets Not Sold to New GM Should Be Valued According ,to Goesling’s OLVIE Analysis.. .449

XI. Conclusion... 450

Table A: Specific Conclusions of Value for Each Asset

I. INTRODUCTION1

The Defendants are a group of Old GM’s creditors referred to as the Term Lenders, who initially held a security interest in approximately $1.5 billion of Old GM’s assets, with a perfected security interest resulting from a UCC-1 Statement filed in Delaware. In earlier stages of this litigation (described below), the perfected security interest of the Term Lenders resulting from the Delaware UCC-1 filing was terminated when a UCC-3 Termination Statement was mistakenly filed in Delaware. Despite the filing of the UCC-3 Termination Statement in Delaware, the Defendants allege that, at the time of the 363 Sale they held a perfected security interest in over 200,000 fixtures at GM plants because of twenty-six Fixture Filings in counties where disputed assets were located. The Defendants argue that these fixtures should be valued according to their replacement cost new less depreciation, as part of a going-concern business. The Avoidance Action Trust, on behalf of Old GM’s unsecured creditors, disputes whether most of these assets are indeed fixtures, and if they were, it argues that they should be valued at their liquidation value.

It is impractical, to say the least, to litigate issues with respect to each of the over 200,000 disputed assets. Therefore, in pretrial proceedings, the Court directed the parties to designate forty representative assets to be the subject of this trial. The Court indicated that it would issue an opinion regarding which assets are fixtures and how to value them. The parties agreed that after the issuance of this Opinion, they would attempt to settle as to the remaining disputed assets. In an effort to provide guidance to the parties in resolving the remaining disputes, the Court includes extensive factual detail in this Opinion. Where possible, the Court has articulated broad principles of both fixture and valuation law to serve as guiding principles for the more than 200,000 assets that remain in dispute.

A. Fixtures

The representative forty assets were located at General Motors facilities in Michigan and Ohio. Disputed assets were located in other states as well, but the disagreement between the Plaintiff and Defendants touches on the fundamental nature of manufacturing assets located at GM’s plants: which ones were “fixtures” that remained subject to the Term Lenders’ perfected security interests when the chapter 11 cases were filed; and, for those fixtures, what are the appropriate valuation principles?

The Defendants maintain that hundreds of thousands of General Motors assets were fixtures that remained part of the Lenders’ perfected security interest after the UCC-3 Termination Statement was filed in Delaware. The Plaintiff disagrees, and argues that just about every asset located inside General Motors facilities was not a fixture. The forty “representative” assets are characteristic of thousands of other GM assets. Hopefully, with the benefit of this Opinion, the parties will be able to resolve the balance of their dispute through settlement,2

The Representative Assets selected by the parties range from enormous stamping presses and machining equipment, to high-tech robotic arms, to long and winding conveyor systems, and even include a software program. The assets, many of which the Court observed in operation during a site-visit with the parties, perform a wide assortment of tasks. Presses stamp sheet metal into auto body parts; robots conduct precision welding generating a cascade of sparks along an intricate assembly line; and sophisticated paint sprayers coat auto parts in a state-of-the-art paint shop described at trial as truly “beautiful.”

Throughout this case, several principles. have emerged from both the case law and the nature of the assets involved that have assisted the Court in making its ultimate determinations. First, the presence of a concrete pit, specialized- foundation, or trench attendant to an asset weighed heavily in favor of finding that an asset was a fixture. As borne out by the case law, the permanence of concrete evidences both a strong level of attachment, and also a forceful intent that an asset remain in place permanently. Second, given the highly interconnected nature of the assets in the manufacturing and assembly process at these facilities, the Court found it useful to look at the level of integration and interconnectedness that an asset had with the production and assembly process and surrounding assets. An asset highly integrated into the assembly line or manufacturing process, including with respect to other assets adjacent or attached to it, cannot be easily removed or relocated without bringing the manufacturing and assembly to a halt, and are stronger indications that the asset was intended-to remain in place permanently as an accession to the realty. This is particularly true where a group of assets fit together in a specific amalgamation, and one or more of the assets is installed in concrete. On the other hand, an asset standing on its own, separate from the manufacturing and assembly process and other assets, necessarily has a lower level of integration with the assembly line and manufacturing process, and there is a lesser indication of an intent for permanence. These principles, explained more fully below, will hopefully assist the parties as they endeavor to resolve the disputes surrounding the remaining assets in question.

B. Valuation

The crux of the valuation task the Court faces is this: how can the Court isolate the value of individual assets from the historic government intervention in the 363 Sale? The Plaintiff argues that the Court should pretend the 363 Sale never happened: without the so-called Public Policy Subsidy and government intervention, Old GM would have liquidated, New GM would not be manufacturing automobiles today, and all of Old GM’s assets would be valued at their liquidation value—most' for scrap. But that is not the world we live in. Defendants urge the Court to value the Representative Assets according to an intermediate step in a contemporaneous valuation by KPMG3: “RCNLD,” which values assets at their replacement cost new less certain depreciation and utilization-based economic obsolescence, but which omits a downward adjustment for economic obsolescence according to the earning power of the business at the time and under the circumstances of the 363 Sale in June 2009 during the Great Recession. Essentially, Defendants ask the Court to value the Representative Assets as if they were part of a business with guaranteed earnings to support the assets’ value. That is not the world we live in, either.

Instead, the Court now exercises its discretion to craft the best available valuation from the evidence presented at trial. The Court largely rejects the two options presented by the parties and instead finds that the KPMG values, including the earnings-based downward adjustment, are the best valuation methodology for the Old GM assets sold to New GM that were expected to remain in continued use. It would not be appropriate to include the value of the Public Policy Subsidy in the individual valuation of the Representative Assets. But teasing out the value of the Public Policy Subsidy does not require resorting to a counterfactual hypothetical world in which the 363 Sale never occurred. The Court finds that, for the Representative Assets that were sold to New GM, a “going concern in continued use” premise of value is appropriate. Those assets were intended to be sold as part of a going concern business; they were indeed sold; and most of them are still in operation to this day. Valuing those assets under a liquidation premise would disregard their proposed disposition on the Valuation Date, run counter to the facts of this case, and significantly deprive the Defendants of the going concern value of their collateral.

However, the Court disagrees with Defendants that RCNLD is the best valuation of the Representative Assets. KPMG’s RCNLD values take into account depreciation, physical obsolescence, and utilization-based economic obsolescence, but not whether the projected earnings of the business support the valuation of the assets. RCNLD was essentially a midpoint in KPMG’s valuation process; after calculating the RCNLD, KPMG applied a 55% reduction to certain categories of assets (including the Representative Assets) to account for its assessment of GM’s Total Invested Capital, or TIC. The parties and the Court refer to this 55% downward adjustment as the TIC Adjustment. KPMG described the TIC Adjustment as a necessary step to reach a value for the assets that an ordinary private market participant would pay—-in other words, the value of the assets without the Public Policy Subsidy. Defendants’ attacks on the TIC Adjustment, whether from an accounting standpoint or by attacking KPMG’s valuation of New GM’s TIC, are impermissible attempts at Monday-morning quarterbacking. KPMG’s Final Fair Value, including the TIC Adjustment, was a contemporaneous, third-party valuation that was the product of months of hard work by experienced professionals, and unlike the opinion testimony of the other experts in this case, it was not done for litigation purposes. The Court finds that for the assets sold to New GM, KPMG’s Final Fair Value is the best available evidence of the assets’ value.

In keeping with the principle that assets should be valued according to their proposed disposition on the Valuation Date and not a hypothetical outcome, the two Representative Assets that were not sold to New GM should not be valued on a going-concern premise. Those assets were intended on the Valuation Date to remain with the Motors Liquidation Co. estate and be liquidated within one to two years; and so they were. Consistent with their proposed disposition on the Valuation Date, the Court adopts liquidation value for those assets.

Valuing the hundreds of thousands of assets the Defendants contend are collateral for the Term Loan is no less daunting than assessing whether those assets are fixtures. The Court recognizes—as the parties likely do—that individual appraisal of over 200,000 assets is simply not feasible. The Court hopes that by articulating the principles that follow in this Opinion, the parties will be able to resolve the dispute through settlement.

II. BACKGROUND

A. Brief History of Old GM

For over one hundred years, General Motors Corporation (“Old GM”) and its approximately 463 direct and indirect wholly-owned subsidiaries were a major part of the U.S. manufacturing and industrial base and the market leader in the U.S. automotive industry. (TX-6 at 4.) Old GM was the largest Original Equipment Manufacturer (“OEM”) of automobiles in the U.S. and the second largest OEM in the world. (JX-6 at 10.) As of March 31, 2009, Old GM employed approximately 235,000 persons worldwide, with approximately 91,000 employed in the U.S.

Old GM utilized many thousands of different suppliers; approximately 11,500 of those suppliers were located in North America. In re Gen. Motors Corp., 407 B.R. 463, 476 (Bankr. S.D.N.Y. 2009). At least hundreds and possibly thousands of automotive parts suppliers depended on Old GM for survival.

B. Events Leading to Bankruptcy

1. Term Loan Agreement and Collateral Agreement

In 2006, GM obtained a $1.5 billion seven-year term loan (the “Term Loan”), evidenced by a note pursuant to the Term Loan Agreement.4 (ECF Doc. # 962 (“Joint Pretrial Order” or “JPTO”) ¶ 44.) JPMC was the administrative agent under the Term Loan Agreement. (Id. ¶ 46.) To secure their obligations under the Term Loan, GM and Saturn granted to JPMC, pursuant to a November 29, 2006, collateral agreement, among Old GM, Saturn and JPMC, a first priority security interest in certain equipment, fixtures, documents, general intangibles, all books and records and their proceeds. (Id. ¶ 47.) A UCC-1 financing statement (the “UCC-1 Statement”) was filed with the Secretary of State of Delaware which perfected the Term Lenders’ security interest in all of the Collateral “now owned or at any time hereafter acquired” by Old GM and its affiliates. (Id. ¶ 48.)

The Term Loan Agreement contemplated that fixture filings would be filed in county real estate records (“Fixture Filings”) with respect to each of the “Material Facilities” in the corresponding office of the County Clerk for the counties where the Material Facilities were located. (Id. ¶ 50.) “Material Facilities” is defined in the Term Loan Agreement as manufacturing facilities listed on Schedule 1 to the Term Loan Collateral Agreement where Collateral with a net book value of at least $100,000,000 was installed or located. (Id, 1151.) Twenty-six Fixture Filings were made. (Id. ¶ 52.)

The Term Loan was a complex syndicated commercial financing, pursuant to which JPMC, Credit Suisse, Cayman Islands Branch, ABN AMRO Bank N.V., Barclays Bank PLC, The Bank of New York, and National City Bank (collectively, the “Bank Lenders”) committed upfront to fund the Term Loan, (Term Loan Agreement ¶2.01, Ex. 1.) The Bank Lenders then had the right to sell, typically through assignments, interests in the Term Loan and the accompanying note in the secondary market to a variety of investors. (Id. ¶ 10.06.) The Bank Lenders ultimately assigned some or all of their interests in the Term Loan, and over 500 sophisticated entities became lenders under the Term Loan Agreement (the “Term Lenders”). (“Amended Complaint,” ECF Doc. #91 ¶¶ 15-568.)

Prior to entering into the Term Loan Agreement, GM entered into a synthetic lease (the “Synthetic Lease”) on October 31, 2001, by which GM obtained up to approximately $300 million in financing from a syndicate of financial institutions. In re Motors Liquidation Co., 777 F.3d 100, 101 (2d Cir. 2015). The Synthetic Lease was documented by a Participation Agreement dated as of October 31, 2001, with JPMC acting as administrative agent. In re Motors Liquidation Co,, 486 B.R. 596, 606 n.13 (Bankr. S.D.N.Y. 2013), rev’d, 777 F.3d 100 (2d Cir. 2015) [hereinafter Bankruptcy UCC Opinion]. GM’s obligation to repay the financing under the Synthetic Lease was secured by liens on certain real properties. Id. at 606.

Outstanding amounts under the Synthetic Lease were paid off and the Synthetic Lease was terminated on October 30, 2008, and the liens on real estate and ■related assets were released. Id, at 608-14. On October 30, 2008, GM’s counsel, with respect to the Synthetic Lease, caused the filing of UCC-3 termination statements with the Delaware Secretary of State. Id, As part of that filing, JPMC and its counsel erroneously authorized the filing of a UCC-3 termination statement (the “Termination Statement”) terminating the UCC-1 Statement securing the Term Loan, Id. Specifically, the Termination Statement provided that the “[effectiveness of the [UCC-1] Statement ... is terminated with respect to security interest(s) of the Secured Party authorizing [the] Termination Statement.”5 (Am. Compl. .¶ 582, Ex. 2.)

2. Financial Difficulty at GM and the Automotive Industry Generally

In 2008, as a result of a decline in market demand for full-size trucks and SUVs, competition from foreign automakers, rising oil prices and overall economic conditions, as well as rising structural costs relating to labor, GM was facing financial difficulties including impaired liquidity. (See JPTO ¶¶ 1-9; Trial Tr. (Worth) at 1801:24-1802:14; Keller Direct ¶¶ 22-25.) With the growth of competitors, between 1980 and early 2009, Old GM’s market share for new North American vehicle sales dropped from approximately 45% to approximately 19.5%.

The pressure mounted in the fall of 2008 with a contraction of the credit markets, lowering of consumer confidence, high unemployment, and a further drop in consumer discretionary spending. These factors contributed to a downturn in auto sales.

Old GM was also burdened with significant structural costs, union restrictions, pension and healthcare obligations, an inefficient dealership network, and several failed brands. These pressures and burdens resulted in Old GM facing a capital shortfall. (JPTO ¶¶ 8-9.)

The price of Old GM’s common stock declined from $23.19 to $0.75 per share from May 1, 2008 to May 29, 2009 (the last trading day before the June 1, 2009 filing of Old GM’s Chapter 11 petition). In its Form 10-Q filed on May 8, 2009, Old GM reported consolidated global assets of approximately $82 billion and liabilities of approximately $172 billion, as of March 31, 2009; That same Form 10-Q reported total net revenue had decreased by 47.1%' in the first quarter of 2009, as compared to the same period in 2008. (Id. ¶ 16.)

3. Failed Efforts to Engage with the Private Market

Prior to filing for bankruptcy, Old GM attempted to raise capital by selling certain business units and brands, including Saturn, Saab, Hummer, Opel, and AC Del-co. Old GM also explored a merger with Chrysler, but no such merger took place. (Id. ¶ 10.)

In April 2009, Old GM attempted a public exchange offer to provide equity to its outstanding bondholders. The public exchange offer announced in April 2009 was unsuccessful. (Id. ¶ 12.)

Between 2008 and June 30, 2009, Old GM engaged in unsuccessful attempts to secure private financing. (Id. ¶ 13.) By all accounts, no private market participant was willing to make a deal with Old GM.

I. Government Intervention

In late 2008 and early 2009, the United States Government agreed to extend substantial financing to Old GM. In late 2008 and through June 30, 2009, the United States and Canadian Governments were concerned that if Old GM ceased operations, it would cause significant harm to the economy and exacerbate the financial crisis. (Id. ¶ 19.)

a) TARP, Treasury Prepetition Loans, and the Viability Plans

The United States Government implemented programs to assist the automotive industry through the U.S. Treasury and its Presidential Task Force on the Auto Industry pursuant to the Troubled Asset Relief Program (“TARP”). (Id. ¶ 20.)

On December 31, 2008, the Government agreed to provide Old GM with a bridge loan of up to $13.4 billion on a senior secured basis (the “Treasury Prepetition Loan”) under TARP. Old GM drew $4 billion on that Treasury Prepetition Loan in December 2008. It then drew $5.4 billion more between December and February 2009, and the remaining $4 billion on February 17, 2009. (Id. ¶ 22.)

On March 30, 2009, the President of the United States announced that the United States Government would extend to Old GM adequate working capital for a period of another sixty days to enable it to continue operations, and that it would work with Old GM to develop and implement an appropriate viability plan. (Id. ¶ 23.)

On April 22, 2009, the United States Government and Old GM entered into amended credit agreements for the Treasury Prepetition Loan. On April 24 2009, Old GM received a second TARP loan of $2 billion. On May 20, 2009, Old GM received a third TARP loan of $4 billion. Old GM had borrowed a total of $19.4 billion from the U.S. Government by the end of May 2009.

As a condition to the TARP loans, Old GM was required to submit viability plans. Old GM ultimately submitted five versions of its viability plan to the United States Government. The first four were rejected. The United States Government accepted the fifth viability plan, Viability Plan 4B (“VP-4B”), which contemplated additional government funding in connection with a bankruptcy filing. (Id. ¶¶ 28-30.)

C. GM’s Bankruptcy, the DIP Financing Order, and the 363 Sale

On June 1, 2009 (the “Petition Date”), GM and certain of its subsidiaries filed voluntary petitions for relief under chapter 11 of title 11 of the Bankruptcy Code in this Court. As of the Petition Date, the outstanding principal balance under the Term Loan Agreement was in excess of $1.4 billion. (Am. Compl. ¶ 573.)

On June 3, 2009, the Office of the United States Trustee appointed the Official Committee of Unsecured Creditors of Motors Liquidation f/k/a General Motors Corporation (the “Committee”) pursuant to section 1102 of the Bankruptcy Code.

On the Petition Date, the Debtors also filed the motion for debtor-in-possession financing (the “DIP Motion”) seeking authority to obtain interim postpetition financing on a secured and superpriority basis up to a maximum aggregate interim amount of $15 billion and final postpetition financing on a secured and superpriority basis up to a maximum aggregate final amount of $33.3 billion under a DIP facility (the “DIP Facility”) from the United States Department of Treasury and Export Development Canada. The DIP Facility was to be used to pay, among other things, certain prepetition claims and fund the Debtors’ operations and administration costs. (See Am. Compl. ¶ 574.) The Court approved the DIP Facility, first on an interim and then on a final basis. (Interim DIP Order (Main Proceeding ECF Doc. # 292); DIP Order (Main Proceeding ECF Doc. #2529).) Among other things, the DIP Order authorized repayment in full of the Term Loan. (Am. Compl. ¶ 578.)

Paragraph 19(d) of the DIP Order provides for full general releases of any and all claims against, among others, the holders of the Term Loan, except:

that such release shall not apply to the Committee with respect only to the perfection of first priority liens of the Prepetition Senior Facilities Secured Parties (it being agreed that if the Pre-petition Senior Facilities Secured Parties, after Payment, assert or seek to enforce any right or interest in respect of any junior liens, the Committee shall have the right to contest such right or interest in such junior lien on any grounds, including (without limitation) validity, enforceability, priority, perfection or value) (the ‘Reserved Claims’).

(DIP Order ¶ 19(d).)

Following entry of the DIP Order, the Debtors paid $1,481,656,507.70 to the Term Lenders in full satisfaction of all claims arising under the Term Loan Agreement. (Am. Compl. ¶ 578.)

Also on the Petition Date, Old GM filed a motion in this Court seeking approval to sell substantially all of its assets to a Government-sponsored entity in an expedited sale under Section 363 of the Bankruptcy Code (the “363 Sale”). The Government-sponsored entity purchasing Old GM’s assets was to be a new company, NGMCO, Inc. (“New GM”). In other words, the Sale Motion contemplated that New GM would purchase Old GM’s assets with a credit bid that would include Old GM’s pre-petition TARP loans and the vast majority of the DIP Facility. (DX-4 at 9.) As additional consideration, New GM agreed to distribute to Old GM—for the benefit of Old GM’s unsecured creditors-10% of the common equity of New GM, plus warrants to purchase an additional 15% of New GM’s stock. (JPTO ¶ 36; DX-4 at 9.) As described further below, Old GM’s financial advisor, Evercore, estimated that the total purchase price paid to Old GM was between $91.2 and $93.6 billion, and valued the common equity and warrants provided to Old GM at $7.4 to $9.8 billion. (JX-3 at 106.) The assets that New GM did not acquire would remain with Old GM, which was renamed Motors Liquidation Company. If any bid was higher or better than the existing terms of the 363 Sale, then, subject to Bankruptcy Court approval, Old GM’s assets would be sold to that bidder. (JPTO ¶¶ 33, 39.) No other bids for Old GM’s assets were submitted.

D. History of this Action

1. The Original Complaint and Summary Judgment Motions

On the July 31, 2009 deadline set out in the Final DIP Order, the Committee filed a complaint initiating this adversary proceeding (the “Original Complaint,” ECF Doc, # 1) against the Defendants. The Original Complaint’s only asserted claim under section 644(a) was one to avoid liens based on the termination of the Delaware UCC-1 Statement. (Original Complaint ¶¶ 7-8, 426, 433-37, 439-41.) The Original Complaint did not challenge the validity, extent, or priority of any security interest arising from fixture filings. On cross-motions for summary judgment, the Bankruptcy Court held that the termination of the UCC-1 Statement was ineffective unless it was authorized, and neither party intended to terminate it. Bankruptcy UCC Opinion., 486 B.R. at 606.

The case was appealed directly to the Second Circuit which, after a decision by the Delaware Supreme Court on a certified question, held that the UCC-1 Statement was not effective as of the Petition Date due to the filing of the Termination Statement in October 2008. See Motors Liquidation Co., 777 F.3d at 105 (“[A]l-though JPMorgan never intended to terminate the Main Term Loan UCC-1, it authorized the filing of a UCC-3 termination statement that had that effect .. *, Nothing more is needed.”). While the UCC-1 Statement no longer served to perfect the security interest in personal property at GM facilities, the Fixture Filings had been made in the offices of the County Clerks for the counties where the Material Facilities were located. The security interest in fixtures covered by the twenty-six Fixture Filings were unaffected by the UCC-3 Termination Statement filed in Delaware.

2. The Amended Complaint

After the appeal to the Second Circuit was resolved, the Avoidance Action Trust, as successor to the Committee, became the Plaintiff in this case. (JPTO at 1.) The Plaintiff amended the Original Complaint on May 20, 2015 (the “Amended Complaint,” ECF Doc. #91).6 The Amended Complaint included a new paragraph, which stated:

To the extent that some portion of the Collateral was secured and perfected by filings other than the [UGC-l] Statement (the “Surviving Collateral”), the value of the Surviving Collateral was less than the amount of the Term Loan Lenders’ claim under the Term Loan Agreement, and Defendants were not entitled to receive the Postpetition Transfers to the extent that the amount of such transfers exceeded the value of the Surviving Collateral. The Surviving Collateral is of inconsequential value.

(Am. Compl. ¶601.) Like the Original Complaint, the Amended Complaint only asserts a section 544 claim regarding the termination of the UCC-1 Statement, as the term “financing statement” in paragraph 601 refers to the “Delaware UCC-1.” The “Surviving Collateral” referenced in paragraph 601 refers to collateral secured by the twenty-six fixture filings. As will be discussed further below, paragraph 601 is not an attack on the priority of allegedly unperfected security interests; it is an assertion that the assets actually covered by fixture filings are of “inconsequential value.” Indeed, this assertion about the value of the fixtures is the underlying premise of the Plaintiffs case— that nearly everything at the GM plants are not fixtures, and those assets that are fixtures are of no real value.

On May 19, 2016, the Plaintiff filed a letter (the “May 2016 Letter,” ECF Doe. # 613) raising for the first time an issue regarding the perfection and priority of liens on fixtures located at GM’s Lansing Delta Township (“LDT”) facility. In the May 2016 Letter, the Plaintiff explained that the LDT fixture filing identified a vacant parcel of land near the LDT plant. The Plaintiff noted that it planned to argue that “there is no surviving collateral at the Lansing plant” because of this error in the LDT fixture filing. (May 2016 Letter at 1.) The Amended Complaint was not amended after the May 2016 Letter was filed or at any time before or during trial,

E. The Court’s Site Visit to LDT and Warren Transmission

The Defendants and the Motors Liquidation Company Avoidance Action Trust (the “Plaintiff’) requested that the Court travel to Michigan to view many of the Representative Assets located at the Warren Transmission facility and'the LDT facilities. (See ECF Doc. #896.) On March 23, 2017, the Court entered the Protocol Order for GM Site Visits (the “Protocol Order,” ECF Doc. #897). The Protocol Order set forth the agreed-upon procedures (the “Protocol”) for the Court to accompany the parties on a guided visit to view certain of the Representative Assets located at the GM Warren Transmission facility and the facilities at Lansing Delta Township.

The Court visited Warren Transmission facility on April 4, 2017, and the LDT manufacturing facilities on April 5, 2017.7 Pursuant to the Protocol, the parties prepared brief scripted statements that were read aloud when the Court was viewing each Representative Asset. The Court found the site visit to be a useful supplement to the testimony and photographic evidence provided at trial.

F. GM’s eFAST Ledger

The database that GM uses for its fixed .asset accounting is called eFAST. (Trial Tr. (Goesling) at 2928:8-25; see also Fulcher Dep. Tr. at 37:12-18.) The eFAST database contains extensive information about GM’s assets, including approximately 425 different fields within eFAST that contain asset-specific information regarding financial accounting, federal tax accounting and property tax reporting. (Trial Tr. (Goesling) at 2928:3-25; see also PX-290 (describing categories of information contained in the eFAST database).)

For this litigation, New GM produced data extracted from eFAST regarding the forty Representative Assets. (PX-231 (eFAST extract).) The eFAST extract, PX-231, includes information relating to each fixed asset, such as: the Asset ID number; a description of the asset; the in-service date, which is the date the asset was capitalized and put into production (Fulcher Dep. Tr. at 41:25-42:2); the installed cost; Lease Contract (ie., whether the asset is subject to a lease); the manufacturer and model number; the Book De-preciable Life in years and months (ie., 1300 in the column means 13 years, 0 months); and “PT Real Personal,” which is GM’s classification of an asset as real estate or personal property for tax purposes. (Id. at 46:23-47:1.)

III. FACTUAL BACKGROUND REGARDING RELEVANT GM PLANTS

A. GM Lansing Delta Township

GM’s facility at Lansing Delta Township consists of stamping, assembly, and paint shop operations. These processes work together in a seamless work flow to produce more than one thousand vehicles each day.

1. The LDT Plant

The assembly operation at Lansing Delta Township (“Lansing Assembly”) in Michigan was completed in 2006 and was the first greenfield plant in the U.S. designed to integrate the best of GM’s flexible manufacturing processes! (Miller Direct ¶ 166; Stevens Direct ¶ 13.) With Lansing Assembly, GM’s goal was to utilize the best and most recent learning and concepts, implementing in the U.S. the concepts that had been implemented in new plants around the world. (Stevens Di.rect ¶ 13.) Consistent with GM’s global manufacturing system (“GMS”), LDT was designed with flexible framing stations and flexible tooling to enable the production of different models at the same time and to enable model changes over time with virtually no machinery and equipment changes and minimal tooling changes. (Id.)

Since it was completed in 2006, Lansing Assembly has always been physically and functionally integrated with the stamping operations (“Lansing Stamping”). (Miller Direct ¶ 166.) As a practical matter, Lansing Stamping and Lansing Assembly function as a single, integrated operation to produce a common line of crossover vehicles: the Chevrolet Traverse, GMC Acadia (production recently moved to another plant), and the Buick Enclave. (Id.) GM has managed Lansing Stamping and Lansing Assembly as a unified facility known as “LDT.” (Id.) The two facilities are operationally integrated under the oversight of a single plant manager. (Id.) Structurally, the two “facilities” are in a single building. (Id. ¶ 167.) Employees walk freely from one “facility” to the other “facility” without leaving a building or passing through any security checkpoint. (Id.) The are no walls at all between Lansing Assembly’s body shop and Lansing Stamping; both processes are performed in a single building. (Id.)

In simple terms, the output from Lansing Stamping is the input for Lansing Assembly. (Id. ¶ 168.) The presses in Lansing Stamping stamp nearly all of the sheet metal that is then assembled by sophisticated robots at the body shop of Lansing Assembly in the very same building. (Id.) Even when the plants are not operating, the schedules for maintenance- and safety-related shutdowns are coordinated across the two facilities. (Id.) In addition, the two plants are served by the same complex of utility assets—including the LDT Central Utilities Complex selected by the parties as one of the forty Representative Assets in this case. (Id.) Finally, Lansing Stamping and Lansing Assembly share: (a) information technology infrastructure; (b) maintenance tools and consumables; (c) parking lots; (d) site entrances; (e) security gates; (f) employee congregation areas; (g) storage areas; (h) testing facilities; (i) human resources personnel; and (j) facilities service providers. (Id.)

Since Lansing Assembly was constructed in 2006, GM has invested more than a half a billion dollars into it. (Trial Tr. (Stevens) at 422:25-423:6.) The investment supported numerous renovations, including reconfiguring portions of the subassembly area in the body shop as part of a model change, extending the buildings by 100 feet, and installing an additional 200 feet of conveyor. (Id. at 423:7-424:17.) Framing gates were also added to the framing stations in the body shop (id. at 427:7-16.) and the body shop expanded into the stamping facility. (Trial Tr. (Miller) at 1223:6-14.) Additionally, changes in equipment were made to accommodate a new aluminum vehicle that was going into production. (Id. at 1119:17-1120:19.)

The paint shop is equally integrated into the operations at the LDT facilities. The following exhibit demonstrates the highly integrated production flow at LDT:

[[Image here]]

(Stevens Direct, Ex. A at 11.)

2. The Eaton County Fixture Filing

A Fixture Filing listing Old GM as 'the debtor was recorded on behalf of JPMor-gan on April 26, 2007, in Eaton County, Michigan (the “Eaton County Fixture Filing”). It describes the collateral covered by ⅛ as “all fixtures located on the real estate described in Exhibit A,” Exhibit A, as it is filed* in the Eaton County Register of Deeds office, includes the following;

[[Image here]]

EXHIBIT A

8400 MILLETT HWY, LANSING TOWNSHIP, LANSING MI 48917-9549

S 1/2 SEC 28 LYING W OF W UNE HWY I-96/69, EXC NW 1/4 OF SW 1/4', AND EXC PARTS S & E OF LINE COM 100 FT W OF S 1/4 COR SAID SEC, TH N 50 FT, E 400 FT, N 26 FT, E 188.65 FT TO W LINE SAID HWY R/W& POE, EXC LANDS USED FOR GUNIEA RD & MILLETT HWY; 144 ACRES +/-; SEC 28 T4N R3W