In the United States Court of Federal Claims
Nos. 10-647C, 11-100C, and 12-900C
(Filed: June 14, 2017)
CONSOLIDATED
NOT FOR PUBLICATION
)
COLONIAL CHEVROLET CO., )
INC., et al., )
)
Plaintiffs, )
v. )
)
THE UNITED STATES, )
)
Defendant. )
)
********************* )
ALLEY’S OF KINGSPORT, INC., et )
al., )
) RCFC 56(d)
Plaintiffs, )
v. )
)
THE UNITED STATES, )
)
Defendant. )
)
****** *************** )
SPITZER MOTOR CITY, INC., et al., )
)
Plaintiffs, )
v. )
)
THE UNITED STATES, )
)
Defendant. )
)
ORDER GRANTING-IN-PART AND DENYING-IN-PART
GM PLAINTIFFS’ RULE 56(d) MOTION
Pending before the court is a renewed motion for discovery pursuant to Rule 56(d)
of the Rules of the United States Court of Federal Claims (“RCFC”) filed by plaintiffs in
Colonial Chevrolet Co., Inc., et al. v. United States (Case No. 10-647C). The plaintiffs
are former General Motors Corporation (“GM”) franchisees (“GM plaintiffs”) who claim
that the United States government’s actions in connection with the GM bailout, which
resulted in the United States becoming a majority shareholder in the post-bankruptcy
GM, amounted to a taking of their franchise agreements without just compensation under
the Fifth Amendment. As discussed in A & D Auto Sales, Inc. v. United States, 748 F.3d
1142, 1147, 1150 (Fed. Cir. 2014), the plaintiffs contend that the taking arose when the
United States required GM to terminate the plaintiffs’ car dealership franchise
agreements as a condition to the government providing financial assistance to GM in
2009.
The plaintiffs claim that they need discovery in order to respond to the motion for
summary judgment the government filed after this court rejected the government’s
motion to dismiss. See Colonial Chevrolet Co., Inc. United States, 123 Fed. Cl. 134, 136
(2015). In the motion for summary judgment, the government argues among other things
that most of the GM plaintiffs’ claims are barred by a release they signed in exchange for
payments and other benefits in wind-down agreements offered by GM on June 1, 2009,
the day GM filed for bankruptcy. Although the government was not a party to the wind-
down agreements it argues that the releases in the wind-down agreements protect the
United States and bar the GM plaintiffs’ Fifth Amendment taking claims. The releases in
the wind-down agreements state in relevant part as follows:
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Dealer . . . hereby releases, settles, cancels, discharges, and acknowledges
to be fully satisfied any and all claims, demands, damages, debts; liabilities,
obligations, costs, expenses, liens, actions, and causes of action of every
kind and nature whatsoever . . . whether known or unknown, foreseen or
unforeseen, suspected or unsuspected (“Claims”), which Dealer or anyone
claiming through or under Dealer may have as of the date of the execution
of this Agreement against GM, the 363 Acquirer, their Affiliates or any of
their respective members, partners, venturers, stockholders, officers,
directors, employees, agents, spouses, legal representatives, successors or
assigns (collectively, the “GM Parties”), arising out of or relating to . . . the
Dealer Agreements or this Agreement . . . or any other events, transactions,
claims, discussions or circumstances of any kind arising in whole or in part
prior to the effective date of this Agreement . . . .
Def.’s Reply App. A131 (ECF No. 181). The government argues that as the majority
shareholder in the new GM it is protected from all of the claims filed by those plaintiffs
that signed the wind-down agreements.
According to the GM plaintiffs, they cannot respond to the government’s
contention that the releases they signed bar their claims without discovery into the
government’s role in overseeing the GM bailout and in drafting the wind-down
agreements. In this connection the plaintiffs contend that the releases do not cover their
claims but that if the releases are broad enough to bar their claims the releases are
unenforceable. Specifically they argue that the government misrepresented its role by not
identifying itself in the release and that the government placed plaintiffs under duress by
giving them only 12 days to review their wind-down agreements. The GM plaintiffs seek
to depose several former government officials who were instrumental in designing the
GM bailout. They also seek documents from the Special Inspector General for the
Troubled Asset Relief Program (“SIGTARP”). The GM plaintiffs also argue that in order
to respond to the government’s argument that their dealerships would have had no value
3
without a government bailout, they seek discovery regarding the government’s ownership
of GM cars and trucks to establish the value of servicing government-owned GM cars
and trucks.
After careful consideration, the court finds that the GM plaintiffs may conduct
limited discovery to determine the government’s role, if any, in the drafting of the wind-
down agreements in order to respond to the government’s contention that the releases bar
plaintiffs’ Fifth Amendment claims. However, the plaintiffs’ request for discovery into
whether the government endeavored to intentionally misrepresent its role in new GM in
order to induce plaintiffs to sign releases with old GM is denied. Plaintiffs have not
presented any basis for discovery into whether the government fraudulently
misrepresented its role in new GM or caused plaintiffs duress. In addition, the court finds
that the plaintiffs may also conduct limited discovery into the government’s fleet of GM
vehicles at the time of the bailout. Therefore, the plaintiffs’ renewed RCFC 56(d) motion
is GRANTED-IN-PART and DENIED-IN-PART. 1
I. LEGAL STANDARDS
Under RCFC 56(d), “[i]f a nonmovant shows by affidavit or declaration that, for
specified reasons, it cannot present facts essential to justify its opposition [to a motion for
summary judgment], the court may: (1) defer considering the motion or deny it; (2) allow
1
The GM plaintiffs’ motion (ECF No. 260), filed June 2, 2017, for leave to supplement the
record with a video recording of Mr. Rattner from March 10, 2011 describing the restructuring of
Chrysler and GM is GRANTED.
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time to obtain affidavits or declarations or to take discovery; or (3) issue any other
appropriate order.”
Interpreting the analogous Federal Rule of Civil Procedure, the Federal Circuit has
found that “[w]hen the discovery is reasonably directed to ‘facts essential to justify the
party’s opposition,’ . . . such discovery must be permitted or summary judgment
refused.” Opryland USA Inc. v. Great Am. Music Show, Inc., 970 F.2d 847, 852 (Fed.
Cir. 1992) (citations omitted).
Ordinarily to meet this standard a plaintiff must:
(1) specify the particular factual discovery being sought, (2) explain how
the results of the discovery are reasonably expected to engender a genuine
issue of material fact, (3) provide an adequate factual predicate for the
belief that there are discoverable facts sufficient to raise a genuine and
material issue, (4) recite the efforts previously made to obtain those facts,
and (5) show good grounds for the failure to have discovered the essential
facts sooner.
Theisen Vending Co. v. United States, 58 Fed. Cl. 194, 198 (2003).
II. DISCUSSION
A. The GM Plaintiffs May Conduct Limited Discovery Regarding the
Scope of the Release in the Wind-Down Agreement But Not Into Their
Claims of Fraudulent Misrepresentation or Duress.
While the GM plaintiffs argue as a matter of law that their releases do not cover
their Fifth Amendment claims, they also argue as a factual matter that the releases were
never intended to cover their constitutional claims against the United States. They argue
that discovery will show that the wind-down agreements did not extend to Fifth
Amendment takings claims.
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The court agrees with the GM plaintiffs that they may conduct discovery regarding
the government’s role in the wind-down agreements in order to establish the intent of the
parties regarding the scope of the releases signed. This court has found that “[w]hen the
United States asserts its rights as a third party beneficiary to a private agreement,” in
particular with regard to a release, “the United States has the burden of showing that it is
entitled to those rights under the state law governing that agreement.” W. Chelsea
Buildings, LLC v. United States, 109 Fed. Cl. 5, 16-17 (2013) (citing United States v.
State Farm Mut. Auto. Ins. Co., 936 F.2d 206, 207 (5th Cir. 1991)). Under Michigan law,
which the court agrees with plaintiffs governs the wind-down agreements they entered
into with Old GM, “[i]f the text in the release is unambiguous,” the court “must ascertain
the parties’ intentions from the plain, ordinary meaning of the language of the release.”
Gortney v. Norfolk & W. Ry. Co., 549 N.W.2d 612, 614 (Mich. Ct. App. 1996) (citations
omitted). 2 A release is ambiguous “if its language is reasonably susceptible to more than
one interpretation.” Id. at 615 (citations omitted).
Without resolving the merits of the government’s motion for summary judgment,
the court finds that where the United States is not identified by name and there is no
mention of constitutional claims, discovery into the scope of the release language is
appropriate, including discovery into the role of the United States, if any, in drafting the
release.
2
The wind-down agreements state “[t]his Agreement shall be governed by, and construed in
accordance with, the laws of the state of Michigan.” E.g., Def.’s Reply App. A135 (ECF No.
181).
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In their RCFC 56(d) motion, the GM plaintiffs also contend that, if the court finds
the releases extend to their constitutional claims, the releases in the wind-down
agreements are invalid on the grounds that they were obtained due to fraudulent
misrepresentation or duress. Under Michigan law, “[a] release is invalid if (1) the
releasor was acting under duress, (2) there was misrepresentation as to the nature of the
release agreement, or (3) there was fraudulent or overreaching conduct to secure the
release.” Brooks v. Holmes, 413 N.W.2d 688, 689 (Mich. Ct. App. 1987) (per curiam)
(citations omitted); Skotak v. Vic Tanny Int’l, Inc., 513 N.W.2d 428, 430 (Mich. Ct. App.
1994) (per curiam). Citing Michigan law, as required by the wind-down agreements, the
plaintiffs argue that they are seeking discovery to show that the releases are invalid on the
grounds that:
(1) the defendant made a material representation, (2) it was false, (3) the
defendant knew it was false when made, or made it recklessly, without
knowledge of its truth and as a positive assertion, (4) it was made with the
intention to induce reliance by the plaintiff, (5) the plaintiff acted in
reliance upon it, and (6) the plaintiff thereby suffered injury.
State-William P’ship v. Gale, 425 N.W.2d 756, 761 (Mich. Ct. App. 1988).
In affidavits filed with their discovery request, the GM plaintiffs state that they
relied on the statement of President Obama that the United States did not intend to run
GM and thus they were unaware of the extent of the government’s control over the
operations of GM, that the government intentionally concealed its role in GM at the time
they signed the wind-down agreements in order to induce them to sign the agreements,
and that they suffered injury because of the government’s actions.
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The GM plaintiffs also argue that the releases are void on the grounds of economic
duress because the plaintiffs were subject to a wrongful act or threat that deprived them
of their unfettered will and they had no adequate legal remedy available. Pl.’s Mot. 22
(quoting Barnett v. International Tennis Corp., 263 N.W.2d 908 (Mich. Ct. App. 1978)).
Specifically, the GM plaintiffs assert that they felt coerced due to “the short time frame in
which they had to sign the wind-down agreements.” Id. at 23 (citing plaintiffs’
affidavits). For example, Ms. VanderMeer states in her affidavit that she believes the
short time frame was imposed on her “to prevent me from discovering the true role of the
Federal government in terminating my dealership” and that it prevented her “from
obtaining proper legal advice and from allowing an attorney to examine the wind-down
agreement and liability release agreement and advising me of the true nature of the claims
and rights I was giving up by signing the agreements.” Ms. VanderMeer states that she
believes “this was done intentionally by the Federal government officials who I did not
know at the time were operating and managing GM.” Mr. Gibson adds in his affidavit
that he felt his “choices at the time, when facing the death of my dealership, were
between shooting it in the head and suffering an immediate death or shooting it in the
stomach and suffering a delayed death.”
To invalidate a release clause on the grounds of misrepresentation, “a
misrepresentation must be made with the intent to mislead or deceive.” Castillo v.
Vannuil, No. 323581, 2015 WL 6161860, at *4 (Mich. Ct. App. Oct. 20, 2015) (per
curiam) (citing Paterek v. 6600 Ltd., 465 N.W.2d 342, 345 (Mich. Ct. App. 1990) (per
curiam)). “An innocent misrepresentation is insufficient to invalidate a release.” Pape v.
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Dobronski, No. 320552, 2015 WL 3448727, at *2 (Mich. Ct. App. May 28, 2015)
(quoting Hungerman v. McCord Gasket Corp., 473 N.W.2d 720 (Mich. Ct. App. 1991)).
Under Michigan law, each element of misrepresentation “must be proved with a
reasonable degree of certainty, and all of them must be found to exist; the absence of any
one of them is fatal to a recovery.” Titan Ins. Co. v. Hyten, 817 N.W.2d 562, 567-68
(Mich. 2012) (citations omitted); see also In re Complaint of Rovas Against SBC Mich.,
754 N.W.2d 259, 283 (Mich. 2008) (citing Hi–Way Motor Co. v. Int’l Harvester Co., 247
N.W.2d 813 (Mich. 1976); Candler v. Heigho, 175 N.W. 141 (Mich. 1919)).
Michigan courts have found that to satisfy the first element, generally,
representations must be “statements of past or existing fact, rather than future promises or
good-faith opinions.” Cooper v. Auto Club Ins. Ass’n, 751 N.W.2d 443, 452 (Mich.
2008) (citing Hi-Way Motor Co., 247 N.W.2d 813; Danto v. Charles C. Robbins, Inc.,
230 N.W. 188 (Mich. 1930); Foreman v. Foreman, 701 N.W.2d 167 (Mich. Ct. App.
2005); see also Delta Props., Inc. v. Motor Wheel Corp., No. 177965, 1997 WL
33343966, at *2 (Mich. Ct. App. Sept. 9, 1997) (“Future promises” or “an expression of .
. . anticipated action . . . are not actionable in tort.” citing Hi-Way Motor Co., 247
N.W.2d at 817)); State-William, 425 N.W.2d at 761 (finding that statements about the
probability of a lease were opinions, not misrepresentations of fact). “[A] promise made
in bad faith without intention of performance” can only serve as the basis for a fraudulent
misrepresentation claim if “evidence of fraudulent intent . . . relate[s] to conduct of the
actor at the very time of making the representations, or almost immediately thereafter.”
Hi-Way Motor Co., 247 N.W.2d at 816-17 (citations omitted).
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With regard to the second element, statements must be “objectively false or
misleading.” Cooper, 751 N.W.2d at 452 (citing Hord v. Envtl. Research Inst. of Mich.,
617 N.W.2d 543 (Mich. 2000) (per curiam)).
With regard to the third and fourth elements, the plaintiff must show “(1)
knowledge of falsity or reckless disregard of the truth or falsity of a statement, and (2) an
intent that a person detrimentally rely on the statement.” In re Complaint of Rovas
Against SBC Mich., 754 N.W.2d at 278. With regard to alleged misrepresentation
regarding a release, “the failure to specifically draw another’s attention to a particular
clause of a contract” does not amount to a misrepresentation “made with the intent to
mislead or deceive.” Castillo, 2015 WL 6161860, at *4. “Quite the contrary, it is the
responsibility of one signing an agreement to know and understand its contents.” Id.
(citing Scholz v. Montgomery Ward & Co., 468 N.W.2d 845 (Mich. 1991)). “The
purpose of the fraudulent conduct must be to secure the release.” Gonzalez v. Rusty
Wallace Racing Experience, No. 319471, 2015 WL 159490, at *3 (Mich. Ct. App. Jan.
13, 2015) (citing Brooks v. Holmes, 413 N.W.2d 688 (Mich. Ct. App. 1987)), appeal
denied, 870 N.W.2d 722 (Mich. 2015).
With regard to the fifth element, the evidence must demonstrate that the alleged
misrepresentation was at least “a contributing influence upon plaintiff’s decision.”
McKinstry v. Valley Obstetrics-Gynecology Clinic, P.C., 405 N.W.2d 88, 97 (Mich.
1987). However, the plaintiff’s actions in reliance upon the misrepresentation must be
reasonable. Zaremba Equip., Inc. v. Harco Nat’l Ins. Co., 761 N.W.2d 151, 165 (Mich.
Ct. App. 2008) (citing Novak v. Nationwide Mut. Ins. Co., 599 N.W.2d 546, 554 (Mich.
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Ct. App. 1999)). A plaintiff cannot ignore contradictory information. Titan Ins. Co., 817
N.W.2d at 568 n.4 (citations omitted). “[F]raud cannot be ‘perpetrated upon one who has
full knowledge to the contrary of a representation.’” Cooper, 751 N.W.2d at 451
(quoting Montgomery Ward & Co. v. Williams, 47 N.W.2d 607 (Mich. 1951)).
Lastly, Michigan courts have explained that the alleged injury must occur “as a
consequence” of the fraudulent misrepresentation. Cooper, 751 N.W.2d at 452 (citing
Hi-Way Motor Co., 247 N.W.2d 813).
With regard to plaintiffs’ duress argument, Michigan courts have long held that
“[d]uress exists when one by the unlawful act of another is induced to make a contract or
perform some act under circumstances which deprive him of the exercise of free will.”
Norton v. Michigan State Highway Dep’t, 24 N.W.2d 132, 135 (Mich. 1946) (quoting
Hackley v. Headley, 8 N.W. 511, 512-13 (Mich. 1881)). “Fear of financial ruin alone is
insufficient to establish economic duress; it must also be established that the person
applying the coercion acted unlawfully.” Apfelblat v. Nat’l Bank Wyandotte-Taylor, 404
N.W.2d 725, 728 (Mich. Ct. App. 1987).
Given these legal standards, the GM plaintiffs have not demonstrated any grounds
for allowing discovery into whether the subject releases were obtained through fraudulent
misrepresentation or duress. First and foremost, there is no evidence to support plaintiffs’
assertion that President Obama’s statement regarding “running GM” was a
misrepresentation intended to mislead plaintiffs into signing the releases in the wind-
down agreements. President Obama’s remarks were not false or misleading. In the
remarks referenced by the GM plaintiffs, entitled “Remarks by the President on General
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Motors Restructuring,” dated June 1, 2009, President Obama expressly stated that the
government was becoming a majority stockholder in GM. He stated that “our
government will be making a significant additional investment of about $30 billion in
GM -- an investment that will entitle American taxpayers to ownership of about 60
percent of the new GM.” He then explained that in “taking so much stock in GM . . . we
are acting as reluctant shareholders,” and that “[t]he federal government will refrain from
exercising its rights as a shareholder in all but the most fundamental corporate decisions.”
Importantly, he concluded by explaining that:
Building a leaner GM will come at a cost. . . . So I want to say a word
directly to all the men and women watching today, wondering what all of
this will mean as far as their own lives are concerned. . . More dealerships
will shut their doors . . . .
These public remarks make absolutely clear that the government played a crucial
role in the bailout of GM and became a stockholder in the post-bankruptcy company.
Plaintiffs cannot claim based on the public statements of President Obama that the
government misled them as to the United States’ role in the GM bailout. Accordingly,
even if plaintiffs are correct that the government “played down” its role in the day-to-day
management of GM, Pls.’ Reply 8 (ECF No. 244), that is not sufficient to overcome the
fact that nothing in President Obama’s remarks, which plaintiffs rely on, were false or
misleading. President Obama made it clear the United States was becoming a controlling
stockholder and that some dealerships would be closing.
In addition, the fact that the plaintiffs’ attention was not drawn to the language in
the release clause or to the United States’ role as a stockholder is irrelevant to show
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misrepresentation as a basis for discovery. Under Michigan law, it was the plaintiffs’
responsibility to know and understand the contents of the agreements. “[O]ne who signs
a contract will not be heard to say, when enforcement is sought, that he did not read it, or
that he supposed it was different in its terms.” Wilkie v. Auto-Owners Ins. Co., 664
N.W.2d 776, 786 (Mich. 2003) (quoting Farm Bureau Mut. Ins. Co. of Michigan v.
Nikkel, 596 N.W. 915, 920 (Mich. 1999)).
With regard to their duress argument, plaintiffs’ reliance on Barnett v. Int’l Tennis
Corp., 263 N.W.2d at 913, is misplaced. In Barnett, 263 N.W.2d at 913, the Court of
Appeals of Michigan quoted the longstanding rule from Hackley v. Headley, 8 N.W. 511
at 512, that “[d]uress exists when one by the unlawful act of another is induced to make a
contract or perform some act under circumstances which deprive him of the exercise of
free will.” Plaintiffs cite only the “basic elements” of duress that the Barnett court
quoted from Professor Williston’s treatise on contracts. Moreover, plaintiffs rely entirely
on the short time frame the plaintiffs had to decide whether to execute the wind-down
agreements. The plaintiffs have not shown or even alleged that the government engaged
in any unlawful act and therefore the plaintiffs’ proposed discovery cannot be reasonably
expected to result in evidence showing that the plaintiffs were “induced by any unlawful
act of [the United States] to make a contract under circumstances which deprived them of
their free will.” Barnett, 263 N.W.2d at 913.
In sum, plaintiffs have not provided any grounds to support their claims of
fraudulent misrepresentation or duress. Their affidavits fail to provide a basis for
discovery under Michigan law standards for fraudulent misrepresentation or duress. In
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such circumstances, plaintiffs’ request for discovery in order to prove duress or that the
government made a material misrepresentation must be denied.
B. Limited Discovery Regarding the Government’s GM Fleet Will Be
Allowed.
In its motion for summary judgment, the government argues that the claims by the
GM plaintiffs that did not sign wind-down agreements with releases should be barred on
the grounds that the benefits offered through the wind-down agreements were equal to or
greater than what those GM plaintiffs would have received had GM been liquidated in an
orderly bankruptcy proceeding.
The GM plaintiffs argue that they need discovery regarding the government’s plan
for servicing its fleet of GM vehicles to show that the dealerships of the six named
plaintiffs who did not sign the wind-down agreements had more value than what they
were offered by GM as part of the wind-down agreements. Pl.’s Mot. 29. Plaintiffs have
provided an affidavit from their expert, Edward M. Stockton, vice president and director
of economics services for The Fontana Group, Inc., in which Mr. Stockton states that
plaintiffs asked him “to establish to a reasonable degree of scientific certainty the value
of certain General Motors (“GM”) dealerships at and around the time they were
terminated in approximately 2009.” Pls.’ Mot. App. B at 2. In his affidavit Mr. Stockton
states:
In order to valuate these GM Dealerships fully and fairly from an economic
standpoint, it is necessary to consider sufficient information to inform the
analysis across the realm of potential material profit sources for the
franchise. That information includes an accounting of the fleet of GM
vehicles in the possession of the federal government at and around the time
of the GM dealership terminations.
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Id. at 3. According to Mr. Stockton, this information is necessary because (1)
maintenance was a large portion of GM Plaintiffs’ business models, (2) the government
fleet was large and therefore significant, (3) this information is not publicly available, and
(4) the government fleet affected the value of all GM Plaintiffs’ dealerships regardless of
whether the specific dealership being valuated ever actually serviced any federal GM
vehicles. App. B at 3-4.
In its response the government asserts that this discovery request must be denied
on the grounds that the plaintiffs already possess information regarding the number of
government vehicles serviced by or purchased from plaintiffs’ dealerships and
information about government vehicles is publicly available in the General Service
Administration’s “Federal Fleet Report.”
The court agrees with the plaintiffs that they may conduct discovery regarding the
government’s plan for servicing its fleet of GM vehicles. The plaintiffs argue that they
require discovery regarding not only their own dealerships. In addition, the General
Service Administration’s “Federal Fleet Report” relied upon by the government does
contains detailed information on the government’s inventory of vehicles, including
whether those vehicles are owned or leased, the costs of operating the vehicles, and how
many vehicles were purchased by the government in 2009, but it does not contain the
information the plaintiffs seek regarding GM vehicles.
III. CONCLUSION
For the reasons above, the GM plaintiffs’ motion for discovery pursuant to RCFC
56(d) is GRANTED-IN-PART and DENIED-IN-PART.
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The plaintiffs shall have until June 30, 2017 to file proposed discovery requests
consistent with this order together with a proposed schedule for discovery and finalizing
briefing on the government’s motion for summary judgment with regard to the GM
plaintiffs. If the parties cannot agree, the government shall have until July 14, 2017 to
file a response.
IT IS SO ORDERED.
s/Nancy B. Firestone
NANCY B. FIRESTONE
Senior Judge
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