The U.S. Court of Appeals for the Second Circuit issued a summary order on February 3, 2026, in the complex bankruptcy case of Residential Capital LLC, the mortgage lending subsidiary of General Motors that collapsed during the 2008 financial crisis. The case involves multiple parties including the ResCap Liquidating Trust and several settlement class representatives seeking remedies in one of the largest mortgage-related bankruptcies in recent history.
The three-judge panel consisting of Circuit Judges Reena Raggi, Susan L. Carney, and Beth Robinson heard the consolidated appeals numbered 25-118 (Lead), 25-131 (CON), 25-138 (CON), and 25-225 (XAP). The proceeding took place at the Thurgood Marshall United States Courthouse in New York City.
Residential Capital LLC, commonly known as ResCap, was once one of the nation's largest mortgage lenders and servicers. The company filed for bankruptcy in May 2012 amid mounting losses from subprime mortgages that contributed to the broader financial crisis. The bankruptcy case has continued for more than a decade, involving complex litigation over mortgage-backed securities, loan origination practices, and claims by investors and borrowers.
The current appeal involves the ResCap Liquidating Trust, which serves as the successor to Residential Funding Company LLC, one of ResCap's key subsidiaries. The trust was established as part of the bankruptcy reorganization to pursue claims and distribute recoveries to creditors and other parties affected by the company's collapse.
Multiple settlement classes are represented in the litigation, including the Kessler Settlement Class and the Mitchell Settlement Class. Individual representatives include Rowena Drennen, Flora Gaskin, Roger Turner, Christie Turner, John Picard, Rebecca Picard, Steven Mitchell, and Ruth Mitchell, all seeking remedies on behalf of their respective classes.
The defendants in the case include several major insurance companies: Certain Underwriters at Lloyds, London; Twin City Fire Insurance Company; Continental Casualty Company; and Clarendon National. These insurers likely provided coverage to ResCap for various liabilities that arose from the company's mortgage lending and servicing operations.
The Second Circuit's summary order carries specific limitations on its precedential value. According to the court's notice, rulings by summary order do not have precedential effect, meaning they cannot be cited as binding authority in future cases. However, citation to summary orders filed after January 1, 2007, is permitted under Federal Rule of Appellate Procedure 32.1 and the Second Circuit's Local Rule 32.1.1.
Parties citing to this summary order must reference either the Federal Appendix or an electronic database with the notation "Summary Order." Additionally, any party citing the order must serve a copy on parties not represented by counsel, ensuring all participants have access to the referenced decision.
The ResCap bankruptcy has been notable for its complexity and duration, involving thousands of claims related to mortgage origination, servicing practices, and securities offerings. The company's collapse was attributed to its heavy involvement in subprime lending, particularly through its GMAC Mortgage unit, which originated and securitized billions of dollars in mortgages before the housing market crash.
Settlement classes in such cases typically represent groups of borrowers, investors, or other parties who suffered similar harms from the company's practices. The Kessler and Mitchell settlement classes likely represent distinct groups of claimants with different types of claims against ResCap and its affiliated entities.
The involvement of major insurance companies as defendants suggests the litigation may center on coverage disputes related to ResCap's various liabilities. Insurance coverage litigation often arises in large bankruptcies when liquidating trusts seek to recover from insurers to maximize distributions to creditors and claimants.
The Second Circuit's handling of this case continues the court's oversight of significant financial crisis-related litigation. The court has previously addressed numerous cases stemming from the mortgage crisis, including disputes over mortgage-backed securities, loan origination practices, and regulatory enforcement actions.
While the specific holdings of the summary order are not detailed in the available documentation, the consolidated nature of the appeals suggests the court addressed multiple related issues in a single proceeding. This approach is common in complex bankruptcy litigation where related appeals can be efficiently resolved together.
The case represents ongoing efforts to resolve claims and distribute recoveries from one of the mortgage industry's most significant failures. More than a decade after ResCap's bankruptcy filing, the liquidation process continues as courts work through complex claims and coverage disputes that arose from the company's role in the broader financial crisis.