Court: GM ignition-switch lawsuits can proceed
General Motors cannot avoid lawsuits from pre-bankruptcy ignition-switch defect victims, a federal court ruled Wednesday.
The 2nd U.S. Circuit Court of Appeals overturned a bankruptcy judge’s ruling that had protected GM from those lawsuits because of the company’s 2009 bankruptcy restructuring.
The ruling gives new life to hundreds of lawsuits from potential victims, including some who refused to accept settlements and instead took their chances in court. It also gives life to lawsuits from potential victims whom GM refused to offer deals and to classaction lawsuits by consumers who claim their vehicle values fell because of the scandal.
Accordingly, it may expose the so-called New GM to new liabilities for a defect that killed at least 124 people and injured 275 in small cars made by the Old GM, such as the Chevrolet Cobalt and Saturn Ion.
GM shares rose 0.4% Thursday, closing at $30.76.
Plaintiffs’ attorneys who have battled the automaker in court quickly hailed the decision.
“I was so relieved for my cli- ents,” Texas attorney Robert Hilliard said in an interview. “For years many of the victims of the GM ignition switch have had their claims languishing in bankruptcy court. These folks will have their day in court.”
Victims who qualified for settlements — based on the determination of GM-hired independent compensation fund chief Kenneth Feinberg — have already received settlements from GM totaling at least $595 million. In many cases, those settlements topped $1 million, with some deals much higher.
“We are reviewing the ruling and its impact,” GM spokesman Jim Cain said in a statement. “Even if some claims are ultimately allowed to proceed, the plaintiffs must still prove their cases.”
The central question for the court was whether GM’s Chapter 11 bankruptcy protected it from ignition-switch claims that arose before it petitioned the court for protection from its creditors. GM failed to disclose the defect during its bankruptcy, giving rise to the dispute over whether victims were given adequate opportunity to seek compensation during the bankruptcy case.
The court ruled that GM knew or should have known about the defect. The company has repeatedly apologized and acknowledged it failed to fix the defect for more than a decade following a series of bureaucratic mishaps, communication mistakes and engineering blunders.
The New GM was created when the federal government bailed out the old GM, funding a transaction in which the Detroitbased automaker’s best assets were sold to a newly created company that was given the name General Motors LLC instead of General Motors Corp.