Motors Liquidation: Ignition claims barred; plaintiffs file complaint

By Caroline Salls

Pittsburgh, April 23 - Motors Liquidation Co., formerly General Motors Corp., asked the U.S. Bankruptcy Court for the Southern District of New York to enforce its July 2009 sale order and injunction in connection with litigation in which plaintiffs seek economic losses against the new GM related to an old GM vehicle or part, according to a Monday court filing.

Motors Liquidation said these types of claims were never assumed by new GM and are barred by the sale order and injunction.

The company said the motion to enforce does not address any litigation involving an accident or incident causing personal injury, loss of life or property damage and does not involve whether new GM should repair an ignition switch defect.

Motors Liquidation said new GM has committed to replacing the defective ignition switch as a result of the recall being conducted under the supervision of the National Highway Traffic Safety Administration (NHTSA).

According to the motion, new GM recently sent notices to NHTSA concerning problems with ignition switches and ignition switch repairs in some vehicles and parts manufactured by old GM.

Shortly after new GM issued the recall notice, numerous plaintiffs throughout the country sued the new company for claimed economic losses allegedly resulting from ignition switch defects in old GM vehicles and parts, "the very type of claims retained by old GM for which new GM has no liability."

As a result, Motors Liquidation said the motion to enforce asks the court to decide whether new GM can be sued in violation of the sale order and injunction for economic damages related to vehicles and parts sold by old GM.

"Faced with a fundamental bar to many of their claims against new GM, the ignition switch plaintiffs simply have decided to ignore the court's sale order and injunction and proceed as though it never existed," Motors Liquidation said.

"The law is settled, however, that persons subject to a court's injunction do not have that option."

Specifically, Motors Liquidation said it is asking the court to require the plaintiffs to comply with the sale order and injunction by ordering them to cease and desist from further prosecuting against new GM claims that are barred by the order, dismiss with prejudice those void claims because they were filed in violation of the sale order and injunction and prove whether they have any claims against new GM not otherwise already barred.

Defect complaint

Also on Monday, eight class representatives filed a complaint against General Motors, LLC, arguing that "the sale order cannot be used by GM to absolve it of any liability from plaintiffs' defect claims."

According to the complaint, GM discovered the ignition switch defect in millions of its vehicles more than a decade ago.

Instead of replacing the defective ignition switch, or notifying the NHTSA, vehicle owners or the public of the danger, the plaintiffs said GM made a business decision to conceal its existence.

Once GM could no longer conceal the existence of the ignition switch defect in some of its vehicles, it was forced to disclose that, by its own count, the defect is linked to at least 31 accidents and 13 deaths, the plaintiffs said. The complaint said data recorded on NHTSA's Fatal Analysis Reporting System indicates that 303 fatalities have resulted.

"To make matters worse, during its 2009 Chapter 11 case, GM fraudulently concealed the ignition defect as it took billions of dollars in taxpayer money from the U.S. government and obtained the U.S. government's sponsorship of a plan of reorganization that salvaged the company's very existence," the plaintiff said.

The plaintiffs said consumers did not have an opportunity to assert or have any reason to believe that they should try to assert any objections or claims in the bankruptcy case concerning damages caused by the defect.

"Now that the defect has been disclosed as a result of a nationwide recall, GM has taken the position that the claims related to the vehicles' unmerchantability and its own misfeasance/malfeasance are barred by this court's 363 sale order," the complaint said.

"GM's argument suggests that the U.S. government would have agreed to extend $40 billion of taxpayer money for GM's restructuring, and supported shielding it from liability through the sale order, had it known of GM's intentional misconduct."

Motors Liquidation was formerly General Motors, a Detroit-based automaker that filed for bankruptcy on June 1, 2009. The new General Motors Corp. emerged from Chapter 11 on July 10, 2009. Motors Liquidation's Chapter 11 case number is 09-50026.

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