Judge: GM sale order bars ignition switch successor liability claims

By Caroline Salls

Pittsburgh, April 15 – Plaintiffs in faulty ignition switch lawsuits filed against General Motors LLC are not exempt from provisions in predecessor General Motors Corp.’s asset sale order barring the filing of claims for successor liability, according to a Wednesday ruling by U.S. Bankruptcy Court for the Southern District of New York judge Robert E. Gerber.

Specifically, Gerber ruled that economic loss plaintiffs and re-closing sale plaintiffs are not exempt from the sale order provisions.

However, the judge said the economic loss plaintiffs may file other claims against the new GM arising out of the company’s own, independent post-closing actions, as long as those claims do not in any way rely on conduct by old GM.

According to the ruling, parties can file late claims, which may be allowed, but the assets of the Motors Liquidation GUC Trust cannot be tapped to satisfy those claims, nor will old GM’s Chapter 11 plan be modified in connection with payment of the ignition switch claims.

As previously reported, new GM had agreed to assume responsibility for any accident claims involving post-sale deaths, personal injury, and property damage, which would include any that might have resulted from the ignition switch defect.

However, Wednesday’s order said that announcement was almost immediately followed by the filing of about 60 class actions in courts around the United States, seeking compensatory damages, punitive damages, RICO damages and attorneys’ fees for other kinds of losses to consumers, specifically economic losses, alleged to have resulted from the defect.

Gerber said the claims for economic loss include claims for alleged reduction in the resale value of affected cars, unpaid time off from work when getting an ignition switch replaced and inconvenience.

The court said the number of class actions now pending against new GM, most of which were brought by or on behalf of individuals claiming economic loss, now exceeds 140.

Though the amount sought by economic loss plaintiffs is for the most part unliquidated, the judge said it has been described as ranging from $7 billion to $10 billion.

According to the ruling, new GM asked the court to enforce the sale order’s provisions, blocking economic loss lawsuits against new GM on claims involving vehicles and parts manufactured by old GM.

New GM argued that while it had voluntarily agreed to take on an array of old GM liabilities for the post-sale accidents involving both old GM and new GM vehicles to satisfy statutory recall obligations and obligations under Lemon Laws, the sale order blocked any others, including those arising from the economic loss lawsuits.

Appeal planned

Attorneys from Hagens Berman Sobol Shapiro LLP, co-lead counsel representing owners of millions of recalled vehicles in the litigation against General Motors, responded to the ruling in a Wednesday news release.

“We believe that new GM’s misconduct was in fact present in the sale of millions of defective vehicles – a truth we believe new GM knew and chose to conceal,” Hagens Berman managing partner Steve Berman said in the release.

“We will appeal judge Gerber’s ruling that claims versus new GM for old GM’s misconduct are barred.

“It cannot be the law that old GM could hide defects and subsequently use the bankruptcy court as a shield.

“As judge Gerber agreed, due process required that old GM give notice to owners of cars with defects, and consumers did not get notice. The law must provide a remedy.”

According to attorneys at Hagens Berman, evidence overwhelmingly shows that old GM was aware of the defect for years before the company’s bankruptcy but chose not to conduct a safety recall and concealed its knowledge of the defect from regulators and consumers. The attorneys allege new GM continued the cover-up for years before finally issuing recalls beginning in February 2014.

The new General Motors, a Detroit-based automaker, emerged from Chapter 11 bankruptcy on July 10, 2009.

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