Court Upholds GM’s Bankruptcy Shield from Death Claims

But judge leaves potential loophole for plaintiffs.

by on Apr.16, 2015

The faulty GM ignition switch could inadvertently move to the Off position, causing a crash.

General Motors has been handed a major victory in its effort to shield itself from lawsuits linked to the defective ignition switches it used in older vehicles.

A federal judge has ruled the “new GM” is not liable for death and injury claims for crashes that occurred prior to the automaker’s emergence from bankruptcy in July 2009 – even in the event of misconduct by the “old GM.” But ruling from the federal bench in New York, Judge Robert Gerber did say owners could seek damages if they prove vehicles equipped with those switches have lost value since GM exited Chapter 11.

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The automaker hailed the news which, it said, “doesn’t establish any liability against GM.” It also noted that the burden will be on plaintiffs to prove any new claims for losses.

By various estimates, GM could be spared anywhere from $7 billion to $10 billion in potential legal liabilities from those whose death or injury might have been linked to one of the vehicles equipped with a faulty ignition switch.

(Lawyers claim GM actively aimed to conceal ignition defect. Click Here for more.)

The maker in February 2014 announced the recall of 2.6 million vehicles that it said could experience unexpected engine shutoffs because the switches could inadvertently be moved to the Off position while being driven. That could lead to a crash and serious injuries because brakes, power steering and airbag systems all would be disabled.

It soon came out that GM engineers and managers knew of the problem for at least a decade but overruled a possible recall for a number of years. With top executives called to testify before Congress and the ignition problem fodder for daily headlines, GM set up a compensation fund that is covering all potential victims, including those involved in crashes prior to its bankruptcy.

But while payouts may run into the millions, the settlements are potentially far less than what could be awarded in a jury trial – and those accepting the payouts are precluded from suing the maker. The administrator of the fund has so far confirmed 84 deaths and 100s of injuries linked to the problem.

(Jeep recall repairs for fire risk proceeding at snail’s pace. Click Here for the latest.)

Even after the fund was established, a number of lawsuits were filed against GM, plaintiffs’ attorneys hoping to get the bankruptcy shield lifted. But Judge Gerber agreed with the automaker that the company that emerged from Chapter 11 protection left behind all liabilities, including such legal matters as well as billions of dollars in debt.

“Hundreds of victims and their families will go to bed tonight forever deprived of justice,” said Texas attorney Robert Hilliard, who represented a number of ignition switch victims and their families. “GM, bathing in billions, may now turn its back on the dead and injured, worry free.”

Ken Rimer, the stepfather of 19-year-old Natasha Weigel, an 18-year-old killed in an ignition switch crash, likened the court ruling to “a ‘Get Out of Jail Free’ card for GM.”

(Jury awards $150 mil to family of 9-year killed in Jeep fire. Click Here for more.)

The judge notably barred plaintiffs from claiming misconduct by old GM prior to the bankruptcy. But inappropriate actions after July 2009 could be cited in subsequent damage claims, the court ruled. GM could still face significant costs if owners can prove the company’s actions have caused them to lose value on vehicles equipped with the faulty ignition switches.

However, several experts has consulted, including those at the Black Book, an arbiter of automotive auction pricing, have seen little to no impact on GM used car values in the wake of last year’s recalls and headlines.

Nonetheless, some of the maker’s opponents focused on the positive following the court decision.

“We are pleased that Judge Gerber will allow claims to proceed against New GM if misconduct by New GM was involved in this series of massive recalls,” said Steve Berman, managing partner of Hagens Berman and co-lead counsel representing plaintiffs in nationwide litigation against GM. “We believe that New GM’s misconduct was in fact present in the sale of millions of defective vehicles – a truth that we believe New GM knew and chose to conceal.”

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4 Responses to “Court Upholds GM’s Bankruptcy Shield from Death Claims”

  1. Jorge says:

    This is kind of a strange ruling, IMO. Either they are or they aren’t liable. If the new GM is liable for a loss in value of a product they never produced as the current “new GM” company, then they are also liable for the deaths and injuries from products they produced as the old GM.

    This ruling may be overturned on appeal.

  2. Dimitri says:

    Good for GM. If consumers are so stupid as to hang 10 pounds of keys from their keychains that actually caused the problem themselves (NOT an actual defect), then they don’t deserve compensation. I liken this to the witch hunt Ford endured over the Firestone tire debacle. There was nothing truly wrong with those tires. Once again, the ignorant, apparently blameless consumer was inappropriately awarded compensation because they didn’t take the basic responsibility of ensuring their tires were properly inflated. At some point, the vehicle owner my take some responsibility. In GM’s case, I’m glad the money-grubbing attorneys didn’t see a payday.

    • Jorge says:

      It’s a design flaw and GM should man-up and pay for it – period. Yes I understand that many motorists are braindead and cause most of their own problems, but a defect is a defect and this is a legitimate safety defect that GM should be held accountable for. Bankruptcy does not exclude any business from owed taxes so it should not exempt them from safety product issues either, IMO.

      Bankruptcy is intended to allow the company to reorganized because they have mismanaged their business and gotten themselves into a financially situation. That doesn’t mean they should get a free pass on their negligence regarding public safety. Management should be held 100% responsible for the past actions and not be given a get out of jail free pass.

      As far as the Ford/Firestone tire deal you are correct – there was nothing wrong with those tires other than braindead people repeatedly driving the tires into curbs until they damaged the tires. Yes and Jackpot Justice prevailed in that case like in many other’s in the U.S. because paid liars can convince technically illiterate people that the tires were the problem, not the drivers.

      Wait until a U.S. jury convicts a company for selling bottled water because some fool drinks an excessive quantity and dies. Trust me it WILL happen with the broken U.S. judicial system.

  3. Rt says:

    I always did feel that new GM would be shielded from most liability claims by old GM. That is how the bankruptcy proceedings were set up. I’m not saying yhat I agree or that it is necessarily ethical, but it is legal.