Date
18 October 2017
GM has successfully argued that it was protected from lawsuits before its exit from Chapter 11 bankruptcy.  However, a judge has allowed post-bankruptcy lawsuits to proceed. Photo: Internet
GM has successfully argued that it was protected from lawsuits before its exit from Chapter 11 bankruptcy. However, a judge has allowed post-bankruptcy lawsuits to proceed. Photo: Internet

GM escapes lawsuits over faulty ignition

General Motors Co. (GM) has avoided dozens of lawsuits accusing it of concealing an ignition-switch defect that led to the recall of 2.6 million vehicles.

A United States bankruptcy judge ruled in favor of GM which argued that it was protected from claims on vehicles pre-dating its 2009 exit from Chapter 11 bankruptcy, Reuters reported Thursday.

Plaintiffs in the lawsuits said the company violated their constitutional rights by failing to disclose the defect.

The decision by Judge Robert Gerber means GM may avoid potentially billions of dollars in liability, as well as the cost of defending those lawsuits.

However, claims arising from GM’s conduct after its bankruptcy will not be affected.

The plaintiffs will have to file their claims against the financially strapped “Old GM”, the shell company comprised of bad assets GM shed in bankruptcy.

As of October, Old GM’s main assets were worth about US$9.25 billion, versus roughly US$32 billion in claims, a recovery of about 29 cents on the dollar for trust creditors.

Judge Gerber held that GM economic-loss plaintiffs can still bring claims against New GM based solely on its post-bankruptcy conduct.

A lead lawyer for ignition-switch plaintiffs, Steve Berman, said that he is pleased the judge is allowing claims based on New GM’s conduct proceed.

However, he said, plaintiffs will fight the ruling on appeal.

Gerber will certify the case for direct review by the second US Circuit Court of Appeals.

GM spokesman Jim Cain said Gerber properly concluded that claims based on old GM’s conduct were barred and that the plaintiffs still had to prove the merits of their claims against new GM.

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CG/RA 

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