GM is shielded from some ignition-switch suits, ruling finds

Wed Apr 15, 2015 6:17pm EDT
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By Jessica Dye and Nick Brown

NEW YORK (Reuters) - General Motors Co will not have to face dozens of lawsuits accusing it of concealing an ignition-switch defect that led to the recall of 2.6 million vehicles, a U.S. bankruptcy judge ruled on Wednesday.

GM had argued it was protected from claims on vehicles pre-dating its 2009 exit from Chapter 11 bankruptcy, while plaintiffs in the lawsuits said the company violated their constitutional rights by failing to disclose the defect.

The decision by U.S. Bankruptcy Judge Robert Gerber means GM may avoid potentially billions of dollars in liability, as well as the cost of defending those lawsuits, although 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 $9.25 billion, versus roughly $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 was pleased the judge would let claims based on New GM's conduct proceed. However, he said, plaintiffs intended to fight the ruling on appeal.

Gerber said he would certify the case for direct review by the 2nd U.S. Circuit Court of Appeals.

A GM spokesman, Jim Cain, said that 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.   Continued...

A man walks past a row of General Motors vehicles at a Chevrolet dealership on Woodward Avenue in Detroit, Michigan April 1, 2014. REUTERS/Rebecca Cook