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GM Seeks Court Protection From Faulty Ignition Switch Lawsuits

April 23, 2014

General Motors Co. has filed a motion in a U.S. federal bankruptcy court to bar lawsuits which originate from ignition switch flaws in vehicles it sold prior to its 2009 bankruptcy. This is GM’s move against class-action litigation which aims to hold the automaker liable for actions done before it filed for bankruptcy a few years ago.

There are over 50 lawsuits filed against GM which are seeking damages related to the defective ignition switch. The ignition switch problem, which has prompted the carmaker to recall 2.6 million vehicles, has been linked to 13 fatalities.

GM asks for protection specifically against class-action litigations that do not involve incidents which resulted in property damage, personal injury or loss of life. Most of the liability lawsuits unrelated to accidents are filed by owners who claim that their vehicles lost value due to GM’s response to the ignition problem.

The Detroit-based automaker has requested the Bankruptcy Court for the Southern District of New York “to rule on whether the growing number of lawsuits alleging purely economic damages resulting from the ignition switch recall may proceed.”

In 2009, GM came out of bankruptcy protection as a different legal entity. ‘Old GM’ is pre-bankruptcy, while ‘New GM’ is post-bankruptcy. Due to the said protection, the ‘New GM’ is without liability for actions performed by ‘Old GM.’ Lawsuits involving pre-bankruptcy matters must be brought against what is left of ‘Old GM’ and not ‘New GM.’

In its filing, GM stressed that the ‘New GM’ is free of economic responsibility for all vehicles and parts sold by the ‘Old GM': “New GM’s recall covenant does not create a basis for the plaintiffs to sue new GM for economic damages relating to a vehicle or part sold by old GM.”

The hearing for the motion is slated for May 29th. The judge will determine if non-injury lawsuits against GM should be or should not be dismissed.

Many lawsuits have been filed against GM since the automaker started its massive recall in February. Plaintiffs said that they have leased or purchased vehicles with the defective part and claimed that GM tried to conceal its knowledge of the problem.

Because of the alleged fraud, they say that GM should not be protected from liability. Plaintiffs filed a proposed class-action lawsuit that seeks to lift the protection and make the automaker responsible for all liabilities.

“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,” the plaintiffs indicated in the lawsuit.

In response, GM requested the court to instruct plaintiffs to stop suing ‘New GM’ for claims blocked by the bankruptcy sale order and the injunction and to dismiss previous claims.

As for incidents that involve injury or death, GM will continue to help victims and/or their families.

“General Motors has taken responsibility for its actions and will keep doing so. GM has also acknowledged that it has civic and legal obligations relating to injuries that may relate to recalled vehicles, and it has retained Kenneth Feinberg to advise the company what options may be available to deal with those obligations,” the automaker said in a statement.

Photo credit: © General Motors CC BY-NC

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