GM Asks Court to Enforce Bankruptcy Liability Shield Against Ignition Lawsuits

April 22, 2014

General Motors Co. filed a motion in a U.S. bankruptcy court to enforce a bar on lawsuits related to ignition defects in cars sold before its 2009 bankruptcy as it fights a class action lawsuit that seeks to set aside the restriction.

The plaintiffs also filed a class action lawsuit on Monday, seeking an order declaring that GM cannot use the bankruptcy protection to absolve itself from liabilities.

The faulty ignition switch has been linked to at least 13 deaths and the recall of 2.6 million GM vehicles.

GM emerged from bankruptcy protection in 2009 as a different legal entity than the so-called old GM. Under those terms, the “new GM” shed liability for incidents predating its exit from bankruptcy, and any lawsuit related to pre-bankruptcy issues must be brought against what remains of 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 company argued in a filing on Monday in the Bankruptcy Court for the Southern District of New York.

Since it began to recall vehicles in February, GM has been hit by dozens of lawsuits on behalf of individuals injured or killed in crashes involving recalled cars, as well as customers who said their vehicles lost value as a result of the company’s actions.

The plaintiffs have claimed they bought or leased vehicles that had the defective ignition switch and accused GM of fraudulently concealing its knowledge of the defect, saying that as a result, it was not entitled to protection from liability.

“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 said in their lawsuit.

In its filing, GM asked the court to direct the plaintiffs to cease and desist from further prosecuting against new GM claims that are barred by the bankruptcy sale order and the injunction, and also dismiss the earlier claims.

GM and lawyers for the plaintiffs were not immediately available for comment outside regular U.S. business hours.

Last week, GM sought a stay on litigation related to ignition claims until a judicial panel on multidistrict litigation decides on a motion to consolidate the case with other lawsuits and the bankruptcy court rules on whether the claims violate GM’s 2009 bankruptcy sale order.

(Reporting by Supriya Kurane and Arnab Sen in Bangalore; Editing by Gopakumar Warrier and Saumyadeb Chakrabarty)

 

 

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