GM Ignition Defects Lawsuit in California Awaits Bankruptcy Ruling

By | April 23, 2014

A lawsuit against General Motors Co. in California over ignition-switch defects linked to 13 deaths was put on hold until a bankruptcy judge in New York rules on whether some compensation claims can be brought without violating a court order in the company’s 2009 reorganization.

U.S. District Judge Jeffrey White in Oakland said Tuesday that the California lawsuit also should be delayed pending a decision by a federal judicial panel on whether it should be consolidated with at least 18 related cases.

Freezing the case “will promote judicial economy, uniformity and consistency in decision making,” the judge said in a court filing. He denied a request by the California plaintiffs to make GM turn over internal reports and documents about the ignition switches.

After recalling 2.59 million cars with ignition defects, Detroit-based GM is grappling with its most daunting challenge since filing for bankruptcy during the financial crisis. The carmaker is facing customer suits and regulatory probes into why it waited a decade or more to fix the defects. The company has begun repairs, offering free rentals to customers who take their cars to dealers.

Bankruptcy Court

GM on Monday asked the U.S. Bankruptcy Court in Manhattan to reaffirm its protection from economic claims stemming from pre-bankruptcy malfeasance in a bid to block about 50 car-owner lawsuits demanding compensation for faulty switches.

Economic losses include a decline in a vehicle’s value and the loss of use or wages for time spent getting it repaired. GM said it isn’t seeking court action on lawsuits over accidents that caused injury, loss of life or property damage, nor its obligation to repair the defects.

The carmaker has said dozens of suits similar to one brought in California by Galdina Maciel had been filed claiming damages and liability for design defects that the new GM rejected in bankruptcy.

The California case is Maciel v. General Motors, 14- cv-01339, U.S. District Court, Northern District of California (Oakland). The bankruptcy case is In re Motors Liquidation Co., 09-bk-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

–With assistance from Linda Sandler in New York.

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