General Motors is off the hook for potentially dozens of lawsuits related to the defective ignition switch found in millions of its cars because the current company is legally a different one post-bankruptcy and bailout, a federal judge in New York ruled today.
Reuters reports that GM will avoid legal liability potentially billions of dollars for lawsuits related to the ignition switches from their pre-2009 cars. That year GM declared bankruptcy, went through restructuring and emerged as a new company after a $49.5 billion government bailout.
Last year, at the height of GM’s recall crisis, the company’s lawyers said they would not waive protection from lawsuits provided under the Chapter 11 bankruptcy agreement.
Plaintiffs’ lawyers argued GM misled the bankruptcy court by not disclosing the faulty ignition switch issue, which court testimony has showed engineers and executives knew about for at least a decade.
But as the Wall Street Journal reports, the judge “could find no instances where GM had committed fraud upon the court when it was going through the bankruptcy process.”
With the bankruptcy shield in place, customers will be unable to sue “new GM” for injuries, deaths or lost resale value prior to 2009. Lost resale value, meaning suing over cars that dropped in value because nobody wants to buy them, is a big one here — that cost Toyota $1.3 billion in a December 2012 settlement stemming from the unintended acceleration scandal.
The ruling doesn’t exempt “new GM” from all lawsuits related to the ignition switch; the company can still be sued for actions taken after the bankruptcy, like a failure to order a recall between the 2009 reorganization and when it actually happened in early 2014.
Plaintiffs with a grievance against “old GM” will instead have to file claims against the shell company of bad assets the automaker shed during the bankruptcy, Reuters reports. These days that organization is called Motors Liquidation Company.
U.S. Bankruptcy Judge Robert Gerber’s ruling on the matter is 134 pages long. Gerber also presided over GM’s bankruptcy case six years ago.
GM is already providing compensation to those injured by the faulty ignition switch or to the families of those killed through an independent fund. The death toll as approved by that fund rose to 84 people yesterday.
Regardless, today’s decision is a huge win for “New GM,” which could have lost potentially billions of dollars defending these lawsuits or settling them.