General Motors is invoking a clause from its 2009 bankruptcy that would block most of its customers from suing the automaker over faulty ignition switches.GM said it asked a federal bankruptcy court in New York—the same one which granted GM the right to waive all liability for products built before its $50 billion taxpayer-funded bankruptcy in June 2009—to exclude any lawsuits that don’t involve accidents or injuries. If approved, GM could wipe out a $350 million class-action lawsuit in California alleging GM’s “willful nondisclosure of critical safety information” and two other suits in Michigan and Texas alleging lost resale value, along with any number of individual cases now or in the future. Because GM is technically a new company and separate from the “old GM”—which was renamed as Motors Liquidation Company and funded with four leftover trusts—it may only have to pay pennies on the dollar if a judge approves the motion.
“The lawsuits that are the subject of this motion, most of which purport to be class actions, are brought by or on behalf of individuals who were not injured as the result of any failure of the ignition switch,” GM said in a statement. The company added it was seeking to dismiss all cases claiming “purely economic damages,” which could exclude any number of people and businesses, including GM’s dealers and corporate fleet customers. While there is no question that GM can be held liable for a product defect, owners joining one or more class action lawsuits would likely wait up to three years before they receive a dime – typically the time it takes for such cases to be granted and settled. If those cases aren’t granted, GM may be fighting individual lawsuits like Toyota, which still has hundreds of claims stemming from the throttle and floor-mat recalls in 2009.
“Some of our big claims are predicated entirely on conduct occurring after the New GM came about, and none of it requires any unwinding or dilution of the bankruptcy protection,” said Robert B. Carey, one of the lawyers behind the $350 million class-action lawsuit. “New GM’s own post-bankruptcy conduct is sufficient to hold them responsible for damage inflicted on consumers.”
At this point, GM is still gauging its “civic and legal obligations” with Kenneth Feinberg, the lawyer who drew up quick and successful settlements for victims of the Boston Marathon bombing, September 11 terrorist attacks and the Newtown, Connecticut, school shooting. Likely, GM will create its own fund and Feinberg will award individual payouts based on the damages—similar to what an outside class-action lawsuit would otherwise force GM to do—under the condition that recipients cannot sue the company for any future related claims.
Without knowing what GM will ultimately decide—and given the roughly six-month time period until the bankruptcy judge makes the call—the automaker has essentially declared its exit strategy from the predicament of 2.6 million customers affected by the ignition-switch recall. If your car shut off on the road and you happened to not hit anything, GM shouldn’t be punished since you weren’t hurt. If your car’s ignition switch never had a problem, GM doesn’t want to pay for exposing you to an unnecessary risk—even though it admitted fault, left a 13-year paper trail of coverups and miscommunication, and said it was ultimately unsure which of its cars had actually been repaired.
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Depending on the judge’s decision, the situation could be worse for GM’s customers who may not have had the time or money to document the problem or attempt to repair it, or been able to link it to an actual injury. Given the generous leniency that corporations receive under U.S. bankruptcy laws, those people can only hope GM is coming up with a better solution of its own. Reported by Car and Driver 2 hours ago.