Bankruptcy Law

A risky move? GM heads to bankruptcy court today in effort to head off ignition class actions

Lawyers for General Motors go back to bankruptcy court today in a bid to ban class-action lawsuits over faulty ignition switches.

General Motors said in a filing last week with the Securities and Exchange Commission that it is aware of 59 would-be class actions filed on behalf of car owners seeking compensation for economic losses caused by the ignition switch problem, the New York Times reports.

GM claims its bankruptcy absolved the new company of liability for economic losses stemming from the defect, according to the Times and the Wall Street Journal (sub. req.). The company says it did assume responsibility, however, for personal-injury and wrongful death suits.

The move is a gamble, said University of Pennsylvania bankruptcy law professor David Skeel. At issue is whether the company committed fraud in bankruptcy court five years ago by failing to disclose the problems with the ignition switch.

The result could be a kind of mini-trial on the issue, Skeel told the Times. “In a way, it’s we’re redoing the bankruptcy,” he said. “It’s quite possible this trial could be a larger event than the real bankruptcy.”

Prior coverage: “GM seeks bankruptcy court ban on class actions alleging lost value due to car ignition-switch issues”

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