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GM seeks bankruptcy court ban on class actions alleging lost value due to car ignition-switch issues

Posted Apr 22, 2014 11:55 AM CDT
By Martha Neil

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In a Monday filing, General Motors asked a federal bankruptcy court in New York to put the kibosh on nearly 50 class actions. They allege that owners of small cars manufactured by the automaker have seen their vehicles' value diminish recently because of news about a massive recall over ignition-switch issues that have been linked to a number of fatal accidents.

Because liability for such claimed product defects was not passed on to the "new GM" in a 2009 bankruptcy court order, the suits are blocked by the order, contends GM. But in another filing, plaintiffs say GM should not be able to avail itself of bankruptcy court protection from the litigation, arguing that the automaker has known about ignition switch issues for a decade, yet concealed them instead of fixing the problem, reports the Detroit Free Press.

“To make matters worse, during its 2009 chapter 11 case, GM fraudulently concealed the ignition defect as it took billions of dollars in taxpayer money from the U.S. government and obtained the U.S. government’s sponsorship of a plan of reorganization that salvaged the company’s very existence," the filing by the plaintiffs says.

Meanwhile, GM has not yet decided, according to a spokesman, whether to attempt to invoke a bankruptcy shield over wrongful death lawsuits that occurred before the conclusion of the bankruptcy case, the Associated Press says.

“General Motors has taken responsibility for its actions and will keep doing so,” the company said in a Monday written statement. “GM has also acknowledged that it has civic and legal obligations relating to injuries that may relate to recalled vehicles, and it has retained Kenneth Feinberg to advise the company what options may be available to deal with those obligations.”

Feinberg is an expert on compensating victims of mass disasters, but it isn't yet clear exactly what role he will play in the ongoing litigation.

Plaintiff lawyers are decrying GM's effort to invoke a bankruptcy shield.

"It's completely strategic," said attorney Robert Hilliard, of Corpus Christi, Texas, who is representing plaintiffs in ignitition-switch litigation against GM. "Better take the Feinberg money because there's no telling what they're going to do tomorrow."

But GM says it is just applying the law, reports CNN Money.

"It was an absolute condition of New GM's purchase offer that New GM not take on all of Old GM's liabilities," the company says in its Monday filing. "That was the bargain struck by New GM and Old GM, and approved by the court as being in the best interests of Old GM's bankruptcy estate and the public interest."

See also:

ABAJournal.com: "GM seeks court ruling it is protected from ignition-switch suits under bankruptcy law"

New York Times (reg. req.): "Sending Alerts Instead, G.M. Delayed Car Recalls"

Reuters: "GM seeks U.S. court protection against ignition lawsuits"

Wall Street Journal Law Blog (sub. req.): "GM, Victim Families Spar Over Liability "

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