Trials & Litigation

GM seeks court ruling it is protected from ignition-switch suits under bankruptcy law

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Amidst a recall of at least 2.6 million vehicles over ignition-switch issues and a growing number of would-be class actions claiming that company officials knew of defects for years, General Motors is seeking a freeze on the litigation and a court ruling that it is protected from liability by bankruptcy law.

GM’s strategy was revealed in a Friday court filing in federal court in San Francisco, reports the Detroit Free Press.

The auto manufacturer wants the court to delay the class action there while it seeks a declaratory judgment from a bankruptcy court in New York. The issue: whether GM is shielded from products liability suits concerning defects and crashes prior to July 2009, when GM exited bankruptcy. GM’s original bankruptcy case was filed in federal court in Manhattan.

The company also says delay is appropriate while it awaits a decision whether at least 19 recall-related lawsuits throughout the country will be consolidated, the newspaper reports. A federal panel in charge of deciding that question is scheduled to meet in late May.

While a bankruptcy ordinarily frees the debtor from contractual obligations and liability in tort cases, plaintiffs in recall cases are expected to argue that GM should be held liable because known defects weren’t disclosed in its bankruptcy filing. Those in the San Francisco case are seeking damages for the diminished value of their vehicles due to the recall, the Free Press reports.

Meanwhile, GM says it’s only responsible for a so-called glove-box warranty that covers repairs to “Old GM” products for three years or 36,000 miles after purchase.

Anton Valukas, the chairman of Jenner & Block, is leading an internal investigation for GM. Disaster compensation expert Kenneth Feinberg is helping the company review its options.

Additional and related coverage: “Solo practitioner ‘single-handedly set the stage’ for massive GM recall”

Bloomberg: “GM vetoed better ignition part to save money, advocates say “

Detroit Free Press: “Safety advocates to Barra: Why did GM choose weak ignition switch design?”

Wall Street Journal (sub. req.): “GM Chief Can’t Shake Recall Furor”

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