Wednesday, May 23, 2018
Business

GM says bankruptcy should shield it from deadly switch legal claims

DETROIT — General Motors and a battalion of trial lawyers are preparing for an epic court fight over whether GM is liable for the sins of its corporate past.

The company is asking a U.S. bankruptcy court to shield it from legal claims for actions that took place before the company's 2009 bankruptcy. But lawyers who are suing GM say it shouldn't get the usual benefits of bankruptcy protection because it concealed a deadly ignition switch problem, which has been linked to 13 deaths, when the court was making bankruptcy decisions.

Late Monday, GM filed a motion in New York asking the court to bar claims that GM small cars lost value because of the ignition switch problem, which has led to the recall of 2.6 million older small cars worldwide. The company has admitted knowing about the problem for more than a decade, yet it failed to start recalling the cars until February to replace the defective switches.

The Detroit automaker contends in its motion that under the bankruptcy, which ended on July 10, 2009, assets and liabilities of the old General Motors Inc. were split in two, with good assets sold under court order to "New GM" and bad ones and most liabilities going to the "Old GM," which was left behind. The recalled cars were made and sold by the old company. The new GM, the motion asserts, took on only these categories of liabilities after bankruptcy: those for post-bankruptcy crashes involving cars made by "Old GM" that caused injuries, deaths or property damage; and warranty and lemon law claims.

But Robert Hilliard, a lawyer who has several wrongful-death lawsuits pending against GM, says the motion is an implied threat to those who have filed such lawsuits against GM: Either settle or risk getting nothing because the company will argue that claims should go against the Old GM, which has few assets.

After GM filed its motion, a group of trial lawyers concerned that the court will bar them from seeking damages quickly filed a class-action lawsuit with the bankruptcy court. The lawsuit says that since GM knew about the defective ignition switches before its 2009 bankruptcy, it should have informed the court of its potential liability. The lawsuit also says GM can't use the bankruptcy as a shield because the same employees worked for the company both before and after the bankruptcy.

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