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GM Settles 200-Plus Ignition Switch Lawsuits

Terms of the deal were not disclosed, but likely to carry over to state filings.

by on Jun.23, 2017

General Motors settled more than 200 lawsuits related to its faulty ignition switches.

After years of attempting to legally maneuver its way out of lawsuits about its defective ignition switches, General Motors agreed to settle more than 200 federal lawsuits, according to a recent court filing.

The filing revealed that the settlement terms are confidential, but the deal could pave the way to resolved hundreds of similar claims at the state court level, lawyers said in the filing, according to Reuters.

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The defective switches could move from the power to the accessory position, causing the vehicle to stall, cutting power to several systems in the vehicle, including the brakes, steering and airbags. The problem, which GM engineers hid for more than a decade, has been tied to 124 deaths and 275 injuries.

The automaker has paid more than $2.5 billion in penalties to federal and state agencies as well as in settlements to victims and their families and lawsuits from owners of the vehicles.

(Supreme Court ruling could be costly for General Motors. Find out why. Click Here.)

Prior to the Takata airbag inflator recall, it was the largest recall in U.S. history, accounting for more than 2.7 million older GM vehicles, including models like the Chevrolet Cobalt and Saturn Ion.

The move to settle came after the U.S. Supreme Court earlier this year rejected an appeal from GM, where the company claimed that it was protected from lawsuits related to the defective switches before its 2009 bankruptcy, a position taken by the court that handled the GM run through Chapter 11.

But a 2016 ruling by the New York-based 2nd U.S. Circuit Court of Appeals reversed that position. And, with the Supreme Court refusing to hear the case, GM now could face claims predating its bankruptcy.

“Hundreds of death and injury cases have been frozen in place for years as GM wrongly tried to hide behind a fake bankruptcy,” Robert Hilliard, a lead counsel for plaintiffs affected by the ignition switch defect, said in a statement. “Now, GM can hide no more.”

(Click Here to see more about GM’s $1 million SEC fine.)

Initially, the company created a special victims’ compensation fund. But GM declared that it would only compensate those whose claims dated back to no earlier than July 2010, when the carmaker emerged from its bankruptcy – a process backed by $49.5 billion in federal aid approved by both President George W. Bush and his successor, Barack Obama.

As part of its run through Chapter 11, older ignition switch claims were lumped in with what was referred to as “Old GM.” Formally known as Motors Liquidation, it handled numerous bad assets including dozens of plants slated for closure.

Protecting a company emerging from Chapter 11 from old liabilities has been a standard part of the bankruptcy process, but critics opposed that policy on a variety of grounds.

Among other things, they pointed to the large amount of taxpayer money used to keep GM alive. The New York-based Circuit Court also concluded that GM knew about the problem and should have disclosed it before going through bankruptcy.

(To see more about GM’s ignition switch problem, Click Here.)

“At minimum, Old GM knew about moving stalls and airbag non‐deployments in certain models, and should have revealed those facts in bankruptcy,” the court said in its ruling last year. “New GM essentially asks that we reward debtors who conceal claims against potential creditors. We decline to do so.”

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