General Motors has been handed a major victory in its effort to shield itself from lawsuits linked to the defective ignition switches it used in older vehicles.
A federal judge has ruled the “new GM” is not liable for death and injury claims for crashes that occurred prior to the automaker’s emergence from bankruptcy in July 2009 – even in the event of misconduct by the “old GM.” But ruling from the federal bench in New York, Judge Robert Gerber did say owners could seek damages if they prove vehicles equipped with those switches have lost value since GM exited Chapter 11.
The automaker hailed the news which, it said, “doesn’t establish any liability against GM.” It also noted that the burden will be on plaintiffs to prove any new claims for losses.
By various estimates, GM could be spared anywhere from $7 billion to $10 billion in potential legal liabilities from those whose death or injury might have been linked to one of the vehicles equipped with a faulty ignition switch.
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The maker in February 2014 announced the recall of 2.6 million vehicles that it said could experience unexpected engine shutoffs because the switches could inadvertently be moved to the Off position while being driven. That could lead to a crash and serious injuries because brakes, power steering and airbag systems all would be disabled.
It soon came out that GM engineers and managers knew of the problem for at least a decade but overruled a possible recall for a number of years. With top executives called to testify before Congress and the ignition problem fodder for daily headlines, GM set up a compensation fund that is covering all potential victims, including those involved in crashes prior to its bankruptcy.
But while payouts may run into the millions, the settlements are potentially far less than what could be awarded in a jury trial – and those accepting the payouts are precluded from suing the maker. The administrator of the fund has so far confirmed 84 deaths and 100s of injuries linked to the problem.
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Even after the fund was established, a number of lawsuits were filed against GM, plaintiffs’ attorneys hoping to get the bankruptcy shield lifted. But Judge Gerber agreed with the automaker that the company that emerged from Chapter 11 protection left behind all liabilities, including such legal matters as well as billions of dollars in debt.
“Hundreds of victims and their families will go to bed tonight forever deprived of justice,” said Texas attorney Robert Hilliard, who represented a number of ignition switch victims and their families. “GM, bathing in billions, may now turn its back on the dead and injured, worry free.”
Ken Rimer, the stepfather of 19-year-old Natasha Weigel, an 18-year-old killed in an ignition switch crash, likened the court ruling to “a ‘Get Out of Jail Free’ card for GM.”
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The judge notably barred plaintiffs from claiming misconduct by old GM prior to the bankruptcy. But inappropriate actions after July 2009 could be cited in subsequent damage claims, the court ruled. GM could still face significant costs if owners can prove the company’s actions have caused them to lose value on vehicles equipped with the faulty ignition switches.
However, several experts TheDetroitBureau.com has consulted, including those at the Black Book, an arbiter of automotive auction pricing, have seen little to no impact on GM used car values in the wake of last year’s recalls and headlines.
Nonetheless, some of the maker’s opponents focused on the positive following the court decision.
“We are pleased that Judge Gerber will allow claims to proceed against New GM if misconduct by New GM was involved in this series of massive recalls,” said Steve Berman, managing partner of Hagens Berman and co-lead counsel representing plaintiffs in nationwide litigation against GM. “We believe that New GM’s misconduct was in fact present in the sale of millions of defective vehicles – a truth that we believe New GM knew and chose to conceal.”