The U.S. Supreme Court has rejected an appeal from General Motors, a move that means the automaker could be exposed to a spate of new lawsuits stemming out of its cover-up of an ignition switch defect blamed for killing at least 124 people.
The automaker had hoped that it was protected from lawsuits that occurred 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.”
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In 2014, GM recalled about 2.7 million older vehicles, including such models as the Saturn Ion and Chevrolet Cobalt, because of a problem with their ignition switches. An improper design meant they could inadvertently be switched to the “Off” or “ACC” positions while driving, cutting power to the engine and safety systems, including the brakes and airbags.
Ultimately, hundreds of accidents were linked to the defect, resulting in at least 124 deaths and 275 injuries.
That problem turned out to have been known by some GM engineers and executives for as much as a decade. Then-new CEO Mary Barra quickly stepped in, firing a number of company employees and ordering not only the recall but also the creation of 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.
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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.
“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.”
While the decision appears to allow some additional ignition switch suits to proceed, it is not clear that the Super Court has yet had the last word on the case. Other District Courts could yet weigh in with a different position, GM noted in a statement, possibly setting up a situation in which the nine justices might revisit the case.
“The Supreme Court’s decision was not a decision on the merits, and it’s likely that the issues we raised will have to be addressed in the future in other venues because the Second Circuit’s decision departed substantially from well-settled bankruptcy law,” the GM statement declared. “As a practical matter, this doesn’t change the landscape much in terms of the GM litigation.”
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