GM should not benefit from bankruptcy protection in ignition-switch cases, lawyers claim image

Lawyers of people suing General Motors for its defective ignition switches urged a US appeals court not to take into consideration bankruptcy court rulings, as they protect the automaker from lawsuits potentially worth billions of dollars.

A panel of three judges on the 2nd US Circuit Court of Appeals did not clearly indicate during oral arguments how they might rule and a decision is expected within several months. The judges pressed lawyers for both the plaintiffs and GM over what the automaker knew about the switch problems during the automaker’s 2009 bankruptcy proceedings. One of the judges said that what GM knew was a “pretty important question” for determining whether the company had an obligation during the bankruptcy process to notify vehicle owners about their potential claims. The plaintiffs say that since they were not properly notified, they were denied their right to participate in the proceedings.

Steve Berman, a lawyer for some of the plaintiffs, claimed GM did know enough about the switch defect because the issue had been raised as early as 2004. GM’s lawyer, Arthur Steinberg, countered that while some switch-related incidents have been investigated over the years, employees “didn’t make a connection” between those events and a broader safety issue until after the bankruptcy.

The company’s bankruptcy created “New GM” to contain the company’s valuable assets while leaving behind most of its burdensome liabilities with “Old GM.” Last year, the judge who oversaw that process said New GM was shielded from liability over Old GM’s pre-bankruptcy actions, but did allow “independent” claims based solely on New GM’s conduct to proceed. Some GM customers say New GM should not be shielded because of its years-long concealment of the switch defect. The company has also appealed, saying that allowing for independent claims retroactively alters the sale agreement that created New GM.

Via Reuters