Court Rules Against "Old GM" Defense in Ignition Switch Cases

Retired U.S. Bankruptcy Judge Robert Gerber ruled in April 2015 that most ignition-switch claimants could not sue New GM for damages because the company should emerge from bankruptcy free of claims against Old GM. But Furman's opinion said the argument that all GM cars lost value because of the recalls was unsound.

The dispute stems from defective ignition switches in millions of GM vehicles that could inadvertently slide into the "off" position and disable critical safety features.

Plaintiffs' lawyers said they were seeking as much as $10 billion in damages in the proposed class actions, which were consolidated before Furman in federal court. The successor-liability claims that the bankruptcy court deemed barred against the post-bankruptcy "New GM" under a provision of the sale contract must still qualify as "claims" under Chapter 11 of the Bankruptcy Code, the court said.

Lawyers claim GM could be facing lawsuits worth up to $10 billion based on the Second Circuit's ruling, but General Motors is emphasizing many cases involve auto owners who want compensated even though they suffered no harmed.

GM spokesman Jim Cain said that the company would continue to defend the remaining claims.

The appeals court ruled owners can file claims against GM for any loss of vehicle value caused by GM concealing defects and for the effect numerous recalls had on the value of the vehicles.

Before this ruling, victims of the faulty ignition switch made by General Motors could not pursue the restructured company in court for damages because of a decision of the United States Bankruptcy Court. But the judge threw out broader loss-of-value claims from owners of GM cars that weren't recalled. The company determined that the defect led to 124 deaths and 275 injuries. The company called back 2.6 million vehicles in 2014 and it has already paid about 2 billion dollars in settlements and penalties, including a 900-million-dollar fine to resolve a U.S. criminal investigation, in connection with the scandal.

As The New York Times reports, a lawyer who represents some plaintiffs against General Motors has stated that hundreds of injury and wrongful death cases were delayed while this instance was being considered.

The parties are scheduled to discuss the next steps in a hearing scheduled for July 28.

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