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GM Petitions U.S. Supreme Court Over Previous Ignition Case Ruling

GM Petitions U.S. Supreme Court Over Previous Ignition Case Ruling

General Motors has petitioned the U.S. Supreme Court to overturn an appellate court’s ruling that the company’s 2009 bankruptcy does not shield it from lawsuits associated with the company’s ignition switch scandal. The ignition scandal allegedly led to 124 deaths and 275 injuries according to most recent reports.

In a July 2016 ruling by the 2nd U.S. Circuit Court of Appeals in New York, General Motors was found liable for ignition lawsuits surrounding incidents related to the defective ignition situation prior to the company’s July 2009 emergence from bankruptcy reorganization. GM’s lawyers argue in their petition that this ruling, if left standing, would undermine a key component to the company’s 2009 bankruptcy reorganization.

“In short, this case presents exceptionally important questions, and the Second Circuit’s answers were exceptionally wrong,” GM’s lawyers said in the petition. “The Court should grant review.”

When General Motors Corporation went into bankruptcy under chapter 11 of the U.S. Bankruptcy Code, the court allowed the company to divide its assets and liabilities into two organizations. The first organization was the corpse of “Old GM” which included the majority of the company’s vast debt load, many liabilities and excess assets. The second company was “New GM,” a new company formed from debtor in possession (DIP) financing provided by the U.S. Treasury, Canadian and Ontario governments.

As part of the ruling, New GM (the GM filing the petition now) was “free and clear” of most product tort cases on incidents that occurred prior to the forming of the new company. While New GM did opt to retain some liabilities associated with the old company–such as vehicle warranties and employee pensions–this type of “free and clear” clause is common in corporate bankruptcy filings.

This is also the element that the 2nd Circuit overruled, granting folks the ability to file suit against New GM for incidents that occurred prior to July 2009. The three judge 2nd Circuit panel ruled that barring potential plaintiffs from being able to file suits against New GM violated their constitutional rights as they were not notified of the defect prior to the company’s bankruptcy.

New GM has already paid nearly $2 billion in claims and fines associated with the defective ignition situation, in which it acknowledges employees were aware of the defect. GM ultimately recalled 2.6 million vehicles in 2014 to replace the ignition switches that could slip causing the engine to stall or shut off without warning.

The July ruling originates from a 2015 challenge regarding New GM’s liabilities associated with the old company. In that case the same judge who ruled in the company’s original bankruptcy, Judge Robert Gerber, ruled the company was protected from liabilities associated with the old.





 

About Nick Saporito

AutoVerdict Senior Editor Nick Saporito began writing about cars at age 13. Nick ran a couple of automotive enthusiast sites for several years, before taking some time off to focus on his career and education. By day he's a marketing executive in the telecom world and by night he hangs out here at AV. You'll find him focusing on tech, design and the industry's future.
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  1. Extreme4x4
    Except that they were supposed to disclose ALL of their liabilities in the BK. They hid this, even then. There are some in the legal community that say that could invalidate the BK.

    Interesting.

    I think they should just do the right thing. They will have even more of a black eye if they weasel out of it.
    nsaporito
    I have major mixed feelings about this case.

    On one hand, I strongly feel that the victims of this should have the ability to go after New GM since the defect was not publicly announced until after the chapter 11 filing. But I also have a hard time justifying what is legally very correct: New GM is not liable for product torts prior to June 2009.
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