The U.S. Supreme Court has declined to hear General Motors’ appeal case regarding its ignition switch scandal. The rejection could open GM up to billions in lawsuits, as the appeal was an attempt to overrule a lower court’s ruling that New GM is liable for ignition switch claims on accidents that occurred prior to the company’s bankruptcy filing.
The high court’s rejection is a major economic blow to GM. Plaintiff lawyers have estimated the claims, of which there are hundreds, could total as much as $10 billion. GM has already expended approximately $2.5 billion on the ignition switch scandal; $600 million of which was set aside to compensate victims for injury and loss. Another $900 million was paid to the Justice Department as a fine for failing to address the product defect in a proper fashion.
In the Second U.S. Circuit Court of Appeals ruling, which happened last July, GM’s liability shield gained during its June 2009 bankruptcy proceeding was overruled. As common in corporate bankruptcies, GM was deemed “free and clear” of all product liabilities on incidents that occurred prior to the formation of New GM in 2009. GM’s legal team argued last July that their bankruptcy shield clearly exempted them from ignition cases from plaintiffs with incidents that happened prior to the bankruptcy.
The federal court ruled against GM, citing that the bankruptcy shield was denying plaintiff’s constitutional rights to due process. The legal logic of the court is that since GM did not disclose the ignition switch liability during its bankruptcy proceedings in 2009, it cannot be shielded from said liabilities today.
This entire case stems from the company’s 2014 recall of about 2.58 million vehicles to replace defective ignition switches. In these vehicles the ignition could inadvertently move to the “off” position while the vehicle was in motion, causing crashes. GM has admitted the company was aware of the defect years before issuing the recall.
GM states the company is aware of 100 class-action lawsuits, 284 federal and state lawsuits and additional cases in Canada, all pending from the ignition scandal. The company is also under investigation by 49 state attorneys general regarding the ignition switch scandal.
The company has declined to state any internal estimates as to the value of the pending claims.