June 9, 2014 at 11:12 pm

New York judge to hear GM suits on economic loss

Washington —A federal judicial panel ordered transferred to a judge in New York more than 70 “economic loss” lawsuits filed against General Motors Co. in connection with its recall of 2.6 million cars for ignition switch defects.

The move is a win for GM and for Delphi Automotive LLC, which produced the defective switch and is also named in many of the lawsuits. Both had urged the suits be heard in New York.

GM spokesman Greg Martin praised the ruling: “This order affirms what we’ve maintained all along. All cases should be transferred to the southern district of New York, which is in the best position to coordinate with the bankruptcy court’s proceedings, has previously heard appeals from the sale order and injunction, decided several contested matters relating to the asset sale, and where several of the ignition switch actions filed to date are pending.”

GM cited a press report from early April that suggested the value of recalled Cobalts hasn’t declined since the crisis began, questioning if owners have faced economic losses.

The cases will be heard by U.S. District Judge Jesse Furman, named to the bench in 2012 by President Barack Obama. He is the brother of Jason Furman, who is chair of Obama’s Council of Economic Advisers. Furman is a former law clerk to then-Supreme Court Justice David Souter.

All of the suits stem from the recall related to older Cobalt, Ion and other cars in which the vehicle’s ignition switch to move unintentionally from the “run” position to the “accessory” or “off” position, shutting off the engine and disabling power steering and air bags.

The seven-member panel, which met last month in Chicago, said consolidating the cases will “eliminate duplicative discovery; prevent inconsistent pretrial rulings, including with respect to class certification; and conserve the resources of the parties, their counsel, and the judiciary.”

The panel said it made sense to move the cases to New York, since both GM and Delphi filed for bankruptcy in New York.

The decision noted that U.S. Bankruptcy Judge Robert Gerber is currently deciding whether GM’s July 2009 exit from bankruptcy as a new company prohibits the economic loss ignition switch defect lawsuits from going forward.

Furman has already heard appeals related to GM’s bankruptcy and therefore has “some familiarity with the common defendant and its prior bankruptcy proceedings. Judge Furman is an experienced transferee judge with the ability to handle these complex proceedings expeditiously,” said the panel.

On Thursday, GM CEO Mary Barra said the automaker has agreed to offer settlements involving the 13 people who were killed and 54 crashes linked to the defect. The amount that GM will offer is up to outside adviser Ken Feinberg.

But GM executives said they were not planning to offer any money to owners of the recalled cars, who have sued claiming the resale value of their vehicles has been harmed by the recall crisis. The final determinations of who will be offered settlements will be made by Feinberg, GM said. “What we’re saying is we want the compensation program to reach everybody who either, you know, lost a loved one or was seriously injured as a result of the ignition switch,” Barra said Thursday.

Last year Toyota Motor Corp. agreed to settle dozens of class-action suits and pay $250 million to up to 1.9 million owners of vehicles that were recalled for sudden unintended-acceleration issues in 2009 and 2010 for diminished value of vehicles connected to vehicle sales, trade-ins, early lease terminations and total loss over a 15-month period. Average losses were about $340 per vehicle, with claims paid depending on how many owners filed valid paperwork.

That was 42 percent of a “best-case scenario” if the case had gone to trial, lawyers for the owners said.

DShepardson@detroitnews.com
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