Judge puts GM suits on hold pending appeal

David Shepardson
Detroit News Washington Bureau

A federal bankruptcy judge said Wednesday he was putting on hold dozens of ignition switch lawsuits against General Motors Co. until an appeals court rules on whether the Detroit automaker has bankruptcy immunity.

The Detroit automaker had asked U.S. Bankruptcy Judge Robert Gerber to toss out the lawsuits after his ruling on April 15 that said the automaker would not have to face the suits — and as much as $10 billion in damages — stemming from its decade-long failure to disclose an ignition-switch defect that has been blamed for more than 300 deaths and injuries.

In a 13-page ruling Wednesday, Gerber said he was issuing a legal stay barring further action in dozens of lawsuits until the U.S. Court of Appeals has a chance to review his decision. Had Gerber dismissed the cases, the Appeals Court could have reinstated them if it reversed him.

GM spokesman Jim Cain said the ruling is clear. “Judge Gerber’s proposed judgment speaks for itself: He made a practical decision to stay many of the claims pending against GM, given plaintiffs’ expressed intention to appeal his ruling. The bottom line is that many claims will not go forward at this time,”

In his April ruling, Gerber upheld a legal shield that protected the “new” GM from claims originating before its 2009 bankruptcy and restructuring. That includes millions of vehicle owners, 2.59 million of whom had cars with the faulty ignition switch.

Observing that “this is a matter of considerable public importance,” Gerber ruled that the suing owners may immediately seek an appeal before the U.S. Court of Appeals rather than going to a federal district court first.

Hagens Berman Sobol Shapiro LLP, a law firm representing owners of millions of recalled GM vehicles in litigation against GM, said in April it plans to do just that.

“It cannot be the law that Old GM could hide the defects, and subsequently use the bankruptcy court as a shield. As Judge Gerber agreed, due process required that Old GM give notice to owners of cars with defects, and consumers did not get notice,” Steve Berman, managing partner of Hagens Berman and co-lead counsel representing plaintiffs in nationwide litigation against GM, said in a statement. “The law must provide a remedy.”

Gerber’s ruling applied to a small number of suits stemming from crashes before July 2009, but the vast majority of claims seeking as much as $10 billion are for economic losses — such as diminished resale value due to the defects or those who unknowingly bought used cars. It applies to as many as 70 million GM cars and trucks that were on the road before the company’s exit from bankruptcy. The decision stalls more than 140 lawsuits across the country.

Gerber’s Wednesday ruling was critical of some lawyers suing GM, who have filed suits in state and federal courts in violation of the 2009 bankruptcy order that he upheld in April.

“Whether those counsel did so out of arrogance; ignorance; their own perceptions of when orders should be complied with; or an apparent notion that orders of a United States Bankruptcy Court are unworthy of respect, is of no moment,” Gerber wrote. “New GM is right in its contention that the normal remedy for the filing of a complaint in violation of a court order — now determined, in respects relevant here, to be fully valid — would be an order mandating that complaint’s dismissal.”

But Gerber opted not to dismiss the cases. He said GM’s position is protected and addresses GM’s “legitimate needs and concerns for now.”

He also sent a warning to lawyers seeking to circumvent his ruling, saying the court “cannot tolerate efforts of that character. Wholly apart from the additional expertise that Bankruptcy courts have with respect to the orders they enter and the bankruptcy matters they decide, the interpretation of this Court’s Sale Order is a matter for this court.”

“New” GM, established after the automaker’s bankruptcy in 2009 as part of a $50 billion U.S. bailout, has accepted legal liability for crashes and death and injury claims for accidents that took place after June 2009, even if the vehicles were built by GM before the bankruptcy. GM also has extended the ignition compensation program to cover crashes that took place before the 2009 bankruptcy.

But consumers who hoped to sue GM over the lower values of older cars, particularly Saturn Ions and Chevrolet Cobalts with the defective ignition switch, may be out of luck.

GM’s compensation fund has approved 107 death claims and 199 injury claims and promised to pay at least $1 million for all death claims. GM has said it expects to spend $550 million on claims.