Lost appeal could cost GM billions
General Motors Co. could be exposed to billions of dollars in additional claims related to its defective ignition switches after the U.S. Supreme Court turned away an appeal from the company seeking to block hundreds of lawsuits from proceeding.
The justices on Monday left in place a lower court ruling that said the automaker’s 2009 bankruptcy did not shield it from liability in cases involving death and injuries, or for economic loss because the value of the cars plunged. The court did not comment on its reasoning for rejecting to hear the case.
That could open up the company to expensive and costly damages, which plaintiffs’ lawyers have estimated could be as much as $10 billion. GM has already paid $2.5 billion in legal costs and settlements related to the ignition switch defect, including a $900 million fine to the Justice Department and about $600 million as part of a compensation program to families of victims killed or those injured in accidents related to the faulty ignition switches. Those who settled in the compensation program can’t file another suit against GM.
The ignition switch defect, which allowed the key to inadvertently move to the “off” position and disable air bags, ultimately was tied to 124 deaths and hundreds of injuries. It led to a 2014 recall of nearly 2.59 million older cars.
A federal appeals court ruled last year that GM remains responsible for ignition-switch injuries and deaths that occurred pre-bankruptcy because the company knew about the problem for more than a decade, but kept it secret from the bankruptcy court.
The company said well-established bankruptcy law allowed the newly reorganized GM to obtain the old company’s assets “free and clear” of liabilities.
“The Supreme Court’s decision was not a decision on the merits, and it’s likely that the issues we raised will have to be addressed in the future in other venues because the Second Circuit’s decision departed substantially from well-settled bankruptcy law,” GM spokesman Jim Cain said in a statement. “As a practical matter, this doesn’t change the landscape much in terms of the GM litigation. The plaintiffs must still establish their right to assert successor liability claims. From there, they still have to prove those claims have merit.”
When it emerged as a new company in 2009 after bankruptcy, GM agreed to certain liabilities but as a new company was protected from some liabilities of the old company. That is known as its bankruptcy shield.
The new GM agreed to be liable for claims related to accidents occurring after — but not before — it emerged as a new company, even though the vehicles were built previous to that.
A number of injury, wrongful death and economic loss lawsuits have been filed against GM because of the defective switches. The automaker admitted it knew of the defect for years but did not recall the cars for more than a decade. It also paid fines to the National Highway Traffic Safety Administration.
The Second U.S. Circuit Court of Appeals last year ruled that claims against GM could continue, including pre-bankruptcy death and injury cases and pre-bankruptcy economic loss claims related to the ignition switch. GM does not know how many valid personal injury and death cases it may face.
Bob Hilliard, lead counsel representing many families of victims killed and those injured by GM’s defective ignition switches, said in a Monday statement that he hopes justice will now prevail for many.
“Even when GM told the world it was owning up to its mistakes and doing right by those they killed and injured, they were still ordering their lawyers to spare no expense or legal maneuver to try and stop these victims from having their day in court,” Hilliard said in a statement. “Now, GM can hide no more.”
At the end of January, GM said it knew of 100 class-action economic harm cases pending against the company in the U.S. and 21 in Canada related to the ignition switch. It also knew of 284 cases pending in federal and state courts in the U.S. and 14 in Canada alleging injury or death due to the defect.
GM has said it is unable to estimate its potential liability for those cases.
Some “bellwether” trials are slated for later this year and in 2018 in a group of consolidated lawsuits that allege injury or death. The outcomes of the bellwether cases could be used as a pattern for settlements in remaining cases against the automaker. In a series of earlier cases, juries for two cases ruled in favor of GM; the court dismissed one case; plaintiffs dismissed two cases before trial and three cases were settled.
Aside from the lawsuits, GM also faces an investigation by 49 state attorneys general and separate investigations by the Arizona attorney general and the Orange County, California, district attorney.
Associated Press contributed.