The 2009 bankruptcy sale of General Motors (GM) does not shield the carmaker from non-ignition switch-related product liability claims that are based solely on GM’s alleged conduct occurring after the sale. This was made clear in an order by U.S. Bankruptcy Judge Martin Glenn last month. This clears the way for millions of claims to proceed against the successor.
Judge Glenn determined that the post-bankruptcy version of GM, commonly referred to as “New GM,” cannot use the “free and clear” sale provisions in its agreement to purchase the assets of its predecessor to avoid claims over a failure to issue a recall or warn about alleged vehicle defects other than its well-known ignition switch problems.
Judge Glenn ruled that “non-ignition switch Plaintiffs” may bring claims against New GM based solely on the company’s wrongful conduct after the close of the bankruptcy sale. This ruling permits claims related to GM recalls other than its February and March 2014 ignition switch recalls to be heard in trial court proceedings.
The ruling expands on a 2015 bankruptcy court decision, affirmed by the Second Circuit Court of Appeals last year, that since the ignition switch defect did not fully come to light until after the bankruptcy sale, New GM could still face liability, even if the cars in question were put out by “Old GM.” As a result, potentially millions of non-ignition switch Plaintiffs can now seek recovery for damages “associated with its sale of knowingly defective cars and its failure to timely recall the vehicles.”
GM has recalled more than 27 million vehicles that had the defective ignition switch. It appears this decision means that millions of claims involving other ignition switch defects, power steering defects, and defects in side impact air bag systems can be heard in the district court, unencumbered by the 2009 sale order.”
Judge Glenn’s ruling helps resolve a liability issue left unanswered last year. The Second Circuit, in its successor liability decision, left open questions such as “who is an ignition switch Plaintiff” and “what types of Plaintiffs” can bring independent claims against the company.
To address those so-called threshold issues, Judge Glenn has been sorting out how the Second Circuit ruling should be interpreted by asking for input from New GM and the buyers. The purchasers include Plaintiffs bringing claims over the ignition switch defect, some whose cars had other defects, and drivers or passengers who sustained accidents after GM’s 2009 bankruptcy sale. GM had contended that the only successor liability claims it should face beyond those made by car owners whose vehicles were subject to the February and March 2014 faulty ignition switch recall are those arising from a select group of Plaintiffs who appealed a set of 2015 bankruptcy court orders issued by retired judge Robert Gerber, addressing the permissibility of certain types of claims.
GM had claimed that any “non-ignition switch Plaintiffs” who failed to appeal from the bankruptcy court’s 2015 rulings lost the opportunity to bring their due process claims. But Judge Glenn said that his readings of the court’s earlier decisions reveal that the door was not closed for Plaintiffs with “truly independent claims,” or “those claims that could not have possibly been asserted before the bankruptcy sale.” Applying the Second Circuit’s formulation, Judge Glenn said the actions brought by Plaintiffs who were involved in accidents after the 2009 sale that were allegedly caused by “a non-ignition switch-related defect” are outside the scope of the sale order.
The threshold issue addressed by the court is tied to a specific case brought by the estate of an 8-year-old girl who died after a shifter in her family’s 2004 Chevrolet Suburban allegedly failed. Judge Glenn’s ruling now allows that case to head to trial this month in a Connecticut federal court.
The bankruptcy is In re: Motors Liquidation Co., (case number 1:09-bk-50026) in the U.S. Bankruptcy Court for the Southern District of New York.
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.