NYC Bankruptcy Judge Rules In Favor Of New GM Management

Recall Lawyer News

In a big decision that influenced expected multi-billion dollar damages related to injuries and deaths due to faulty ignition switches, a New York bankruptcy judge ruled that the new owners of GM were protected from paying damages to plaintiffs according to the parameters of the bankruptcy filed by the old owners.

Sunday, April 19, 2015 - A New York City federal bankruptcy court has filed an opinion stating that the sale of General Motors from it‘s previous owners to new management in accordance with the agreed upon parameters of the deal will protect the new owners from potential damages connected to faulty ignition switch multidistrict litigation. GM claimed that the MDL that is currently pending against the old owners and expected to cost billions of dollars in damages was not assumed when the deal was consummated.

The decision by Judge Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan has angered some plaintiffs who claim that the old and new management from GM intentionally covered up the ignition issues until after the merger was ratified in order to block litigation against the new owners with protections offered by the bankruptcy courts. Plaintiffs claimed that the defendants knew of the details of the ignition issues in 2007 with other evidence pointing to as far as 2004, but didn‘t come forward until 2014. The sale order for GM was entered in July of 2009.

The decision by Judge Gerber does not necessarily sit well, as he mentioned toward the beginning of the litigation that the bankruptcy and sale of GM before the ignition issues were made public may work as a "get out of jail free card" for the automaker. Much in line with that sentiment, the decision by Judge Gerber was hailed as a success by those with GM.

The issue at the center of the GM multidistrict litigation concerns the ignition switches on more than 27 million cars that were recalled as a result of the malfunctions. The plaintiffs allege that the faulty switches could move out of their proper position and cut off power to the brakes and airbags, leading to an alarming amount of injuries and deaths related to the poor engineering.

The total number deaths involved of approved claims by the court recently reached 67, however the Center for Auto Safety has reported that more than 300 deaths may have taken place as a result of the ignition switch issues. Plaintiffs claim that in an effort to secure the bankruptcy ruling GM received this week, the details of the ignition problems were kept under wraps for year while the number of those affected by the defects continued to rise. If plaintiffs were to discover the ignition switch defect before GM went into bankruptcy, they would have been able to take the company to court directly instead of having to tiptoe around the bankruptcy rules now dictating the course of the MDL.

The lawsuits filed against GM are seeking up to $10 billion in damages stemming from more than 140 cases against the large automotive company. In addition to damages related to the injuries or deaths sustained in connection to the faulty ignition switch, plaintiffs are attempting to recover money lost after the resale value of their cars plummeted after news broke about the ignition switches. However, the resale value arguments were tossed by the judge.