GM Dodges The Bullet In Court: So Now What Happens To Ignition Switch Complaints?

April 17, 2015

This week, General Motors prevailed in a very important court case. According to Auto News, a U.S. bankruptcy judge has ruled that the automaker's 2009 restructuring shields it from a number of lawsuits stemming from last year's Switchgate fiasco. Unfortunately for GM, that may not be the end of the story.

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A LOOK BACK

2014 was a rough year for GM. It started off nicely, as the company reveled in the appointment of Mary Barra as CEO -- the first woman to hold such a position at a major automaker.

In February, though, things went South, when GM recalled more than a million older vehicles for faulty ignition switches. Dozens of other recalls followed -- some related, some not -- and by the time we toasted the arrival of 2015, the automaker had recalled more than 30 million vehicles worldwide.

Initially, there was some question as to whether GM would -- or could -- be held liable for accidents, injuries, and deaths caused by the flawed ignition switches. The catch was, technically speaking, they were installed by a different entity, General Motors Corporation, which became General Motors Company after a 2009 restructuring.

Of course, that didn't stop people and organizations from suing -- and sue they did.

Few of those plaintiffs were involved in accidents -- those who were tended to apply to GM's compensation fund. Rather, the lawsuits came from GM owners who claimed that the high-profile ignition switch recall reduced the trade-in value of their vehicles. (A similar tactic was used in 2013 by Toyota owners, who received more than $1.6 billion settlement dough.)

Suddenly, people began to wonder if GM might be liable after all.

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THIS WEEK

As it turns out, the worrying was for naught. In New York this week, U.S. Bankruptcy Judge Robert Gerber determined that "new" GM can't be held accountable for the mistakes and missteps of "old" GM. No doubt, folks at GM breathed a sigh of relief.

However, the legal wrangling isn't over. Gerber's ruling simply means that plaintiffs can't sue "new" GM for damages resulting either directly (e.g. accidents, injuries) or indirectly (e.g. depreciation) from the flawed ignition switches. They still have at least three options for seeking relief:

1) They can sue old GM for damages -- though if they succeed, they're likely to earn mere pennies on the dollar due to old GM's limited coffers.

2) They can sue new GM for failing to disclose problems the company might've known about at the time of its restructuring. That suit can also include any actions that new GM might've taken to cover up ignition switch problems in recent years.

3) They can appeal Gerber's ruling altogether.

Since the rule of thumb in lawsuits tends to be "sue everyone and sue often", we wouldn't be surprised if the plaintiffs followed all three routes. Stay tuned.

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