US motor giant could pay billions after car switch defect resulted in 124 deaths
General Motors Co’s bid to block hundreds of lawsuits, potentially worth billions of dollars, over a deadly ignition-switch defect broke down yesterday when the US Supreme Court refused to hear its appeal claiming the suits were barred by the number one American motor firm’s 2009 bankruptcy.
The justices declined to review a 2016 ruling by the New York-based Second US Circuit Court of Appeals that rejected GM’s bid to block customer lawsuits related to crashes and diminished vehicle value because the plaintiffs had not been properly notified of the defect prior to the bankruptcy filing.
The case involved a faulty ignition switch in GM vehicles linked to 124 deaths and 275 injuries. The switch could slip out of place, causing engine stalls while driving and cutting power to critical brakes, steering and air bag systems.
GM spokesman Jim Cain said in a statement the denial of the appeal “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”.
Investors shrugged off the ruling as GM shares rose $0.33, or 1%, to $34.08 (R444) in trading yesterday.
The court’s action allows lawsuits to proceed over pre-bankruptcy death, injury, economic loss and used-car economic losses.
“Hundreds of death and injury cases have been frozen in place for years as GM wrongly tried to hide behind a fake bankruptcy,” Robert Hilliard, lead counsel for the plaintiffs, said in a statement. “Now, GM can hide no more.”
GM’s Cain said: “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.”
The defect prompted Detroit-based GM to begin recalling 2.6 million vehicles in 2014. It has already paid about $2.5-billion (R32.5-billion) in criminal and civil penalties and settlements and legal fees in connection with the switch.
The company previously acknowledged that some of its employees knew about the switch defect for years before a recall was initiated.
In 2015, a US bankruptcy judge ruled that GM was shielded from liability over its pre-bankruptcy actions. The Second Circuit reversed that ruling. Since the plaintiffs were not properly notified of the defect or bankruptcy filing, barring them from suing GM would violate their constitutional rights to due process, the court found.
That ruling affected injury and death cases stemming from prebankruptcy crashes, as well as claims from customers who said their vehicles lost value as a result of the ignition switch and recalls.
The claims could be worth up to $10-billion, according to court papers. – Reuters