General Motors will not have to face some recall-related claims from vehicle owners following a recent court ruling in the United States.
According to Reuters, a Manhattan federal court judge dismissed some claims brought against the automaker by customers seeking compensation for a drop in their vehicles’ resale values after a series of 2014 safety recalls including the infamous one concerned with faulty ignition switches.
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Judge Jesse Furman dismissed racketeering and some state law claims plus claims from customers whose vehicles were not allegedly defective when sold, the report said.
Plaintiffs’ pursuit of damages based purely on perceived harm to GM’s brand following more than 70 recalls in 2014 was “unprecedented and unsound”, Furman wrote.
Recognising the so-called “brand devaluation theory” would open the door to a flood of claims by consumers who bought any product from a manufacturer subsequently hit by a scandal or found to have produced an unrelated defective product, he said, according to Reuters.
But Furman said he would allow plaintiffs to pursue damages involving out of pocket costs connected to the recalls. He added some plaintiffs could pursue damages for the difference between what they paid for the vehicles and what they would have been worth without the alleged defect.
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By GlobalDataAccording to the report, plaintiffs’ lawyers said they were seeking as much as US$10bn in damages in the proposed class actions. Those cases were consolidated before Furman who also oversees injury and death cases brought over crashes blamed on an ignition switch that prompted the recall of 2.6m vehicles in 2014.
GM spokesman Jim Cain told the news agency the company would continue to defend the remaining claims.
“The court made it clear the plaintiffs overreached in many aspects of their complaint, and the ruling significantly curtails the scope of their potential recovery,” he said.
A lead lawyer for plaintiffs, Steve Berman, told Reuters they planned to appeal the ruling. The GM recalls were “unprecedented, and the law should be able to react to this,” he said. But even with the dismissals, claims on behalf of millions of other GM owners would continue, he added.
Reuters noted GM already has paid $2bn in criminal and civil penalties and settlements over the design of the ignition switch which can slip out of place and cut power to air bags, steering and brakes. The part [redesigned as part of an attempted fix but not assigned a new part number thus causing confusion in the recall replacement parts supply chain – ed] has been linked to 124 deaths and 275 injuries. GM has admitted that some employees knew about the issue for more than a decade before a recall was ordered.
The decision followed an earlier ruling from a federal appeals court which said the terms of GM’s 2009 bankruptcy did not protect it from economic-loss lawsuits over the ignition switch.
Because the appeals court’s ruling affected claims brought over vehicles made by pre-bankruptcy ‘Old GM’, Furman said his latest ruling was limited to vehicles made by post-bankruptcy ‘New GM’.
“Thus, while it is a significant step” in the litigation, “much remains to be done,” Furman added, according to Reuters.
The parties are scheduled to discuss the next steps in a hearing scheduled for 28 July, the report noted.
