An old and unfortunate General Motors recall – which followed crash fatalities – was back in the news this week as a US federal appeals court said GM was not liable for punitive damages over the accidents that occurred after its 2009 bankruptcy and involved vehicles it produced earlier, including vehicles with faulty ignition switches.
According to Reuters, the 2nd US Circuit Court of Appeals in Manhattan ruled the automaker did not agree to contractually assume liability for punitive damages as part of its federally-backed Chapter 11 reorganisation.
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In April 2017 the US Supreme Court turned down GM’s request to review the second circuit’s ruling striking down the bankruptcy shield for the car company as it related to hundreds of victims of the ignition switch defect in GM vehicles.
Reuters this week noted GM filed for bankruptcy in June 2009 and its best assets were transferred to a new Detroit-based company with the same name. The other assets and many liabilities stayed with ‘Old GM’ aka Motors Liquidation Co.
The 3-0 court decision may help GM reduce its ultimate exposure in nationwide litigation over defective ignition switches in several Chevrolet, Pontiac and Saturn models, the news agency said, adding this was also a defeat for drivers involved in post-bankruptcy accidents, including those who collided with older GM vehicles driven by others, as well as their law firms.
The ignition switch defect could cause engine stalls and keep airbags from deploying, and was linked to 124 deaths.
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By GlobalDataA lawyer for the drivers and their law firms did not immediately respond to Reuters’ requests for comment. GM had no comment.
Circuit Judge Dennis Jacobs said GM’s agreement to acquire assets “free and clear” of most liabilities excused it from punitive damages claims for Old GM’s conduct.
He also noted that the judge who oversaw the bankruptcy concluded that the new company could not be liable for claims that the “deeply insolvent” Old GM would never have paid.
The decision upheld a May 2018 ruling by US District Judge Jesse Furman in Manhattan, who oversees the ignition switch litigation.
Drivers have sought a variety of damages in that litigation, including for declining resale values.
GM had recalled 2.6m vehicles since 2014 over the ignition switch problems, Reuters said.
It had also paid US$2.6bn in related penalties and settlements, including $900m to settle a US Department of Justice criminal case.
