If General Motors (GM) thought it could avoid liability for a defect that killed 124 people and injured 275 others, the U.S. Supreme Court decisively quashed that notion. In April of this year, the Court rejected an appeal by GM to dismiss dozens of lawsuits over defective ignition switches. By doing so, the Court opened the door to a flurry of litigation from hundreds of potential victims which could total $5 billion to $10 billion in liabilities.
GM minimizes the importance of this ruling for its ongoing litigation matters. But what the Second Circuit Court of Appeals said, and what the Supreme Court affirmed, could have significant consequences for companies with pending products liability suits that have declared bankruptcy.
To understand why, first you need to be familiar with the terms of GM’s bankruptcy. When GM declared bankruptcy in 2009, the “New GM” that emerged was indemnified against claims brought against the pre-bankruptcy company known as “Old GM.” Generally, when companies file for bankruptcy, they are protected from product liability claims arising from incidents that happened before the bankruptcy.
The litigation resulting from the ignition switch defect (which caused the sudden disabling of air bags, power assisted steering and power brakes) presented the question of which GM entity was liable for claims against the old company. In 2015, the bankruptcy court ruled in favor of GM. It allowed lawsuits to be brought against new GM so long as they were rooted in the actions of post-bankruptcy GM.
The Court of Appeals saw a major flaw in this reasoning given the facts surrounding the recall. There was evidence that people at the company knew about the defect back in 2001. A Congressional investigation established that some executives became aware of the defect in 2005 but did not initiate a recall until 2014 (after New GM was created). Why should a debtor who knew about the defect be shielded from lawsuits by filing bankruptcy? The court said that Old Gm was aware of air bag deployment problems and should have revealed that information in bankruptcy and to the owners of the affected cars. Without providing an explanation, the Supreme Court agreed with the Court of Appeals.
What does this mean for those affected by the defect? Anyone who was injured or suffered a family member’s death can sue for damages if they have not already received a payout from the compensation fund.
If you or someone you know suffered a serious injury due to a defective vehicle, including one involving a faulty GM ignition switch, please contact the Alexander Law Group, LLP immediately to discuss your rights. Call 888.777.1776 right now, for a free, confidential, and personal consultation with one of our attorneys or contact us online.