General Motors is still embroiled in litigation with plaintiffs from various states over ignition switch failures that resulted in serious crashes. In a case pending before the U.S. Supreme Court, the company is asserting that the Second Circuit Court of Appeals was wrong to rule that New GM—the company that emerged from bankruptcy in 2009—could not evade new lawsuits over the switches.
According to the bankruptcy discharge in the GM case, New GM would assume all existing liabilities of Old GM, including matters in litigation. The problem for New GM is that Old GM failed to disclose in the bankruptcy proceedings the issue of the switch failures and the potential for future lawsuits.
In a bankruptcy, creditors and potential creditors have a right to be heard before an action is discharged. Because of Old GM’s failure to disclose, owners of GM cars with the faulty switches, such as Pontiacs, Chevrolets, and Saturns, had no opportunity to be heard in the bankruptcy proceeding.
The Second Circuit ruled that New GM’s immunity from claims against Old GM arising after the bankruptcy was lost because the plaintiffs had not been afforded their due process rights to weigh in on the bankruptcy.
Most recently, New GM has a motion for summary judgment pending in the U.S. District Court for the Southern District of New York. In that proceeding, the company claims that exceptions to the doctrine of successor liability are limited to creditors to whom recovery was offered prior to the bankruptcy sale. Consequently, New GM argues that it has no successor liability for claims filed after the bankruptcy discharge.
The plaintiffs argue that New GM is, in effect, Old GM because it uses the same facilities, including corporate headquarters, and because certain board members remain the same. Therefore, according to the plaintiffs, New GM is not a successor: it is the same entity as Old GM. In addition, the plaintiffs argued that New GM’s court filings failed to explain how the case could be dismissed on the ground of successor liability when the bankruptcy shield had already been lifted. With the shield lifted, successor liability should no longer be a defense.
Approximately 325 cases remain in the federal court system. The Supreme Court’s ruling on the removal of New GM’s immunity from suits after the bankruptcy will be pivotal in whether those cases proceed.
If you or a loved one was badly injured in a crash due to a defective GM ignition switch, contact the personal injury lawyers at the Alexander Law Group, LLP or call 888.777.1776. All calls are free and confidential.