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GM Ignition Switch Blamed in Suit for Cobalt Deaths

March 21 (Bloomberg) -- General Motors Co., facing lawsuits in the U.S. and Canada over faulty ignition switches, was served with what may be the first wrongful-death suit since the company recalled 1.6 million vehicles in February, in a case involving two fatalities in a 2006 car crash, a law firm said.

The lawsuit was filed today in Hennepin County District Court in Minneapolis, according to the firm. The filing couldn’t immediately be confirmed in court records.

Bob Hilliard, one of the lawyers who filed the case, said in an interview that his clients are seeking $50 million to $100 million, as well as punitive damages. The suit accuses the carmaker of negligence in designing and manufacturing the switch, Hilliard said. The dealership that sold the car and the car’s owner, a relative of the driver, were also named in the suit.

Seventeen-year-old Megan Phillips was driving a 2005 Chevrolet Cobalt with two friends in Wisconsin when the ignition switch moved to the “accessory” position and cut power to the car, according to a copy of the complaint provided by the law firm. The Cobalt veered off the road, hit a telephone junction box and two trees and the air bags didn’t deploy, according to the complaint. Phillips was seriously injured and her two passengers were killed, according to the complaint.

Twelve Deaths

GM has said it identified 12 deaths in connection with the recall of more than one million vehicleswith defective switches made in the mid-2000s, including some Chevrolet Cobalts and HHRs as well as Opel, Pontiac and Saturn models. The two fatalities in Hilliard’s suit are among those 12, according to his firm, Hilliard Munoz Gonzales LLP in Corpus Christi, Texas.

GM this week recalled 1.55 million vans, sedans and sport-utility vehicles, citing concerns over brakes, seat belts and air bags, adding to the 1.6 million cars recalled over the faulty ignition switches.

Last week, Hilliard filed a proposed class action, or group lawsuit, against the automaker in Texas seeking as much as $10 billion to compensate GM car owners for the diminished value of vehicles affected by the recall. At least two similar suits in California and Michigan have since been filed by other firms.

Similar Failure

Investigators documented the 2006 Wisconsin accident and identified a failure similar to one cited by GM in its February recalls, according to a report commissioned by the National Highway Traffic Safety Administration.

Greg Martin, a spokesman for Detroit-based General Motors, declined to comment on specific lawsuits.

An investor sued GM and Chief Executive Officer Mary T. Barra today in federal court in Detroit, saying the failure to address the switch matter in a timely fashion hurt the company’s stock.

GM as currently constituted is protected from claims over deaths or economic losses occurring before the so-called old GM emerged from bankruptcy in July 2009. The new GM also renounced any punitive damages associated with the old GM. Challenging its immunity for any pre-reorganization crashes would require asking the judge who oversaw the historic U.S.-backed bankruptcy to reconsider its terms.

The time to revoke court orders dating from GM’s bankruptcy “has long past,” according to the automaker’s bankruptcy lawyer, Harvey Miller of Weil Gotshal & Manges LLP.

Full Extent

GM’s creditors diligently examined its liabilities and potential exposure for possible torts, he said in an earlier interview. “No pertinent information was withheld from the court during the GM Chapter 11 case,” he said.

Hilliard said GM shouldn’t be shielded from liability for the pre-2009 crash because at the time of its reorganization, the company didn’t present the full extent of its ignition-switch liabilities.

“It would be a heartless decision if they told the victims: ‘Yes this is our fault, yes we’re responsible, yes we covered it up for over a decade, and yes we are going to stand behind the shield of bankruptcy,’” Hilliard said in an interview today.

To persuade U.S. Bankruptcy Judge Robert Gerber to reopen the case, Hilliard would need to prove that the old GM had knowingly deceived the court, said Chip Bowles, a bankruptcy lawyer at Bingham Greenebaum Doll LLP in Louisville, Kentucky, who wasn’t involved in the GM liquidation.

Set Aside

“A few bankruptcy cases have been set aside for fraud on the court, but you have to establish deliberate fraud and concealment,” said Bowles, a former board member of the American Bankruptcy Institute.

Gerber declined to comment on past or pending cases.

“GM is focused on ensuring the safety and peace of mind of our customers involved in the recall,” the company said in a statement. “It is true that new GM did not assume liability for claims arising from incidents or accidents occurring prior to July 2009. Our principle throughout this process has been to put the customer first, and that will continue to guide us.”

Martin, the GM spokesman, declined to say whether the statement would encompass victims of pre-bankruptcy incidents.

To contact the reporter on this story: Patrick G. Lee in New York at plee315@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Mary Romano

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