General Motors May Face Some Ignition-Switch Punitive Claims

  • Bankruptcy judge says 2009 sale was `ambiguous' as to damages
  • Suits would have to show GM `inherited' knowledge of fault

General Motors Co. may face limited claims for punitive damages over injuries and deaths if plaintiffs can prove the carmaker’s employees “inherited” information from its bankrupt predecessor that shows they knew about a faulty ignition switch.

GM was split in two in a 2009 bankruptcy, leaving old liabilities behind and putting its assets into a new corporate entity that operates today. The sale agreement behind that transaction has been at the heart of legal disputes over what kind of claims can be made against the new company over the switch defect, which predates 2009. 

U.S. Bankruptcy Judge Robert Gerber said in a court filing Monday in Manhattan that the sale didn’t clearly make new GM responsible. He ruled against plaintiffs across the country who had said the agreement “unambiguously” did just that.

“At best, it is ambiguous,” Gerber said.

The ruling offers a mixed result for GM, which Gerber said had interpreted a past decision of his too broadly. 

“The plaintiffs can assert considerably more in the way of claims and allegations than New GM contends,” the judge wrote.

‘Inherited’ Knowledge

Punitive damages can be sought only if plaintiffs show that employees “inherited” knowledge from their time at so-called Old GM, he said, or had knowledge based on documents or communications from Old GM.

The decision covers lawsuits around the U.S., which can now go forward in accordance with Gerber’s statements.

“A jury will now be allowed to hear evidence of GM’s cover up and determine what monetary punishment to assess for so many needless deaths and injuries,” Bob Hilliard, a lawyer for one group of plaintiffs, said in a statement.

GM said the decision is not a victory for plaintiffs.

“The bankruptcy court held that New GM did not contractually assume, as part of the bankruptcy sale, liability for punitive damages based on Old GM conduct relating to Old GM vehicles,” the company said in a statement. “Although it is true that the Court also held that New GM could be liable for punitive damages for ‘independent claims’ based solely on New GM’s conduct, plaintiffs to date have not established any such independent claims against New GM.”

In April, GM escaped billions of dollars in liability after a judge ruled it couldn’t be sued for the lost value of most affected cars.

The case is In re Motors Liquidation Co., 09-bk-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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