GM Customers Press Judge for Information on Recalled Cars

General Motors Co. customers kept up pressure on the automaker to share more information about its recalled cars, asking a bankruptcy court to let their probe of the company go forward after a judge in California halted it.

The California car owners yesterday asked U.S. Bankruptcy Judge Robert Gerber in Manhattan to let them gather information from the company. If Gerber, who supervised GM’s 2009 reorganization, grants the request, the car owners’ investigation would parallel the company’s internal probe, led by former U.S. attorney Anton Valukas.

GM, which has recalled 2.59 million vehicles over faulty ignition switches linked to 13 deaths, won a halt to the California suit, which seeks recovery for economic losses, pending a ruling by Gerber on whether 50 groups can claim compensation for depreciated cars.

The California customers say that GM needs to recall more cars and that repairs to the ignition switches aren’t enough to stop accidents. The company has said most economic claims were wiped out in bankruptcy.

The car owners said their probe will focus on what GM, as it existed before and after reorganization, knew about the ignition switches and key systems of Chevrolet Cobalts and Saturn Ions and how they estimated potential claims from drivers injured because of the defects. The car owners also want to study what GM didn’t tell Gerber during the bankruptcy.

Liabilities Lifted

This process of evidence-gathering, known as discovery, is a step toward determining whether Detroit-based GM deceived the bankruptcy court about the defects during its reorganization, when Gerber freed the company from most pre-bankruptcy liabilities, leaving intact some warranty obligations and accident responsibility.

“There is a decent chance that Gerber would allow discovery,” said Chip Bowles of Bingham Greenebaum Doll LLP in Louisville, Kentucky, a bankruptcy lawyer who isn’t involved in the GM cases.

The California plaintiffs also asked Gerber to tell them if they must abandon claims for damages that relate to old GM’s actions, as his order implied.

Gerber has reaffirmed his GM rulings before, telling customers in 2010 that the reorganized company wasn’t liable for its predecessor’s “implied” or stated warranties for Saturns. He said they could file a “far less valuable claim” against old GM, which has limited assets.

Saturn Case

While it will be hard for the California car owners to persuade Gerber to reverse his orders, they might win some concessions. The judge let the Saturn customers continue pursuing their case against the automaker in Delaware, where the suit started.

Sander Esserman of Stutzman, Bromberg, Esserman & Plifka in Dallas, who signed the California car owners’ request to Gerber, proposed that the judge address the matter at a court conference set for May 2.

“I know I’m asking for a lot,” the lawyer said today in a phone interview. “But this is an unusual case.”

Esserman has offered to act as a liaison with lawyers for other groups of customers to organize a presentation.

GM asked for the May 2 conference to discuss the logistics of its request to reaffirm Gerber’s bankruptcy order, saying the process would be complicated by the many lawyers for each of about 50 groups of customers that are suing the company.

Conference Matters

“No substantive matters will be decided at the conference, nor will evidence be taken,” according to an April 22 order by Gerber. The session will be devoted to “determining how best to procedurally address any contentions parties wish to make.”

The court will consider “what must be determined, when, and how,” according to the filing.

“The court will not entertain repetitive comments,” Gerber said. A briefing schedule and hearing date would be set.

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

Before it's here, it's on the Bloomberg Terminal.