GM Judge Throws Out Key Ignition Claim in Second Trial

  • Judge says switch plaintiffs failed to prove fraud claim
  • Jurors still to decide whether owner's car had a defect

General Motors Co. won a partial victory in its second trial over faulty ignition switches as a judge threw out a key fraud claim against the automaker, boosting the company’s outlook for resolving hundreds of similar cases on better terms.

A federal judge in Manhattan on Monday dismissed the allegation, agreeing with GM that driver Dionne Spain hadn’t presented enough evidence to show that the company made false or misleading statements about the defect in its cars. U.S. District Judge Jesse Furman didn’t issue a written opinion. The ruling follows Furman’s earlier rejection of other claims, including a demand for punitive damages.

Jurors in Manhattan federal court will still weigh whether Spain’s 2007 Saturn Sky had a defect and whether that defect led to a crash on a New Orleans bridge in 2014. GM rested its defense Monday and the case will go to the jury Tuesday.

"GM needed to prevail on the fraud allegation because fraud is a dangerous claim that can lead to high verdicts," said Erik Gordon, a business professor at the University of Michigan who isn’t involved in the case.

Randall Jackson, a lawyer for Spain, declined to comment on the ruling.

‘Right Decision’

“Dismissing the fraudulent-misrepresentation claim was the right decision because there was not sufficient evidence presented at trial to even send it to the jury to decide,” GM spokesman Jim Cain said in an e-mailed statement.

GM, which recalled millions of vehicles over the flaw in 2014, admitted to using defective ignition switches for years and to hiding the fact from customers and regulators. But the company is challenging suits that it says wrongfully blame the flaw for crashes, injuries and deaths.

The Detroit-based carmaker has already paid more than $2 billion to resolve legal issues stemming from the scandal, including $900 million to end a criminal probe by the U.S. government; $575 million to settle a shareholder suit and more than 1,380 civil cases by victims; and $595 million through a victims’ compensation fund outside of court.

The first case, selected by the plaintiffs, concluded in embarrassment for their lawyers. That trial ended abruptly when GM revealed evidence that the plaintiffs, an Oklahoma couple, had lied under oath and wrongfully blamed GM for their eviction from their “dream house.”

Plaintiffs in all the cases allege GM endangered drivers and passengers by delaying the recall of defective vehicles. Due to a weakness in the design of ignition switches, jostled keys or a bump from a knee could shut off the engine, disable power steering, power brakes and air bags, and leave occupants almost helpless as vehicles careened out of control.

The case is In re General Motors LLC Ignition Switch Litigation, 14-MD-2543, U.S. District Court, Southern District of New York (Manhattan).

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