Risk & Compliance

High Court Clears Way for Suits Against GM

The automaker lost its bid for review of a lower court ruling that exposes it to liability for injuries resulting from an ignition-switch defect.
Matthew HellerApril 25, 2017
High Court Clears Way for Suits Against GM

The U.S. Supreme Court has refused to hear General Motor’s appeal of a lower court decision that would allow hundreds of customer lawsuits over a deadly ignition-switch defect to proceed.

GM’s petition for Supreme Court review focused on the issue of whether the automaker was shielded from liability by its 2009 bankruptcy. The 2nd Circuit Court of Appeals last year held the bankruptcy shield did not apply because consumers had not been properly notified of the defect before the Chapter 11 filing.

“Hundreds of death and injury cases have been frozen in place for years as GM wrongly tried to hide behind a fake bankruptcy,” Robert Hilliard, lead counsel for the plaintiffs, said in a statement after the Supreme Court denied review. “Now, GM can hide no more.”

But GM spokesman Jim Cain said the denial of the appeal “was not a decision on the merits, and it’s likely that the issues we raised will have to be addressed in the future in other venues because the Second Circuit’s decision departed substantially from well-settled bankruptcy law.”

The defect has been linked to 124 deaths and 275 injuries. GM began recalling 2.6 million vehicles in 2014 but has acknowledged some of its employees knew about the defect for years before the recall was initiated.

The litigation involves injury and death claims stemming from pre-bankruptcy crashes, as well as claims that vehicles lost value as a result of the defect and recalls involving other parts. The claims could be worth up to $10 billion, according to court papers.

In 2015, a U.S. bankruptcy judge ruled that GM was shielded from liability over its pre-bankruptcy actions. But the 2nd Circuit reversed that ruling, finding the plaintiffs’ due process rights to be properly notified of the defect applied “even in a company’s moment of crisis.”

GM argued in its petition for Supreme Court review that even if the pre-bankruptcy GM “failed to comply with its due process obligations, nothing in bankruptcy law, the Constitution, or common sense supports the Second Circuit’s decision to remedy the seller’s mistake by punishing” the new GM that was formed by the Obama administration to acquire the company’s assets.