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Judge’s Decision Protects GM from Billions in Damages

April 22, 2015

As one of the largest automotive recalls in American history, this blog has been covering the massive and tragic GM ignition switch failure–which has killed at least 84 and injured at least 157–for more than a year. As we previously reported, GM had been covering up known problems for about a decade. Recently, the Associated Press reported that GM has repaired about 70 percent, or 1.6 million, of the two million affected vehicles, which is good news (the average completion rate is 75 percent after a year and a half). However, for many of the families of those injured or killed by the malfunctioning cars and trucks, there is more bad news.

A judge’s recently published decision holds that because GM filed for bankruptcy in 2009, it will not be obligated to pay damages from problems that arose before that time, which includes the sale of most of the faulty vehicles. This news comes despite the judge’s acknowledgment in this document that at least 24 people who worked for GM before its bankruptcy knew about the ignition problem.

As the Associated Press reports, this decision will shield the corporation “from $7 billion to $10 billion in potential legal liabilities.” Reuters explains that these cases fall against “Old GM,” which as of a few months ago was worth $9 billion–a small portion of the total value of claims against it, $32 billion. Accordingly, plaintiffs can only sue GM for “actions that happened after it left bankruptcy in July of 2009.”

Obviously, this ruling does not sit well with consumer advocates or attorneys, one of whom recently remarked, “Hundreds of victims and their families will go to bed tonight forever deprived of justice. GM, bathing in billions, may now turn its back on the dead and injured, worry free.”

Moreover, plaintiffs and those representing them claim that because of the alleged widespread GM cover-up, they had no way of knowing about the ignition switch failures before 2009, making a lawsuit impossible. Choosing to see this as an opportunity, another attorney explains that this decision makes room for many individuals who want to sue the so-called New GM for its knowledge and continued sale of defective vehicles well past 2009. (Claims Journal predicts that such cases may pay out as much as $7.5 billion spread across roughly 10 million GM car owners.)

The company has allocated more than $400 million “to compensate those killed or injured in crashes–no matter when they happened,” but this is a drop in the bucket compared to the $32 billion in pending claims. Many industry watchdog groups also complain that the $35 million fine the government imposed on GM for its failure to protect consumers, to a company worth over $177 billion, is too low to have any deterrent effect.

With an appeal in the works from plaintiffs’ attorneys, this conversation will surely continue into the coming months.

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