GM returns to bankruptcy court

The former Government Motors returned to bankruptcy court yesterday with a plea to enforce the liability shield it constructed during its 2009 Chapter 11 bankruptcy proceedings. The embattled automaker wants the judge to rule that “New GM” cannot be held liable for economic losses related to its ignition switch recall:

New GM says it did not agree to take on liability for so-called economic loss claims like the ones it now faces, in which plaintiffs allege that their cars lost value due to the recall. The company wants [Judge] Gerber to endorse that position and declare that such lawsuits can only be brought against the Old GM shell.

Gerber said he wanted the case to move quickly, and called on the parties to agree on deadlines for filing briefs. “You can take the weekend off,” he told lawyers, but added that he expected a timetable early next week.

The Old GM shell, of course, has no net assets to speak of, having assumed numerous liabilities of the struggling automaker before bankruptcy proceedings. There are at least 59 potential class-action lawsuits in the works seeking economic loss damages, but to get them, they will have to unwind the liability shield somehow.

One way to do that would be to demonstrate that GM had committed fraud by concealing the ignition switch defect before the bankruptcy. Another potential avenue would be to establish that the bankruptcy shield had denied the plaintiffs due process by depriving them of their day in court now that the ignition switch defect has been made public.

The court proceedings mark the sixth ongoing probe of GM, following investigations launched by Congress, an undisclosed state attorney general, the U.S. Attorney’s office, the SEC, and the NHTSA. GM also has an internal probe trying to determine who knew or should have known about the problem that has claimed at least 13 lives and cost GM car owners millions of dollars.

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Jazz Shaw 5:31 PM on December 01, 2022