The court sent claims by plaintiffs alleging injuries from other defects-not the ignition-switch problems-back to the U.S. Bankruptcy Court for the Southern District of NY for more development of facts about GM’s knowledge of the defects at the time of the sale.
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US District Judge Jesse Furman in Manhattan federal court dismissed racketeering and some state-law claims, as well as claims from customers whose vehicles were not allegedly defective when sold.
A federal bankruptcy judge a year ago ruled that the ignition switch claims should be among the discarded cases – blocking $7 billion to $10 billion in damages, attorneys estimated – but the three-judge appeals panel this week over turned that ruling and said that GM essentially sought to benefit from concealing the problems.
“The court finds that that novel theory of damages is unsound in light of persuasive precedent interpreting consumer protection law”, Furman said. “Many of the claims we face have been brought on behalf of vehicle owners who want to be compensated even though they have not suffered any loss”, a company statement said.
Yesterday’s decision followed a ruling from a federal appeals court on Wednesday that said the terms of GM’s 2009 bankruptcy did not protect it from economic-loss lawsuits over the ignition switch.
GM said it was reviewing the impact of the ruling, which the company said does not decide whether claims are valid.
Robert Hilliard, a lead attorney in the death and injury cases, says GM is now exposed to billions more in liabilities.
The plaintiffs might have had leverage to obtain “accommodations” had GM disclosed the defect, and had they been given direct notice of the bankruptcy proceedings and an opportunity to be heard at the time of the sale, the U.S. Court of Appeals for the Second Circuit said in a July 13 opinion (see related story).
The company has paid $2 billion in criminal and civil penalties and settlements over the switch, which can slip out of place and cut power to air bags, steering and brake systems.
In its ruling, the appeals court said that the desire to move GM through bankruptcy quickly to avoid its collapse was “laudable”, but it doesn’t do away with basic constitutional principles.
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“Due process applies even in a company’s moment of crisis”, the court wrote.
