GM, lawyers fight over bankruptcy protections
DETROIT — General Motors Co. and a battalion of lawyers are preparing for a court fight over whether GM is liable for the sins of its corporate past.
The company is asking US Bankruptcy Court to shield it from claims for actions that took place before its 2009 bankruptcy. But lawyers suing GM say it shouldn’t get the usual benefits of bankruptcy protection, because it concealed a deadly ignition switch problem.
They also say the company’s motion is part of a strategy to force settlements in dozens of suits alleging the switches caused deaths and injuries.
Late Monday, GM filed a motion in New York asking the court to bar claims that GM small cars lost value because of the ignition switch problem, which has led to the recall of 2.6 million older small cars worldwide. The company admits knowing of the problem for over a decade, yet failing to recall cars until February.
The faulty switches, which GM says have caused at least 13 deaths, can move unexpectedly from the ‘‘run’’ position to ‘‘accessory’’ or ‘‘off,’’ shutting down the engine and knocking out power-assisted steering and brakes. Drivers can lose control and crash. If the engine is off, air bags won’t inflate.
The automaker contends that under the bankruptcy, which ended on July 10, 2009, assets and liabilities of the old General Motors were split, with good assets sold under court order to ‘‘New GM’’ and bad ones and most liabilities going to the ‘‘Old GM,’’ which was left behind. The recalled cars were made and sold by the old company.
The new GM, the company says, took on only three categories of liabilities: those for post-bankruptcy crashes involving cars made by ‘‘Old GM’’ that caused injuries, deaths, or property damage, plus warranty and lemon law claims.
‘‘Plaintiffs assert claims for liabilities that, under the sale order and injunction, were retained by Old GM,’’ the motion states. It asks the court to dismiss about 50 class-action lawsuits seeking damages for lost car values, and for an order stopping similar new claims.
But Robert Hilliard, a lawyer with several suits pending against GM, says its motion is an implied threat to those who have sued: Either settle or risk getting nothing because the company will argue that claims should go against the Old GM, which has few assets.
GM has hired Kenneth Feinberg, who handled the fund for victims of the Sept. 11, 2001, terror attacks, Boston Marathon bombings, and BP oil spill in the Gulf of Mexico, to explore ways to compensate victims.
GM said it hasn’t decided whether to seek court protection in the wrongful death lawsuits from things that happened before bankruptcy, and that the motion filed Monday is focused solely on lawsuits alleging economic loss from a drop in value of the recalled cars.
After GM filed its motion, trial lawyers who fear the court will bar them from seeking damages sued in Bankruptcy Court, saying that since GM knew of defective switches before its bankruptcy, it should have told the court of the potential liability, and that GM can’t use the bankruptcy as a shield because the same employees worked for it before and after the 2009 bankruptcy.