The investigation into GM’s massive manufacturing defect, cover-up, and long-delayed recall is still ramping up, but the lawsuits are already well under way. Or at least, they’re trying to be — but those lawsuits might be over before they start. GM is now relying on their bankruptcy, bailout, and restructuring to claim protection for any errors, small and large, that the company made prior to 2009. Including an error that’s killed at least thirteen peopler.
GM is asking the courts in which they are being sued to stay the lawsuits, Reuters reports. So far GM has filed two motions asking for stays: one in a U.S. District Court in Texas, and the other in a U.S. District Court in California. The motions were filed in response to lawsuits GM is currently facing in those courts.
GM will also be filing a motion in bankruptcy court in New York asking to have an injunction protecting the “new” GM from any of the “old” GM’s liabilities enforced.
The enormous cluster that is the GM ignition switch recall began, as we now know, as early as 2001. Over the next 13 years, the company would ignore customer complaints, botch the repairs, and generally pretend nothing was wrong.
Between the time when the design flaw first worked its way into model year 2002 cars and the recall in 2014, the world economy crashed hard. GM faced bankruptcy, but in an effort to save the American car industry, the federal government stepped in.
Under the terms of that 2009 restructuring, GM is technically a different company and legal entity than it was before. Things were shifted around such that “new GM” had the assets — the parts of the company that could be rescued and made profitable again — and that “old GM” maintains the liabilities. Those liabilities not only include debts, but also responsibility for company actions that took place prior to 2009.
Because of the way bankruptcy works, most of those debts will of course never be repaid, or were settled for a smaller percentage of their original value. GM therefore has two big reasons to want to avoid these lawsuits. First, the obvious: most companies don’t want to face massive, expensive lawsuits that cost them millions of dollars and generate endless bad publicity. Second, because if anyone successfully holds GM liable for any action they took prior to 2009, that potentially opens the door for everyone with a stake to hold GM liable for actions they took prior to 2009. And if those liabilities were enough to sink the company once, they could possibly be enough to do it again.
Lawmakers have asked the Justice Department to step in and “oppose any action by GM to deny responsibility.” Now that GM has officially filed motions, the DoJ could file something in response. Meanwhile, they have opened a criminal investigation.
GM is still exploring the option of whether to create a victim compensation fund.
GM to seek court protection against ignition lawsuits [Reuters]
by Kate Cox via Consumerist
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