Bloomberg News

The GM Recall: Which Claims Are Barred, What the Lawyers Are Trying 

March 19, 2014

General Motors Co. announced in February it was recalling 1.6 million vehicles because of a defect in their ignition systems linked to at least 12 deaths. Claims over deaths or economic losses occurring before July 2009 were blocked by a bankruptcy judge in approving the sale of assets from the former GM to the current auto maker. Lawyers alerted by the recall are now examining pre-bankruptcy deaths and claims to get the ban lifted. Some have used online postings to acquire clients with banned claims.

Q. What claims are blocked?

A. By court order, the new GM can’t be held responsible for any product-related liabilities that arose before July 10, 2009.

Q. What claims for compensation are not barred?

A. GM can be held responsible for wrongful death, personal injury or damage to property caused by accidents on or after July 10, 2009.

Q. What happened to people with pre-2009 claims?

A. The bankruptcy judge set up a mediation process in 2010. They had to be willing to accept a reduced amount acceptable to the old GM to start negotiating.

Q. Is there a way to get around the bankruptcy ban?

A. Challenging GM’s liability immunity would require asking the judge who oversaw the historic U.S.-backed bankruptcy to reconsider its ban on claims. Harvey Miller of Weil Gotshal & Manges LLP, the automaker’s bankruptcy lawyer, said the time to revoke court orders dating from GM’s bankruptcy “has long passed.” He said the company’s creditors diligently examined its liabilities and potential exposure for possible torts. “No pertinent information was withheld from the court during the GM Chapter 11 case,” he said.

Bob Hilliard, a plaintiffs’ lawyer based in Corpus Christi, Texas, has a different view. He is representing the families of two teenagers who died in a 2006 crash of a Cobalt, one of the recalled models. Hilliard, who hasn’t filed a wrongful-death suit, said the bankruptcy judge wasn’t advised of the full extent of GM’s ignition-switch liabilities. “If you are aware of potential exposure to litigation and you don’t reveal it, that’s fraud,” he said. “I’m going to go back to that bankruptcy judge and say, ‘You have to undo this, the liability of old GM, because it was the new GM’s continued coverup after the bankruptcy that allowed people to be hurt or killed.”

To persuade U.S. Bankruptcy Judge Robert Gerber to reopen the case, he would need to gather evidence and prove that the old GM had knowingly deceived the judge, said Chip Bowles, a bankruptcy lawyer with Bingham Greenebaum Doll LLP who wasn’t involved in the GM liquidation. Judge Gerber declined to comment.

Q. What post-bankruptcy claims have been litigated or settled?

A. GM paid an undisclosed amount in September to the family of a 29 year-old nurse who died in 2010 in Georgia. The plaintiffs alleged that a faulty ignition switch caused their daughter’s fatal accident, which involved a 2005 Chevrolet Cobalt. On March 14, Hilliard, the Corpus Christi lawyer, sued GM in a proposed class action on behalf of affected vehicle owners. He seeks between $6 billion and $10 billion for the lowered resale value of cars affected by the GM recall. On March 19, Seattle plaintiffs' firm Hagens Berman Sobol Shapiro LLP filed a similar suit in Santa Ana, California, seeking to recover about $250 for each owner, or more than $350 million in total, plus punitive damages for the automaker's alleged failure to disclose critical safety information. Law firms such as Lieff Cabraser Heimann & Bernstein LLP and Beasley, Allen, Crow, Methvin, Portis & Miles P.C. are looking for incidents potentially related to the ignition switch issue or re-evaluating ongoing auto cases in light of the recall.

Q. What other recall liability does GM face?

A. Injuries that have not yet taken place or been identified. "For every incident that gets reported to the automaker, there are usually nine or 10 more,’’ said Clarence Ditlow, executive director of the Washington-based Center for Auto Safety, a consumer advocacy group. “You can expect the number of deaths associated with this recall to rise.”

Q. What might GM do beyond what it is legally required to?

A. The automaker’s statement on the crashes suggests it may eventually help more drivers than it’s legally obliged to. “GM is focused on ensuring the safety and peace of mind of our customers involved in the recall,” GM spokesman Greg Martin said in a statement. “It is true that new GM did not assume liability for claims arising from incidents or accidents occurring prior to July 2009. Our principle throughout this process has been to put the customer first, and that will continue to guide us.” He declined to say if that could include compensating victims of pre-bankruptcy incidents.


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