Bloomberg News

GM Bid to Freeze Ignition Lawsuit Is Called a ‘Red Herring’

April 19, 2014

General Motors Co.’s (GM:US) bid to freeze a lawsuit over faulty ignition switches may compromise public safety, plaintiffs told a judge in California, calling the automaker’s claim that its 2009 bankruptcy shielded it from the old GM’s liabilities “irrelevant” and a “red herring.”

GM two days ago defeated a consumer effort to have a court order the company to tell owners of recalled vehicles to stop driving their cars until the defect is fixed. A federal judge in Corpus Christi, Texas, said U.S. regulators are better situated than courts to manage recall terms.

The Detroit-based company has asked federal judges in California and Texas to delay litigation over the defects in cars it recalled until a bankruptcy judge in New York rules on whether some claims for compensation can be brought without violating a court order in its 2009 reorganization.

After recalling 2.59 million cars with ignition defects linked to 13 deaths, the biggest U.S. automaker is grappling with its most daunting challenge since filing for bankruptcy. It includes customer suits and regulatory probes into why GM waited a decade or more to fix the defects. The company has begun repairs, offering free rentals to customers who take their cars to dealers.

The carmaker has said at least 36 suits similar to one by Galdina Maciel in California, who responded Feb. 17 to GM’s bid to freeze the suit, had been filed over claims of damages and liability for design defects that the new GM rejected in bankruptcy.

California Plaintiffs

The California plaintiffs said they want to seek information from GM so they can decide whether they should ask the judge to tell GM to disclose more facts about its cars and expand its recall, perhaps also grounding the defective vehicles.

“This discovery is sought in order to protect the public,” they said in a Feb. 17 court filing. What might happen in bankruptcy court if GM asks a judge there to reaffirm his order, as it has said it would, is “irrelevant” to the California suit at this stage of the proceedings, they said.

“GMs argument regarding the impending filing with the Bankruptcy Court is a red herring and must be rejected,” they said.

The car owners cited GM’s claim that it worried about “inconsistent rulings” by the bankruptcy court and the district courts. They said car owners said any rulings on the ignition suits are far off. The cases may be consolidated in a single court.

Company Statement

“Our full efforts are on our customers’ safety and fixing their vehicles as quickly as we can,” Kevin Kelly, a GM spokesman, said Feb. 17 in an e-mailed statement. “We also are conducting an unsparing, comprehensive review of the circumstances leading to the ignition switch recall to make sure something like this does not happen again.”

Kelly declined to comment on the litigation.

The Texas case is Silvas v. General Motors LLC, 14-cv-00089, U.S. District Court, Southern District of Texas (Corpus Christi). The Maciel case is Maciel v. General Motors LLC, 14-cv-01339 U.S. District Court, Northern District of California (Oakland).

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net

To contact the editors responsible for this story: David E. Rovella at drovella@bloomberg.net Charles Carter, Peter Blumberg


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  • GM
    (General Motors Co)
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