Today, many were unhappy with Judge Robert E. Gerber’s opinion from the United States Bankruptcy Court in Manhattan. He ruled that General Motors was not liable for most ignition switch suits because of a liability shield clause in the 2009 General Motors bankruptcy. The New York Times explained, “Economic loss cases will be allowed to go forward, the judge ruled, only if they can be tied solely to actions by the post-bankruptcy company, known as New G.M., and ‘do not in any way rely on any acts or conduct’ by the pre-bankruptcy company.”
Families who planned to sue instead of take a settlement from the compensation fund are now barred from such legal action. Some expressed disappointment that now, General Motors can’t receive any fines for punitive damages nor will drivers who experienced financial losses be remunerated. Lawyers had estimated that the costs to GM would range from $7 to $10 billion.
Gerber’s ruling was based on the fact that, when GM declared bankruptcy, the New GM bought Old GM’s assets without taking losses and liabilities related parts or vehicles made by the Old GM. Technically, the New GM is on paper a new company that was created in 2009 when the Old GM’s bankruptcy was discharged. Additionally, the judge was concerned with setting a precedent in which one class of creditors in a bankruptcy was given special dispensation not available to other creditors.
Steve Berman, co-lead counsel for plaintiffs against GM plans to appeal the ruling. “It cannot be the law that Old GM could hide the defects, and subsequently use the bankruptcy court as a shield. Evidence overwhelmingly shows that Old GM was aware of the deadly defect for years before the bankruptcy, but chose not to conduct a safety recall and concealed its knowledge of the defect from regulators and consumers. New GM continued the cover-up for years before finally issuing recalls beginning in February of 2014.”
While GM’s vigorous legal defense of the liability shield in the 2009 bankruptcy has a sound economic basis, the ethics of this defense is less clear.
What do you think of the Judge’s decision?