GM to Face Pre-Bankruptcy Claims As Supreme Court Rejects Its Bid

GM to Face Pre-Bankruptcy Claims As Supreme Court Rejects Its Bid

The automaker General Motors in the past few years has paid out a big chunk of money – approximately $2 billion – in various fines, penalties and more so in settlements that are related to its faulty ignition switches. These faulty switches have plagued the automaker for nearly a decade, forcing it to recall its vehicles.

GM has filed for bankruptcy in 2009 and thus has argued that as bankruptcy filing wipes out any past liability it should block the lawsuits that involve crashes prior to its bankruptcy filing. There are hundreds of lawsuits worth billions of dollars against GM for ignition-switch malfunction leading to crashes. This switch that was used in the small cars that the company started producing in 2002 and 2003 had the tendency to turn off by itself. This resulted in power shutting off disabling the airbags.

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The United States Supreme Court on Monday rebuffed the claim of GM and declined to review a lower-court ruling. This is a big setback for the company as it simply means that several hundreds of the remaining unsolved cases against G.M., which involves personal injury or wrongful death claims could be sent to state courts for trials or resolution.

GM has set up a compensation fund, which has so far made payments to many claimants, but was making its claim that if a company files for bankruptcy then any past liability filing typically wipes out. But, when last year a federal court gave a ruling that pre-bankruptcy claims will proceed then the company has appealed to the Supreme Court to review that ruling. The Supreme Court too rejected it.

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The lawyer Robert C. Hilliard who is currently handling some 243 claims against the automaker said, “There are a lot of cases out there that either is going to have to be settled by G.M. or litigated, now that the Supreme Court is not getting involved. Among them are cases involving 27 deaths.” According to him, there are still some 1000 cases that are outstanding.

It is alleged that the company engineers were aware of the switch problems for many years before they issued the limited recalls of its affected models. The problem was there, but it remained obscured when G.M. went through a federally financed bankruptcy in 2009. It was only in 2014 that the company acknowledged that it had failed to respond in time and then went ahead with recalling 2.6 million vehicles. It eventually ended paying $900 million for settling a federal criminal investigation and to compensate those who were victims of switch-related crashes it set aside a fund of $594.5 million.

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