Judge says GM could be faulted if car owner rights were violated

Article by Andrew Christian, on February 24, 2015

Judge Robert Gerber of the United States Bankruptcy Court in Manhattan remarked that if General Motors did violate car owners' constitutional rights by concealing ignition-switch defects during its bankruptcy, he may narrow the legal protections granted to the carmaker under its 2009 bankruptcy sale.

GM's 2009 bankruptcy led to a sale of its profitable assets to an entity that now known as General Motors Co., while its liabilities were assigned to the "Old GM" trust.

According to GM, the plaintiffs should seek compensation from the trust since their claims pertain to vehicles built before bankruptcy. The carmaker has already set up a program to compensate victims – either for those killed or injured -- due to faulty ignition switches.

The compensation will be paid from an out-of-court fund and GM has already allotted an initial $400 million for it. On the other plaintiffs say they should seek compensation from GM, rather than the trust, since the carmaker hid the ignition switch defects when the bankruptcy sale was approved, which means a violation of their right to due process.

While Gerber is not expected to issue a ruling in the next few weeks or months, his recent comments indicates that he was not swayed by either side.

Gerber remarked that if due process was violated, then he would be "inclined to" reassess the terms of the sale order and modify it to keep GM responsible for ignition-switch defects it knew about after the sale. Plaintiffs, however, are not pushing for a modified sale order, but wanted Gerber to rule that it did not apply to them.

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