General Motors Co. is asking the United States Bankruptcy Court for the Southern District of New York to enforce bankruptcy protection terms that bar pre-bankruptcy issue lawsuits. An enforcement of the terms would mean GM would be shielded from lawsuits stemming from faulty ignition switches in cars sold before its 2009 bankruptcy.
Plaintiffs suing GM has filed a proposed class-action lawsuit in Manhattan bankruptcy court, asking it to rule that the carmaker cannot use the bankruptcy protection to shield itself from liabilities. Under the terms of GM’s bankruptcy protection, the "New GM" would not bear any liability for incidents that predate its bankruptcy emergence.
Likewise, lawsuits involving pre-bankruptcy issues should be brought against what remains of “Old GM.” In its recent motion, GM said that that plaintiffs cannot use the New GM's recall covenant to sue new GM for economic damages over a vehicle or part sold by old GM. The carmaker has reiterated its commitment to replace the faulty ignition switches.
GM spokesman Jim Cain said in an e-mailed statement that the carmaker recognizes its "civil and legal obligations relating to injuries" related to the recalled cars. Cain added that GM has tapped the services of lawyer Kenneth Feinberg to advise it of its legal options. Feinberg is widely known for managing compensation funds for high-profile incidents like the 9/11 terrorist attacks and the BP Plc oil spill.
Since initiating the recall in February, GM has been facing lawsuits in behalf of individuals injured or killed in crashes involving recalled cars. The carmaker has also been facing lawsuits in behalf customers who claim that their cars had lost value due to its actions.
The plaintiffs have claimed that concealed having knowledge of the faulty ignition switch, which should mean that the carmaker was not entitled to protection from liability. The plaintiffs content that GM’s argument is suggesting that the federal government would still bail out the carmaker even if it knows of the company’s intentional misconduct. [source: Reuters]