Supreme Court Declines to Hear GM Appeal Over Ignition Switches

The Supreme Court on Monday turned away an appeal from General Motors Co. seeking to block dozens of lawsuits over faulty ignition switches that one plaintiffs’ attorney said could expose GM to billions of dollars in additional claims.

The justices without comment left in place a lower court ruling that said the automaker’s 2009 bankruptcy did not shield it from liability in the cases.

An attorney representing hundreds of plaintiffs who are suing the company said this exposes GM to around 1,000 additional lawsuits and $5 billion to $10 billion in liabilities. GM disagreed, saying that lower courts will have to decide whether the company is shielded from pre-bankruptcy claims.

A federal appellate court ruled last year that the company remains responsible for ignition-switch injuries and deaths that occurred pre-bankruptcy because the company knew about the problem for more than a decade but kept it secret from the bankruptcy court and owners of cars with the faulty switches. The decision also opens GM to claims that any of those cars sold by the company prior to bankruptcy lost value because of the ignition-switch scandal.

The company had argued that well-established bankruptcy law allowed the newly reorganized GM to obtain the old company’s assets “free and clear” of liabilities.

The automaker recalled 2.6 million small cars worldwide in 2014 to replace defective switches that played a role in at least 124 deaths and 275 injuries, according to a victims’ fund set up by GM and administered by attorney Kenneth Feinberg. The switches could unexpectedly switch from the “run” position to “off” or “accessory,” shutting off the engine and knocking out power-assisted steering and power brakes.

The company has paid nearly $875 million to settle death and injury claims related to the switches. That includes $600 million from Feinberg’s fund and $275 million to settle 1,385 separate claims. It also has paid $300 million to settle shareholder lawsuits.

After it emerged from the government-funded bankruptcy, the company referred to as New GM was indemnified against most claims made against the pre-bankruptcy company, known as Old GM. A bankruptcy court sided with the company in 2015, ruling that most claims against Old GM could not be pursued.

But the appeals court in Manhattan overturned most of that decision and said hundreds of pre-bankruptcy claims could go forward.

Robert Hilliard, a Corpus Christi, Texas, lawyer who has about 300 pre-bankruptcy cases pending against GM, said the decision wrecks GM’s strategy to settle the strongest post-bankruptcy cases and refuse to negotiate with pre-bankruptcy plaintiffs.

“This takes GM back to the starting line after four years,” Hilliard said. “They are now back to being responsible for terrible deaths.”

Hilliard said pretrial discovery and depositions on broader factual issues have been completed, so he would expect cases to go to trial shortly.

But the company disagreed, saying in a statement that the decision does not change the legal landscape much for GM. GM said that the Supreme Court did not make a decision on the merits of the company’s legal argument that it was shielded against pre-bankruptcy claims, but merely said those decisions will be made by lower courts.

“The plaintiffs must still establish their right to assert successor liability claims,” the company said. “From there, still have to prove those claims have merit.”

The company said the appeals court “departed substantially from well-settled bankruptcy law.”