Judge Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan on Wednesday, May 27, entered an order staying actions brought against the automaker, referred to in court papers as New GM. The lawsuits allege harm from defects in automobiles made by General Motors Corp., or Old GM, the predecessor to the current automaker.
Gerber's order halts the lawsuits from plaintiffs who were victims of accidents due to faulty ignition switches. It also applies to those plaintiffs who seek damages from New GM based on economic harm, which include the alleged reduction in the resale value of recalled vehicles.
The order notes an exception, though, for suits relating to any Old GM liabilities that New GM assumed. It also exempts plaintiffs prosecuting damages claims relating to conduct by New GM alone, not any based on the actions of Old GM.
The order comes after Gerber penned an April 15 opinion that found a July 5, 2009, sale order in the Chapter 11 case of Old GM protected New GM from successor liability. Specifically, New GM, which purchased the assets of Old GM through a Section 363 sale, was not on the hook for billions of dollars of damages stemming from actions taken by its predecessor.
"Any claims and/or causes of action brought by the ignition switch pre-closing accident plaintiffs that seek to hold New GM liable for accidents or incidents that occurred prior to the closing of the 363 sale are barred and enjoined pursuant to the sale order," court papers read.
Starting in March 2014, following the company's announcement that various Chevy, Pontiac and Saturn models contained faulty ignition switches, New GM was hit with a barrage of lawsuits alleging damages related to accidents involving the affected models as well as damages for economic losses tied to a decline in value of GM vehicles, both recalled and nonrecalled models, because of the company's tarnished reputation.
New GM had asserted in court papers that litigation claims against Old GM were not assumed under the sale and thus were barred under the sale order.
"If for some reason the ruling is reversed, then we'd have to consider our options," Cain said. The claims are "mostly economic claims that are unproven. We have very strong factual and legal defenses," he added.
Gerber's ruling allows an ignition switch preclosing accident plaintiff that believes he or she has a "good-faith basis" to continue a lawsuit against New GM by filing a motion seeking permission to continue the case. A plaintiff, however, only could proceed if new justifications for the legal action could be made. Court filings said pleadings "shall not reargue issues that were already decided" by the court.
"I think the judge is being cautious in order to protect the rights of those that were not active in the bankruptcy court. But they are going to ... raise an issue that has not already been addressed, which is going to be tough to do," said Bill Weintraub of Goodwin Procter LLP. Weintraub is bankruptcy counsel for the co-lead plaintiffs in the multidistrict litigation involving issues relating to personal injury claims for Old GM vehicles.
If a plaintiff disagrees with the merits of the decision, he or she should appeal rather than submit a no-stay pleading, Weintraub said. He declined to comment on what points of Gerber's decision might be appealed or where the plaintiffs would seek review of the ruling.