U.S. Supreme Court Declines to Review GM Ignition Switch Case
April 24 2017 - 10:59AM
Dow Jones News
By Katy Stech
The nation's top court on Monday rejected a request from General
Motors Co. to limit the fallout from its ignition-switch
defect.
The U.S. Supreme Court denied the Detroit auto maker's request
to review a lower-court ruling that gave some victims' families the
power to sue over defective ignition switches, exposing the company
to billions of dollars in potential new claims.
GM had tried to overturn a July ruling from the Second U.S.
Circuit Court of Appeals that said the auto maker should have
disclosed the ignition-switch defect when its operations were sold
during its 2009 bankruptcy. Under bankruptcy law, a company's
operations can be sold "free and clear" of past liabilities,
blocking future lawsuits over claims that arose before the
sale.
The decision could expose GM to hundreds of additional wrongful
death and personal injury cases.
The potential legal claims could total more than $10 billion,
according to a bankruptcy judge's estimate, though the ultimate
financial fallout could be far less if plaintiffs don't prevail in
court or reach settlements. GM has already reached ignition-switch
settlements with consumers, shareholders and federal prosecutors
totaling more than $2 billion.
GM recalled 2.6 million older cars in 2014 with the defective
switches, which can slip from the run position, cause vehicles to
stall and disable safety features including air bags. The company
acknowledged that employees knew of problems for more than a
decade. The defect has been linked to 124 deaths and led GM to
settle a federal criminal case.
In its request for Supreme Court review, GM lawyers said the
lower-court ruling "threatens to undermine one of the largest
bankruptcies in history."
The appeals court found that GM should have known of the
ignition-switch defect -- or strongly suspected it -- at the time
of its bankruptcy case and therefore should have disclosed it.
Failing to do so violated consumer rights that are built into the
chapter 11 bankruptcy process, the court said. GM "essentially asks
that we reward [bankrupt companies] who conceal claims," the court
said.
Without the Supreme Court's intervention, the lower court's
ruling stands.
Mike Spector and Brent Kendall contributed to this article.
Write to Katy Stech at katherine.stech@wsj.com
(END) Dow Jones Newswires
April 24, 2017 10:44 ET (14:44 GMT)
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