By Jeff Bennett
A federal judge handed General Motors Co. a legal victory on
Wednesday, ruling the Detroit auto maker can retain a bankruptcy
shield that protects it from as much as $10 billion in claims
brought by customers seeking damages tied to faulty ignition
switches.
U.S. Bankruptcy Judge Robert Gerber in a 134-page ruling said he
found nothing to support claims GM had committed fraud upon the
court when it was going through its 2009 bankruptcy. GM has said
its senior executives didn't know the extent of the problem until
late 2013.
The decision prevents customers from suing for declining resale
values and injuries tied to the defective switch. It also allows GM
to focus on a class-action case brought by a different set of
customers in ignition-switch related accidents that occurred after
the 2009 bankruptcy filing. That case could stretch on for several
months.
The auto maker recalled 2.6 million Chevrolet Cobalts and other
vehicles in early 2014 for a faulty ignition switch that has been
tied to 84 deaths and 157 serious injuries. The actions have cost
GM billions of dollars, and it could face billions more in legal
costs or federal fines.
"This ruling padlocks the courthouse doors," said Texas attorney
Bob Hilliard, one of the lawyers representing the plaintiffs.
"Hundreds of victims and their families will go to bed tonight
forever deprived of justice."
GM has created a victim's compensation fund and set aside
hundreds of millions of dollars to settle death and injury claims,
including from customers whose claims would have been blocked by
the company's bankruptcy shield.
Judge Gerber "properly concluded that claims based on Old GM's
conduct are barred," a GM spokesman said. Old GM refers to the
pre-bankruptcy company.
The legal fight now turns to the court of Judge Jesse Furman who
is hearing class-action lawsuits brought about by those injured or
killed in ignition switch related accidents after 2009.
More than a dozen GM executives and managers are set to begin
giving depositions as early as May 6. GM Chief Executive Mary Barra
is slated to give her deposition on Oct. 8.
GM authorized an internal investigation of its own which led the
auto maker to dismiss 15 engineers and lawyers for failing to
address the problem or take action when needed. The auto maker
still faces a variety of investigations including one conducted by
the Department of Justice.
"Wednesday's ruling does not bring the legal liability to zero
as GM now has to concern itself with what fines or indictment the
U.S. government will place on it," said Morningstar Inc. auto
analyst David Whiston. "We have long argued that we expect a fine
in the billions but not enough to cripple GM."
Mr. Whiston said GM management may quantify its remaining
exposure when reporting first quarter results on April 23.
Write to Jeff Bennett at jeff.bennett@wsj.com
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