Lawyers Seek Another $1 Billion From General Motors Over Ignition-Switch Defect -- Update
August 11 2017 - 3:13PM
Dow Jones News
By Mike Colias and Mike Spector
Lawyers are alleging that General Motors Co. is on the hook for
an additional $1 billion to address claims stemming from faulty
ignition switches, the latest legal wrangling over a safety defect
that continues to dog the Detroit auto maker years after a recall
that triggered widespread investigations and settlements.
Lawyers representing car-accident victims and customers seeking
recompense for declining vehicle values have reached a tentative
settlement with a trust for creditors of so-called Old GM, the
remnants of the auto giant left behind as part of its $50 billion
government rescue and bankruptcy restructuring.
The trust is now seeking $1 billion in GM stock from the auto
maker to cover the claims. A plaintiffs' lawyer outlined the
tentative settlement terms during a court hearing in New York on
Friday morning.
GM, in a statement, said the other parties "secretly plotted"
without its input, calling the trust's request "ridiculous" and
part of "an unfair, unjust and improper scheme" to force the auto
maker to pay for claims lacking merit.
"We will aggressively protect our rights and our shareholders,"
the company said, adding it would work to hold the trust and
plaintiffs "accountable for their bad faith and improper
actions."
Steve Berman, a plaintiffs' lawyer at Hagens Berman Sobol
Shapiro LLP involved in the settlement discussions, said the trust
took proper actions allowed under terms of GM's 2009
bankruptcy-sale order. That sale sent assets to a new company owned
by the U.S. Treasury while leaving undesired liabilities behind
with Old GM.
"The notion that we've done anything but follow the terms of the
sale agreement or done anything wrong are unfounded," Mr. Berman
said in an interview, adding that he hoped to present a judge with
a signed settlement as soon as Tuesday.
A lawyer for Old GM's general unsecured creditors' trust
declined to comment.
The total claims from accident victims and customers alleging GM
is to blame for lower vehicle resale values total more than $10
billion, according to figures cited in court papers. The Old GM
trust is seeking $1 billion in shares from the revitalized "New GM"
under a complex formula in the auto maker's bankruptcy-sale order
that triggers payments when claims exceed a certain amount.
The skirmish traces back to a series of legal battles straddling
courts overseeing the remnants GM discarded after seeking
bankruptcy protection and subsequent litigation years later over
the defective ignition switches. GM in 2014 recalled roughly 2.6
million older vehicles with switches that risked slipping from the
run position, causing cars to stall and disabling safety features
including air bags.
The safety problem was ultimately linked to 124 deaths and GM
reached settlements totaling more than $2 billion with federal
prosecutors, shareholders and thousands of consumers. That included
paying $900 million to settle criminal charges of wire fraud and
concealing the defect from regulators.
When the defect and recall emerged in 2014, GM asserted a legal
shield that prevented consumers from pursuing claims that predated
the company's July 2009 court-approved bankruptcy sale. The sale,
done "free and clear" of certain liabilities, shielded GM from the
older claims.
But a federal appeals court later undid the legal shield, ruling
GM had evidence of the defective ignition switches during its 2009
bankruptcy proceedings and violated consumers' due process rights
by failing to reveal it. GM has admitted to failing to recall
vehicles with the switches for more than a decade despite internal
evidence of the problem. The U.S. Supreme Court declined to hear
GM's appeal of the federal appeals court's decision.
GM waived the legal shield for ignition-switch victims seeking
money from a compensation fund the auto maker established that
eventually paid out about $600 million. But other claimants have
continued to go after the auto maker, leading to the latest legal
battle.
Write to Mike Colias at Mike.Colias@wsj.com and Mike Spector at
mike.spector@wsj.com
(END) Dow Jones Newswires
August 11, 2017 14:58 ET (18:58 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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