GM Ignition Switch Defect MDL Should Continue, Plaintiffs Say

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Plaintiffs in the ongoing General Motor’s Ignition Switch Defect MDL told a New York district judge Wednesday that the Second Circuit’s ruling in parallel bankruptcy proceedings relating to the defect means GM must be held accountable for the loss-of-value cases.

In their brief, plaintiffs in the General Motors MDL, opposed the automaker’s motion to dismiss their third amended complaint, telling the judge that the Second Circuit’s decision that partially undid a bankruptcy ruling protecting New GM from certain MDL claims is relevant to their brand-wide diminution allegations.

Specifically, the plaintiffs point out that the appeals court decision citing important factual findings relating to the materiality of safety and the importance of preserving customer goodwill were relevant to their cases.

The plaintiffs go on to cite excerpts of the recent ruling, stating that “if consumer confidence dissipated, neither Treasury loans for a 360 sales could save GM: nobody would buy a GM car.”

Asserting that the Second Circuit’s decision is consistent with and “strongly supports,” the plaintiffs opposed New GM’s motion to dismiss their amended complaint.

Old GM, named General Motors Corp. before bankruptcy proceedings, was in severe financial distress and likely would have liquidated absent financial assistance from the federal government before and after its chapter 11 filing in June 2009.

In the bankruptcy court’s 2009 sale approval order, New GM agreed to assume responsibility only for specified liabilities, including warranty claims, accidents occurring after the sale, and Lemon Law claims. Otherwise, the sale was supposedly free and clear of claims, thus broadly immunizing New GM from successor liability claims.

But in early 2014, New GM initiated recalls of millions of vehicles. It was later discovered that Old GM had known about a defect in its ignition switches for several years before bankruptcy.

The defect caused cars and their electrical systems to shut down unexpectedly, in some cases causing accidents. With the electrical system off, air bags would not inflate, allegedly resulting in injuries and even death.

New GM was hit with a slew of lawsuits following disclosure of the ignition switch defect. New GM responded with a motion asking the bankruptcy judge to enforce the “free and clear” sale order and bar claims against it based on the ignition switch defect.

On Wednesday, the Second Circuit handed down its ruling that there would be no bankruptcy protection for General Motors.

In their ruling, the appeals court panel stated that by not revealing the ignition switch issue during bankruptcy proceedings, General Motors took away the legal rights of victims because they never had a chance to contest the bankruptcy and were barred from suing New GM after the disclosure of the defective ignition switches.

A group of approximately 120 plaintiffs across the country are seeking to represent a nationwide Class of GM vehicle owners, alleging the automaker concealed the ignition switch defect since 2009.

The proposed Class could include potentially millions of GM car owners who were affected by the massive safety and the subsequent loss of value of their vehicles.

In February 2016, General Motors filed a motion to dismiss the plaintiffs’ claims, arguing that they were based on the alleged stigma of the recall announcement.  GM argued that the group failed to state that any of the recalls issued by the National Highway Traffic Safety Administration failed to resolve their vehicles’ problems thereby making their claims moot.

Currently, the fifth of six scheduled bellwether trials in the GM Ignition Switch Defect MDL is set to commence in the Fall. The first trial was a success for GM after the plaintiff’s case imploded and was dismissed in January 2016 following accusations that the plaintiff had given misleading testimony about his health and financial condition.

A jury sided with GM in the second bellwether and the third trial was settled. The fourth bellwether case was voluntarily dismissed.

The plaintiffs’ lead attorneys are Robert C. Hilliard of Hilliard Munoz Gonzales LLP, Steve W. Berman of Hagens Berman Sobol Shapiro LLP, and Elizabeth J. Cabraser of Lieff Cabraser Heimann & Bernstein LLP.

The GM Ignition Switch Defect MDL is In re: General Motors LLC Ignition Switch Litigation, MDL No. 2543, in the U.S. District Court for the Southern District of New York.

UPDATE: July 2020, the GM ignition switch defect class action settlement is now open. Click here to file a claim.