MANHATTAN (CN) – The sale of General Motors to its new corporate owner six years ago may help the company escape billions in liability for the ignition switch debacle that spawned nationwide litigation, a federal bankruptcy judge ruled.
In 2009, GM’s former company sold its assets to the current limited liability company that owns it under an agreement that also shields the new owner from successor-liability claims.
That clause spawned controversy last year amid revelations that ignition switch defects in GM vehicles caused accidents that killed at least 35 people, though an independent report commissioned by Center for Auto Safety says the death toll could be as high as 300.
GM tried to fend off more than 60 class action lawsuits filed against it across the United States by turning to federal bankruptcy court for the enforcement of the sale order. The company had expected to face between $7 and $10 billion in liability.
U.S. Bankruptcy Judge Robert Gerber noted that there were 850 objections to this order, the “most serious” of which related to the “free and clear” provision as applied to the ignition litigation.
“After lengthy analysis, the court overruled those objections,” Gerber wrote in a 138-page opinion issued Wednesday.
Introducing the summary of conclusions, the opinion stated: “New GM is right when it says that most of the claims now asserted against it are proscribed under the sale order.”
Gerber continued: “But that is only the start, and not the end, of the relevant inquiry. And assuming, as the plaintiffs argue, that old GM’s and then new GM’s delay in announcing the ignition switch defect to the driving public was unforgiveable, that too is only the start, and not the end of the relevant inquiry.”
Only cases related to accidents that took place before July 10, 2009 will be allowed to proceed under certain circumstances, according to the ruling.
GM’s sales reporting manager James Cain praised the decision in a statement.
“Judge Gerber properly concluded that claims based on old GM’s conduct are barred, and that the sale order and injunction will be enforced for such purposes,” he wrote. “With respect to any claims that were not expressly barred, Judge Gerber’s decision doesn’t establish any liability against GM and the plaintiffs still must prove the merits of their claims in the multi-district litigation proceeding.”
A lawyer for the victims of accidents before GM’s sale did not respond to a request for comment by press time.
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