On Sept. 14, the Second Circuit Court of Appeals rejected General Motor’s request that the court rethink its decision that struck down bankruptcy court orders that shielded the post-bankruptcy iteration (New GM) of the company from liability for ignition-switch defects due to a 2009 asset sale. The panel declined GM’s petition for an en banc rehearing of its ruling earlier this summer. In that ruling the Second Circuit reversed a lower court’s decision that the sale order of GM could be used to evade claims from the alleged defects.

In its July decision, the appeals court panel revived claims over GM’s ignition-switch defects, finding that that the liability protection from the sale order violated potential victims’ rights to due process. GM did not reveal the ignition switch problem during the bankruptcy.

As we have previously reported, GM began recalling cars because of the defect in February 2014. The timing of the disclosure by GM effectively denied consumers the right to weigh in on the sale – therefore they cannot be bound by the provisions of the sale order that shielded the company from litigation, the Second Circuit said. Those seeking to hold New GM liable include individuals injured in accidents, and representatives of people killed, prior to the bankruptcy sale as well as those seeking to hold New GM liable for economic losses tied to the defects. This ruling is a major blow to GM and is legally – as well as morally – sound.

Source: Law360.com

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