This Tuesday General Motors has asked the supreme Court to overturn an appellate court's ruling that the automaker's 2009 bankruptcy does not shield it from lawsuits over a faulty ignition switch linked to at least 124 deaths and 274 injuries.
Whether you like it or not, the petition market a last-ditch effort by GM to block hundreds of customer lawsuits over faulty ignition switches, and other vehicles components, on grounds that they were barred by the automaker's 2009 bankruptcy sale to a new corporate entity. In its petition, GM said the federal bankruptcy code permits a purchaser, in this case a newly formed company, to obtain a debtor's rapidly deteriorating assets and be "free and clear" of its liabilities. GM said that if the July 2016 ruling by the 2nd U.S. Circuit Court of Appeals in New York was left standing, it would undermine a key component of its corporate rescue and make future such deals more difficult.
The case related to an ignition switch that could slip out of place, causing engines to stall and cutting power to the brake, steering and air bag systems. The defect prompted GM to begin recalling 2.6 million vehicles in 2014. GM has already paid roughly $2 billion in criminal and civil penalties and settlements in connection with the switch. The company previously acknowledged that some of its employees knew about the switch defect for years before a recall was initiated. The 2nd Circuit's decision affected injury and death cases stemming from pre-bankruptcy crashes, as well as claims from customers who say their vehicles lost value as a result of the ignition switch and recalls involving other parts.