Lost Value Cases May Affect GM Bankruptcy RulingNovember 6, 2014
A group of car owners is seeking to penetrate the GM bankruptcy shield and regain the lost value of their recalled vehicles. Owners of vehicles affected by the massive recall of nearly 3 million vehicles have asked a federal judge to consider exemptions to the July 2009 GM bankruptcy agreement. The current bankruptcy agreement would prevent vehicle owners from suing to recover the lost resale value of vehicles affected by the automakers recall due to a dangerous defect in the ignition switch systems.
Recalled Vehicles And GM Bankruptcy
The issue behind the lawsuit stems from vehicles manufactured prior to the GM bankruptcy ruling that contained the defective ignition switch system. Attorneys for the automaker maintain that the company that emerged from the bankruptcy should not be responsible for the mistakes of its pre-bankruptcy predecessor. Lawyers for the vehicle owners believe that the GM bankruptcy decision should make no difference in whether the company was liable for the lost value of the vehicles that rolled off its assembly lines.
$2B On The Line In GM Bankruptcy Ruling
A Bloomberg News report showed that a GM bankruptcy ruling in favor of the vehicle owners could cost the automaker an additional $2 billion in lost value claims. The GM bankruptcy decision would follow the wave of product liability lawsuits the company already faces from drivers who were killed or injured from the faulty ignition switches. GM has already set aside $600 million for accident victims, including those who were injured driving pre-bankruptcy models.
GM Bankruptcy Judge To Determine If Company Lied
Federal bankruptcy Judge Robert Gerber, who made the initial GM bankruptcy ruling, will determine if the company failed to disclose the ignition switch issue in its 2009 case. Most news reports only revealed the problem earlier this year, when new CEO Mary Barra disclosed it to the public and announced the massive recall. In a court conference last July, Judge Gerber told attendees that, if then-GM CEO Fritz Henderson “knew about the switch problem and intended to keep it from me, that might constitute fraud on the court.”
Car Owners Seek $10B After GM Bankruptcy Ruling
A fraud ruling would open the GM bankruptcy shield and subject the company to even more lawsuits. If Judge Gerber’s GM bankruptcy decision favors the owners, the owners’ class action lawsuits will be heard in a federal court in Manhattan by U.S. District Judge Jesse Furman. Owners of the recalled vehicles are seeking more than $10 billion in lost economic value. Laws in 21 states limit owners to claiming a fixed amount for lost value, ranging from $25 in Massachusetts to $10,000 in Kansas. Sixteen states, including Texas, allow owners to triple their lost value claims automatically, while other states allow judges to decide on a case-by-case basis whether to grant triple damages.
Source: MSN Money
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