GM Reportedly Rushes to Block Ignition-Switch Settlement, Still Faces Billions in Liabilities ""
Posted on: August 18, 2017

DETROIT, MI - JUNE 6: The General Motors Global Headquarters, site of today's GM 2017 Annual Meeting of Shareholders, is shown June 6, 2017 in Detroit, Michigan. (Photo by Bill Pugliano/Getty Images)

Lawyers behind a $10 billion class-action suit against General Motors for defective ignition switches are claiming the automaker blocked a settlement at the last minute that would have forced the company to pay potentially billions more in damages resulting from the 2014 scandal.

GM’s trust representing its pre-2009 bankruptcy assets, officially known as the General Unsecured Creditor (GUC) Trust, backed away from a $15 million settlement this week that would have forced the automaker to pay the trust’s existing personal injury and economic loss claims with $1 billion of company stock. The trust is part of Old GM, a legally separate remnant that is paying the bankrupt company’s creditors for claims before June 2009, when New GM was created after the company’s bankruptcy approval. The settlement, which was awaiting the trust’s signatures, would have moved the $10 billion suit into GM’s list of “approved claims,” according to Automotive News. That would have triggered a clause GM agreed to during its bankruptcy proceedings, which stated that the company would need to pull $1 billion in stock if the trust’s approved claims reached $35 billion.

The suit seeks damages for roughly 12 million current and former owners of GM vehicles, including those that were not recalled as a result of the low-torque ignition switches that led to a confirmed 124 deaths and 275 injuries.

Hagens Berman, which filed that class-action suit in October 2014, was co-signer on a court filing Thursday stating that GM’s “malodorous change of heart does not undo the GUC Trust’s binding acceptance of the settlement agreement.” The trust did not actually sign the settlement. According to Reuters, GM told the trust (which is, technically, part of GM) that it would pay it to continue fighting the suit if it agreed to walk away from the settlement. The U.S. Bankruptcy Court in Manhattan is now investigating whether anyone issued threats that led to the settlement’s breakup. GM spokesman Jim Cain told Automotive News that “now the focus can return to where it belongs, which is the merits of the plaintiffs’ remaining claims,” which he said “lack merit.”

In 2015, GM settled criminal charges with the U.S. Department of Justice for $900 million and paid up to $625 million for a victim-compensation fund, $300 million to a New York teachers’ pension fund for lost shareholder equity, and $275 million to settle more than 1380 death and injury claims that were not part of the compensation fund. The bankruptcy court had assured GM that any cases involving vehicles sold prior to its 2009 bankruptcy would be blocked. An appeals court overturned the ruling in July 2016. This past April, when GM appealed the appeal, the Supreme Court upheld the decision.

Through July 17, GM said it knew of more than 100 class-action lawsuits in the U.S. and Canada alleging economic losses, investigations by 49 state attorneys general, separate investigations by the Arizona attorney general and the district attorney of Orange County, California, and “several hundred” individual lawsuits alleging injuries and deaths, according to its second-quarter SEC filing. The company will face additional trials of selected cases from the multi-district litigation, known as bellwether cases, this year and in 2018 to determine possible settlements for the remaining cases.

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