— General Motors could be facing a mess worth billions of dollar after the U.S. Supreme Court let stand a lower court ruling that says GM's 2009 bankruptcy that turned the company from the "Old GM" into the allegedly "New GM" does not mean hundreds of lawsuits can't be filed against the automaker.
However, the justices didn't say why they let the appeals court ruling stand as-is.
Attorneys for the plaintiffs say hundreds of victims will now have the chance to face GM in court, including for hundreds of death and injury claims.
“Hundreds of death and injury cases have been frozen in place for years as GM wrongly tried to hide behind a fake bankruptcy. Even when GM told the world it was owning up to its mistakes and doing right by those they killed and injured, they were still ordering their lawyers to spare no expense or legal maneuver to try and stop these victims from having their day in Court." - Robert Hilliard, lead counsel for the plaintiffs
A defective ignition switch has internal problems that with a simple bump to the key or key ring can cause the switch to move from the "run" position into the "accessory" or "off" position. Even a heavy key ring can cause the switch to move if the vehicle hits a small bump in the road, leaving drivers without power steering, power brakes and sometimes, no working airbags.
The switches have caused at least 124 deaths and 275 injuries and led to some drivers being accused of crimes that were in reality caused by failure of the ignition switches, such as the cases of GM owners LaKisha Ward-Green and Candice Anderson.
In 2015, a federal judge ruled a bankruptcy agreement with the government gave GM immunity for its actions prior to July 2009. When that ruling came down, GM was staring at hundreds of lawsuits concerning the older cars, including one lawsuit for $10 billion.
However, the judge in the case admitted that "old GM" certainly knew about the ignition switch defects but continued to conceal that knowledge from customers and the government. The judge also said millions of vehicles should have been recalled long ago, yet the law was on the side of General Motors due to the wording of the bankruptcy agreement.
Consumers say the bankruptcy agreement should have never been approved by the court because GM committed fraud by keeping its mouth shut about known ignition switch defects. The proof of that can be seen in a report from an outside investigator who determined the "New GM" carried on the behavior of "Old GM."
The plaintiffs appealed the 2015 ruling and were handed a decision in 2016 from the U.S. Second Circuit Court of Appeals that put GM back in the hot seat for certain claims prior to 2009.
The appeals court ruled GM would still answer to owners who lost money on their cars due to the ignition switches and that certain personal injury and wrongful death claims could proceed.
Attorneys for GM took their case to the Supreme Court and argued the appeals court violated established laws by ignoring the bankruptcy agreement and the ruling would affect all future business bankruptcies if courts ignore the clear wording in agreements.
The automaker also says ignoring the bankruptcy agreement means future bankruptcy agreements will leave creditors worried about selling assets during bankruptcy negotiations if the agreements aren't upheld.
GM said the appeals court ruling “will undermine a crucial aspect of one of the biggest and most important bankruptcies in history” by making the automaker answer for deeds it believed were erased by the 2009 bankruptcy agreement.
GM investors are likely wide-eyed with the Supreme Court ruling because the automaker has already paid more than $2 billion for previous settlements, including $900 million to the Justice Department and about $595 million to victims that filed claims under a compensation program started by GM.
In addition to those payments, GM was hit with another $575 million to settle 1,385 death and injury claims along with a shareholder suit.