Focus of GM Recall Litigation Falls on Bankruptcy Court

Focus of GM Recall Litigation Falls on Bankruptcy Court Mark Robinson Jr. of Robinson, Calcagnie & Robinson

General Motors Co.’s move in U.S. bankruptcy court to bar lawsuits seeking economic damages tied to its recalls has put the brakes on consumer class actions across the country—at least for the next month.

GM has recalled 2.6 million cars to fix ignition-switch defects that, by shutting off engines and preventing air bags from deploying in accidents, have been linked to 13 deaths. More than 50 class actions allege that GM failed to tell its customers about the defect, which it learned of about a decade ago. The plaintiffs seek to recover for the lost value of cars they owned or leased. Such claims account for most of the lawsuits yet filed.

On Monday, GM filed a motion that could potentially toss out those class actions on the ground the automaker is immune under the terms of its 2009 bankruptcy from claims for economic damages. The motion, filed in U.S. Bankruptcy Court for the Southern District of New York, does not seek to bar cases over injuries, physical damages or deaths from accidents.

“General Motors has taken responsibility for its actions and will keep doing so,” the company said in a written statement on Tuesday.

Two groups of plaintiffs attorneys are fighting back. One group, led by New York’s Wolf Haldenstein Adler Freeman & Herz and joined by bankruptcy counsel at New York’s Golenbock Eiseman Assor Bell & Peskoe, filed a complaint on Monday, seeking a declaratory judgment that GM is not immune from economic damages. The group alleges that by failing to disclose the defect, GM violated its consumers’ due-process rights and committed fraud on the court.

Another group, led by Seattle’s Hagens Berman Sobol Shapiro and Robinson Calcagnie Robinson Shapiro Davis in Newport Beach, Calif., filed an objection on Tuesday, raising similar arguments. This group was joined by bankruptcy counsel at Boston’s Brown Rudnick.

“We didn’t get due process,” Mark Robinson said. “We should have been notified about the defect and the problems, and also been notified about our right to file claims in the bankruptcy court.”

U.S. Bankruptcy Judge Robert Gerber has scheduled a conference for May 2.

Meanwhile, in motions filed in several of the class actions this month, GM has sought to stay the litigation, citing the bankruptcy proceedings and a pending effort before the U.S. Judicial Panel on Multidistrict Litigation to coordinate defect-related lawsuits. Federal judges have granted stays in at least half a dozen class actions.

Plaintiffs lawyers have sought to transfer the cases to U.S. District Judge James Selna of the Central District of California, who oversaw the litigation over Toyota Motor Corp.’s sudden-acceleration defects. Responses to that request, including GM’s, are due by Friday.

The panel has scheduled the cases for its May 29 hearing in Chicago.

Contact Amanda Bronstad at abronstad@alm.com.

LOAD MORE