GM Bankruptcy Judge Urges Focus on Due Process Issues

Southern District Bankruptcy Judge Robert Gerber (See Profile) urged attorneys for General Motors and for its customers suing over defective ignition switches to attempt to agree on facts as much as possible before litigating further.

The customers in In re: Motors Liquidation Co., 09-bk-50026 are seeking to hold GM liable for economic losses they suffered as a result of cars being recalled.

Gerber ruled at a hearing on Wednesday that the parties should submit briefs on whether the customers were denied due process by the 2009 approval of GM’s bankruptcy sale, which absolved “new GM” from claims. He also asked for briefing on possible remedies and on whether any of the claims were against “old GM.”

He said it would be premature to brief the issue of whether GM had committed “fraud on the court” that could make it subject to liability despite the 2009 order. At one point, he sketched a “hypothetical” if it was shown that GM had deliberately concealed from the court its knowledge of the faulty switches, saying such a finding would constitute fraud on the court.

Gerber said his plan was trying to hit “the sweet spot between fairness and getting to the right result.”

Arthur Steinberg, a partner at King & Spalding who represents GM, said during the hearing that “everything flows from the procedural due process issue” and that if GM prevailed on that issue, the other issues would become moot.

Elihu Inselbuch, a member of Caplin & Drysdale, similarly said that “if this court were to decide that issue against us, presumably we wouldn’t have to reach the remedy issue.”

The next status conference is set for Aug. 5.

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