When General Motors Co. entered bankruptcy court five years ago, it used the laws to slash labor costs, shed factories and rid itself of billions of dollars in debt, the Wall Street Journal reported today. Now the automaker is turning to chapter 11 to try to solve a new problem: potential liability stemming from the ignition-switch problems that emerged publicly in February. In recent weeks, the company's lawyers have argued that the 2009 bankruptcy filing, in which the debt-laden "Old GM" sold its best assets to a new, government-backed company and left the rest behind, shields it from certain liabilities stemming from its ignition-switch problems. Whether GM gets stuck with a tab for those liabilities, which could run into the billions of dollars, is now largely in the hands of Bankruptcy Judge Robert Gerber. GM's argument — that it is unfair to make the company pay for liabilities it expressly gave up five years ago — holds appeal, said David Skeel, a bankruptcy expert and law professor at the University of Pennsylvania. "The point of corporate bankruptcy is to bring all the stakeholders into one place, resolve the problems and start over," he said. "When you allow multiple bites at the apple," he added, the bankruptcy process "falls apart." Skeel and others say that, in rare situations, it makes sense to allow creditors to "re-open" a bankruptcy reorganization to press old claims. A company, for instance, shouldn't be allowed to hide possible liabilities, then claim they are wiped away with its bankruptcy filing in the rear-view mirror. "The plaintiffs here have a sympathetic argument — that you can't just cut off a creditor's rights without first giving them notice" that those rights exist, said Stephen Selbst, a bankruptcy lawyer in New York not involved in the GM case.
