The multidistrict litigation on faulty ignition switches in General Motors cars resembles a game of chicken. Following a year-end decision by a New York district judge, the question now is: “Who blinks first, reorganized GM or the plaintiffs’ lawyers?”
The decision on Dec. 30 by District Judge Jesse M. Furman turns up the heat on the reorganized automaker because he opened the door for what he called the “first bellwether” trial to take place in Oklahoma. With one minor exception on a claim the plaintiff abandoned, Judge Furman found enough evidence to survive a motion for summary judgment.
General Motors Corp., or Old GM, filed for reorganization in June 2009, listing assets of $82.3 billion against debt totaling $172.8 billion. The court-approved sale of the business to General Motors LLC, or New GM, was completed the next month.
In February 2014, New GM disclosed a potentially deadly defect in ignition switches that would unexpectedly turn off a car’s electrical system, disabling power steering and air bags. Lawsuits followed, with litigation centralized in district court in New York regarding personal-injury claims against New GM. The bankruptcy judge in New York shouldered responsibility for defining which claims could or could not be asserted against Old and New GM, in view of the sale approval order and Old GM’s confirmed chapter 11 plan.
The Oklahoma suit had potentially helpful facts for New GM because the allegedly defective auto in this case was totaled in the crash and junked before suit commenced. Consequently, there is no physical evidence to prove whether the ignition switch was in fact defective or caused injuries. Judge Furman is nevertheless letting the suit go to trial by denying New GM’s Rule 56 motion. In the process, he made rulings that increase pressure on New GM.
Denying summary judgment under Oklahoma law despite the missing switch, Judge Furman said that “a reasonable jury could infer a causal link between the plaintiff’s injury and facts relating to a defendant’s conduct.” He also held that the “failure-to-warn products liability claim would constitute an Independent Claim” where the “plaintiff could conceivably recover punitive damages.”
Judge Furman likewise denied New GM summary judgment on the plaintiff’s so-called negligent-recall claim, which might also support an award of punitive damages. Again looking to Oklahoma law, he said that New GM “exposed itself to liability if the recall was carried out negligently and caused injury.”
The opinion was not entirely on the plaintiff’s side. With respect to the plaintiff’s fraud claim, Judge Furman said New GM “ultimately may prevail” because the plaintiff might not be able to show “reasonable reliance” given the automaker’s recall notices. New GM’s argument, though, did not justify summary judgment in its favor.
Judge Furman could conceivably rule differently in suits based on law in other states.
The opinion contains a handy summary of a decision by the bankruptcy judge drawing the contours of claims that could be brought potentially successfully against New GM despite the “free and clear” sale by Old GM. Generally speaking, plaintiffs have possibly valid claims for (1) compensatory damages for some claims based on Old GM’s conduct related to liabilities that New GM specifically assumed in the sale, (2) compensatory damages for claims based solely on New GM’s conduct, known as Independent Claims, and (3) punitive damages for Independent Claims that could be based on knowledge of Old GM that is imputed to New GM.
The opinion is In re General Motors LLC Ignition Switch Litigation, 14-md-2543 (S.D.N.Y. Dec. 30, 2015).