March 19, 2014 – 10:09 pm ET
Basic Motors was hit with a lawsuit on Wednesday demanding that the company be held liable for allegedly concealing ignition troubles before its 2009 bankruptcy.
The ignition switch issues led to the recall of 1.6 million vehicles last month.
GM is a various legal entity than the one particular that filed for bankruptcy protection and reorganized in 2009. The so-referred to as new GM is not accountable under the terms of its bankruptcy for legal claims relating to incidents that took location before July 2009. Individuals claims must be brought towards what remains of the “outdated” or pre-bankruptcy GM.
But the proposed class action, filed in federal court in California, stated plaintiffs ought to be permitted to sue over the pre-bankruptcy actions, “simply because of the active concealment by Outdated GM and GM.”
The lawsuit also said that GM was responsible for reporting to the federal government any safety-related problems for automobiles made before its bankruptcy.
A spokesman for the automaker declined to comment especially on the lawsuit, saying the business has apologized for the recall and that taking care of customers was its best priority.
GM announced the recall in February, despite learning of troubles with the ignition switch in 2001. GM has explained that when the ignition switch was jostled, a key could turn off the car’;s engine and disable airbags, at times even though traveling at higher speed.
Wednesday’;s lawsuit is 1 of a number of filed in Texas and Michigan by automobile owners who declare the recent recall triggered their vehicles to drop worth. It seems to be the first to increase the situation of “successor liability,” which means that GM could be liable for actions of the company before it emerged from bankruptcy.
The named plaintiff is Katie McConnell, the proprietor of a 2007 Saturn Ion Coupe. The lawsuit is in search of at least $ 350 million in damages, in accordance to the lawyer that filed the lawsuit, Steve Berman of Hagens Berman Sobol Shapiro in Seattle.
In the suit, McConnell explained she wouldn’t have purchased the Ion, or would have paid significantly less for it than she did, if she’d identified about the defects, according to the complaint.
The lawsuit mentioned the “previous” GM knew about the ignition difficulties as early as 2001, but continued to make and marketplace defective automobiles until finally 2007. The new GM continued the deception, the lawsuit alleged.
As a consequence, the new GM need to be liable “for the deceptive and unfair acts and omissions” of the old GM, the lawsuit explained. It also stated the court ought to waive the statute of limitations for older claims because of GM’;s actions.
“While civil in nature, we believe it is a step towards holding G.M. accountable for its inaction,” Berman mentioned in a statement.
The recall over the ignition dilemma, which has been linked to at least twelve deaths, has led to government criminal and civil investigations, an internal probe by GM, and preparations for hearings by Congress. All ask why GM took so long to address a difficulty it has explained first came to its focus in 2001.
GM may look for to have the class-action lawsuits, as nicely as other possible cases connected to the ignition defect, consolidated just before one judge rather than encounter distinct outcomes and verdicts in separate courts, mentioned Aaron Jacoby, chairman of Arent Fox LLP’s automotive group in Los Angeles.
“Defendants want consistency,” Jacoby explained in a phone interview. “The plaintiffs will try out to get it where they can get the greatest benefits.”
It would be a huge win for GM if the company can get the instances consolidated prior to a federal judge in Michigan, in which it is based mostly, rather than in Texas where jurors tend to be a lot more on the side of plaintiffs and much more most likely to award big verdicts towards corporate defendants, Jacoby mentioned.
Hagens Berman was element of a class-action settlement, valued by plaintiff attorneys at $ 1.63 billion, with Toyota on behalf of American auto consumers who claimed economic losses from the Japanese automaker’s 2009 and 2010 recalls for sudden acceleration-relevant issues. Toyota is nevertheless trying to resolve hundreds of private injury and wrongful death lawsuits stemming from the recalls.
Reuters and Bloomberg contributed to this report.