GM doesn't have to pay punitive damages for defect that killed dozens, court rules

Jamie L. LaReau | Detroit Free Press

General Motors is protected from paying punitive damages related to vehicle defects linked to more than 100 deaths.

A U.S. Court of Appeals for the 2nd Circuit in New York ruled Tuesday that GM is shielded from compensating people for its alleged misconduct from prior to 2009, when the company filed for federal bankruptcy protection, the Wall Street Journal reported.

The new GM emerged from a government-brokered bankruptcy 10 years ago. The ruling stated that it cannot be liable for punitive damages based on actions taken by its corporate predecessor, "old GM."

As a result, GM is now limited in the liability it faces for faulty ignition switches, a big defeat for many consumers suing GM for injuries or fatalities linked to the defective ignition switches.

GM's flawed ignition switch is one of the deadliest auto defects in U.S. history, with a total of 124 people killed and 275 injured in small cars such as the Chevrolet Cobalt and Saturn Ion that were made by GM before it filed for bankruptcy. The defective ignition switches could cause vehicles to stall while in operation.

GM recalled about 2.6 million Cobalts and other small cars in 2014, but acknowledged it knew about the ignition switch problems for more than a decade. In fact, federal prosecutors have said GM could have fixed it for less than $1 per car.

Texas lawyer Robert Hilliard represents some of the vehicle owners who sued GM. He told the Journal that “gross negligence conduct during the ignition switch debacle at GM was a given.” But under this ruling, potential settlements for consumers suing GM won’t take its “egregious conduct” into account.

In short, Hilliard said that GM won’t “pay for its sins."

For its part, GM spokesman Dave Caldwell told the Free Press, “The rulings affirm previous court decisions.”

Defect claims have been part of GM’s $50 billion taxpayer bailout and restructuring. From that restructuring a “new GM” was created as a buyer for the company’s assets and the "old GM" kept the liabilities for the bankruptcy court to sort out.

GM has argued in lower-court rulings that because of the creation of a new company, legal claims predating its bankruptcy could not be filed.

In 2017, GM agreed to pay $120 million to settle claims from dozens of states.

The family of Brooke Melton of Georgia received more than $5 million in a settlement from GM after she died in a 2010 accident near Atlanta in which she lost control of her 2005 Chevrolet Cobalt. That was the case that more or less sparked the massive recall and congressional investigation of GM.

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The $120 million settlement, tied to violations of consumer protection laws, is on top of GM's previous penalties and settlements of an estimated $2.5 billion, including $900 million to settle a U.S. Department of Justice criminal case.

As part of that $900 million settlement, GM and the government had a deferred prosecution agreement. GM agreed to comply with government monitors for three years. That ended in the fall of last year.

Punitive damages, also called “exemplary damages,” are a monetary amount awarded to a plaintiff in a civil lawsuit to punish a defendant, such as GM would be, for intentional wrongdoing — in this case, selling products that it knows are defective.

Consumers are still suing for the economic losses tied to the ignition switch defect. Those claims make up the bulk of GM’s remaining exposure surrounding the defect, the Journal said.

Contact Jamie L. LaReau at 313-222-2149 or jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter.