Lawyers for General Motors have urged a federal bankruptcy judge in Manhattan to throw away a settlement that would need the company to pay $1 billion to vehicle owners suing over malfunctioning ignition switches.
The automaker made its argument on the first day of an arranged three-day bench trial before Judge Martin Glenn of the United States Bankruptcy Court in New York. The trial will identify the credibility of a deal the vehicle owners said they reached in August with a trust that holds many General Motors liabilities prior to its 2009 bankruptcy.
The claims come from GM’s 2014 recall of 2.6 million vehicles with faulty ignition switches, consisting one connected to 124 deaths.
Lawyers for the car owners say the trust accepted a deal August but left a number of days later, instead accepting GM’s offer to help pay for its defense against the vehicle owners’ claims.
The judge questioned how that happened, noting GM had an interest in liquifying any deal that needed it to pay more.
“I have trouble saying it passes the smell test,” stated Glenn, referring to a two-hour conference between the trust and GM in August, after which the trust dropped the agreement with the plaintiffs.
However attorneys for the carmaker and the trust informed Glenn the trust had every right to drop the contract.
“In some cases people just get cold feet, even when they get married,” stated Susheel Kirpalani, a lawyer for General Motors, “and the same applies to settlements, your honor.”
The automaker stated the deal with the car owners had never ever been signed, rendering it non-binding. Mitchell Karlan, a lawyer for the trust, on Monday also stated plaintiff laywers contradicted each other in their testimony on when the agreement was presumably reached.
But the vehicle owners stated the trust acted in bad faith and claimed the agreement was binding even without a signature, indicating discussions and e-mails with the trust.
The settlement required the trust to accept $10 billion in claims to solve about 11.9 million allegations over financial loss and between 400 and 500 personal injury and wrongful death claims.
About 2.4 million claims, having vehicles involved were sold after automaker’s bankruptcy, would have stayed pending in another court.
General Motors has currently paid approximately $2.5 billion to settle ignition switch-related claims, consisting of $900 million to settle a criminal investigation by the U.S. Justice Department.