GM not liable for punitive damages in ignition switch cases says U.S. appeals court

General Motors

A federal appeals court stated General Motors is not liable for punitive damages concerning accidents that took place after its 2009 bankruptcy and involved vehicles it produced previously, including vehicles with defective ignition switches.

The 2nd U.S. Circuit Court of Appeals in Manhattan stated on Tuesday that GM did not accept to contractually assume liability for punitive damages as part of its federally-backed Chapter 11 reorganization.

GM filed for bankruptcy in June 2009, and its best assets were shifted to a new Detroit-based company with a similar name. The other assets and many liabilities stayed with “Old GM,” which is also referred to as Motors Liquidation Co.

Tuesday’s 3-0 decision may help GM decrease its ultimate exposure in nationwide litigation over faulty ignition switches in several Chevrolet, Pontiac and Saturn models.

It is also a defeat for drivers associated with post-bankruptcy accidents, including those who collided with older GM automobiles driven by others, as well as their law companies.

The ignition switch problem could cause engine stalls and keep airbags from deploying and have been associated with 124 deaths.

Circuit Judge Dennis Jacobs stated the automaker’s agreement to acquire assets “free and clear” of most liabilities excused it from punitive damages allegations for Old GM’s conduct.

He also added that the judge who oversaw the bankruptcy had concluded that the new firm could not be liable for allegations the “deeply insolvent” Old GM would never have paid.

The decision upheld a May 2018 ruling by U.S. District Judge Jesse Furman in Manhattan, who supervises the ignition switch litigation.

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