General Motors Company (GM) hit with lawsuit over pre-bankruptcy responsibilities

Posted Mar 20, 2014

General Motors Company (NYSE:GM) has been plagued with a 1.6 million vehicle recall that started last month. What makes this case interesting is that General Motors today is a different legal entity than the one that filed for bankruptcy in 2009. The new 
General Motors is apparently not responsible under the terms of its bankruptcy exit for legal claims that relate to incidents that took place before July 2009.


Those claims were expected to be brought against what remains of the old pre-bankrupt GM. However, a proposed class action was filed in a federal court in California. The class action suit claims that plaintiffs should be allowed to file a lawsuit over the pre-bankruptcy actions “because of the active concealment by Old GM and GM.”

The lawsuit states that General Motors was responsible for reporting to any safety-related problems for cars to the federal government before its bankruptcy.

General Motors announced the recall last month, despite knowing of problems with the ignition switch as far back as 13 years ago. When the ignition switch is jostled, a key could cut power to the car’s engine and disable airbags even if the vehicle is traveling at a high speed. At least 12 deaths were caused by this issue.

The plaintiff named in the lawsuit from Wednesday is Katie McConnell, an owner of a 2007 Saturn Ion. The lawsuit is seeking at least $350 million in damages. The lawsuit claims that “old” GM knew about the ignition problems in 2001, but continued to make defective vehicles until 2007 and the new GM continued the deception.

You can follow more of our coverage on our GM tagged articles.

[Source: Reuters/4-Traders]