Judge: Bankruptcy shields GM from some ignition suits

A US bankruptcy judge ruled Wednesday that General Motors' 2009 bankruptcy shields it from a large number of lawsuits over ignition-switch defects.

The judge rejected arguments made in class-action suits that post-bankruptcy GM should be liable for potentially billions of dollars worth of claims related to dangerously defective ignitions that dated to before the bankruptcy.

GM began recalling cars in February 2014, but documents uncovered in litigation and in congressional investigations showed the automaker knew of the ignition problem more than a decade earlier.

Plaintiffs argued the legal shield over past conduct normally granted to companies exiting bankruptcy should be breached because GM, they alleged, fraudulently concealed the ignition defect during the bankruptcy process.

GM faced an estimated $7-10 billion in claims for losses associated with the diminished value of the cars due to the ignition-switch defect

But judge Robert Gerber, who oversaw the original bankruptcy, said the court needed to discount claims "that are supposedly against New GM" but are in fact against "Old GM."

"Claims premised in any way on Old GM conduct are properly proscribed . . . and by reason of the Court's other rulings, the prohibitions against he assertion of such claims stand," he ruled.

Gerber also concluded there was no evidence of fraud during the bankruptcy. GM maintains its senior executives did not know about the ignition defect until late 2013.  

"There must be a direct nexus between the knowledge and intent of any wrongdoer and communications to the court," Gerber said.

"If the fraud has taken place elsewhere (and is unknown to those actually communicating with the court), the requisite attempt to defile the court itself and subvert the legal process is difficult, if not impossible, to show."

GM praised the ruling.

"Judge Gerber properly concluded that claims based on Old GM's conduct are barred, and that the Sale Order and Injunction will be enforced for such purposes," the automaker said.

"With respect to any claims that were not expressly barred, Judge Gerber's decision doesn't establish any liability against GM and the plaintiffs still must prove the merits of their claims in the (legal) proceeding."

At least 84 people died due to the ignition-recall defect, according to an independent compensation fund set up by the automaker.

GM continues to face a Justice Department probe of its conduct and numerous other lawsuits into the scandal.