GM sued in California over ignition switch

Crain News Service and wire reports

DETROIT (March 21, 2014) — General Motors Co. was hit with a lawsuit on March 19  demanding that the auto maker be held liable for allegedly concealing ignition problems before its 2009 bankruptcy.

The ignition switch problems led to the recall of 1.6 million vehicles last month.

GM is a different legal entity than the one that filed for bankruptcy protection and reorganized in 2009. The so-called new GM is not responsible, under the terms of its bankruptcy, for legal claims relating to incidents that took place before July 2009. Those claims must be brought against what remains of the “old” or pre-bankruptcy GM.

But the proposed class-action lawsuit, filed in federal court in California, said plaintiffs should be allowed to sue over the pre-bankruptcy actions, “because of the active concealment by Old GM and GM.”

The lawsuit also said that the company was responsible for reporting to the federal government any safety-related problems for cars made before its bankruptcy.

A spokesman for the auto maker declined to comment specifically on the lawsuit, saying the company has apologized for the recall and that taking care of customers was its top priority.

GM announced the recall in February, despite learning of problems with the ignition switch in 2001. GM has said that when the ignition switch was jostled, a key could turn off the car's engine and disable airbags, sometimes while traveling at high speed.

This latest lawsuit is one of several filed in Texas and Michigan by car owners who claim the recent recall caused their vehicles to lose value. It appears to be the first to raise the issue of “successor liability”—meaning that GM could be liable for actions of the company before it emerged from bankruptcy.

The named plaintiff is Katie McConnell, the owner of a 2007 Saturn Ion Coupe. The lawsuit is seeking at least $350 million in damages, according to the lawyer that filed the lawsuit, Steve Berman of Hagens Berman Sobol Shapiro in Seattle.

In the suit, Ms. McConnell said she wouldn't have bought the Ion, or would have paid less for it than she did, if she'd known about the defects, according to the complaint.

The lawsuit said the “old” GM knew about the ignition problems as early as 2001, but continued to make and market defective vehicles until 2007. The new GM continued the deception, the lawsuit alleged.

As a result, the new GM should be liable “for the deceptive and unfair acts and omissions” of the old GM, the lawsuit said. It also said the court should waive the statute of limitations for older claims because of GM's actions.

“While civil in nature, we believe it is a step toward holding G.M. accountable for its inaction,” Mr. Berman said in a statement.

The recall over the ignition problem, which has been linked to at least 12 deaths, has led to government criminal and civil investigations, an internal probe by GM, and preparations for hearings by Congress. All ask why GM took so long to address a problem it has said first came to its attention in 2001.

GM may seek to have the class-action lawsuits, as well as other possible cases related to the ignition defect, consolidated before one judge rather than face different outcomes and verdicts in separate courts, said Aaron Jacoby, chairman of Arent Fox L.L.P.'s automotive group in Los Angeles.

“Defendants want consistency,” Mr. Jacoby said in a telephone interview. “The plaintiffs will try to get it where they can get the best results.”

Michigan, Texas join in

It would be a big win for GM if the company can get the cases consolidated before a federal judge in Michigan, where it is based, rather than in Texas where jurors tend to be more on the side of plaintiffs and more likely to award big verdicts against corporate defendants, Mr. Jacoby said.

Hagens Berman was part of a class-action settlement—valued by plaintiff lawyers at $1.63 billion—with Toyota Motor Corp. on behalf of American car buyers who claimed financial losses from the Japanese auto maker's 2009 and 2010 recalls for sudden acceleration-related issues. Toyota is still trying to resolve hundreds of personal injury and wrongful death lawsuits stemming from the recalls.

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Reuters and Bloomberg News contributed to this report, which appeared on autonews.com, the website of Automotive News, a Detroit-based sister publication of Tire Business.