A federal bankruptcy judge has ruled that people suing General Motors over faulty ignition switches can seek punitive damages that could cost the company millions of dollars or more.
When General Motors emerged from a 2009 bankruptcy, it became known as "New GM." The new company essentially was shielded from liabilities of the old company that was left behind.
But Judge Robert Gerber in New York ruled Monday that employees and knowledge were transferred from the "Old GM" to the new company. Plaintiffs, he ruled, can seek punitive damages if they can show that "New GM" knew of the faulty switches but covered it up.
The ruling has the potential to open GM to large jury verdicts, because the company has admitted knowing about the faulty switches for a decade or more but failed to recall the cars until February 2014. Many of the engineers, attorneys and safety investigators who had knowledge of the switches went from the old company to the new one.
But in a written statement, GM said the ruling was not a victory for those suing the company. Although the court ruled that New GM could be liable for punitive damages for claims based solely on its conduct, "plaintiffs to date have not established any such independent claims against New GM," the statement said.
The ignition switches can slip out of the run position and shut off the engine, knocking out the power steering, power brakes and air bags. They are responsible for crashes that killed at least 169 people and injured hundreds of others.
Texas attorney Robert Hilliard, who has several wrongful death and injury lawsuits pending against GM, said the ruling was a complete win for plaintiffs. He said the New GM admitted in an agreement to settle criminal charges with the Justice Department that it knew of the faulty switches for 20 months before notifying federal safety regulators in February of 2014. The company can't contradict the agreement in legal proceedings, so it has no defense, Hilliard argued.
"A jury now will be allowed to hear evidence of GM's cover-up and determine what monetary punishment to assess for so many needless deaths and injuries," Hilliard said.
There are still about 250 wrongful death and injury lawsuits pending in state and federal courts, according to Hilliard. He says the ruling exposes GM to billions of dollars in punitive damages.
Judge Gerber's ruling also applies to cases in which plaintiffs allege that the value of their cars declined because of GM's conduct.
Carl Tobias, a law professor at the University of Richmond, says both sides are posturing about the ruling. The plaintiffs, he said, must show "egregious misconduct" to get punitive damages, which is a heavy burden. But he said they can rely on the Justice Department documents to do that. "I think that makes it pretty strong on the plaintiffs' side," he said.