In a blow to General Motors, a U.S. appeals court reversed part of a bankruptcy court ruling that protected the automaker from some lawsuits over an ignition-switch defect that prompted the recall of 2.6 million vehicles in 2014.
The 2nd U.S. Circuit Court of Appeals in Manhattan said barring plaintiffs from suing the automaker over crashes and lost vehicle value stemming from the faulty switch would violate their constitutional rights to due process, since they had not been notified of the defect prior to GM’s 2009 bankruptcy.
The ruling effectively rebuffs GM’s attempts to shield itself from hundreds of customer lawsuits over faulty ignition switches, and other vehicles components, on grounds that they were automatically barred by the company’s 2009 bankruptcy sale to a new corporate entity.
“Due process applies even in a company’s moment of crisis,” the opinion stated.
The 2nd Circuit’s decision affects injury and death cases stemming from pre-bankruptcy crashes, as well as claims for lost vehicle value. Plaintiffs had filed lawsuits over the ignition switch, as well as dozens of other parts in GM vehicles that were subject to recalls in 2014.
A lead lawyer for ignition switch plaintiffs, Robert Hilliard, said Wednesday’s decision will give plaintiffs whose claims had been stayed by the bankruptcy order their day in court.
“The 2nd Circuit, in a sound and substantive way, called GM out for its cover-up, its lies and its attempts to use bankruptcy as a way to hide from the victims,” Hilliard said.
GM spokesman James Cain said the company is reviewing the decision and its impact.