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GOM Law Blog | Faulty Ignition

Did G.M Hide Behind Bankruptcy to Save $10 Billion in Loss Claims from Faulty Ignition Suits.

In mid-April, 2015, the federal judge overseeing General Motor’s bankruptcy upheld the shield of bankruptcy to protect G.M from $7-$10 Billion dollars worth of lawsuits. The potential lawsuits involved faulty ignition switches that may have resulted in 84 deaths. The move not only saves G.M from paying out massive awards, but also hands the auto giant a mega victory in its bid to rebuild its brand, company, and profits. Does this ruling allow G.M. to hide behind bankruptcy?

 

 

In 2009, General Motors filed for bankruptcy protection and in so doing set in place a shield or cutoff period that would protect the company from paying debts. The recent ruling by Judge Robert E. Gerber makes it clear that bankruptcy protection would also include potential claims from before the 2009 filing date for the G.M bankruptcy.

 

The Crux of the problem is this. General Motors is on record admitting that employees of the company knew that the ignition switches were faulty. G.M is also on record admitting that they failed to warn the owners of those vehicles of the potential threat to their lives or that those owners may have a legal claim against General Motors. At stake were two potential losses. One was the claims against physical damage to people when the ignition switch malfunctioned. The other was potential legal cases that would have claimed damage due to the hyper deflation of vehicle prices due to the ignition switch issue. Judge Gerber’s decision dismisses both types of legal cases against General Motor so long as said cases involved problems that occurred prior to July 10, 2009. The decision allows G.M to Hide from what would otherwise be legal obligations to pay for loss of life.

 

The Bankruptcy and the New G.M.

 

The old G.M died July 10, 2015, which is the same day that the new G.M was born. The bankruptcy officially separates the past from the present and for right now the future. If you have a claim against the old company, then it has officially been dismissed regardless of loss of life, loss of value or loss of any nature. The old G.M protection is in the laws that govern bankruptcy — The new G.M has no protection by Bankruptcy laws.

 

Claims that tied to the new G.M. have no protection from bankruptcy. You have to make sure that the claim cannot be linked to the old G.M. Even if the connection is small; the claim will be denied. There is a lot of money at stake, but it is not just money. People lost their lives because they believed in the G.M brand and trusted this company to manufacture vehicles that were safe to drive, and that met government standards for safety. That was not the case with these vehicles, and General Motors knew that. Rather than face the truth G.M hid behind bankruptcy.

 

When we talk about a lot of money being involved in the potential legal cases due to this defective switch, the reality is that nearly 30 million vehicles worldwide are affected. Despite these grievous numbers and the potential for loss of life, the auto giant continues to win in court. It is far cheaper to pay lawyers to defend its practices than it is to pay $7-$10 billion dollars in claims. Where does that leave the people who have lost loved ones? It leaves them out of court. A small bit of good news is that the Plaintiffs in this lawsuit plan to appeal the decision in hopes that another judge will see the situation differently.

 

Given the fact that G.M knew about these defects their response to Judge Robert E. Gerber verdict was professional with a bit of hard steel. While their reaction was professional, what they had to say was chilling. A spokesman for General Motor is on record for saying that despite the fact that the ruling did not bar all claims, that plaintiffs still must prove the merits of their claims in court. This, coming after the old G.M gains freedom from the billions of dollars worth of claims including claims that involve loss of life over a part that the company knew was a risk. Is this the face of corporate America? Is this the precedent to sell defected products and then hide behind bankruptcy to skirt wrongful death lawsuits? The ruling by Judge Gerber visibly shook relatives of people who died in accidents that involved the defective vehicles that the old G.M willingly sold.

 

The Mockery of Loss of Life

 

It is a sham of sorts. It would behoove someone to verify that G.M had the legal right to file bankruptcy in the first place. Is it possible that financial problems of the company were inflated merely as a means of escaping a bigger financial pitfall later? There are people around the world who will live everyday with the pain of losing a child, a spouse, a father, a mother, a friend or a relative because the old G.M was not forthright enough to deal with a problem that they knew could kill people.

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