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GM to seek court protection against ignition lawsuits

A man walks past a row of General Motors vehicles at a Chevrolet dealership on Woodward Avenue in Detroit, Michigan April 1, 2014. REUTERS/R
A man walks past a row of General Motors vehicles at a Chevrolet dealership on Woodward Avenue in Detroit, Michigan April 1, 2014. REUTERS/R

By Jessica Dye

(Reuters) - General Motors Co said it would ask a U.S. court to bar lawsuits related to actions before its 2009 bankruptcy, signaling a tougher stance toward legal claims stemming from its recent recall over faulty ignition switches.

GM has said it is protected from liability for claims related to incidents that occurred before it exited bankruptcy in 2009, and has taken steps to raise those issues with the court by filing motions to stay recall-related lawsuits while it asks that bankruptcy court to clarify the extent of that protection.

In a filing with the U.S. District Court for the Southern District of Texas on Tuesday, GM asked for a stay on litigation related to ignition claims until a judicial panel on multidistrict litigation decides on a motion to consolidate the case with other lawsuits and the bankruptcy court rules on whether the claims violate GM's 2009 bankruptcy sale order.

The company earlier filed a similar motion with the U.S. District Court for the Northern District of California seeking a stay on pending litigation.

The plaintiffs in those cases have claimed they bought or leased vehicles that had an ignition switch defect. The defect has been linked to the deaths of at least 13 people and the recall of 2.6 million GM vehicles.

GM said it would shortly file a motion in the Bankruptcy Court for the Southern District of New York to enforce an injunction contained in its sale order, which the company said bars plaintiffs from suing the reorganized company for any claims related to the predecessor company.

U.S. Senator Richard Blumenthal, a Connecticut Democrat, said in a statement Wednesday that the filings "demonstrate clearly" GM's intent to use the bankruptcy process to block lawsuits, and urged judges to deny it that protection.

"Regardless of these legal battles, the company should simply do right by these victims and establish a compensation fund that will make them whole," Blumenthal said in the statement.

Since it began to recall vehicles in February, GM has been hit by dozens of lawsuits on behalf of individuals injured or killed in crashes involving recalled cars, as well as customers who said their vehicles lost value as a result of the company's actions.

A spokesman for GM, Greg Martin, said in an email on Wednesday that it was premature to comment on the litigation. He reiterated that GM had "both civic and legal obligations" in the matter, as GM Chief Executive Mary Barra told members of Congress during testimony earlier this month.

JUDICIAL DAY OF RECKONING?

GM emerged from bankruptcy protection in 2009 as a different legal entity than the so-called old GM. Under those terms, "new GM" shed liability for incidents predating its exit from bankruptcy, and any lawsuits related to pre-bankruptcy issues must be brought against what remains of old GM.

That protection has outraged some safety advocates, politicians and plaintiffs' lawyers, who have called on GM to either waive bankruptcy protection or establish a fund to compensate victims whose claims might otherwise be barred.

They have said that because GM allegedly covered up problems with the switch for more than a decade, and received support from the U.S. government during its bankruptcy, it should not fight against plaintiffs' attempts to seek payment for their injuries.

Plaintiffs' lawyers have also accused GM of fraudulently concealing its knowledge of the defect, and said that as a result, it was not entitled to protection from liability.

"As a result of GM's conduct, especially in light of the taxpayer bailout of that company, they've lost the right to impose their view as to what's best for my clients and the other class members," said Adam Levitt of Grant & Eisenhofer, a lawyer for plaintiffs in the California case.

A lawyer for the Texas plaintiffs, Robert Hilliard of Hilliard Munoz Gonzales, said that whether the case is resolved in federal district court or bankruptcy court, "there will soon be a judicial reckoning" for the company.

GM announced on April 1 that it had retained lawyer Kenneth Feinberg to help assess legal options, adding that the company would take up to 60 days to evaluate the matter.

Feinberg has administered funds to compensate victims of the September 11, 2001, attacks, the BP Plc oil spill and Boston Marathon bombing.

Safety advocates said the move indicated that the company was exploring the creation of a victims' fund, although GM has not confirmed that.

GM has said it is working to obtain replacement parts for affected customers. Barra said in an interview with NADA-TV posted online on Tuesday that the replacement ignition switches "are flowing now" and reiterated the company's position that the customer stands at the center of its decisions.

The Texas case was in Re: Charles Silvas and Grace Silvas vs. General Motors LLC in the U.S. District Court, Southern District of Texas, No. 2:14-CV-00089

(Reporting by Jessica Dye in New York, Sweta Singh in Bangalore, Ben Klayman in Detroit and Richard Cowan in Washington; editing by Ted Kerr, Matthew Lewis and Bernard Orr)

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