Court Finds GM Not Liable for Punitive Damages In Ignition Cases

The 2nd U.S. Circuit Court of Appeals in Manhattan has decided to give General Motors a pass on the punitive damages associated with its faulty ignition switches. If you don’t recall the issue, it’s hardly your fault. The cars were manufactured prior to GM’s 2009 bankruptcy declaration and encompassed models from brands that no longer exist.

That timing was everything, too. Apparently the affected Saturn, Pontiac, and Chevrolet vehicles are part of the “Old GM” that died during the Great Recession. Most of the automaker’s former assets and liabilities were transferred to the “Motors Liquidation Company,” so that the General could be reborn fresh and untainted, like a baby phoenix. 

According to Reuters, Circuit Judge Dennis Jacobs explained GM’s agreement to acquire assets “free and clear” of most liabilities technically excused it from any punitive damages stemming from Old GM’s conduct. On top of the government bailout, that’s a pretty sweet deal. However, one could also argue that the brutal financial position the manufacturer found itself in ahead of the recession wouldn’t have allowed it to pay out anyway. Jacobs certainly did.

From Reuters:

Tuesday’s 3-0 decision may help GM reduce its ultimate exposure in nationwide litigation over defective ignition switches in several Chevrolet, Pontiac and Saturn models.

It is also a defeat for drivers involved in post-bankruptcy accidents, including those who collided with older GM vehicles driven by others, as well as their law firms.

The ignition switch defect could cause engine stalls and keep airbags from deploying, and has been linked to 124 deaths.

Injuries are presumed to be closer to 300. Thus far, the company has recalled more than 2.6 million vehicles since callbacks began in 2014. Claims exist that GM was well aware of the issue going back all the way to 2004; many blame the entire issue on the firm knowingly taking risks by using cheaper parts that could render its vehicles unsafe.

However, General Motors has already shelled out more than $2.6 billion in penalties and settlements stemming from the ignition switches — including $900 million to settle its criminal case with the Justice Department (with oversight conditions). It didn’t exactly get away scot-free.

a version of this post first appeared on TTAC

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