Motors Liquidation court to address class action suits, fraud charges

By Kali Hays

New York, May 19 - The U.S. Bankruptcy Court for the Southern District of New York issued a scheduling order for Motors Liquidation Co., formerly General Motors Corp., regarding "threshold issues" related to the company's recall of 9.7 million vehicles over ignition switch, electrical, and other safety concerns, according to an 8-K filed Friday with the Securities and Exchange Commission.

Among the issues the court identified for resolution are the more than 55 class action lawsuits filed against the New GM seeking damages "resulting from the ignition-switch-related recalls or the underlying condition of the vehicles covered by those recalled," according to the 8-K.

Many of the claims may be overlapping, and a May 29 hearing has been scheduled to consider consolidation and transfer of the lawsuits.

Another issue acknowledged by the order is "whether a fraud on the court was committed in connection with the sale order in respect to the ignition switch issue and whether any or all of the claims asserted in the class actions are against Old GM and or the GUC Trust."

As previously reported, in a class action lawsuit filed April 21, class representatives alleged that GM discovered the ignition switch defect more than a decade ago and made a business decision to conceal it.

"To make matters worse, during its 2009 Chapter 11 case, GM fraudulently concealed the ignition defect as it took billions of dollars in taxpayer money from the U.S. government and obtained the U.S. government's sponsorship of a plan of reorganization that salvaged the company's very existence," the plaintiff said.

The plaintiffs said consumers did not have an opportunity to assert or have any reason to believe that they should try to assert any objections or claims in the bankruptcy case concerning damages caused by the defect.

On April 23 the company asked the court to enforce the 2009 sale order and injunction which approved the sale of substantially all of the assets of General Motors Corp. to New GM and outlined the possibility of litigation in which plaintiffs seek economic losses against the New GM related to an old GM vehicle or part.

Shortly after New GM issued a recall notice, numerous plaintiffs throughout the country sued the new company for claimed economic losses allegedly resulting from ignition switch defects in Old GM vehicles and parts, "the very type of claims retained by old GM for which new GM has no liability."

As many of the recalled vehicles were manufactured or sold prior to asset the sale, Motors Liquidation said these types of claims were never assumed by new GM and are barred by the sale order and injunction.

"The GUC Trust intends to vigorously defend its position that none of the claims may be properly asserted against Old GM of the GUC Trust," the 8-K stated.

The 8-K stated that to date, no plaintiff has asserted a claim against the GUC Trust in connection with the class actions.

Motors Liquidation was formerly General Motors, a Detroit-based automaker that filed for bankruptcy on June 1, 2009. The new General Motors Corp. emerged from Chapter 11 on July 10, 2009. Motors Liquidation's Chapter 11 case number is 09-50026.

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