By on August 12, 2016

General Motors #AMERICA

General Motors hopes to avoid paying up to $10 billion in liabilities by challenging last month’s appeals court ruling in the faulty ignition switch saga.

The automaker wants a rehearing after the court ruled that it couldn’t use its 2009 bankruptcy to block hundreds of crash-related lawsuits, according to the Wall Street Journal.

In July, the U.S. Appeals Court of Manhattan overruled an earlier court decision that protected GM from financial damage from ignition switch-related accidents that took place before 2009. The automaker has already paid out $2 billion in settlements related to the faulty switches, which are linked to 124 deaths. It wants a panel of appeals court judges to decide the matter, and hopefully rule in its favor.

According to GM, last month’s ruling “makes no sense and is flatly contrary to the bankruptcy code and decisions from other courts.” If the decision isn’t overturned, it could damage the entire bankruptcy process, the automaker claimed.

Steve Berman, a plaintiffs’ lawyer, told the WSJ that he “isn’t too worried.” The court’s decision was unanimous, he noted, and it rarely grants requests for a rehearing.

The appeals court claimed GM knew about issues with the ignition switches at the time of bankruptcy, but it waited until early 2014 to make the defect public. That violated the due process rights of its consumers, the court ruled.

Laws are laws, GM asserts. By transitioning into a wholly new corporate entity after the bankruptcy, it washed its hands of the sins of “Old GM.” The automaker said the ruling, as it stands, puts all companies who purchase bankruptcy sale assets in danger.

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40 Comments on “GM to Appeals Court: Respect our Bankruptcy!...”


  • avatar
    maxxcool7421

    #$%^ you GM. you KILLED people and lied. $%^& you…

    • 0 avatar
      jimborambo

      you are right. they stuck it to their 1) dealers, 2) suppliers, 3)employees and 4) customers via bankruptcy and now they whine about doing the right thing.

  • avatar
    SCE to AUX

    I still believe GM’s awareness of the gravity of the situation grew over time, and was highly aggravated by ineptitude and other factors such as incomplete data from the field.

    The meme that says “GM lied, people died” is inflammatory and inaccurate.

    However, GM should still be liable for the entire episode, and not hide behind bankruptcy law. That’s immoral and bad business.

    • 0 avatar
      RobertRyan

      Hmmm they are showing the deceiptfull. ways of a certain German Company. At least the German Company has not tried to get out of the responsibility of killing people directly. Fine should be at least $10 Billion

  • avatar
    dukeisduke

    Screw that. They thought they could skate on these cases, pushing them off on “Old GM”. This is probably going to SCOTUS.

  • avatar
    mikey

    Oh yeah , and Honda has replaced all the Takata air bags ???? And VW ,that paragon of virtue , has been oh so cooperative , re – Emission test cheat. So glad their not still selling cars with Takata air bags….Oh wait

  • avatar
    dukeisduke

    “Laws are laws, GM asserts. By transitioning into a wholly new corporate entity after the bankruptcy, it washed its hands of the sins of ‘Old GM.’ The automaker said the ruling, as it stands, puts all companies who purchase bankruptcy sale assets in danger.”

    It’s one thing when another completely different corporate entity buys the assets of a bankrupt outfit. This was just a shell game, part of the “quick rinse” bankruptcy engineered by GM and the Obama administration.

    • 0 avatar
      Pch101

      You really don’t get it. Successor liability is standard practice in BK. That has nothing to do at all with the “quick rinse” aspect or the government’s involvement — it is the norm.

      What do you think that bankruptcy is supposed to do exactly? The whole point of bankruptcy is to get out of paying everything that is owed to all of the creditors. Litigants are at the back of the creditors line; they get scraps, if anything at all.

      • 0 avatar
        dukeisduke

        I know that’s a standard thing with bankruptcy, so who’s on the hook for all these wrongful death suits? We the taxpayers? Can it be shown that GM knew prior to the bankruptcy that this was a potential liability? I’m wondering now if part of their reason for declaring bankruptcy was to avoid a known issue. If that can be shown, I believe they’re on the hook for these repairs and judgments. It would be a case of fraud.

        • 0 avatar
          Pch101

          “so who’s on the hook for all these wrongful death suits? We the taxpayers?”

          Motors Liquidation aka the Old GM.

          “Can it be shown that GM knew prior to the bankruptcy that this was a potential liability?”

          How is that relevant?

          The New GM bought the assets of the Old GM. If the assets came with liabilities, then it would have either paid less money for them or else not bought them at all.

          Let’s suppose that you are buying a house from someone in bankruptcy, and you find a house that (for some bizarro reason) places the buyer on the hook for the seller’s divorce settlement. Are you going to reduce your offer price to a level that reflects your risk or would you pretend that this isn’t an issue when it directly impacts you?

          “I’m wondering now if part of their reason for declaring bankruptcy was to avoid a known issue.”

          No, the company filed Chapter 11 because the alternative was to completely fail and end up in Chapter 7.

          But even if it did know, it makes no difference at all. TTAC just got through covering the Gawker bankruptcy that was filed to avoid paying out a lawsuit that it had lost. Filing BK to avoid paying legal claims is not unusual at all.

  • avatar
    Pch101

    The appeals court screwed this up and inexplicably so.

    Successor liability is a basic bankruptcy concept. Irrespective of how one feels about General Motors or its ignitions, the appeals court set a terrible precedent that is out of sync with a well-established and uncontroversial legal doctrine that allows buyers to acquire assets from bankrupt entities without taking on their risk. This deserves to be overturned.

    • 0 avatar
      thegamper

      I agree that this decision seems contrary to well established precedent, however, I think the distinction here (at least the distinction that the plaintiff’s attorneys are trying to establish) is that GM knew of the defect, the resulting liability and failed to disclose it.

      It is also well established precedent that in order to discharge a liability in bankruptcy it has to be disclosed to the court, giving adverse parties a chance to respond and make a claim. So who knew what and when is going to be the heart of the issue if they appeal it up. Failing to disclose a known liability that has price tag in the billions is fraud on the court.

      I haven’t been following closely enough to know all the details or even read the court opinions, but I think this is the issue now, not whether bankrupt entities can discharge liabilities past, present and future. I don’t believe any court in the land would dispute that. Unless of course you owe student loans, then you are fu#ked.

      • 0 avatar
        Pch101

        The disclosure or lack thereof isn’t relevant to the buyer of the assets. Since the buyer doesn’t take on the liability as a matter of law, why should it matter what lawsuits were in the pipeline?

        If you buy assets out of bankruptcy, the assets’ life story should make no difference to you because you aren’t buying those liabilities. The liabilities remain with the seller, which in this case was the old GM.

        Those who bought cars from the old GM are free to have a beef with the old GM. They are only pursuing the new GM because the old one doesn’t have any money.

        • 0 avatar
          George Herbert

          The problem is, this is a material failure to disclose a liability in the bankrupcy process, that was known to the prior company structure, and as the prior company structure became the new company structure through the proceeding, taints the new company as well.

          If it *had* been a clean break and the prior company really shut down/went away, you’d be punting at vapors by now. But as the old structure’s still there, they’re a target. They’re a useful target, in that claiming that the bankruptcy was procured by fraud taints the current corporate structure who performed the fraud (as the prior company). They performed on paper separation but didn’t go away.

          If this is shot down as violating Bankruptcy law, then the reply is to file to unwind the bankruptcy as having been procured via fraud, by the prior company now operating as the new company, and then they’re more screwed than they were before.

          In the alternative, everyone associated with the prior company who knew anything gets charged with bankruptcy fraud and the new company loses a massive cadre of execs, board members, engineers, managers to a huge criminal case.

        • 0 avatar
          George Herbert

          Criminal violation of 18 USC 157, for example. Using a chapter 11 to further a fraud.

          • 0 avatar
            Pch101

            Bankruptcy fraud generally involves the understatement of assets. (Guy who files BK tries to reduce what he owes by claiming that he is more broke than he is.) That doesn’t apply here.

            It can involve multiple filings, i.e. a form of double dipping. That didn’t happen here either.

            There is no fraud here. It would (a) have to be intentional and (b) be material to the case. Good luck proving the first point, and you won’t prove the second.

            These cases were immaterial to the bankruptcy. GM would have filed bankruptcy, regardless. At most, they are a contingent liability that should have been disclosed. On the priority list of creditors, civil suit plaintiffs are not high on the food chain.

  • avatar
    Big Al From 'Murica

    The problem with using bankruptcy law as a defense is that in 2009 they did everything they could to convince the public that it was not a bankruptcy. Now that years have passed and it suits them…”Hey look, we went bankrupt”

    Guess I’ll stick with the automakers that didn’t go bankrupt.

    • 0 avatar
      Pch101

      When I type “general motors bankruptcy” into Google, I get 641,000 hits. Not exactly a secret.

    • 0 avatar
      SCE to AUX

      I thought I remembered it as you did (as not technically a bankruptcy), but this contemporary article from June 4, 2009, clearly describes it as a Chapter 11 bankruptcy:

      http://www.economist.com/node/13782942

      • 0 avatar
        Big Al From 'Murica

        Well perhaps the politicians selling it to us were not quite truthful then. I remember the government financing being sold because traditional bankruptcy wouldn’t have worked. And while the economist may have been saying that, not like GM was pushing it as such.

        • 0 avatar
          Pch101

          They were telling you the truth, but you are confusing one issue (the type of bankruptcy) with another (how to pay for it.)

          There are two types of bankruptcies available to large businesses. Chapter 7 liquidates the business. Chapter 11 reorganizes the business.

          The old General Motors filed 11. A new company was created that bought the assets from the old GM. The names are similar, but they are legally separate.

          Then there is the financing that is needed. Usually, large companies filing 11 will obtain “debtor in possession” financing from a lender in order to get through the bankruptcy. However, the markets circa 2009 would not have provided the money — the credit markets had melted down. In any case, the new GM could not have afforded to support that much new debt, anyway. So the government stepped up and provided money in the form of equity (buying stock) so that GM could get the cash that it needed without borrowing it.

          It is not typical to use government money to pay for a bankruptcy, but you already knew that. Except for the fact that the government served as the DIP lender, it was a “normal” bankruptcy. It complied with the law.

          This was widely reported at the time. Everything was out in the open.

          • 0 avatar
            deanst

            Not normal in a few ways – the order of priority given to various claims was questionable, and the fact that the new gm was able to carry over the tax loses of the old gm was unprecedented.

          • 0 avatar
            Pch101

            The doctrine of “absolute priority” is not absolute.

            I explained this at the time. I can’t believe that I’m still explaining it seven years later.

          • 0 avatar
            dal20402

            “the fact that the new gm was able to carry over the tax loses of the old gm was unprecedented.”

            Would you rather the government have just given new GM more cash, so new GM could pay it back to the government over the following few quarters?

          • 0 avatar
            Big Al From 'Murica

            OK, I appreciate the clarification. I thought I remembered though that part of the deal was that “New GM” had to honor warranty claims and any recalls that might arise with cars manufactured during “old GM’s tenure. That is of course a separate issue from what is described in the article. Anyway, not quite as clearcut of an issue as I had thought. Also, wasn’t there some issue with how the bondholders were stiffed as a result of the government being involved?

            However, in light of this, people need to stop comparing the loans other automakers took (Ford, Nissan, etc) to what happened here. Bankruptcy is very different than borrowing some money during tough times to retool. The rest of the automotive industry can still be sued when a 2006 model kills an occupant. GM can not and the rest of the industry didnt get to saddle another entity with a bunch of bad debt.

          • 0 avatar
            Pch101

            The new GM agreed to provide warranty and recall coverage for cars made by the old GM. Without an agreement, these would not have been the new GM’s problem.

            The new GM is also responsible for lawsuits related to these defects for incidents with those cars that have occurred since the bankruptcy. But the new GM did not agree to accept liability for incidents that occurred before the bankruptcy. So the timing matters — those whose ignition failures occurred since the bankruptcy are covered by the new GM.

            That’s what these cases are about. Those who were injured and estates of those who were killed by GM cars prior to the bankruptcy should sue the old GM. But the old GM doesn’t have any money, so their attorneys are going after the deep pocket of the new GM that did not agree to accept that liability. (The appeals court has determined that the terms of that agreement aren’t so clear, which is one reasaon why it ruled as it did in this case.)

  • avatar
    xidex

    @SCE to AUX

    watch the congressional hearings on you-tube for the ignition scandal, you better believe GM knew about the issue, if i recall correctly it was 6 cents or something like that to repair the issue once discovered (which happened pre production), they decided not to spend the money at the time lol
    very foolish apparently, all for a lousy spring

  • avatar
    FOG

    No judgement either way here, just trying to understand the economic impact. 2 billion for 124 deaths 16.1 million dollars a death. Each life is priceless, but the lawyers usually get almost half that. So 8 million for each death and 1 billion for the lawyers. In the process this will cause GM to layoff thousands of people in order to pay this debt slowing the economy. In turn suppliers will layoff people…

    There has to be a way to hold GM accountable that takes care of the needs of the families who lost loved ones without making lawyers richer and costing jobs.

  • avatar
    Whittaker

    “” According to GM, last month’s ruling “makes no sense and is flatly contrary to the bankruptcy code and decisions from other courts.” “”

    LOL!

    GM benefited from probably the most political, unorthodox and unprecedented bankruptcy of all time.
    And now they think normal precedent should govern.

    • 0 avatar
      RobertRyan

      @Whittacker
      It was a first anywhere in the world, a bankrupt Automotive company being revived by a National Government . Oh make that two Automotive entities. People have short memories. Not even the Communists have tried to revive a defunct business

      • 0 avatar
        deanst

        Automakers worldwide benefit from government subsidies, even if they don’t go through bankruptcy to get the cash. It seems like every time the Detroit 3 renovate a plant in the u.s. or Canada there are politicians around to hand over a check.

        “Not even the Communinists have tried to revive a defunct business.” – was that really intended as a serious comment?

        • 0 avatar
          RobertRyan

          @deanst
          Even the Communists in the old Yugoslavia allowed underperforming companies to fail. Chinese are doing the same, no bailouts to save face
          Subsidies are a different matter from doing a Lazarus and reviving the dead

        • 0 avatar
          Big Al from Oz

          deanst,
          I do believe the beneficiaries of socialist industrial models, similar to how GM and Chrysler were saved, along with all the associated protectionism with US “trucks” (any large, gasoline powered vehicle, SUVs, CUVs, pickups, Vans, etc) is countries that don’t have any auto manufacturing.

          Look at Australia. For every vehicle exported from the US to Australia an American tax payer has given the Aussie car buyer a $3 000USD ($4 000AUD) gift in subsidising the vehicle.

          Isn’t that fantastic ………….. for an Aussie car buyer.

          By build cars when all the car manufacturing governments are paying us to buy them!

          • 0 avatar
            Big Al From 'Murica

            OK, in light of the fact that the average American taxpayer pays about 8 grand total in income taxes and 45 percent or so actually pay zero income taxes after various credits, I’m going to need to see a source on this. And I mean a real source…not a quote from your buddy RobertRyan.

          • 0 avatar
            DenverMike

            Don’t expect a “source”. BAFO doesn’t provide them and he admits this. His comments are 100% opinion, including the fictitious facts and figures he invents out of thin air.

  • avatar
    jimborambo

    This case is clear to me. They did it and they knew it. Pay the consequences

  • avatar
    DenverMike

    GM is simply capitalizing on the old GM/Chevy/Buick/etc, legacy, marque and lineage. It’s the legal term know as: “You Can’t Have Your Cake And Eat It Too”

    Had the new owners started over as “Average Motors”, changed the name of the Silverado to Desperado, Sierra to Donner Pass, Camaro to Kapado, etc, etc, then I believe they’d have a decent case for an appeal.

    When you buy-out the dead carcass of “Frank’s Kitchen Remodeling”, Frank being a known con artist and felon, getting sued several times a year, are you gonna keep old namesake going??

    Starting as the new guy in town, a complete unknown doing kitchen remodels, vs a well established company that’s spent tons on advertising/PR over the years, has its own downsides.

    The New GM took the other legal option called: “You Take The Good With The Bad”.

  • avatar
    an innocent man

    Interesting story on the BK from the person who put it together.

    http://www.forbes.com/sites/danbigman/2013/10/30/how-general-motors-was-really-saved-the-untold-true-story-of-the-most-important-bankruptcy-in-u-s-history/#72feebc25acc

  • avatar
    Big Al From 'Murica

    So is GM endorsing The Donald then since he too is skilled at using bankruptcy law to his advantage!

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