The General Motors Corporation (GM), which received federal bailout money to stay afloat, exited bankruptcy in July 2009. At that time the controlling bankruptcy order shielded GM from liability from almost all accidents occurring prior to its reorganization. Because of the concerns raised by the Attorneys General in eight states, GM did agree at the time to cover losses caused by already-known defects of older vehicles who were involved in crashes which occurred after restructuring. A little over $500 million was placed in a special fund by GM to anticipate such claims after its reorganization.
However, now new concerns arise in the wake of recent disclosures that some of the automaker’s models, including Chevrolet Cobra and Saturn Ions, among others, have had faulty ignition switches. At least 13 people have died in accidents resulting from problems with these cars. The public pressure to address the issue, as well as the prompting of the House Energy and Commerce Committee, caused GM’s Chief Executive Officer, Mary Barra, to testify on the matter on April 1, 2014. While Ms. Barra did hint at the notion that GM may set up a fund to compensate the victims and families hurt in these crashes, she reiterated that GM’s old liabilities were subject to discharge by the company’s Chapter 11 bankruptcy. Nevertheless, she plans to retain Kenneth Feinberg to see what kind of steps the company might take to help such families. Mr. Feinberg has developed national acclaim as an attorney and accountant who administered claims for victims of the 9/11 terror attacks, the BP underwater oil spill and most recently the 2013 Boston Marathon bombing.
So far Ms. Barra believes GM must continue its internal investigation to find out why these defects were not remedied earlier. Critics, including Congresspersons of both parties, claim the record amply shows the auto company knew of the defect but chose to ignore it because of the cost concerns attached to any recall. The findings of an internal inquiry, however, may bear some relevance as to whether accident victims could bring a claim for accidents which occurred before the bankruptcy ended. Normally, such a company would enjoy an immunity shield from such prosecutions but the Justice Department is reviewing this matter to see if the company may not qualify for such immunity if they fraudulently failed to disclose knowledge of this defect and any potential liabilities resulting from such defect. Generally, bankruptcy courts will deny bankruptcy discharge where the debtor company fraudulently misstates in a material way the value of its assets in required filings. The picture is much murkier when it comes to fraudulent statements of liabilities. The consensus among some, including the former attorneys general mentioned above, appears to be that GM will not lose its immunity to cover the losses from these accidents. That is why Senator Blumenthal from Connecticut – in 2009 its Attorney General – is calling for the company to voluntarily step up and create a trust fund for victims ranging in size from $3 to $8 billion. Such voluntary payments could render this debate essentially moot.
In Albuquerque, Giddens & Gatton Law, PC has attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases. The firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Contact Giddens & Gatton Law, PC at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com. Giddens & Gatton Law, PC is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.