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Did You Know… General Motors (GM) Is Claiming Immunity From Punitive Damages?

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GM trying to avoid liability for its products under bankruptcy protectionIn 2009, General Motors received a $50 billion “bailout” in which the “Old” GM was liquidated and its best assets were sold to the U.S. Treasury Department as the “New” GM.

It gets a little confusing because even though the operating name stayed the same, logo stayed the same, the employees stayed the same, the cars stayed the same, the commercials stayed the same, the dealerships stayed the same, the service centers stayed the same, and the warranties stayed the same it would appear there was not really any change to the company, but, because of the bankruptcy, the “old” GM and “new” GM were legally completely different companies.

Thus, the bankruptcy liquidation created an opportunity for GM to renege on their obligation to consumers who were injured or killed by one of the 71 million cars manufactured by “old” GM before bankruptcy that are still on the road. Fortunately for consumers (and with pressure from AAJ members and key members of Congress), the “new” GM agreed to accept responsibility for the older cars in accidents that happened after bankruptcy.

Chrysler Group LLC received a similar bailout and made a similar agreement to accept responsibility for their vehicles manufactured before bankruptcy. Chrysler, however, was able to secure an additional legal protection from punitive damage claims arising from alleged manufacturing defects of their pre-bankruptcy automobiles. GM failed to secure similar legal immunity from punitive damages in its bankruptcy proceedings.

Fast forward to present day and GM is now claiming immunity from punitive damages and threatening to stonewall victims making punitive damage claims, despite their failure to secure immunity. In fact, a lawyer for GM recently demanded that a woman whose husband was killed in a vehicle manufactured by the “old” GM drop her punitive damages claim against the company.

Nicholas Bourgeois was a 28-year old Marine who was killed in an accident involving a U-Haul truck manufactured by General Motors. An alleged vehicle defect caused one of the truck’s front tires to blow-out, which caused Mr. Bourgeois to lose control of the truck and crash into another vehicle. This accident killed Mr. Bourgeois and two other people.

When Mrs. Bourgeois brought a lawsuit against GM, one of GM’s lawyers demanded that she drop the punitive damages portion of the suit. The GM attorney’s email to Mrs. Bourgeois’ attorney read, in part:

"The upshot of all this is that punitive damages cannot be claimed against [General Motors] based on alleged bad conduct of the bankrupt seller…” "Should you actually serve a complaint upon [General Motors] that includes a punitive damages claim, we would immediately [seek] its dismissal in the Arizona court and if necessary, we would also apply to the U.S. Bankruptcy [Court] in New York for a stay of the Arizona proceedings pending [issuance] of an order enforcing the terms of the sale order,"

Further, a spokesman for GM said "there is no basis for punishing the new General Motors Co. for the alleged transgressions of an older, totally different company, nor is there any policy served by punishing the new GM."

GM’s demands to drop the punitive damages claim would seem reasonable if they were supported by the bankruptcy agreement they entered into. However, the demands are not supported by their bankruptcy document. Bankruptcy attorney Donald Workman is quoted in the Wall Street Journal as saying the GM attorney’s email “flies in the face of the clear language in [GM's bankruptcy sale agreement], which is very inclusive of all liabilities to third parties. That would seem to include, very clearly, punitive damages."

This sounds like the type of story that may very well end up in my “Faces of Lawsuit Abuse” series where plaintiffs are given the “run around” and subjected to frivolous defense theories and threats.

[More on GM and Bankruptcy]

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(c) Copyright 2012 Brett A. Emison

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  1. Mike Bryant says:
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    It is criminal what they have been legally allowed to do. Enron got in trouble for the dummy debt companies. Keep getting the message out.