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GM lawsuits will proceed as one case in New York

A panel of federal judges handed General Motors a modest but meaningful victory Monday, consolidating the pretrial phase of more than 80 lawsuits against the company into a single proceeding in Manhattan — the venue sought by the automaker.

It came as the embattled company prepared to face investors Tuesday in what is expected to be a tense annual shareholders meeting, the company’s first since it began recalling millions of defective small cars in February.

The cases, most seeking class-action status, have been filed around the country on behalf of owners of Chevrolet Cobalts, Saturn Ions and other cars that GM recalled this year for a defective ignition switch. Owners are seeking compensation for lost value of the vehicles and other economic damages from the company’s decade-long failure to address a safety problem that it now links to 13 deaths.

GM’s ultimate strategy is to have the cases dismissed, and toward that end, it has asked Judge Robert E. Gerber of the U.S. Bankruptcy Court in the Southern District of New York to rule that the cases violate a provision of the company’s July 10, 2009, restructuring agreement that protects it from legal claims stemming from incidents before that date. (Most of the recalled cars were manufactured before 2009.)

The ruling by a seven-judge panel Monday puts the cases in the same district as Gerber — though this proceeding will be overseen in District Court by Judge Jesse M. Furman — and is thought by some legal observers to be potentially more favorable to GM because of the familiarity with the issues involving the automaker’s bankruptcy.

GM, which disputes that the cars have lost any value, welcomed the decision with a written statement Monday afternoon.

“This order affirms what we’ve maintained all along,” the company said. “All cases should be transferred to the Southern District of New York, which is in the best position to coordinate with the Bankruptcy Court’s proceedings, has previously heard appeals from the Sale Order and Injunction, decided several contested matters relating to the asset sale and where several of the ignition switch actions filed to date are pending.”

The panel’s ruling called the venue “the most appropriate choice,” citing the Southern District’s handling of the bankruptcy proceedings of GM and Delphi, its parts supplier. Lawyers for various cases had argued aggressively for a number of locations, including Chicago, Texas and Southern California, where the litigation against Toyota over unintended acceleration was consolidated.

None of this legal wrangling involves the cases filed against the company over personal injury and wrongful death from the ignition switch flaw. GM is hoping to resolve those claims outside of the courts with a compensation system devised by Kenneth R. Feinberg, the lawyer who has overseen victims’ funds in a number of cases, including the Boston Marathon bombings and the BP oil rig explosion.

The pretrial phase covers discovery and other evidence-gathering, and consolidating that portion of multiple cases is a common way of streamlining similar litigation. If the parties do not reach a settlement in pretrial, the cases will revert back to the courts where they were filed.

The panel’s decision came a day before GM’s annual shareholder meeting, a session that is expected to be tense after the release last week of a scathing report on the company’s handling of the ignition switch issue, written by Anton R. Valukas, a former U.S. attorney hired to conduct an internal investigation.

In recent years, the annual meeting, held at GM headquarters in Detroit, has been uneventful and sparsely attended. But interest is expected to be far greater this year as some investors are becoming concerned about the company’s mounting financial exposure from claims over the ignition flaw.

During the meeting, shareholders will get their first opportunity to hear about the crisis directly from Mary T. Barra, the chief executive. Barra will hold a news conference before the meeting, which will be run by the chairman of GM’s board, Theodore M. Solso.

Other than to express support for Barra and her management team, Solso and other directors have been largely silent since GM began recalling millions of defective small cars in February.

Board members, however, have been named as defendants in several lawsuits by shareholders, who allege that GM’s failure to disclose the switch problems for years has unfairly hurt the value of their stock.

GM has set aside $1.7 billion to pay for the switch recall and dozens of other safety recalls it has issued this year. The company’s stock price is down 10 percent from the beginning of the year, a period when the market overall has risen to record heights.

Family members of accident victims were in Detroit on Monday to protest GM’s handling of the long-delayed recall before the meeting. Among the protesters was Laura Christian, birth mother of Amber Marie Rose, who died in a Cobalt crash in 2005.

Christian contended that GM has deliberately minimized the number of people who died as a result of the faulty switch, which can suddenly cut engine power and deactivate air bags. “The number is well over a hundred and growing,” she said.

Posted to: Business Consumer - Retail

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