Throughout the country, there have been about 50 nationwide class action lawsuits filed against General Motors over the defective ignition switches it installed in over 2.6 million of its vehicles.  More such lawsuits are filed every week.  The pace of developments in the case has been quick.

This week, GM filed a motion in the United States Bankruptcy Court for the Southern District of New York to put a halt to all of the ignition switch lawsuits.  GM argues that back in 2009 when it filed bankruptcy, it was a different company.  It argues that the “Old GM” is gone and now all that exists is the “New GM,” a completely separate company.  In fact, in 2009, the government of the United States gave GM a $50 billion bailout to save it from having to liquidate.  Technically, the government’s money went to a “new company” that purchased the assets of the “old company” free of any liabilities.  GM now argues that if it was not for the stipulation that the asset purchase would come with no liabilities attached, it would not have gone through with the purchase.

This argument ignores several important points.  First, while the “New GM” was technically different than the “Old GM,” the entity commonly known as General Motors never ceased operations,  not even for a day.  The same people continued to run the company and the same people continued to be employed by the company before bankruptcy and after bankruptcy.  There were no noticeable changes except for the fact that there was a lot less debt to worry about.

Second, whatever you want to call it, GM knew of the defects with the ignition switch systems and chose to cover up the defects from everyone, including the bankruptcy court.  Fraud is a common exception to bankruptcy court orders.  GM apparently committed fraud for 13 years as it covered up the existence of the dangerous and deadly defects.

Third, GM continued to manufacture defective vehicles after bankruptcy.  For example, it manufactured defective Chevy Cobalts until 2011 – two years after bankruptcy.  Thus, even in the unlikely event that GM wins its argument in the bankruptcy court and cancels its liability for pre-2009 defects, the bankruptcy court cannot order that GM has no liability for its actions after the bankruptcy filing.  Those liabilities will remain no matter what.

Moreover, on May 29 in Chicago, Illinois, the Judicial Panel on Multidistrict Litigation will hold a hearing aimed at deciding whether all of the nationwide GM class action suits will be consolidated into a single lawsuit.  If so, the JPML will also decide where that lawsuit will be litigated.  I will be arguing at the hearing that the cases should be litigated in the United States District Court for the Eastern District of Michigan since that is where GM is headquartered.  A decision by the JPML is expected in early June.

— Kassem Dakhlallah is a senior partner with At Law Group, PLLC.  His practice focuses on complex litigation, including class actions, representative actions, commercial litigation, civil forfeiture and personal injury. He can be reached at (313) 406-7606 and kd@atlawgroup.com.