GM cannot use bankruptcy to evade lawsuits over faulty ignition switches: Court

GM cannot use bankruptcy to evade lawsuits over faulty ignition switches: Court

A big problem has arisen for General Motors. The Second US Circuit Court of Appeals in Manhattan on Wednesday has announced that the company cannot use its 2009 bankruptcy to avoid lawsuits related to faulty ignition switches. The judgment will result the automaker to face billion in liabilities.

The court said that the company was aware of the defective switches well before it entered into bankruptcy seven years back, but it maintained silence on the matter. By not disclosing the issue, GM avoided crash victims to make claims and did not allow them to take their due share.

A three-judge panel in a 74-page opinion has mentioned that GM has asked to reward it for hiding the claims and the court has denied doing so. In April 2015, retired US Bankruptcy Judge Robert Gerber has ruled out that most ignition-switch claimants could not file case against the New GM for damages as the company has to come out from bankruptcy free from claims against Old GM.

But the appeals court has changed the decision by allowing many pre-bankruptcy claims to take place. When asked from General Motors, it said that it has been assessing options available to them, including an appeal.

GM said that the appeals court has not decided whether claims against it are valid. Many of the claims have been filed on the behalf of car owners who want compensation even when they have not suffered any damage. But the court said that the due process would be applicable even when the company has been facing crisis.



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