As General Motors Co had moved to delay litigation of ignition-defect cases in California and Texas, bankruptcy law experts say that the maneuver could save the automaker billions of dollars in terms of customer payouts, Bloomberg reported.
Last week, GM has requested federal judges in the two states to stall the trial of the lawsuits filed against them until the bankruptcy judge in New York determine whether the claims could be settled without the automaker violating the terms it has agreed in its Chapter 11 reorganization in 2009. According to the 2009 order of US Bankruptcy Judge Robert Gerber, the "new" GM should reject all of its predecessor's liabilities, including claims that are based on a car's design defects.
Aside from the maneuver, GM reportedly hired lawyer Kenneth Feinberg, whose sole role is to provide legal advise on how the automaker should compensate people who had accidents as a results of the ignition defects found in their cars. Some of the cars that had the defect are the Cobalts, Saturns and other small car models of GM. Bloomberg noted that Feinberg might have been hired because of his experience, as he had ran funds for the September 11 terror attacks' victims and those who were affected with the BP Plc oil spill in the Gulf of Mexico.
"They're running on parallel tracks but the trains are going to different stations. (GM then can invoke the fund Feinverg recommended to say, 'As a matter of law we don't have to pay anybody a nickel, but we recognize our responsibility to people who were harmed by our product, so we are going to help them'," bankruptcy lawyer Chip Bowles at Bingham Greenebaum Doll LLP said.
Customers might have difficulty seeking higher damages should the automaker's bankruptcy court allows the lawsuit to move forward. Bankruptcy professor Stephen Lubben at Seton Hall University School of Law in Newark, New Jersey said, "Having the court reaffirm its order could head off attempts to litigate the issue before some other court, which might not be as well-versed in bankruptcy and the broad reach of the bankruptcy code."
