GM asks Supreme Court to reverse ignition switch claims ruling

(Reuters) - General Motors Co GM.N on Tuesday asked the U.S. Supreme Court to overturn an appellate court's ruling that the automaker's 2009 bankruptcy does not shield it from lawsuits over a faulty ignition switch linked to 124 deaths and 275 injuries.

The GM logo is seen at the General Motors Warren Transmission Operations Plant in Warren, Michigan October 26, 2015. REUTERS/Rebecca Cook

The petition marked a last-ditch effort by GM to block hundreds of customer lawsuits over faulty ignition switches, and other vehicles components, on grounds that they were barred by the automaker’s 2009 bankruptcy sale to a new corporate entity.

In its petition, GM said the federal bankruptcy code permits a purchaser, in this case a newly formed company, to obtain a debtor’s rapidly deteriorating assets and be “free and clear” of its liabilities.

GM said that if the July 2016 ruling by the 2nd U.S. Circuit Court of Appeals in New York was left standing, it would undermine a key component of its corporate rescue and make future such deals more difficult.

“In short, this case presents exceptionally important questions, and the Second Circuit’s answers were exceptionally wrong,” GM’s lawyers said in the petition. “The Court should grant review.”

The case related to an ignition switch that could slip out of place, causing engines to stall and cutting power to the brake, steering and air bag systems. The defect prompted GM to begin recalling 2.6 million vehicles in 2014.

GM has already paid roughly $2 billion in criminal and civil penalties and settlements in connection with the switch. The company previously acknowledged that some of its employees knew about the switch defect for years before a recall was initiated.

The 2nd Circuit’s decision affected injury and death cases stemming from pre-bankruptcy crashes, as well as claims from customers who say their vehicles lost value as a result of the ignition switch and recalls involving other parts.

The three-judge panel at that time held that barring plaintiffs from suing GM over the faulty switch would violate their constitutional rights to due process, since they had not been notified of the defect prior to GM’s bankruptcy.

The 2nd Circuit appeal stemmed from a 2015 decision from the judge who oversaw GM’s 2009 bankruptcy, which created “New GM” to contain valuable assets while leaving behind most of its burdensome liabilities with “Old GM.”

U.S. Bankruptcy Judge Robert Gerber, now retired, ruled in 2015 that New GM was shielded from liability over Old GM’s pre-bankruptcy actions, but he allowed some “independent” claims based solely on New GM’s conduct to proceed.

Reporting by Nate Raymond in New York; Editing by David Gregorio