Bankruptcy might limit GM’s liability in crash deaths

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Posted: Wednesday, March 26, 2014 12:00 am

Margie Beskau would seem to have a strong lawsuit against General Motors Co. for millions in damages.

Eight years ago, her 15-year-old daughter, Amy Rademaker, died in a Chevrolet Cobalt — one of the cars the automaker has now admitted had a deadly safety defect. A faulty ignition switch shut off the car, leaving its teenage driver without power steering, brakes or air bags.

But Beskau probably will never collect in the civil courts, legal experts say, because GM has been absolved of all responsibility for crashes before the automaker’s 2009 bankruptcy and federal bailout. That’s despite the automaker’s public apologies and its recall of 1.6 million vehicles to fix ignition switches.

GM has acknowledged 12 deaths were caused by the problem. But the Center for Auto Safety, an advocacy group, estimates that number could be more than 300. More than half of those accidents occurred before GM’s bankruptcy, according to an analysis the center performed at the Los Angeles Times’ request.

“They should be liable for Amy’s death,” Beskau said. “They lied to everybody; they covered up the problem. They put anybody who bought the car or who — like my daughter — rode in the car at risk.”

The automaker confirmed that the post-bankruptcy GM bears no liability for accidents before its legal reinvention. Bankruptcy and product liability experts agree.

As in many corporate bankruptcies, GM’s legal slate was wiped clean. The restructuring technically created a new company of the same name, which bought the assets of the old GM — but allowed it to shed its debts and legal liabilities. The U.S. government brokered the transaction as part of a historic bailout to save the company from collapse.

“GM completely threw all product liability claimants under the bus,” said Steve Jakubowski, a Chicago bankruptcy attorney.

The bailout ultimately cost taxpayers $10.5 billion.

The question of liability hangs on a specific date: June 1, 2009, the day GM filed for bankruptcy. GM is off the hook for lawsuits based on crashes before that date, said Harvey Miller, a partner in the New York law firm of Weil, Gotshal & Manges, which guided GM through its 2009 bankruptcy. The automaker could face millions of dollars in civil judgments involving crashes after that date.

The crash that killed Beskau’s daughter and another teen, Natasha Weigel, took place on a Wisconsin road in 2006. The ignition switch in a 2005 Chevy Cobalt driven by 17-year-old Megan Phillips slipped out of the “on” position, shutting off the power steering, power brakes and air bags. Phillips lost control of the car, striking a telephone junction box and two trees. The air bags failed. The passengers were killed and Phillips suffered lasting injuries.

Margie Beskau suspected a problem with the car at the time. Only recently — as GM recalled cars in the past six weeks and issued multiple apologies — did Beskau and the families of the other victims in the accident become aware that GM knew of the problem and had failed to fix it. The switches can fail because of heavy key chains, or if a driver inadvertently bumps the keys and ignition.

The families filed a wrongful-death and injury suit against the automaker last week, after learning about multiple federal investigations into GM’s actions — and documents showing the automaker knew about the ignition switch problem before the bankruptcy. But it hinges on convincing the original bankruptcy judge that the company defrauded the court by withholding information about the safety defect.

The case is a long shot, attorneys said.

“They just won’t do it,” said Jakubowski, the Chicago bankruptcy attorney. “I can’t fathom a bankruptcy court now saying it would have any interest in revisiting the judgment to alter it or revoke it.”

Rudy Gonzales, one of the attorneys representing the families, expects a battle but said families should still file against GM.

“There is no question that this is going to be a legal fight unless General Motors does what it should do,” Gonzales said, noting the company’s public admissions that it failed to resolve a serious safety issue.

It’s not clear how much money GM might have to pay out if it picks up the claims for deaths and injuries before its bankruptcy.

The study estimating that the ignition problem may have caused more than 300 deaths was commissioned by the Center for Auto Safety. The number is a count of people who died in affected cars while riding in the front or passenger seats during crashes in which air bags failed.

The study could not determine that all of those accidents resulted from the ignition failure, and it examined just two of the six models that GM has recalled for ignition switch problems.

GM has disputed the numbers.

“Without rigorous analysis, it is pure speculation to attempt to draw any meaningful conclusions,” the automaker said in a statement.

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