On Monday, a United States Bankruptcy Judge ruled that GM can be held liable for punitive damages stemming from its defective ignition switches. GM attempted to avoid punitive damage claims, but Judge Robert Gerber held that the company can face punitives in lawsuits alleging that the new company created after GM’s 2009 bankruptcy knew about the ignition switch defects and tried to conceal them.
The decision is a big win for plaintiffs bringing claims against GM for serious injuries and deaths resulting from the faulty ignition switches. The purpose of punitive damages is to punish corporations for intentional wrongdoing and to deter similar conduct in the future. Judge Gerber’s ruling could result in GM paying millions, or perhaps billions, of dollars to plaintiffs.
In September, GM reached a criminal settlement of $900 million, and last year, it paid $35 million in fines for failing to disclose the defect. During the criminal settlement negotiations, GM admitted to misleading regulators about the defective switch and failing to recall millions of vehicles.
In 2009, GM declared bankruptcy which created a “New GM” and a separate “Old GM”. New GM argued it was protected from claims on vehicles pre-dating its 2009 exit from Chapter 11 bankruptcy, and in April 2015, Judge Gerber upheld GM’s liability shield finding that GM was not liable for incidents that occurred before 2009. However, claims arising from GM’s conduct after its bankruptcy were not affected by the decision.