Court Lets Government Motors Keep its Liability Shield and Screw Over Crash Victims

The GM bailout is a gift that keeps on giving to the company.

As I noted last year, the GM bailout is a gift that keeps on giving to the company. It cost the taxpayers more than $10 billion to prop up the company. And now a federal judge has ruled that thanks to a liability shield that the company

obtained as part of the bailout package, it does not have to pay damages to victims of crashes caused by faulty switches in Cobalts and a host of other GM cars.

As I wrote at that time:

GM knew there was a problem with the cars, now linked to at least 31 crashes and a dozen deaths, before the launch of the 2005 Chevy Cobalt. An accidental bump could push its key into the "accessory" or "off" position, shutting down the moving vehicle and preventing its air bag from deploying as it crashed.

But GM ignored the problem and put the Cobalt on the road—followed by six other models sharing a similar design—because of the "lead time, cost and effectiveness" involved in any redesign, according to a timeline GM submitted to the National Highway Transportation Safety Administration (NHTSA).

GM ultimately recalled about millions of vehicles but the families of two teenagers killed in a 2006 Cobalt crash in Wisconsin, filed a class-action lawsuit last week seeking $6 billion to $10 billion in damages for GM's alleged negligence. GM, however, refused to pay claiming that it had immunity for all cars involved in crashes prior to 2009, when it was restructured.

It is not unusual for companies in bankruptcy to obtain a shield. However, what was unusual about this bankruptcy was that the company wasn't required to put money in special trust funds for prospective victims. So the only way that the victims could collect full damages was if they could prove in court that GM had knowingly concealed information about the defective switches when it obtained the shield, a very high burden.

They couldn't. Reports the Wall Street Journal, U.S. Bankruptcy Judge Robert Gerber, has handed down a 134-page ruling saying he could find no instances where GM had committed fraud upon the court when it was going through the bankruptcy process. GM executives claimed that they were not informed of the problem by their subordinates until late 2013 and the court bought that. This raises all kinds of questions about the culture of silence in the company so that executives can maintain plausible deniability.

But for now, as Texas attorney Bob Hilliard, one of the lawyers representing the plaintiffs, noted:

"This ruling padlocks the courthouse doors. Hundreds of victims and their families will go to bed tonight forever deprived of justice. GM, bathing in billions, may now turn its back on the dead and injured, worry free."

But hopefully the president will go to bed and get a good night's rest. After all, he has more people to screw over both at home and abroad tomorrow.