2nd Circ. Has Doubts About New GM's Ch. 11 Liability Shield - Law360

2nd Circ. Has Doubts About New GM's Ch. 11 Liability Shield - Law360

2nd Circ. Has Doubts About New GM's Ch. 11 Liability Shield - Law360

Law360, New York (March 15, 2016, 3:39 PM ET) -- A Second Circuit panel appeared troubled Tuesday by a landmark bankruptcy ruling that largely shields the post-Chapter 11 version of General Motors from liability tied to deadly ignition-switch defects, with one appellate judge wondering how the decision could have been made in the bankruptcy context at all.

(Credit: AP)

At a closely watched appeal in which various claimant groups are seeking leave to target General Motors LLC, or New GM, Circuit Judges Chester J. Straub, Denny Chin and Susan L. Carney all expressed displeasure at U.S. Bankruptcy Judge Robert Gerber's April 2015 decision to wall off the $47 billion auto giant.

That decision came just months before a $900 million settlement between Old GM and criminal prosecutors.

Front-and-center in Tuesday's arguments was a stipulation between Chapter 11 GM and plaintiffs in which, according to Judge Gerber's opinion, "at least 24 Old GM personnel (all of whom were transferred to New GM), including engineers, senior managers and attorneys, were informed or otherwise aware of the ignition switch defect" before a 2009 sale agreement rescued the automaker.

“Old GM knew,” Judge Straub told the automaker's counsel Arthur Jay Steinberg of King & Spalding LLP. “The very same people who knew went to New GM. No one told the court. No one told the claimants. How are we to deal with that?”