A federal judge dismissed a swathe of customer claims in the nationwide litigation over General Motors Co.’s deadly ignition switch defect that triggered the recall of millions of vehicles two years ago.
Friday’s ruling by a Manhattan federal judge comes two days after an appeals court dealt GM a blow by reviving hundreds of related cases that had been blocked by the carmaker’s 2009 trip through bankruptcy court. GM’s shifting fortunes in the case come as the Detroit-based company prepares for a third test trial over the flaw, set to start in September. GM won the first two.
U.S. District Judge Jesse Furman, who has been managing hundreds of consolidated cases and is overseeing a series of test trials, targeted one of the plaintiffs’ key claims — that customers deserve financial compensation due to the reduction in resale value of the vehicles caused by damage to GM’s reputation and brand. The lawyers have argued those claims are worth as much as $10 billion, though GM disputes that figure.
"The court finds that that novel theory of damages is unsound in light of persuasive precedent interpreting consumer protection law," Furman said.
Furman also rejected plaintiffs’ allegations under the Racketeer Influenced and Corrupt Organizations Act, saying the claims of a coverup “fail to allege the existence of an ‘enterprise’ within the meaning” of the statute.
“The court made it clear the plaintiffs overreached in many aspects of their complaint and the ruling significantly curtails the scope of their potential recovery," GM Spokesman James Cain said in a statement.
The plaintiffs accuse GM of endangering them by delaying the recall of defective vehicles in which jostled keys could trigger a shut-off and disable steering, brakes and airbags. The flaw has caused at least 124 deaths.
The carmaker has already paid more than $2 billion to resolve legal claims stemming from the scandal, including $900 million to end a criminal probe by the U.S. government, $575 million to settle a shareholder suit and more than 1,380 civil cases by victims, and at least $595 million through a victims’ compensation fund outside of court.
Steve Berman, one of the plaintiffs’ lawyers, said that while he was pleased the judge allowed many claims to go forward, he would appeal his dismissal of others.
“We do not agree with the court’s dismissal of claims that the series of recalls irrevocably damaged GM’s brand and caused consumers of all GM-branded cars to suffer loss of vehicle value,” Berman said in a statement.
The case is In re General Motors LLC Ignition Switch Litigation, 14-MD-2543, U.S. District Court, Southern District of New York (Manhattan).