GM Recall: First Lawsuit Has Been Cast, But Does It Stand a Chance?

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Vehicle owners in Texas have banded together in a lawsuit against General Motors in the most recent chapter of the ongoing recall debacle that seems to get more spiraling in nature each week, Bloomberg has reported. Bob Hilliard, one of the lawyers who filed the complaint on Friday in federal court in Corpus Christi, said he’s looking to recover $6 billion to $10 billion for the lost value of cars affected by the recall, which has so far included 1.6 million vehicles.

“These vehicles, all they have to do is get on the road for this defect to manifest,” Hilliard told Bloomberg in a phone interview. “This is a true safety defect.”

The complaint is largely based on claims that GM hid the defects and the “diminution in value” of the owners’ vehicles, and not deaths resulting from crashes when the engines stopped because keys came loose, Bloomberg reported. General Motors has confirmed that it believes twelve deaths were the direct result of the ignition fault, but a watchdog group last week that the ultimate body count could be closer to 300, after reviewing numerous accident reports.

Multiple investigations are underway since the initial recall was launched in January, including an internal one by GM, one by the National Highway Traffic Safety Administration, and probes into the company’s timeliness by the NHTSA and a House subcommittee. The Justice Department and the Transportation Department are involved as well.

“GM is focused now on ensuring the safety and peace of mind of our customers involved in the recall. Our principle throughout this process has been to the put the customer first, and that will continue to guide us,” said Greg Martin, a company spokesman, in an e-mail responding to a Bloomberg request for comment on Hilliard’s lawsuit.

Not surprisingly, the suit is seeking class-action status, in order to represent all of the vehicle owners affected by the recall — well over a million people. The named plaintiffs in the case are Daryl and Maria Brandt of Nueces County, Texas, who own a 2007 Chevy Cobalt, Bloomberg said.

Hilliard is also representing two teenagers who died in a 2006 crash of a Cobalt. However, the lawsuit faces an uphill climb as the company’s restructuring in 2009 — as a result of the bailout — might shield it from legal actions, since the company today is technically a different company than the one that manufactured and sold the defective vehicles. However, Hilliard doesn’t believe that the entity, in whatever form it takes on paper, should be protected by a technicality.

While bankruptcy typically protects companies from new claims that predate the reorganization, GM didn’t present the full extent of its ignition-switch liabilities, Bloomberg quoted Hilliard as saying.


“If you are aware of potential exposure to litigation and you don’t reveal it, that’s fraud,” he said. “I’m going to go back to that bankruptcy judge and say, ‘You have to undo this, the liability of old GM, because it was the new GM’s continued coverup after the bankruptcy that allowed people to be hurt or killed.’”

Chip Bowles, a bankruptcy lawyer who wasn’t involved in GM’s liquidation and restructuring, told Bloomberg that in order to persuade U.S. Bankruptcy Judge Robert Gerber in Manhattan to reconsider the terms of GM’s reorganization, Hilliard or other lawyers would need to gather evidence and prove that the old GM had knowingly deceived the judge, the site said.

“A few bankruptcy cases have been set aside for fraud on the court, but you have to establish deliberate fraud and concealment,” said Bowles.