U.S. Supreme Court Declines to Review GM Ignition Switch Case

By Katy Stech Features Dow Jones Newswires

The nation's top court on Monday rejected a request from General Motors Co. to limit the fallout from its ignition-switch defect.

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The U.S. Supreme Court denied the Detroit auto maker's request to review a lower-court ruling that gave some victims' families the power to sue over defective ignition switches, exposing the company to billions of dollars in potential new claims.

GM had tried to overturn a July ruling from the Second U.S. Circuit Court of Appeals that said the auto maker should have disclosed the ignition-switch defect when its operations were sold during its 2009 bankruptcy. Under bankruptcy law, a company's operations can be sold "free and clear" of past liabilities, blocking future lawsuits over claims that arose before the sale.

The decision could expose GM to hundreds of additional wrongful death and personal injury cases.

The potential legal claims could total more than $10 billion, according to a bankruptcy judge's estimate, though the ultimate financial fallout could be far less if plaintiffs don't prevail in court or reach settlements. GM has already reached ignition-switch settlements with consumers, shareholders and federal prosecutors totaling more than $2 billion.

GM recalled 2.6 million older cars in 2014 with the defective switches, which can slip from the run position, cause vehicles to stall and disable safety features including air bags. The company acknowledged that employees knew of problems for more than a decade. The defect has been linked to 124 deaths and led GM to settle a federal criminal case.

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In its request for Supreme Court review, GM lawyers said the lower-court ruling "threatens to undermine one of the largest bankruptcies in history."

The appeals court found that GM should have known of the ignition-switch defect -- or strongly suspected it -- at the time of its bankruptcy case and therefore should have disclosed it. Failing to do so violated consumer rights that are built into the chapter 11 bankruptcy process, the court said. GM "essentially asks that we reward [bankrupt companies] who conceal claims," the court said.

Without the Supreme Court's intervention, the lower court's ruling stands.

Mike Spector and Brent Kendall contributed to this article.

Write to Katy Stech at katherine.stech@wsj.com

(END) Dow Jones Newswires

April 24, 2017 10:44 ET (14:44 GMT)