Brain and spinal cord injuries are two common results of automobile accidents.  A large number of lawsuits have been filed against General Motors by persons suffering from brain and spinal cord injuries sustained in accidents involving defective GM vehicles or parts, and many of those cases are currently pending.  On June 1, 2009, GM filed for protection from creditors in the Bankruptcy Court for the Southern District of New York, resulting in all pending lawsuits being stayed until the bankruptcy is finalized.  The case was assigned to Judge Robert E. Gerber who is holding hearings on GM’s proposed reorganization at the time of this post.

One of the issues Judge Gerber is expected to rule on this week is whether persons injured by defective GM products will retain their rights to sue or continue lawsuits pending against GM.  There are three categories of injured people whose rights will be affected by the Court’s rulings.  The first are people who had filed lawsuits against GM and received judgments prior to the bankruptcy, but had not yet been paid.  These people are considered unsecured creditors of GM.  The second category are those who were injured by GM products and filed lawsuits that were not resolved before the bankruptcy, so their claims are pending subject to the stay.  The final group, are those who will be injured in the future by GM products sold before bankruptcy.   Under pressure from consumer groups and Attorney’s General from more than ten states, , GM agreed in negotiations leading up to this week’s hearings to allow people injured by GM products in the future to retain their rights to sue.  GM has not, however, capitulated on recognizing pending claims and judgments.

An example of the types of claims that would be extinguished if the court approves GM’s proposed plan is the claims of four year old Alyssa Perrino.  Alyssa was a healthy, intelligent  little girl who sustained catastrophic brain injuries requiring removal of a large portion of her skull when a weak seat in the GM vehicle in which she was riding failed rearward and struck her head.  At the time of the accident, Alyssa was properly strapped into her car seat in the rear of the vehicle.  Prior to the accident, Alyssa spoke three languages, but as a result of her brain injuries, she is now only able to speak ten to fifteen words.  Her mobility is severely limited.  Alyssa was lucky to survive the accident, but her life and the life of the Perrino family has been forever changed.  While the Perrino family’s lawsuit against GM was resolved prior to GM’s bankruptcy, it is typical of cases in which defective vehicles caused irreversible brain and spinal cord injuries.

The bankruptcy plan proposed by GM would transfer automotive brands Chevrolet, Cadillac, Buick and GMC to a new company called Vehicle Acquisition Holdings LLC (Newco).  Under the plan, the United States Government would own 60 percent of Newco, the Canadian government would get 12.5 percent, the United Auto Workers Union, 17.5 percent and unsecured creditors, 10 percent.  Existing GM shareholders are not expected to receive any interest in Newco.  Technically, People whose lawsuits the bankruptcy court does not extinguish will proceed against Newco.  Those lawsuits that do not survive the bankruptcy can continue against the “old GM”, but the old GM is not expected to have assets to pay claims even it the lawsuits were successful.

While the proposed reorganization plan submitted by General Motors, would extinguish claims for injuries like Alyssa Perrino’s if they were pending at the time the bankruptcy was filed, ironically,  GM has agreed that the new owner of GM would assume GM’s liability for warranty claims.   Thus, approval of the plan would lead to the illogical result that if a GM part fails under warranty, the new GM would be liable for the repair, but if the same part killed or injured a person prior to the bankruptcy, the new GM would have no liability at all.

On June 19, 2009, the deadline for filing objections to the proposed GM sale, consumer groups, unions and creditors filed objections to the GM bailout.  Philadelphia attorney Barry Bessler is represented a number of consumer groups in the Chrysler bankruptcy and is representing them in the GM proceedings, as well.  During the Chrysler proceedings, Chrysler successfully washed its hands of all past and future product liability claims involving Chrysler products sold prior to the bankruptcy.  Bressler had argued that the GM case is distinguishable from the Chrysler case in terms of the proper way to treat product liability claimants.  Bressler was quoted in Law.Com as saying “[i]n GM, there is no third-party buyer. Hopefully, that means there’s a stronger case [for successor liability].”  Attorneys for people with pending asbestos products liability lawsuits against GM, have filed objections to the proposed plan, as well.

In addition to consumer groups, attorneys general from at least eleven states filed objections to the “no successor liability” provisions of the bankruptcy plan proposed by GM.  Attorneys general from Connecticut, Kentucky, Maryland, Minnesota, Missouri, Nebraska, North Dakota, Montana, Ohio, West Virginia and Vermont filed objections arguing that GM’s plan to extinguish liabilities for injuries cased by safety defects would take key legal rights away from victims.  Attorney General Richard Blumenthal of Connecticut referred to GM’s proposal as “very unfair and unwise “.   In an interview, Blumenthal stated “[s]o much is at stake. We have fought repeatedly for repair or recall of vehicles and parts that are defective so that people can be spared injury, and there are far-reaching ramifications of failing to apply accountability to the New GM.”

Attorneys general from a number of states also filed objections to GM’s proposed plan due to the impact it would have on GM dealers in their states.  In his statement regarding Montana’s objections to the GM proposal, Montana’s Attorney General Steve Bullock said that GM is attempting to circumvent state laws designed to protect auto dealers. According to Bullock, GM has insisted that current GM dealers sign new dealership agreements that force these dealers to waive state laws that were enacted to protect them.  Bullock further stated that, if his state lost dealerships, some consumers in rural areas would have to drive hundreds of miles just to get their cars or trucks serviced.

In addition to objections on behalf of consumers and dealers, objections to the GM restructuring were also filed by various bondholders who argued that they were treated unfairly vis a vis other creditors.  Finally, the Steelworkers Union filed objections on behalf of retired steelworkers and engineers who said the plan would leave GM without funds to pay health benefits to union-represented retirees and their families. In their objections, the Steelworkers and Engineers said that “GM has been not only unfair, but cruel” in its treatment of the steelworkers and engineers, and that GM was attempting to renege on a deal to create a health care trust for current workers and to protect the health and life insurance benefits of retirees.

A multi-day hearing on GM’s proposed sale began June 30, 2009 .   At the time this article was posted, proceedings were ongoing and Judge Gerber had not ruled on the objections of injured consumers.  Persons interested in following the proceedings in near real time can do so at http://dealbook.blogs.nytimes.com.

The outcome of the negotiations and court proceedings will affect many people who stand to lose jobs, benefits or investments, but none will be more profoundly affected than persons who have suffered catastrophic injuries such as brain and spinal cord injuries caused by defective GM products. With many millions of GM vehicles on U.S. roads, it is impossible to estimate the number of people who will be injured, and lack the resources to obtain essential medical and other services.   Given that many of these people will become medical wards of the States, U.S. taxpayers will continue bailing out and GM and Chrysler long after the astounding infusion of public funds during the current bankruptcy proceedings has been forgotten.