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Missouri District Court: Availability of punitive damages, strict liability claims against New GM clarified

In light of an order of a New York bankruptcy court with respect to what claims could be maintained against General Motors following the bankruptcy sale of the company (Old GM) to a new entity (New GM), a federal court in Missouri ordered the owner of a 2004 GMC Savannah van manufactured by Old GM to file an amended complaint that omitted all collective references to Old GM and New GM, omitted any claim for punitive damages based solely on Old GM’s conduct, and contained specific allegations as to whether any claims for punitive damages are passed on knowledge of or actions by New GM post-sale (Roberts v. General Motors LLC, November 20, 2015, Shaw, C.).

Background. The U.S. Bankruptcy Court in the Southern District of New York—acting in a “gatekeeper” role in which it does not decide non-bankruptcy issues concerning the merits of the ignition switch defect plaintiffs’ claims against General Motors LLC (New GM)—ruled that New GM could be liable for punitive damages in the many cases against it in other courts (In re: Motors Liquidation Co.). The bankruptcy court set out two “pathways” to punitive damages that are available to plaintiffs whose products liability claims were based on New GM’s “post-closing acts or conduct” after the sale of the assets of “Old GM” to the new entity, “New GM” in bankruptcy proceedings (post-closing accident plaintiffs). Punitive damages must rely solely on New GM knowledge or conduct imputed by New GM personnel or documents and cannot be based on Old GM knowledge or conduct. However, the claims can be based on knowledge of New GM employees that was “inherited” from their tenure at Old GM.

Punitive damages claim. Noting that the bankruptcy court’s ruling did not exclude all possibility of punitive damages against New GM, the Missouri court explained that the vehicle owner in this case must specifically include factual allegations that the claim for punitive damages was based on “(a) knowledge inherited by New GM when former Old GM employees came over to New GM or New GM took custody of what previously were Old GM records, or (b) knowledge New GM acquired post-sale.” In addition, the vehicle owner had failed to identify specific persons or documents as the source of New GM’s knowledge. Thus, the complaint must be amended in order to meet the requirements set forth by the bankruptcy court for punitive damage claims against New GM.

Failure-to warn, other defect claims.  In its role as gatekeeper, the bankruptcy court did not rule out products liability claims against New GM for failure to warn after the sale of a vehicle manufactured by Old GM. In fact, it specifically rejected New GM’s contention that claims based on a duty to warn after a vehicle’s sale were Old GM retained liabilities. The bankruptcy court also did not rule out other claims based on New GM’s own conduct, such as violations of alleged duties New GM owed to purchasers of Old GM vehicles.

However, the bankruptcy court made it clear that these types of claims must be based on New GM’s own conduct and knowledge to “get through the bankruptcy court gate.” Therefore, the vehicles’ claims based on New GM’s failure to warn or other post-sale actions or omissions were not barred, but they lacked the necessary specific allegations with respect to New GM’s action or inaction. Thus, the court ordered the vehicle owner to amend the complaint to include those specific allegations.

The case is No. 4:13-CV-541 CAS.

Attorneys: Gary K. Burger, Jr. (Burger Law) for Lauretta Roberts. Kent B. Hanson (Hanson Bolkcom Law Group) and Peter B. Hoffman (Baker and Sterchi, LLC) for General Motors LLC.

Companies: General Motors LLC