The Second Circuit of the United States Court of Appeals held that General Motors failed to properly disclose its knowledge of ignition switch defects and accordingly it will now have to face many lawsuits for injuries and other damages, that were once dismissed as part of its bankruptcy filing.
In 2009 General Motors declared bankruptcy. In doing so, it sought to take any of its viable assets and in an organized sale, transfer them to a new entity now known as “new GM”. When a company files for bankruptcy they must disclose claims known or likely to be known. The reason is that when bankruptcy is granted, all debts known or likely to be known are wiped out and the company gets to move forward as a new “reorganized” entity.
Though GM was near financial collapse and the Court did want to maintain a company with thousands of employees, they are not above the law. The safety of many was at risk and many injuries and deaths had occurred due to defective ignition switches which had caused movement stalls and air-bag non-deployment. The cause was simple: the poorly improperly designed ignition switch could slip from the run position and therefore cause many features to fail while in operation.