Location of GM ignition suit litigation to be decided by U.S. panel

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WASHINGTON (Blooomberg) -- General Motors Co. wants to return to a New York courtroom to fight at least 90 ignition-switch defect lawsuits while some car owners are driving for the cases to be heard by a California judge seasoned in auto litigation.

A panel of federal judges meeting today in Chicago will decide.

Their ruling, which could come within a week, will be the first significant step in resolving whether GM is liable for the switch defect and owes billions of dollars in damages to the owners of Chevrolet Cobalts and other cars. The Judicial Panel on Multidistrict Litigation will also select the judge who will handle the combined cases.

Many car owners want the case handled by the judge overseeing sudden-acceleration lawsuits against Toyota Motor Corp. while GM prefers Manhattan, where a bankruptcy judge approved its reorganization.

The decision on “venue can have an impact, and not just because it could go to a particular judge,” said Alan Rothman, a product-liability lawyer at Kaye Scholer LLP in New York who isn’t involved in the litigation. “It will impact which circuit’s law will apply,” he said, referring to different rules that apply in different regions.

GM was sued after it began recalling 2.59 million Cobalts, Saturn Ions and other small cars in February. The company said heavy key rings or jarring can cause the ignition switch in some cars to slip out of the “on” position, cutting off power and deactivating air bags. The company has linked to the defect to at least 13 deaths.

U.S. probes

GM last week agreed to pay a record $35 million fine as part of the U.S. Transportation Department’s investigation into how the company handled the recall, which is the subject of probes by Congress and the Justice Department.

Car owners who sued claim GM knew of the defect for at least a decade and failed to correct it. They seek group status on behalf of all owners of defective cars and want to recover their vehicles’ lost value. Bob Hilliard, a plaintiffs’ lawyer, has said he seeks to recover $6 billion to $10 billion.

GM was sued in federal courts across the U.S., with at least 27 cases now pending in California alone. As is typical, the multidistrict panel will decide whether to group the cases as one and send them to a particular court and judge as a way to streamline the litigation.

State-court cases and those alleging wrongful death won’t be included.

Several plaintiffs’ lawyers say the cases should be consolidated before U.S. District Judge James Selna in Santa Ana, Calif., about 30 miles south of Los Angeles. Selna presides over pending suits on behalf of 16 million owners of Toyota vehicles subject to sudden and unintended acceleration.

Speed, efficiency

Steve Berman, a lawyer for some plaintiffs, said in a March court filing that Selna is well-versed in auto litigation and knows how to handle the pre-trial disputes that inevitably arise over depositions and the exchange of evidence.

“Speed and efficiency are paramount,” wrote Berman, an attorney with Seattle’s Hagens Berman Sobol Shapiro LLP. The focus “of the ignition-switch actions is the fraud perpetrated on the plaintiffs.”

Other plaintiffs want the cases to be heard in Chicago, Miami or Corpus Christi, Texas, where they have sued. GM wants the cases consolidated in the federal court in Manhattan, about a mile from where a prior incarnation of the company filed for bankruptcy in 2009. Company lawyers say proximity to the bankruptcy court trumps Selna’s experience.

The New York court “is in the best position to coordinate with the bankruptcy proceedings in that district,” GM’s lawyer, Andrew Bloomer of Chicago-based Kirkland & Ellis LLP, said in an April 25 filing with the panel.

Shed liability

That’s especially so because GM will argue as part of its defense that a June 2009 bankruptcy court order, approving the sale of assets belonging to the now-defunct General Motors Corp. to a new and similarly named entity, allowed it to shed legal liability for most economic-loss claims arising from the ignition defect.

“Those types of claims were never assumed by New GM,” Bloomer wrote. GM’s second choice for a court location is Detroit.

James Cain, a GM spokesman, said the company’s court filings speak for themselves and declined to comment further.

Separately, GM has asked U.S. Bankruptcy Judge Robert Gerber in Manhattan to issue an order affirming that most economic loss claims can’t be pursued now.

Customers, creditors

On May 16, Gerber ordered the plaintiffs and the carmaker to file briefs on whether old GM broke rules by not treating customers with defective cars as creditors when it filed for bankruptcy and whether that company hid evidence of the defect.

The multidistrict panel will consider which judges are most familiar with automobile cases and which courts have capacity to take on a large litigation, Rothman said. The panel will also weigh whether a certain location is most convenient for lawyers and their clients.

“The panel is not bound to transfer to a district where any case is pending,” he said. Rulings on where the case will be tried are sometimes “the most intriguing and least predictable” decision the panel makes, he said.

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