GM Ignition Recall Leads to Litigation over Resale Value

Atlanta business litigation lawyer

Atlanta business litigation lawyerGeneral Motors is asking a federal bankruptcy court to dismiss billions of dollars in lawsuits associated with the company’s treatment of ignition switch defects over the last decade.    The company’s mounting legal defense comes on the heels of a vast nation-wide recall of ignition switches on hundreds of thousands of GM cars and trucks and a revamp of GM’s own internal mechanical defect investigation process.


The ignition switch defect affects an estimated 1.6 million vehicles nationwide.


Dozens of cases, mostly class-action suits, related to injuries and fatalities allegedly associated with the defective ignition switches have been filed in courts around the country. Although there obviously are claims based upon injuries and deaths caused by the defect, the more unusual claims are for the loss in resale value that the owners of the calls that have now been recalled will suffer.


The claims for personal injuries and wrongful death are based upon both negligence and fraud in not disclosing the defect when GM discovered it years ago. The claims for loss of value to the recalled cars is based upon the contention that subsequent buyers of the recalled cars may not be willing to purchase the cars at all and will almost certainly insist upon significant discounts. The claims for loss of resale value of the allegedly defective vehicles  raise some unusual issues. If the owner of a recalled car does not have the defect repaired, GM will have a strong argument that the diminution of value of the car was caused by the owner not having the defect fixed. Even if the recalled car owners do have the defect corrected, however, they may suffer economic damage even if the cars are, in fact, no longer defective. The damage will not be caused  by the fact that the cars are defective, because they no longer are. The damage will instead be based upon the false perception that the cars remain defective. That damage, while based upon a false perception, will be just as real to the car owner whether or not the perception is true or false.


The bankruptcy court is expected to rule on GM’s motion to stay the pending lawsuits until a judicial panel on multidistrict litigation can rule on a GM motion to consolidate several cases in the next few weeks.


In 1991, James J. “Jim” Thomas has more than 35 years of experience in complex business litigation as well as in the analysis, evaluation, and resolution of existing and potential litigation. Visit online or give Jim a call at 404-869-5248 to set up a free consultation.

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