By Amanda Bronstad, From The National Law Journal
General Motors Co. is banking that a recent ruling in Delaware could wipe out shareholder lawsuits filed over last year’s ignition-switch recalls.
Vice Chancellor Sam Glasscock of Delaware Court of Chancery on June 26 dismissed a shareholder derivative action against GM after concluding the plaintiffs had “failed to raise a reasonable doubt that GM’s directors acted in good faith or otherwise face a substantial likelihood of personal liability in connection with the faulty ignition switches.”
The ruling gave GM its first victory against a raft of shareholder cases filed following its recalls of more than 30 million cars and trucks worldwide, many for a defect that causes the ignition switch to slip into the accessory position, shutting down electrical power and disabling air bags. The defect spawned hundreds of lawsuits, including the shareholder claims, which have been consolidated into four separate cases.
In addition to the proceeding in Delaware, two derivative lawsuits are pending in state and federal courts in Michigan; GM has moved to dismiss a fourth case, a securities class action, with its next brief due on Friday.
“The Delaware court properly dismissed the complaint because GM’s board of directors did its job in exercising oversight over the company,” GM spokesman James Cain wrote in an email to the NLJ. “The other shareholder derivative actions pending against the board make the same allegations, so we hope the courts will dismiss those as well.”
As for the securities class action, he wrote: “The claims asserted in the cases are different, but the shareholder suit suffers from the same failure to allege particularized facts sufficient to support a case.”
All the shareholder cases seek to refute a GM internal report that blamed its failure to identify the defect on negligence by a few company engineers and lawyers, many of whom have been fired, and concluded that the board and top executives were kept in the dark.
The derivative cases in the U.S. District Court for the Eastern District of Michigan and the Michigan Third Judicial Circuit in Wayne County, had been stayed pending the Delaware decision.
Plaintiffs lawyers in both cases—Dave Honigman, a partner at Mantese Honigman in Troy, Michigan, and Susan Winters of Leikin Ingber & Winters in Southfield, Michigan—did not respond to requests or calls for comment.
But the securities class action is going forward on behalf of hundreds of thousands of GM shareholders who allegedly lost billions of dollars following the recalls.
In a 574-page complaint that cites 38 written and oral statements, the plaintiffs allege that GM’s executives failed to warn shareholders of the costs and liabilities associated with the recalls, including a victim compensation fund and defending against hundreds of lawsuits.
“Rather, at every turn, GM sought to cover up and hide from investors the true costs and risks arising from the ignition-switch defects,” wrote Salvatore Graziano, a partner at New York’s Bernstein Litowitz Berger & Grossmann. Graziano declined to comment.
In addition to GM, the case names chief executive officer Mary Barra, former chief executive officer Daniel Akerson, GM president Daniel Ammann and five additional senior officers. The proposed class is on behalf of shareholders who bought GM stock between Nov. 17, 2010, and July 24, 2014.
GM filed a motion to dismiss the case on March 13.
IMAGE: Stock traders bid on GM shares at the New York Stock Exchange during the GM initial public offering, Thursday, Nov. 18, 2010 in New York.
Photo: Mark Lennihan/AP
For more on this story go to: http://www.nationallawjournal.com/id=1202731433491/One-Down-GM-Aims-at-Three-More-Defect-Securities-Actions#ixzz3fLqmoVGr