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Court rules GM must answer for pre-bankruptcy ignition issues

Just because the company went through bankruptcy doesn't mean it's automatically forgiven for all past misdeeds.

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DETROIT, MI - SEPTEMBER 17: The General Motors logo on the world headquarters building is shown September 17, 2015 in Detroit, Michigan. Mary Barra, Chief Executive Officer of General Motors, and Mark Reuss, President of GM North America, held an Employee Town Hall Meeting and a question & answer session with the news media today to discuss GM's $900 million settlement with the Justice Department over GM's ignition switch recalls. (Photo by Bill Pugliano/Getty Images)
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For the longest time, General Motors has argued that New GM (post-bankruptcy) should not be held liable for the misdeeds of Old GM (pre-bankruptcy), as it relates mostly to its massive ignition-switch recall from 2014. Now, a new court ruling could throw that argument into the wastebin.

The 2nd US Circuit Court of Appeals ruled that plaintiffs cannot be barred from suing new GM, as it would violate their right to due process, Reuters reports. This is because owners had not been notified of the issue before the bankruptcy occurred.

This ruling could cost the company billions. Not only does it affect lawsuits regarding injuries and deaths related to the ignition-switch recall, but also claims of lost vehicle value. According to Reuters, the plaintiffs' lawyers estimate that this could cost GM between $7 billion and $10 billion.

General Motors

This ruling could end up costing GM billions of dollars, on top of the billion it's already paid out.

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General Motors did not immediately return a request for comment, but a GM spokesman told Reuters that the merits of certain claims are questionable, and a federal judge is currently working to decide whether or not to honor GM's motion to dismiss those lost-value suits.

The recall was initiated after it was discovered that many GM vehicles had ignition switches that were too easy to disengage, and could be affected by something as simple as a knee bump. The car could be accidentally switched off, which would disable the airbags. Not only did Old GM know about this problem, it tried to sweep it under the rug with some under-the-table parts fixes.

GM's already shelled out about $2 billion in settlements and fines. The ignition switches in question have been linked to more than 100 deaths and 250 injuries.