(Bloomberg) -- The U.S. Supreme Court cleared the way for potentially billions of dollars in legal claims against General Motors Co. over a deadly ignition-switch defect, turning away the company’s appeal in a clash connected to its 2009 bankruptcy sale.
The justices, without comment, left intact a federal appeals court ruling that said the accord, which turned “Old GM” into “New GM,” didn’t block lawsuits over accidents that happened before the sale or claims that the flaw caused vehicles to lose value.
Related: GM must defend igniton-switch suits affecting used cars
|Ignition flaw leaked to 124 deaths
The ignition flaw has been linked to at least 124 deaths and led to 2.59 million vehicle recalls. Plaintiffs’ lawyers have estimated that claims against the company may total as much as $10 billion.
GM fell by 3 cents, or 0.1 percent, to $33.72 at 11:39 a.m. in New York.
The company pointed to a federal bankruptcy law provision that lets a purchaser acquire a debtor’s assets “free and clear” of any liability.
The appeals court said the provision doesn’t shield GM, because the company knew about the flaw before the bankruptcy and should have directly notified each affected customer. Barring the suits would violate the Constitution’s due process clause, the court said.
“New GM essentially asks that we reward debtors who conceal claims against potential creditors,” the appeals court said.
The July 2016 ruling also revived suits by post-sale car buyers who say they wouldn’t have made the purchase had they known about the switch flaw.
|‘Undermine’ bankruptcy
In its appeal, GM argued the ruling “will undermine a crucial aspect of one of the biggest and most important bankruptcies in history.”
GM spokesman Jim Cain said in an emailed statement that the court’s action Monday "doesn’t change the landscape much in terms of the GM litigation." Those who sued still must show they have the right to raise their claims and "still have to prove those claims have merit," he said.
Robert Hilliard, the lead lawyer for those who sued, said, "GM can hide no more" from the claims. "These cases are factually some of the most tragic stories, and also some of the strongest in terms of clear liability of GM’s intentional misconduct. Each case will soon be sent back to its local venue and each one will be tried to a verdict," he said in an emailed statement.
The plaintiffs say GM moved too slowly to recall vehicles in which jostled keys could trigger a shut-off and disable steering, brakes and air bags. While GM has said top executives didn’t know the ignition switch was a persistent problem, the company admitted in a Justice Department settlement that it knew about the defect by 2005 and concealed it from regulators from 2012 to 2014.
The case is General Motors v. Elliott, 16-764.
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