Products Liability Law Daily Negligent failure-to-warn claim and punitive damages okayed for upcoming GM MDL bellwether trial
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Tuesday, August 16, 2016

Negligent failure-to-warn claim and punitive damages okayed for upcoming GM MDL bellwether trial

By Susan Lasser, J.D.

The driver in an upcoming bellwether trial in the multi-district litigation relating to General Motors LLC’s faulty ignition switches will be able to proceed against the automaker on negligent failure-to-warn and actual fraud claims, the federal district court overseeing the MDL ruled. In addition, with these "independent claims," the driver will be allowed to pursue punitive damages. The court, however, dismissed the driver’s failure-to-recall and constructive fraud claims (In re: General Motors LLC Ignition Switch Litigation (Cockram v. General Motors LLC), August 15, 2016, Furman, J.).

Five and a half years after purchasing a new 2006 Chevrolet Cobalt, manufactured by General Motors Corporation (Old GM), the car owner/driver crashed her vehicle into a drainage ditch culvert. Despite the frontal impact, the frontal airbags did not deploy, and the driver was severely injured as a result. She brought various claims under Virginia law against General Motors LLC (New GM), seeking compensatory and punitive damages for her injuries resulting from the airbag nondeployment and claiming that it was caused by a defect in the ignition switch that allowed the switch to move from the "run" to the "accessory" or "off" positions. She did not claim that inadvertent ignition switch rotation caused her car to veer off the road and crash—only that it caused the airbags to fail, enhancing or exacerbating her injuries. The driver’s case is scheduled to be the next bellwether trial in the multi-district litigation (MDL) relating to the manufacturer’s faulty ignition switches.

Bankruptcy proceedings. Old GM filed for bankruptcy in 2009. New GM emerged from that bankruptcy. After New GM’s disclosure of an ignition switch defect in early 2014, many plaintiffs filed claims against New GM—some alleging economic losses and some, including the driver in this case, alleging personal injuries and wrongful deaths. In April 2015, the bankruptcy court ruled that many of the claims brought against New GM were barred by the 2009 Sale Order through which New GM assumed many of Old GM’s assets and some of its liabilities. Specifically, the court held that New GM could be held liable for certain assumed liabilities of Old GM—namely, products liability claims that were included in the Sale Agreement—and for "claims based solely on any wrongful conduct on its own part." A subsequent order implementing that opinion defined claims "based solely on New GM’s own, independent, post-Closing acts or conduct" as "Independent Claims." A few months later, the court ruled that, as a matter of bankruptcy law, knowledge of Old GM personnel or knowledge of information contained in Old GM files could be imputed to New GM to the extent that it could be shown, as a matter of non-bankruptcy law, that New GM actually had that knowledge. The court also determined that claims for punitive damages only could be "based on New GM knowledge and conduct alone" because New GM did not assume liability for punitive damages under the Sale Agreement.

Thus, the court in the current case noted that in light of those bankruptcy court rulings, it was undisputed that there were three types of damages potentially available to the driver in this action: (1) compensatory damages for products liability claims based on Old GM conduct, the liability for which was assumed by New GM; (2) compensatory damages for "Independent Claims"—i.e., claims based solely on New GM conduct; and (3) punitive damages for "Independent Claims." The driver pursued all three.

Motion for partial summary judgment. New GM moved for partial summary judgment, arguing that the driver’s claims based on New GM’s conduct alone (which were the only claims that could expose New GM to punitive damages according to the bankruptcy court’s rulings) failed as a matter of law. Notably, New GM did not seek dismissal of the driver’s claims based on Old GM’s conduct and pursued against New GM on a theory of assumed products liability.

Negligent failure to warn. Virginia recognizes a failure-to-warn cause of action against a car supplier based on that supplier’s knowledge of a latent defect in the car at the point of sale and its failure to warn the purchaser about that defect. Further, the duty to warn extends beyond the point of sale. The parties disputed whether Virginia does, or would, recognize a post-sale duty to warn in the circumstances of the driver’s case—involving a successor corporation (an asset purchaser) rather than the original manufacturer or supplier.

The court, reaching the same conclusion on the issue as it did in the first bellwether trial which had applied Oklahoma law, predicted that if presented with the issue, the Virginia Supreme Court would recognize a post-sale duty to warn on the part of a successor assuming certain conditions were met. The court observed that the clear trend has been toward recognizing such a duty. Moreover, the court found that the relationship between New GM and Old GM’s customers—including the driver in the current case—was "direct and continuing" and sufficiently "special" to give rise to a duty to warn under Virginia law. Thus, the court denied New GM’s motion for summary judgment with respect to the driver’s negligent failure-to-warn claim.

Negligence per se. In addition, the court said that it followed that New GM’s motion with respect to the driver’s negligence per se claim also failed because New GM’s arguments for dismissal of that claim—that New GM did not owe the driver a duty and that the driver could not base her claim on a violation of the Sale Agreement—were repetitive of New GM’s arguments on the negligent failure to warn claim.

Failure to recall. However, on the driver’s claim based on a failure to recall, the driver failed to identify a Virginia precedent recognizing a duty to recall. While the court predicted that the Virginia Supreme Court would adopt generally the approach of the Restatement (Third) of Torts: Products Liability when defining New GM’s duties, the Third Restatement did not impose a duty to recall absent "a governmental directive issued pursuant to a statute or administrative regulation specifically requir[ing] the seller or distributor to recall the product." That governmental directive "must require the defendant to recall the product during the time period in which the plaintiff claims the defendant breached the duty to recall." No such directive existed during the relevant time period in the case at bar, which was prior to the driver’s accident. Thus, the court dismissed the driver’s failure-to-recall claim.

Effect on punitive damages. Finally, although the court dismissed the driver’s failure-to-recall claim and constructive fraud claim, her other Independent Claims, including her actual fraud claim, survived. Therefore, the court held the driver could seek punitive damages.

The case is Nos. 14-MD-2543 (JMF) and 14-MC-2543 (JMF).

Attorneys: Steve W. Berman (Hagens Berman Sobol Shapiro LLP) for Stephanie Cockram. Andrew Baker Bloomer (Kirkland & Ellis LLP) for General Motors LLC.

Companies: General Motors LLC

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