July 1, 2009 6:09 PM
Live Blogging the GM Sales Hearing: Are Consumers Getting a Raw Deal?
Posted by Zach Lowe
As Wednesday afternoon turns into Wednesday evening at the GM sales hearing, we're hearing an impassioned plea from Chicago-based attorney Steve Jakubowski of the Coleman Law Firm in Chicago on behalf of consumers who say they stand to lose in the deal.
Specifically, Jakubowski (who writes a blog on bankruptcy law) is arguing that "new GM" should not be able to leave pending product liability suits behind with "old GM" in bankruptcy court. That would mean, in effect, that such plaintiffs--some of whom may have spent years preparing their cases--would be forced to try and extract some compensation from the corpse of "old GM" that will remain in bankruptcy court, according to the AP and the New York Times. Good luck.
Unfortunately for Jakubowski, who took nearly as much time to make his case as Harvey Miller of Weil, Gotshal & Manges did to defend the entire deal on behalf of GM, a federal bankruptcy judge in this very building in Manhattan allowed Chrysler last month to do essentially the same thing with its pending litigation claims, according to the NYT. In fact, the paper says GM litigants are getting a better deal, because the company agreed earlier this week that victims who suffer future injuries or accidents involving old GM vehicles can sue "new GM."
That does nothing for pending litigants, Jakubowski told the judge. "I don't think they can come in here and walk away," Jakubowski said.
Judge Robert Gerber acknowledged the importance of Jakubowski's argument today. "You've got the most important issue on the docket," the judge told Jakubowski.
(And in a charming moment, Jakubowski thanked Gerber and Weil for their work in the trial, and said he would use the transcript of this trial in teaching mock trials at his local high school. "It has been a great pleasure to be here," he told the courtroom).
As we write this, an attorney representing plaintiffs with pending asbestos-related cases against GM is making a similar argument, since GM would also leave those claims behind in bankruptcy under the current plan. (GM apparently used asbestos to manufacture its brakes at some point). Asbestos litigants have a much smaller chunk of liability against GM than general torts claimants, according to court records.
These objections represent the main obstacle to the GM sales plan, along with a group of dissident bondholders (repped by Patton Boggs) who say the deal violates bankruptcy law because the bondholders are going to have to settle for pennies on the dollar while other unsecured creditors (especially the United Auto Workers) will get significant equity stakes in the new company.
Patton Boggs will make their objections tomorrow, as we appear to be wrapping up here.
Live Blogging the GM Sales Hearing
The Sales Hearing - 3:26 PM
Harvey Miller: "There is no Alternative" - 3:37 PM
GM: A $90 Billion Company? - 3:48 PM
The Labor Issue - 4:40 PM
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