Judge Hears Argument by Owners of GM Recall Cars -- 3rd Update

By Dow Jones Business News, 
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By Stephanie Gleason and Jeff Bennett

General Motors Co.'s compensation expert Kenneth Feinberg is devising a plan that would compensate injury victims linked to an ignition-switch recall no matter when their accident occurred, according to a Texas attorney.

Plaintiffs' attorney Bob Hilliard, who met with Mr. Feinberg on Friday, said the adviser plans to propose some form of compensation for all victims regardless of whether their accident occurred before or after GM's July 2009 bankruptcy.

Under terms of its bankruptcy exit, GM was shielded from all liabilities before its July 2009 filing for court protection. A decision to treat pre- and post-bankruptcy victims equally would signal an easing of its past position.

A GM spokesman declined to comment on Mr. Hillard's assertions. "It is inappropriate for us to comment until Mr. Feinberg's work is complete," he said.

Mr. Feinberg, in a separate interview, called the meeting productive but added: "any talk of compensation is very premature. There were no substantive conclusions."

Meanwhile, a federal judge in New York on Friday took up the matter of whether those GM owners claiming of loss of vehicle value as a result of the recall can sue the Detroit company. Judge Robert Gerber of the U.S. Bankruptcy Court in Manhattan must decide whether lawsuits filed by those claiming economic losses are shielded by GM's bankruptcy filing.

Judge Gerber said Friday that he will decide whether the owners were denied due process because GM didn't issue a recall for their vehicles until after it filed bankruptcy in 2009.

Both moves by the auto maker highlight the two-pronged strategy GM is employing to contain the potential financial and legal fallout. While Mr. Feinberg wants to appease accident victims, GM attorneys in New York want Judge Gerber to uphold bankruptcy stipulations that shielded the company from other liabilities.

Last month, GM asked Judge Gerber to affirm that GM had essentially discarded its liabilities related to consumer financial losses during the case.

Before a packed courtroom on Friday, attorney Edward Weisfelner, argued the GM car owners seeking claims for loss of value were denied information about the defect that should have been disclosed in 2009.

"They weren't given due process," he said. "In that case, should the sale order [which created the bankruptcy shield] apply to them?"

If the judge agrees, the class-action lawsuits could ultimately proceed against GM. Denial could force the plaintiffs to seek recovery from the bankrupt entity, which has few assets and wouldn't likely result in any payments.

The economic loss suits are separate from the lawsuits filed by Mr. Hilliard and others representing accident victims.

Write to Jeff Bennett at jeff.bennett@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


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  05-02-141941ET
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