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Just when GM thought its bankruptcy was over, the giant automaker will be back in front of Judge Robert E. Gerber in the Federal Bankruptcy Court of the Southern District of New York. This comes just five months after the company moved forward with the new G.M., and declared the “Government Motors,” over and done with.

New Court Proceedings

G.M. is asking the judge to enforce a provision the company’s bankruptcy reorganization from July 10, 2009. This provision held that the “new GM” was insulated from lawsuits brought for accidents that occurred before that date. GM is trying to shut down the cascade of class action lawsuits stemming from the recall of 2.6 million cars due to a defective ignition switch that has been linked to 13 deaths – an issue the company now admits it was aware of for more than a decade before the recall.

Risky Move

Though asking a judge to enforce a part of restructuring is normal in bankruptcy cases, some experts say this is a risky move due to the allegations that the company committed fraud by not disclosing the potential liabilities. David A. Skeel, a bankruptcy specialist at the University of Pennsylvania School of Law feels, “…it’ a gamble from G.M.’s perspective.” Skeel and other experts feel this routine motion could end up leading to a mini-trial regarding the claims of fraud. “In a way, it’s we’re redoing the bankruptcy. It’s quite possible this trial could be a larger event than the real bankruptcy.”

Bigger Implications

Richard Levin, head of the restructuring practice at Cravath, Swaine, & Moore feels, “This may be an important case for teaching us how bankruptcy sales can relieve a company of its past mistakes.” Other lawyers note that regardless of Judge Gerber’s ruling the losing side will most likely appeal – perhaps driving the case all the way up to the Supreme Court.

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