WEBVTT - Bloomberg Law: Erik Larson on GM (Audio)

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<v Speaker 1>General Motors is accusing the trust set up to handle

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<v Speaker 1>its bankruptcy claims of secretly plotting with plaintiff's attorneys to

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<v Speaker 1>make it pay one billion dollars in stock as part

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<v Speaker 1>of a class action settlement. Under the settlement, the bankruptcy

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<v Speaker 1>trust for the old GM will pay plaintiffs fifteen million

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<v Speaker 1>dollars and accept ten billion dollars in previously disputed claims

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<v Speaker 1>that pushed the total approved claims in the case beyond

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<v Speaker 1>a threshold of thirty five billion, which is critical. Plaintiffs

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<v Speaker 1>attorney Steve Berman said that threshold triggers a provision in

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<v Speaker 1>the two thousand nine bankruptcy sale created to save GM

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<v Speaker 1>that would force GM to contribute one billion dollars in

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<v Speaker 1>stock to help pay the claims. Bloomberg News legal reporter

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<v Speaker 1>Eric Larson has been following this case and joins us. Now. Eric,

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<v Speaker 1>We've been hearing about these GM ignitions, which cases, and

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<v Speaker 1>the trials and the settlements for years. So describe this settlement. Well,

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<v Speaker 1>this settlement is a little bit different because, UH, it

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<v Speaker 1>requires GM to potentially put in a billion dollars in

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<v Speaker 1>stock that the company itself, the new GM, had no

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<v Speaker 1>part in. UH, no part in arranging the settlement, So

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<v Speaker 1>they're going to challenge it saying that this these ten

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<v Speaker 1>billion dollars and claims that the Trust wants to recognize

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<v Speaker 1>our bogus claims they would never hold up in court.

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<v Speaker 1>I and they claim that the Trust is merely accepting

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<v Speaker 1>them just to trigger that that threshold number and force

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<v Speaker 1>this one billion dollars in stock to go in and

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<v Speaker 1>basically make the settlement more palatable for the plaintiffs. Eric,

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<v Speaker 1>what do we know about what standard will judge this question?

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<v Speaker 1>What is either what does the New General Motors have

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<v Speaker 1>to show uh to to avoid having to put in

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<v Speaker 1>this billion dollars in stock. Well, that's a really good question,

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<v Speaker 1>and it's it's pretty unclear at this point. This is

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<v Speaker 1>a pretty early early days for this dispute, which I

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<v Speaker 1>think is going to get a little bit heated in court. Uh.

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<v Speaker 1>This the first time that old GM and New GM

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<v Speaker 1>are sort of fighting like this, and it's it's a

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<v Speaker 1>little bit unusual, and neither side really has laid out

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<v Speaker 1>exactly what their legal arguments are. It was just referenced

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<v Speaker 1>in court that this settlement had been reached and there

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<v Speaker 1>were not a lot of details given other than what

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<v Speaker 1>we've already discussed and the settlement is due to be

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<v Speaker 1>signed tomorrow, so we should get more details. But I

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<v Speaker 1>know that new GM is saying that this deal was

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<v Speaker 1>reached secretly. Uh. They seem to think that they should

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<v Speaker 1>have been involved somehow, and that this was basically they

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<v Speaker 1>used the word plotted, uh, you know, behind their backs.

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<v Speaker 1>So whereas the plaintiffs attorney says that this is exactly

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<v Speaker 1>what GM bargained for when it put this provision in

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<v Speaker 1>the two thousand nine bankruptcy bankruptcy sale in the first place,

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<v Speaker 1>So there was always going to be that risk at

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<v Speaker 1>thirty five billion dollars in claims could be reached or

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<v Speaker 1>exceeded and trigger this, And they say they're just going

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<v Speaker 1>by the books. So Eric GM also called it a

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<v Speaker 1>contrived scheme. But how do they reach this point where

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<v Speaker 1>they're about to sign a settlement, according to the plantiffs attorney,

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<v Speaker 1>and they're just realizing this now, why didn't this come

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<v Speaker 1>up earlier? Well? I think that that's another good question.

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<v Speaker 1>I think the judge will probably be asking that question

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<v Speaker 1>as well. Um, it's notably the trust and the plaintiffs

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<v Speaker 1>they are going to argue. They said they'll argue that

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<v Speaker 1>they don't think new GM actually has any right to

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<v Speaker 1>object here. They say that the language and the sale

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<v Speaker 1>in this provision that we discussed about the thirty five

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<v Speaker 1>billion dollar marks, that that language is very clear, and

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<v Speaker 1>that the trust is the only entity that is has

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<v Speaker 1>the authority to you know, deal with these claims and

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<v Speaker 1>approve or deny them. So um, I think they're going

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<v Speaker 1>to argue that they're just going by what is in

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<v Speaker 1>the sale agreements and that GM is just sort of

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<v Speaker 1>out of luck. But it's a good question why this

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<v Speaker 1>is just coming up now, just you know, a few

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<v Speaker 1>days before the settlement is supposed to be signed. But

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<v Speaker 1>of course even after it's signed, judge still has to

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<v Speaker 1>approve it. So um, there they'll be making all these

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<v Speaker 1>arguments in court, I would imagine very soon. Eric. When

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<v Speaker 1>you talk about these ten billion dollars and previously disputed claims,

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<v Speaker 1>what are those? What's the biggest category are we talking about,

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<v Speaker 1>like the claims that that the defect lowered car resale

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<v Speaker 1>values or something else? Right, So these are four hundreds

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<v Speaker 1>to five hundred personal injury claims. They're not all just

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<v Speaker 1>related to the ignition switch issue, um, but just personal

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<v Speaker 1>injury claims from before the bankruptcy, but also UM a

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<v Speaker 1>class action suit that has eleven point nine million class

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<v Speaker 1>members UM, and those are related to the so called

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<v Speaker 1>economic losses UH that these vehicles suffered as a result

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<v Speaker 1>of the ignition switch recall and also other recalls, a

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<v Speaker 1>series of recalls in two thousand fourteen. Uh. So there's it.

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<v Speaker 1>Quite a big settlement, UM and UH it covers a

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<v Speaker 1>wide array of different types of lawsuits that GM frankly

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<v Speaker 1>thought they'd put behind them when they signed that two

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<v Speaker 1>thousand nine bankruptcy. About thirty seconds here, Eric, who is

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<v Speaker 1>going to have to sign this settlement? Is New GM

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<v Speaker 1>going to have to sign the settlement? No, this is

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<v Speaker 1>a settlement between only the trust that was set up

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<v Speaker 1>for the general unsecured creditors of the so called old

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<v Speaker 1>GM that was when the company was basically split as

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<v Speaker 1>part of that bankruptcy sale. UH. And this plaintiffs group

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<v Speaker 1>with the plaintiffs attorney Steve Berman. UM. That's those are

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<v Speaker 1>the only two signs. And of course GM New GM

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<v Speaker 1>will be objecting to it and trying to stop it.

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<v Speaker 1>You really need a diagram to figure this one out.

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<v Speaker 1>Thanks so much for helping us with that. That's Bloomberg

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<v Speaker 1>News legal reporter Eric Larson, who has written about this case.