Foes of GM bankruptcy plan promise appeals

updated 7:20 p.m. ET July 6, 2009

NEW YORK - Groups representing plaintiffs in car accidents said Monday they would oppose General Motors' attempt to quickly exit bankruptcy protection, arguing that hundreds of victims could be hurt by the government-led plan.

U.S. Judge Robert Gerber approved a crucial step of the plan late Sunday, allowing the troubled automaker to sell its assets to a new company and saying the deal was in the best interest of both the automaker and its creditors, who would get nothing if the automaker was forced to liquidate.

The Detroit car maker's Chapter 11 filing on June 1 was the fourth-largest in U.S. history. (Under Chapter 11 reorganization, a company can stay in operation under court protection while it sheds debts and unprofitable assets).

General Motors and the Obama administration praised the judge's decision but opponents readied an appeal to the U.S. District Court in New York. A Chicago law firm representing people who have sued GM in several auto accident cases said they objected to parts of the plan that would free the "new GM" from liability for people injured by a defective GM product before June 1.

Steve Jakubowski, who filed the appeal notice for the accident litigants, said his appeal would assert that the bankruptcy judge overstepped his authority by preventing victims from pursuing litigation under their state product liability laws.

He estimated that about 1,000 lawsuits could be pending with potential damages in the range of hundreds of millions of dollars.

"It affects ... virtually every walk of life in this country," he said. The deadline to appeal the case to the District Court is noon Thursday, after which point Gerber's order takes effect and the sale is free to close.

Steve Rattner, the head of the Obama administration's auto task force, said the government was "confident that (Gerber's) decision will stand and the sale of GM's assets to new GM will proceed expeditiously."

The bankruptcy judge's ruling followed a three-day hearing that wrapped up Thursday. GM and government officials had urged a quick approval of the sale, saying it was needed to keep the automaker from selling itself off piece by piece. The Treasury Department, which is expected to provide about $50 billion in aid to the automaker, has vowed to cut off funding to GM if the sale doesn't go through by July 10.

"Now it's our responsibility to fix this business and place the company on a clear path to success without delay," GM CEO Fritz Henderson said in a statement Monday.

Litigants injured by a defective GM product before June 1 would have to seek compensation from the "old GM," the collection of assets leftover from the sale, where they would be less likely to receive compensation.

Robert Dinnigan, whose 10-year-old daughter Amanda was paralyzed from the neck down in an accident aboard a 2003 GMC Envoy two years ago, said the court decision may have doomed the chances of a lawsuit he filed against GM after the February 2007 crash.

"Our only recourse is the old GM. There isn't going to be anything left even if we get a chance to go to court," said Dinnigan, who faces medical bills of around $500,000 per year. It cost about $100,000 to retrofit Dinnigan's Smithtown, N.Y., home to accommodate Amanda's needs, he said.

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