By Brendan Pierson
(Reuters) - Plaintiffs suing General Motors Co (N:GM) over faulty ignition switches and other alleged vehicle defects have reached a $1 billion settlement requiring the automaker to turn over that amount of stock, a lawyer for the plaintiffs said in a court hearing on Friday.
GM lawyer Richard Godfrey strongly criticized the agreement, telling U.S. District Judge Jesse Furman in Manhattan the Detroit-based company was given no say in the deal negotiated between the plaintiffs and a trust set up for creditors of “old GM,” which holds many liabilities predating the automaker's 2009 bankruptcy.
Godfrey said the settlement was a result of collusion between the plaintiffs and the trust, and "a complete surrender and sellout using new GM's money."
The ignition switch litigation consolidated before Furman stems from GM's 2014 recall of 2.6 million vehicles with defective switches. One type of switch has been linked to nearly 400 injuries and 124 deaths. The claims have expanded to include a variety of alleged defects in millions of cars.
GM said in a statement it would fight the settlement in court, calling it a “contrived scheme” doomed to fail.
According to Steve Berman, the plaintiffs' lawyer, the settlement called for the trust to take on $10 billion of ignition switch claims, which would boost the total claims against the trust to more than $35 billion.
He said that would trigger a provision in GM’s bankruptcy reorganization plan requiring "new GM" to transfer about $1 billion in stock to the trust, which would be used to fund the settlement.
In a phone interview after the hearing, Berman said the settlement would resolve about 11.9 million economic loss claims and between 400 and 500 personal injury and wrongful death claims. He added that he expected to ask the federal bankruptcy court in Manhattan by Tuesday to set the deal in motion.
About 2.4 million claims, involving vehicles sold after GM's bankruptcy, would remain, Berman said.
"The notion from new GM that this is somehow an inappropriate procedure is crazy," he said. "They bargained for this."
Godfrey told the hearing the trust had $400 million in its own assets that could be used to fund a settlement, instead of requiring GM to turn over stock.
After the hearing, GM spokesman Patrick Morrissey said the automaker had been told the deal would include a $15 million payment from the trust releasing it from liability, effectively shielding that $400 million. That was not discussed at the hearing, and Berman declined to comment.