A U.S. bankrupty judge has ruled a $1 billion stock payout from General Motors (GM, Financial) to victims of auto accidents as a result of a faulty ignition switch is unenforceable.
The ruling did little to affect the automaker's stock price. GM shares were trading at $43.86 a share, or down 0.39%, as the market closed on Thursday.
Judge Martin Glenn, of the U.S. Bankruptcy Court Southern District Court of New York, wrote in court documents filed earlier today, "This is a very troubling dispute."
In the years before old General Motors (the company that existed before the government bailout) filed for chapter 11 in June 2009, the former automaker built over 12 million vehicles with seriously defective ignition switches.
Hundreds of these vehicles were involved in serious accidents caused by the ignition switch defects, resulting in personal injury, death and property damage. "Old" GM knew about the ignition switch defects, but never disclosed them before or during the bankruptcy case.
The facts about the ignition switch defects only became public after the "new" GM issued a series of recall notices in 2014. That disclosure triggered numerous lawsuits in state and federal courts, including bankruptcy court.
Glenn said he could not move forward with the case because it lacked key signatures between plaintiffs and a trust for the bankruptcy estate of the old General Motors.
GM was mostly silent after Thursday's ruling, but attorneys for the plaintiffs in the case said they were disappointed with the results but "thankful that the court reviewed the issue so carefully and is committed to quickly resolving late claims motions."'
Attorney Steve Berman, who represented the plaintiffs on behalf of the firm Hagens Berman Sobol Shapiro, replied to an email inquiry from GuruFocus, saying: "All parties will have to assess next steps."
