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Another GM Recall Lawsuit: California v. General Motors

— January 9, 2015

General Motors Logo - GM recallRecently, the lawsuit “People of the State of California v. General Motors L.L.C., 14cv7787” was filed.  There, citizens of California are suing the General Motors car company over its mishandling of the ignition switch recall.  To be clear, the issue with the faulty ignition switches was that they would allow keys to slip and shut cars off – sometimes while at high speed, disabling power steering, airbags, electronic stability control, and a variety of other safety features, resulting in many deadly and injurious car accidents this year.

Below is an excerpt from that lawsuit, the full text of which is available here.  For an overview of the GM ignition switch recall, click here.

“JESSE M. FURMAN, United States District Judge:
The present case — brought by the People of the State of California, acting by and through Orange County District Attorney Tony Rackauckas (“Plaintiff”), against General Motors L.L.C. (“New GM”) — is part of the multidistrict litigation (“MDL”) proceedings relating to defects in the ignition switches and other features of certain General Motors vehicles and associated product recalls.
The question at this stage does not pertain to the merits, but to whether the case should remain in federal court as part of the MDL. Plaintiff originally filed suit in California state court (specifically, Orange County Superior Court); thereafter, New GM removed the case to the United States District Court for the Central District of California, from which it was transferred to this Court as part of the MDL proceedings. Now pending is Plaintiff’s motion to remand the case back to Orange County Superior Court. For the reasons to follow, the motion is GRANTED.

As noted, this case is part of the ongoing MDL proceedings relating to defects in certain General Motors vehicles and associated product recalls, familiarity with which is assumed.
In parallel proceedings pending before the Honorable Robert E. Gerber, a United States Bankruptcy Judge in this District, New GM is seeking to enjoin many of the claims within the MDL. […]
Specifically, to the extent relevant here, New GM has moved to enforce a Sale Order and Injunction entered by Judge Gerber in 2009 (the “Sale Order”), through which New GM purchased the majority of the assets of Reorganized Debtor General Motors Corporation, now called Motors Liquidation Corporation (“Old GM”), “free and clear” of many of Old GM’s liabilities. (09-BR-50026 Docket Nos. 2968, 12620).
During the pendency of those proceedings, Judge Gerber has required parties seeking to litigate defects claims against New GM to either enter into a stipulation with New GM staying their actions pending his decision on the motions to enforce or to file a “No Stay Pleading” indicating why their actions should not be stayed. (See, e.g., 09-BR-50026 Docket No. 12697, at 5-6).
On June 27, 2014, the District Attorney of Orange County, Tony Rackauckas, acting on behalf of the People of the State of California, filed the action that is the subject of this motion in California’s Orange County Superior Court. (14-CV-7787 Docket No. 1, Ex. 3).
On July 1, 2014, Plaintiff filed its First Amended Complaint. (Am. Compl. (14-CV-7787 Docket No. 1, Ex. 5)). The Amended Complaint alleges that, by failing to disclose and by actively concealing several known defects in its vehicles, including the ignition switch defects, New GM “enticed vehicle purchasers to buy GM vehicles under false pretenses” (Am. Compl. ¶ 2), and thus violated California’s Business & Professions Code, Sections 17200 et. seq. (California’s Unfair Competition Law, or “UCL”) and 17500 et seq. (California’s False Advertising Law, or “FAL”) (Am. Compl. ¶¶ 1, 253-274). The Amended Complaint asserts that the case is a “law enforcement action which primarily seeks to protect the public safety and welfare, brought by a governmental unit in the exercise of and to enforce its police power” and that Plaintiff only seeks to hold New GM liable for its “own acts and omissions after the July 10, 2009 effective date” of the Sale Order. (Am. Compl. ¶¶ 1, 3 (emphasis in original)). […]
New GM filed a Notice of Removal on August 5, 2014, removing the case to the United States District Court for the Central District of California. (See Def.’s Notice Removal Action Under 28 U.S.C. § 1441(a) (Bankruptcy Court & Subject Matter Jurisdiction) (“Notice of Removal”) (14-CV-7787 Docket No. 1)). New GM asserted (and continues to assert) that removal was proper for two reasons. First, New GM contended that “Plaintiff’s claims in this case, and any dispute concerning the [Sale Order], arise under the Bankruptcy Code or in a case under the Bankruptcy Code, and the Bankruptcy Court therefore has core jurisdiction over this action under 28 U.S.C. §§ 157(b) and 1334(b).” (Id. ¶10).
Second, New GM asserted federal question jurisdiction under Title 28, United States Code, Section 1331. (Id. ¶¶ 13-18). On August 6, 2014, New GM filed a Notice of Tag – Along Action with the Judicial Panel of Multidistrict Litigation (“JPML”), seeking to have the case transferred to this Court and included as part of the MDL. (JPML MD-2543 Docket No. 399).
On August 19, 2014, Plaintiff filed an opposition to the Notice of Tag-Along action (JPML MD-2543 Docket No. 413); on the same day, Plaintiff filed a ‘“Limited’ No Stay Pleading” in the Bankruptcy Court, seeking permissionto file a motion to remand the action to state court (09-BR-50026 Docket No.12862). Plaintiff proceeded to file such a motion on August 22, 2014 (C.D. Cal. 14-CV-1238 Docket No. 18), but the United States District Court for the Central District of California declined to rule on it pending the JPML’s decision on transfer (C.D. Cal. 14-CV-0123 Docket No. 35).
Thereafter, Plaintiff withdrew its opposition to transfer (JPML MD-2543 Docket No. 470), and on September 25, 2014, the action was transferred here. (14-CV-7787 Docket No. 38). Plaintiff filed the motion to remand in this Court on October 9, 2014. (14-MD-2543 Docket No. 335).

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