Shareholder Derivative Suit Against GM Over Ignition Switch Defect Dismissed By Delaware Chancery Court

Reportedly, GM Shareholders filed suit against the company in Delaware Chancery Court, alleging that the “board of directors did not perform its duty in preventing the mounting losses from the sale of vehicles with faulty and deadly ignition switches.” Specifically, the shareholders sought to recover “losses due to expenses, fines, lawsuits and damages to the company as a result of the 119 deaths and 234 injuries associated with faulty parts and a huge and costly recall.” GM filed a motion to dismiss, which was granted by Delaware Chancery Court Judge Sam Glasscock III.  Judge Glasscock found that “the GM board ‘did not consciously fail to monitor’ or oversee GM operations and thus he could not find ‘substantial likelihood of personal liability on the part of a majority of the board.'” Judge Glasscock also “concluded GM had adequate risk-assessment systems in place and there were not obvious problems or ‘red flags’ that the board knew of but ignored, nor was there evidence of bad faith on the part of the directors.” Apparently, Judge Glasscock’s decision could have impact outside of the Delaware case, as there are three “similar cases” pending in Michigan, which were “waiting for the outcome of the Delaware case.” We’ll keep our eyes on these cases for you.

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