When General Motors came out of bankruptcy in two thousand nine, it left behind a shell of its old self. The shell known as Old GM, was set up to handle lingering legal claims, including lawsuits over faulty ignition switches. The financial arrangements. However, we're complicated, and over the past week they fostered a billion dollar disagreement. First, New GM, that's the company that still makes cars, accused Old GM of secretly plotting with with plaintiff's attorneys to extract more money
from the automaker. Now New GM has reached a deal with Old GM, and that has plaintiffs lawyers crying foul. With us. To help explain all of this is Eric Gordon. He's a professor at the University of Michigan's Ross School of Business and he's with us in our Chicago studio. Eric, thanks for being with us. UM. This is kind of complicated stuff, So just start, if you would, by explaining exactly what old GM is and what its obligations and and motivations are. Old GM is a creature of the
bankruptcy reorganization. In In that reorganization, GM is basically split into two pieces. Old GM now referred to as the trust. UM got a certain amount of money, a lot of money, billions of dollars, and some property. It got some old plants and some property, and it's a liquidating trust. It's designed to pay off the obligations that had to be
paid off under the agreement, the bankruptcy agreement. New GM, or what you and I think of as GM today, got spun off as supposedly a clean, new, fresh start entity. That's the purpose of bankruptcy reorganization UM, so that you know it could still make cars and still employ people. Turns out it hasn't been one fresh start. There's some there's some dangling kind of threads here, UM, including the
billion dollar thread you mentioned Eric. Last week, we understood and there was a report that GM had old GM, that trust had settled with plaintiffs lawyers. What happened? Yeah, So apparently apparently the old GM, the trust, and the plaintiffs lawyers, who have you been involved in some lengthy settlement negotiations over some big big bucks got together and finally hammered out a deal they were happy with. They
being those two old GM and the plaintiffs lawyers. Apparently UM New GM was not involved in that wasn't part of the negotiations. UH and found out that as part of those negotiations, the two parties, Old GM and the trust O g M and the plans managed to hammer out a deal which pulls one of those threads, the billion dollar thread UM and GM. New GM is not happy about that for a number of reasons. I mean, maybe for a billion reasons, but for some you know,
very specific reasons. And so now we have a new agreement that I guess maybe supersedes the old old agreement. This is between new GM and old GM. Tell us about about that. So the old agreement apparently was never signed, certainly wasn't approved by the court. UM New GM voiced in some very strong words, it's disapproval of that agreement, and it's a disapproval of the conduct of both the plaintiffs lawyers and old GM in reaching it. Apparently got
together with old GM. Um and made its displeasure clear, but also made Old GM and offer it didn't want to refuse, which is UM. Look, we will UH cover legal feest to litigate some issues we New GM want to have litigated. You weren't going to litigate them. Who knows why GM suspects there was a little sort of hand holding between old GM and the plaintiffs, but even if not, maybe old GM just didn't want to spend the money. So new GM said, Okay, we'll here, we'll
bring something to the table. We'll cover some legal fees. And under this new agreement between old and new GM, this time the plaintiffs lawyers are left out. Um, new GM is going to cover some legal fees and apparently all GM is going to litigate some defenses that the GM hopes will prevail and keep it from having to pay that billion dollars. Eric, I understand the judge scolded all the lawyers on on all the sides out of hearing.
Why ye, Well, for two reasons. One, judges like settlements, especially settlements that have been you know, underway for quite a long time. You'll walk into a judge's courtroom at the last minute and say, oaps, look the settlement that we've been working on forever. Uh, nope, we've got We've got something new. So so Judge Glenn. Judge Glenn, like
any judge, is not happy about that. But the plaintiffs lawyers, a plaintiffs lawyer at least ed wise fell in there, Um referred to, well, it must have been the result of threats, some pretty heavy duty threats that GM made, New GM made to old GM. Um. He did admit that he doesn't know that those threats exist, but but he he said that sort of they must have. So the judge got pretty angry about that and has ordered both sides to produce evidence that there were or were
not threats. Um so that the judge, you know, and they just just blew up into Judge's face and he is not a happy guy. We're gonna have to leave it there, Thank you so much. Eric Gordon and the professor at the University of Michigan's Ross School of Business. Coming up on Bloomberg Law legal victory for Uber as it tries to keep a price fixing suit out of court.