Photo credit: GM photo/Steve Fecht
September 17, 2015 – 3:16 pm ET
(Bloomberg) — General Motors’ potential liability over flawed ignition switches isn’t over yet, and billions of dollars remain at stake.
GM agreed today to pay $ 575 million to end a shareholder suit tied to the defect and more than 1,380 civil cases by victims. A separate $ 900 million accord with the U.S. government resolved a criminal probe into the matter.
That still leaves GM facing hundreds of personal-injury and wrongful-death claims over the deadly flaw, as well as suits by car owners seeking as much as $ 10 billion for the lost value of their vehicles.
GM CEO Mary Barra announced the settlements to employees today in a town hall meeting.
“I have said many times how sorry I am for what happened,” Barra said today. “On behalf of all of us, I have apologized to the families who lost loved ones and to those who were injured. I do so again today.”
Six personal-injury cases are set for trial, the first in New York in January. If those aren’t settled, the proceedings will shed light once again on the company’s illegal behavior after the flaw was discovered and harm its reputation, said Carl Tobias, who teaches product-liability law at the University of Richmond in Virginia.
“There’s still a risk of a potentially embarrassing trial,” Tobias said. “I don’t think they’ll be able to settle them all — one holdout who wants to go to trial can gum up the works.”
The cases set for trial are strong and might be extremely costly for GM, revealing what Texas attorney Bob Hilliard, whose personal-injury and wrongful-death cases made up the bulk of today’s settlement, calls a cover-up.
“A jury may get the chance to do what the Department of Justice determined it could not do — hit them with a huge punitive damage award,” the lawyer said.
The plaintiffs argue that GM endangered them by delaying the recall of defective vehicles in which jostled keys could trigger a shut-off and disable steering, brakes and airbags. GM has said top executives didn’t know the switch was a persistent problem. None will be prosecuted under the Justice Department deal.
Lawsuits over the lost value of the vehicles haven’t gone as far in court, and none of those cases is scheduled for trial. GM argues the potential damages are far less than the car-owners contend.
“We do not recognize or believe that that figure has any validity,” Jim Cain, a spokesman for GM, said in a phone interview. “For our part, it’s impossible to estimate our liability because of the all uncertainties that are associated with litigation.”
Some victims were “outraged” by the criminal settlement, Hilliard said.
One of his clients, Jay Gass, is the father of Lara Gass, a third-year law student who was killed driving a 2006 Saturn Ion. Gass, who met with Manhattan U.S. Attorney Preet Bharara earlier in the government’s investigation, was informed of the criminal accord by a federal agent in a phone call early today.
“It shows that corporations only have to budget enough money to buy their way out of criminal actions with the U.S. government,” Gass said in an e-mail. “Families who lost their loved ones in crashes caused by defective GM ignition switches are suffering once again with the loss of any confidence that justice will be served.”
The defect was a low-torque ignition switch installed in at least five vehicle models starting in 2003, including the Chevrolet Cobalt and the Saturn Ion, the U.S. said in its settlement agreement with GM. Under the accord, the company admitted that 15 deaths and an unspecified number of serious injuries were linked to the flaw.
Even before the switch went into production in 2002, some GM engineers knew it was prone to slipping out of the “run” position, the U.S. said. The company considered fixing the problem, which would have cost $ 1 a vehicle, a few years later, but chose not to after deciding it didn’t pose a safety concern, according to the documents.
By the spring of 2012, the U.S. said, some GM employees knew the switch was defective because it could “cause airbag non-deployment,” according to the agreement. GM didn’t notify federal safety officials until about 20 months later, in February 2014.
The delay allowed GM to “fully package, present, explain and handle the deadly problem, taking affirmative steps to keep the defective switch matter outside the normal process,” the U.S. said.
Even after GM stopped selling the affected vehicles, GM dealers from 2012 to 2013 continued to sell used cars that would become subject to recall over the flaw, according to the agreement.
“It’s an admission, inside a criminal proceeding, of wrongdoing,” said Hilliard. The admissions will bolster the remaining cases that weren’t settled, he said.
The settlement will require a special master to determine how to divide the money and make offers to individual plaintiffs who can accept or reject them, Hilliard said. If enough claimants refuse to participate, GM can walk away, he said, without citing the required percentage needed.
Hilliard said he signed the agreement a little before midnight, after news of the criminal settlement became public. He said the criminal settlement had no effect on the timing of his settlement.
“It’s a large and substantial number,” Hilliard said. “It’s very, very fair to my clients.”
The settlement covers death and injury claimants represented by Hilliard but doesn’t include 31 deaths and 244 injuries that predate GM’s 2009 bankruptcy. Hilliard said he has encouraged GM to settle these claims.
GM gained the upper hand over many victims when a judge approved the company’s sale in bankruptcy, barring many claims that predated the Chapter 11 filing. Victims have appealed that ruling, which would expose GM to additional liability if it were overturned.
“GM will certainly take it to the Supreme Court if it has to,” said Tobias, the Virginia law professor.
Automotive News contributed to this report.
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