General Motors Settles Criminal Proceedings with Justice Department Over Defective Ignition Switches, But Still Faces Mountain of Plaintiff Lawsuits

Posted on Monday, January 11, 2016

Written by Rick Busby for Provost Umphrey

In 2015, General Motors made some progress towards resolving some of the lawsuits surrounding failed ignition switches that have dogged the auto giant for over a decade. However, the settlements reached were largely with GM shareholders and the U.S. Federal Government, with a smaller portion of the settlement figures slated for actual victims of GM’s failed products.

In September 2015, GM reached agreements resulting in almost $1.5 billion to be paid out among GM shareholders, the Feds and nearly 1,400 civil suits filed by victims. The U.S. Federal Government will receive $900 million, the lion’s share of the settlement, to end its criminal litigations with GM. The balance of the settlement amounts totaling almost $600 million will be allocated to settle the suits with GM shareholders and actual victims. The settlement of criminal proceedings with the Feds was announced within hours after GM signed the settlement agreements with GM shareholders and the civil suit plaintiff’s group.

While this is generally good news indicative of progress in the big picture, the devil is in the details. Of the nearly 1,400 civil suits whose settlements that will be governed by the September 2015 agreements, a court appointed master will have to administrate the actual settlement of proceeds and there could be complications along the way. Under the agreement, individual plaintiffs will be allowed to accept or reject the actual settlement. However, if enough of the plaintiffs refuse the settlement General Motors may be able to walk away. Unknown is the actual number of plaintiffs who have to refuse before GM can walk away.

Is GM’s Settlement With Feds An Admission of Criminal Guilt?

The tender legal spot for GM is that the settlement with the Feds appears to be, in effect, an admission of guilt in a criminal proceeding. With a mountain of civil suits being played out in other venues involving the same circumstances, plaintiffs and their attorneys may be emboldened and more inclined to push harder to take GM to trial. The plaintiff’s bet would be in trusting that juries would punish GM for their apparently criminal corporate negligence and hold them liable for punitive damages beyond the caps put in place in various state venues. With hundreds of lawsuits still pending, there are billions of dollars potentially at stake.

For example, the September 2015 civil suit settlement does not include a class of plaintiffs who filed suits prior to GM’s bankruptcy in 2009. That group of plaintiffs includes claims involving more than 30 deaths and almost 250 injuries. The auto giant gained a legal advantage over these plaintiffs when a U.S. Bankruptcy Court judge approved GM’s Chapter 11 filing in 2009. However, these cases have been on appeal since and the subsequent settlement of criminal proceedings with the U.S. Justice Department could reinvigorate the appeals process for plaintiffs. For GM’s part, they will likely be willing to take those cases all the way to the Supreme Court to stave off settlement or trial litigation in those matters attempting to shield their liability behind bankruptcy protections.

Will Juries Find General Motors Liable for Punitive Damages?

Added to those densely complicated litigious scenarios, in January 2016, the first of six personal injury cases already slated for trial gets kicked off in New York. Assuming GM does not settle these cases before their court dates, the trials themselves will continue to shed negative light on GM. In each trial, plaintiff’s attorneys will be able to continue shining the spotlight on the criminal behavior of GM executives after the ignition switch defect was discovered. Every instance of this occurring holds the potential for damaging GM’s reputation even further.

The general legal consensus is that the current cases that are set for trial are generally strong in favor of the plaintiffs. Continuing to defend itself could be extremely costly for General Motors, beyond just the actual dollar amount of a settlement or judgment. With plaintiffs arguing before juries that GM was negligent, potentially criminally so, by delaying the recall of defective vehicles that placed millions of drivers in jeopardy, GM could find itself on the wrong end of a punitive damages award.

While General Motors’ executives will not be criminally prosecuted under the settlement with the Feds, GM itself is not out of the woods by any stretch. Despite the settlements and the amount of GM money already has on the table, the auto giant still faces hundreds of lawsuits involving personal injury, wrongful death and a mound of suits from car owners claiming as much as $10 billion in loss of value to their cars equipped with the defective ignition switches. While the current legal consensus is that the owners of defective vehicles may have trouble making their case for lost value, the reality is the sheer volume of suits will continue to be legally expensive for GM to administrate and litigate, even if they ultimately prevail.

Victim’s Families Still Await Justice In General Motors Ignition Switch Lawsuits

All of this “progress” in the massive litigation provides little comfort to the families of the estimated 42 victims whose deaths have been linked to the GM ignition-switch defect. By the time GM recalled more than 2.6 million vehicles in 2014 to repair the faulty ignition switches, the families of many of the victims had already endured almost a decade of denials and apparent corporate indifference from GM. As a result of settling the criminal proceedings with the U.S. Justice Department, it is now known that “corporate indifference” was likely more akin to fraud and reckless endangerment.

To further frustrate matters, over 30 of those 42 victims are the subject of cases that got derailed and remain under appeal after GM’s 2009 Chapter 11 bankruptcy was approved. Even more frustrating for the families of those victims is the relatively low ceiling cap in most states on damages that can be recovered from GM, even in the event of a death.

For example, in Wisconsin there is a cap of $350,000 on damages for loss of life due to product defects. In many instances, caps on damages like this serve as a barrier for potential claimants who cannot afford legal representation. Smaller law firms cannot afford to take on the expensive cost of litigation on contingency as the costs of litigation can easily outstrip the total award.

Many times law firms simply refuse to take these cases because of the economics, leaving victim’s families with virtually no recourse. While this outcome was never the intent of laws that cap damages, in many instances it effectively does so. Ironically, this serves to protect the corporate interests from punitive product liabilities and contributes to the cultivation of a culture of corporate indifference.

Will General Motors’ Experience Prove To Be A Corporate Cautionary Tale?

While most auto recalls do not lead to death, any malfunction can cause undesired consequences, which is why GM’s actions in covering up the faulty ignition switches proved so detrimental and even fatal for so many. In the case of GM’s defective ignition switch, a tiny metal pin called a detent plunger failed. The “tiny pin” is intended to hold the ignition switch in the “run” position. When it failed, the ignition switch spontaneously turned off while the car was in motion, causing the loss of power and the subsequent failure of airbags to deploy upon the inevitable crash.

This chain of events caused by the failure of a tiny inexpensive part and GM’s subsequent cover up of the defect has led to fatalities, grievous personal injury and incalculable suffering by victims and their families. There was a moment in time when GM and its executives became aware of the defect. Had GM chosen to come forward at the time, to fix the defect would have certainly been expensive.

However, with the nearly $1.5 billion GM paid to settle suits in September 2015 and the open-ended potential of ongoing litigation costing GM significantly more in the future, one can’t help but wonder if the safest and least expensive course to have pursued would have been simply coming forward and recalling the defective ignition switches long ago.

How many lives would have been spared? How many injuries would have never happened? We can never know for sure. However, hopefully GM’s story in this instance will serve as a cautionary tale to others in the future.

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