General Motors Headquarters in Detorit, MI. (Photo: Ritcheypro via Wikimedia Commons.)
General Motors Corp.’s hiring of noted claims attorney Kenneth Feinberg has raised the possibility that it might set up a fund to compensate victims of accidents linked to its recent recalls. But the announcement, made by CEO Mary Barra during testimony before Congress, has done little to placate the plaintiffs bar.
Prominent litigators said Barra was evasive and provided little new information about GM’s handling of ignition switch defects that prompted recalls of 2.6 million vehicles.
“I was extremely disappointed in the CEO’s statement generally,” said Jere Beasley, founding shareholder of Beasley, Allen, Crow, Methvin, Portis & Miles, whose Montgomery, Ala., firm has filed lawsuits against GM. “I’ve never seen a more clear-cut case of liability where the CEO admits liability, in effect apologies and says, ‘Bad things happened.’ ”
GM’s recalls cover a wide range of vehicles with defective ignition switches that might cause engines to stall and prevent air bags from deploying in crashes. The defects have been linked to 13 deaths.
Although she had already apologized for the recalls, Barra’s House and Senate committee testimony on Tuesday and Wednesday marked the first time the company publicly addressed GM’s potential legal liability for defects that, according to lawsuits, the company had known about for the past decade. Under a provision of its bankruptcy, GM was absolved of liability for accidents that occurred before its 2009 filing. But several prominent consumer groups led by Public Citizen called on GM to waive that shield and establish a trust fund for victims of the defects, according to a letter they sent on Tuesday to Barra.
Plaintiffs lawyers expect GM to set up such a fund.
“I would trust GM is not foolish and they will waive the bankruptcy defense,” said Stephen Sheller, founding partner of Sheller P.C. in Philadelphia, who has at least two prospective cases involving accidents that occurred following the bankruptcy. “They need to make amends. That’s one of the key things they absolutely need to do.”
Feinberg, who administered compensation programs for victims of the Sept. 11, 2001, terror attacks and the Boston Marathon bombing last year, said in a prepared statement on Tuesday: “My mandate from the company is to consider the options for dealing with issues surrounding the ignition switch matter, and to do so in an independent, balanced and objective manner based upon my prior experience.”
But when asked during the congressional hearings whether GM planned to set up a compensation fund, Barra refused to be specific.
Lawyers with suits against GM said that hiring Feinberg gives them little assurance. The attorney came under fire from the plaintiffs bar over delays in paying claims under BP PLC’s $20 billion compensation fund following the 2010 Deepwater Horizon oil spill.
Plaintiffs lawyers, many of whom work for contingency fees, would prefer to see their cases remain in court. They already have mobilized an effort to consolidate the GM litigation for pretrial purposes before a single judge.
In the BP case, said Elizabeth Cabraser, whose firm has filed a class action against GM, independent court oversight was lacking when Feinberg, managing partner of Washington’s Feinberg Rozen, was in charge of oil spill claims.
“Retaining Ken Feinberg is a good sign that somebody is very, very serious about being innovative and creative and proactive to resolve this,” said Cabraser, a partner at San Francisco’s Lieff Cabraser Heimann & Bernstein. “But it’s also going to take proactive court action. It’s going to have to take ongoing pressure and action from consumers as well.”
Consumers, in fact, have filed the bulk of the lawsuits against GM over the recalls. They allege their cars lost value due to the undisclosed defects. Whether a compensation fund would include damages for consumers, as opposed to accident victims alone, remains unclear.
“As the information continues to emerge day by day, it’s clear that GM has a serious problem with all of its consumers, and we’d like to think that when they ultimately understand they’ll need to step up and take responsibility it will include compensating the consumers they lied to for so many years about the defects in these cars,” said Adam Levitt, a director in the Chicago office of Wilmington’s Grant & Eisenhofer, who leads the firms consumer practice group.
Contact Amanda Bronstad at email@example.com.