Legal Issues Pile Up for General Motors GC

Legal Issues Pile Up for General Motors GC

Michael Millikin, General Motors Co.’s general counsel, now has a new problem to contend with—a possible criminal inquiry by the U.S. Department of Justice into the timeliness of GM’s response to consumer complaints of sudden and sometimes-fatal car shutdowns.

Under the Transportation Recall Enhancement, Accountability and Documentation Act of 2000, known as the TREAD Act, an auto company can face criminal penalties if it does not report to regulators a defect that led to serious injury or death within five days of learning of the incident.

Bloomberg News reported the opening of the DOJ inquiry earlier this week, based on unnamed sources. And The New York Times corroborated the investigation on Wednesday, according to its own sources.

But GM spokesman Alan Adler told Thursday, “We have not been informed of a Justice Department investigation.”

It wasn’t as though Millikin didn’t have plenty to deal with already, related to a defective ignition switch that resulted in what GM now says were 12 deaths and numerous crashes and injuries. GM has recalled 1.6 million cars to repair the problem. Details are in its recall letter [PDF].

The DOJ inquiry goes atop Millikin’s already sizable inbox:

  • Earlier this week, GM named Millikin and outside counsel Anton Valukas of Jenner & Block to lead an internal investigation into how the company handled complaints about the defect that may have begun as early as 2001.
  • The National Highway Traffic and Safety Administration has opened an investigation into why GM took so long to admit and fix the problem.
  • The House Energy and Commerce Committee has opened an investigation into why GM and NHTSA took so long to address the problem.
  • Plaintiffs lawyers across the country are lining up aggrieved clients to sue GM, which until now has been steadily recovering from its 2009 bankruptcy and government bailout.

The lawsuits could be an especially sticky problem for Millikin and GM. Under the bankruptcy restructuring, the “new GM” accepted no responsibility for prebankruptcy defects or repairs, which remained with the “old GM.”

Experts are saying suits over the decade-old ignition defect could throw GM’s bankruptcy into question and reopen liability issues the company thought it had put to rest, according to a story in Wednesday’s New York Times.

If GM knew about the ignition switch defect at the time and didn’t disclose it, or the potential for litigation over it, then, “You open up the bankruptcy and start all over again,” John Pottow, a lawyer specializing in bankruptcy and business law at the University of Michigan Law School, told the Times.

GM’s Adler said Thursday, “We have no comment on any matters in litigation.”

Some auto-safety advocates are urging GM to avoid this particular issue by waiving its postbankruptcy immunity, according to a story in Wednesday’s USA Today. Clarence Ditlow, who runs the Center for Auto Safety, and John Claybrook, a former head of NHTSA, have asked GM to set up a $1 billion fund to cover the ignition liability, the story said.

Meanwhile, bipartisan leaders of the House committee scrutinizing the company’s conduct have written a letter to GM management [PDF] seeking more information on the ignition problem.

The letter asks the company to brief committee staff members by March 18, and to deliver requested documents by March 25. Among items being requested are all field reports related to the ignitions, all related documents submitted to NHTSA, a detailed time line of all related communications between GM and NHTSA, and all communications to or from GM related to the ignitions.

And every day seems to bring a new revelation. Transportation Secretary Anthony Foxx was asked about the GM situation during budget testimony before a Senate appropriations subcommittee Thursday. He said GM hadn’t given federal regulators enough data to open a formal investigation, but vowed that NHTSA is “conducting an ongoing aggressive investigation into the timing of the recall,” according to the Detroit News.

With GM under such heavy scrutiny, Millikin probably shouldn’t plan a vacation any time soon.