Attorneys Complain GM's Compensation Plan Falls Short

Attorneys Complain GM's Compensation Plan Falls Short Diego M. Radzinschi / NLJ Kenneth R. Feinberg

General Motors Co. unveiled its plan to compensate victims of its ignition-switch defect on Monday, but plaintiffs lawyers complained that the program leaves out a large number of their clients, many of whom will pursue their cases in court.

The uncapped fund, announced by claims attorney Kenneth Feinberg, would pay millions of dollars to families of people killed in accidents caused by the defects, which forced GM to recall 2.6 million cars. It also would pay those who were seriously or moderately injured.

Lawyers representing those victims said they were still evaluating the details, but were quick to complain that the program fell woefully short.

“I think Mr. Feinberg has made a very sincere effort here in trying to come up with what he considers to be an appropriate plan, but it’s limited by what GM is letting him do,” said Lance Cooper, founding partner of The Cooper Firm in Marietta, Ga. “It’s going to be reasonable for some cases, and in others, victims and clients will want to have their day in court.”

For one thing, the plan is limited to the 2.6 million cars recalled in three batches beginning in February over the ignition switch defect, but the automaker has issued additional rounds of recalls since then. Late Monday, in fact, GM announced six recalls involving 8.4 million vehicles worldwide because of ignition defects. Earlier in June, it recalled nearly 3.2 million cars to rework or replace ignition keys plus more than 500,000 Chevy Camaros because of ignition problems.

The plan, while a “good start,” needs to parallel the scope of the recalls over ignition problems, said Elizabeth Cabraser, a partner at San Francisco’s Lieff Cabraser Heimann & Bernstein.

“I realize there have been serial recalls, and there may be some catching up to do,” she said. “But it is involving the same key-system defect, and so it just makes sense to us that the program would include those. And that may be a matter of discussion with GM.”

The plan excludes accidents in which airbags deployed. During a June 18 congressional hearing, several officeholders raised concerns that limiting the plan to crashes in which airbags failed would reduce GM’s liability; the defect, by shutting down engines, could disable other features, such as power steering.

Plaintiffs attorneys echoed that concern. “For GM to eliminate all those crashes where an airbag may have deployed is likely leaving out families from the plan who should be part of the plan,” Cooper said.

Anyone who accepts a payout must waive all legal claims against GM. Plaintiffs lawyers, many of whom unsuccessfully pushed for punitive damages to be part of the plan, said clients in some states might pursue those claims in court.

But consumers involved in accidents that predated GM’s 2009 bankruptcy face an uphill battle, attorneys said. Although those victims could recover from Feinberg, GM has moved to bar any such claims in bankruptcy court.

The next hearing in the bankruptcy was scheduled for Wednesday, but lawyers don’t expect U.S. Bankruptcy Judge Robert Gerber to render a decision before GM begins processing claims on Aug. 1.

“This plan may be in effect and play out before the court makes this decision,” said Jere Beasley, founding shareholder of Beasley, Allen, Crow, Methvin, Portis & Miles in Montgomery, Ala. “That would be a risk we’d have to explain to clients.”

In addition, many families don’t own their vehicles anymore, or the black box recordings, to prove the defect caused their crashes, he said. The plan, as a result, favors victims who kept especially good records.

It also means that Feinberg has considerable discretion in deciding whether an accident was caused by the ignition defect, said Carl Tobias, a professor at the University of Richmond School of Law.

“How insistent is he going to be on very precise evidentiary proof?” he said. “He offered a lot of possibilities, but a lot of this will be completely circumstantial. There will be difficulties of proof for some plaintiffs. The question is whether he’ll accept that or not.”

Robert Hilliard, a partner at Hilliard Muñoz Gonzales in Corpus Christi who represents a number of victims who settled claims with GM before learning of the defect, noted that the plan, while allowing those clients to participate, offsets the amount of their earlier recoveries. For a client who already got $1.5 million, for example, the plan might not be worth it.

Some plaintiffs lawyers emphasized that a court should supervise the claims process. That’s what happened with the compensation fund that Feinberg administered for BP PLC following its Deepwater Horizon oil spill in 2010. That program was disbanded after plaintiffs lawyers, pursuing cases in court in lieu of participating, reached a settlement with BP to resolve economic damages claims. It’s the only other fund in which Feinberg doled out payments that were paid for by the company being sued.

“You need something like that attached here to take away the GM control,” Beasley said. Feinberg, he said, “still works for GM.”

Contact Amanda Bronstad at abronstad@alm.com.

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