Kenneth R. Feinberg
Kenneth R. Feinberg (Diego M. Radzinschi / NLJ)

Plaintiffs’ lawyers were quick to criticize General Motors Co.’s compensation fund for victims of its ignition-switch defect. So why are so many of the critics gearing up to file claims?

“It’s a free preview,” said Kenneth Feinberg, hired by GM to pay out claims. “Why not submit a claim? See what happens?”

The fund won’t cover millions of recalled vehicles, but the alternative — going to court — won’t be easy, said James Rogers of the Law Offices of James S. Rogers in Seattle, who represents the families of two people who died in separate accidents. “When you take these cases, you’re committed to a fight,” he said. “You’re trying to overcome the obstacles of a major, large corporation.”

The fund began accepting claims on Aug. 1. GM had announced that it would set aside $400 million, and possibly $200 million more, to pay claims for those who were injured or died in one of the 2.6 million cars and trucks the company recalled for the defects. Claimants won’t abandon their right to sue if they seek compensation from GM — only if they accept what Feinberg offers.

“We’re going to give the plan a chance,” said Jere Beasley, founding shareholder of Beasley, Allen, Crow, Methvin, Portis & Miles, who has criticized aspects of the GM compensation program. “If we have a bad experience with the fund, we’ll most likely go into the courts full bore.”

The hurdles to litigation are not insignificant. Parties who settled lawsuits against GM before disclosure of the defect will find it difficult, although not necessarily impossible, to persuade judges to reopen their cases, plaintiffs attorneys said. And U.S. Bankruptcy Judge Robert Gerber in New York hasn’t yet ruled on whether GM’s 2009 bankruptcy bars older cases. The Feinberg fund, by contrast, will accept claims under both circumstances.

“The compensation fund is really quite limited. And a lot of it hinges, too, on [GM's] bankruptcy motion,” said Peter Henning, a professor at Wayne State University Law School in Detroit who specializes in white-collar crime and securities and is following the GM litigation. “If they can get the prebankruptcy claims essentially excluded, and you can’t reopen those, that makes the compensation fund the only game in town.”

And crash victims who lack evidence — their car’s “black box” is missing, or they disposed of the wrecked vehicle — might have a better chance with him, Feinberg said. “Especially for the older cases, going through this process will be much easier and much more accommodating than trying to reconstruct a lawsuit in the courtroom with all the legal barriers,” he said.

GETTING THROUGH THE DOOR

But not for everyone. “If you can get in the door of Feinberg’s fund, you are going to get money,” Henning said. “The issue is how much, and if you can get into that door.”

Feinberg’s firm, Feinberg Rozen in Washington, has hired outside vendors to help him process claims. The Garden City Group Inc., a legal administration company in New York City, will manage claims through a call center and will process online claims submitted to www.GMIgnitionCompensation.com, according to the law firm’s business manager, Camille Biros. Economic consulting firm ARPC will help provide the estimated 20 people who will review each claim.

The deadline to submit claims is Dec. 31. GM will be allowed to submit information about each claim, but Feinberg will have final say on payments. The fund covers only the vehicles GM recalled in February and March for ignition defects — not the 12 million more it has recalled since then. In one of those later recalls, GM had acknowledged three deaths and eight injuries.

That forces everyone else to file lawsuits. On July 29, for example, Robert Hilliard of Hilliard Muñoz Gonzales in Corpus Christi filed a lawsuit on behalf of more than 650 people who were injured or died, many of whose claims aren’t eligible for payment under the fund.

During a July 17 subcommittee hearing, U.S. Sen. Richard Blumenthal, D-Conn., argued the program should be expanded. “Many of the reasons for these recalls are defects in the same part,” he said. “I believe strongly that your fund must be extended to include those victims of deaths, injuries and damage in those other recalls.”

The fund draws another line: Claim­ants have to prove their airbags didn’t deploy. That’s because the ignition defect shuts off electric power throughout the car, disabling airbags and power steering.

“If the airbag went off, it’s much more likely to be operator error or something else,” Henning said. “And GM doesn’t want to turn this into a battle over the facts or causation. They’re using the airbag as a proxy.”

The distinction is important, Feinberg said. “If the airbag didn’t deploy, or you don’t know whether the airbag deployed or not, file a claim,” he said. “If the airbag deployed, do not file a claim — it cannot be ignition-switch failure.”Still, plaintiffs attorneys were unclear whether their clients would qualify. For example, Paul Danziger of Houston’s Danziger & De Llano, who plans to file claims on behalf of 10 people, has cases in which airbags didn’t go off because the car spun around or rolled over. “Not every car will have a frontal impact,” he said. “The question is: Are they going to pay those or not?”

Feinberg insisted that the “great bulk” of the injuries and deaths associated with the ignition switch could be resolved through the claims process. During the Senate hearing, he acknowledged that he couldn’t make everyone happy.

“I don’t think there is anybody who provided us input that is entirely satisfied with all aspects of the protocol,” he said. “The perfect is the enemy of the good.”