Federal Judge Urges Settlement of GM Lawsuits

Most of the cases claim economic losses.

by on Aug.13, 2014

One of the replacement ignition switches.

A federal judge is encouraging attorneys to settle over 100 lawsuits that have been brought against General Motors in cases involving the maker’s defective ignition switches.

The majority of those cases involve economic losses, claims that used GM vehicles have lost value as a result of the maker’s ignition switch recall. But about a dozen of those cases involve personal injury claims, according to the Associated Press. In all, attorneys represent nearly 1,000 individual plaintiffs suing GM.

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U.S. District Judge Jesse M. Furman said he intends “to encourage settlement as much as possible.”  But whether the plaintiffs’ attorneys take the jurist’s advice may depend on what happens in another courtroom.

In February, GM recalled 2.6 million vehicles, including the Chevrolet Cobalt and Saturn Ion, because a defective ignition switch could inadvertently cause a vehicle to shut off, disabling power steering and brakes, as well as the airbag system. The maker has said it knows of 13 deaths linked to the defect, though outside observers believe the figure is significantly higher.

Complicating matters, GM’s internal documents show the maker apparently first learned of the problem over a decade ago but failed to act until this year. That delay has triggered a series of investigations, including a criminal probe by the U.S. Justice Department. And, in May, the National Highway Traffic Safety Administration penalized GM $35 million due to the delay, which violated federal rules requiring manufacturers to act quickly upon learning of a safety defect.

(GM announces five new recalls, then cuts the number to four. Click Here to find out why.)

Early this month, a GM-funded victims’ compensation fund began accepting claims related to the problem. It is being run by compensation expert Kenneth Feinberg, who previously handled the 9/11 and BP oil spill funds.

But if that is GM’s carrot, the maker is also waving a stick at potential claimants. It has asked the court that handled its bankruptcy to rule that the maker cannot be sued for any accident, injury, death or economic loss that occurred before GM emerged from Chapter 11 protection in July 2009. If the court agrees, that would eliminate many of the lawsuits – especially for economic losses, as those cases involving death or injury could still receive payouts from the victims’ compensation fund.

District Judge Furman told lawyers he does not want to interfere with the work of the bankruptcy court. And that means that the lawsuits he is handling could effectively be put on hold until a decision is made.

(Hyundai fined $17.5 million for delaying recall, Click Here.)

One of the largest suits pending against GM was filed by a Seattle law firm on behalf of GM vehicle owners. It has said that economic losses could mount to as much as $10 billion. However, as TheDetroitBureau.com last month reported, there is so far little evidence based on industry data to indicate that GM vehicles, such as older Chevy Cobalt sedans, have dropped in value more quickly than competing models of the same age.

In a separate decision, a Georgia judge has allowed the family of one GM ignition switch victim to re-open the case they settled with the maker last year. The parents of the late Brooke Melton, who was killed in a 2010 Cobalt crash linked to a faulty switch, had settled for $5 million – likely more than would have been awarded by the compensation fund. They have since claimed that the case was tainted by false evidence provided by GM representatives.

(GM loses a round in court to parents of ignition switch victim. Click Herefor the rest of that story.)

GM has set aside at least $400 million for the victim’s compensation program, according to its chief financial officer, though CEO Mary Barra has said the fund is open-ended and that the maker will pay any and all claims Feinberg feels are justified. The fund is only intended to compensate those who were victims of crashes, and not those who are claiming economic losses.

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2 Responses to “Federal Judge Urges Settlement of GM Lawsuits”

  1. veh says:

    Well, if you can get a settlement without having to pay a lawyer, you’re probably better off

  2. Jorge says:

    How much value does the car lose after the ignition switch has been replaced with a new, better design? Probably 99% of the affected autos will be traded in on a new model purchase so there really isn’t going to be any loss to current owners. The siren chasers are just looking for a free lunch, as usual.

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