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GM Customer Lawyers Jostle for Roles in Ignition-Switch Suits 

August 11, 2014

GM Customer Lawyers Jostle for Role in Ignition Switch Battle

A shop foreman performs a service recall on a General Motors Co. (GM) 2005 Saturn Ion in New Hudson, Michigan. Last month, after recalling almost 29 million cars in North America for varied defects, GM asked the bankruptcy court to broaden its immunity, to block lawsuits over fallen car values and pre-bankruptcy accidents stemming from non-ignition flaws. Photographer: Jeff Kowalsky/Bloomberg

Lawyers for General Motors Co. (GM:US) customers are jostling to lead lawsuits over faulty ignition switches. They don’t know what they can sue for -- a judge will tell them that -- but they do want to be in charge.

Car owners suing over the lost value of recalled vehicles have yet to learn whether they can claim $10 billion, a few hundred thousand dollars, or nothing. That number will be decided later by the bankruptcy judge who presided over GM’s bailout in 2009.

“The biggest wild card is the bankruptcy court,” said Peter Henning, a law professor at Wayne State University in Detroit. The claims could be thrown out entirely or limited to a minor loss of value, he said. U.S. Bankruptcy Judge Robert Gerber in New York might not rule until late this year.

Meanwhile about 100 delayed cases are in the hands of U.S. District Judge Jesse Furman in Manhattan. He told customers today at his first court conference that he will advance their suits as fast as possible, and encourage settlements, while at the same time try not to get in Gerber’s way.

Furman has taken some steps to choose attorneys to run the fight, and to respond to compensation demands over 2.6 million almost unsaleable GM Cobalts and Ions, though he has yet to make a final selection. Lawyers who run a case call the shots and, in the end, make the most money. They have said it may be year-end before Gerber says the suits can proceed.

‘Be Sensitive’

“I’m also going to be very sensitive about stepping on the toes of Judge Gerber and the bankruptcy proceedings,” Furman said in court today, where about 100 people came to watch the proceeding.

Last month, after recalling almost 29 million cars in North America for varied defects, GM asked the bankruptcy court to broaden its immunity, to block lawsuits over fallen car values and pre-bankruptcy accidents stemming from non-ignition flaws.

Accident cases related to the defect have also been sent to Furman’s court. At least 13 people were killed in crashes linked to the ignition-switch recall, GM said. Victims’ attorneys contend it’s more than 60.

GM budgeted as much as $600 million to pay ignition-switch death and injury claims through a fund. The company will fight all other lawsuits, Chief Executive Officer Mary Barra has said.

Cases Combined

Lawsuits demanding money for fallen car prices were shipped to Furman to be combined into one unified case, after Gerber rules on which of the claims are allowable.

Richard Godfrey, a lawyer for GM, told Furman today that there are 98 economic-loss and 11 personal-injury cases in the so-called multidistrict litigation.

Candidates for lead counsel include leaders of three West Coast class-action law firms. All three fought Toyota Motor Corp. over sudden acceleration: Steve W. Berman of Hagens Berman Sobol Shapiro LLP in Seattle, Elizabeth Cabraser of Lieff Cabraser Heimann & Bernstein LLP in San Francisco and Mark P. Robinson Jr. of Robinson Calcagnie Robinson Shapiro Davis Inc. in Newport Beach, California.

Berman, Cabraser and Robinson, already temporarily heading the ignition cases, asked Furman to keep them as lead counsels. Against Toyota, Berman’s firm shared $200 million in fees with 30 other firms, including those of Cabraser and Robinson. They won the equivalent of $1.6 billion for car owners by arguing that recalls drove down prices.

Pinto Case

Robinson won some of the largest jury awards for defective products in U.S. history, starting in 1978 with a $128 million verdict against Ford Motor Co. in a Pinto gas-tank rupture suit. Cabraser pursued injury and death claims against Toyota.

Berman, Cabraser and Robinson, if appointed, will share leadership with a 10-member executive committee. They recommended a panel including David Boies of Boies, Schiller & Flexner LLP in New York; Joseph F. Rice of Motley Rice in Mount Pleasant, South Carolina; and Lance Cooper of the Cooper Firm in Marietta, Georgia.

Cooper spurred the GM recalls that accelerated the entire ignition debacle. He sued over the death of a 29-year-old woman killed when her 2005 Chevy Cobalt crashed. Cooper reopened that lawsuit in May, claiming the company fraudulently induced the woman’s parents to settle by withholding evidence of ignition-switch defects. A judge on Aug. 9 rejected GM’s bid to dismiss the new suit.

Bankruptcy Judge

The GM car-value suits were delayed in April after the automaker asked Gerber, the bankruptcy judge, to affirm past rulings barring customers from suing the reorganized “new GM” over faulty cars made before the bankruptcy.

Bankruptcy usually absolves a debtor of many liabilities that existed before it sought court protection.

If he rules as GM wants, customers will be barred from claiming billions of dollars for punitive damages, and their demands for economic losses might be blocked. Gerber may tell them to try to get money from “old GM,” which has little left to give.

The common theme of the economic-loss claims is that GM caused car owners financial injury by falsely insisting its vehicles were safe, Berman wrote the judge July 22.

Car owners said Detroit-based GM forfeited Gerber’s protection for wrongdoing that occurred before bankruptcy, because it wrongfully hid the long-known switch defect.

The plaintiffs claim GM’s actions after the bankruptcy aren’t Gerber’s concern, and should move forward.

The bankruptcy is In re Motors Liquidation Co., 09-bk-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The car price suits in federal court in Manhattan are In re General Motors LLC Ignition Switch Litigation, 14-md-02543.

To contact the reporters on this story: Linda Sandler in New York at lsandler@bloomberg.net; Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

To contact the editors responsible for this story: David E. Rovella at drovella@bloomberg.net Andrew Dunn, Joe Schneider


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