- General Motors has reached a preliminary settlement in a lawsuit on behalf of owners of vehicles with faulty ignition switches and related defects, agreeing to pay $120 million.
- The class-action lawsuit claimed loss of residual value in owners’ vehicles because of the defect.
- GM has recalled more than 2.6 million vehicles from the 2004 through 2014 model years, and 124 deaths were reported because switch failure could cause vehicles to stall.
General Motors has agreed to pay $120 million to settle more claims that its deadly ignition-switch defect caused car owners economic harm, according to a settlement filing on Friday in New York City’s U.S. District Court.
First reported by Reuters and reviewed by C/D, the settlement is barely 1 percent of what law firm Hagens Berman claimed it would reap for GM owners when it filed the class-action suit in 2014, shortly after GM’s admission that year that its ignition switches caused vehicles to stall and disable all safety features, including airbags. The settlement names 216 plaintiffs who had owned some of the more than 2.6 million cars with the defective ignition switches, along with other GM cars recalled in 2014 for faulty power steering and side airbags that would not deploy in a crash, according to the filing. It addresses economic harm due to resale, repairs, and other related losses due to the defect. It is unrelated to the $625 million settlement fund that GM initiated in 2014 to pay for 124 deaths and 275 injuries. It is also unrelated to a settlement in 2015 that paid $275 million for more than 1380 death and injury claims that were not part of the compensation fund.
Once the court approves this new settlement, owners will know exactly what they’re entitled to and will be contacted as part of the class. But money—and it’s not all that much, relatively speaking—isn’t what GM is sorry to lose. It’s the battle over the automaker’s pre-2009 bankruptcy assets, which originally barred all claims against it for any vehicles built prior to the bankruptcy.
That’s typical when a company files bankruptcy, as the protection built into federal law splits the company into two, in this case Old GM and New GM. New GM had refused to pay any damages that Old GM was responsible for, such as someone with a 2005 Cobalt who wanted to sue (and wasn’t part of the prior settlements) instead of someone with a 2010 Cobalt. In 2015, when GM settled criminal charges with the U.S. Department of Justice for $900 million and paid $300 million to a New York teachers’ pension fund for lost shareholder equity, the bankruptcy court assured GM that any cases involving vehicles sold prior to its 2009 bankruptcy would be blocked.
An appeals court overturned that ruling in July 2016. In April 2017, GM appealed the appeal and lost in the Supreme Court. Months later, a bankruptcy judge found that GM’s trust “acted in bad faith” when it refused to sign a separate settlement that would have triggered the trust—set up to pay creditors damaged by Old GM—to move the economic harm lawsuit as an approved claim. The lawsuit remained in limbo until this past Friday, where the court approved those pre-bankruptcy claims and ordered Old GM’s trust to pay $50 million and New GM to cough up $70 million, plus $34.5 million for the lawyers.
GM covered up the ignition-switch defect for 13 years, and the company only admitted the fault after a small Georgia law firm exposed how the company had secretly redesigned the switch without changing the part number. The parents of Brooke Melton, a 29-year-old woman who died in a 2005 Chevrolet Cobalt when her car stalled, settled in that 2013 lawsuit. GM settled with the Melton family a second time after the company failed to disclose information proving the part had been changed. The older, defective switches were manufactured with torque thresholds that were low enough that the key could slip out of the run position, thereby disabling the engine, power assists, and safety features that included airbags.
This may not be the final lawsuit. As of March 16, the U.S. Judicial Panel on Multi-District Litigation, which consolidates identical cases around the country, listed 444 cases pending against GM for the ignition-switch defect. Friday’s settlement should reduce that amount, but it hasn’t eliminated them. According to Reuters, GM has “resolved or dismissed” some 3000 cases under the multi-district litigation. It’s true that in six years, there haven’t been many more new claims to be made. The message, however, is clear: GM is still responsible to pay up for these ignition switches, no matter when they were installed.