By setting up a fund, GM could avert years of civil litigation and
limit its financial and reputational harm.
GM has retained Kenneth Feinberg, a Washington lawyer who has
overseen compensation funds for victims of high-profile catastrophes
like the BP Plc oil spill and the September 11, 2001, attacks.
Feinberg told CNBC on Wednesday that GM is "asking me to help
develop some sort of program that might be used to compensate
Feinberg did not return a request for comment. A spokesman for GM,
Jim Cain, said Feinberg is "highly respected for his handling of
compensation issues, and we've hired him to explore and evaluate all
options." That work is ongoing, and no decisions have been made,
GM has been hit with dozens of lawsuits since it began its recall
over the ignition switch in February, which has now encompassed 2.6
million vehicles. The cases have been brought on behalf of
individuals injured or killed in accidents involving recalled
vehicles, as well as by customers who say they suffered economic
losses like lower resale value. They claim GM hid knowledge of
switch problems for more than a decade.
GM has at least two strong defenses to those suits. One is that
so-called New GM, the company that emerged from bankruptcy in 2009,
can't be held responsible for the actions of Old GM, which is a
separate legal entity. Most of the vehicles with faulty ignition
switches were produced before the bankruptcy.
GM made this argument recently in motions filed in federal courts in
San Francisco and Corpus Christi, Texas. The company asked to put
those cases on hold, saying it intends to ask a bankruptcy court in
New York to decide whether such claims are barred against the
Another potentially strong shield for GM, legal experts said, is the
statute of limitations, which sets a deadline for filing certain
lawsuits. Those limits vary by state, but lawsuits over accidents
more than two or three years old may encounter that barrier.
A victims' compensation fund typically requires claimants to waive
their right to sue and give up the chance to pursue punitive
damages, a type of award not linked to an actual injury but designed
to punish companies.
Such waivers would protect the company from having to reveal
potentially damaging details about its actions and face juries that
could award victims huge sums in punitive damages.
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A fund would not, however, shield the company from government probes
and potential criminal prosecution. GM is under investigation by
federal prosecutors, regulators and Congress. The company is also
conducting an internal probe.
But funds are generally voluntary, and claimants can't be forced to
sign on, a problem BP confronted. While its fund processed more than
1 million claims and paid out more than $6.2 billion, it was still
hit with hundreds of lawsuits from those who were either ineligible
or unwilling for the fund.
Compensation programs come in many forms and can be set up in a
variety of ways. Congress created the fund for victims of the
September 11 attacks, and the White House worked with BP on its
compensation system. A company could also act on its own to set up a
There's another option — working with the U.S. Department of
U.S. Senator Richard Blumenthal, a Connecticut Democrat, suggested
that path on Wednesday, saying that GM should agree to make victim
restitution a part of any resolution to the ongoing criminal
That could be GM's best option, as working together with federal
prosecutors may help allay criticism that it is acting in its own
self-interest, said Adam Zimmerman, a professor at Loyola Law School
and tort law expert who worked on the September 11 fund. While
fairly unusual, such an agreement would give GM, and victims, "more
legal certainty and justice than its own fund."
(Reporting by Jessica Dye, editing by Amy Stevens)
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