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 Plaintiffs have now named Delphi, one of the largest auto parts
suppliers in the world, in at least two lawsuits stemming from the
recall. One was filed by a former Delphi employee whose daughter was
killed in a 2013 crash involving a recalled 2006 Chevy Cobalt, the
other by customers who claim the ignition problems caused their cars
to lose value.
Delphi's legal exposure may hinge on how much control it had over
decisions involving the design of the switch, and the terms of its
four-year bankruptcy, which ended in 2009.
While Delphi made the part, GM set the specifications and ultimately
approved its use, according to documents from civil litigation and
congressional investigations.
Delphi spokeswoman Claudia Tapia declined to comment, except to say
that the company was "working cooperatively with GM on this matter."
The company has not yet filed responses to the two lawsuits. GM
spokesman Jim Cain said that Delphi owned the intellectual property
for the switch but declined to comment on questions of liability or
lawsuits.
The February and March recalls center on concerns that ignition
switches supplied by Delphi could unexpectedly turn off engines
during operation and leave airbags, power steering and power brakes
inoperable.
GM has linked the defect to 13 deaths and has apologized for how it
handled the recall and said it is committed to helping affected
customers.
BANKRUPTCY SHIELD
Even though there's no doubt that Delphi made the ignition switch,
the company would likely benefit from defenses that are not
available to GM, which itself faces a spate of lawsuits over the
recall.
Like GM, Delphi went through bankruptcy and emerged in 2009 as a
different legal entity. In purchasing "old" Delphi's assets, the new
company largely shed liability for past actions. The terms of
Delphi's bankruptcy asset sale preclude "successor liability,"
meaning that the new entity would generally not assume liabilities
created by its predecessor.
GM went through a similar process and also has a so-called shield
from certain kinds of liabilities. But Delphi's shield is stronger.
GM agreed to modify the terms of its bankruptcy exit to allow "new"
GM to assume liability for post-bankruptcy accidents involving
pre-bankruptcy products.
Delphi, which emerged from a four-year trip through bankruptcy just
months later, did not.
For Delphi, "there's that potential that there's just no
responsibility at all" said Larry Coben, a plaintiffs' attorney with
the firm Anapol Schwartz, who represented GM product liability
claimants during its bankruptcy.
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To penetrate this shield, plaintiffs' lawyers could mount a
two-pronged argument. First, they would have to convince a judge
that Delphi was engaged in an ongoing cover-up of the defects, and
second, that because of this cover-up, the court should invoke
"successor liability" and allow the suits to proceed against "new"
Delphi.
LONGTIME PARTNERS
If plaintiffs can get past the bankruptcy issue, Delphi may also be
able to invoke what is known as the "component parts doctrine" and
argue that it doesn't bear the same responsibility as GM, since it
only supplied the part and was not responsible for the overall
vehicle.
But if Delphi is found to have played a meaningful role in the
design decisions, "then they're liable," said Mark Geistfeld, a
professor at New York University School of Law who specializes in
civil litigation.
Delphi began as a GM subsidiary and was spun off into an independent
company in 1999. GM is Delphi's largest customer, accounting for
approximately 17 percent of its net sales, according to Delphi's
latest annual report.
Delphi told congressional investigators that GM approved the
original part in 2002, despite the fact that it did not meet GM's
own specifications, according to a memo released by the U.S. House
of Representatives Energy and Commerce Committee.
During a hearing on the recall on Tuesday, Rep. Marsha Blackburn, a
Republican from Tennessee, said that both GM and Delphi engineers
worked on the switch.
The two companies, Blackburn said, "have a shared responsibility and
liability in this entire issue."
But that's easier said than proved in court.
"Ultimately, it would be up to a jury," said Lance Cooper, a
plaintiffs' attorney from Georgia who is involved in litigation
against GM. "If Delphi makes the switch and they know it's a bad
switch, they could point the finger at GM, but that's not going to
keep them out of a courtroom."
(Reporting by Jessica Dye; editing by Eric Effron and Peter
Henderson)
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