GM Discussing Settlement of Faulty Switch Cases, Lawyer Says

May 02, 2014 4:32 pm ET

(Updates with bankruptcy rulings in seventh paragraph.)

May 2 (Bloomberg) -- General Motors Co. held settlement talks over injury and death claims stemming from defective ignition switches that led to the recall of millions of vehicles, according to an attorney who is suing the company.

Bob Hilliard, a Texas attorney pursuing claims on behalf of hundreds of death and injury clients, said he met today in Washington with Kenneth Feinberg, the lawyer hired by GM to advise on its recent recall.

According to Hilliard, the lawyers discussed “full resolution” of claims. “I expect GM to pay full and complete compensation for every single qualified claim.”

“It would be inappropriate to comment until Mr. Feinberg has completed his work,” Kevin Kelly, a GM spokesman, said about the talks. Feinberg didn’t immediately return a call to his office seeking comment on the talks.

Any settlement discussions would bring the company a step closer to resolving claims stemming from the recall of 2.59 million cars. GM initiated the recall this year, saying faulty ignition switches could shut off engines while driving and prevent airbags from inflating. The defect has been linked to 13 deaths.

Economic Damages

Hilliard is also seeking billions of dollars on behalf of car owners who say they suffered economic damages because of the recall. While GM has agreed to address accident and death claims, it says court orders in the 2009 bankruptcy absolved it of responsibility for financial damages. The company has asked U.S. Bankruptcy Judge Robert Gerber to affirm that ruling.

Claims for economic loss can eclipse what lawyers seek for injured clients. Hilliard told Bloomberg he wants as much as $10 billion so customers can buy new vehicles.

By contrast, other clients of his are seeking $50 million to $100 million, plus punitive damages, in a wrongful-death suit against the automaker that focuses on two fatalities in a 2006 crash.

Gerber today conducted a meeting in his Manhattan courtroom to determine the best way to handle about 60 suits over economic losses. He said he will review bankruptcy law and publicly available information before determining whether the car owners can pursue their own investigation of whether their claims were properly handled in the bankruptcy.

‘Old GM’

GM says responsibility for economic loss claims lies with the “Old GM,” the remnants of the carmaker that were spun off and left to liquidate in bankruptcy. Recoveries from Old GM’s estate would probably be lower, as a trust to repay creditors has already been depleted. They would also come at the expense of other unsecured creditors.

Feinberg, 68, has managed funds to compensate victims of the Boston Marathon bombing and the Sept. 11 terrorist attacks. BP paid Feinberg’s law firm as much as $1.3 million a month to run a $20 billion fund for casualties of the 2010 Gulf of Mexico oil spill.

Hilliard said Feinberg, whom he knows from the BP case, invited him to Washington for the meeting because he has a significant number of clients. Feinberg discussed individual claimants, including a man whose paralysis involved $15 million in lifetime care, Hilliard said.

“There’s no equivocating about a compensation plan” for all victims, Hilliard said in a phone interview. “GM isn’t asserting any bankruptcy shield” by saying it doesn’t owe anything to people who were injured or killed before 2009, he said.

--With assistance from Tiffany Kary and Patrick G. Lee in U.S. Bankruptcy Court in Manhattan.