GM Adviser Calls Talks With Accident Lawyers ‘Very Preliminary’

May 03, 2014 12:01 am ET

May 3 (Bloomberg) -- General Motors Co. held preliminary talks over injury and death claims stemming from defective ignition switches, the same day company lawyers went to court in New York to fend off car owners seeking economic damages from its massive recall.

The meeting over accident claims yesterday in Washington was “very preliminary,” Kenneth Feinberg, a lawyer advising the carmaker, said in a phone interview. “There were no settlement talks and GM has agreed to nothing.”

Bob Hilliard, a Texas attorney pursuing claims on behalf of death and injury clients described it as a “settlement meeting” to discuss compensation for about 300 victims he represents.

GM has recalled 2.59 million vehicles, saying faulty switches could shut off engines suddenly and prevent airbags from inflating. The defect has been linked to 13 deaths, and the Detroit-based automaker hired Feinberg to advise on how to compensate accident victims.

While Feinberg was meeting with Hilliard, GM lawyers were in a Manhattan bankruptcy court to fight economic damages suits. Although GM has agreed to address accident and death claims, it says court orders in its 2009 government-led bankruptcy absolved it of responsibility for financial damages. The company asked U.S. Bankruptcy Judge Robert Gerber to affirm that ruling.

$10 Billion

Claims for economic loss can eclipse what lawyers seek for injured clients. Hilliard, who has also brought a suit seeking damages for such losses, 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 that focuses on two fatalities in a 2006 crash.

Gerber yesterday held a hearing in his Manhattan courtroom to determine the best way to handle about 60 suits over economic losses. He said he will review the law and publicly available information before determining whether the car owners can pursue their own investigation of whether fraudulently withheld information about the switch defect in 2009.

Plaintiffs’ lawyer Ed Weisfelner said a fraud investigation would raise difficult questions of who at GM knew what, and when they knew it.

‘Joe the Mechanic’

“New GM may ultimately argue that Joe the Mechanic’s knowledge isn’t to be imputed into an executive office or a boardroom,” Weisfelner said to Gerber. He added that addressing the fraud issue would also raise questions over whether the U.S. Treasury Department, which was an intermediary in the bankruptcy, knew about the defect.

Gerber and the lawyers discussed a less difficult way for car owners to make their case. Instead of trying to prove fraud, plaintiffs’ lawyers said they would seek to prove customers were deprived of “due process” during the bankruptcy because, unaware of the ignition-switch flaw, they didn’t know to show up in court and assert their claims.

If the judge agrees that their rights were violated, customers should be allowed to bring claims against the new GM as a remedy, plaintiffs’ lawyers said.

‘Old GM’

GM says responsibility for economic losses 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 compensation fund after the 2010 Gulf of Mexico oil spill.

He and Hilliard disagreed on the substance of yesterday’s discussions.

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.

‘No Equivocating’

“There’s no equivocating about a compensation plan” for all victims, Hilliard said in a phone interview yesterday. “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.

Feinberg said he’s gathering compensation proposals and expects to have something to present to Detroit-based GM in a month. He said he met with Hilliard and three of the lawyer’s colleagues.

“There were no discussions of individual cases,” Feinberg said. “We talked concepts.”

The bankruptcy is In re Motors Liquidation Co., 09- bk-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).