General Motors has closed its settlement fund to victims of ignition-switch-related injuries. At the fund’s submission deadline last Saturday, administrator Kenneth Feinberg had accepted claims for 51 deaths and 78 injuries involving 2.6 million GM cars, which were recalled at the start of 2014 for defective ignition switches that can shut off the vehicles while driving.
The deadline ended the six-month window for submissions, which was extended by one month to Jan. 31 after reports surfaced that GM had never notified the family of one of the first victims. Its passing means GM won’t accept any new claims. It doesn’t mean that Feinberg, who managed the September 11th and Boston Marathon bombing funds, is done sorting through the 1103 claims he’s currently reviewing, or the 1502 additional claims awaiting documentation. In quarterly SEC filings, GM has allocated $600 million to the victim fund but has said whatever total amount Feinberg awards would be unlimited.
GM is still facing at least 178 individual and class-action cases from across the country alleging economic and physical harm that have been grouped into a multi-district litigation. New York judge Jesse Furman has yet to decide when these cases—which in total allege damages up to $10 billion—will be tried before a single court. Another 17 class-action lawsuits in Canada and investigations by 48 state attorneys general are pending. The Department of Justice is also leading a criminal investigation against GM.
But GM’s bankruptcy clause, which the automaker has filed multiple “motions to enforce,” is currently shielding the company from liability from most, if not all, of these court actions. Judge Robert E. Gerber, the same judge who presided over GM’s original bankruptcy filing in 2009, has yet to issue a final ruling on whether this clause legitimately protects the automaker from having to pay out large sums of cash. In a recent November 5th filing to the U.S. Bankruptcy Court in the Southern District of New York, GM was stiffly two-faced on the matter.
On one hand, it says the remains of old GM—a trust set up in 2011 to pay creditors from new GM’s stock—has $945 million left in its coffers and should be the company’s only entity charged with paying valid claims.
But in the same filing, GM says that money isn’t enough to cover the proposed damages from the multi-district legislation and that such payments would “create an unmanageable, uncontrollable situation for the court.” In other words, GM has already paid past creditors about $2.1 billion in stock options and warrants—amounts based upon what GM thinks it will have left to pay future lawsuits and debts—and thinks the new cases would kill the fund and those “binding contractual commitments” entirely. It would also be unfair, GM says, to pay the new plaintiffs in full when the company’s previous creditors received only a fraction of their actual losses. This could bring additional litigation to clog the courts, GM says. Another bankruptcy hearing on this matter is scheduled for February 17th.
- Inside NHTSA: What Happened with GM Recalls Could Easily Happen Again
- GM Ignition-Switch Engineer Speaks After Months of Silence: “I Did My Job”
- NHTSA: GM Finally Has Enough Ignition Switches for Every Recalled Vehicle
Until the judges smack their gavels to the contrary, GM remains in a cozy position of blocking itself from lawsuits seeking many times what it’s paying under the victim settlement fund. And despite posting profits and record sales, GM can continue, at least in court, to look like the weaker man on the field.
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