Compensation Fund May Benefit Not Only Victims But GM, Too

General Motors has retained the services of Kenneth Feinberg, a Washington lawyer who has overseen compensation funds for victims of high profile catastrophes, to develop a program that may be used to compensate eligible claimants of its faulty ignition switches.

GM is faced with a class action lawsuit following its recall in February of 2.6 million vehicles due to problems with their ignition switches, stating that the “ignition switch torque performance in these vehicles might not meet General Motors’ specifications resulting in the non-deployment of airbags in crash events.”

The GM lawsuit alleges that GM had been aware of the GM ignition switch defect for at least a decade. “In 2004, before the launch of the 2005 Cobalt, GM became aware of incidents in which the vehicle engine would suddenly lose power in the event the key moved out of the ‘run’ position when the driver inadvertently contacted the key or steering column,” the GM class action lawsuit says. “An investigation was opened and after consideration of lead-time required, cost and effectiveness of potential solutions, the investigation was closed and no action taken.”

With the setting up of a compensation fund, claimants may have to waive their right to individually sue and forego the opportunity to pursue punitive damages. The waivers would protect the company from revealing possible damaging details that could award victims huge sums in punitive damages.

It should be noted, though, that any compensation fund is also voluntary and cannot force anyone to sign up.

A compensation fund, however, does not bar the government from probing for potential criminal prosecution. In fact, GM is now under investigation by federal prosecutors, regulators and Congress.

This brings to what others are saying as the best option for GM, working with the U.S. Department of Justice. A professor at Loyola Law School, Adam Zimmerman, said that working with federal prosecutors would rest any suspicion that GM is acting alone and not thinking of the victims.

According to reports, U.S. Senator Richard Blumenthal, a Democrat from Connecticut, said that GM should just agree to make compensation to victims a part of any resolution to the ongoing criminal investigation.

With dozens of lawsuits, GM is putting up two defenses. The first one refers to the New GM, arguing that the company that emerged from the 2009 bankruptcy should not be held liable for the actions of the old GM.

Another defense is the statute of limitations, which sets a deadline to file certain lawsuits, which may vary by state, but hovers within the range of two to three years.

The GM Ignition Switch Defect Class Action Lawsuit is Daryl Brandt, et al. v. General Motors LLC, Case No. 2:14-cv-00079, in the U.S. District Court for the Southern District of Texas, Corpus Christi Division.

If you owned or a leased a Chevy Cobalt, Pontiac, HHR, or Saturn, you may be eligible to join a free class action lawsuit over the GM ignition switch recall. Submit your claim at the GM Ignition Switch Recall Class Action Lawsuit Investigation.