Source: The Wall Street Journal by Jeff Bennett
Hundreds of car owners suing General Motors Co. over its ignition-switch flaw got a boost on Friday when a New York judge ordered the auto maker to turn over internal files and documents about its handling of the defect to plaintiff attorneys.
U.S. District Judge Jesse M. Furman directed GM to turn over all documentation—including what it submitted to Congress and an internal investigation—to a panel of attorneys representing plaintiffs who have sued alleging economic losses, personal injury and deaths tied to the company's recall of older cars equipped with the switch.
The discovery order pertains only to those auto accidents that occurred after GM emerged from bankruptcy court protection in July 2009. Attorneys in a separate case have been stymied from pursuing discovery while U.S. Bankruptcy Court Judge Robert Gerber determines whether GM committed fraud during its 2009 bankruptcy.
GM is shielded from liabilities that occurred before its bankruptcy by a decision transferring them to "old GM," a company that now has few assets that could be used to paid claims. Judge Gerber, who presided over the auto maker's bankruptcy, has been asked to void that decision, but hasn't yet issued his decision.
Friday's ruling in essence paves the way for plaintiff attorneys to begin obtaining records they could use in cases before and after its bankruptcy petition. At issue is whether GM purposely chose not to disclose the ignition switch flaw that lower-level employees first flagged in 2005, which could be used to void the bankruptcy shield.
"The sooner we begin discovery, the sooner we will know if this criminal conduct and cover up made it to the head of the snake," said Texas attorney Bob Hilliard, who along with Steve Berman and Elizabeth Cabraser, represent the plaintiffs. "The significance here, and what GM doesn't like, is that we will now get access to more records."
GM contends its bankruptcy effectively shields the current company against any litigation connected to accidents or product litigation that occurred before July 2009. The auto maker said its executives never knew of the issue and didn't commit any fraud.
In a court filing last week, the company argued that Judge Gerber "had already been confronted with a request for discovery, and has unambiguously found that it will significantly disrupt the process in the bankruptcy court and slow the train down."
In both cases, GM is attempting to sidestep an avalanche of lawsuits connected to the recall of 2.6 million Chevrolet Cobalt, Saturn Ion and other older model cars to replace a defective ignition switch. Engineers discovered that if the ignition key was jarred, the switch could move from "run" to "accessory," cutting power to air bags and the electric steering.
The company established a victims' compensation fund in August operated independently by Washington, D.C., attorney Kenneth Feinberg. Mr. Feinberg is evaluating claims by any driver, passenger, bystander or occupant of a third party vehicle who claimed they were injured as a result of an ignition switch related crash. Mr. Feinberg will ultimately determine the death count which now stands at 19. Those who accept GM's payouts must waive litigation against the company.
GM had hired former federal prosecutor Anton Valukas to lead an investigation into why it took the company so long to initiate the recall. That investigation lead to the dismissal of 15 employees and stark criticism of GM for a culture that allowed employees to take no action when problems were spotted.