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McClatchy-Tribune  07/17/2014 5:17 PM ET
GM will not waive bankruptcy shield against pre-2009 victims who sue [Detroit Free Press :: ]

July 17--WASHINGTON -- General Motors' top lawyer -- under harsh questioning by U.S. senators -- acknowledged today that the company will not waive its bankruptcy protection in dealing with court litigation linked to claims involving its millions of vehicles recalled for a safety defect.

Michael Millikin's statement -- a simple "we will not" to Sen. Richard Blumenthal's question of whether GM would waive its immunity -- came even as senators roundly criticized the company's legal team for its handling of the crisis. U.S. Sen. Claire McCaskill, D-Mo., who chairs the Senate Consumer Protection Subcommittee holding the hearing, even called for the general counsel's firing.

"It is very clear that the culture of lawyering up and whack-a-mole to minimize liability in individual lawsuits killed innocent customers of General Motors," said McCaskill. Even so, GM CEO Mary Barra -- testifying for the fourth time before Congress on the recall -- praised Millikin's "high integrity" and said people in his own department held information about the defect from him.

Millikin's admission that GM intends to use its bankruptcy shield was its first such acknowledgment, though it was widely expected. Months ago, the company indicated it planned to use immunity from product liability claims for incidents prior to July 2009 to shield it from economic-loss claims. Millikin's statement suggested that could also apply to wrongful death claims.

GM has created an unlimited compensation fund to reach settlements with victims of crashes related to the defect. The company will not use bankruptcy shield with those who seek compensation through that fund. It will even allow people who had earlier reached settlements with the company to reopen them. But in order to accept a settlement, the victim or the family of a person killed will have to agree not to sue GM in court.

But those claims won't include those involving economic loss, said compensation expert Ken Feinberg, who has been retained by GM to administer the fund. Under questioning by McCaskill, he acknowledged that if a family is interested in punitive damages they are better off going to court.

In court, however, those claims could potentially run up against the bankruptcy shield. Feinberg assured members of the Senate panel that he will work with claimants to make sure their claims are as strong as possible and that he would "make sure that compensation is generous and is appropriate and is adequate."

The hearing came as Senate Democrats are in the early stages of talkng up legislation in response to the recall, which is linked to defective ignition switches that can be inadvertently jostled out of position. Some lawmakers are agitating for increasing the maximum fine from $35 million to $300 million; providing for criminal penalities for executives who keep potentially deadly safety information from the public; and increasing reporting requirements for automakers.

GM's own internal investigation, conducted by former U.S. Attorney Anton Valukas, found widespread indications that various departments in the company did not share information and that warning signs over the course of a decade were not appropriately acted upon.

"As I stated earlier, we will do all we can to make certain that this does not happen again," Barra told the subcommittee.

For the first time, Rodney O'Neal, the president and CEO of Troy-based Delphi, which supplied the ignition swtiches, said his company is cooperating with investigators but had only a limited role of providing the parts in question.

Despite indications Delphi had supplied GM a switch with torque resistance below specifications, he said GM had called for "a switch that turned smoothly." He also said it was ultimately GM's responsibility to ensure the part was safe and interacted appropriately with other equipment.

GM, he said, "knowingly approved a final design that included less torque than the orginal target."

GM first announced a recall of the affected vehicles in February, saying the cars can stall and air bags could be disabled if the switches were knocked out of position. Delphi said it has already shipped more than a million new switches to dealers to fix the defect.

As the hearing got underway, Feinberg described the program under which victims and their families can apply for compensation between Aug. 1 and Dec. 31. They can show evidence that the defect caused their injury or their loved one's death.

Questioned by the panel's top Republican, Sen. Dean Heller of Nevada, Feinberg said it is only limited to injuries or death -- not cases where people's cars may have been damaged, but they or other passengers were unhurt. Feinberg said those people would have to seek redress in the courts.

"I'm not saying those folks don't have a valid claim, I'm saying they don't come to this program," Feinberg said. He said he also wants to see claims where a victim claims the defect caused a crash where air bags did deploy, though they would face a higher hurdle of proof.

Millikin came under fire for indications in the Valukas report showing multiple instances where lawyers in his department were aware of claims involving the defective part, but never brought it to the attention of engineers or other executives. Just this week, the New York Times reported that the company responded to death inquiries by federal regulators over the years by sometimes claiming attorney-client privilege or otherwise refusing to respond to questions.

"We had lawyers at General Motors who didn't do their jobs," Millikin said.

"This is either gross negligence or gross incompetence on the part of a lawyer," said McCaskill, adding later, "How do you have a system in place that doesn't account for that?"

Contact TODD SPANGLER at 703-854-8947 or at tspangler@freepress.com

 

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