The failure to include an element of punishment in the GM compensation plan is disturbing. It’s most significant that General Motors own lawyers have told the automaker that it will face punitive damages over the ignition switch defects if GM’s customers’ cases are allowed to go to trial. Because of that, the lawyers told GM there was an urgent need to settle the lawsuits. All of the revelations were contained in the Valukas report. The automaker, which has said it wants to help its victims, is facing new and revived suits over injuries and deaths as a result of its knowledge of a serious design defect, a massive cover-up by the company, followed by the recall of 2.59 million cars.
The Melton case, brought by Lance Cooper on behalf of Ken and Beth Melton, was settled for a confidential amount in September of last year. GM has now revealed the amount, which was $5 million. The settlement came after a GM lawyer warned the automaker of a “substantial adverse verdict” if a jury ever heard that the automaker knew of the defect for nine years and didn’t fix it. This shocking revelation was mentioned in detail in the Valukas report. Philip Holladay of King & Spalding, one of GM’s regular outside law firms, warned the automaker that it needed to settle cases to avoid paying large punitive damages. The Valukas report said that Holladay wrote that “this (Melton) case needs to be settled.”
It was most interesting to see how GM handled this damages element in the compensation plan. To put it bluntly, it was totally ignored. I believe that the automaker will be hit with substantial punitive damages if any of the victims’ lawsuits are ever heard by a jury. In at least four cases since 2010, GM was warned by outside lawyers that jurors might award crash victims “substantial” or “punitive” awards if they heard of the company’s failures to fix a design defect they had known about for a long time. Even though the Valukas report barely scratched the surface, it did reveal how truly bad GM had been for a period of 11 years.
Most all independent observers, the amount to settle cases went up significantly once the Valukas report was released I believe the questions and answers during the congressional committee hearing on June 18 made matters even worse for GM. Nothing has happened since the hearing to change my beliefs. In fact, things have gotten even worse for GM on almost a daily basis.
Mrs. Barra has admitted to a history of incompetence and negligent conduct at the company she now heads. She has repeatedly said the company will establish a compensation fund for its victims, which will help families of persons who were killed and the victims who were injured. While that sounds good, and is part of a “fix GM” public relations campaign, I do not believe a fund under the complete control of GM will work. I believe any compensation fund must be court-supervised to insure fairness to all concerned.
It is critical to make sure GM’s “corporate feet” are held to the fire for its wrongful conduct and for its failure to report a known defect that caused hundreds of deaths and many serious injuries. To be effective, and achieve the desired purpose, any settlement with GM must factor in the element of punitive damages. Not only should the families of victims be compensated, but a company that covered up for more than a decade a known and most serious safety problem that killed a tremendous number of innocent people, must also be punished severely.
The more we learn about what GM knew about the defect and cover-up – who all knew about it, and who actually made the decisions that were made, putting profits before safety, the more certain it is that GM deserved to be punished. Our goal is to make sure not only that all of our clients are treated fairly, but that GM is taught a lesson about safety. The involvement of the court system is critically important. Completing the necessary discovery to get to the bottom of GM’s safety problems is badly needed. While the Valukas report is helpful, it leaves too much unanswered.
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