General Motors recently announced that it has settled over 1,400 individual lawsuits brought in connection with defective ignition switches installed on numerous makes of the company’s vehicles, which caused the failure of power brakes, steering, and airbags, and reportedly resulted in at least 124 deaths. The announcement of the mass settlement came on the same day that the Department of Justice announced that it had completed a criminal probe into GM, resulting in a deferred prosecution agreement and a $900 million forfeiture paid to the federal government. As part of the agreement, GM acknowledged that it failed to disclose defects with its vehicles and withheld information from the government.

 

General Motors Waited Twelve Years to Notify the Public of the Defects

The defective switches at issue were installed on cars manufactured between 2003 and 2007, including the Chevrolet Cobalt, the Pontiac G5, the Saturn Ion, the Chevrolet HHR, the Saturn Sky, and the Pontiac Solstice. The Department of Justice found that GM had been aware of problems with the ignition switch going as far back as 2002, before the first vehicles were sold, but production nonetheless went forward despite the fact that the switches fell below GM’s own internal standards. GM became aware as early as 2004 that the faulty ignition switches were resulting in sudden stalls and engine shut-offs in the car, but no decision was made to discontinue production. By 2012, the company learned of deaths and injuries that were being caused by the ignition switches, but, yet again, production continued. Not until 2014 did GM decide to notify the National Highway Safety Transportation Board and to alert the public. The company recalled 26 million cars in 2014, but by that point, hundreds of accidents reportedly due to the defect had already occurred.

 

Victims’ Compensation Fund to Pay $625 Million

While GM acknowledges that 15 deaths occurred due to the faulty switches, authorities running an outside victim compensation fund established by GM believe that 124 deaths are attributable to the defect. The victim compensation fund will reportedly pay $625 million to victims and/or their families to settle the 1,400 claims. Plaintiffs are not required to accept the terms of the settlement, however, and 400 individual lawsuits against GM will proceed, including 84 cases involving deaths, with the first trial beginning in January 2015. The cases have been consolidated in the Southern District of New York, the federal district court in Lower Manhattan.

 

Despite Deaths, General Motors Avoided Criminal Prosecution

Product liability cases such as this one do not generally involve federal criminal and civil investigations, but the Department of Justice became involved here, likely due to the scope of the company’s wrongdoing and the failure to disclose required safety information to the government and to the public. As part of its settlement with the government, GM agreed to a deferred prosecution agreement with the Department of Justice, which in this case means the government will defer prosecuting the company for three years, and will dismiss the criminal charges at that time if the company completes the requirements of the agreement.


The Department of Justice specifically found that GM engaged in an attempt to conceal material facts from the National Highway Transportation Safety Board and also committed wire fraud. As part of the agreement with the Department of Justice, GM will pay $900 million in fines to the federal government and is required to hire an independent monitor to oversee safety procedures at the company. Notably, the company avoided criminal prosecution and none of the individuals at the company, including 15 employees fired in connection with the wrongdoing, currently face criminal charges for their actions