GM Announces Settlement and Deferred Prosecution Agreement in Faulty Ignition Switch Case

Yesterday, General Motors announced a $900 million criminal settlement ending the government’s investigation into faulty ignition switches in the Chevy Cobalt, Saturn Ion and other small GM cars.

The settlement resolves more than half of the death and personal injury lawsuits in the ongoing multidistrict litigation and a shareholder class action in two civil settlements that will result in a $575 million charge in the third quarter, Law360 reports.

A deferred prosecution agreement filed in New York federal court confirmed the settlement. No individual GM employees were charged, and the Justice Department agreed to defer prosecution of the company for three years. If GM adheres to the settlement terms, which include independent monitoring of its safety practices, the company can have its record wiped clean, the New York Times reports. GM admitted that it failed to disclose the ignition switch defect to regulators in a timely manner and also misled consumers about the safety of the affected vehicles, according to the settlement.

GM was accused of ignoring warnings about the faulty ignition switch for more than a decade. The faulty switch, if bumped or jostled, can move to the off position, shutting off the engine and disabling the air bags and electronic systems such as power steering, which resulted in numerous crashes. Last year, as litigation and investigations mounted, GM set up a compensation fund for deaths and injuries linked to the faulty ignition switch. The number of deaths now acknowledged to  be linked to the defective switch has reached 124, according to the Times. General Motors has recalled nearly 2.6 million cars, but because many of these are older cars and may no longer be owned by the original buyers, it can be difficult to reach current owners. And because of the large number of cars involved in the recall, dealers have had difficulty getting sufficient replacement parts and scheduling all the repairs.

The civil settlements announced on Thursday resolve more than 1,380 death and injury lawsuits in the multidistrict litigation (MDL) and a shareholder class action filed in Michigan federal court, according to a statement from GM.

The MDL still includes economic loss suits, as well as 370 injury suits and 84 death suits. Injured plaintiffs who resolved their suits will be able to recover from the settlement based on their eligibility, which will be determined by an independent third-party special master, Law360 reports. “The parties to these agreements have resolved difficult claims without the burden, expense and uncertainty of litigation,” GM general counsel Craig Glidden said in a statement Thursday. There are still six cases on the ignition switch MDL’s trial docket, with the first trial scheduled to begin in January 2016, according to Law360.

 

 

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