GM debacle sure to keep attorneys busy

April 14, 2014 Updated Apr 14, 2014 at 8:35 AM EDT

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April 14, 2014 Updated Apr 14, 2014 at 8:35 AM EDT

A car enthusiast since his teenage years, Timothy O'Connell can appreciate the beauty and class of an automobile. He also realizes the obvious need for them in modern society.

What the partner at Gelber & O'Connell said he worries about is making sure that carmakers act responsibly in keeping vehicles safe.

"When we get into our automobiles and turn on that ignition switch, especially with all the safety devices built in these days, it's not like back in the 1950s when there were no safety mechanisms. We expect that we're going to be able to get from point A to B safely," said O'Connell, a personal injury attorney whose career spans 30 years. "And shame on any corporation that is aware of a defect and fails to act and puts the consumers at risk."

Trust in the automotive industry has been somewhat compromised by recent allegations that for years General Motors hid the presence of a faulty ignition switch defect linked to at least 31 accidents and 13 deaths. The delayed recall of 2.6 million vehicles resulted in recent congressional hearings, forcing new CEO Mary Barra to answer for the actions of the company.

O'Connell, who is handling a lawsuit against GM for a defect in one of its recent automobiles - unrelated to the ignition switch recall - said there are numerous federal investigations into GM's actions. They include action by the Senate, House of Representatives and the National Highway Transportation Administration.

"What you're looking at is what they knew, when they knew it and who knew it," O'Connell said. "It's certainly garnering a lot of attention. There is public outcry."

According to the Associated Press, Barra, who was named CEO in January, said many of the answers Congress is seeking will come out in an internal GM investigation that should be completed in 45 to 60 days. GM hired an outside attorney to lead an investigation of the company's safety processes.

Barra also said she was unaware of certain details about GM's handling of the problem and that if inappropriate decisions were made, the company will take action, including firing those involved.

Missouri Sen. Claire McCaskill, chair of the Senate committee charged with overseeing the alleged malfeasance, recently said GM should face criminal charges if the allegations are found to have merit. She referred to a 2010 Supreme Court case, which considered corporations as people and therefore criminally accountable.

According to O'Connell, a pattern seemed to have developed over the years with accidents involving cars that shut down related to the ignition switch designed for the 2005 Chevrolet Cobalt, yet it was still not brought to light. It took nearly a decade before a recall was issued in February.

GM changed the faulty part in 2006 but did not change the identifying part number, which McCaskill alleged showed an intent to be deceptive.

"It will be interesting to see where these hearings and investigations go, as to whether or not there will be criminal implications," O'Connell said last week. "There clearly will be civil implications - it's just a matter of to what extent."

By law, corporations and their employees can be held criminally liable for conduct, he said. Both parties can be held responsible for an employee acting within the scope of his or her authority, which benefits that person, as well as the corporation. An accomplice also can be held responsible, he said, citing the example of when a supervisor helps with criminal conduct. There also can be what he called a conspiracy theory, which is when two or more people act in an ongoing criminal enterprise.

"A supervisor has a duty to act on behalf of the corporation," said O'Connell, noting that reports allege lower management knew about the problem but never brought it to light.

"There is a laundry list of people within a corporation that can be held criminally responsible," he said. "And there are numerous ways corporate employees and/or the corporation can be held responsible for criminal acts."

Corporations can also be collaterally responsible, and financial liability can come in different forms, he added. Blame can be spread across the corporation, as well as to parts manufacturers that were subcontracted. He said lawsuits also can result in loss or suspension of government contracts, which can hurt a company's bottom line.

In addition, there can be shareholder lawsuits if a corporation engages in conduct resulting in devaluation of stock. The GM share price went below $35 a share in recent weeks - about a 15 percent drop. Also a possibility is incurring civil penalties under the False Claims Act, which carries a penalty that would triple the value of the damage that is suffered, he added.

"You have extensive potential for civil liability," O'Connell said. "I can see potentially both coming to bear on GM, because this alleged blatant disregard for safety of consumers happened over a 10-year period of time."

Personal injury attorney James Morris, who has handled cases against Acura and Chrysler, said automakers diligently defend their products with great concern for their reputation. They use large, experienced law firms and the defense typically challenges that something other than the defect caused the accident.

"It's very difficult to take on an auto manufacturer in court," Morris said. "A lot of lawyers wouldn't because they know it's not like an insurance and auto accident case. How they normally defend these cases is they'll lay claim that the true cause of the accident was you were going too fast or it was icy. ... Maybe the car was defective when it was sold or maybe it wasn't maintained properly. They don't just settle a case because a case was brought."

This outcome could be different, though.

O'Connell said GM could potentially look for protection under bankruptcy laws - it filed for bankruptcy protection in 2009 and was taken over by the U.S. government, which owned a stake in the company until November. Or it could put up a defense that the statute of limitations has expired, Morris said, adding that the company will try to handle the situation with keen sensitivity.

"Whether they want to use every defense available to them might be another question because it may look horrible as far as the public perception goes," Morris said. "It's so public and so bad, they may not put up every defense they usually would ... because they know that their conduct was so bad that they don't want to have trials on the issue."

He sees the case being akin to the British Petroleum oil spill several years ago in the Gulf of Mexico. It's a PR nightmare for a big corporation, according to Morris.

GM may come forward and do something similar to BP by making a settlement in which the company sets up a fund and has someone oversee distribution of the money on a case-by-case basis, he said.

"BP knew they messed up with the oil spill and started a giant fund. They had a lawyer administer the fund and that lawyer reviewed the applications as to whether you'll be able to recover money from the fund," he said. "But even if they acknowledge responsibility and liability, they still have to have some criteria to qualify someone to recover something from the fund."

O'Connell said automakers issue recalls all the time but problems occur when the recall is late and the problem lingers.

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