Fantasy sports meets first large challenge

Published: November 13, 2015

WILL HORN
Business Editor

In the long and ongoing General Motors ignition switch scandal, a recent update says that GM may face punitive damages costing the company millions or possibly billions of dollars. For those who have not heard of the scandal, it started back in 2001 when GM originally detected the defect in the switch. Over the next few years, GM continued to ignore the problem at hand and still sent out cars with the known defect. In 2013, things started to come to light, and over the next year and a half, GM recalled almost 3 million cars for possible ignition switch defects.

The actual defect was that the ignition switch was about 1.6 millimeters too small. This meant the car could shut off without warning while the car was still in motion. Airbags and other safety features would be disabled since the car was no longer on. GM originally claimed that this switch was the cause of 31 crashes and 13 deaths; however, upon further investigation, the death toll has now reached 100. The eligible injury claims have also risen to a staggering 184.

The company has set up a compensation fund to attempt to regain favor with customers. The fund is run by two outside lawyers, Keith Feinberg and Camille Biros, and pays out compensation to victims involved in crashes caused by the faulty switch. Feinberg is still sorting through claims to determine who is eligible. GM recently paid another $150 million into the fund, raising the fund to a total of $550 million. GM has no say in who gets compensation and Feinberg and Biros do not need to explain their reasoning to GM.

Now the company may face punitive damages that come from individual lawsuits brought on by victims of the car crashes. So far, GM has paid a $35 million dollar fine to federal regulators for not alerting them of the faulty switch in time and has also agreed to a $900 million settlement of a criminal case brought against them by the U.S. Department of Justice.

Robert Hilliard, a Texas lawyer representing individuals suing GM for trouble caused by the faulty ignition switch, believes this is a step in the right direction toward properly compensating victims. Punitive damages are used to punish companies for knowingly doing something wrong, like sending out cars with a faulty switch and not recalling them.

GM has been able to avoid these damages thus far due to a technicality created during the $50 billion taxpayer bailout back in 2009, which restructured the company creating Old GM and New GM. Responsibility for future liabilities was placed on GM, but older liabilities could not be carried over until now. Judge Robert E. Gerber has now ruled that since pertinent information about the faulty switch could have been carried over by employees, the liability can now be placed on New GM. Gerber did state, however, that the damages are only limited to the extent of GM’s knowledge and conduct in this situation.

Students seem to be in agreement with Judge Gerber’s decision. Junior Nick Gambal has this to say about the whole situation:

“GM is only sorry because they got caught. I bet you there are so many other examples of this that were never made public because they were paid off beforehand, settled in court or never even got there. Just like with recent scandals in sports, business, politics or entertainment, usually those who apologize to the public are only doing so because they got caught. It is funny how this works with the media because GM or whoever will always have to issue a statement saying they are sorry, they will not do it again, and pay whoever off. However, what is most important is if they actually learned from the situation, and only time will tell. Sadly, the only way to find out if they do not learn is if something like this happens again.”

Similarly, junior Jordan Den Herder says, “It’s totally reasonable for GM to be hit so hard, the federal government needs to send the message that things like this won’t stand. Unfortunately, corporate greed gets the best of big companies and they get so selfish as to devalue a life and it should definitely be stopped abruptly, any way possible.”

Finally, junior Katie Twigg summarizes it perfectly saying, “They have a corporate and ethical responsibility to all their customers the moment someone buys one of their products. They failed to follow these responsibilities due to their lack of honesty and therefore should face punitive damages. They lost trust in their customers and need to also find ways to gain that trust back. It may be an uphill journey for them but if they want to regain trust it is a journey they have to take.”

The company still faces hundreds of cases waiting to be settled and has already agreed to pay $575 million in settlements for 1,385 plaintiffs who were not entitled to the compensation fund. They are also now facing a shareholder lawsuit that says the company’s actions caused the value of the stock to go down.

Contact the writer: harry.horn@scranton.edu

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