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Spangenberg, Shibley & Liber, LLP | Jun 6, 2014

When it's easier to ask forgiveness by consent

Categories: Defective Products, Auto Accident

GM recently settled claims asserted by the National Highway Traffic Safety Administration (NHTSA) that GM hid from consumers a known defect with ignition switches in some GM vehicle models.

That defect came to cause the death of several driversafter GM became aware of the defect and failed to take action or report the danger. GM will pay the NHTSA $35 million and will also agree to comply with an NHTSA investigation and provide periodic reports to the NHTSA on certain required safety initiatives.

Unlike some of the more egregious decrees entered into by the SEC, FCC and FTC, this decree at least required GM to admit that they broke the law. Specifically, GM admitted that they did comply with federal laws that require companies to notify the NHSTA within five business days of determining that a safety-related defect exists. That said, because the decree does not find any specific facts with regard to when GM knew about the defect or for how long they concealed it, it is of middling value to plaintiffs with wrongful death or injury actions currently pending.

Decrees like this are generally good for shareholders, who value the certainty they provide as to the loss and the sense of finality they sometimes represent. They are, however, almost always bad for consumers and the public generally. They allow the wrongdoing company to escape with a financial slap on the wrist, while avoiding any meaningful admission of wrongdoing. This is of great importance where, as here, an admission of fault could have significant collateral consequences in pending civil actions brought by those actually harmed – here the families of those lost due to GM’s disregard for safety. Elizabeth Warren has spoken powerfully about this issue with regard to the SEC and has gotten some traction in getting that agency to require admissions of wrongdoing in certain types of cases. Here’s hoping other federal agencies start to do the same.

Photo courtesy of AAA Auto Injury Clinic