GM Facing a Snowstorm of Suits Over Its Ignition Switch Recall

General Motors faces a flurry of lawsuits resulting from its recall of 1.6 million cars for a faulty ignition key.

General Motors faces a flurry of lawsuits resulting from its recall of 1.6 million cars for a faulty ignition key. AP

Already facing an assortment of investigations into its handling of a deadly ignition switch problem – among them a criminal probe by the U.S. Justice Department – General Motors is facing a number of potentially costly law suits, including one that accuses it of securities fraud.

A GM shareholder filed a class-action lawsuit last Friday claiming shareholders were defrauded by GM due to its the handling of the ignition switch recall. Also on Friday, what is believed to be the first wrongful death suit was filed in Minnesota state court on behalf of two teenage girls killed in a 2006 crash of a 2005 Chevy Cobalt, one of the models GM recalled over ignition problems.

A number of plaintiffs’ attorneys are threatening to bring suit against the embattled automaker on behalf of owners and victims of crashes linked to the safety problem which has been blamed for at least 12 deaths and 31 crashes. GM has recalled some 1.6 million cars.

“GM’s illegal and immoral activities during (2010 through March 2014) effectively eviscerated GM’s reputation for safety, quality, value and performance, said the lawsuit filed in U.S. District Court by New York-based law firm Pomerantz LLP and by Cafferty Clobes Meriwether & Sprengel LLP in Ann Arbor, the Detroit News reported.

“Moreover, the news of the company’s recalls through a series of disclosures, and later reports of government criminal and civil investigations into the company, triggered a sharp decline in the company’s share price, wiping out billions in shareholder value.”

GM’s stock has dropped from $36.11 on Feb. 7, when the recall was announced to $35.01 on March 21, when the suit was filed. However, in the days after the initial recall, the stock began climbing to a high of $37.69 on March 7. It’s dropped a little over 9 percent since then, including being down from the Friday close today to $34.37 in mid-morning trading.

The drop from March 7 coincides with the news of a Justice Department investigation into the recall. The suit also names CEO Mary Barra, former chief executive Dan Akerson and other top officials including GM President Dan Ammann and North America Chief Alan Batey.

GM is still not commenting on any of the litigation.

“We will respond in due course,” said GM spokesman Jim Cain. “We are focused on getting the cars fixed and examining our internal processes to determine why this happened and making sure it never happens again.

In addition, to the class-action suit filed last week, Barra found out she will be testifying before a House subcommittee on Capitol Hill. The committee said it wants to know whether “this tragedy could have been prevented and what can be done to ensure the loss of life” doesn’t happen again, according to the Detroit Free Press.

Also filed on Friday in Detroit was an additional class-action suit led by the owner of a 2006 Saturn Ion in Tennessee. The suit claims that the automaker violated the warranty rights of the owners of the calls affected by the recall. The suit suggests that the owners, if they had known about the issue, wouldn’t have paid as much for the vehicles or wouldn’t have bought them at all.

One thing that could pose a problem for those suing GM is the fact that the maker’s bankruptcy settlement essentially bars lawsuits on behalf of those injured or killed in crashes linked to the ignition switch problem that occurred prior to 2009.

GM is under pressure to waive that immunity, with the Center for Auto Safety's president, Clarence Ditlow, recently calling on the maker to set aside a $1 billion victim’s fund. Barra has said the maker intends to put owners first as it tries to resolve the ignition switch issue, telling reporters last week: “We are focused on the customer and doing everything we can to get their vehicles fixed, and (we are) sorry for the loss of life that has occurred.”

GM has not said whether it will accept the idea of waiving immunity, however, but a number of legal observers suggest that question will be presented to the courts.

Even as the Justice Department ramps up its GM investigation, it has closed a long-running probe of Toyota, over the Japanese maker’s handling of a series of safety issues in 2009 and 2010. Toyota accepted a $1.2 billion fine and will be on probation for three years. Many observers believe that settlement could provide a model for any resolution of the GM probe.

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