General Motors Sued by Orange County DA for Unfair Consumer and Business Practices
Hours after a General Motors-hired arbitrator announced in Washington, D.C., there will be no limit on payouts to victims of accidents caused by flawed switches on GM vehicles, the Orange County District Attorney's office revealed it has filed a consumer protection lawsuit against the company in Superior Court in Santa Ana.
"This case is about having safe cars on the road, because cars carry our most precious cargo," says District Attorney Tony Rackauckas in the lawsuit announcement. "Orange County citizens rely on safe cars to transport and meet their families and friends, and get to work. Each driver of the road should be able to expect that the other cars on the road are safe and will not cause a harmful, preventable accident."
The Detroit automaker's spokespeople had no immediate comment on "People v. General Motors LLC" (Santa Ana), but they can be forgiven because it was a busy day for them. Besides the announcements by the arbitrator and district attorney, the automaker itself announced six new safety recalls affecting about 7.6 million vehicles made since 1997. The OCDA had noted GM already recalled 17 million vehicles in 33 actions during the first five months of this year.
Filing a local civil suit against a large automaker preparing to dole out billions to resolve separate legal claims is not new to the OCDA, which went after Toyota in 2010 on similar grounds. Toyota agreed in April 2012 to pay $16 million to settle the Orange County lawsuit--15 months before a federal judge in Santa Ana signed off on a $1.6 billion settlement of a nationwide class-action lawsuit against Toyota over sudden-acceleration issues.
The OCDA alleges that GM endangered motorists and the public by intentionally concealing serious safety defects to avoid the cost of a recall or replacing defective parts, according to the complaint filed June 27 in Orange County Superior Court. This not only put the public at risk through deception, the OCDA charges, but it created an unfair business advantage over competing automakers.
The safety defects Orange County prosecutors are zeroing in on include power steering, airbag and brake-related problems. Consumers were enticed under false pretenses to purchase GM vehicles the company knew were faulty, alleges the OCDA.
"GM is charged with continuing to sell and lease its vehicles while knowingly concealing and suppressing information about the defects from California consumers," states the lawsuit announcement. "The complaint charges GM with valuing cost-cutting over safety, and intentionally falsely represented to the public that GM-manufactured vehicles were safe and reliable, despite its knowledge of the defects, to avoid the cost and negative attention of a recall."
The complaint seeks to put GM on the hook for those who have been injured and killed, suffered property or economic damage and/or have been unable to sell or trade their cars.
The automaker is accused of unfair competition by training employees to get around regulators and recalls by never using the words "defect," "stall" or others that suggest vehicles were defective. GM is further accused of routinely choosing the cheapest part supplier without regard for safety and discouraging employees from acting to address safety issues.
Specifically, the OCDA filed a Complaint for Violations of the Unfair Competition Law and the False Advertising Law. Prosecutors want GM to "cease unlawful, unfair, deceptive, and fraudulent business practices as it pertains to both consumers and competitors" and to pay restitution for consumers, civil penalties and injunctive relief. No dollar amount is specified.
"We must encourage all businesses to be fair and live up to safety standards, and must not allow those engaging in unfair practices to punish those businesses that don't cut corners by compromising safety," Rackauckas reasons.
Hours earlier, at a National Press Club news conference, Kenneth Feinberg said GM will pay the compensation claims of people who were driving cars of a specific make, model and year known to have problems with ignition switches. When the switches failed, power was shut off to the power steering and airbags, which you'll recall are two of the parts specified by Orange County prosecutors.
"They are funding it without any cap on the aggregate [total] amount of money that's going to be available," said Feinberg, the compensation expert who previously handled the 9/11 and Boston Marathon settlements. "GM basically has said whatever it costs to pay all eligible claims, under the protocol [rules of the program] they will pay it. There is no ceiling on the aggregate dollars."
The OCDA may have just pushed that ceiling higher.
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