Kenneth Feinberg, the lawyer who calculated payouts for victims of the Sept. 11 terrorist attacks, Virginia Tech shooting and BP oil spill, soon may begin trying to put a dollar figure on the damage inflicted by the faulty ignition switches in General Motors cars.
Meanwhile, GM is asking a bankruptcy judge in New York to quell the tide of lawsuits over the defect, a move that could make the process of compensating crash victims' families and owners of the defective cars faster, simpler and cheaper for the company.
GM has not announced specific plans for Feinberg, whose hiring it announced April 1. The company has said it is in early discussions and expects to reveal more of its plans around late May. A company spokesman declined to comment last week beyond a statement saying, "GM has both civil and legal obligations in regard to this matter" and hired Feinberg "to help us explore our options."
In an interview with CNBC last week, Feinberg said his impression so far from GM is that "they're asking for me to help develop some sort of program that might be used to compensate eligible claimants." He said issues such as how much money would be devoted to the effort and how damages would be calculated are unknown.
Sen. Richard Blumenthal, D-Conn., issued a statement last week urging GM to "do right by these victims and establish a compensation fund that will make them whole."
If GM establishes a compensation fund, it would apparently be a first for an automotive-defect case, said Kyle Logue, a professor at the University of Michigan Law School who specializes in tort and insurance law.
"It's good public relations for a company that does it, and it can also be good for the bottom line if it reduces lawsuits," Logue says. "Lawsuits take a long time, they take a lot of resources, and they produce a lot of uncertainty for a company. A compensation fund has the advantage of being certain and over relatively quick."
GM has said it expects to take a $1.3 billion charge against first-quarter earnings for costs related to the recall. Brian Johnson, an analyst with Barclays Capital, estimated in a report last month that GM's costs related to the ignition-switch recall could amount to $2.5 billion to $3.5 billion, including a potential compensation fund.
Toyota Motor Corp. agreed to pay $1.2 billion to resolve a criminal investigation related to its unintended-acceleration recalls and to settle class-action civil claims for $1.6 billion. Those payments are in addition to more than $48 million in regulatory fines and undisclosed settlements with individual crash victims and their families.
Calculating payouts related to GM's ignition-switch defect would involve a different set of complicated variables than what Feinberg dealt with in the 9/11 and 2010 BP oil spill matters. Presumably, he would need to determine which crashes were caused by the flaw or whether individual injuries and deaths are attributable to it.
The BP process involved about 100,000 claims that ultimately lacked proof or were found to be false, with some attempted claims resulting in federal indictments.
Government data indicate that the recalled GM models are involved in hundreds of fatal crashes each year, though GM has linked the defect to just 13 deaths and 35 crashes since 2004.
Research by Automotive News has identified 12 of those fatalities, with just two of them occurring after GM emerged from bankruptcy protection in July 2009.
Under the terms of its bankruptcy, GM is not liable for accidents occurring before that date.
A hearing is scheduled for Friday, April 25, on GM's request to have a bankruptcy judge uphold those terms and disallow lawsuits related to prebankruptcy incidents. Instead, GM may try to funnel most claims through a program administered by Feinberg.
Feinberg distributed $7 billion to the families of 2,880 people killed in the 9/11 attacks and 2,680 people who were injured.
The average award was $2 million for a death claim and $400,000 for an injury, he wrote in a 2012 book, Who Gets What: Fair Compensation after Tragedy and Financial Upheaval.
In the BP case, Feinberg approved payouts totaling $6.2 billion. He wasn't paid for the 9/11 job, but his firm collected about $29 million in fees from BP over two years.
He wrote that Gulf Coast residents angry about the oil spill made him "a human pinata," and he admitted making some mistakes, including "overpromising" what he could accomplish and underestimating the messiness of the claims process.