By Jessica Dye, Julia Edwards and Paul Lienert
(Reuters) - Two families who settled with General Motors Co over fatal crashes linked to faulty ignition switches are considering trying to overturn the agreements, after the company disclosed it had known about the issue for years.
The lawyer of one family said he could challenge the agreement, alleging that the automaker fraudulently covered up the problem, and his clients intended to try. A second family also told Reuters it is preparing to try to break the deal and then sue GM. Neither family has yet done so, however, and trying to win such actions will be difficult.
To undo a settlement, plaintiffs would have to convince a judge that they were intentionally misled or defrauded by the other party, according to legal experts and plaintiffs' lawyers. If the families were successful in setting aside the settlements, they could then sue GM.
GM, which on Friday increased a global recall of vehicles because of the ignition switch problem by almost a million to nearly 2.6 million, declined to comment on specific suits or pending litigation. In a statement it said: "We deeply regret the circumstances that led to the recall. We have launched an internal review to give us an unvarnished report on what happened. We will hold ourselves accountable and improve our processes so our customers do not experience this again."
Courts are often reluctant to undo settlements, which are the main means of resolving personal-injury and wrongful-death cases, said Frank Vandall, a professor at Emory University School of Law and a product-liability expert.
Each settlement would have to be challenged individually, since the deals depended on the laws of the state where the settlement was reached, the facts of the case and the terms of the individual agreement.
With a sophisticated litigant like GM at the table, it's likely any agreement would be "very well-drafted and difficult" to break, Vandall said. Breaking a settlement also may mean that the family has to return any money they received, depending on the terms of the original agreement.
But if it emerges that GM continued to sell cars with the faulty ignition switch despite having evidence that it was a hazard, and intentionally misled opposing lawyers or omitted critical information, "judges might well set aside the settlement," Vandall said.
Attorney Bob Hilliard, who is representing the family of Hasaya Chansuthus, who was killed in the 2009 crash of a 2006 Cobalt, said he believes the family has a case for fraud because GM hid the ignition switch issue. The family settled with GM in early 2011 and now they intend to overturn the deal and sue, he said.
"If GM conceals negligent facts...and they use that to pressure a settlement for pennies, while at the same time preventing any reasonable plaintiffs' lawyer from discovering that the Cobalt had a death-causing defect, then that's fraud," said Hilliard in an interview. "The law abhors fraud."
Another obstacle facing plaintiffs who seek to sue GM is that the automaker is not responsible under the terms of its bankruptcy exit for legal claims relating to incidents that took place before July 2009. Those claims must be brought against what remains of the "old" or pre-bankruptcy GM, legal analysts say.
To get around this difficulty, plaintiffs may attempt to argue that they should be allowed to sue the "new" GM over pre-bankruptcy actions. In doing so, they could invoke the theory of "successor liability," meaning that the new GM should be held accountable for claims against the former company because they believe GM committed fraud, legal experts say.
FIRST DOCUMENTED DEATH
The adoptive parents of Amber Rose, who died at the age of 16 when the airbags failed to deploy as she crashed her 2005 Chevrolet Cobalt into a tree in Dentsville, Maryland in July 2005, say they are planning to try to overturn a settlement and sue GM. They reached an agreement with the automaker in February 2006 over what has become the first documented death linked to the faulty ignition switches.
Both Jim Rose and his former wife, Terry DiBattista, say they were never informed about the potentially defective ignition switches. GM had flagged problems with the switch to Chevrolet dealers in a service bulletin in February 2005, five months before Amber's fatal crash.
But the GM lawyer who dealt with the Rose case did not mention the switch, presenting the settlement offer as "a courtesy" to her family, DiBattista said.
"I just found out three weeks ago about the ignition switch" that in some cases could shut the engine and airbags off in the Cobalt and other GM small cars, DiBattista told Reuters.
Amber's birth mother, Laura Christian, is friends with DiBattista. The pair are traveling together with parents of other crash victims to Washington, DC, where lawmakers are holding hearings on the GM recall next week.
Christian said she is also planning to sue the automaker, even though she didn't seek a settlement after her daughter's death. Christian said she first contacted GM in September 2005, seeking to find out why the airbags did not deploy, "but nobody would ever speak to me."
If the families go ahead with the lawsuits it would add to mounting litigation and a public relations crisis at the company, which faces congressional investigations, a criminal probe by the Department of Justice, an investigation by the National Highway Traffic Safety Administration, and an internal probe of its own.
Attorneys in several states have filed class action suits against GM, which also faces at least two wrongful-death suits from the families of crash victims who have not settled. Lawsuits in California and Alabama allege that GM knew of ignition-switch problems as early as 2001, but failed to take proper steps to fix the defects.
It's unclear how many out-of-court settlements GM may have reached with families over accidents now linked to the faulty ignition. Reuters learned of at least three such settlements, which are subject to certain confidentiality agreements. GM declined to comment.
In addition to the two families who settled and are now considering suing, the family of Brooke Melton, who was killed in a 2010 accident involving a 2005 Cobalt, also reached a settlement but currently is not planning to sue, according to the family's attorney Lance Cooper.
(Editing by Martin Howell and Peter Henderson)