Crime Fraud Exception for GM’s Outside Counsel in Deadly Ignition-Switch Litigation?

The National Law Journal recently published a story about the possible application of the crime fraud exception to attorney client privilege in the deadly GM ignition-switch cases under the headline “What Did Counsel to GM Know? Plaintiffs allege that GM’s outside counsel, King & Spalding, encouraged GM to enter into confidential settlements to avoid revealing the ignition-switch defects. The plaintiffs allege that King & Spalding had a responsibility to tell federal regulators about the defect if GM did not. The underlying fact scenario of the case is a classic example of the interplay between attorney-client privilege and the exceptions to client confidentiality, and can serve as an example of the obligations of a lawyer or law firm employed by an organization under ABA Model Rule 1.13. One of the lawyer’s for the plaintiff’s claims that there is no evidence so far that King & Spalding advised GM to report the defect to the proper federal authorities, and that “[t]he only focus was settling cases and moving on.”

In January, the New York Times wrote a related story “Victims of GM Deadly Defect Fall Through the Legal Cracks” The article explains how damage caps in many states, combined with GM’s legal strategy to make suing it costly, prevented many injured and families of those injured and killed from obtaining lawyers willing to sue GM over the ignition-switches. Many injured persons and families of those who died found that when non-compensatory damages were capped at $300,000 to $400,000, GM was able to make suing it too costly for plaintiffs’ lawyers to take the cases. This was especially true when victims were young or elderly and had negligible economic damages. When GM did settle, often confidentiality agreements kept the dangerous ignition-switches secret. The story claims that at least 42 persons died in crashes linked to the faulty switches, and GM was able to keep the problem largely hidden for more than a decade. The New York Times story is useful to show how damage caps combined with certain defense strategies can have public safety consequences.

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