By Amanda Bronstad, From The National Law Journal

Individuals who were injured or had loved ones killed allegedly because of a defect in the ignition switch of General Motors Co. vehicles must file claims through a victim-compensation fund before they can learn whether they have the option to sue.

That’s because U.S. Bankruptcy Judge Robert Gerber has scheduled oral arguments on Feb. 4 in GM’s motion to bar lawsuits for injuries or deaths that occurred before 2009, when it emerged from Chapter 11 bankruptcy. GM, which filed a final brief on the motion on Jan. 16, has argued that a provision in its bankruptcy exempts it from liability over those accidents.

In the meantime, alleged victims of the defect have until Jan. 31 to submit claims to a compensation fund administered by attorney Kenneth Feinberg. The program is limited to those with severe injuries or deaths from accidents involving only the 2.6 million vehicles that GM recalled worldwide over the defect last year—and excludes cases in which air bags deployed.

Under the fund’s rules, victims must waive their right to sue if they accept a payment.

Lawyers with clients potentially affected by the bankruptcy are encouraging them to submit claims.

If Gerber rules for GM, they “will be effectively kicked out of the courthouse and their claims may very well be forever extinguished. These are folks who suffered serious permanent injuries and had loved ones die at the hands of GM’s defect,” Robert Hilliard of Hilliard Muñoz Gonzales in Corpus Christi, Texas, who has more than than 140 clients potentially affected by the bankruptcy, wrote in an email to The National Law Journal.

As a result, he said, “all eligible or potentially eligible fund claims are being submitted.”

Jere Beasley, founding principal of Beasley, Allen, Crow, Methvin, Portis & Miles in Montgomery, said his firm and The Cooper Firm in Marietta, Ga., have filed 55 claims through the fund. But he said they have a “good number of potential claims” that haven’t been filed.

“We encouraged anybody who could be affected by the bankruptcy to file with the claim fund,” he said. He said he’s making sure “clients fully understand they run the risk of not taking what’s offered if it’s unreasonable.”

GM filed its motion in bankruptcy court once the fund began accepting claims on Aug. 1. On Jan. 13, Gerber, of the Southern District of New York, scheduled oral arguments on GM’s motion, setting aside Feb. 5 if necessary. A proposed schedule is due on Tuesday.

On Nov. 17, Feinberg extended the original Dec. 31 deadline “out of an abundance of caution.”

But the move followed pressure from Hilliard and U.S. Sen. Richard Blumenthal, D-Conn., who said the fund should remain open until Gerber rules on the bankruptcy issue. “Right now, injured parties do not know enough about their legal rights or facts to make an intelligent and informed decision,” Blumenthal said at the time.

Camille Biros, business manager at Feinberg’s firm, Feinberg Rozen in Washington, has previously said that claimants don’t give up their legal rights until they accept a payment—and they have 90 days to do so.

A representative for Feinberg declined to comment on the bankruptcy case or whether the deadline could be extended again. Feinberg and GM previously have said the deadline wouldn’t change.

As of Jan. 16, the fund had approved 121 claims, including 49 deaths. But 320 were rejected and 757 more were deficient. Another 857 remain under review and 763 lack documentation.

IMAGE: U. S. Bankruptcy Court for the Southern Discrict of New York. Photo: Rick Kopstein/ALM

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