Automakers Could Face Billion-Dollar Lawsuits over Safety Recalls

Feb 17, 2015 04:00 PM EST | Jordan Ecarma

Automakers who are still dealing with fallout from last year's record recalls should watch their backs--billion-dollar verdicts were the outcome of some product-related lawsuits in 2014 for the first time in a decade.

In one example, the family members of a smoker that died at age 36 were awarded $23.6 billion, while the jury in another case awarded $9 billion to a New Yorker whose diabetes medication was allegedly tied to his bladder cancer, said a Bloomberg report.

An atmosphere of suspicion toward large corporations could mean trouble for companies like General Motors, whose 2.6 million-vehicle small car recall last year has been tied to at least 56 deaths and reportedly stems from corporate mismanagement.

Japanese supplier Takata has been under fire as well for its exploding air bags, which have faulty inflators that can launch shrapnel at passengers in the event of a crash.

"People now come into the jury room really suspicious, instead of wondering is this ambulance-chasing lawyer trying to squeeze money out of a company," Erik Gordon, law and business professor at the University of Michigan, told Bloomberg. "Jurors now come in expecting to hear a story of corporate wrong-doing and are being very receptive to these stories."

Even when punitive verdicts are reduced by judges, the negative publicity can have long-term effects for companies.

"It can affect their business," attorney Victor Schwartz told Bloomberg by phone. "It can affect the reputation of the company. The stock can go down."

Takata stock recently took a hit, investors bailing in the wake of reports that at least five people have died in vehicles equipped with the company's air bags.

GM has been working to mitigate any more fallout from its devastatingly poor decisions surrounding flawed ignition switches. Setting up a fund led by Kenneth Feinberg, the company has set aside an initial $400 million to compensate those injured and the families of those killed in its vehicles. To receive the monetary restitution, victims must agree not to sue GM.

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