Securities Regulation Daily Wrap Up, TOP STORY—E.D. Mich.: GM settles ignition switch action for $300 million, (May 20, 2016)

By Rodney F. Tonkovic, J.D.

A $300 million settlement in the General Motors faulty-ignition switch action filed in the Eastern District of Michigan has been approved. In exchange for dismissing the action with prejudice, GM will pay into an escrow account, to be distributed on a pro rata basis based upon the size of the claims (New York State Teachers' Retirement System v. General Motors Company, May 19, 2016, Parker, L.).

According to the complaint, between November 17, 2010, and March 10, 2014, GM touted the safety, quality, and reliability of its vehicles despite knowing that millions had faulty ignition switches. The complaint alleged further that GM's recall of affected vehicles and the subsequent reports of government criminal and civil investigations into the matter led to a sharp decline in GM's stock prices that wiped out billions in shareholder value.

GM announced the settlement of this action in documents filed with the SEC in September 2015. At the same time, the company announced that it had entered into a deferred prosecution agreement with federal prosecutors. The settlement was preliminarily approved on November 20, 2015.

Settlement. The court unconditionally approved certification of the class for settlement purposes and found that the proposed settlement is "fair, reasonable, and adequate." The court found that: (1) the settlement was the product of arms'-length negotiations; (2) the allegations raised many complex issues, the litigation of which would require substantial time and expense; (3) extensive discovery had been undertaken; (4) the plaintiffs' success or a favorable recovery was not guaranteed; (5) class counsel was in favor of settlement; (6) there were very few objections; and (7) the settlement served the public interest.

Attorney fees. The court then granted the lead counsel's request for attorney fees in the amount of 7 percent of the settlement fund ($21 million), plus interest. In finding the requested fee award to be reasonable, the court noted that the amount sought was considerably lower than the range generally accepted in the Sixth Circuit. A lodestar cross-check confirmed that the fee was reasonable. The court also granted a request for reimbursement of costs and expenses totaling $778,649.83.

The case is No. 14-11191.

Attorneys: Adam Wierzbowski (Bernstein Litowitz Berger & Grossmann LLP) E. Powell Miller (The Miller Law Firm, P.C.) for New York State Teachers' Retirement System. Raymond W. Henney (Honigman Miller Schwartz and Cohn LLP) for General Motors Co.

Companies: General Motors Co.

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