Crisis handler Kenneth Feinberg hired to guide GM through maze of lawsuitsGeorge Conk in The Detroit Free Press, April 04, 2014
Kenneth Feinberg’s new mission is to guide General Motors through the minefield of lawsuits and potential criminal charges arising from the ignition switch recalls and learn from missteps in his other high-profile roles, according to legal experts who have followed his performance in previous disasters.
The 68-year-old Massachusetts native joins Anton Valukas, the chairman of the blue chip Jenner & Block law firm, and former Clinton White House media adviser Jeff Eller in a triumvirate of high-priced experts whose mission is to manage risk and contain damage.
Feinberg cultivated a mostly positive reputation as special master of the U.S. government’s September 11th Victim Compensation Fund. The Obama Administration also appointed him administrator of the BP Deepwater Horizon Disaster Victim Compensation Fund. Now he oversees Massachusetts’ One Fund — the victim assistance fund established in the wake of the 2013 Boston Marathon bombings.
He’s not a total stranger to GM, having served as the Treasury Department’s initial “pay czar,” restricting pay increases for executives at banks and automakers bailed out by the Troubled Asset Relief Program. That meant for a brief period he held up raises for current CEO Mary Barra and about two dozen other GM executives.
So the skinny on him is if the Old Testament’s Solomon was not available, Ken Feinberg is the next best choice. But he doesn’t come cheap. And he does have his critics.
BP paid his law firm, Feinberg Rozen, $850,000 a month to administer the $20-billion Gulf Coast Claims Facility, a pool of money set aside to compensate about 500,000 people whose businesses and homes were damaged by the April 2010 explosion, fire and capsizing of the Deepwater Horizon offshore drilling platform. In early 2011, BP raised that payment to $1.25 million a month.
GM declined to say how much it will pay Feinberg. Spokesman Greg Martin said the company does not have to disclose any payment to Feinberg Rozen to the Securities and Exchange Commission.
“There is no written contract or agreement as of yet. A written agreement will be worked out within the next few weeks,” said Amy Weiss, a spokeswoman for Feinberg said in an email.
Barra said Tuesday that GM officials will meet with Feinberg today, adding that it would take 30-60 days to weigh options.
“We have not made any decisions,” she said. “We have just started this process with Mr. Feinberg.”
Limits of authority
GM likely will study the BP case to understand the limits of Feinberg’s authority. His conduct in that case stirred critics. The line between his role as evenhanded mediator and his obligation to BP became blurry.
In February 2011, U.S. District Judge Carl Barbier ordered Feinberg to stop representing himself to claimants as a neutral party when he was a lawyer and agent representing BP.
“Pride precedes a fall and that is what happened to Kenneth Feinberg in the BP cases,” said George Conk, a law professor at Fordham University. “He implausibly claimed to be a neutral rather than a lawyer for BP while his law firm received hundreds of thousands of dollars to carry out BP’s obligations to provide temporary and permanent compensation to those who suffered spill-related losses.”
Many of the Gulf Coast residents seeking reimbursement had no attorneys. Those familiar with the process said Feinberg discouraged them from securing representation. One condition for receiving payment was signing a fairly broad waiver relinquishing the right to sue BP.
“He was really trying to coax people to not join the class-action case,” said Joanne Doroshow, executive director for the New York Law School’s Center for Justice and Democracy. “Some of those people were desperate for some money to survive, but they should not have been forced to sign away their rights on a broad basis.”
Further complicating the GM case is the liability shield that the Obama Auto Task Force granted GM and Chrysler coming out of bankruptcy. With the shield, no one could sue the companies for deaths or injuries in accidents occurring pre-bankruptcy in mid-2009.
It’s unclear how many of the 13 fatalities GM has linked to the defective ignition switches occurred prior to July 2009. GM has not said whether it will use its immunity to void lawsuits arising from crashes before that date.
On its website, Feinberg Rozen touts its leadership in “alternative dispute resolution.” That could be an indication GM will at least consider options other than the immunity the government gave it. But the firm’s value to GM will be in the degree to which it can contain the final legal cost relative to what that bill would be without their efforts.
Even his critics acknowledge Feinberg’s skill and effectiveness.
“He puts himself into extremely difficult situations that most people would not want go near,” Doroshow said. “You have to give him his props.”
So the company is hoping the saintly aura of Feinberg still has some magic, Fordham’s Conk said, adding, “A better view for claimants is that as a lawyer he has an ethical obligation to diligently and competently represent his client GM.”