Santa Clara, CA: A settlement agreement has been reached between General Motors and investors in a securities class action lawsuit over the company' handling of its defective ignition switches. Specifically, the New York State Teachers' Retirement System has filed papers in a Michigan federal court requesting approval of the $300 million settlement.
The class claims that during the period GM concealed ignition-switch defects in several older-model cars, including Chevrolet Cobalts and Saturn Ions, a defect responsible for the deaths of at least 124 people, the company had inflated its stock price. The concealment by GM of the fatal ignition switch defect drove GM stock prices into the ground.
According to the filing, the settlement was an excellent outcome and came gratifyingly early in the litigation. "The court had not yet ruled on defendants' motions to dismiss when the parties reached their agreement in principle to settle,"it said. "Even if the action had progressed beyond the motions to dismiss, lead plaintiff still had to prove falsity and scienter, and it faced additional serious risks relating to its ability to prove loss causation and damages."
The initial complaint was filed in March 2014, the month after GM began its recalls, and a 543-page consolidated class action complaint was filed in January. The New York teachers' pension fund was tapped as lead plaintiff in October 2014.
The suit covers stock bought from November 17, 2010 to July 2014. The stock price declined from $37.09 in March 2014 to $31.93 in April 2014 as information started coming out, the complaint states. According to the suit, that was what it called the first wave; three months later, there was another. The price fell from $37.41 on July 23 to $35.74 on July 24.
The case is New York State Teachers' Retirement System v. General Motors Co. et al., case number 4:14-cv-11191, in the U.S. District Court for the Eastern District of Michigan.