Claiming consumers here were misled, Attorney General Tom Horne has filed a $3 billion lawsuit against General Motors alleging it sold vehicles to Arizonans the company knew were unsafe.
“Manufacturers of any product, from toys to automobiles, must make and sell products that are, above all else, safe to use,” Horne said in the complaint filed in Maricopa County Superior Court, the first one filed by a state against the auto giant. And he said manufacturers are required to tell the truth about the safety of their products.
“When a safety defect does occur, manufacturers must promptly initiate some form of recall to address the problem,” he said.
There have been some recalls — Horne says belatedly — of GM vehicles because of ignition problems. But Horne said federal regulators found an “astounding” number of other “concealed defects,” ranging from airbags and seat belts to brakes and electronic stability control.
Those defects, Horne said, affected more than 27 million GM vehicles, including “hundreds of thousands in Arizona.”
He said that includes not just those made after the company emerged from bankruptcy in 2009 but older vehicles with serious defects. And Horne said the reborn company was aware of the problems, making it liable for the problems.
“New GM was not born innocent,” he said.
“For example, current CEO Mary Barra, while head of product development, was informed in 2011 of a safety defect in the electronic power steering of several models,” the lawsuit says. “Despite 4,800 consumer complaints and more than 30,000 warranty repairs, GM waited until 2014 to disclose this defect.”
The lawsuit, based on Arizona’s Consumer Fraud Act, asks a judge to force GM to surrender any profits made from selling defective vehicle. And it seeks a separate fine of $10,000 for each one sold in Arizona.
How many there are is unclear.
The lawsuit does not list a number.
But there are reports that about 300,000 of the 27 million vehicles recalled by GM so far were sold in Arizona. At $10,000 per violation, that would translate out to $3 billion — minus any contingency fee which would be paid to private law firms who brought the case to Horne and have agreed to do the legwork for the state.
Horne said it made sense to work with these firms as they already have filed class-action claims on behalf of buyers nationwide. He said they already have developed many of the details necessary to pursue the case.
A copy of the contingency fee contract was not immediately available.
But state law caps such fees on a sliding scale, starting at 25 percent of the first $10 million recovered, dropping to 5 percent of anything in excess of $25 million. And Rob Carey, a former assistant attorney general whose firm is handling the outside lawsuit, said he agreed to take less than that, though he did not have the specific figure at hand.
GM spokesman James Cain said the company has reviewed the 130-page complaint.
“It mischaracterized the facts, the performance of our vehicles and our work to ensure the safety of our customers,” he said. “We intend to vigorously defend the case.”
The lawsuit lists a series of accidents across the nation in which people were killed or injured, allegedly due to the defects in the vehicles that were not recalled. But it also complains of an injury of a different kind to car buyers here, even if they have had no problems.
For example, it says 2011 and 2010 Chevrolet Camaros are worth about $2,000 less when measured against the value of comparable vehicles. Similar losses in value are cited for other GM products.
Horne acknowledged that he is having Arizona go it alone, versus what has been the normal practice of joining with other states when bringing these kinds of actions against a manufacturer or an industry. But he said he thought it was important to pursue the matter.
And there may be a financial benefit.
“It might help solve that $300 million a year education problem,” he said, citing a court ruling saying Arizona has to reset state aid to schools to where it should have been if lawmakers had complied with a 2000 voter-approved mandate to adjust that figure annually to account for inflation.
On the other side of the equation, Horne said there’s no cost or risk to the state or its taxpayers.
“There’s no burden on the department because the outside lawyers are handling it,” he said.
Those outside lawyers have a history with Arizona. Both Carey and Steve Berman were intimately involved with Arizona’s lawsuit two decades ago against the tobacco industry. It resulted in a $368 billion nationwide deal, with Arizona getting $3.2 billion over 25 years.