GM, Law Firm Dispute Crime-Fraud Exception

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By Yin Wilczek

July 13 — In strong language, General Motors LLC and King & Spalding LLP told a court to reject attempts by plaintiffs in the massive ignition switch defect case to obtain privileged material through the crime-fraud exception.

GM and the law firm told the U.S. District Court for the Southern District of New York in separate July 10 responses that the plaintiffs fail to satisfy the exception.

GM added that if the plaintiffs' motion to compel is granted, it would “turn the adversarial system” on its head and “regularly put privileged materials in the cross-hairs” of the exception.

Exception Applies?

In their July 9 motion to compel, the plaintiffs argued that GM knew about a “rash” of cases in which airbags failed to deploy in its 2005–07 Chevrolet Cobalts but “continued to do nothing to warn unsuspecting drivers that their cars were unsafe” (See previous story, 07/13/15).

The plaintiffs also alleged that GM and its long-time outside counsel, King & Spalding, “conspired to cover up the ignition switch defect that has killed and injured hundreds.” They argued that the company's concealment of the defect from 2009 to 2014 is “precisely the sort of `ongoing or future wrongdoing' that triggers the crime-fraud exception.”

King & Spalding is not a party to the lawsuit.

In their filings, GM and King & Spalding argued that the plaintiffs failed to show that there was probable cause to believe that a fraud or crime was attempted or committed, and that the requested documents were in furtherance of the alleged wrongdoing.

The law firm also argued that it and its lawyers did nothing wrong. It is not a crime, a fraud or an ethical violation to recommend settlement to a client to end or avoid litigation, it contended. A finding to the contrary would stifle litigants from obtaining competent and effective legal advice. King and Spalding also argued that the plaintiffs have not shown that the documents they seek further a crime or fraud.

“Plaintiffs’ motion is directed at purely internal K&S work product that has never been shared with GM or anyone else outside K&S,” the firm asserted. “Since GM has never even seen the documents that Plaintiffs are seeking to compel, those documents cannot possibly have furthered any alleged crime or fraud.”

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

GM's filing is available at http://www.bloomberglaw.com/public/document/In_re_General_Motors_LLC_Ignition_ Switch_Litigation_Docket_No_114/7.

King & Spalding's filing is available at http://www.bloomberglaw.com/public/document/In_re_General_ Motors_LLC_Ignition_Switch_ Litigation_Docket_No_114/6.