Asleep at the Wheel?

In 2014 the general counsel of General Motors (GM), Michael Millikin, found himself in a place no lawyer ever wants to be: the hot seat at a congressional hearing with U.S. lawmakers calling for his resignation. Although CEO Mary Barra ultimately stood by Millikin and he was exonerated in the internal investigation, the GM recall scandal nonetheless raises difficult questions about the responsibilities of in-house counsel.

As part of a case study on the role of general counsel, Harvard Law School is asking students to try to imagine themselves in Millikin’s shoes. In the case study “Driving Blind at General Motors,” Nathan Cisneros, Karina Shaw, and Lisa Rohrer present GM’s slow-footed response to a widespread safety defect and the resulting federal investigation. Focusing on the actions—and inactions—of the in-house legal counsel in dealing with a faulty ignition switch and related airbag malfunction, this case highlights the missteps that led to the crisis, the leadership’s delayed response, and the consequences for the company. As a result, participants are provided with a real-life example of how corporate culture, bureaucratic divisions, and a lack of accountability can pose significant challenges to the in-house counsel’s ethical and professional obligations.

Drawing on publically sourced material, including the congressional hearing, internal GM reports, and press accounts, the case study outlines the details and timeline of the scandal, paying special attention to the role of the in-house legal department. In 2000 the GM engineering department introduced an alternative ignition switch for a new vehicle platform. Known internally as the “switch from hell,” the new design proved to be overly sensitive, causing the engine to unexpectedly turn off. The switch nonetheless was approved, and despite reports of engines spontaneously shutting off at high speeds, GM engineers labeled the problem as one of convenience rather than safety, a categorization that would relegate the issue to the back burner.

It wasn’t until GM started to face litigation claims over a seemingly separate issue—airbag nondeployment—that the ignition switches began to receive significant attention. Although these claims seemed isolated at first, in 2007, GM received its first warning from outside counsel that the scale of the problem and GM’s inaction could result in punitive damages. Despite the urgency of the problem, GM continued to drag its feet. The legal department treated litigation claims discretely, and since most claims were less than $100,000, they did not require the notification or involvement of the department’s leadership. No recall was issued, and the legal department seemed content to refer the problem to engineering and wash its hands of the issue once settlements were made. As the internal investigation would note, the legal department also failed to follow directives in place that obligated staff to notify leadership of issues that might be severe. It wasn’t until the spring of 2013 that the connection was finally made between the switch and the airbag nondeployment, but even then it took GM until February 2014 to officially issue a recall.

With more than 1.4 million cars recalled and 13 deaths linked to the faulty switches, the case quickly attracted widespread media attention. The Department of Justice launched a criminal investigation, and GM also initiated its own independent inquiry. Notably, the independent report highlighted a number of cultural and organizational problems that may have contributed to the delay, including within the legal department. The prevailing belief among many GM employees was that the legal department discouraged employees from raising concerns or taking notes during meetings about the faulty switch, and that it also encouraged employees to exercise caution when writing about safety issues. Most concerning, the report found that the legal department ignored its own directives regarding the communication of serious issues to department superiors—an oversight that undoubtedly contributed to the company’s delayed response to the crisis. Thus, while the report exonerated the general counsel, the CEO’s decision to not fire him was nonetheless controversial and left interesting questions about the responsibilities of general counsel at large corporations.

Among its many questions, the case study asks students to consider the following:

• Was Barra making the right choice by not holding her general counsel accountable for failings in the legal department under his watch?
• Was Millikin the best person to steer reform, or would it take a new person in the general counsel’s seat to chart a new course?
• What steps in GM’s culture should be taken to remedy the cultural failings? Who has to drive the change, and how likely is it that such change will occur?

One of the authors of the case, Nathan Cisneros, explains that a goal of the exercise was to get participants to think about how the legal department interfaced with the rest of GM. Large corporations are complex organizations, and even well-intended general counsel have to deal with the problems of miscommunication and competing interests. While the complexity of the GM story precludes it from being a black-and-white morality tale, it nonetheless demonstrates both the important role of general counsel as well as the serious challenges they face in balancing business with the law.