Terry, it is useful for you to understand that the General Counsel position is not merely that of a lawyer's. He is a full-time senior executive of the company, who advises the Board on business policy, oversees all legal matters and corporate governance, and engages in public policy advocacy. His duty of care, to the public whose safety is at stake and to shareholders and fellow employees, is far wider than that of a mere lawyer. His "failure to act" (that is, to fulfil this duty of care) is therefore more catastrophic and so much more to be deplored.

He didn't do anything, or didn't do enough, to try and fix the very serious problems that had been brought to his attention.

In this case, you have it right; it was the lawyer's failure to do what he should have done. More generally, "failure to act" means that someone did not take action when s/he should have. If I see a burning house and I do not call the fire department, that's my failure to act.

The answer to this goes beyond English to touch on the professional and ethical requirements on senior executives of large corporations. "Failure to act" in this case means "failure to do what is expected and required of such a senior executive (in a legal capacity in such a big corporation producing products that affect the safety of millions of individuals)." Millikin as General Counsel would have been expected, as soon as he was aware of any lawsuit in relation to a defect, to bring it to the attention of the CEO and the director of production, and ensure that a solution/remedy was found, and that the supervisory bodies for transport safety were informed, and that customers and the general public were informed, and that a recall-and-repair scheme was put in place to rectify the faults for all the cars affected.