By on May 20, 2009

Chalk up another reason why Chrysler should have been allowed to fail. The New York Times reports that if Chrysler’s restructuring is approved it would allow the automaker to evade liability for injury-causing defects on its vehicles. An Automotive News [sub] write-up of Chrysler’s creditors reveals that the Ad Hoc Committee of Consumer-Victims of Chrysler LLC consists of 150 members seeking an estimated $650 million in damages allegedly caused by Chrysler vehicle defects. Under current reorganization plans, those creditors would be left with no recourse after Fiat assumes “good Chrysler’s” assets.

If GM follows Chrysler’s example (which one law professor calls “bizarre”) even more consumer lawsuits could be shelved. A coalition of consumer advocates including Public Citizen, the Center for Auto Safety, Consumer Action, Consumers for Auto Reliability and Safety and the National Association of Consumer Advocates have petitioned the court to transfer legal liability to the new Chrysler. Since Chrysler is already walking away from Lemon Law protections (bouncing checks all the way), it’s probably safe to assume that the Pentastar will be reborn free from lawsuit claims. Because when has the bailout ever been about the best interests of the consumer?

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30 Comments on “Chrysler: So Long and Thanks for All the Lawsuits...”


  • avatar
    johnthacker

    This is why selling all assets to a shell company followed by a sham bankruptcy to escape liabilities generally isn’t allowed. Bankruptcy laws have evolved for a reason.

  • avatar
    dolorean23

    One question. Approximately how many of these lawsuits could be frivilous; i.e., the cupholder spilled hot coffee on my pants or there weren’t enough air bags to protect me when I was parked on the railroad tracks and got hit by a train. These types of lucidious letigation have turned the American legal system into a morass that could seriously use an enema. However, nothing says that serious lawsuits can reapply.

  • avatar
    njoneer

    Wow. Why wait til June 1, GM? It sounds like C11 will make all your dreams come true.

  • avatar
    Mr. Sparky

    Chrysler: So Long And Thanks For All The Lawsuits

    Does this mean the Chrysler is abandoning the planet before the hyperspatial express route comes through?

    Or does it mean that Chrysler’s bankruptcy was planned by dolphins? (Damn dolphins… I knew dolphin safe tuna would to lead to this sort of uprising.)

    *Confused?

  • avatar
    Strippo

    Approximately how many of these lawsuits could be frivilous

    It doesn’t take bankruptcy to dispose of frivolous lawsuits.

  • avatar
    Robert Schwartz

    Another county heard from. The process stinks.

    IT SHINES AND IT STINKS

  • avatar
    brettc

    Jesus, this is just like a shady contractor that gets a bunch of money and stops doing work on someone’s house, and then opens up with a different business name and starts screwing over another homeowner down the street.

    It’s pathetic that these “new” companies are going to be able to evade things.

  • avatar
    Ken Elias

    All lawsuits are “stayed” when a company enters bankruptcy. These lawsuits can proceed against the “bad” Chrysler – but they’ll have to duke it out with other creditors to get paid.

    Won’t stop new lawsuits against the New Chrysler when those cars blow up. Question is which company gets tagged for cars already on the dealer lots…?

  • avatar

    One question. Approximately how many of these lawsuits could be frivilous; i.e., the cupholder spilled hot coffee on my pants or there weren’t enough air bags to protect me when I was parked on the railroad tracks and got hit by a train. These types of lucidious letigation have turned the American legal system into a morass that could seriously use an enema. However, nothing says that serious lawsuits can reapply.

    Possible, but I would bet a lot of them are folks who’s steering snapped off and they lost control and were injured or killed in a serious accident. Funny how they love taxpayer money but don’t love settling taxpayer lawsuits.

    In lawsuits, the law favors the suits.

    John

  • avatar
    Autojunkie

    “damages allegedly caused by Chrysler vehicle defects” being the key phrase here.

    I would say that 90% or more, based on previous cases, have nothing to do with the vehicle manufacture. Improper use, improper maintenance, improper repairs, improper restraint use, unattentive driving, drug/alcohol influenced driving, and the list goes on.

    A “good” lawyer automatically names every conceivable source of payout when trying to seek compensation for a client.

    Ambulance chasers… I could go on, but I can sum it all up with one phone number:

    1-800-LAWSUIT

    Their billboards are all over the poorest areas of the Detroit metro area.

  • avatar
    jpcavanaugh

    Ken Elias:
    Question is which company gets tagged for cars already on the dealer lots…?

    This is a very good question. It would be my guess that liablilty follows the manufacturer. Any vehicles manufactured by Old Chrysler are the responsibiliy of Old Chrysler.

    It gets interesting if New Chrysler elects to cover warranties on cars built by Old Chrysler. Should they get stuck with products liability claims too? I suspect that they will try to accept warranties, but not accept liability claims. Fascinating question.

  • avatar
    educatordan

    Last one out of Auburn Hills, please turn out the lights. But please for the love of god, find a responsible buyer for Jeep, I need a few more years before I can afford to buy a new Wrangler.

  • avatar
    lw

    Imagine buying a Chrysler today and tomorrow you get in a massive accident due to a defect.. Maybe the line worker was trying to watch CNN to see if he had a job while he tightened the bolt.

    Who you gonna sue?

    Every new Chrysler should come with a HUGE disclaimer that you have no recourse against the manufacture, but of course they won’t and people will lose everything they own because they listened to Obama.

    Dear Obama,

    I bought a Chrysler 2 days after your speech. It is a lemon. My lemon check bounced and while I was driving the car home from the bank (I went there to complain about the bounced check) the left front tire came off at 70MPH. My wife is typing this since I’m paralyzed. My family is destroyed. The medical bills are well over a million dollars and your health care plan doesn’t seem to be working yet.

    I bought the car because you said I was covered and I should trust you and the government. Can I be included in the TARP? Can your health plan let me walk again?

    Please advise,
    Joe Six Pack

  • avatar
    Conslaw

    A good lawyer doesn’t name a defendant that doesn’t belong in the suit. Every defendant added makes the suit more expensive to bring. The more defendants, the lower share each defendant expects to pay. A million dollar case against 10 defendants is a lot like bringing, and paying for 10 different suits. With a million dollar case against one defendant you are only paying the expenses of one case.

    For as much whining as people do about plaintiff’s personal injury lawyers, they are the ultimate capitalistic entrepreneurs. High risk, high reward, they eat what they kill. If they don’t get recoveries for their clients, they go hungry and soon go out of business.

  • avatar
    jthorner

    “Chalk up another reason why Chrysler should have been allowed to fail.”

    Any form of bankruptcy would have almost certainly left those with liability claims against the failed company high and dry. Bailout or not, the lemon law and product liability plaintiffs were going to get the shaft one way or another.

  • avatar
    Airhen

    Simply wow, simply wow! It just keeps getting worse.

  • avatar
    Robert Schwartz

    “Pension Funds Object to Chrysler Sale, Want Trustee” by Christopher Scinta and Bob Van Voris on May 20, 2009 (Bloomberg):

    A group of Indiana pension funds that hold first lien debt of Chrysler LLC objected to a plan to auction the company’s assets …

    The Indiana State Teachers Retirement Fund, Indiana State Police Pension Trust and Indiana Major Move Construction filed court papers late yesterday and today asking U.S. Bankruptcy Judge Arthur Gonzalez in New York to block the sale, claiming the plan is illegal and tramples their rights.

    The funds are also asking for appointment of a trustee to run Chrysler, saying the company has “ceded control over their business and their restructuring efforts to the United States Treasury Department,” which is using the bankruptcy to reward certain creditors that “the government deems politically important,” according to one of the filings.

    * * *

  • avatar
    MisterB

    This transaction is a sale of ASSETS. The liabilities remain with the OLD Chyrsler. Liability for products sold before the BK filing will not be assumed. The liability for future product claims were created when the vehicles were sold.

    When title to the vehicle took place would determine the sale of the vehicle. My understanding is that the dealer and the finance company take title to the vehicle when the vehicle arrives at the dealer. Therefore, vehicles now on the lots but not yet sold to the public would have product liability against the OLD Chysler.

    Certainly, the asset purchase agreement will spell out were these liabilities go. The new entity will specify that it is NOT assuming these liabilities. Once the court approves these terms, future state law tort claims will be preempted by the BK Court.

    One other thought: I would think that any insurance coverage that OLD Chrysler had would still be available to old Chrysler claimants.

    Finally, this extingushing of legal claims is one more advatage that Chyrsler and GM will have over Ford.

  • avatar

    For as much whining as people do about plaintiff’s personal injury lawyers, they are the ultimate capitalistic entrepreneurs. High risk, high reward, they eat what they kill. If they don’t get recoveries for their clients, they go hungry and soon go out of business.

    I don’t whine about them. As a matter of fact, I think that the trial lawyers have established such an important precedent in the tobacco litigation that I think the concept should be expanded. The tobacco companies have to pay billions to the states to pay for costs the states supposedly bear because those companies sell tobacco.

    A major reason for the cost of medical care is that everything to do with medicine must be tested, vetted and insured for the possibility of some kind of malpractice or personal injury litigation. So, since trial lawyers, like the tobacco companies, have caused society to bear a cost, let the trial lawyers pay.

    A 50% special tax on attorneys personal injury fees would generate about $40 billion a year. That could buy an awful lot of health insurance.

    How uncomfortable is it to have the shoe on the other foot while being hoisted on your own petard, esquire?

  • avatar
    windswords

    I have no sympathy for these “victims” and their lawsuits. They should have known better than to buy a car from a company heading for bankruptcy. These are supposed to be intteligent human beings. They should have seen the writing on the wall. Oh, wait! I thought I was posting on the story about the Dodge dealer who lost his franchise. Never mind.

  • avatar
    Captain Tungsten

    Don’t Panic!

  • avatar
    erikhans

    Sometimes I wonder what the heck is going on with the Original Poster here! Chrysler is sending out NEW CHECKS! The bounced ones had to do with the company filing bankruptcy. New Chrysler, new checks….

  • avatar
    essen

    So, should I assume the extended warranty on my Jeep is worthless? And should I cancel the extended warranty on my Vette and get my money back before they C11?

  • avatar
    Robert Schwartz

    “So, should I assume the extended warranty on my Jeep is worthless?”

    No the President himself guaranteed it. If you have a warranty problem call 202-456-1414, and ask for the service desk.

  • avatar
    Jason

    My general aversion to all things Chrysler feels more and more justified all the time.

  • avatar
    autoemployeefornow

    Who isn’t getting f’cked by Chrysler?

  • avatar
    Ralph SS

    I can see it now. Fords new advertising campaign:
    “Buy a Ford. Hey! If something goes wrong you can still sue us!”

  • avatar
    carlos.negros

    The practice of disposing of liabilities is nothing new.

    When Monsanto was being sued by workers for contamination with carcinogens, they split out the company into two parts. The “good” part was Monsanto and included their seed products. The “bad” part made chemicals and was given the name Solutia. Solutia had all the liabilities. After the lawsuits hit, they declared bankruptcy. In the end, it was the people who were hurt by their products that paid the price.

  • avatar
    TireGuy

    Because when has the bailout ever been about the best interests of the consumer?

    Since when have class Actions and frivolous law suits in the US been in the real interest of the consumer? They cost every single American a lot of money making products more expensive, making lawyers rich, as well as some of the plaintiffs. This system is unreasonable any way.

    No tears here.

  • avatar

    AS A 300 owner, this hurts me most. I never would have guessed Chrysler would be in this shape years ago when I bought my car.

    I think I’m gonna have to trade it in for a new E class.


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