Chrysler Walks Away From Lemon Laws

by Robert Farago

Published: May 9th, 2009

When life gives you lemons, you make lemonade (or glazed strawberry lemon streusel muffins). When Chrysler gives you lemons, you’re SOL. Since April 30, Judge Arthur Gonzales has to approve payment on claims against Chrysler incurred before C11. That includes “lemon law” settlement checks to customers who bought defective Dodge, Chrysler or Jeep products. Not happening. “San Diego attorney Ellen Turnage represents a client who reached a settlement with Chrysler over a 2006 Dodge Magnum with a bad suspension. The car has been returned to Chrysler, but the automaker’s check bounced. ‘Now he’s got no car and no money, so he can’t go buy a new one,’ Turnage said of her client. ‘He’s stuck. We’re hanging on to a glimmer of hope that at some point this will all be resolved.'” As the LA Times reports, Turnage’s pessimism is well-justified. Instead of saying, sorry, we’ll expedite this, the new Chrysler is telling aggrieved customers to FO&D.

The company said it had no plans at this point to ask the bankruptcy judge to approve payments to settle lemon law complaints. “This is a complex process and there are a lot of issues being discussed,” said Chrysler spokesman Mike Palese. “This could be one of those issues that comes up in the course of the bankruptcy, but I can’t say that we have any plans to present it at this time.”

Chrysler advises customers with pending lemon law complaints to file a proof of claim form with the Bankruptcy Court and join the ranks of the automaker’s unsecured creditors.

“In that case, you’ll be lucky to get pennies on the dollar,” [Atlanta attorney Alex] Simanovsky said.

Can we see the details on that government-backed warranty now, please? [thanks to pixarwolf for the link]

Robert Farago

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Pch101 on May 11, 2009
My outrage is reserved for the public officials who are driving this process. A bankruptcy would have been filed, anyway. The difference is that the government may pay these claimants. Had the government not been involved, the odds of them ever seeing the money would be about 0%, because the secureds would be entitled to take 100% of the tiny cash pie that is available to pay the creditors in this case. You've gone at length about your belief in absolute priority as an absolute doctrine, so it's surprising that you didn't pound on that argument here. Perhaps that's because absolute priority was probably not really your first concern, and your position has a lot more to do with your angst over the alleged value of the VEBA's worthless stock, even though it seems likely that the VEBA would have creditor priority over a lemon law litigant. Your absolute priority must be to make sure that the union gets zero, regardless of whatever rights it may have as a creditor in this case.

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Slumba on May 20, 2009

This doesn't make a lot of sense. If the check bounces you can go to court and get treble damages; should be simple and fast.

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