By on June 28, 2009

Facing mounting political pressure, GM’s new masters have agreed to allow new liability cases against products made by old (pre- and intra-bankruptcy) GM to proceed against New (post-pre-bankruptcy). According to the New York Times, the deal went down in federal bankruptcy court on Friday. “G.M. and the administration’s [hands-off] auto task force have been negotiating with more than a dozen state attorneys general who have objected to the company’s plan to sell its desirable assets to a new, government-financed entity. A hearing to approve the plan is scheduled for Tuesday in federal bankruptcy court in Manhattan.” So, that’s that then. The Ad Hoc Committee of Consumer Victims of GM and Chrysler can relax. Comcast can kick back. Rep. Andre Carson can chill. Or can they?

Again, this agreement applies to new cases against Old GM. The Wall Street Journal:

Car-accident victims with pending lawsuits and those who had won damages against GM before it filed for bankruptcy would still be unable to bring claims against the new GM,”  reports. “They would remain with other unsecured creditors making claims against the ‘”old GM.” As GM’s old estate winds down, those victims are likely to recover little or nothing.

Bottom line: this settlement leaves some claimants out in the cold. And raises questions about the fairness of post-C11 Chrysler’s fast walk away from its product liability legacy.

The [The Ad Hoc Committee of Consumer Victims of GM and Chrysler] said new GM should take on claims from victims already hurt from defective GM vehicles. It also said Chrysler should take responsibility for future claims, as well as those with pending lawsuits and successful cases brought against Chrysler before it filed for bankruptcy.

The committee said Chrysler’s unwillingness to take on future claims as GM has represented “an unacceptable double standard.”

Meanwhile, this settlement opens the door for other politically-connected parties who feel aggrieved by old GM. Dealers’ choice?

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15 Comments on “GM (a.k.a. Obama Administration) Cave on Old to New Product Liability. Ish....”


  • avatar
    lw

    Very nice. Now the folks have a method to stick the new GM with all kinds of nasties..

    Maybe the asbestos folks are next? Just need enough AGs to get in the game and you too can win a seat at the New GM trough.

    Meet the new GM trough, same as the old GM trough! (except now the trough is MUCH deeper and longer thanks to Uncle Sam)

  • avatar

    lw :

    Funny you should mention that. From The Detroit News:

    “[The Unsecured Creditors committee] comprising 15 groups owed billions by GM, was established June 3, two days after the automaker filed for bankruptcy. It is made up of officials from two bondholding trusts, unions for steel and autoworkers, an advertising firm, car dealerships, auto parts suppliers, a man with a pending asbestos case, two people with pending personal injury lawsuits against GM and the pension guarantor.

    Two other organizations — consumer victims and asbestos claimants — withdrew petitions for their own independent bargaining committees on Thursday and on Tuesday Gerber denied a similar motion made by small GM bondholders, leaving the Committee of Unsecured Creditors as the sole bargaining group in the case.”

  • avatar
    Happy_Endings

    I think a picture of Judge Smails from Caddyshack would be appropriate.

    “You’ll get nothing and like it!”

  • avatar
    chuckR

    “The past is never dead. It’s not even past.”

    — William Faulkner

    Quick question – if Government Motors could leave its past and its liabilities, what would the proper discount be for a new ‘old GM’ car in the eyes of a potential car buyer?

  • avatar
    golf4me

    Why’d they even bother with C11 then?

    And I thought Osama didn’t want to run a car company? huh. If he keeps giving away stuff like this, they won’t have a chance. Dumb. Very dumb. But, hey the guy is a lawyer, so the result should not be a surprise.

  • avatar
    Cougar Red

    So:

    1. Ford is on the hook for everything,

    2. New GM is on the hook for the products it makes and for future accidents caused by Old GM defects, while

    3. New Chrysler is only on the hook for the products it makes.

    Brilliant.

    BTW the law in Texas is that a non-manufacturing seller cannot be liable for products liability unless one of several exceptions are met. One of the exceptions is that the manufacturer is insolvent. We are already seeing Chrysler dealers being sued in products liability lawsuits based on this exception.

    Not every state has such a law.

    Even-handed justice, eh?

  • avatar
    johnthacker

    Why’d they even bother with C11 then?

    Successor liability is fairly common even after bankruptcy, particular when the result is a “new” company that’s intended to be exactly like the “old” one, without liability. Here’s a discussion of Oregon law. California law is pretty similar.

    People here occasionally bring up Studebaker as an example of how people who bought a car from an “old” manufacturer might be screwed. But there is someone who courts have repeatedly found to hold successor liability for Studebaker. McGraw-Edison.

    If people who had an old GM or old Chrysler were like people with Studebakers, they would be able to sue someone for product liability, and it would be the “new” companies, the continuations.

  • avatar
    johnthacker

    Of course, successor liability isn’t treated the same in every state, but I guarantee that courts in some states will find that someone can be sued over claims, and in some states, dealers may be the ones.

  • avatar
    Hippo

    No leech left behind.

  • avatar
    ihatetrees

    The committee said Chrysler’s unwillingness to take on future claims as GM has represented “an unacceptable double standard.”

    More accurate:

    The committee said that Marchionne’s unwillingness to be as stupid as GM represented “an unaccepable double standard.”

    I mean, didn’t Fiat get $2billion from GM a couple years ago?

    Whatever you think of Fiat cars, they can negotiate a deal.

  • avatar
    lw

    June sales figures should be interesting….

  • avatar
    tparkit

    This is a political payoff, pure and simple. For years, trial lawyers have been the single biggest contributor to the Democratic Party. That’s because their right to litigate is secured (or inhibited) by legislation, and because they have made a fine living functioning as an arm of state-level attorneys-general. This development opens up taxpayer-funded gushers of legal fees and settlements to the lawyers who did so much to put the Democrats in power. To see who is highest in the pecking order, watch who GM retains to “defend” the company. The lawyers for and against GM will all meet in the bar after each day in court to toast their mutual good fortune.

  • avatar
    lw

    Maybe GM will start a new round of taxpayer funded commercials….

    We stand behind our products! Did you or a loved one die in your Chrysler? Your probably out of luck. Buy GM! Drive GM! Die in a GM!

  • avatar
    tpandw

    lw:

    Maybe they’ve already started. ‘Your idea of Buick just went boom’ (or something).

  • avatar
    CarnotCycle

    When this subject came up last week, I was thinking of an “asbestos 2.0” slush-fund that the “new” companies could fund but not be directly liable for. Sort of like VEBA-for-lawyers type of thing.

    But I guess that would’ve involved some press releases, so instead it’s swept under the rug here. Either way I knew the trial-sharks were going to get theirs, Donkeys wouldn’t have it any other way given that they are the trial-attorneys’ bitches.

    That same dynamic will also cripple any health-care reform, because any REAL reform in that business involves reforming the malpractice-tort industrial complex. Not gonna happen with the Donks.

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