The Effect of Chrysler's Bankruptcy on Consumers

August 1, 2009

The bankruptcy court's decision to let Chrysler avoid legal responsibility for some future claims could have a great effect on those injured in accidents involving Chrysler vehicles.

August 01, 2009 /24-7PressRelease/ -- The Effect of Chrysler's Bankruptcy on Consumers

Article provided by Perrin Law Firm
Visit us at http://www.johnperrinlaw.com

As part of Chrysler's finalized bankruptcy plan, the company received an important immunity from the bankruptcy court: immunity against any future tort claims by consumers who had purchased vehicles before the company went into bankruptcy. Thus, on June 10, when the new Chrysler emerged from bankruptcy -- now owned by Fiat, United Autoworkers and the US and Canadian governments -- it did so with a clean slate.

The decision to allow Chrysler to avoid legal responsibility for any future product liability or other personal injury claims stemming from products sold before June 10 was a controversial one. Personal injury attorneys, consumer advocacy groups and Attorney Generals from at least 8 states all contested the bankruptcy court's decision. They argued that the bankruptcy court's ruling raised important constitutional questions about whether the court has the power to take away a person's future right to sue, particularly when the injury has not even occurred.

The opposition's arguments, however, were not successful and the court eventually granted the automaker the immunity it wanted, deciding that it would be unfair to make the new Chrysler responsible for any injuries caused by the old Chrysler.

In what many believe to be a peculiar twist, the new Chrysler has promised to uphold the warranties of any vehicles sold by the company prior to the bankruptcy. Many are left asking why Chrysler will agree to replace any defective parts on their cars but will not be responsible if one of those defective parts results in harm or even the death of a driver or passenger in a Chrysler vehicle.

Normally, when a person is injured in an accident and it is determined that a part or component of the vehicle was defective, thus causing the injury or worsening it, the person has the right to file a products liability claim against the manufacturer. At the time Chrysler filed for bankruptcy protection on April 30, it had approximately 300 such claims pending against it.

However, the new Chrysler can only be held responsible for any legal claims arising from products it sold after the bankruptcy. This means that if someone bought a Chrysler vehicle on June 9 and is subsequently killed because of a defectively manufactured part in the car, the person's family will have no legal right to sue the company for their loved one's death.

Further, the new Chrysler is not responsible for any of the legal claims pending against the company or that had been settled but not yet paid before the bankruptcy. All of those people were forced to take their place in the long line of unsecured creditors against the old Chrysler to fight over any assets that might be left over to pay their claims after the bankruptcy.

Many argue that the bankruptcy court could have taken a different route to ensure those with legitimate legal claims against the company were not left out in the cold. For example, the court could have handled the case in the same manner as the asbestos litigation was handled when the manufactures of the dangerous product went bankrupt. In the asbestos case, the bankruptcy court set up a victim compensation fund so that people at least received some type of remuneration for their injuries. However, it doesn't appear that this option was even seriously considered in the Chrysler bankruptcy, particularly when the company argued it had no money left to pay any of the legal claims pending against it.

Now, General Motors is seeking the same immunity protection in its fast-track bankruptcy filing and all indications seem to suggest that the biggest US automaker will get it. Between Chrysler and GM, the two companies are responsible for putting nearly 4.5 million cars on the road in 2008 alone. How many thousands of Americans may be harmed sometime in the future by one of these vehicles and be denied their right to compensation for their injuries?

Some consumer advocacy groups and certain attorneys have considered appealing the bankruptcy judge's ruling. Whether or not the appeal will result in any real change is yet to be seen. Until then, those who purchased Chrysler vehicles before this summer's bankruptcy ruling are left hoping that their cars will continue to keep their loved ones safe.

Article provided by Perrin Law Firm
Visit us at http://www.johnperrinlaw.com

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