Personal-injury and other lawyers are warning that if they cant sue Chrysler LLC in the future, theyll go after the bankrupt automakers dealers and suppliers.
That was one of the arguments made in court documents filed late Tuesday in Chryslers bankruptcy case. Those warnings came in objections to the possibility that much of Chrysler will be transferred to Fiat S.p.A. free of outstanding legal claims against the U.S. automaker.
Some of the most strenuous objections came from three groups: the ad hoc committee of consumer victims of Chrysler LLC, a group of tort claimants and consumer organizations and the ad hoc committee seeking fairness for warranty and lemon-law claimants.
The warranty and lemon-law group also complained that Chrysler already has begun to stiff consumers who were supposed to be paid under state lemon laws -- a charge refuted by the automaker.
Although all pending and new lemon law and vehicle-warranty lawsuits against Chrysler and its related entities are stayed by order of the bankruptcy court, Chrysler will support our brands and our customers, spokesman Michael Palese said in an e-mail response to questions from Automotive News.
Chrysler will honor all warranty repair requests and service contracts and continue to produce and support quality vehicles, he said.
In addition, Chrysler will reissue checks to consumers that had not cleared prior to the date of the bankruptcy filing and which are not subject to the matters stayed by the bankruptcy court.
Reimbursements for any related bank fees will be made on a case-by-case basis, Palese said.
The three groups motions were similar in objective. The new company that is to be formed from the alliance between Chrysler and Fiat should be required to take over the legal responsibilities that Chrysler currently has for personal-injury, warranty, and other claims, the motions argued.
Allowing the new entity to take over Chrysler assets free and clear of outstanding or future claims against the old Chrysler ultimately would doom the new company, those groups said.
The agreement, whereby Fiat will take control of Chrysler, seeks to specifically exclude all products liability claims arising from the sale of Chrysler products prior to the closing of the deal, the committee of consumer victims said in its court filing.
Sue dealers, suppliers instead
If the alliance goes forward free of those claims, consumers and personal-injury victims would be unable to sue the new company. Instead, they would sue others in the chain of production and sale, including dealers and suppliers -- the very entities that new Chrysler will rely upon for its survival, the tort claimants and consumer organizations said in court documents.
New Chrysler will then be confronted by a slew of articles in the press and complaints on the Web about how those who bought Chrysler vehicles, or might buy them in the future, are left out in the cold, the tort claimants and consumer organizations said. This will cause consumers to think long and hard about ever buying a vehicle from new Chrysler, damaging the brand and making the survival of new Chrysler difficult, if not impossible.
The claimants and consumer organizations also argued against taking away the right to sue from individuals who will be injured in the future by driving a Chrysler vehicle that already is defective. They also issued a thinly veiled warning of a long legal fight if the court rules against them.
The court should avoid the difficult constitutional questions that would arise from clearing new Chrysler of liability for claims that do not yet exist and make clear that the sale does not release the claims of consumers who will be injured or suffer losses in the future as a result of defects in Chrysler vehicles sold by Chrysler before the bankruptcy proceeding, they said.
The committee of consumer victims admitted that in a case involving Trans World Airlines Inc., a Bankruptcy Court allowed TWA to emerge from bankruptcy free of lawsuit claims against it. This court should decline to follow TWA, the committee said, because in that case, the judge interpreted the bankruptcy codes terminology far beyond its plain meaning.
The lemon-law group said Chrysler already has begun to deny its previous obligations.
Chrysler has been picking and choosing which obligations they will uphold and which ones they will ignore, with the result of penalizing the customers, the group said in its written filing.
To be sure, the court on May 1 authorized Chrysler, in its sole discretion, to continue their warranty programs and extended service programs and to perform all obligations related thereto in the ordinary course of business. The lemon-law group said that the phrase perform all obligations related thereto meant that Chrysler was bound to honor warranties and lemon-law rulings.
Instead, with full knowledge that it would be filing bankruptcy in just a matter of days, Chrysler had issued several checks for settlements in cases where they failed to make repairs as promised under warranty terms, the group said. Those checks then bounced, the group said.
A deal with Fiat should be conditioned, the group said, on the purchaser assuming warranty obligations, as well as liabilities for breach of warranty obligations both before and after Chryslers bankruptcy filing.
Neil Roland contributed to this report.