Under the bankruptcy plans that were approved for Chrysler and GM, several thousand American consumers with pending claims against the companies alleging that defects in the companies’ vehicles caused death or injury will be forced to bring their claims in the bankruptcy court. Under the bankruptcy plan for Chrysler, all consumers who purchased Chrysler vehicles before New Chrysler emerged from bankruptcy will likewise be relegated to bringing claims in the bankruptcy court if a defect in one of those vehicles causes a death or injury. There are approximately 30 million Chrysler vehicles that are currently on the road that were purchased before New Chrysler was established.
New GM, on the other hand, has accepted responsibility for injuries or deaths caused by defects in Old GM vehicles as long as those claims were not pending before New GM emerged from bankruptcy. That means that Chrysler is the only car company in America that will not stand behind the safety of its vehicles. There will be virtually no money in the bankruptcy court to pay any sums to the tort Claimants who have cases against Chrysler LLC and only a small sum available to the tort Claimants with cases against General Motors Corporation.
This situation leaves these Claimants victimized twice – first, by an unsafe car that, in many cases, caused devastating injury or death; and second, by a bankruptcy they had nothing to do with. This result is unfair and unnecessary. With only a small additional investment, Chrysler and GM can afford to give every victim with a claim their day in court. Chrysler and GM have agreed to indemnify their dealers in product liability cases. While indemnification will not give all injured victims the ability to prove their case in court, it will help many victims.
For example, in testimony before the House Judiciary Committee on July 22, 2009, Kevyn Orr, a lawyer with Jones Day, appearing on behalf of Chrysler, testified as follows:
Chrysler Group has agreed to indemnify its dealers against product liability lawsuits. These dealers sold approximately 85% of the vehicles sold by Old Carco. As a result, in the vast majority of product liability cases involving Old Carco vehicles sold before the bankruptcy, Chrysler Group will defend its dealers pursuant to its dealership agreements.
Similarly, General Motors Corporation has agreed that it will continue to honor all dealership indemnification contracts and will provide payment to Claimants who obtain a dealership network. For example, a section of the GM Dealer Sales agreement states:
General Motors will assume the defense of Dealer and indemnify Dealer against any judgment for monetary damages or rescission of contract, less any offset recovered by Dealer, in any lawsuit naming Dealer as a Defendant relating to any Product that has not been altered when the lawsuit concerns:
The Participation Agreement with GM’s dealers that have been terminated states:
GM reaffirms the indemnification provisions of Article 17.4 of the Dealer Agreement and specifically agrees that such provisions apply to all new Motor Vehicles sold by Dealer.
There are, however, circumstances in which dealer indemnification will not provide redress for injured Claimants:
• In ten states, Plaintiffs may not recover from non-negligent dealers even if manufacturers become insolvent: Colorado, Georgia, Kentucky, Louisiana, Michigan, Mississippi, Nebraska, North Dakota, South Dakota and Utah.
• In many cases, non-owners of vehicles, such as passengers or pedestrians, often cannot sue the car dealer.
• It is misleading for jurors to believe that they are holding Dealers – who had nothing to do with design and manufacturing – responsible for product defects when the real party of interest is the manufacturer. In addition, jurors will naturally be more reluctant to assess liability against a local merchant who may be significantly involved in community affairs, or they may assess smaller damages than is fair to the consumer simply to avoid burdening the local dealer.
• It will be difficult for Claimants to get discovery against the manufacturer if the Claimant can only sue the dealer. This will make it difficult, if not impossible, for the Claimants to access the information they need to prove their cases.
Congress should pass legislation that would require Chrysler and GM to accept liability for product liability claims that were pending as of the time that the companies declared bankruptcy and would require Chrysler to accept liability for product liability claims involving its vehicles that were sold pre-bankruptcy. According to the companies, this will not impose a great deal of additional costs on the companies since they are already indemnifying their dealer network, but at the same time, it will ensure that all the victims receive their day in court and not remain victims of both a defective vehicle and then of the bankruptcies of the two carmakers.
Source: Philadelphia Injury Attorney Blog
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