Dismissing victim claims in Chrysler reorganization sets dangerous precedent

posted on:
June 10, 2009

author:
KURT NILAND

shona scotts car Dismissing victim claims in Chrysler reorganization sets dangerous precedentThey are all different ages and come from a variety of backgrounds, but they share two things in common: they or someone they love has been injured or killed because they were passengers in Chrysler vehicles — cars with known design defects or faulty components. They have also lost their ability to hold Chrysler legally accountable for all of the injuries and deaths that could have been avoided.

In May, the Ad Hoc Committee of Consumer-Victims of Chrysler LLC, which represents the victims with pending claims against the auto manufacturer, filed an official objection to the sale of Chrysler to Fiat free and clear of most liabilities. Under the arrangement, the new Chrysler would only have to honor pre-Fiat warranties, and it would remain bound to lemon laws on those vehicles. However, New Chrysler would be legally liable only for the vehicles it sold post-closing.

It’s an arrangement that creates a “very dangerous ticking time bomb bankruptcy loophole,” warned the Center for Justice & Democracy, Consumer Federation of America, U.S. PIRG, Public Citizen, and Consumers for Auto Reliability and Safety in a letter to President Obama.

If the government allows Chrysler to escape accountability, responsibility and liability, then it sets a dangerous precedent that will almost certainly be followed by General Motors and other corporations facing immanent bankruptcy. American consumers filed just under 12,000 claims alleging injury or death against GM in the last five years – about 78 percent more than filed against Chrysler in the same period of time.

According to Joanne Doroshow, the executive director of the Center for Justice & Democracy, complaints against Chrysler and GM amount to “nearly half of all defect claims against auto manufacturers in the country.”

There are 40 million GM and Chrysler vehicles on the road today, representing at least 40 million people who will lose all legal recourse if they ever become harmed by their vehicle’s defective design or function.

The inability of many consumers to pay astronomical medical bills, even if those bills are fractional copayments, may force many families to financial ruin. The parents of Amanda Dinnigan, a 10-year-old girl whose spine was snapped by a defective seatbelt in her family’s GMC Envoy, pay about $500,000 per year in health care costs. Amanda was paralyzed in the 2007 accident.

What auto manufacturers gain as they are dismissed from liability will certainly be felt by banks, mortgage lenders, health care providers, and other institutions as millions of dollars of bad debt ripple throughout the economy. It’s this scenario that underscores the lack of foresight in the government’s decision to let Chrysler off the hook.

Ethics aside, however, the move doesn’t do much for company image. At a time when Chrysler and GM need to woo future customers, it would help if they found a way to stand by their past and present ones. The messages emerging from the sale of Chrysler’s assets are cold and distant to the people whose lives have been shattered by injury or the loss of a loved one, but those messages will also resonate throughout the country and fall on the ears of potential buyers. 

Doroshow said that the Chrysler deal “Strips away a critical public safety protection that has been used to reduce the number of Americans hurt or killed from defective Chrysler and General Motors vehicles.” In particular, it robs the public of its “right to hold these companies accountable,” she said.

Litigation is the most powerful tool the public has for encouraging change. Where government regulations and civil penalties fail to bring about higher product standards, compensatory and punitive damages often succeed.

Joan Claybrook, the former head of National Highway Traffic Safety Administration, who now runs Public Citizen, said that “liability puts a burden [on companies] to be very careful … and not cut corners.” Without that extra protection, she said, “manufacturers will literally get away with murder.”

More information is available at www.safetysearch.net.

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