Bankruptcy Law

Chrysler Bankruptcy Plan Would Stymie Lawsuits for Auto Defects

Chrysler’s bankruptcy plan would honor vehicle warranties but apparently exempts its successor corporation from liability for lawsuits over defects in autos already sold.

The bankruptcy plan specifically accepts the warranty obligation, but says nothing about lawsuits, the New York Times reports. A coalition of consumer groups is asking the bankruptcy court to require Chrysler to assume liability claims in products liability cases.

Even if the court accepts Chrysler’s plan to eliminate the right to sue, it’s not clear whether it would succeed, according to Cornell law professor Theodore Eisenberg. “It is a due process question,” he told the Times.

Richard Zitrin, a law professor at the University of California Hastings College of the Law, said the plan is unusual. Bankruptcies are usually designed to excuse existing debts, not to protect companies from future obligations created by lawsuits, he explained. “It sounds bizarre to me,” he told the Times.

Car owners who have already won lemon law lawsuits against Chrysler are also hurting, USA Today reports. Many settlement checks are bouncing, the newspaper says.

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