'New' Chrysler Exempt from Old (and Future) Lawsuits, GM Might Be Too


When Italian automaker Fiat bought struggling Chrysler, the deal exempted the new company from all liability in pending lawsuits from malfunctions in Chrysler vehicles produced or sold before June 10, the day the sale closed.

If GM comes out of its current Chapter 11 bankruptcy, it will probably be granted similar protection.

The Detroit Free Press reported on two families affected by the exemption – the Catalanos and the Fox family.

Linda Catalano died last Aug. 3 when her 1997 Chrysler Town & Country slipped from park into reverse as she was stepping out of the vehicle. Her family will now not see any compensation for the emotional and financial damages they suffered because of the accident.

Sixteen-year-old Justin Fox was killed in a fiery crash on July 4, 2007, when the extended-cab Chevrolet Silverado he was driving was hit between the driver's door and the left front tire by a friend driving a Ford Expedition, according to the Detroit Free Press report.

The Catalanos’ case against Chrysler focused on what they claim was a flawed transmission. The Foxes' sued GM, alleging that the sidesaddle design of the truck's fuel system was a contributor in Justin's death. Both families used the help of a personal injury lawyer to represent them in their cases.

Auto companies usually defend these cases by citing factors other than the quality of their vehicles that could have caused the deaths. Not all cases currently against Chrysler and GM would result in a personal injury settlement or a damage award.

The Free Press report states former Chrysler Chairman and CEO Bob Nardelli testified that Chrysler's expense for product liability, lemon law claims and other lawsuits is about $240 million each year. The new Chrysler has accepted some liability under state lemon laws, but it will be far less than in the past.

Old Chrysler does still have some assets – including approximately seven factories, some machinery and real estate. But according to the Free Press, the assets might only be worth about $2 million when sold.

Claimants could refile their cases against auto suppliers and auto dealers, but many of those businesses are also struggling, with little hope of recovery, the Free Press reported.

"It's not going to be a great day for tort claimants," said Anthony Sabino, who teaches bankruptcy law at St. John's University in New York. "But this will be a major bone of contention in the Chrysler case over the next six months. Those trials will have to go forward in some fashion, either in state or U.S. District Court."

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