When the U.S. Government brokered a bankruptcy for Chrysler two years ago, it allowed the car maker to discharge any obligations it owed to car accident victims with pending cases against the automaker, or those who had already won an award or settlement.
The Wall Street Journal has tracked several stories of some of the losers in the government deal, including the family of Vicki Denton. Ms. Denton died when the airbag in her 1998 Dodge Caravan failed to deploy in a collision. After years of litigation, in 2009 a jury determined that Ms. Denton’s vehicle was defective, and order Chrysler to pay her son $2.2 million in damages. Despite the jury’s finding, Chrysler has not paid the judgment, and under the rules of the bailout will never have to.
The bailout and restructuring, like most bankruptcies, caused winners and losers. Those pursing product liability claims were the losers.
“The government was deciding who was going to be taken care of and who was not,” said David Skeel, a University of Pennsylvania law school professor and bankruptcy expert who has testified before Congress on the auto bailouts. Even if the auto makers had legal rights to leave behind product-liability claims, “there is a deep unfairness. It would have been easy enough to set something aside for them.”
Chrysler and GM were insolvent and “came to the taxpayer and asked for help,” says Ron Bloom, the president’s chief adviser on manufacturing policy and a member of the auto task force that negotiated the car makers’ restructurings. “In a situation like that everybody simply cannot get everything they were promised or the check would have been a multitude of what we in fact spent.”
After objections from several state attorney generals, General Motors agreed to remain exposed to product defect lawsuits, but only those that occurred after the bankruptcy. This offers little comfort to the parents of Joshua Flax, and toddler who was killed when the Dodge Caravan he was riding in was rear-ended in 2001. The front passenger seat became dislodged and struck Joshua in the head, killing him. A jury found the car to be defective and awarded the family $23 million. After years of appeals by the automaker the Tennessee Supreme Court in 2008 ruled that Chrysler must pay, but the company appealed again, and when the bankruptcy was announce in 2009 the case became worthless.
“We did what we were supposed to do, we went through the legal system,” said Joshua’s grandfather, still angry at the automaker. “This is a real person. It’s not just something to write off on the ledger book.”
Here’s a video discussion of the issue:
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