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It's the end of the road for many GM and Chrysler lawsuits

Plaintiffs with unresolved injury claims stand little chance of collecting now that General Motors and Chrysler have emerged from bankruptcy proceedings.

July 11, 2009|Maura Dolan and Carol J. Williams

OAKLAND AND LOS ANGELES — Kimberly Young has recurring nightmares. She is rolling over and over and over, helpless, pinned inside a car.

Outside Manteca, Calif., last August, the 43-year-old accountant was driving to dinner with her daughter to celebrate a promotion. Her memory of the accident is fuzzy, but she believes she swerved to avoid something, then tried to correct. She remembers hearing a horn.

Her 2004 Jeep Grand Cherokee rolled over three times. The roof caved in, and her neck snapped. The accident left Young a quadriplegic. By the time she got out of the hospital, the home she had owned for 11 years was in foreclosure, and she needed round-the-clock care.

Young's lawyers argue the Jeep was prone to rolling over and want to sue Chrysler to pay for her medical bills and care.

That's not likely to happen. Along with hundreds of other people who have unresolved injury claims against Chrysler or General Motors Corp., Young has little chance of collecting from the auto company because of its bankruptcy.

Plaintiffs' lawyers tried unsuccessfully to have the new automakers that emerged from bankruptcy held liable for damages caused by their predecessors' products. They won a partial victory with GM, but both companies will shed liability for most claims.

The "new" General Motors and Chrysler will both be liable for damages caused by cars manufactured after bankruptcy. Neither company will be liable for damages from accidents that took place before their bankruptcy filings.

The difference between the two is that GM will be liable for future accidents involving cars built before the bankruptcy filing; Chrysler will not be.

Spokesmen for the companies say that result is just one of the side effects of bankruptcy, a process that has also cost tens of thousands of jobs, put thousands of dealerships on a quick path to closure and wiped out billions of dollars in debt owed to bondholders.

The companies also point out that the fact that a person was injured in an accident doesn't prove the car was defective.

"Bankruptcy is a very complex and difficult process," Chrysler spokesman Mike Palese said. It was "really important for the future viability of the company that we would be free from this type of liability."

GM spokesman Greg Martin added that claims related to vehicles sold before the bankruptcy "will stay with the 'old GM' " and be dealt with along with other unsecured claims. Under the bankruptcy plan, the "new GM" will take the company's best factories and manufacture cars, while the "old GM" will liquidate the company's remaining assets and pay off debts at pennies on the dollar.

For people who allege they were injured by defective cars, that's a grim prospect. Susana Villa Garibay, a mother of four who lives in Lincoln Heights, was left a paraplegic when her car seat ejected after her 1995 GM van was hit from behind, according to her attorney. She cannot sue the new GM because the accident occurred May 4. GM filed for bankruptcy June 1.

"She needs help. She was working three jobs," said her lawyer, Douglas Shaffer. "There was inadequate insurance on the vehicle that hit her, so she is literally left without recourse because of this bankruptcy."

Christine Spagnoli, president of Consumer Attorneys of California, said Chrysler agreed to replace defective parts in existing cars that are sold after the bankruptcy ended.

But it will carry no liability for deaths and injuries that might occur as a result of those defects.

"They are taking care of parts, but they aren't taking care of people," she said.

With an estimated 80 million GM and Chrysler vehicles on the road, 3,400 Americans will be killed or injured in accidents involving alleged defects in their cars in the next year, predicted Sean Kane, head of Safety Research & Strategies Inc. Kane based that forecast on data both automakers provided to the National Highway Traffic Safety Administration on previous accidents.

Of equal concern, added Kane, is the expected break in the flow of death and injury statistics to the NHTSA -- information that the federal agency monitors to spot defects that lead to recalls.

"If the claims aren't filed, we lose an important defect surveillance tool," Kane said. "And if the companies bear no liability for deaths and injuries caused by the uncorrected defects, what incentive do they have to recall?"

Rep. Andre Carson (D-Ind.) has introduced a bill in Congress that would require the post-bankruptcy carmakers to cover all current and future claims over defective vehicles made by their forerunners.

The deals are good for the economy but "should not have to come at the expense of the American consumer, who deserves the right to hold accountable any business that produces a defective product that causes personal injury or harm," he said.

Young is one of those consumers now faced with staggering expenses because of the bankruptcy. Without the possibility of compensation from Chrysler, "I don't have any hope," she said.

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