State AGs challenging GM's liability plan.
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The Wall Street Journal (6/22, A4, Spector) reports, "Eight state attorneys general are opposing a provision in General Motors Corp.'s bankruptcy plan that would free the auto maker from liability for vehicle defects. Attorneys general from Connecticut, Kentucky, Maryland, Minnesota, Missouri, Nebraska, North Dakota and Vermont filed an objection in U.S. Bankruptcy Court in the Southern District of New York Friday, arguing that GM's plan to shed these liabilities would bar accident victims from 'key legal rights.'" The states "could face an uphill battle" as "legal precedent shows that most companies have wide latitude to leave claims behind in bankruptcy court."
McClatchy (6/21, Gelles) reported on the impact of GM and Chrysler's bankruptcies on consumer protections. Clarence Ditlow, executive director of the Center for Auto Safety said, "The immediate impact on the consumer is that if you have a pending product-liability lawsuit, or if you're in a crash tomorrow that gives rise to a product-liability lawsuit, your claim is extinguished; you're not going to recover. Ditlow said the Chrysler deal also could undermine provisions, such as double or triple damages, that made some states' lemon laws more effective." McClatchy notes, though, that "some lemon-law lawyers, such as Robert Silverman of Kimmel & Silverman, said Chrysler customers scored a victory because the final deal with Fiat requires the new company to honor warranty and lemon-law claims for Chrysler products made in the last five years."
The Washington Post (6/19, Marr) reported, "Lawyers are scrambling to file paperwork today to oppose the sale of GM's assets. Christine Spagnoli, president of Consumer Attorneys of California, said the automakers' pledge to guarantee warranties, parts and maintenance is misleading to customers." Spagnoli explained, "They're saying, 'If your brakes are bad, we'll fix them. But if you crash and get hurt because your brakes are bad, we don't want to be accountable for that.'"
The Detroit News (6/22, Guthrie) reports, "John Pottow, a University of Michigan law professor and bankruptcy expert, was returning Thursday from a conference in New York, where he said General Motors lawyers gave him the impression they are still considering how to proceed." Said Pottow, "What's fascinating about this is that it is the government taking the hard line here, insisting that the new company should emerge free of those liabilities. It's the government actually thinking like hardheaded investors instead of taking the more predictable, more socialist line." Critics "are lobbying to establish government-supported victims' compensation funds." One expert noted, "There is a lot of discussion in Washington about compensation funds, which happens frequently in cases like this. ... When you have products that have and will continue to kill people, there are funds set up for victims."