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  • Writer's pictureKirk Hartley

Connecticut Brief in Chrysler Illustrates Why Manville/Travelers is So Important

A decision is expected tomorrow after the briefs and argument flowied all last week in Chrysler. In a nutshell, the battle seems to boil down to how much the sale order will or will not do to give the buyer entity the future comfort and protection provided by a federal bankrupcty court order/injunction limiting future claims. For example, will the buyer entitiy obtain the injunctive protection it wants to protect itself from the expenses of product laibility claims arising from products sold by ” old Chrsyler”? If so, that order will completely contradict state tort law rules that allow successor liability to be imposed on successor entities that assume control of and the financial benfeits of a prior manufacturing operation that it is out of existences and/or insolvent. Likewise, will “old” and “new” Chrysler ” obtain the order they want to enjoin future fraudulent conveyance claims asseting that too little money has been left behind for creditors?

Various objectors have weighed in on the issues, and oppose an order granting the buyer protection against future product liability claims. The objectors include all product liability claimants. Another one is the State of Connecticut. It’s opening statement, docket # 2567, builds from its objection. The following is the text of the obecjtionn, but with footnotes omitted and emphasis added:


The State of Connecticut (the “State”) by Richard Blumenthal, Attorney General (the “Attorney General”), and through its undersigned counsel, respectfully submits this opening statement with respect to its Joinder, Limited Objection, and Reservation of Rights filed May 23, 2009 [Docket No 1976] (the “Objection”).

This court should not enter any order depriving purchasers of Chrysler vehicles of legal rights to be compensated for death or serious injuries caused by defects in Chrysler products. Any such order would be unfair, in violation of due process, and inconsistent with the public assertions by the President of the United States and the Debtor that consumers who buy Chrysler products have no cause for concern.

The State has objected to the Debtors’ motion for an Order authorizing the sale of substantially all of the Debtors’ assets free and clear of liens, claims, interests and encumbrances (the “Sale”). This objection raises two concerns: (1) the proposed rejection of product liability claims for vehicles sold pre-closing; and (2) the proposed rejection of all future claims based on theories of transferee or successor liability for vehicles sold pre-closing.

On the first point, the State joins in the Objection of The Ad Hoc Committee of Consumer-Victims of Chrysler LLC (the “Ad Hoc Committee”) in its Limited Objection to Motion for an Order Authorizing the Sale of Substantially all of the Debtors’ Assets Free and Clear of Liens, Claims, Interests and Encumbrances and Reservation of Rights of the Ad Hoc Committee of Consumer-Victims of Chrysler LLC [doc. id 1192] (the “Consumer Objection”). As the Ad Hoc Committee argues in the Consumer Objection, and the State argues by reference in its Objection, Section 363(f) simply does not permit the sale free and clear of “claims,” even though it does permit the sale free and clear of “liens.”

With respect to the State’s second issue, due process principles do not allow the sale to New Chrysler “free and clear” of future, presently unknown claims. Fiat’s argument that the “the number and variety of objections that have been filed demonstrates that notice of the proposed sale has been disseminated widely,” (Docket No. 2111 at 11) is unfounded. Consumers who are unaware that they may have product liability claims in the future could not possibly recognize the need to review or respond to a notice about those not-yet-existing claims now. This situation cannot be what the Department of the Treasury and the United States government intended when they provided substantial financial assistance to the Debtors. It also appears to be directly at odds with President Obama’s statement on March 30, 2009: But just in case there’s still nagging doubts, let me say it as plainly as I can: If you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired, just like always. Your warranty will be safe. In fact, it will be safer than it’s ever been, because starting today, the United States government will stand behind your warranty.

Remarks by the President on the American Automotive Industry, March 30, 2009.

Presumably, consumers presently purchasing new Chrysler vehicles are not being informed that they may have no claim under product liability law for any harm they may suffer as the result of a defective Chrysler vehicle. Thus, Fiat’s argument that the publicity of the proposed sale satisfies due process is unavailing. Unknowing consumers are still buying Chrysler vehicles with no indication that future injuries caused by a defect in those vehicles will not be a liability of New Chrysler. Injuries caused by automobile defects can be devastating. The medical bills, loss of income, severe disability, or most tragically, loss of life are difficult enough to bear. This court should block the Debtors from erecting another unconscionable burden — litigating whether this Court has the authority to approve the Sale free and clear of product liability claims. New Chrysler should be clearly liable under a theory of successor liability, among others.

Consumers purchasing Chrysler products today do not know that they may not have the legal rights enjoyed by purchasers of other cars concerning life threatening defects. Congress cannot have intended to eviscerate such rights when it enacted Section 363, nor what the Treasury had in mind when it loaned the Debtors billions of taxpayer dollars. Accordingly, the State urges this Court, if it is inclined to allow the Sale, to do so subject to the retention of product liability claims. Dated: Hartford, Connecticut May 26, 2009 STATE OF CONNECTICUT RICHARD BLUMENTHAL, ATTORNEY GENERAL By: /s/ Denise Mondell Denise Mondell (DM-8434) Matthew F. Fitzsimmons Assistant Attorneys General Office of the Attorney General State of Connecticut 55 Elm Street Hartford, CT 06106 Phone: (860) 808-5150 Fax: (860) 808-5383

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