Lemon Law Claims Survive Chrysler Bankruptcy

by on Jul. 13, 2009

Consumer Rights Consumer Protection 

Summary: On April 30, 2009 Chrysler LLC filed a voluntary petition for Chapter 11 bankruptcy protection. Chrysler’s filing, with 39.3 billion in assets, is the seventh-largest bankruptcy in U. S. History.

On April 30, 2009, one time automotive giant, Chrysler LLC filed a voluntary petition for Chapter 11 bankruptcy protection. Chrysler’s filing, with 39.3 billion in assets, is the seventh-largest bankruptcy in U. S. History.

At the time of filing, there were some 1,350 consumer lawsuits pending nation wide against Chrysler for violations of so called Federal and State “Lemon Laws.” The filing of bankruptcy, along with the automatic stay imposed by the Bankruptcy Code, brought these “Lemon Law” claims to a screeching halt. Consumers could take no further action of any kind against Chrysler.

In general, Lemon Laws give rights and remedies to consumers with problematic vehicles. They require manufacturers, or manufacturers’ authorized dealers, to repair defective vehicles within a reasonable time. If repairs are not made within a reasonable time, then Lemon Laws require the manufacturer to replace the vehicle, refund the purchase price, or pay damages to the consumer. Most Lemon Laws also require the manufacture to pay the consumer’s attorney fees.

As part of the Chrysler reorganization plan, a proposal to sell the majority of its assets to Italian Auto Manufacturer, Fiat, and then join Fiat in forming a new, stronger, more efficient Chrysler Company was submitted to the Court. Objections, motions and arguments were heard. On June 1, 2009, the Bankruptcy Court entered an Order approving and authorizing the Fiat Transaction. As a result, a “New Chrysler” automotive manufacturer was born.

According to documents filed with the Court on June 30, 2009, the “New Chrysler” agreed to assume certain liabilities of the bankrupt Chrysler. These liabilities include pending and future Lemon Law claims. This means that the 1,350 consumers who were stopped from pursuing their lawsuits because of the bankruptcy, are now able to resume litigation in courtrooms across America.

Through a process outlined in court documents, the “New Chrysler” will assume the liability of bankrupt Chrysler and be substituted as the defendant in pending Lemon Law litigation. Future Lemon Law claims will be brought directly against the “New Chrysler.” Consumers will have the same rights and remedies against the “New Chrysler” as they had prior to the Chapter 11 filing. The Bankruptcy Court is expected to approve and order the “New Chrysler” assumption of “Lemon Law” liability as early as July 16, 2009.

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