GM and Chrysler have both now filed for bankruptcy, and the future of pending civil claims involving many injured individuals as a result of defective products (seat belts, roofs, gas tanks, air bags, etc.) is looking ominous.
As a product liability lawyer, I have had the honor of representing individuals, including children, who have been permanently injured due to manufacturing negligence. Currently, The Lyon Firm is active in automotive product liability and is representing a nineteen year old women from Shelby Ohio who was paralyzed due to a defective lap belt and seat design in a Pontiac Grand Am. At the time of the accident, she was a passenger in the middle rear seat when the car sustained a head on collision with a tree. During the impact, she sustained injuries to her lower lumbar and abdomen. The injuries have left her without any bladder control and partial paralysis in her lower extremities. She will never walk without assistance again and will need ongoing medical care. GM was well aware of the defective lap belt and defective seat for decades prior to manufacturing the 2000 Grand Am in which my client was riding.
Now, due to additional neglect in the company, it appears that many personal injury victims who sustained injuries and death from automotive defects in GM and Chrysler vehicles will go uncompensated. The effect of these bankruptcies will place an additional burden on the tax payer to provide medical care and assistance to these individuals and leaving the individuals grossly undercompensated for the injuries they sustained through no fault of their own.
THE STAY OF AUTOMOTIVE PRODUCT LIABILITY CLAIMS
At this time, the details of a product liability fund or appropriate course of litigation has not been announced but it is anticipated that there will be little recourse for these individuals. Currently, it is reasonable to assume the hundreds of automotive crashworthiness lawsuits being actively litigated across the country will be stayed pursuant to an automatic stay under Section 362 of the Bankruptcy Code.
The stay will likely include all claims that have been filed or could have been filed to recover any claim that arose prior to the commencement of the bankruptcy. [11 U.S.C. § 362(a)(1) (1993). If a stay is put into effect, it will likely cause all pending litigation to stop and may also prevent new cases from being filed until the bankruptcy court determines the stay should be lifted.
RELIEF FROM AUTOMOTIVE BANKRUPTCY FOR AUTOMOTIVE PRODUCT LIABILITY CLAIMS.
A court may grant relief from such a stay to allow a party to proceed under certain limited circumstances.
1. Relief would result in a partial or complete resolution of the issues;
2. There is a lack of any connection with or interference with the bankruptcy case;
3. The other proceeding involves the debtor as a fiduciary;
4. A specialized tribunal with the necessary expertise has been established to hear the cause of action;
5. The debtor's insurer has assumed ful responsibility for defending it;
6. The action primarily involves third parties;
7. The litigation in another forum would prejudice the interests of other creditors;
8. The judgment claim arising from the other action is subject to equitable subordination;
9. The moving party's success in the other proceeding would result in a judicial lien avoidable by the debtor;
10. The interests of judicial economy and the expeditious and economical resolution of litigation;
11. The parties are ready for trial in the other proceeding; and
12. The impact of the stay on the parties and the balance of the harms.
Bankruptcy Stay Authority: See, In re Mid-Atlantic Handling Sys., LL C, 304 B.R. at 130 (citing In re Ice Cream Liquidation, Inc., 281 B .R. 154, 165 (Bankr.D.Conn.2002)). See also In re Curtis, 40 B.R. 795, 799-800 (Bankr.D.Utah 1984) (utilizing same factors). All twelve factors are not necessarily present in a particular case, and a court need not rely on any plurality of factors in deciding whether to lift the automatic stay. In re Mid-Atlantic Handling Sys., LLC, 304 B.R. at 130 (citing In re Ice Cream Liquidation, Inc., 281 B.R. at 165).
AUTOMOTIVE PRODUCT LIABILITY CLAIMS ARE UNSECURED CREDITORS
In the rare event of removing the Stay, the future looks very difficult due to the classification as an un-secured creditor -- , i.e., the lowest level of priority in a very large pool of creditors. As a result, “The most likely result is they are going to get chewed up and get little if anything,” said Richard A. Zitrin, who teaches legal ethics at the Hastings College of the Law of the University of California in San Francisco. “They’re being put in a bucket with much more powerful forces, so they are going to be the low people in the pecking order.”
OPTIONS FOR PROTECTING AUTOMOTIVE PRODUCT LIABILITY CLAIMS IN BANKRUPTCY
There has been very little open discussion on the best manner to protect the pending and future product liability claims. However, this is a big issue not only for the injured but for any company that is going to be purchasing GM or Chrysler assets. It is in the future of liabilities that there has likely been more discussion, as any buyer will be concerned with assuming the past and future liabilities.
One way to protect all consumers would be for the bankruptcy court to require the new Chrysler to either set aside money to cover claims or require a special insurance policy, said Norman I. Silber, a law professor at Hofstra University, who specializes in consumer law. This would also protect a future buyer. This approach would work well for GM as well. The government should not overlook the product liability issues without coming to some solution. As mentioned above, the government will be stuck with the health bills, so they should require these companies to set up a system for taking responsibility for its past decisions. Unfortunately, these companies are the worst kind of offenders -- they hurt so many people and they cannot pay for the damage.
