The federal government’s 2009 bailout of Chrysler has had an unintended consequence: It makes the auto maker immune from liability for punitive damages from any defects in cars made before the financial restructuring.
Or so said The Wall Street Journal in a detailed story last week.
According to The Journal, Chrysler was given this loophole during federal bankruptcy proceedings, and it was all approved by a judge. The federal law permits “sick companies at times to abandon product liability or other risks, overruling state laws that give consumers the right to seek damages,” The Journal reported.
Chrysler’s immunity, which The Journal says no other car maker has, is the result of a clause that Chrysler put into its sale deal to Italian Fiat SpA.
The loophole applies to more than 28 million cars and trucks, according to The Journal. And that’s not good news to anyone who owns an older Dodge Caravan or a Jeep Cherokee, which are suspected of having dangerous structural flaws.
For example, Stephen Mares’ Caravan burst into flames about two years ago, supposedly because of a fuel system leak. But now he’s been told he can’t sue Chrysler for punitive damages for the burns that he and his children suffered, The Journal reported.
And the National Highway Traffic Safety Administration is investigating whether there are problems with the Jeep Cherokee.
Chrysler got $12.5 billion in assistance from the government, aid that it has already paid back. But the auto maker is firm in its belief that it is only fair that its current management shouldn’t be held liable for punitive damages stemming from work done by previous executives, according to The Journal.
A Chrysler spokesperson brought up the issue of how punitive-damage awards can be wide-ranging and pricey.
The point of punitive damages is to make companies pay the piper when they engage in “reckless or intentional wrongdoing.”
“They sometimes exceed actual losses and aim to deter future wrongdoing by the defendant or others in a position to engage in similar conduct,” The Journal wrote.
The paper offers a detailed analysis of the history of punitive damages and Chrysler’s situation, with defenses by the auto maker and denunciation by lawyers and representatives of Ralph Nader’s Center for Auto Safety.
It’s an enlightening story. My vote is that Chrysler shouldn’t have been left off the hook for punitive damages.
Attorney Gordon Johnson
Past Chair Traumatic Brain Injury Litigation Group, American Association of Justiceg@gordonjohnson.com
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