As reported in BankruptcyLaw360, the former Chrysler LLC has asked the bankruptcy court to approve a process to ease the implementation of the lemon law provision in Italian carmaker Fiat SpA's $2 billion agreement to purchase the company.

The sale agreement, consummated June 10, allows for the sale of Chrysler's principal assets to Fiat, creating a new company called Chrysler Group LLC, referred to in the bankruptcy proceeding as “New Chrysler.”

Under the deal, new Chrysler would also assume certain liabilities of the old company, and pay the old company $2 billion in cash.

Before the sale was approved, several state attorneys general and consumer groups pushed for the rights of consumers under state lemon laws be adequately protected under the deal.

To resolve these concerns, New Chrysler agreed to assume many of the lemon law obligations, including Pennsylvania lemon law and New Jersey lemon law claims, and a lemon law provision was inserted into the sale order.

Under that provision, New Chrysler took on many of the lemon law obligations, but did not assume certain forms of relief or liabilities, like punitive, exemplary or consequential damages or claims for personal injury. New Chrysler also did not take on liabilities for vehicles that were manufactured more than five years before the sale's closing.

In addition, the provision did not detail exactly how New Chrysler is to assume the lemon law liabilities, particularly the pending lemon law actions against the debtors. Upon entering bankruptcy protecting, Chrysler was a defendant in some 1,350 lemon law actions in various states.

In the motion filed Tuesday, Chrysler requests that the court approve a clear process to allow pending and future lemon law claims against old Chrysler to be switched to New Chrysler, allowing the remaining debtor and the bankruptcy court to be freed of involvement from the cases.

“The debtors have been contacted by numerous lemon law claimants, including the lemon law firm David J. Gorberg & Associates, seeking to determine how to assert the assumed lemon law liabilities. The debtors have also received inquiries from various states seeking clarification regarding the best means to proceed in administering lemon law actions,” the motion said.

“Without a clear process to address these issues, the debtors anticipate that certain lemon law claimants may seek to proceed with their claims and lawsuits in a manner that violates the automatic stay or violates the limitations of the lemon law provision. Likewise the debtors expect that the may be faced with numerous motions to modify the automatic stay to permit the pursuit of the assumed lemon law liabilities,” the motion said.

Old Chrysler is asking the bankruptcy court to allow a plaintiff to switch its lemon law case to New Chrysler in one of three ways.

The first method would involve filing the appropriate papers in the lemon law case to indicate that New Chrysler is being substituted for a defendant, and stating that only the assumed liabilities are being pursued against New Chrysler.

The second method involves dismissing the lemon law action and filing a new action solely against New Chrysler.

The third allows for any similar arrangement deemed acceptable by both the debtors and New Chrysler, as long as no claims are pursued against the debtors and no excluded liabilities are pursued against New Chrysler.

Any lemon law plaintiff who follows those procedures will not be deemed in violation of the automatic stay, the debtors proposed.

Responses to the request are due July 10; a hearing will be held July 16.

*The above information was reported in BankruptcyLaw360.

The car industry is very convoluted these days, with continued change around the world. The poor economy has resulted in widespread cost reductions and new partnerships in auto ownerships.

To help clarify the confusion, here is a list of which auto companies owns which brands. Despite the changes, the one consistent factor is that all consumers are still fully protected from defective autos through the state lemon law.


BMW owns: BMW, Mini, and Rolls Royce

Fiat owns: Alfa Romeo, Ferrari, Fiat, Lancia, Maserati; Chrysler, Dodge, Jeep–20-percent stake

Ford Motor Company owns: Ford, Lincoln, Mercury, Volvo (for now), and still owns 13.4 percent of Mazda

General Motors owns: Buick, Cadillac, Chevrolet, GMC. Also owns a controlling interest in Daewoo, as well as Opel and Vauxhall in Europe and Holden in Australia. (Pontiac to be discontinued)

Honda owns: Honda, Acura

Hyundai owns: Hyundai, Kia

Tata Motors (India) owns: Jaguar and Land Rover

Mazda (partially owned by Ford)

Mitsubishi

Daimler AG owns: Mercedes-Benz and Smart

Nissan owns: Nissan and Infiniti (Nissan is owned by Renault--France)

Porsche owns: Porsche and a majority share in Volkswagen

Subaru (A controlling interest of Subaru is owned by Toyota)

Suzuki

Toyota Motor Company owns: Lexus, Toyota, Scion, Daihatsu and Hino Motors, with a stake in Fuji Industries (Subaru’s parent company) and Isuzu

Volkswagen owns: Audi, Volkswagen, Bentley, Bugatti, Lamborghini, and overseas SEAT and Skoda.

In formal negotiations to be sold:
Hummer: Tengzhong (China)
Saturn: Penske Automotive Group
Saab: Koenigsegg (Sweden)

The New Jersey Assembly has given final approval to strengthen the
New Jersey lemon law. It's now up to Governor Jon Corzine whether to sign the approved bill, giving greater rights to the original lemon law which was enacted 17 years ago.

Under the new act, New Jersey residents who purchased or leased a new vehicle with a defect that could not be repaired in three attempts would have lemon law protection for the first 24,000 miles, up from the current 18,000. Defects that endanger health and safety would have to be corrected in one attempt.

David J. Gorberg, the lemon law lawyer, says strengthening New Jersey's lemon law will give consumers peace of mind and may also help the auto industry.

Congratulations to PA lemon law lawyer, David Gorberg, for being named a 2009 Pennsylvania Super Lawyer for a 6th year in a row! The Super Lawyer List was published in the June 2009 edition of Philadelphia Magazine and Law and Politics Magazine.

In November of 2008, Law & Politics Magazine mailed more then 34,000 ballots to attorneys across Pennsylvania requesting each lawyer to vote for the most effective attorneys they had personally observed in action. Each nominated lawyer was given a score based on the number of votes. The top point getters were then reviewed by a panel of experts to determine the final outcome for the Super Lawyer award. The final list of Pennsylvania Super Lawyers is made up of less then five percent of all Pennsylvania lawyers.

As reported in the Detroit News, Chrysler LLC said today it would honor lemon law claims from existing owners.

Under state and federal laws, owners of defective new vehicles can demand repairs or replacement vehicles if a new vehicle can't be fixed. Chrysler will agree to "recognize, honor and pay liabilities under lemon law for additional repairs, refund or replacement of a defective vehicle," the company said in a legal filing today. Chrysler had already agreed to honor existing warranties.

In the wake of Chrysler’s bankruptcy, many individuals have been effected. Most thoughts go first to the automakers themselves, then the suppliers, on down to the individual car dealerships and their employees. There is one group that remains forgotten - and now it seems Chrysler is seeking to keep it that way.

Those persons who have brought Lemon Law and Breach of Warranty suits for their defective vehicles are in a state of limbo. All cases that are currently filed in state and federal courts are stayed. Anyone who had settled a lawsuit but had not yet been paid at the time Chrysler filed for bankruptcy has yet to see their recovery. This means that in addition to countless persons being owed money by Chrysler for unpaid claims, there are others whose vehicles were to be bought back by the manufacturer or replaced, and are now stuck with defective vehicles, or in the worst cases left without vehicles that the manufacturer had taken possession of and without the money to replace them.

Normally when a company emerges from bankruptcy those cases that were stayed may be re-listed by courts; the settled matters, if part of a bankruptcy sale, will be paid, giving consumers a light at the end of the tunnel. Chrysler, in its agreement of sale to Italian automaker Fiat, appears to oblige the purchaser to honor warranties and warranty based claims, their conduct however, appears a complete contradiction.

Having advocated for consumer rights for years, this is a troubling sign of things to come. Should Chrysler have all claims filed prior to the bankruptcy discharged, those consumers who purchased these defective products will be without any recourse. If General Motors files for bankruptcy June 1, we could see the same issues emerge. I urge all consumers to contact their state representatives and tell them to fight for their rights.