Chrylser’s Bankruptcy Filing – A Tort Lawyer’s Thoughts

If you are breathing and can read, you know that Chrysler has filed a Chapter 11 bankruptcy petition.

I am not a bankruptcy lawyer.  I am not a corporate lawyer.  But the filing has some immediate consequences readily apparent to the reasonably prudent tort lawyer.

1. Pending Cases.  All tort cases against Chrysler will be stayed by the filing of the petition.  In the short-run, it will bring all action in those cases to a halt, even if suppliers and other defendants are parties to the case.  In the coming months, motions will be filed to permit the action to proceed against the non-Chrysler defendants and those issues will have to be sorted out.  Cases on appeal will also be stayed for some period of time.  People who have unpaid judgments against Chrysler will not be able to collect on those judgments.  Plaintiffs  who have judgments on appeal secured by surety bonds will be able to collect from the surety bond issuer if they are successful on appeal,  but the appeal will be stayed in the short-run.  Plaintiffs  who have judgments on appeal that are not secured by a surety bond will be general, unsecured creditors if they are successful on appeal.  Some effort will be made to have some money set aside from Chrysler’s assets to pay pending judgments and pending claims.  How much will be paid on the dollar value of those judgments and claims?   By what process will the valuation of the pending claims be determined?  All of that remains to be seen.    Some of you may ask:  Chrysler has liability insurance, doesn’t it?  Yes, but the self-insured retention is very high. 

2.  Plaintiffs with judgments or pending claims:  See above.

3.  Plaintiff’s lawyers with pending claims:  See above.

4.  Defense lawyers with pending cases:  These cases are on hold until issues concerning the stay are resolved.  Plaintiff’s lawyers will be trying to proceed with discovery in cases with co-defendants.  Chrysler will undoubtedly resist, because that discovery could impact Chrysler’s interests in the litigation.  And then there is that little matter of accounts receivable ….

5.  Plaintiff’s and plaintiff’s lawyers who have cases that are not yet filed:  The stay applies bar the filing of a case against Chrysler.  They will need to consult with bankruptcy counsel on what must be done to preserve the statute of limitations in cases in which Chrysler is a potential defendant.   Tennessee plaintiff’s lawyers will want to sue the retailer of the Chrysler product, because of T.C.A. Sec. 29-28-106(a)(3), which imposes liability on sellers of products if the manufacturer is  judicially declared insolvent.  Plaintiff’s lawyers will also want to carefully examine the economic viability of these cases.

6.  Defense counsel in non-filed cases: Changes will present opportunities to grow business  for some lawyers and a loss in business for others.  In the meantime, uncertainty abounds.  This is not  a good time to be a young lawyer or unproductive partner.

7.  Experts.  Expert witnesses for plaintiffs and defendants will be put on hold pending the resolution of the stay issue.  Their future employment in pending and future Chrysler cases will be up in the air for several months.  Experts for the defense will be checking their fee agreements to see who is on the hook – Chrysler’s law firm or Chrysler.  Chrysler’s law firms will be doing the same thing.  Plaintiff’s lawyers – email experts now and stop the work.

8.  Court reporters:  If cases are stayed depositions stop.  So do trials.

9.  Exhibit and model makers:  No cases, no exhibits and models.

10.  Auto dealers:  More risk for dealers,especially under the Tennessee law mentioned above and states with some form of joint and several liability. 

11.  Auto suppliers:  There will be more of an incentive to go after suppliers of component parts if Chrysler, the assembler of all the parts, has financial problems.  To be sure, if there is a problem with a component part, Chrysler has always had a right to indemnification from the manufacturer of that component part.  Now, the whole dynamic in those relationships has changed, and one could only guess what will happen next.  One this is for certain here:  change.

12.  Non-dealer and manufacturer co-defendants:  If the case against you has some form of joint and several liability, a hand will be digging into your pocket.

13.  Insurance carriers for dealers, suppliers, and co-defendants:  Get ready to spend money.

14.  Lawyers for insurance carriers for dealers, suppliers, and co-defendants:  Get ready to make some money, but look over your shoulder, because the firms who used to defend Chrysler will be looking for your business.

15.  Jury consultants.  Both sides frequently use them.  It has no need for focus groups, shadow juries or jury-pickers in the short-run.

16.   Chrysler’s liability insurance companies:  I don’t know enough about how those policies are written or layered to offer an opinion here.

 17.  Mediators:  Pending mediations will be canceled.  Don’t look for any to be booked in the short-run.

18.  Investigators.  Counsel for both sides use them.  Business will decrease in the short-run.

19.  Videographers:  Used for depostions and inspections, but not in the short-run.

20.  Liquor stores and honky tonks:  Look for a surge in business.  Accept cash – do not run a tab.

P.S.  Some of you know that my beautiful and extremely bright wife defends Chrysler in products cases.   These are my thoughts, not hers.  Thus, this post is my responsibility and not hers.  She undoubtedly knows the answers to some of the questions I raised, but I know better than to ask.