Eight States Challenge Product Liability Issues in GM Bankruptcy

June 23, 2009

A provision that would release future owners of General Motors for product liability on cars sold prior to the company’s bankruptcy is being challenged by the attorneys general of eight states.

GM’s bankruptcy filing, now working its way through a federal court in New York, includes a provision that prevents consumers from seeking liability claims against future owners of GM. Under the provision, those who sued GM for injuries sustained in vehicles sold prior to the bankruptcy filing would be left on the same legal standing as GM’s unsecured creditors.

If approved by the U.S. Bankruptcy Court for the Southern District of New York, the move would allow Vehicle Acquisition Holdings (Newco) to buy GM free and clear of product liability, a move that has frustrated some consumer advocates.

“This proposed order would deprive GM consumers of key legal rights to compensation for death or serious injuries caused by defective GM products,” said Connecticut Attorney General Richard Blumenthal, who joined with counterparts in Kentucky, Maryland, Minnesota, Missouri, Nebraska, North Dakota and Vermont to file the motion.

“Stripping consumer rights would be unfair… and also inconsistent with public assurances by the President of the United States that consumers can have confidence in GM vehicles,” Blumenthal said.

Missouri Attorney General Chris Koster added that “consumers have fought hard over decades to earn the lemon law and product liability protections that GM now wishes to escape… I will not stand by and allow people who have made such a major purchase as an automobile to not have the peace of mind they rightfully deserve.”

Precedent, however, is against the attorneys general: Chrysler, which has already emerged from bankruptcy protection, was granted the same protection.

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