General Motors Has Declared Bankruptcy
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The recent news that General Motors has declared bankruptcy should alarm those who drive a GM vehicle, as they will be without the constitutional protections guaranteed to allow open access to the court.
There are very legitimate and compelling reasons to take reasonable measures to salvage a company such as General Motors. The jobs of thousands of hard working people hang in the balance. In addition, GM is an institutional tradition in our country’s economy. Given this, why doesn’t it make sense that relief from claims resulting from GM’s negligence in their product manufacture should be forgiven? Let’s take the example of the mother and child riding in a GM product that is known to roll over easily, under normal driving conditions, as a result of product design defects that GM knew existed. Mom is severely injured but makes a reasonable recovery and $250,000 in medical bills. Mom’s little six year-old girl is rendered permanently paralyzed from her neck down. She will require 70 years of intensive and constant care at an expected cost of $25,000,000.
Ignoring for the moment the damages flowing from causing a young girl to live her entire life as a paraplegic, who pays for the care this young girl will require? You and I will ultimately pay for this little girl’s care, just as we will care for every person who is barred from recovering damages due to GM’s negligence. Injuries of a serious nature require significant care, far beyond the resources of any family. These injured victims will be forced to rely on the available social programs to help with their care.
Those victims injured in accidents that occur after GM emerges from bankruptcy protection will be able to bring claims against what will be a government-owned GM. Car-accident victims who have pending lawsuits, those who won damages against GM before it filed for bankruptcy, and those who are injured while GM is undergoing bankruptcy proceedings will be unable to bring claims against the newly restructured GM. They will instead be placed into a large group of unsecured creditors at the bottom rung of the creditor ladder and are likely to recover nothing.
In an effort to halt the usurpation of consumers’ causes of action, eight state attorneys general are opposing the provision of the bankruptcy plan that would release GM from liability. The attorneys general of CT, KY, MD, MN, MO, NE, ND, and VT, have filed an objection in U.S. Bankruptcy Court in the Southern District of New York to protect the “key legal rights” that should be afforded to product defect victims.
The ability of plaintiffs to be compensated for injuries resulting from product defects is extremely significant, as evidenced by the recent revelation that Ford Motor Co. may have conspired with rival automakers to conceal a problem with defective seat systems. A group of Maryland plaintiffs, who own Ford Explorers from 1991 to 2001, Mountaineers from 1997 to 2001, or Windstars from 1995 through 2001, have recently sought to be certified as a class, alleging that defective seating systems create a substantial risk in these vehicles because of their likelihood to collapse backward in the event of a crash. The plaintiffs further claim that Ford has known of the defect for years. Unfortunately such defects are not uncommon, and though Ford may be required to compensate victims, GM would be insulated from reimbursing individuals injured by such problems.
While those with pre-existing claims will likely receive little or no compensation, GM has said that it plans to continue to guarantee warranties on parts and maintenance. Christine Spagnoli, president of Consumer Attorneys of California, noted the ridiculousness of this. “They’re saying, ‘If your brakes are bad, we’ll fix them. But if you crash and get hurt because your brakes are bad, we don’t want to be accountable for that.”
Some critics of the proposed bankruptcy plan are lobbying the government to establish victims’ compensation funds. Though such funds would severely limit the amount of money available to those injured or killed by defects, they would provide them with at least some monetary recompense.
If GM’s proposed plan proceeds, it would not give consumers much incentive to buy or even continue to drive the company’s product until GM emerges from bankruptcy. Why would someone want to drive a vehicle that may have defects from which he/ she would not be protected? In fact, GM may be doing its potential business a great disservice by branding itself as a corporation that puts the rights of customers second, while shirking its responsibilities. If nothing else, it is certainly doing its customers a disservice by refusing to fully compensate drivers and passengers injured over the next several months.