The well-publicized bankruptcies of General Motors and Chrysler are proceeding — but plaintiffs with legal claims totaling more than $2 billion against the automakers are not part of the settlement talks.
Hundreds of plaintiffs have pending lawsuits against the carmakers. These litigants are blaming defective manufacturing for their injuries, which in some cases are severe and crippling.
Lawyers are skeptical as to whether they'll ever see any payment because these plaintiffs are considered "unsecured creditors" in the bankruptcies. Thus, they are at the bottom of the repayment list.
"We want all the people who have suffered injury, who have a lawsuit, to have their day in court," said Larry Coben, chairman of the Committee of Consumer Victims of General Motors, and founder of law firm Coben & Associates in Scottsdale, Ariz., told CNN.
"They shouldn't be lost in the shuffle here."
Coben colleague Barry Bressler is leading a team of lawyers representing 170 injured plaintiffs in the bankruptcy proceeding who have complained against Chrysler for claims worth $600 million and 300 injured plaintiffs who sued GM for claims worth $1.25 billion.
A partner with the Philadelphia firm Schnader, Harrison, Segal & Lewis, one of Bressler's clients was a passenger in a GM vehicle and was paralyzed when it crashed, allegedly due to a faulty seatbelt.
Bankruptcy Court Judge Arthur Gonzalez agreed to the transfer of Chrysler's best-performing assets, including factories and dealership contracts, to the newly created Chrysler Group LLC. Many factories, dealerships and creditors were left behind in the bankruptcy process, including pension funds from Indiana teachers and state police.
Indiana Treasurer Richard Mourdock appealed — first to the Court of Appeals, 2nd Circuit, and then to the U.S. Supreme Court — that the pension funds, as secured creditors, should have higher status than unsecured creditors.
But the Supreme Court gave the Chrysler bankruptcy a green light, nonetheless. Mourdock's appeal delayed the process by a few days.
That does not bode well for the injured plaintiffs. Experts say that these bankruptcies are anything but conventional.
"There is an elephant in the courtroom that can’t be ignored: the dominant role of the federal government in the process," writes James Gattuso, an economist at the Heritage Foundation, in a posting on the think tank's online blog, The Foundry.
"Tellingly, the announcement of bankruptcy was not made from Detroit, or from a federal courthouse somewhere — it was made from the White House, by President Obama himself. That left no doubt as to who is in the driver’s seat."
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