Public Citizen, on behalf of itself, Center for Auto Safety, Consumer Action, Consumers for Auto Reliability and Safety, and National Association of Consumer Advocates, filed objections in the federal bankruptcy court in New York that oversaw the Chrysler bankruptcy proceeding, asking the court to preserve the rights of consumers who have suffered or will suffer injury or loss caused by defects in Chrysler vehicles to seek compensation from Chrysler. We argued that Chrysler could not be sold “free and clear” of product liability claims, and that eliminating the future claims of people who have not yet been injured violates the Constitution.
After the bankruptcy court approved the sale, we appealed. On June 5, 2009 the Second Circuit heard the case and, that afternoon, affirmed the sale. We sought a stay of the sale from the Supreme Court on June 7, and on June 8 filed a petition for a writ of certiorari, asking the Supreme Court to hear the case. On June 9, the Supreme Court denied the stay, allowing the sale to go through.
On August 5, the Second Circuit issued its decision. With regard to claims of people who will be injured in the future by Chrysler cars sold before the bankruptcy, the court stated that it affirmed the bankruptcy court decition “insofar as it constituted a valid exercise ofauthority under the Bankruptcy Code.” However, it declined “delineate the scope of the bankruptcy court’s authority to extinguish future claims, until such time as [it is] presented with an actual claim for an injury that is caused by Old Chrysler, that occurs after the Sale, and that is cognizable under state successor liability law.” Because the Second Circuit had not decided the issue, we withdrew our petition for certiorari. Chrysler subsequently announced that it was going to assume liability for product liability claims brought by people injured in post-Chrysler bankruptcy crashes involving cars sold before the bankruptcy.