AGs say they oppose Chrysler bankruptcy

Chris Rizo May 28, 2009, 12:48am

Richard Cordray (D-Ohio)

Lisa Madigan (D-Ill.)

Darrell McGraw (D-W.Va.)

NEW YORK (Legal Newsline)-Attorneys general from a handful of states have filed their objections to the proposed sale of Chrysler LLC's assets to Italian automaker Fiat SpA.

Attorneys general from Illinois, Ohio, Florida, Kentucky and West Virginia are among state officials who say they fear the sale could hurt their respective states and consumers.

Illinois Attorney General Lisa Madigan and Ohio Attorney General Richard Cordray have filed papers in federal bankruptcy court saying they fear that the sale could saddle their states with workers' compensation claims from Chrysler workers in their states.

"We are working to protect the safety net for Chrysler employees and ensure that sufficient funds are available to pay for any potential workers' compensation claims," Madigan said.

Officials say they are also worried the sale of the troubled automaker could fetter consumers' protections under state lemon laws.

"We are carefully monitoring the developments of this fast-moving case and continue to work aggressively to protect Ohio's interests," Cordray said. "Ohio's Lemon Law goes beyond the terms of a general warranty and this objection seeks to ensure that consumers will maintain that protection."

In papers filed in the Southern District of New York, the Democratic attorney general asked the bankruptcy judge to block Auburn Hills, Mich.-based Chrysler's pending sale until the Lemon Law issues are resolved.

Meanwhile, Florida Attorney General Bill McCollum, a Republican, said he opposes the sale because car dealers in the Sunshine State could have their franchise agreements voided.

West Virginia Attorney General Darrell McGraw lodged a similar complaint with the Bankruptcy Court, saying if dealerships are forced to close it would mean that residents would have to driver further to have their Chrysler-brand vehicles serviced.

"Rural states such as West Virginia are disproportionately impacted by the loss of new car dealerships since the distance and difficult terrain consumers must navigate to obtain service from surviving dealerships unfairly and unnecessarily shifts the burden of service and warranty obligations from New Chrysler to the consumers who are typically in a worse position to absorb the increased costs," McGraw's filing said.

For his part, Connecticut Attorney General Richard Blumenthal says he too wants assurances that the sale would not interfere with the rights of consumers who buy defective cars from the company.

The Democrat also said he is concerned that the Chrysler bankruptcy could interfere with a pending lawsuit against the company related to a 2005 Jeep Cherokee rollover accident that left a woman paralyzed from the chest down.

From Legal Newsline: Reach staff reporter Chris Rizo at

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