Chrysler Deal with Fiat Filed with Bk Court
The agreement for the Fiat transaction has been filed. As expected, it is very substantial – 80 pages with 20 exhibits/schedules. One aspect is especially interesting, and should be of additional concern to rejected dealers. Sections 2.08 and 2.09 list assumed liabilities and those not assumed. Of note are the following subsections of 2.08, as well as subsection (i) of section 2.09. In 2.08, the following are assumed:
(g) all Liabilities pursuant to product warranties, product returns and rebates on vehicles sold by Sellers prior to the Closing;
(h) all Product Liability Claims arising from the sale after the Closing of Products or Inventory manufactured by Sellers or their Subsidiaries in whole or in part prior to the Closing;
In 2.09 the following are not assumed: (i) all Product Liability Claims arising from the sale of Products or Inventory prior to the Closing;
Consequently, New Chrysler will be responsible for warranties and presumably lemon law returns. It will only be responsible for product liability claims, however, to the extent that a claim is filed for a product sold by the New Chrysler. That means that rejected dealers will have no protection from product liability claims filed against them for Chrysler vehicles that they sold. Normally, a dealer could expect Chrysler indemnification under the dealer agreement, but that is being rejected, and the indemnification will thus no longer be in effect. And with New Chrysler not responsible for product liability claims for those cars, those product liability cases will likely be primarily filed against the dealers as sellers. This is a factor that a rejected dealer must consider when continuing in business with another franchise or as an independent dealer. Either the dealer must be sure it has sufficient insurance coverage to protect it from the claims, or it must look at continuing under some other entity.
The assumed dealers should be covered since in assuming the dealer agreements, New Chrysler assumes the indemnification obligations of the dealer agreement. The issue is being given further consideration.
(g) all Liabilities pursuant to product warranties, product returns and rebates on vehicles sold by Sellers prior to the Closing;
(h) all Product Liability Claims arising from the sale after the Closing of Products or Inventory manufactured by Sellers or their Subsidiaries in whole or in part prior to the Closing;
In 2.09 the following are not assumed: (i) all Product Liability Claims arising from the sale of Products or Inventory prior to the Closing;
Consequently, New Chrysler will be responsible for warranties and presumably lemon law returns. It will only be responsible for product liability claims, however, to the extent that a claim is filed for a product sold by the New Chrysler. That means that rejected dealers will have no protection from product liability claims filed against them for Chrysler vehicles that they sold. Normally, a dealer could expect Chrysler indemnification under the dealer agreement, but that is being rejected, and the indemnification will thus no longer be in effect. And with New Chrysler not responsible for product liability claims for those cars, those product liability cases will likely be primarily filed against the dealers as sellers. This is a factor that a rejected dealer must consider when continuing in business with another franchise or as an independent dealer. Either the dealer must be sure it has sufficient insurance coverage to protect it from the claims, or it must look at continuing under some other entity.
The assumed dealers should be covered since in assuming the dealer agreements, New Chrysler assumes the indemnification obligations of the dealer agreement. The issue is being given further consideration.
posted by Jim Sewell @ 1:57 PM
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