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Fiat can take Chrysler assets without its responsibilities

Bankruptcy judge Arthur J. Gonzalez held last week that Fiat need not assume Chrysler's product liability defect responsibilities along with its assets.  A bankruptcy judge has broad discretion in deciding whether a successor entity must stand behind its predecessor's liabilities for personal injuries.  Many judges, and most common law decisions outside bankruptcy, hold that a successor entity that takes over the valuable assets of a company must also assume its existing duties to injury victims.

In the recent Chrysler bankruptcy, the judge ruled that Fiat would not have to meet Chrysler's existing or inchoate obligations.  Most likely, he concluded that having a viable company with no pre-existing obligations was of greater value than maintaining the Chrysler obligation if it would be an obstacle to Fiat's purchase.  Critics of the decision point out, however, that Fiat had agreed to the purchase without this concession in place, and that this after-the-fact decision will deny people with legitimate defect claims against Chrysler, Jeep and Dodge of their "day in court."
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