Chrysler’s Sunroof Case Speeds Off to New York

(CN) - Claims that Chrysler sold several models of its cars with defective, leak-prone sunroofs may wind up in Manhattan bankruptcy court, a federal judge ruled.

Jay Miller and Brooke Willman filed a class action against Chrysler Group earlier this year in Newark, N.J.

The federal complaint alleged design defects in the Chrysler 300 series and six different Jeep models manufactured or sold since 2006. Miller and Willman said the defective sunroofs in these models leaked during inclement weather or car washes, causing electrical shortages and other device malfunctions.

But Chrysler said the case should play out in the Southern District of New York where it has been sorting out the bankruptcy proceedings of its predecessor, the briefly renamed Old Carco.

U.S. District Judge Michael Shipp granted the motion to transfer on Friday.

"Because the sale resulting in defendant's liabilities took place in the context of a bankruptcy proceeding, it is inconsequential what may have occurred, and what liabilities may have been incurred, if the sale took place outside of the realm of bankruptcy," Shipp wrote.

Transferring to New York promotes judicial efficiency, according to the ruling.

"The court finds that transfer of this case to the district where Old Carco's bankruptcy case is ongoing would promote judicial efficiency by establishing one forum where all claims arising from the sale of Old Carco's estate can be addressed," Shipp wrote. "Additionally, transfer will avoid the risk of 'inconsistent rulings' relating to interpretation and application of the sale order."

It remains up to the Southern District of New York as to whether it will transfer the case to its Bankruptcy Court, but precedent dictates that "courts routinely refer most bankruptcy cases to the bankruptcy court," Shipp wrote.

Precedent also led the judge to downplay claims that jury trials are unavailable in bankruptcy court.

"Even when a district court must ultimately preside over a trial by jury, there is no reason why the Bankruptcy Court may not preside over an adversary proceeding and adjudicate [preliminary matters] until such time as the case is ready for trial," according to precedent.

Though Shipp agreed that a plaintiff's choice of forum deserves deference, Chrysler persuasively argued that "all the other factors favor transfer."

The latest amended complaint alleged breach of contract, bad faith, breach of warranty, negligence and other claims.

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