Tort Liability of Dealers Selling 1973-1987 GM Pickups

ESSENTIAL INFORMATION
Washington DC

October 18, 1993

Dear General Motors Truck Dealer:

We are writing to notify you, that in our view, you face enormous potential liability losses should you sell a used General Motors pickup with side saddle gas tanks without remedying the hazard. The clear basis for your liability is explained in the attached legal memorandum from the Center for Auto Safety. General Motors itself lost a $105 million verdict in one lawsuit on these pickups. It has settled or lost over 125 other pickup gas tank cases at a reported cost of over $100 million more.

GM side saddle pickups represent the worst vehicle fire hazard in history, with more than 400 people killed due to burns in fire crashes and over 2,000 injured. When the National Highway Traffic Safety Administration (NHTSA) recalled the Ford Pinto, only 27 fire deaths were reported. NHTSA's Fatal Accident Reporting System shows these GM pickups are 3.5 times as likely as comparable Ford pickups to be involved in fatal side impact crashes where fire is the cause of the fatality and 4.7 times as likely as Dodge pickups. Since September 1992, at least 29 people have been killed and 24 injured in fire crashes in 1973-87 GM C/K pickups. The Center for Auto Safety projects another 200 people will be burned to death and 1,000 more injured during the remaining useful life of the 6 million GM pickups on the road if they are not remedied.

The dangerous defect in these pickups is the location of the fuel tanks outside the frame where they are vulnerable to rupture in side impacts at speeds as low as 20 MPH. GM's original Design Directive for the 1973 pickups said, "The fuel tank must be mounted as near to the center of the vehicle (truck) as practical." Chrysler engineers concluded in designing their 1973 pickups: "A frame mounted fuel tank mounted on the outside of the frame rail is not acceptable. Any side impact would automatically encroach on this area and the probability of tank leakage would be extremely high."

On April 9, 1993, NHTSA asked GM to voluntarily recall these pickups based on "an increased risk of fire to occupants of the [pickups] and to occupants of the vehicles that strike the [pickups] in side impact crashes that is associated with the GM design in which the fuel tanks are mounted outside of the frame rails. . . . this design is likely to lead to 5-6 additional fatalities per year in severe, but otherwise survivable, side impact crashes compared to Ford full-size pickups." (Copies of NHTSA's recall request and supporting documentation can be obtained from the agency's Technical Reference Division, Room 5118, 400 Seventh Street SW, Washington DC 20590.)

Under the terms of the proposed settlement of the private class action against GM, your liability exposure may increase dramatically in the future since GM plans to distribute $1,000 coupons to 6 million owners of 1973-87 GM pickups to induce them to buy new trucks. Should you accept a 1973-87 pickup in trade with one of the $1,000 coupons, you face potential liability for reselling that pickup if it is subsequently involved in a fire crash.

We believe it is in the public interest and your best interest to urge General Motors to modify the proposed class action settlement to provide for a repair option with any of the several known methods of remedying their fuel system safety hazards.

Sincerely,

John Richard
Executive Director


Tort Liability of Dealers Selling 1973-1987 GM Pickups


Dealers may be held liable for reselling General Motors 1973-87 Pickup Trucks with side-saddle gas tanks under negligence and strict liability theories. Liability is most likely to be assessed where the dealer has knowledge that the Trucks are defective or dangerous and does nothing to avoid preventing injury to purchasing consumers. After the federal government's April 1993 request that GM recall the Trucks with detailed supporting information on their gas tank hazards, dealer knowledge of the Trucks' dangers increased significantly.

It is "black letter law" that a seller of a product manufactured by a third party is liable for negligence where the seller has knowledge that the product is dangerous or is likely to cause harm. The Restatement (Second) of Torts Section 399 (1965) states:

A seller of a chattel, manufactured by a third person who sells it knowing that it is, or likely to be, dangerous is subject to liability [for physical harm caused by its use].

Section 401 states:

A seller of a chattel manufactured by a third person who knows or has reason to know that the chattel is, or is likely to be, dangerous when used by a person to whom it is delivered or for whose use it is supplied, or to others whom the seller should expect to share in or be endangered by its use, is subject to liability for bodily harm caused thereby to them if he fails to exercise reasonable care to inform them of the danger or otherwise to protect them against it.

Courts have consistently applied these principles in holding that a seller or other non-manufacturing supplier of a dangerous or defective product liable in negligence if the seller knew or had reason to know of the danger of the product. Eagle Picher Industries, Inc. v. Paul Balbos, 326 Md. 179, 604 A.2d 445 (1991); Fernandes v. Union Bookbinding Co. Inc., 400 Mass. 27, 507 N.E.2d 728,732 (S.Ct. Mass. 1987); Bailey v. Montgomery Ward & Co., Inc. 635 P.2d 899 (1981); Olivarez v. Broadway Hardware, Inc., 564 S.W. 2d 195 (Tex. Civ. App. 1978); Cadillac Corporation. v. Moore, 320 So. 2d 361 (1975).

For example, the court in Eagle Picher Industries, supra, held that the defendant, who was a supplier and installer of asbestos products, should have known of the dangerous effects of asbestos. The court in Cadillac Corp. v. Moore, supra, found that the defendant, who was a seller of mobile homes, knew or should have known that the heater in the mobile home at issue was constructed to burn liquid petroleum or natural gas and was unsafe for its intended purpose.

Applying this reasoning to the defective General Motors Pickup Trucks, dealers may be held liable for injuries resulting from the resale of the Trucks where the dealer knew of the danger caused by the location of the gas tank on the outside of the frame rails in a side impact collision and yet continued to sell the Trucks. Liability under negligence doctrine would lie where the dealer could have protected the consumer from danger by repairing the Truck or warning consumers of the dangers prior to sale.

In addition to negligence, dealers may also be liable under the doctrine of Strict Liability. Section 402A of the Restatement (Second), Torts, specifically applies to "any person engaged in the business of selling products for use or consumption." The section permits a person injured by an allegedly defective product to sue any seller of that product, if that seller is engaged in the business of selling such a product. Some courts have applied the Restatement Section 402A to sellers of used goods including any manufacturer of such a product, to any wholesale or retail dealer or distributor. In Childers v. Joseph, 842 F2d. 689, 696 (3rd Cir. 1988) the court applied Section 402A of the Restatement in refusing to dismiss a claim against a General Motors Dealer who sold the allegedly defective truck cab and chassis. The court held that both manufacturer and dealer were properly named as defendants.

Additionally, some state courts have held that dealers may be liable in strict product liability if plaintiffs show that the dealer had actual knowledge of the defect in the product. See Fillippini v. Ford Motor Co., 110 F.R.D. 131, 135 (N.D. Ill. 1986); see also Dehmlow v. Austin Fireworks, Inc. 1993 U.S. Dist. Lexis 8339 (N.D. Ill. 1993).

Under general principles of tort law, if the dealers resell the Pickups Trucks knowing that the side-saddle gas tanks create a dangerous condition, they could be held liable for personal injury. Given the clear and convincing evidence on the dangers of side-saddle gas tanks in 1973-87 GM Pickups that have resulted in punitive damage awards, Moseley v. GM, Civ. File No. 90V6276, (Ga. State Ct., Fulton County, Feb. 4, 1993) and the National Highway Traffic Safety Administration's request to GM to recall all Pickups with side-saddle gas tanks, liability could result where dealers are shown to have learned of the Pickups' hazards.

October 18, 1993