Talk of Commas at a Chrysler Bankruptcy Hearing

From Eoin O’Dell’s roundup of comma-related mischief on I learned of a dispute that surfaced at a Chrysler bankruptcy hearing earlier in July.

In June 2009, Fiat and the new Chrysler Group LLC agreed to honor all the rights consumers had against the “Old Chrysler” under state “lemon laws.” The agreement was contained in a bankruptcy court judge’s order, but it’s analogous to a contract. Here’s the relevant language, with the juicy bit in bold italics:

Notwithstanding anything else contained herein or in the Purchase Agreement, in connection with the purchase of the Debtors’ brands and related Purchased Assets, the Purchaser from and after the Closing, will recognize, honor and pay liabilities under Lemon Laws for additional repairs, refunds (monetary damages) or replacement of a defective vehicle (including reasonable attorneys fees, if any required to be paid under such Lemon Laws and necessarily incurred in obtaining those remedies), and for any regulatory obligations under such Lemon Laws arising now, including but not limited to cases resolved prepetition or in the future, on vehicles manufactured by the Debtors in the five years prior to the Closing.

This language was at issue in connection with a lemon-law case settlement between Chrysler and one Bradley E. Wolff that was entered into shortly before Chrysler filed for bankruptcy in April 2009.

Wolff’s Dodge was made more than five years before the bankruptcy filing. Was his settlement covered by the agreement contained in the court order? At the court hearing, discussion focused on commas in that agreement—the comma after “future” and the absence of a comma after “prepetition.” The Wall Street Journal’s Bankruptcy Beat blog has the full story.

I quote Bankruptcy Beat (although I added to the text in brackets):

Steven L. Holley of Sullivan & Cromwell, a lawyer for Chrysler, said at a court hearing Thursday that the wording is clear: Chrysler is only liable for lemon law damages on cars less than five years old, for cases resolved both pre-petition and in the future

“Under normal rules of English grammar [the comma after “future”] refers to everything that precedes it,” Holley said in court.

But Wolff’s lawyer, Larry R. Hoddick of Caronna, Johnson & Hoddick LLP, had a different take. Again, according to Bankruptcy Beat (although I added the text in brackets):

Hoddick’s argument is that the lack of a comma [after “prepetition”] is a “sleight of hand” that absolves Chrysler from paying some claims settled before the bankruptcy filing, including Wolff’s. Hoddick contends that if the clause, “in the future,” were set off by commas, Chrysler would be liable to pay settlements like Wolff’s made before the bankruptcy filing.

“They cannot just remove a comma and then say they don’t have to pay all the cases pre-petition,” said Hoddick, speaking to the court on the phone from California.

Here’s my take on this:

You can discount Mr. Hoddick’s argument. The lack of a comma after “prepetition” isn’t the result of some trickery—it’s simply how the text of the agreement was written. The question is what one or more meanings the reasonable reader might derive from the language at issue. Sure, if there were offsetting commas around “or in the future,” it would be clear that “on vehicles manufactured by the Debtors in the five years prior to the Closing” modifies “prepetition” as well as “in the future.” And if my aunt had wheels, she’d be a bus.

But that’s not to say that Mr. Holley of S&C offers a compelling argument. Whenever I hear a lawyer refer to “normal rules of English grammar,” my heart sinks, as usually it’s used to support an interpretation that is in fact highly debatable. And that’s the case here.

In referring to “normal rules of English grammar,” Mr. Holley is, whether he knows it or not, alluding to the comma test under “the rule of the last antecedent.” That’s an arbitrary rule of construction that has zero to do with how people actually write. It’s a topic I’m intimately familiar with, as it was at the heart of that epic Canadian contract dispute, “the case of the million-dollar comma,” in which I acted as expert witness. I discussed the comma test in my Globe & Mail article.

Once you disabuse yourself of any notion that the comma after “future” has some magical significance, you’re left with the fact that “on vehicles manufactured by the Debtors in the five years prior to the Closing” is a closing modifier. And it’s not clear whether it modifies just “in the future” or both “prepetition” and “in the future.” (For more on closing modifiers and the risk of syntactic ambiguity they pose, see MSCD 11.19–26.)

I have no idea which meaning is more likely—there may well be plenty of evidence bearing on the question. It’s clear that the agreement was poorly drafted. How it should have been worded depends on what meaning was intended.

If you want to avoid creating this kind of problem, you have to become familiar with the sources of syntactic ambiguity and how to work around them. You might want to consult chapter 11 of MSCD.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

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