What Happens When Your EV’s Manufacturer Goes Bankrupt?

If you’re an electric-vehicle fan, you’ve likely heard of Fisker Automotive/Fisker Inc., the electric vehicle company headed by Henrik Fisker, a former designer at Aston Martin, and his wife Geeta Gupta-Fisker.

Fisker Automotive was the original iteration, created in 2007 by Henrik; the company only produced one car, the Karma, before declaring bankruptcy in 2013 (to date that story a bit further, Justin Bieber’s manager gave him a Karma for his 18th birthday, live on Ellen in 2012). Henrik was allowed to keep the name and tried again with Fisker Inc. in 2016.

The company initially had big plans and produced the Ocean SUV, a vehicle that was supposed to be the first of four that would have competed in multiple segments of the consumer car market. (The others being a sports car, a compact car and a pick-up truck.) But, amidst sluggish sales, layoffs and investigations by the National Highway and Traffic Safety Administration, that venture also failed and declared bankruptcy this summer.

This month, things have been further complicated by a new hurdle in the sale of Fisker’s remaining fleet. American Lease, which bought Fisker’s remaining 3,000 vehicles, says it’s unable to complete the scale due to a technical issue with the SUVs: There’s seemingly no way to transfer information in the cars to a server not owned by Fisker. American Lease needs to be able to access that information once Fisker is officially dissolved to operate and service any of the vehicles.

American Lease purchased the SUVs for $40 million in July, paying roughly $14,000 per vehicle. TechCrunch reported recently that American Lease said Fisker didn’t mention the possibility of an issue with data transfers until Oct. 4 and American Lease says Fisker confirmed the following week that a migration wouldn’t be possible.

In response, American Lease has filed an objection to the approval of Fisker’s proposed Chapter 11 plan to reorganize and discharge its debts. It stands to be a massive problem for what’s left of Fisker, which used the money from the deal to pay for its bankruptcy process.

The DOJ Disputes Fisker’s Plan

But American Lease isn’t the only one Fisker has left with a headache; its customers have their own problems.Before shuttering, Fisker sold nearly 8,000 SUVs but many of the cars had problems from the get-go: Drivers complained of power loss, braking issues and random warning lights, prompting a series of investigations by the NHTSA.

While Fisker said some problems were fixed by over-the-air software updates, others have lingered and owners need to go to physical locations to have recalled parts replaced. But with the company bankrupt, where can drivers turn to?

According to Fisker’s website, it’s not all that different from getting your car serviced normally: As of writing, the company still runs 23 authorized repair shops in 13 states (and three in Canada). Internationally, there are partner locations in seven European countries: France, the UK, Denmark, Switzerland, Norway, Austria and Germany.

But fixing the car won’t be free: Fisker is paying for two recalled parts—outer door handles and electric water pumps. Labor costs, though, are solely on the owner, according to an FAQ on the site: “Through the bankruptcy process, Fisker was able to fund the purchase of service parts while funding for labor costs is not currently available. It was a priority to make service parts available to avoid delaying these two safety recalls. Fisker is diligently working to secure funding for these labor costs and will update you as and when appropriate.”

According to the Department of Justice, that’s illegal. DOJ officials, on behalf of the NHTSA, said in a filing that Fisker’s actions violate the National Traffic and Motor Vehicle Safety Act. In brief, the Act states that manufacturers must fix vehicle defects or noncompliance “without charge to the consumer,” which could mean repairing the vehicle, replacing it with a reasonable equivalent, or refunding the purchase price.

Customers Push Back

Some owners can find legal recourse as well. Fisker can’t be sued directly; that’s part of the protections afforded to the company by filing for bankruptcy. But, according to Steve Berman, the managing partner of Hagens Berman law firm, regulations still apply in the case and owners can go after their financier.

“Most of the time, when bankruptcy is involved, car owners will be out of luck. The Holder Rule establishes that a bank or financer was involved with the promotion of the vehicles can be held liable to the same extent that the car manufacturer can,” Berman said in a statement. “This means that claims of: violation of “Lemon laws”; breach of contract, breach of warranty, misrepresentation or violation of consumer protection acts that could have been brought against Fisker, could now be brought against Chase.”

Berman and his team have filed such a case against the North American arm of J.P. Morgan Chase Bank on behalf of more than 800 Ocean owners. They have outlined the steps buyers must take to be involved in the suit.

1. Contact the firm: Fisker owners, even those who live outside the U.S., may contact the firm, which will verify their eligibility.
2. Sign a retainer agreement to formally become a client and allow the legal team to file their claim against Chase and receive documents relevant to the case.
3. Agree to an arbitration process: Each client’s arbitration will be in or near their hometown, and they may have to testify at a deposition or the arbitration hearing “as to why they purchased the EV and the extent of their problems with it.”

According to Berman, arbitration is significantly faster than a court case, and while his team can’t give an exact number on how long the process takes, the timeline is closer to months than years. 

He also called the case against Fisker “unique” because there are multiple ways it could be resolved. The main complaints from Fisker customers revolve around how the bankruptcy created “significant” problems for the vehicles, including “a loss of warranty protection, ongoing software problems and inability to obtain software updates,” as well as loss of access to the internet and some safety features.

“While it is too early in the process to know the resolution, and the case against Fisker is unique, our team remains hopeful with potential to recover owners’ losses through loan relief, cash and/or a buy-back model,” Berman said.

If the lawyers lose? Nothing changes. The clients “pay nothing, receive nothing” and the Hagens Berman firm covers the incurred expenses associated with bringing the claim.

American Lease officials, meanwhile, will be pushing to make sure they don’t “pay $40 million, receive no data.”