Last week, I covered one reader's problems with MPC Corporation and her impulse to file a class-action suit against the now-defunct company. That post spurred a lot of letters from people who wanted to join in that suit. One from DJ asks, "A class-action lawsuit against a company already in bankruptcy is sort of beating a dead horse, don't you think?" I do think so, actually.
I'm not a lawyer, though, so I spoke to attorney and JustAnswer consumer protection law expert Paul Moretti about customers' rights in these cases -- specifically about MPC Corporation (and Circuit City) and what consumers can, should, and should not do when they find themselves stuck with a computer and a warranty from a company gone bust.
What is your warranty worth?
Since many of the letters I got regarding MPC involve warranty service, let's talk about that first.
"Once a company goes bankrupt," explains Moretti, "anyone who has a claim against that company has to file it in the bankruptcy court." If your claim is that the company owes you warranty service that you paid for, that makes you an unsecured creditor. Unfortunately, claims from unsecured creditors go to the bottom of the list of people waiting for money from the company.
"And if there is no money to pay to secured creditors," says Moretti, "there is certainly none for unsecured creditors. In that case, all these warranty claims get extinguished by the bankruptcy. MPC customers end up with a piece of paper that says 'warranty' but that can't be enforced."
Or as DJ pointed out, beating a dead horse. Does that mean you should not bother to file your case?
"No!" says Moretti. "You should file. But don't hire a lawyer to do it because that will cost you more than you are likely to get back."
The court awards unsecured creditors in the order they filed their claims. "You essentially file your claim and take a number," says Moretti. "If there is only enough money to pay 500 people, the court will pay the first 500. If there isn't enough money to pay anybody, all of those debts get extinguished."
Keep in mind, though, that the court is unlikely to pay the full dollar amount owed you even if there is money to pay. "They might pay 20 cents on the dollar," says Moretti. "You might end up getting only $5."
Want to file your claim? You can get the necessary form to make your claim at any bankruptcy court, but you have to file it with the court that is handling the case.
What about a replacement warranty?
So what do you do if your warranty went down with the ship? A lot of commenters here at the Gripe Line insist that warranties are a waste of money. They are essentially a form of insurance, so their value depends on the cost of the item you are insuring, how much time you have to make repairs yourself, if you can afford to make any repairs you can't do, and other factors that vary by the individual and computer in question. If you want to replace the warranty on your computer, you can buy an aftermarket policy. But do so quickly -- before the computer has a problem.
Jill Bouwma, spokeswoman for Squaretrade.com, says, "The manufacturer's warranty generally lasts 90 days to a year and is, in most cases, only backed by the manufacturer. So if the manufacturer goes out of business, a consumer will most likely be out of luck getting any repairs or reimbursement from the manufacturer. An extended warranty from SquareTrade.com is underwritten by a large insurer, Amtrust."
Depending on how long you have had your computer, though, this may or may not be an option. "You have up to 90 days from purchase of a new item to buy a warranty for it from Squaretrade.com," says Bouwma.
Who else can you sue?
If you feel the computer you got from MPC is defective, you could -- legally -- go after whoever manufactured it (MPC's supplier), but that's probably a long shot. "That would probably be a large litigation nightmare for the amount of recovery you are likely to get," says Moretti.
Many of you have written to me suggesting that you intend to hold Gateway liable for your loss. But Moretti thinks you won't have much luck there. "If you sell a business today and a year from now that business messes up, that is not your responsibility," he explains. "MPC bought all the liability from Gateway when it bought that business unit."
Are stranded computers lost, too?
If your computer is stranded at MPC, don't give up. "The company has an obligation to return merchandise that belongs to someone else," says Moretti. I posted a memo a while back with information on who to call to chase down stranded computers, but you could also file a claim with the bankruptcy court. "Computers that belong to stranded customers should not be sold off as assets of the MPC liquidation," says Moretti.
Got gripes? Send them to firstname.lastname@example.org.