Chrysler dealers who regained franchises not guaranteed right to reopen, judge says
DETROIT -- Former Chrysler Group LLC dealers who lost their franchise agreements and then regained them in federal arbitration do not necessarily have a right to reopen under the same market conditions as before, a judge has ruled.
In a written ruling Tuesday, Judge Sean Cox of U.S. District Court in Detroit found that the federal Consolidated Appropriations Act of 2010, which created the arbitration process for terminated dealers, does not trump previous state laws governing dealer markets.
That means more than 20 former Chrysler dealers in Michigan, Wisconsin, California, Ohio, Nevada and Florida have only an agreement with Chrysler to be added to its dealership network -- much as if they were starting a brand new business.
They may not be able to enter a market where another dealer offers the same brand of cars and challenges their presence. The returning dealers also cannot seek a court order upholding a favorable arbitration ruling and are barred from seeking any financial damages from Chrysler.
"Congress intended to provide dealers that had been rejected by old Chrysler an opportunity to be added to new Chrysler's dealer network by means of a letter of intent to enter into a sales and service agreement," Cox's ruling states.
Congress "could have drafted (the arbitration law) to require that new Chrysler enter into a sales and service agreement with any dealer that prevailed in (its) arbitration — but it chose not to do so. The court agrees that (the law) was carefully crafted by Congress such that it would not conflict with the state dealer acts that have governed this area for decades."
The attorneys for the automaker have asked Cox to declare that Chrysler is in compliance with the Consolidated Appropriations Act and that the law does not compel "unconditional reinstatement" or pre-empt a Michigan law governing dealer markets.
Cox also left open the issue of whether the letters issued to the dealers are the automaker's "customary and usual" letters of intent with prospective dealers and are thus in compliance with the arbitration law.
Chrysler had 3,200 dealerships before a decision to close 789 as part of its reorganization in 2009. Fourteen were in metro Detroit. Of these, 418 brought claims in federal arbitration, but Chrysler resolved 310 of them short of a hearing.
That left 108 arbitrations, of which the automaker prevailed in 76 and the dealers in the rest.
More than 20 dealers in three consolidated federal lawsuits are covered in Cox's ruling Tuesday.