WASHINGTON -- Chrysler Group has asked the U.S. Bankruptcy Court to pre-empt new state laws that seek to make it easier for rejected dealerships to win reinstatement.
Chrysler argued that new laws in four states will disrupt the company’s business prospects by forcing it to work with “in large part poor-performing dealers.”
The laws also will impede formation of a so-called Genesis network of showrooms with Jeep, Chrysler and Dodge operations under one roof, the lawsuit argued.
“New Chrysler faces the prospect of immediate, severe and irreparable injury,” says the complaint, filed in the Bankruptcy Court in New York. The laws “completely undermine new Chrysler’s ability to develop the strong dealer network it needs to compete successfully in the automotive industry.”
The 31-page complaint, filed Dec. 31, asked the court to declare that new laws in Illinois, North Carolina, Oregon and Maine “are in conflict with and therefore are pre-empted by” the federal bankruptcy code. The Chrysler suit named eight senior officials from the states as defendants.
Numerous states interested
The new laws grant rejected dealerships the right of first refusal on any new showroom that Chrysler plans to open in the terminated dealer’s former market, the suit says.
Also under the new laws, rejected dealerships are given “blocking rights” enabling them to challenge automakers if they award a new franchise in the rejected dealership’s former market.
Ohio and Utah also are considering new reinstatement laws, and dealers in 40 other states are lobbying for similar legislation, Chrysler said in its lawsuit.
Illinois Attorney General Lisa Madigan will be responding to Chrysler in Bankruptcy Court, said David Druker, a spokesman for the Illinois secretary of state.
"The new law does provide protection for dealers, and we do support it," Druker said.
The defendants in North Carolina, Oregon and Maine did not immediately respond to requests for comment.
Spokespeople for the National Automobile Dealers Association, the Committee to Restore Dealer Rights and Automotive Trade Association Executives said they had no immediate plans to respond in court to Chrysler’s complaint.
“NADA, however, has long supported duly enacted state franchise laws,” said association spokesman David Hyatt. “And we would expect to continue to do so.”
One co-leader of the Committee to Restore Dealer Rights, Tammy Darvish, said: “At this time, we continue to carefully monitor and analyze the situation.”
Tim Doran, president of the Ohio Automobile Dealers Association and chairman of Automotive Trade Association Executives, declined to comment.
Grass roots lobbying
The new state laws emerged from grass-roots lobbying by dealers in those states rather than from pressure by national groups, Darvish said.
Attorneys for Chrysler and the defendants will meet “in the near future” to discuss the timing of responses and hearings, the automaker said today in a statement.
As part of its bankruptcy proceeding last spring, Chrysler closed 789 dealerships or a quarter of its total. Several rejected dealers in Ohio, Wisconsin and Arkansas filed state actions seeking reinstatement rights, and Chrysler sought to pre-empt them in Bankruptcy Court.
In August, the Bankruptcy Court ordered the showrooms to withdraw their complaints, saying they couldn’t seek to require Chrysler to assume the obligations of rejected dealers’ agreements.
“The Bankruptcy Court has already ruled that its orders enforcing the bankruptcy code pre-empt state statutes in conflict with its orders,” Chrysler said in a statement today.