WASHINGTON -- A General Motors Co. dealership in California has filed the first lawsuit seeking to overturn an arbitration decision.
Rally Auto Group of Palmdale, Calif., alleged Friday that the arbitrator exceeded his authority in removing the franchise for one of his four GM brands and giving it to a store of a nearby competitor
According to the petition, filed in federal court in Los Angeles, the arbitrator held that Rally could continue selling Buick, Cadillac and GMC vehicles but had to surrender a Chevrolet franchise.
The June decision also ordered Rally to give the Chevrolet franchise to a terminated Saturn store nearby, the suit said.
Rally's suit contends that the arbitrator exceeded his authority both in making a decision on individual brands rather than on the entire dealership, and in awarding a brand to another store.
The federal law enacted in December limits the arbitrator to deciding whether or not the dealership as a whole should be reinstated, the petition alleged.
“Rally, as the covered dealership, should have been reinstated for all GM brands, including Chevrolet,” the petition contends.
Rally has been owned by Larry Mayle for 20 years, according to court documents.
GM was named as the defendant for procedural reasons, said one of Rally's lawyers, Christopher DeVito of Cleveland, Ohio.
A GM spokesperson said the automaker would have no comment on the suit.
Three other suits have been filed by dealerships that were in arbitration, all by shuttered Chrysler stores. None of the suits have challenged the decision.
These suits, by dealers who prevailed in arbitration, have accused Chrysler of issuing letters of intent that contained onerous and unfair conditions for reinstatement.
Chrysler is contesting the claims.
The Rally suit also alleged GM used “corruption, fraud and undue means” in then-CEO Fritz Henderson's testimony to a congressional committee in June 2009.
Henderson said GM would give a terminated dealer the first chance to apply for a new franchise if it were to be awarded in his former market.
GM contradicted this pledge in Rally's arbitration case, the petition alleged.
The December law provided that arbitration decisions were to be binding.
However, DeVito, who has handled arbitration cases filed outside the auto industry, said that the 1925 Federal Arbitration Act serves as “a check and balance for all federal laws requiring arbitration.”
“Many binding arbitration decisions are filed in court to be confirmed or modified/vacated,” he added in an email.
GM reinstates dealers
As part of its bankruptcy last year, GM offered "wind-down" agreements to 2,064 Chevrolet, Buick, GMC and Cadillac dealers.
Under the law passed by Congress in December 2009, GM dealers filed 1,176 arbitration cases to have their dealer agreements reinstated.
Four cases were dismissed.
Earlier this month, GM said 62 arbitration cases were completed, with the automaker winning 39 of the cases and an arbitrator siding with the dealer in 23 cases.
GM offered to reinstate 702 dealers, and allowed them to continue operations as soon as they complied with the automaker's reinstatement terms.
The automaker has also reached 408 individual agreements with other dealers, most of which call for the dealer to close.