DETROIT -- After winning federal arbitration hearings over the summer, four Detroit area car dealership owners are still a long way from being able to sell cars for Chrysler Group LLC again.
The dealers, whose franchises were revoked during the automaker's bankruptcy, are now mired in legal questions that have the potential of killing their businesses -- again.
At issue is the nature of their franchise agreements and whether state or federal law governs the deals.
If state law dictates, any existing Chrysler dealer within nine miles of a new franchise can object and have the franchise terminated before it opens. The previously terminated dealers would be considered new.
If federal law pre-empts state law, the franchises can be reinstated.
Waiting for resolution
In the meantime, Colleen McDonald remains in a holding pattern.
"Not one dealer that was reinstated has opened yet," said McDonald, owner of Livonia Chrysler Jeep. "It's impossible to open. It's impossible to do what they're asking of us."
Also waiting to open are the owners of Bruce Campbell Dodge, Village Chrysler Jeep and Fox Hills Chrysler Jeep. Those four suburban Detroit businesses are among the 32 terminated dealers that have prevailed in arbitration hearings created by Congress. Chrysler prevailed in 76 cases.
In 2009, Chrysler closed 789 dealers, 14 of which were in metro Detroit, reducing its 3,250-dealer network as part of the bankruptcy restructuring.
But it's not just the closed dealers affected in the current round of lawsuits.
Existing dealerships were, in some cases, given the franchises previously held by the terminated dealers.
McDonald's Chrysler and Jeep franchises, for example, were transferred to nearby Crestwood Dodge. As a result, Crestwood Chrysler Jeep Dodge was created.
If McDonald's franchise is reinstated, she is asking a federal judge to revoke the Chrysler and Jeep franchises from Crestwood as well.
An 'absurd' scenario
It has created an "absurd" scenario, Crestwood's attorneys wrote in a legal brief, pointing out Chrysler's original goal was to consolidate dealers.
"Requiring terminated dealers to be placed in their exact former locations would completely undermine this goal by either completely undoing consolidation, if dealers like Crestwood Dodge were required to terminate sales and service agreements... or creating even more dealers in the same market areas," wrote Crestwood attorneys Robert Weller and Michael Weikert.
Michael Palese of Chrysler's corporate communications office said dealers that won in arbitration are not entitled to be reinstated, they just have to be given a "customary letter of intent."
The existing dealers, Palese said, have the right to protest new dealerships under state law. He added that those "protest right... must be resolved before an auto manufacturer can issue a sales and service agreement to a new, or in this case prevailing, dealer."
In addition to McDonald's case, two others in U.S. District Court address the legal issues associated with bringing back the dealerships.
In July, Chrysler filed a lawsuit against Fox Hills Chrysler Jeep asking the court for a declaratory ruling on the question of whether federal or state law governs the reinstatement process. Village Chrysler Jeep was also named in the suit.
Campbell is not named in any of the suits.
Also filed by Chrysler is a similar suit naming dealers in Colorado, Montana, Ohio, Florida and Wisconsin. That suit also seeks clarification on the question of whether state or federal law will govern the dealers that won in arbitration.
A Nov. 18 hearing will be held, which may consolidate all three cases into one.
Fox Hills President James Schebil said the current status puts his business in limbo. The building, for example, has been up for sale in the past but has been taken off the market.
"My building is ready, I'm ready," he said. "Hopefully we'll be open for business again, so I can't go and sell the building."
Nonetheless, attorneys involved in the cases do not expect a turnaround in the next few months.
Twisting in the wind
A federal case like this can take two years or longer if it is appealed, said Eric Bowden, partner in the Bloomfield Hills law firm Colombo & Colombo PC, which represents Fox Hills and Village Chrysler Jeep.
"Chrysler, the dealerships, they've already spent a lot of time and money," he said. "Nobody is going to back down now."
And that is a situation that will help Chrysler prevail over the dealers trying to return, said James Brennan, a partner with suburban Detroit law firm Davis Listman Brennan PLLC, the law firm that represents McDonald and Bruce Campbell.
"Chrysler is trying to wear the dealers down," he said. "All they're doing is making the dealers twist in the wind. Again."