A federal judge on Tuesday dismissed the last of the claims by four Chrysler Group dealers who obtained the right to return to business, yet failed to reopen their stores.
The issue involves a decision by Chrysler in 2009 to close 789 of its 3,200 dealerships while the company was involved in a government directed bankruptcy reorganization. Following the decision to close the dealerships 418 of the terminated dealers filed a claim in federal arbitration. Chrysler eventually resolved 310 of the claims, which left 108 cases to arbitrate. Of these Chrysler prevailed in 76 of the cases.
Shortly after the arbitration Chrysler brought two lawsuits and Colleen McDonald, owner of Livonia Chrysler-Jeep Inc. which is located in suburban Detroit brought a third suit. The suits asked courts to decide whether or not Chrysler was required to reinstate the dealers that prevailed in arbitration or simply issue a letter of intent to let them back into the automakers dealer network.
The cases were consolidated and given to U.S. District Court Judge Sean Cox in Detroit who ruled in March that just because a dealer prevailed it did not automatically mean they were entitled to reopen their former business because the federal arbitration law did not trump state laws in Michigan, Ohio, Nevada, California, Illinois, Florida and Wisconsin regarding dealer franchises, which is where a majority of the dealers are located. Cox also ruled the dealers are not entitled to financial damages under federal arbitration laws because the four remaining dealers had received “customary and usual” letters of intent from Chrysler to return to the dealership network after winning their arbitration cases.
The problem facing the dealers is that many of the states have laws in place allowing any competitor within a given distance to challenge the right of a particular dealer to return regardless of how long the dealer may have been in business before Chrysler closed them down. Many of the 32 dealers who prevailed during the arbitration process face the difficulty of having at least one facing dealer in the same market area. With competition in the auto market being fierce as Americans continue to struggle with high unemployment and stagnant wages many of the current dealers in these markets are opposed to the Chrysler dealerships reopening.
Despite the dealers winning their arbitration claim, if they receive challenges to their reopening Chrysler could withdraw the letter of intent that they had won in arbitration and force the dealer to move to another market.
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