Chrysler Dealer Group Pushes Back

News last week that Chrysler LLC would be terminating its relationship with hundreds of Jeep, Dodge and Chrysler dealerships all across the US came as no surprise. However, when many of the affected dealers learned that their relationship with Chrysler would come to a sudden end on June 9th, suddenly the stakes were raised.

Chrysler Dealers Organize, Fight Back

Now a group calling itself the Committee of Chrysler Affected Dealers has pulled together to speak up on behalf of dealers whose businesses are being shut down. The group is protesting Chrysler’s move to close out 789 dealer franchise agreements, taking its case to the US Bankruptcy Court in a bid to delay hearings that would approve the sale and rejection of the dealer franchise agreements.

“Chrysler’s proposed asset sale and request for immediate termination of dealer franchises will destroy several hundred independent businesses, ruin the livelihoods of their owners, cause the loss of thousands of jobs and precipitate inevitable personal and business bankruptcies flowing from the closing of the affected dealers,” said Stephen D. Lerner, head of the bankruptcy and restructuring practice at Squire, Sanders & Dempsey L.L.P. Lerner leads the team representing the dealer committee, which represents the collective interests of nearly 300 dealers in 45 states. The number of dealers joining the committee’s efforts grows daily.

Federal Statutes, Franchise Laws Violated

The committee believes that Chrysler’s actions violate federal statutes and the franchise laws in place in all fifty states. Those franchise laws are meant to protect dealerships who have invested millions of dollars to establish and maintain their businesses.

The dealer committee is asking the bankruptcy court to require Chrysler LLC to subject its restructuring proposal to the transparency, fairness and equal treatment of similarly situated creditors mandated by the disclosure and plan confirmation provisions of the Bankruptcy Code, and to give the affected dealers the notice and procedural protections that due process and the bankruptcy rules command.

“The Bankruptcy Court will be required to address several matters of first impression and Chrysler has by design given the affected dealers only three business days to respond. The emotional and financial catastrophe that would be wrought by the relief requested in these motions need not happen and should not happen, and certainly not with only three business days’ notice,” Lerner said.

At the center of the argument against the breaking of dealer franchise agreements are the due process rights of the owners. Existing bankruptcy law principles run counter to Chrysler’s proposed restructuring, something that the dealer committee and their attorneys want to argue before the court.

Source: Squire, Sanders & Dempsey L.L.P.

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