US District Judge Feess junks dealer reinstatement case vs Chrysler

Article by Christian Andrei, on April 13, 2012

U.S. District Judge Gary Allen Feess in California has dismissed the case brought by dealer Star Chrysler-Jeep in Glendale, Calif., against Chrysler Group. The discharged dealer sued the automaker for reinstatement after Chrysler terminated 789 franchises during its restructuring in 2009.

The federal judge in California ruled that Chrysler met federal requirements when it provided the dealership an opportunity to come back. In 2010, the dealership won reinstatement through arbitration procedures established by Congress and signed into law. The automaker had sent a letter of intent to the dealership consenting to bring back the franchises with terms that the automaker asserts were "usual and customary." 

Star Chrysler-Jeep argued that the automaker's terms were "oppressive and unreasonable." It also asserted that the automaker has to go far beyond what was expected of other reinstated dealers. However, U.S. District Judge Feess ruled in favor of Chrysler in a judgment filed Monday, stating that the automaker "fully complied with its sole obligations to Star." Chrysler commented in a statement that the ruling confirms its position that it acted lawfully in the terms offered to reinstated dealers.

Out of the 789 dealerships which lost franchises in 2009, 418 have asserted claims against the automaker through the federal arbitration process. Chrysler resolved 310 of them short of a hearing. It has also won another 76 cases. 

U.S. District Judge Sean Cox in Detroit ruled in March that dealers who have won reinstatement do not necessarily have the right to reopen stores. He said that federal arbitration does not trump state laws which govern dealer market competition. The ruling of Cox is expected to be appealed. [source: Autonews]

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