US Court allows terminated Chrysler dealers to sue US Treasury Department

Article by Anita Panait, on February 29, 2012

The U.S. Court of Federal Claims has allowed Chrysler’s dealers terminated during the period that the company underwent bankruptcy in 2009 to proceed with a legal action against the U.S. Treasury Department, alleging that the U.S. government violated the Constitution by taking their store franchises. The court also denied the U.S. government motion to dismiss the case. 

The lawsuit alleges that the current administration violated the Fifth Amendment, which states that the government cannot take private property for public use "without just compensation." The suit, filed in February 2011, alleged that the dealers’ terminations violated state legal rights by taking their franchises without providing adequate compensation.

Leonard Bellavia of Mineola, N.Y., the lawyer representing the dealers expressed delight for the ruling, saying that they received “a very important decision.” Bellavia said the decision means the case cold now move to discovery, adding that he will seek depositions from Treasury's auto task force. 

Bellavia added that following the decision, he expects other dealers who suffered the same fate as his clients to join the lawsuit, which currently involves 72 dealers and seeks around $200 million in compensation.

Although the carmaker was one of the main characters in the 2009 financial debacle, dealers didn’t name Chrysler in the lawsuit. Due to Chrysler’s impending bankruptcy in 2009, the Treasury’s auto task force, headed by financier Steven Rattner, asked General Motors and Chrysler to make more drastic cuts than the carmakers had originally planned. 

As part of Chrysler's turnaround plan, 789 U.S. dealers were terminated, which comprises roughly a quarter of the carmaker’s entire US dealer population. [source: Autonews]

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Topics: chrysler

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