WASHINGTON (April 29, 2010) — Chrysler Group L.L.C. is asking the U.S. Bankruptcy Court to block a new Colorado dealer reinstatement law—a move the auto maker took against similar laws in four other states.
On April 23, Chrysler filed a complaint asking for a ruling by the Bankruptcy Court in New York that the Colorado law, enacted last month, is pre-empted by federal bankruptcy laws.
“The Colorado dealer law attempts to compel new Chrysler to offer rejected dealers any planned dealer establishments or relocations rather than awarding them to existing dealers whose dealer agreements and relationships were specifically and strategically selected and assumed,” the 23-page complaint said.
The new Colorado law requires Chrysler and General Motors Co. to offer a rejected dealership the right of first refusal if the company wants to reopen a point in the rejected dealer's old market. If the auto maker already has re-awarded such a franchise, it must offer to reinstate the rejected dealership or compensate it.
The office of Colorado Gov. Bill Ritter did not immediately respond yesterday to requests for comment.
Other state efforts
In December, Chrysler filed complaints in the same Bankruptcy Court seeking to block similar laws enacted by Illinois, Oregon, Maine and North Carolina.
North Carolina backed off enforcement of its law in a settlement this month with Chrysler. Illinois, Oregon and Maine are continuing to contest Chrysler's complaint.
Chrysler filed its complaint last week as two Colorado state lawmakers introduced legislation to try to beef up enforcement of the new law.
Sens. Shawn Mitchell, a Republican, and Chris Romer, a Democrat, submitted a bill April 23 that would let Colorado authorities impose fines of between $10,000 and $25,000 a day on any auto maker that doesn't comply with the March law.
Chrysler told at least one rejected Colorado dealer this month that it “has no intention” of offering reinstatement under the new state law, a copy of the company's April 2 letter says.
“In my 12 years in the state Legislature, I've never seen a company flagrantly announce it will ignore a law,” Mr. Mitchell said in an interview.
He said he hopes the Colorado Senate and House will pass the bill by May 12, when the Legislature adjourns for the year.
The confusing swirl of events surrounding the Colorado law is complicated by arbitration offered to rejected dealerships seeking reinstatement under a federal law enacted in December.
Eight of the 14 closed Chrysler dealerships in Colorado are seeking reinstatement through arbitration, said Tim Jackson, president of the Colorado Automobile Dealers Association. Of the eight, five have had their markets filled by another dealership, he said.
Under the federal law, arbitrations have to be completed by July.
“We welcome the ability to respond and defend our actions as required by federal law,” Chrysler said in a statement over the weekend.
In supporting its complaints in federal Bankruptcy Court, the company cited an August decision by the court that barred a group of rejected dealers from pursuing claims under state laws.
This report appeared in Automotive News, a Detroit-based sister publication of Tire Business.