By Larry P. Vellequette, Crain News Service
DETROIT (Feb. 4, 2013) — A federal judge has ruled against two Chrysler Group L.L.C. auto dealerships in New York whose owners lost their franchises as part of the auto maker's 2009 bankruptcy.
Eagle Auto Mall and Terry Morris Chrysler-Jeep sued Chrysler in August 2010. They alleged that the auto maker failed to follow the directives of binding arbitration that called for Chrysler to provide Eagle Auto Mall with a "customary and usual" preliminary deal to renew the dealership.
Eagle Auto Mall and Terry Morris Chrysler-Jeep were two of 789 U.S. Chrysler dealerships terminated as part of Chrysler's bankruptcy.
In a ruling issued Jan. 24, District Judge Leonard Wexler found that the letters of intent that Chrysler offered to the owners of the two dealerships after they won arbitrations to restore their franchises were customary and usual.
In 2009, as part of its bankruptcy-supervised reorganization, Chrysler stripped franchise rights from both car dealerships' owners. They later won their franchise rights back in arbitration. But the dealers had argued that the letters of intent they received from Chrysler to restore their franchises differed significantly from those offered to other potential franchisees.
The dealers argued that they were first required to build new facilities, and only then could they sell and service Chrysler products, unlike other potential franchisees who were permitted to do so immediately without the facility upgrades.
The dealers and their attorney, Len Bellavia, had taken the issue to a bench trial in U.S. District Court in Central Islip, N.Y., on Dec. 3 after failing to reach a settlement with the auto maker.
In his ruling, Judge Wexler said he reviewed 135 letters of intent issued by Chrysler since 2009, including those issued to car dealers whose franchises were restored through arbitration. He found after the review that the letters of intent issued to the owners of Eagle Auto Mall and Terry Morris Chrysler-Jeep were customary and usual and therefore complied with the law.
Of the 789 Chrysler dealerships that were stripped of their franchises, about 60 either have been reinstated or have cases that are still pending.
"This decision confirms that Chrysler Group followed the letter and intent of the law and arbitrated in good faith, issuing our customary and usual letter of intent to prevailing dealers," said Mike Palese, a spokesman for Chrysler Group, in a written statement.
This report appeared in Automotive News, a Detroit-based sister publication of Tire Business.