By Chad Halcom, Crain News Service
DETROIT (Jan. 21, 2015) — One Las Vegas dealership and three former Detroit area dealerships — Livonia Chrysler Jeep Inc., Fox Hills Chrysler Jeep and Village Chrysler Jeep — could get a chance to reopen more than five years after a Chrysler Group L.L.C. decision to close them, according to a U.S. appeals court ruling.
The 6th U.S. Circuit Court of Appeals last week found that a federal law creating the arbitration process where those dealers prevailed trumps state laws that would allow nearby competitors to legally challenge their return.
At issue is a federal arbitration process in 2010 where auto dealers could challenge Chrysler's decision to terminate 789 dealers as part of bankruptcy reorganization, reducing its dealer count to about 2,400. Some 32 dealers, including five in Michigan, won reinstatement following arbitration hearings, but lawsuits followed over what that victory actually meant.
U.S. District Judge Sean Cox in Detroit found that dealers who prevailed were not automatically entitled to reopen their former businesses, and that the federal arbitration law did not trump state dealer franchise laws governing Michigan, Ohio, Nevada and several other states.
This meant prevailing dealers could be opposed in their return by another competitor in their former market radius, which in Michigan was six miles at the time but has since expanded to nine miles.
Crestwood Chrysler Dodge Jeep Ram in Garden City, which was acquired in 2013 by The Suburban Collection, had opposed the return of Colleen McDonald's Livonia Chrysler Jeep dealership. Chrysler had also extended the franchise agreement of another dealer near Village while the arbitration process was pending.
But a panel of judges at the appeals court found that the federal law used in the arbitration process pre-empts state laws in Michigan and Nevada that would allow facing dealers to protest the prevailing dealer's reopening.
“Our understanding is the dealers (in the appeal) will all be able, if they can satisfy the conditions in their letters of intent (from Chrysler), to go back and be part of what's now the Fiat Chrysler Automobiles dealership body,” said Eric Bowden, principal at suburban Detroit law firm Colombo & Colombo PC, who represented Fox Hills in Plymouth, Village in Royal Oak and Jim Marsh Chrysler Jeep in Las Vegas.
The appeals court also found that an arbitration victory did not give the dealers unconditional reinstatement, but that it “should meaningfully facilitate incorporation of prevailing dealerships back into the network.”
Michael Palese, manager of legal communications for Chrysler, said in a statement Jan. 20 that the auto maker was “reviewing the decision and considering if we need to pursue any of our legal options,” following the decision.
“FCA U.S. (Chrysler) is pleased the Sixth Circuit affirmed the District Court's ruling that Section 747 did not provide for reinstatement of the dealers who prevailed in arbitration, but only gave them a right to a ‘customary and usual' letter of intent,” the statement said.