Chrysler Suing Four States For Dealer Protections

Here’s a question: You want to do something, but it’s against the law, what do you do? Abandon the idea? No, if you’re Chrysler you sue the government. Detroit News reports that Chrysler LLC are suing officials from Oregon, Maine, North Carolina and Illnois for laws which “unduly burden New Chrysler with the obligation to provide the rejected dealers with rights that this court determined that the rejected dealers do not have,” as lawyers for Chrysler wrote.

The defendants include, Oregon Attorney General John Kroger, the secretaries of state in Maine and Illinois, and transportation officials in all four states. The basis for Chrysler’s case is their claim that the 4 states’ dealer laws violate the bankruptcy code and the U.S Constitution. If Chrysler doesn’t manage to overturn the states’ dealer laws, then the 4 states would be able to prevent Chrysler from granting a franchise to a new dealer in the state or relocate a dealer into a rejected dealers market. The suit was filed in a Manhattan bankruptcy court by not only the new all singing, all dancing Chrysler, but also “old” Chrysler.

Meanwhile, analysts figure that with Chrysler’s market share set to drop as low as six percent, it could need to do even more dealer culling. And, while dealers wait for recently-passed arbitration legislation to go into effect, we’re finding out that even Chrysler’s then-Vice Chairman Jim Press was against the dealer cuts. Or so he says now. “I saw it fraught with terrible issues and short-term sales cost as well as dislocation of customers,” he tells the WSJ. “Dealers are [Chrysler’s] only customers, the reason we are in business. How do you eliminate your customer?” Though he’s got something of a rhetorical point, there’s no doubt that Chrysler’s dealer body needed culling, just not in the slapdash manner it was carried out in. Besides, Chrysler was doing a fine job of eliminating customers by simply selling cars like the Sebring.

Back on the legal front, the legal implications of Chrysler’s asset sale are still being unwound. Though the US Supreme Court recently refused to hear a challenge to the sale, challengers including an Indiana state pension fund are claiming a minor victory, as they believe that the sale no longer holds the force of legal precedent. “If the appeals court’s decision had stayed on the books, it would have been very difficult for people to challenge these kinds of asset sales,” Richard Samp of the Washington Legal Foundation tells the WSJ. As Ilya Shapiro notes at Cato, “the bankruptcy laws are in place to ensure that debts are paid in an established and fair manner and not at the whim of whatever political actors happen to be in power at the time….[the ruling] erases a terrible precedent from the federal judiciary’s books and reaffirms years of settled bankruptcy law.” In short, Chrysler got a one-time-only workaround for bankruptcy law. No wonder it sees state laws as such an unnecessary inconvenience.