As attorneys for marine dealers, the calls we are receiving lately are becoming far too frequent and have a common refrain: “My floor planner doesn’t know it yet, but I am seriously out of trust.”

The good news is that dealers are acting pre-emptively by not waiting to call us until spring when the boats that have been paid for are delivered and the bank discovers the problem. Too many times, dealers contact us after the horse is out of the barn and the floor planner has taken the matter to court.

First of all, it is unfortunate that the economy is presenting challenges, serious ones, to boat dealers. It is more enjoyable to represent dealer clients in times of growth, when they need a lawyer to represent them for expansion, such as buying additional property and acquiring additional product lines.

Boat dealers have not created this economic downturn. They are victims of the housing debacle from subprime loans, escalating gas prices, the economic effects of the war and the various other non-marine industry causes for the slump in boat sales. If there is any correlation at all, it is in the irony that the very lenders who hold their floor plans are the same lenders who issued credit to borrowers who probably should not have been approved in the first place. In a sense, marine lenders were just as liberal as mortgage lenders in granting loans to subprime borrowers.

Why is this relevant?
Simply because these retail lenders, who fund boat loans by allowing the negative equity in a trade-in to be rolled into a brand new loan on a more expensive boat, are sustaining losses because of increased default trends by consumers. Typically, these retail customers were referred to the lender by boat dealers. Consider the substantial savings to banks that issue marine loans by not having to pay millions of dollars on marketing to consumers because a loyal network of boat dealers refers hundreds of millions of dollars of loan business to these lenders. In contrast to home and car buyers, purchasers of boats are generally unfamiliar with specific banks that issue marine loans. They cannot be assured that their own lenders issue boat loans. Consequently, marine lenders have a more genuine basis to refer to boat dealers as “business partners.”

When a downturn in the retail marine industry occurs, as it has, it is inappropriate for lenders to respond precipitously in acting with full legal force against a dealership that has fallen out of trust with its floor planner. To be sure, banks have rights that need to be enforced. There should not be a “cookie cutter” response, however, to each dealer who has fallen behind in floor plan payoffs. This is especially true in a weakened economy, where blame cannot be placed on mismanagement at the dealership level.

The best illustration of an overreacting banking community is to take the scenario of widespread dealer floor plan defaults to an absurd extreme. Imagine the standard procedure of a bank when it discovers an “out-of-trust” situation at one of its dealers. It demands full payment of the unpaid amount within three days. It suspends all drawing privileges on all boats, sold or unsold. If there is no prospect of immediate payment, it goes to court for an order of seizure to repossess the dealer’s inventory.

Now multiply the above procedure by the many dealers who will likely be discovered this spring as being “out of trust.” Consider the value of the new boat inventory. How will the lender dispose of the inventory? Will other dealers be willing to accept these units when they are struggling to retail their own inventories? What impact will forcing a high number of dealers out of business have on future business generations?

After all, haven’t these very dealers been a huge source of profits to floor plan lending institutions over many years, even decades. If a bank has earned $5 million throughout the years from floor plan interest charges, and another $5 million from “interest income” on retail installment contracts, is it appropriate to terminate a relationship because a dealer is $500,000 in arrears on floor plan payoffs? Should losses and defaults in 2008 invalidate the $10 million worth of profits enjoyed by the lender from 1997-2007 in my example?

The answers are simple if the default is isolated to one or two dealers, and for reasons unrelated to the economy. Surely, a lender has the right to cut its losses if a dealer demonstrates an inability to become profitable again. Family issues, gambling problems and illness of a key operator are examples of how defaults can occur.

A sophisticated lender in an industry downturn will not act viscerally by pulling the plug on scores of dealerships. The lender will understand the need to take a huge step back in hard times and analyze the long-term picture, even if it means absorbing multi-million dollar losses in the short-term. This approach is not out of benevolence, but stems from the recognition that dealers are best suited, substantial floor plan defaults notwithstanding, to fetch the highest prices for the bank’s collateral (unsold boats). Of course, the bank must assess whether it is dealing with a “good customer.” Does the dealer have integrity? Has he or she been committed to the business over a long period of time? If so, the lender will likely see the benefit of allowing the dealer to remain in possession of the inventory. Consider the lender’s choice. It could repossess $2 million worth of boats and dispose of them for $1 million, thereby, adding to its losses. If the dealer has personally guaranteed the floor plan and has deep pockets, perhaps the above approach is most sound.

If a lender were to follow its standard protocol of ridding itself of defaulted dealers during bad economic times, it would simply find other, economically stronger dealers to replace them. Good luck. These dealers are economically stronger, in part, because of their unwillingness to expand in a weak market. This brings the banks full circle back to their “business partners,” through whom they have made millions of dollars over the years and know best how to retail boats. Did they suddenly become incompetent in 2008? The moral of the story is that an astute lender will know when to look past a default, however serious, if the essential elements of integrity and a long-term prospect for recovery exist. If GMAC foreclosed on all its “out-of-trust” dealers over the past five years, General Motors would have an even harder time maintaining its market presence.

To the extent a dealer may avoid the most serious consequences of being out of trust, it must act pre-emptively, generally before the lender finds out. Meeting with your franchise attorney and accountant is an essential step. More gets accomplished in a two hour brainstorming session than in months of sleepless nights, wondering what will happen when the weather turns and customers want to “splash” their paid-for boats. The business plan will need to be rewritten and difficult personnel and related overhead decisions made. The process is painstaking, but necessary.

Your advisers will then draw upon demographic data and independent industry projections to help you assess whether the business can enjoy a reasonable return on investment over the long term. If so, a presentation to your floor planner, fully disclosing the loan defalcation, may be appropriate. After the predicable havoc it will create, level heads will eventually prevail. The negotiations will then begin with the lender, your manufacturer, your landlord and others to rebuild this business with certain necessary concessions, commitments and waivers by all concerned.

In those instances where we conclude, along with the client, that there is no likelihood of economic recovery, that realization can be empowering to the dealer. It allows the dealer to come to terms with the end of the business operation, and focus all his or her energies on an exit strategy and a future. The process is cleansing and puts an end to the day-to-day stress, even if it means continuing problems with creditors.

The foregoing is achieved only by advance planning with qualified industry professionals. When dealers turn their problems over to attorneys and accountants, the reduction in their stress levels is palpable, perhaps the most important step in the process.

Founding partner of the law firm Bellavia Gentile & Associates, LLP, Leonard A. Bellavia is a nationally recognized authority in the field of marine and automotive franchise law. Bellavia is endorsed by the Marine Retailers Association of America. He chairs the Litigation Section of the National Association of Dealer Counsel and serves on its board. LBellavia@DealerLaw.com
Originally Posted on 21 April 2008 in Soundings Trade Only Today

Two rejected Chrysler dealerships that won their arbitration cases in 2010 are closer to a trial date in their lawsuit against the automaker.

In a March 9 ruling, U.S. District Court Judge Leonard Wexler denied a Chrysler motion seeking dismissal of the dealerships’ complaint. He told the parties to file their pretrial orders.

Leonard Bellavia, lawyer for the dealerships, said the ruling means the trial should be in 60 to 90 days.

Bellavia declined further comment, other than to say he hopes his clients and Chrysler “can come together and work out an amicable solution.” He wouldn’t say whether there are active settlement discussions.

The dealerships — Eagle Auto Mall Corp. of Riverhead, N.Y., owned by Mark Calisi; and Terry Chrysler-Jeep of Burnt Hills, N.Y., owned by Charlie Morris — sued Chrysler in August 2010, alleging that they received “unreasonable and unconscionable” letters of intent to enter into a franchise agreement after their arbitration victories.

The dealerships, which closed in 2009 as part of Chrysler’s bankruptcy restructuring, sought reinstatement, compensation for lost income and punitive damages.

Two other dealerships — Crossroads Superstore of Atoka, Okla., and Westminster Dodge of Dorchester, Mass. — were part of the original lawsuit but have since settled with Chrysler. Both Chrysler and Bellavia declined to comment on settlement terms. The dealerships did not reopen.
Chrysler’s motion seeking the lawsuit’s dismissal followed a December court ruling in the company’s favor.

In December, the court ruled it did not have jurisdiction to confirm arbitration awards. The court also said the plaintiffs were entitled only to a letter of intent under terms that were “usual and customary” at the time of the offer and not those governing prebankruptcy dealership agreements.

Whether the plaintiffs received such an offer “remained an open question,” the court said. The plaintiffs say the letters were not customary and put onerous conditions on them, such as having to complete a facility renovation prior to reopening.

Chrysler Group spokesman Mike Palese said the December ruling rejected the dealerships’ primary argument that they were entitled to automatic entry into the post-bankruptcy Chrysler’s dealer network.

“As we have contended since the beginning of this process, Chrysler Group complied fully with the letter and intent of the law by issuing its customary and usual [letter of intent] to prevailing dealers, which was the only remedy available under the federal dealer arbitration law,” Palese wrote in an e-mail.

“Chrysler Group will continue to defend this position vigorously and is confident in our position.”

The auto industry’s bailout may have been put in reverse after a judge ruled that 75 terminated Chrysler dealers have the right to sue the United States Treasury for violating their Fifth Amendment rights.

The dealers, all represented by Leonard Bellavia of Bay Shore-based Bellavia Gentile & Associates, had their property seized as part of a $12.5 billion federal bailout between 2008 and 2009. The government ordered Chrysler to terminate 789 franchises as part of the government-led bankruptcy.

Bellavia said since the government ordered the taking, it should be classified as an eminent domain issue and the dealers should be compensated accordingly. The 75 dealers are seeking more than $200 million in restitution.

“Simply because the government arranged to have this seizure of private property carried out by a third party – Chrysler – it is no less a ‘taking’ under long standing principles of constitutional law,” Bellavia said.

Judge Robert Hodges Jr. ruled Monday that the Chrysler dealers could bring a lawsuit against the U.S. Treasury. As a result, Bellavia and other involved attorneys may now seek the depositions of Timothy Geithner, Steven Rattner, and other high-ranking officials of the U.S. Treasury and the Obama administration.

“We fully intend to prove at trial that President Obama’s Automotive Task Force conditioned the bailout of Chrysler on a requirement that it close 25 percent of its dealerships nationwide,” Bellavia said. “The president and his task force believed that a Chrysler liquidation would destroy the U.S. economy and terminated these dealers on the belief that this had to be done for the public good. My clients, however, lost their entire life’s work without just compensation.”

Now that the judge has ruled against the government, Bellavia said he expects more of the 789 terminated Chrysler dealerships to join the lawsuit.

Dealers terminated during Chrysler’s 2009 bankruptcy will be allowed to proceed with a lawsuit against the US Treasury Department, alleging the government violated the Constitution in taking their store franchises.

A ruling handed down Monday by the US Court of Federal Claims denied the government’s motion to dismiss the case. The lawsuit, filed in February 2011, contends that the Obama administration violated the Fifth Amendment, which says private property shall not “be taken” for public use “without just compensation.”

The suit also alleges the terminations violated state legal rights by taking the franchises without adequate compensation.

“We received a very important decision today,” the dealers’ attorney, Leonard Bellavia of Mineola, N.Y., said Monday. He added: “After this decision, I expect those dealers sitting on the sidelines to join the case.”

So far, 75 eliminated dealers have signed on to the suit, which seeks at least $200 million.

A Treasury department spokesman referred questions to the US Department of Justice. A DOJ spokesman declined comment. Chrysler isn’t named in the lawsuit.

The Treasury’s auto task force, which was then headed by financier Steven Rattner, asked Chrysler and General Motors to make deeper cuts than the companies had originally planned.

As part of Chrysler’s restructuring, 789 US dealers were terminated, representing about one-quarter of the automaker’s US dealer body.

The decision clears the way for the case to move to discovery, Bellavia said. He added that he’ll be seeking depositions from Treasury’s auto task force.

On November 18th, Leonard Bellavia and John Gentile held a seminar for NYSADA members in the Albany area. The seminar addressed: Factory Demands for Facility Upgrades and the Dealers Best Strategy’s, GM’s EBE Program – How to Deal with Objections, and Warranty Parts Reimbursement. The dealer members present peppered the attorneys with a mix of specific scenarios affecting their dealerships. Several of the dealer attendees commented that this seminar was extremely informative and left them in a better position to respond to factory pressures.

A regularly quoted source of comment for Automotive News, Mr. Bellavia is also a regular speaker for national automotive and marine related trade organizations. He serves as Chair of the Automotive Franchise Law Section of the Franchise Law Committee of the New York State Bar Association and has been named Chairperson of the Litigation Section of the National Association of Dealer Counsel (“NADC”) and a member of its Board of Directors. Since joining with Leonard Bellavia in 1991, Mr. Gentile has personally handled hundreds of buy/sell transactions over his years in practice and is considered an expert in automotive warranty parts reimbursement.

The administrator handling Saab Cars North America’s finances told creditors last week that the company will be liquidated.

“We notified creditors that it is our opinion that there is no way to salvage the company,” said Jim McTevia, of McTevia & Associates, the administrator appointed to operate the U.S. distribution arm.

Parent company Saab Automobile filed for liquidation Dec. 19 in a Swedish bankruptcy court. Saab Cars North America suspended operations that day.

Saab Cars North America “laid off probably 80 percent of the employees” on Jan. 13, said McTevia.

He said he is seeking a buyer for the U.S. parts distribution business, which he described as the only meaningful asset.

Tim Colbeck, president of Saab Cars North America, expects a buyer for the parts business will be found by the end of February. “There still will be a market for parts,” Colbeck said. The question is whether there will be a U.S. distributor for parts.”

McTevia said he told creditors: “There is no money to keep the company going until someone figures out what to do.”

He added: “They have some parts inventory, which we started distributing. There are no new parts coming in.”

Leonard Bellavia, the lawyer representing 161 of Saab’s 188 dealerships, said he expects dealers to decide this week or next whether to file for a Chapter 7 involuntary bankruptcy or wait for the administrator to liquidate the company. The dealers’ decision will be based on which option potentially gives them a greater portion of the proceeds.

McTevia said the U.S. entity is “probably going to go on for a while because there is all kinds of litigation. There are assets to be liquidated.” The company’s headquarters in Royal Oak, Mich., near Detroit, will be closed by the end of February.

Bellavia estimates the liquidated assets have a value of between $75 million and $125 million, including $25 million owed by General Motors for warranty work. He estimates liabilities at $10.5 million.

Saab resumed parts distribution to dealers on Thursday, Jan. 19. The operation was suspended Dec. 19.

Over 140 of the 188 Saab dealers nationwide have retained the law firm of Bellavia Gentile & Associates, LLP, to represent the dealers in their claims against Saab Cars, N.A., a subsidiary of the Swedish car manufacturer, Saab Automobiles. Saab Automobiles filed for Bankruptcy in Sweden on December 19, 2011.

“Saab dealers are owed substantial amounts from Saab Cars N.A. for warranty repairs and incentive payments. Right now we are identifying and marshaling the assets which should be made available to pay our dealer clients and enable them to provide parts and
warranty repairs for their customers”, said Leonard A. Bellavia, Senior partner at the firm. Bellavia continued; “Our firm has gone up against all of the major automobile manufacturers to protect the rights of dealers. The manufacturers know and respect us, so we believe that we can cut through a lot of the acrimony which typically exists and reach a resolution that will benefit the dealers”.

Ultimately, it is Mr. Bellavia’s hope that all Saab dealers join the group. “There is strength in numbers” said Bellavia, “which provides dealers with the ability to level the playing field with the manufacturers”.

After numerous attempts to sell the assets of Saab Automobiles to investors with the hope of keeping U.S. Saab dealers viable, General Motors, which owns certain critical technologies licensed to Saab, effectively blocked any potential sale. The result has left U.S. Saab dealers in turmoil as they question the ability to sell remaining vehicle inventories the value of which may be compromised due to the manufacturer’s inability to honor vehicle warranties.

Faced with these issues, Saab dealers, through their National Dealer Council have retain ed the nationally acclaimed dealership law firm of Bellavia Gentile & Associates, LLP to negotiate with Saab Cars N.A. and to determine what additional action may be necessary in order to protect the dealers.

About Bellavia Gentile & Associates LLP

Bellavia Gentile & Associates, LLP is a Mineola, New York based law firm with additional offices in Manhattan, Albany and New Jersey. The firm served as Co – Lead counsel for terminated dealers in the recent Chrysler bankruptcy proceedings and represents over 1,000 automobile dealers nationwide. Mr. Bellavia serves as Chair of the Litigation Section of the National Association of Dealer Counsel, an organization of over 500 attorneys nationally who concentrate in the representation of automobile dealers.

For more information about this story and to speak with Mr. Bellavia and one of the New York Saab dealers, call Cecilia Alers.

In Texas, 85 rejected Chrysler and General Motors dealers are suing the federal government, charging they lost their businesses without adequate compensation when the U.S. Treasury Dept. maneuvered the two auto makers into downsizing their dealer networks in 2009.

In a New York-based group action earlier this year, 75 terminated Chrysler dealers sued the U.S. government for the alleged unconstitutional taking of their dealerships without just compensation.

At least 10 dealer names have been added since then. Even more are expected to join, predicts Leonard Bellavia, lead attorney for the plaintiffs. Counter motions are going back and forth between the dealers and the government, like chess moves in a tense match. In October, lawyers filed new motions in the U.S. Court of Federal Claims, which hears cases against the federal government.

As government lawyers seek to dismiss the case, Bellavia looks to add plaintiffs.

“The lure of this case is that it goes to the heart of what every entrepreneur in this country pursues, the American dream,” he tells WardsAuto. “Yet, 789 Chrysler dealers, all symbols of American entrepreneurship, had their businesses taken away” as part of the auto maker’s post-bankruptcy reorganization.

Numerous high-profile dealers have joined the two largest suits against the government. For example, rejected dealers Jack Fitzgerald, co-leader of Committee to Restore Dealer Rights in Maryland, and Patrick Painter, a state representative in Utah, are part of the New York suit.

As more dealers sign on, the amount of damages sought increases. It is at $200 million now, up from $120 million earlier.

More is at stake in the Texas class-action case. “We are seeking the full value of the terminated dealerships and the lost profits and damages for those dealers that were reinstated,” says lead plaintiff attorney Richard Faulkner, estimating claims will run as high as $4 billion. “The numbers continue to change as we are still adding dealers.”

That federal suit was initiated by the former owners of the defunct Colonial Motors, a GM store in Branchburg, MS, and Finnin Motors, a Chrysler-Jeep dealership in Dubuque, IA.

The class action says unnecessary government economic regulation propelled the dealer franchise terminations.

“This case is important because it’s the only way the terminated dealers can recover the value of their terminated dealerships,” Faulkner says. “If the dealers don’t compel the government to pay for taking their property, they will never obtain anything.”

The case could end up at the highest court in the land, he tells WardsAuto. “The unique nature of what the government did to take dealers’ businesses almost ensures that this case will go to the Supreme Court.

“The government has never behaved this way before,” Faulkner says. “The auto task force decided that it would cost too much to eliminate dealers and pay them for their property, so it manipulated the loans and bankruptcy process. The dealers were accordingly terminated – and with extreme prejudice.”

The federal task force headed by Steven Rattner insisted the massive dealership cuts were necessary to save Chrysler and GM.

Rattner has told WardsAuto the task force tried to make sure all parties involved made sacrifices. But the panel regarded dealers collectively as a single constituency.

A subsequent report from an independent investigator for the government’s Troubled Asset Relief Program said the task force overstated the importance of the wholesale dealership terminations in the effort to save the two troubled auto makers.

Potential damages awarded each dealership would be separately calculated, says Harry Zanville, a lawyer in the Texas case.

Aggrieved dealers include those who won in arbitration hearings last year but were “product-starved” and had to close or suffered damages, as well as dealers who won arbitration but didn’t reestablish relations with the auto makers because of conditions and costs imposed, he says.

Chrysler terminated dealers immediately, GM gradually over the course of several months.
Bellavia and his legal team chose not to sue GM because its “wind-down” approach was less rash, he says. “Still, what happened to these business owners is one of the greatest atrocities in American history.”

Bellavia is a dealer’s son who worked at his father’s business to cover his law-school education. “As a product of an auto-dealership family, this case means a great deal to me,” he says.

Attorney Leonard A. Bellavia has dedicated his career to fighting for the rights of US automobile dealers and franchise owners.  Now, he wants to take that fight to the US Treasury Department – who Bellavia believes participated in legal misconduct by ordering the closing of 789 Chrysler Dealerships as part of the Chrysler Bankruptcy in 2009.  The 27 GM dealers who did not sign wind-down agreements are also eligible to participate in this lawsuit.

To file this lawsuit and move this fight forward, Bellavia needs a threshold number of dealers to participate. He’s almost there. But, the law firm still needs more dealers to join the fight.

Buoyed by recent headlines about a potential probe of the US Government’s role in setting criteria that resulted in the loss of franchises by GM and Chrysler dealers, Bellavia is reaching out far and wide to auto dealers.

“If the Executive Branch of the US Government exceeded its authority by mandating that dealers be closed, then the Government should be held accountable by the dealers” Bellavia said.

This is the United States of America, noted Bellavia, and people have property rights that should not be violated.  Dealers need to stand up and seek retribution for the severe economic loss the US Government may have caused them and Bellavia Gentile & Associates has developed a model that makes this feasible.

“We are trying to reach as many former Chrysler and eligible GM Dealers as possible to let them know of this opportunity.  Using the learning curve of our law firm – which represented the highest number of Chrysler dealers in arbitration hearings (according to our information) – and calling upon my personal knowledge gained by cross examining key people at Chrysler – including Bob Nardelli, Jim Press, Peter Grady and John Tangeman – these dealers have a solid chance of getting just compensation for the loss of their dealerships” said Leonard A. Bellavia, Esq.

Former Chrysler and eligible GM Dealers who want more information about joining this lawsuit can email Leonard Bellavia at LBellavia@DealerLaw.com or call the firm at 516.873.3000.

First there were widespread dealership closings by General Motors Co. and Chrysler Group LLC as part of their post-bankruptcy reorganization plans.

Then there were dealership-auto maker arbitration hearings ordered by the U.S. Congress after many dealers complained about the shutdowns.

Now come post-arbitration lawsuits by dealers in federal and state courts. They mainly target Chrysler, but one class-action suit is going after the U.S. government for allegedly spurring the dealership closings.

In rural Atoka, OK, co-owners Jack Haigh and Bob Sullins of Crossroads Superstore are suing Chrysler as part of a “mass-action” lawsuit.

Crossroads, which had sold both GM and Chrysler products, joins forces with three other dealers.

They are: Mark Calisi of Eagle Auto Mall Corp. in Riverhead, NY; Charlie Morris of Terry Chrysler-Jeep, of Burnt Hills, NY; and Jim Bickford of Westminster Dodge, Dorchester, MA.

They are among the few Chrysler dealers that won arbitration rulings against the auto maker that prevailed in 108 of 140 cases.

“It’s a hollow victory,” lead attorney Leonard Bellavia of New York says of Chrysler dealers’ arbitration wins.

Dealers who prevailed still must improve their facilities at Chrysler’s behest, win back customers or spend even more money in litigation, he notes.

After their arbitration wins, several dealerships such as Crossroads received “unreasonable and unconscionable” letters of intent (LOIs) that prevent their ability to resume business operations, according to their legal filings.

“I do not know of one dealer who won arbitration or that was offered reinstatement who is back to selling new vehicles with Chrysler,” says Crossroads’ Haigh.

But he says he does know “plenty of dealers that Chrysler gave (or gifted) franchises to who have new Chryslers on the ground and are selling and servicing without the LOI mess that we got.”

Haigh and his co-plaintiffs seek reinstatement, compensation for lost income and damages.
The Crossroads owners say they joined the East Coast suit because they wanted to leverage costs and thought a federal court in New York. The case will be heard in New York Eastern District Court in Long Island. But it might not stay there.

“Chrysler is making a motion to transfer the case to Michigan to consolidate it with the case it has brought against several Michigan dealers,” Bellavia says.

Haigh is disappointed because he thinks he might have done better with Chevrolet store negotiations, but instead opted to settle a wind-down agreement with GM.

At the time, he says Chrysler representatives were telling him it would help Crossroads’ chances if it weren’t dualed with GM.

Haigh now says settling with GM was a rash decision and the dealership could have been better off with GM, even though Chrysler truck sales typically outperform Chevrolet in his market.

“Chrysler told us it would be far better for us not to have the GM dealership in order to better serve Chrysler. So we put all our eggs in the basket with Chrysler,” says Haigh.

Crossroads’ owners won in arbitration and got the disputed Chrysler LOI. Like a number of dealers, they didn’t sign it, claiming some requirements – including giving Chrysler complete withdrawal rights if a nearby store protests – are unfair and different from stores that weren’t
closed.

By September, about nine dealers nationally sued Chrysler in state and federal courts. Chrysler won’t confirm the number of lawsuits.

One attorney estimates Chrysler could be spending at least $1 million a month in legal fees.
“It would be inappropriate to discuss matters now in litigation,” Chrysler spokesman Mike Palese says in a statement.

He reiterates Chrysler’s ongoing claim that dealers selected for termination were carefully considered, taking into account its Genesis plan of consolidating brands at a single sales point.

“Placing all four brands under one roof in modern facilities has already resulted in enhanced profitability for the Genesis dealerships,” he says.

“It is well documented that due to Chrysler’s optimized network, existing dealers are already enjoying increased profitability and are making significant investments in their dealerships,” Palese says.

The dealers’ federal lawsuit is to get their dealerships back, Sullins says. “We’re trying to get reinstated with the same agreement everyone had before.”

The federal suit in New York could take more than a year, Bellavia estimates. Chrysler will be represented by WilmerHale, a Boston firm.

Gilbert Dannehower, owner of Deland Dodge in central Florida, was the first dealer to win in arbitration against Chrysler. Still, he’s pressing his case forward and suing to get Chrysler to comply with the arbitrator’s award.

He couldn’t accept the steep investment in facilities required by the LOI, says his attorney, Mark Ornstein.

The lawyer says it is unreasonable to expect a dealer, financially strapped after being shut down for a year, to come up with $1 million for facility improvements.

Dannehower also refused to sign the Chrysler LOI after winning in arbitration because he was put off by the language allowing Chrysler to deny him merely if other Chrysler dealers object to what he considers his arbitrated right to sell vehicles.

Yanking Daannehower’s franchise was unfounded in the first place, Ornstein says. “He was the No.1 auto retailer in DeLand at the time of termination. He was an acknowledged stellar performer.”

The arbitrator, a retired judge, went out of her way to mention it in her award, he notes.

“The dealer terminations were 20,000-ft. decisions made in the heat of bankruptcy,” Ornstein says. “Congress, when giving the dealers a right to arbitrate, allowed dealers to tell their individual stories.

“My clients are anxious and willing to let bygones be bygones and get back in the business of selling vehicles.”

Why isn’t GM facing the same LOI legal challenges as Chrysler?

“GM is not imposing unreasonable requirements on dealers,” Bellavia says. “They have not required that new facilities be built and certain rights be waived if another nearby dealer complains. They restored many of their dealers without arbitration.”

Dealers battling to get their dealerships back “are the fighters that Chrysler needs to better its retail network,” Haigh says.

Meanwhile, several dealers filed a federal class-action suit against the U.S., claiming the federal government forced Chrysler and GM to terminate the franchises of thousands of auto dealers, lawyers for the dealers say.

Colonial Motors, a former GM dealer in Mississippi, and Finnin Motors, a former Chrysler dealer in Iowa, filed suit on behalf of a nationwide class of more than a 1,000 dealers, saying unnecessary government economic regulation caused the dealer-franchise terminations.

They are seeking to be fully paid for property damages, says Dallas attorney Richard Faulkner.

“Without need and, on a theory, the federal government demanded that GM and Chrysler immediately terminate a huge number of car dealers or be denied obtaining billions of dollars of TARP (Troubled Asset Relief Program) money,” Faulkner says.

A subsequent government report by the Special Inspector General for the Troubled Asset Relief Program indicated the widespread dealership closings were not vital to the two auto makers’ survival and unnecessarily resulted in thousands of nationwide job losses in the depth of the recession.