Former Chrysler files suit against four states amid dealer law changes

By Caroline Salls

Pittsburgh, Dec. 31 - Old Carco LLC, formerly Chrysler LLC, filed a lawsuit against officials in Maine, Oregon, North Carolina and Illinois, seeking a declaration that recent amendments to the dealer laws in those states conflict with and are preempted by the court order approving the sale of substantially all of Chrysler's assets, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.

Specifically, Old Carco said in its complaint that the dealer law amendments impose obligations on New Chrysler and grant rights to the dealers, in conflict with the sale order and a court order approving rejection of 789 dealer agreements.

The company said the amendments grant various blocking rights to rejected dealers allowing them to challenge or completely preclude New Chrysler from awarding a Chrysler, Jeep, or Dodge dealer agreement to another candidate or relocate an existing dealer within the rejected dealer's former market, without first offering the dealer agreement to the rejected dealer.

According to the complaint, the court already addressed this issue in an August order barring a group of rejected dealers from filing claims against New Chrysler under already existing state dealer laws on the grounds that the statutes those dealers relied on conflicted with the previous orders.

"The same conclusions reached in the enforcement opinion regarding the exercise of rights under prior laws apply with equal force to bar the enforcement of similar rights under the new rejected dealer amendments," the company said in its complaint.

Old Carco said the court has previously ruled that blocking rights under state dealer statutes conflict with and are preempted by the Bankruptcy Code and the court's final orders.

The company is also seeking a permanent injunction barring enforcement of the rejected dealer amendments against New Chrysler and relieving New Chrysler of any need to comply with any provisions of those amendments in connection with the rejected dealers.

Chrysler, an Auburn Hills, Mich.-based automotive company, filed for bankruptcy on April 30, 2009. Its Chapter 11 case number is 09-50002.

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