Auto Industry Update – GM and Chrysler Dealer Arbitrations

In December, Congress passed a bill that grants certain GM and Chrysler dealerships and former dealerships the right to demand binding arbitration with GM or Chrysler to determine whether that manufacturer must be required to restore the dealership to the manufacturer’s dealer network. The bill was signed by President Obama and became effective on December 16, 2009.

Bruce Bennett, Director of Government Relations for Pathman Lewis has been involved in the dealer termination issue and the efforts to enact dealer favorable legislation from the beginning. Through Bruce’s efforts he was instrumental in getting the Florida Congressional Delegation to support the terminated dealers with a legislative solution.
A few important points that dealers should be aware of:

Dealerships covered by the law will receive a “summary” from their manufacturer/former manufacturer of their rights under the law and the specific criteria pursuant to which that dealership was terminated, not renewed, or “wound-down” by January 15, 2010. 

By January 25, 2010, covered dealerships that wish to seek binding arbitration with GM or Chrysler must make the election to do so. Dealerships do not have to wait to receive the summary and can elect arbitration at any time prior to January 25, 2010.
Dealerships that elect arbitration must pay their own fees, expenses, and costs associated with the arbitration, as well as ½ of the shared costs of the arbitration.
The arbitration will be held in the state where the dealership is located, although the parties can agree to conduct the arbitration electronically or over the telephone.
Any arbitration must be completed by June 14, 2010, unless the arbitrator decides to extend the arbitration to July 14, 2010. 

The arbitrator will decide whether the dealership should be continued or reinstated based on a balancing of the economic interests of the dealership, the manufacturer, and the public at large. 

In conducting this balancing, the arbitrator will consider, among other things, the following seven factors: 

· the dealership’s profitability in 2006, 2007, 2008, and 2009;

· the manufacturer’s overall business plan;

· the dealership’s current economic viability;

· the dealership’s satisfaction of the performance objectives established by its franchise agreement;

· the demographic and geographic characteristics of the dealership’s market territory;

· the dealership’s performance in relation to the criteria used by its manufacturer to terminate, not renew, not assume or not assign the dealership’s franchise agreement; and

· the length of experience of the dealership.

While the new law does not allow the arbitrator to order the awarding of damages, it permits a dealership and its manufacturer/former manufacturer to reach a voluntary, negotiated settlement of the dealerships claims – including one that includes compensation – in lieu of arbitration. 

At the arbitration, the dealership and the manufacturer may present any information that is relevant to the question above. 

No provision of the new federal law preempts state franchise laws.
We recognize that there likely will be many other questions regarding the arbitration process established by the new law. Every dealer’s situation is unique; dealers should work with the experienced attorneys at Pathman Lewis to examine in detail whether and how to pursue the rights granted by the new law.

Because of the time constraints in the law it is important that dealers act now.

If you, or any dealer you may know, has been impacted by the actions of GM and/or Chrysler contact Pathman Lewis for a more comprehensive summary or to discuss your options under the law.

Wayne M. Pathman

Lewis D. Kuhl

Pathman Lewis, LLP

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2 South Biscayne Blvd.

Miami, Florida 33131

Telephone (305) 379-2425

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Toll Free (888) 379-3459

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