Chrysler Grp. LLC v. Fox Hills Motor Sales, Inc.

Decision Date16 January 2015
Docket Number13–2119.,Nos. 13–2117,13–2118,s. 13–2117
Citation776 F.3d 411
PartiesCHRYSLER GROUP LLC, Plaintiff–Appellee, United States of America, Intervenor–Appellee, v. FOX HILLS MOTOR SALES, INC.; Village Chrysler Jeep Incorporated; Jim Marsh American Corporation, Defendants–Appellants. Livonia Chrysler Jeep, Inc., Plaintiff–Appellant, v. Chrysler Group, LLC, et al., Defendants–Appellees, United States of America, Intervenor–Appellee. Chrysler Group LLC, Plaintiff–Appellee, United States of America, Intervenor–Appellee, v. Sowell Automotive, Incorporated, et al., Defendants, Spitzer Autoworld Akron, LLC, Defendant–Appellee, Fred Martin Motor Company, Defendant–Appellant.
CourtU.S. Court of Appeals — Sixth Circuit

776 F.3d 411

CHRYSLER GROUP LLC, Plaintiff–Appellee
United States of America, Intervenor–Appellee
v.
FOX HILLS MOTOR SALES, INC.;

Village Chrysler Jeep Incorporated;

Jim Marsh American Corporation, Defendants–Appellants.


Livonia Chrysler Jeep, Inc., Plaintiff–Appellant
v.
Chrysler Group, LLC, et al., Defendants–Appellees
United States of America, Intervenor–Appellee.


Chrysler Group LLC, Plaintiff–Appellee
United States of America, Intervenor–Appellee
v.
Sowell Automotive, Incorporated, et al., Defendants
Spitzer Autoworld Akron, LLC, Defendant–Appellee
Fred Martin Motor Company, Defendant–Appellant.

Nos. 13–2117
13–2118
13–2119.

United States Court of Appeals, Sixth Circuit.

Argued: Aug. 8, 2014.
Decided and Filed: Jan. 16, 2015.

Rehearing En Banc Denied March 13, 2015.


776 F.3d 414

ARGUED:Michael F. Smith, The Smith Appellate Law Firm, Washington, D.C., for Appellants in 13–2117. Robert Charles Davis, Davis Listman Brennan, Mt. Clemens, Michigan, for Appellant in 13–2118. Jay F. McKirahan, Cooper & Elliott, LLC, Columbus, Ohio, for Appellant in 13–2119. Hugh Q. Gottschalk, Wheeler Trigg O'Donnell LLP, Denver, Colorado, for Appellee Chrysler Group in 13–2117 and 13–2118. Katherine I. Twomey, United States Department of Justice, Washington, D.C., for Federal Appellee in 13–2117, 13–2118, and 13–2119. ON BRIEF:Michael F. Smith, The Smith Appellate Law Firm, Washington, D.C., Eric R. Bowden, Michael J. O'Shaughnessy, Colombo & Colombo, P.C., Bloomfield Hills, Michigan, for Appellants in 13–2117. Robert Charles Davis, Davis Listman Brennan, Mt. Clemens, Michigan, for Appellant in 13–2118. Jay F. McKirahan, Cooper & Elliott, LLC, Columbus, Ohio, Lawrence R. Bach, Roderick Linton Belfance, LLP, Akron, Ohio, for Appellant in 132119. Hugh Q. Gottschalk, Christopher P. Montville, Wheeler Trigg O'Donnell LLP, Denver, Colorado, John E. Berg, Cynthia M. Filipovich, Clark Hill PLC, Detroit, Michigan, for Appellee Chrysler Group in 13–2117 and 13–2118. Robert Y. Weller II, Kristen L. Baiardi, Abbott Nicholson, P.C., Detroit, Michigan, for Appellee Dick Scott in 13–2117. Suanne Tiberio Trimmer, Dawda, Mann, Mulcahy & Sadler, PLC, Bloomfield Hills, Michigan, for Prestige Chrysler Appellees in 13–2117 and 13–2118. Anthony B. Giardini, Anthony B. Giardini Co., L.P.A., Lorain, Ohio, for Appellee Spitzer Autoworld in 132119. Daniel Tenny, United States Department

776 F.3d 415

of Justice, Washington, D.C., for Federal Appellee in 13–2117, 13–2118, and 13–2119.

Before: ROGERS and GRIFFIN, Circuit Judges; VAN TATENHOVE, District Judge.*

OPINION

ROGERS, Circuit Judge.

Congress—in Section 747 of the Consolidated Appropriations Act of 2010—created an arbitration procedure for automobile dealerships to seek continuation or reinstatement of franchise agreements that had been terminated by Chrysler during its bankruptcy proceedings, with the approval of the bankruptcy court. This case involves what happens when the dealerships prevail, as some did, in their statutorily-provided arbitrations.

The lawsuit below involved numerous claims, counterclaims, and cross-claims by Chrysler and various dealers. Among other things, the parties dispute the scope of relief provided for successful dealers under § 747, and whether such dealers are subject to state dealer protest laws that permit existing dealerships to protest the addition of a new dealer. The district court correctly held that § 747 does not constitute an unconstitutional legislative reversal of a federal court judgment, and that the only relief provided to successful dealers under § 747 is the issuance of a “customary and usual” letter of intent. The district court also properly found that the letters of intent at issue in this case were “customary and usual,” with the exception of one contractual provision that requires reversal. Contrary to the district court's conclusion, however, application of the state dealer acts of the two states in question (Michigan and Nevada) is preempted by § 747, because the state acts provide for redetermination of factors directly addressed in federally-mandated arbitrations closely related to a major federal government bailout.

I.

This case involves the post-bankruptcy corporate identity of Chrysler, the American automobile manufacturer. The bankruptcy transferred almost all of the business from “Old Chrysler” to “New Chrysler,” an entirely new corporate entity.1 Facing declining sales and an overextended network of dealerships, Old Chrysler arrived at the brink of insolvency after the global financial crisis and filed for Chapter 11 bankruptcy in April 2009. In re Chrysler LLC, 405 B.R. 84, 87–88, 90 (Bankr.S.D.N.Y.2009). Prior to the bankruptcy petition, Old Chrysler applied to and received from the federal government's Troubled Asset Relief Program (“TARP”) a $4 billion loan, which was given in exchange for a security interest in all of Old Chrysler's assets, to be held by the U.S. Treasury. Id. at 89–90 ; see also Emergency Economic Stabilization Act of 2008, Pub.L. No. 110–343, 122 Stat. 3765 (codified at 12 U.S.C. § 5201 et seq. ) (establishing TARP). After this loan, the federal government assumed a central role in Chrysler's restructuring. Beyond the Treasury's floating of considerable capital aid through TARP, the President of the

776 F.3d 416

United States instituted an Auto Task Force, whose goal was to negotiate a comprehensive restructuring among Chrysler and other affected parties. In re Chrysler LLC, 405 B.R. at 91. Eventually, the parties negotiated a plan with Fiat, the Italian automaker, which was willing and able to take up primary ownership of Chrysler's automobile empire. See id. at 91–92.

As part of the final sale order of the bankruptcy court, Old Chrysler sold, free and clear of all liens and encumbrances, nearly all of its assets to New Chrysler, which was owned predominantly by a voluntary employees' beneficiary association and partially by Fiat and various entities of the federal government, with Fiat maintaining the possibility of acquiring a majority ownership in the future. Id. at 92, 113. This asset transfer was conducted pursuant to 11 U.S.C. § 363(f), which creates a mechanism for a bankruptcy trustee to sell certain property of the debtor “free and clear of any interest in such property of an entity other than the estate.”

In addition to transferring substantially all of Old Chrysler's assets to the new entity, the restructuring plan included some procedures designed to consolidate and streamline Old Chrysler's business operations. At the time of the bankruptcy petition, Old Chrysler had 32 manufacturing and assembly facilities and a network of 3,200 independent dealerships in the United States. In re Chrysler LLC, 405 B.R. at 88. Early in the bankruptcy proceedings, Old Chrysler filed a motion seeking to “reject executory contracts and unexpired leases affecting 789 domestic car dealerships,” that is, requesting permission to terminate its sales and service agreements with 789 dealers. See id. That request represented the elimination of nearly a quarter of Chrysler's dealerships in the United States.

In response to the upheaval in the American automobile industry—which was said to threaten almost 2,000 dealerships nationwide and put nearly 100,000 jobs at risk—the United States Senate held a special hearing on June 3, 2009, to address the issue of dealership closures. GM and Chrysler Dealership Closures: Protecting Dealers and Consumers: Hearing Before the S. Comm. on Commerce, Sci. & Transp., 111th. Cong. (2009) (“Senate Hearing”). One senator at the hearing expressed concern that “[w]e committed an awful lot of taxpayer money to try to save all those jobs that are now being cut,” while the cause of the problem was that the automobile manufacturers were stubbornly refusing to innovate in the marketplace. See id. at 85 (statement of Sen. Bill Nelson). One senator stated that “because of this financial investment, we have an obligation to ensure Federal resources are being used wisely and fairly and in the best interests of the taxpayers.” Id. at 20 (statement of Sen. John Thune).2

During the hearing, James Press, the Vice Chairman and President of Old Chrysler, responded that the dealership terminations were necessary for the survival of New Chrysler. He pointed out

776 F.3d 417

that the average Chrysler dealer lost over $3,000 annually and that the existence of “a legacy of dealers that sell only one or two of the company's three brands—Chrysler, Jeep and Dodge—... led to redundancies and inefficiencies in product development and marketing costs.” Id. at 28–29. Press outlined Chrysler's plan to streamline their dealership network:

Chrysler has consistently communicated the need for a consolidation of dealers to our network. Our most recent restructuring effort, Project Genesis, is aimed at bringing all three brands under one roof to go along with our plan to produce fewer products that overlap. Genesis was launched in 2008 with an extensive communication plan including a series of meetings across the United States with our dealers and presentations at the National Auto Dealers Association annual conference. In each market, we identified the optimal number of
...

To continue reading

Request your trial
14 cases
  • United States v. Hiraldo
    • United States
    • U.S. District Court — Northern District of Ohio
    • August 7, 2023
  • In re Gokay
    • United States
    • United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio
    • August 14, 2015
    ...at 425 (citing Bibbo v. Dean Witter Reynolds, Inc., 151 F.3d 559, 562–63 (6th Cir.1998) ). See also Chrysler Group LLC v. Fox Hills Motor Sales, Inc., 776 F.3d 411, 424 (6th Cir.2015) (“Conflict preemption occurs when a state law ‘stands as an obstacle to the accomplishment and execution of......
  • In re Ford Motor Co. F-150 & Ranger Truck Fuel Econ. Mktg. & Sales Practices Litig.
    • United States
    • U.S. District Court — Eastern District of Michigan
    • February 23, 2022
    ... ... Inc. v. Howard & Howard Attorneys, Pllc , 702 ... Fed.Appx. 416, 419 ... Chrysler Group LLC v. Fox Hills Motor Sales, Inc. , 776 ... F.3d 411, 424 ... ...
  • Torres v. Precision Indus., Inc.
    • United States
    • U.S. Court of Appeals — Sixth Circuit
    • April 22, 2021
    ...[to] be refused their natural effect," the state law "must yield to the regulation of Congress." Chrysler Grp. LLC v. Fox Hills Motor Sales, Inc. , 776 F.3d 411, 424 (6th Cir. 2015) (internal quotation marks and alterations omitted).1.The Supreme Court's Hoffman decision is the focal point ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT