Chrysler Grp. LLC v. S. Holland Dodge, Inc.

• Decision Date: 24 May 2012
• Docket Number: 10–13290,Case Nos. 10–12984,10–13908.
• Citation: 862 F.Supp.2d 661
• Parties: CHRYSLER GROUP LLC, Plaintiff, v. SOUTH HOLLAND DODGE, INC., et al., Defendants; Livonia Chrysler Jeep, Inc., a Michigan for profit corporation, Plaintiff, v. Chrysler Group, LLC, et al., Defendants; Chrysler Group LLC, Plaintiff, v. Sowell Automotive, Inc., et al., Defendants.
• Court: U.S. District Court — Eastern District of Michigan

862 F.Supp.2d 661

CHRYSLER GROUP LLC, Plaintiff,

v.SOUTH HOLLAND DODGE, INC., et al., Defendants;

Livonia Chrysler Jeep, Inc., a Michigan for profit corporation, Plaintiff,

v.Chrysler Group, LLC, et al., Defendants;

Chrysler Group LLC, Plaintiff,

v.Sowell Automotive, Inc., et al., Defendants.

Case Nos. 10–12984, 10–13290, 10–13908.

United States District Court,

E.D. Michigan,

Southern Division.

March 27, 2012.

Order Denying Motion to Certify Appeal May 24, 2012.

Cynthia M. Filipovich, John E. Berg, Clark Hill, Detroit, MI, Robert D. Cultice, Wilmerhale, Boston, MA, James P. Brennan, Davis Listman Brennan P.L.L.C., Mt. Clemens, MI, for Plaintiff.

Martin C. Weisman, Weisman, Young & Ruemenapp, P.C., Bingham Farms, MI, Paul R. Norman, Boardman, Suhr, Madison, WI, Thaddeus E. Morgan, Fraser, Trebilcock, Norman C. Witte, Witte Law Office, Lansing, MI, Suanne Tiberio Trimmer, Dawda, Mann, Eric R. Bowden, Lawrence F. Raniszeski, Michael J. O'Shaughnessy, Colombo & Colombo, Bloomfield Hills, MI, Michael J. Dommermuth—Not Sworn, Mcgloin, Davenport, Serverson, Denver, CO, Jay F. McKirahan, Cooper & Elliott, L.L.C., Dublin, OH, Matthew C. Miller, Robert A. Poklar—Not Sworn, Weston Hurd L.L.P., Cleveland, OH, Gerard J. Andree, Sullivan, Ward, Southfield, MI, William J. Denius—Not Sworn, Killgore, Pearlman, Orlando, FL, Cynthia M. Filipovich, John E. Berg, Clark Hill, Robert Y. Weller, Abbott Nicholson, Detroit, MI, Robert D. Cultice, Wilmerhale, Boston, MA, Edward A. Shuttie, Chisholm, Shuttie, Royal Oak, MI, for Defendants.

OPINION & ORDER

SEAN F. COX, District Judge.

Following the 2009 bankruptcies of Chrysler LLC (“Old Chrysler”) and General Motors Corporation (“Old GM”), and actions taken to consolidate their respective dealer networks, Congress enacted Section 747 of the Consolidated Appropriations Act of 2010, Pub.L. No. 111–117 (“Section 747”). That Act was passed to grant certain arbitration rights to dealerships that were rejected or terminated in connection with the those bankruptcies. Several dealers who had been rejected by Old Chrysler initiated, and prevailed in, Section 747 arbitrations with Chrysler Group LLC (“New Chrysler”). Those arbitration determinations have given rise to this litigation because the parties disagree as to what happens next following those Section 747 arbitration determinations.

In addition to New Chrysler, there are two different groups of dealers who are parties to this action. First, there are 8 dealers whose franchise agreements were rejected by Old Chrysler and who prevailed in Section 747 arbitrations with New Chrysler that are currently ¹ parties in these consolidated actions: 1) Livonia Chrysler Group LLC (“Livonia”); 2) Village Chrysler Jeep, Inc. d/b/a Village Automotive Center (“Village”); 3) Fox Hills Motor Sales, Inc. d/b/a Fox Hills Chrysler Jeep (“Fox Hills”); 4) Boucher Imports, Inc. d/b/a Frank Boucher Chrysler (“Boucher”); 5) Jim Marsh American Corp. (“Jim Marsh”); 6) Spitzer Autoworld Akron, LLC (“Spitzer”); 7) BGR, LLC d/b/a Deland Dodge (“BGR”); and 8) Sowell Automotive, Inc., d/b/a Dodge City Chrysler Jeep (“Sowell”) (collectively, the “Rejected Dealers”). Second, there are a number of existing dealers who are parties to this action because they oppose New Chrysler establishing or relocating a dealer who prevailed in a Section 747 arbitration into their area without following the provisions of state-law dealer acts (“Interested Dealers”). These Interested Dealers include: 1) Crestwood Dodge, Inc. (“Crestwood”) (who opposes Livonia); 2) Fred Martin Motor Co. (“Fred Martin”) (who opposes Spitzer); 3) Falls Motor City, Inc. (“Falls Motor City”) (who opposes Spitzer); and 4) Hurley Chrysler Jeep, Inc. (“Hurley”) (who opposes BGR).

This matter is currently before the Court on 15 dispositive motions filed by these parties. In these motions, the parties raise the common issue of what relief is provided by Section 747 to a dealer rejected by Old Chrysler who prevails in a Section 747 arbitration with New Chrysler. The motions also raise the common issue of whether Section 747 preempts state-law dealer acts. The parties have extensively briefed the issues and the Court finds that oral argument would not aid the decisional process. See Local Rule 7.1(f)(2), U.S. District Court, Eastern District of Michigan. The Court therefore orders that the motions will be decided upon the briefs.²

For the reasons that follow, the Court shall declare that: 1) The sole and exclusive remedy for a dealer rejected by Old Chrysler who prevails in a Section 747 arbitration with New Chrysler is a customary and usual letter of intent to enter into a sales and service agreement with New Chrysler; 2) Section 747 does not provide for reinstatement of a dealer rejected by Old Chrysler who prevails in a Section 747 arbitration with New Chrysler; 3) Section 747 does not authorize an award of monetary damages; 4) Section 747 does not provide for judicial confirmation or enforcement and neither the FAA nor the AAA's Commercial Rules govern these statutorily-mandated arbitrations or authorize a party to move to confirm an arbitrator's determination in a Section 747 arbitration; and 5) Section 747 does not preempt the state-law dealer acts that govern the relationships between automobile manufacturers and dealers in California (Cal. Vehicle Code § 3060 et seq.), Florida (Fla. Stat. § 320.01 et seq.), Michigan (Mich. Comp. Laws § 445.1561 et seq.), Nevada (Nev.Rev.Stat. § 482.36311 et seq.), Ohio (Ohio Rev.Code. § 4517.43), or Wisconsin (Wis. Stat. § 218.0101 et seq.).

The Court shall also hold a Status / Scheduling Conference, to discuss the most efficient method of adjudicating the remaining claims in this action.

BACKGROUND

This case has a fairly lengthy background, which is relevant to the issues presented in the pending motions.

A. For Decades, State–Law Dealer Acts Have Provided Certain Protections For Existing Dealers And Allow Them To Challenge A Manufacturer's Decision To Establish Or Relocate Another Dealer Into A Given Area.

For decades, various state-law dealer acts provide certain protections for existing dealers and allow them to challenge a manufacturer's decision to establish or relocate another dealer into a given area.

For example, in 1981, Michigan enacted Mich. Comp. Laws § 445.1561 et seq. (“the Michigan Dealer Act”). Among other things, the Michigan Dealer Act provides protections for existing dealers. It regulates a manufacturer's establishment or relocation of a dealership within a relevant market area where the same line make is already represented. SeeMich. Comp. Laws § 445.1566 & § 445.1576. Before a manufacturer can establish or relocate a dealer into a relevant market area (“RMA”), the manufacturer must do certain things—such as give written notice to existing dealers within the RMA of its intention to establish or relocate another dealer to the RMA. Those existing dealers can then challenge that action by filing a declaratory action in circuit court, to determine if good cause exists for the establishment or relocation of the dealer.

State-law dealer acts also exist in California, Florida, Nevada, Ohio, and Wisconsin. While the dealer acts in each of these states differ in various respects, they provide similar protections to existing dealers. Automotive manufacturers and dealers have been operating under these state-law dealer acts for decades.

B. Livonia, Village, Fox Hills, Boucher, Jim Marsh, Spitzer, BGR, And Sowell Each Operated Under Dealer Agreements With Old Chrysler.

Livonia is a Michigan corporation that operated a dealership in Livonia, Michigan, pursuant to Sales and Service Agreements with Old Chrysler. Livonia operated its dealership under those agreements for more than 25 years.

Village is a Michigan corporation that operated a dealership in Royal Oak, Michigan, pursuant to Sales and Service Agreements with Old Chrysler. Village operated its dealership under those agreements for more than 30 years.

Fox Hills is a Michigan corporation that operated a dealership in Plymouth, Michigan, pursuant to Sales and Service Agreements with Old Chrysler.

Boucher is a Wisconsin corporation that operated a dealership in Wisconsin, pursuant to Sales and Service Agreements with Old Chrysler. Boucher operated as a Chrysler, Jeep, and Dodge dealer under those agreements for 17 years.

Jim Marsh is a Nevada corporation that operated a dealership in Nevada, pursuant to Sales and Service Agreements with Old Chrysler. Jim Marsh operated as a Chrysler, Jeep, and Dodge dealer under those agreements for 9 years.

Spitzer is an Ohio corporation that operated a dealership in Ohio, pursuant to Sales and Service Agreements with Old Chrysler.

BGR is a Florida limited liability company that operated a dealership in Florida, pursuant to Sales and Service Agreements with Old Chrysler. BGR operated as a Chrysler, Jeep, and Dodge dealer under those agreements for 4 years.

Sowell is a California Corporation that operated a dealership in California, pursuant to Sales and Service Agreements with Old Chrysler. Sowell operated as a Chrysler, Jeep, and Dodge dealer under those agreements for more than 14 years.

C. In 2009, Both Old Chrysler And Old GM Filed For Bankruptcy And Consolidated Their Dealer Networks.

During the recent economic decline, the automotive industry was hit hard. In the fall of 2008, a global credit crisis affecting the liquidity markets impacted the availability of loans both to dealers and consumers, resulting in the erosion of consumer confidence and a sharp drop in vehicle sales. By the end of 2008, Old Chrysler and Old GM were both insolvent. This resulted in unprecedented bankruptcy filingsby Old Chrysler and certain of its subsidiaries in April 2009, and by Old GM in June 2009. While both manufacturers consolidated their nationwide dealer networks in connection with these bankruptcy proceedings, they did so in different ways.

1. Old Chrysler's Bankruptcy Filing And...