Dealer Sues Chrysler, Claiming Terms for Reinstatement Violate Arbitration Law

WASHINGTON - In the first lawsuit of its kind, a closed Missouri dealership that prevailed in arbitration over Chrysler Group claims that it received a letter of intent that violates the federal dealer arbitration law, Automotive News reported.

Century Motor Corp., of Wentzville, contends that dealerships seeking reinstatement have to meet conditions not required of the thousands of Chrysler dealerships that were never terminated.

The requirements also were not imposed on dealerships awarded franchises after bankruptcy and before the arbitration law was enacted in December, according to the complaint, filed Thursday, June 17, in U.S. District Court in St. Louis.

The suit says letters of intent given to terminated dealerships that filed arbitration claims should be the same as those given to stores that survived Chrysler's bankruptcy.

Chrysler confirmed today that the suit was the first filed over a letter of intent received by a terminated dealer in arbitration. The automaker, controlled by Fiat S.p.A. since its government-sponsored bankruptcy a year ago, declined additional comment.

"We were outraged by the letter of intent," Kevin Mock, Century's general manager, said in an interview with Automotive News. "We have 20 years and millions and millions of dollars invested in this franchise, and we couldn't just sit back and wait for something to happen."

After receiving the letter of intent, the dealership and its lawyer tried to negotiate with Chrysler over the terms but were "stonewalled," Mock said. The dealership, located in a suburb of St. Louis, is owned by John Mock, 62, and his brother Frank, 54.

A year ago, Chrysler closed 789 dealerships, or a quarter of its dealer network. In January, about 400 of the rejected stores gave notice of their intent to file arbitration claims.

The latest letters of intent violate the federal law's mandate that they be “customary and usual,” Century Motors' suit alleges.

Under the arbitration law, Chrysler and General Motors have seven business days after an arbitration loss "to provide the dealer a customary and usual letter of intent to enter into a sales and service agreement."

“Chrysler is intentionally, knowingly and willfully thwarting the law,” claims the seven-page suit filed by Century's attorney, Allen Press of the Green Jacobson law firm in St. Louis.

One different provision in the new letter of intent would nullify the letter if an existing dealer protested the addition of Century and this protest were not dismissed or denied in 30 days, the complaint alleges.

Another provision would forbid Century to protest if a new dealership were added to its market, the suit claims.

Dealerships must sign letters of intent if they are to be reinstated via franchise agreements, also known as sales and service agreements.

Chrysler has issued letters of intent to two sets of rejected dealerships that filed arbitration claims: the 50 that were given these letters in March and April, before their arbitration hearings were held, and many of the 11 that have won in arbitration since April.

A number of the 50 that received letters of intent this spring said at the time that they didn't intend to sign them because of some of the same provisions cited in Century's suit.