Chrysler Sues 7 Detroit Dealers Over Disputed Letters of Intent

WASHINGTON - Chrysler Group has sued seven Detroit area dealerships in an attempt to gain legal support for the letters of intent it has given dealers reinstated through arbitration. Dealers have challenged the terms of those letters as onerous and unfair, Automotive News reported.

Chrysler claims it should be allowed to withdraw a letter of intent to a dealership if nearby stores protest its reinstatement The condition has been in at least 82 letters offered to dealerships that filed arbitration claims after being closed during the company's bankruptcy last year.

Only 29 dealers have signed the letters of intent, although that number could grow because many of the others are in talks with Chrysler in an attempt to get the requirements eased.

Dealers who haven't signed have argued that several requirements in the letters -- including the one granting Chrysler withdrawal rights if a nearby store protests -- are more stringent than those in letters given to stores that weren't closed.

The letters of intent contain requirements -- such as minimum levels of capital and credit, as well as showroom upgrades -- that a dealer must agree to before being reinstated.

Chrysler's suit, filed in U.S. District Court in Detroit, contends Michigan dealer law trumps the federal law, enacted in December, that created an arbitration process for rejected Chrysler and General Motors Co. dealers.

“Chrysler Group is simply seeking clarification of the rights and legal responsibilities of the company and affected dealers,” the automaker said in a statement.

The Michigan Dealer Act requires Chrysler to notify existing dealers of its intent to establish a new store within six miles and give them the right to file a legal challenge within 30 days, the automaker's suit says.

Chrysler wouldn't say definitively whether it would file similar suits in other states but has “no plans to file elsewhere at the moment,” company spokesman Michael Palese said.

Rejected Chrysler dealers who prevailed in arbitration have filed suits in Florida and Missouri challenging the letters of intent they received.