Chrysler seeks to block rejected dealers’ state suits

Posted on Monday, August 17th, 2009 at 1:16 PM EDT.

Chrysler Group has asked a U.S. Bankruptcy Court judge to prevent rejected dealers from suing the automaker in state courts to get their lost franchises back, the Automotive News reported.

Old Carco, the operating entity for the Chrysler assets left behind in bankruptcy, asked the judge to stop lawsuits filed by 11 dealerships in state courts or administrative bodies, the paper said. The suits want “to force the new Chrysler to continue to honor the very dealer agreements” the Bankruptcy Court previously allowed Chrysler to reject, the motion states, the Automotive News said.

The document accuses the 11 dealerships, which it refers to as “noncompliant,” of trying to do an “end run” around the bankruptcy process, the story said.  It says the lawsuits assert that a state’s motor vehicle statute “trumps the provisions of sections 362, 363 and 365 of the bankruptcy code,” the publication said.

Chrysler said in a prepared statement: “Old Carco was forced to take this action as a result of the actions of the 11 dealers. By taking the actions noted in the motion, the rejected dealers have directly violated the orders of Judge Gonzalez and the bankruptcy court. Instead of appealing the sale and rejection orders in the proper bankruptcy court forum, they are seeking to do an end run on the court’s orders.”

A hearing on Old Carco’s request to halt the state court lawsuits is scheduled for Aug. 27, the story said. (Automotive News)

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