168 Rejected Auto Dealers Seek Arbitration

A spokesperson for General Motors Company says that as of last Friday a total of 168 dealerships filed notice of their wish to be reinstated by means of arbitration proceedings.

The dealers gave their notice ahead of the deadline, which is next Monday according to the law signed into effect by President Obama that allows dealers closed by Chrysler and GM to pursue reinstatement through a neutral third party arbiter.

The figure was given in response to a request for information by Automotive News. GM spokesperson Ryndee Carney reported the figure for GM, however Chrysler would not provide information regarding how many of its 789 closed showrooms have filed for arbitration.

Leonard Bellavia is an attorney in Mineola, N.Y. who represents around 50 arbitration clients. I am surprised that by such an early date 168 had already filed, he says.

Other attorneys representing closed dealerships include Mike Charapp of McLean, Virginia and Eric Chase of Florham Park, New Jersey. The three attorneys believe that roughly 500 to 1,000 rejected dealers will seek arbitration.

According to the new law, GM sent out letters to their 1,300 complete wind-down dealerships regarding the criteria used to revoke their franchises by October of this year, says Carney.

An additional 700 letters were mailed to partial wind-down dealerships selected to lose one or more GM franchises while being allowed to keep at least one. For example, a partial wind-down of a Chevrolet/Cadillac dealer might involve the loss of only the Cadillac franchise.

All letters from GM regarding criteria for closure were received by January 15 in accordance with the law. The 168 filings referred to by Carney were for the close of business on that day.

Bellavia said, I don’t think the January 15 figures are demonstrative at all of the number of total filings, particularly because we have been counseling attorneys and dealers not to file before receiving and discussing with counsel the letters setting forth the criteria used to reject and wind down dealers.

Chrysler spokesperson Kathy Graham said, We don’t want to be seen as trying to influence the process, when asked about the company’s reluctance to release figures.

Charapp, who is representing 24 arbitration clients, says the number of Chrysler dealers that actually file for arbitration will be far lower than those that would like to. He says, Their businesses and lives have been so decimated that they just don’t have the wherewithal. In complex cases, the cost of pursuing reinstatement through the arbitration process could cost rejected dealers as much as $100,000 and involve countless hours spent compiling and preparing the necessary documentation.

Attorneys noted that the letters from GM were more compliant with the new law than those sent out by Chrysler.

Charapp says, GM’s notifications, while sparse, are much more meaningful than those provided by Chrysler. At least the GM notifications tell dealers specific reasons why they were not continued. Chrysler, on the other hand, gives no information to a dealer from which a dealer can tell specifically why he or she was not continued.

Chrysler sent form letters out that listed the criteria used to evaluate performance, along with individual scorecards including factors and a percentage figure. Both Chrysler and GM say that their mailings are compliant with the law.

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