WASHINGTON - A group of car dealers who lost their businesses in Chrysler's 2009 bankruptcy sued the government Thursday, claiming their dealer franchises were closed without adequate compensation.
The 64 former Chrysler dealers said in the lawsuit that the Treasury Department violated their constitutional rights by failing to compensate them for taking their auto businesses. They alleged damages of at least $130 million.
Robert A. Leffler Sr., owner of B&L Chevy-Buick-Pontiac along Route 61 in Coal Township, was not among the car dealers to file suit, but said the ones who did have a valid claim and wished them luck in winning their cases.
Leffler's 35-year-old business, which remains a dealership for GM, was one of 800 dealerships whose franchise rights were terminated by Chrysler in 2009.
A measure was approved by the federal government that forced General Motors and Chrysler - which have both ended partnerships with hundreds of dealers in efforts to restructure - to restore about 3,000 dealerships expected to be closed through bankruptcies.
Leffler out $550K
During an interview in 2009, Leffler said, "As it stands now, the dealers received nothing even though some dealers had invested millions of dollars per manufacturer's requirements to obtain the franchise."
When a dealership is closed by the corporation, the dealership is usually reimbursed for car parts, special tools and vehicles. Instead, B&L was left with $80,00 worth of parts, $70,000 worth of Chrysler-specific tools and $400,000 worth of vehicles.
Leffler said at the time, "We lost the franchise and got no compensation for it."
Lawyers for the dealers said the closures prevented a "significant disruption" in the U.S. auto industry and economy, but said "this is a loss that should not, however, be borne by a few individual auto dealers but ... must in fairness and justice be borne by the public as a whole."
The Treasury Department declined comment on the lawsuit, which was filed in the U.S. Court of Federal Claims.
Chrysler closed 789 auto dealers, or about one quarter of its dealer network, in its June 2009 bankruptcy. The closings of Chrysler and General Motors dealerships were among a broad number of concessions given by dealers, workers, retirees and others to make the companies viable in the government-led auto bankruptcies.
Following a lobbying campaign by car dealers, Congress approved legislation later in 2009 that required arbitration for the closed dealers. Chrysler agreed to restore about 80 franchises through the process while GM reinstated more than 660 dealers it had threatened with closure.
The Obama administration has said without the shared sacrifices of many in the auto industry, the two companies may not have rebounded. Former leaders of the administration's auto task force denied they had any role in choosing which dealerships should be terminated.
The plaintiffs include dealers from 29 states, including several business owners who actively lobbied Congress to restore the rights of dealerships, including Jack Fitzgerald, who owns Fitzgerald Auto Mall of Frederick, Md., and Jim Tarbox, of Tarbox Motors of North Kingston, R.I.