Federal Court Dismisses Arbitration Act Case

A previous post discussed a Dealer Arbitration Act case pending United States District Court in West Islip.  That case involved former Chrylser dealers that were rejected in bankruptcy but were successful in their arbitratations against Chrylser Group.   Judge Wexler previously held that, although the successful dealers could not be "continued" or "reinstatated" like GM wind-down dealers, they could "added" to Chrylser Group's dealer network and were, therefore, entitled to "customary and usual letters of intent."  A non-jury trial was held on December 3, 2012 on the sole issue of whether Chrysler Group did, in fact, offer the dealers a "customary and usual letter of intent."

In a decision entered on January 24, 2013, Judge Wexler agreed with Chrysler Group.  The Court considered 135 letters of intent (LOIs) issued by Chrysler Group between June 2009 and April 2011.  Of these 135 LOIs, 50 were with rejected dealers that reached pre-arbitration settlements with Chrysler Group; 32 were with rejected dealers that, like the plaintiff, prevailed in arbitration; and the remaining 53 were with new dealers not previously affiliated with Old Chrysler. 

The plaintiff dealers asked the Court to focus on 4 terms in their LOIs: site approval, existing dealer protests, facility requirements, and an option to purchase the facility.

The Court noted that 13 of 15 terms appeared in all 135 LOIs it reviewed.  As to the specific 4 terms highlighted by the plaintiff, those terms appeared in the majority in all LOIs (and the one relating to dispute resolution was removed in any event).

In determining that Chrysler Group did offer "customary and usual letters of intent," the Court held: (1) that LOIs did not need to be identical in order for them to customary and usual; (2) that the challenged LOI should be compared against the entire universe of 135 LOIs offered during the period, not just the subset of those offered to new dealers; and (3) that all LOI terms must be considered, not just selected terms.  The Court concluded as follows:

"Upon such review, based upon the facts set forth above, [the] court concludes that there is overwhelming evidence that the Letters of Intent offered to Plaintiffs were the customary and usual letters of intent offered to other dealers during the relevant time period, and that the Letter of Intent therefore fully complied with the [Dealer Arbitration] Act's requirements."