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Chrysler Dealer Reinstated through Arbitration

Minneapolis – The Dady & Gardner law firm received a favorable award for its client Fury Dodge of Lake Elmo under the Consolidated Appropriations Act of 2010, determining that the Chrysler dealer should be reinstated.

In his ruling, arbitrator Richard B. Solum of the American Arbitration Association reiterated the words of a Chrysler executive from the Denver Business Group, who in respect to the 2009 “dealer count reduction” to keep or eliminate Fury, said, “This is a tough one.”  For all the reasons Solum gave in his ruling, saying “as mixed as some of them are,” he found that the balancing of the economic interests of Chrysler, Fury and the public favors adding Fury to the Chrysler network and renewing its sales and service agreements as required by the Act.

J. Michael Dady said this was the 25th and final case they have handled for automobile dealers seeking relief pursuant to provisions of the Act, from their having been de facto terminated as General Motors or Chrysler dealers while both were in bankruptcy. “Of the 25 cases our firm was honored to be asked to handle for adversely affected dealers, 20 of our dealer clients are being reinstated, and five have settled their claims for cash settlements acceptable to them,” Dady explained.

Solum issued his written determination on June 25, seven days after the post hearing briefs were submitted, following the June 9 – 11 hearings. The ruling contained seven statutory factors, giving detailed explanations of each. In looking at the first, Chrysler’s overall business plan, he stated that Chrysler’s plan to consolidate brands (Chrysler, Dodge and Jeep) under one roof, and reduce the number of dealers is well-founded, because the market has changed and marketing needs were materially different than those existing during the last 20 years. One important factor has been that the automobile industry has had to compete with import dealer networks which have far fewer dealers with all brands under one roof, enabling them to operate more efficiently with greater profitability.

During the hearing, Chrysler devoted much effort in making its case to support the “once-in-a-lifetime” elimination of a large number of dealers through its 2009 bankruptcy proceedings.  But arbitrator Solum had to determine if the elimination of Fury was in the best economic interest of the parties, as part of Chrysler’s large plan to have only “quality dealers.”  He points out that the owners of Fury Dodge have been long time operators with the highest sales of the dealership in Minnesota, with Five Star dealer ratings, who have maintained high marks for customer service. He stated that there was no evidence that Chrysler concluded that the Fury Dodge network was not “quality” dealers.

The second statutory factor, Fury’s profitability from 2006 to 2009 and its current viability are explained as one factor as they are inextricably related.  Chrysler recognized that Fury was profitable, financially “healthy and growing” and viable during the “economic tsunami of 2008 and 2009.” Fury Dodge was able to survive, while 397 dealers closed or filed bankruptcy. But Chrysler claimed that Fury’s profitability was somewhat of a mixed bag, saying it was heavily underpinned by its used car, rather than new car operations. Solum said that analysis resulted from a selection of segmented numbers from Fury’s financials, showing an admitted inroad on Fury’s profitability as a new car dealer which he had to consider. But in his final determination, Solum concluded that according to Chrysler’s expert there was no evidence that the inroads were considered by Chrysler in rejecting Fury as a dealer.

As to Fury’s viability, he found that Fury was viable, a finding well supported by the evidence and by reason.

Other Significant Factors

Fury’s satisfaction of performance objectives of the franchise agreements also favors Fury, although they are also mixed, according to the arbitration ruling.  The main objectives are selling, service, facilities and finance. In Chrysler’s 2009 determination to reject Fury, there was no reference to deficient performance under its franchise agreement for sales and service, other than a few notations. After reviewing each section, Solum concluded, “the adherence-to-franchise-agreement factor, while slightly favoring Fury, is of little help in balancing the interests of parties, as it is mixed and was not part of the 2009 decision-making.”

In his fifth factor, the demographic and geographical characteristics of Fury’s market territory, Solum favors Chrysler, stating that it was an important element. The issues relate to Fury’s location in the Lake Elmo area, which Chrysler labeled as “excess,” deemed to be unnecessary in accommodating the selling and servicing of new vehicles. Fury owners testified that they were never advised that their dealership had been designated as an “excessive point” until they were rejected by Chrysler. The Act states that this factor should look to the demographic characteristics of the customers being served. Solum found that the Lake Elmo point location can be served by other dealerships without harming Chrysler or the public. He concludes that while favoring Fury slightly, this factor provided little help in balancing the interests of the parties.

The last two factors pertain to the issues of Fury’s performance and length of experience, in relation to the criteria used to terminate the Minnesota dealer. The arbitrator ruled in favor of Fury, stating that Chrysler failed to make the reject decision based on a full analysis of the stated criteria.

Dady partner Jeffrey F. Haff, who also represented Fury in the arbitration, said their firm was very please with the outcome, stating, “We were glad that we were able to get 20 dealers reinstated, because it appears to us that GM and Chrysler rejected dealers that should have never been terminated in the first place”  

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Fury Dodge Final Determination.pdf1.52 MB
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