In October, the U.S. Court of Federal Claims ruled that hundreds of Chrysler dealers disenfranchised as a condition of a 2009 federal bailout of their manufacturer were not owed compensation under the Fifth Amendment’s Takings Clause.  - Photo by AgnosticPreachersKid via Wikimedia Commons

In October, the U.S. Court of Federal Claims ruled that hundreds of Chrysler dealers disenfranchised as a condition of a 2009 federal bailout of their manufacturer were not owed compensation under the Fifth Amendment’s Takings Clause.

Photo by AgnosticPreachersKid via Wikimedia Commons

WASHINGTON — A group of about 300 disenfranchised Chrysler dealers will appeal a U.S. Claims Court decision that absolved the federal government of responsibility for the loss of their businesses, attorney Len Bellavia of Bellavia Blatt PC announced.

The plaintiffs are among the 789 dealers whose agreements were terminated in May 2009. The group represented about 25% of Chrysler’s U.S. retail network but accounted for only 14% of sales.

But factory executives didn’t make the decision on their own. An Obama administration task force made trimming Chrysler’s roster a condition of accepting federal funds that kept the manufacturer afloat during a Chapter 11 bankruptcy brought on by plummeting new vehicle sales at the outset of the Great Recession.

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Bellavia said the dealers are collectively owed about $1 billion under the Fifth Amendment’s Takings Clause, which requires the federal government to compensate citizens whose private property is seized for public use.

The court denied that claim, pointing in part to testimony from Steven Rattner, the head of the auto task force, and former Chrysler CEO Bob Nardelli. They agreed the factory accepted the terms willingly and in its “best business judgment,” according to Nardelli.

Bellavia expressed disappointment in the verdict but said the 10-year-old case was always likely to wind its way through multiple appeals, whatever the Claims Court decision.

“Both sides understood the trial court was the first step,” Bellavia told Auto Dealer Today. “Even if we won, I would have advised my clients not to take a victory lap. We all knew the appellate court will decide the unique legal issues in this case.”

“It was economic coercion. If Chrysler wanted the bailout, they had to accede to the government’s directive.”

Bellavia stressed that the decision made no note of a provision in the government-drafted loan documents that mandated the closure of a certain number of dealerships. He said this amounted to coercion on the government’s part, an uncommon claim in Takings Clause cases and one to which the court attempted to apply a literal interpretation.

“Coercion in the takings context is not a common matter of proof. ‘Coercion’ connotes this notion of almost a physical force. And that’s not what we were arguing. We weren’t saying the government twisted Chrysler’s arm to file for bankruptcy and terminate dealers,” Bellavia said. “We claimed the coercion as a condition of the bailout. It was economic coercion. If Chrysler wanted the bailout, they had to accede to the government’s directive.”

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