WTO wins summary judgment for Chrysler in preemption case
Following the bankruptcy of Chrysler LLC ("Old Chrysler"), several states, including Colorado, passed legislation that generally provided that Chrysler Group ("New Chrysler") and the restructured GM could not award dealerships to new dealers without first offering the dealerships to the individual dealers who had been terminated or rejected in the bankruptcy process. WTO filed several lawsuits in the Bankruptcy Court in New York on behalf of New Chrysler against these states, arguing that the doctrine of preemption and the contracts clause of the U.S. Constitution prohibited states from requiring New Chrysler to deal with particular individuals in the process of awarding future franchises.
The first case was remanded to the Southern District of New York. Judge Kevin Castel of that Court issued a 34-page opinion in early December 2010 granting summary judgment in New Chrysler's favor and striking down the legislation adopted by Maine and Illinois. Although the ruling only applied directly to the statutes of those two states, the logic and legal conclusions set forth in the Court's opinion apply to the legislation adopted by other states.
This decision is a tremendous victory for Chrysler Group that will allow them to continue the process of upgrading their dealer network after the conclusion of the arbitrations described above.