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TERMINATED DEALERS WILL FINALLY HAVE THEIR DAY With the recent passage of Federal legislation, General Motors and Chrysler dealers will be able to seek arbitration about the loss of their franchises under the spending bill that's going to President Obama's desk. The $1.1 trillion funding measure includes provisions that create an arbitration process that could result in allowing some dealerships to stay open. Over the last several months, NADA and CADA have fought for several provisions in Congress that would allow for the reinstatement of dealer rights. 5 Key Points in the Bill for Dealers: **The time periods referenced herein are all tied to the enactment date of this legislation. The enactment date is the date when President Obama signed this bill into law, which occurred on 12.16.09** Detailed summary of the Legislation (as compiled by Congressional staff): Sections (a) to (c) – Establish Right to Binding Arbitration for Terminated Dealers. Provides GM and Chrysler dealerships terminated as a result of bankruptcy an opportunity to appeal the termination through binding arbitration conducted by an independent third party. Dealerships that prevail in the arbitration must be reinstated in the same geographic area where they operated prior to their termination. Eligibility for reinstatement is limited to dealerships selling brands still owned and manufactured by GM or Chrysler at the time of the arbitration. Section (d) – Factors to be Considered by the Arbitrator. In making the determination, the arbitrator must strike a balance between the economic interests of the dealership, the manufacturer, and the public at large. In striking that balance, the arbitrator must consider the (1) dealership’s profitability in the last four years, (2) manufacturer’s overall business plan, (3) dealership’s current economic viability, (4) dealership’s satisfaction of the performance objectives in the franchise agreement, (5) characteristics of the covered dealership’s market territory, (6) dealership’s performance in relation to the criteria used by the manufacturer to terminate the dealership, and (7) length of experience of the terminated dealership. The dealer and manufacturer can present any relevant evidence during the arbitration. All arbitration hearings must be completed within 180 days after the bill is passed. Section (e) – Explains Details of Arbitration. Arbitration hearing will take place electronically, telephonically, or personally in the state where the dealership is located. The arbitrator will be chosen from the American Arbitration Association. Arbitration discovery is limited to documents related to the performance of the specific dealership. Monetary damages are not available. The bill provides dealerships with a swift remedy. If the arbitrator finds for the dealership, the company must provide the dealer a letter of intent to enter a sales and service agreement within 7 business days of the arbitrator’s decision. Upon execution of the sales and service agreement, the dealer must return any money received from GM or Chrysler in consideration of terminating the franchise agreement. Section (f) – Allows Alternative Agreements. Provides dealers and/or groups representing dealers an opportunity to forgo binding arbitration and negotiate a separate agreement with GM and/or Chrysler. The resulting agreement can address a franchise agreement, compensation, geographic territory or any other lawful issue. Section (g) – Clarifies Ability Process for Terminating Dealerships. Requires any manufacturer seeking to terminate a dealership not otherwise terminated through the bankruptcy process to do so in accordance with applicable state laws. * * * * * * * * Questions or Comments? Please contact:
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