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Ex-Chrysler Dealers Sue Gov't Over Bailout Closures

Fri, 02/18/2011 - 3:37am
Ken Thomas, Associated Press

WASHINGTON (AP) — A group of car dealers who lost their businesses in Chrysler's 2009 bankruptcy sued the government Thursday, claiming their dealer franchises were closed without adequate compensation.

The 64 former Chrysler dealers said in the lawsuit that the Treasury Department violated their constitutional rights by failing to compensate them for taking their auto businesses. They alleged damages of at least $130 million.

Lawyers for the dealers said the closures prevented a "significant disruption" in the U.S. auto industry and economy but said "this is a loss that should not, however, be borne by a few individual auto dealers but ... must in fairness and justice by borne by the public as a whole."

The Treasury Department declined comment on the lawsuit, which was filed in the U.S. Court of Federal Claims.

Chrysler closed 789 auto dealers, or about one quarter of its dealer network, in its June 2009 bankruptcy. The closings of Chrysler and General Motors dealerships were among a broad number of concessions given by dealers, workers, retirees and others to make the companies viable in the government-led auto bankruptcies.

Following a lobbying campaign by car dealers, Congress approved legislation later in 2009 that required arbitration for the closed dealers. Chrysler agreed to restore about 80 franchises through the process while GM reinstated more than 660 dealers it had threatened with closure.

The Obama administration has said without the shared sacrifices of many in the auto industry the two companies may not have rebounded. Former leaders of the administration's auto task force denied they had any role in choosing which dealerships should be terminated.

The plaintiffs include dealers from 29 states, including several business owners who actively lobbied Congress to restore the rights of dealerships, including Jack Fitzgerald, who owns Fitzgerald Auto Mall of Frederick, Md., and Jim Tarbox, of Tarbox Motors of North Kingston, R.I.

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