Some dealers axed by Chrysler were reported to be readying a court challenge although it was unclear how much they would succeed.

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About 300 affected dealers planned to file a motion in the US Bankruptcy Court in Manhattan objecting to the company’s dealer cuts and the company’s plan to sell most of its operations to Fiat, a lawyer representing the group told the Wall Street Journal (WSJ).


“I think the court will be flooded with objections,” Stephen Lerner, partner at Squire, Sanders & Dempsey, the firm hired to represent the group, which is called the Committee of Chrysler Affected Dealers, told the paper. The group, with members from about 45 states, was started with the help of the National Automobile Dealers Association (NADA), the report added.


Chrysler last Thursday told 789 of its 3,200 dealers that it planned to drop them from its retail network as part of its bankruptcy restructuring. Affected dealers are supposed to stop selling new Chrysler vehicles around 9 June. The effort to close or consolidate its existing dealerships has the backing of the Obama administration’s auto task force, the WSJ noted.


The committee was scheduled to meet with the auto task force on Tuesday to discuss the matter, Lerner told the Wall Street Journal.

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The forced closure of dealerships, he added, could violate state and federal laws. “You can’t terminate them literally on three weeks notice,” Lerner said. “It’s not that simple, and it’s never been tested.”


The WSJ suggested the dealers may be in for an uphill fight, though. Bankruptcy laws give the courts wide latitude for tearing up existing contracts such as dealer licenses.


It noted that a group of Chrysler creditors also formed a committee to fight a plan to slash its secured debt but almost all have now relented and the committee has since disbanded.