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MADISON (WKOW) -- Wisconsin's Attorney General has joined a court fight to stop Chrysler from avoiding state statutes that protect auto dealerships.
On Tuesday, Wisconsin Attorney General J.B. Van Hollen announced that he has joined Ohio, Illinois, and eight other states in an effort to oppose attempts by Chrysler LLC to use bankruptcy to avoid state statutes designed to protect auto dealers.
On June 3, 2009, Bankruptcy Judge Arthur J. Gonzalez will conduct a hearing to consider the objections brought forth by Van Hollen and others, including representations of hundreds of Chrysler dealers throughout the U.S. who argue that bankruptcy does not allow Chrysler to avoid statutory protections at the state level.
Chrysler filed a motion asking the court to relieve it from its future contractual obligations to a number of dealers on May 14, 2009. That request was intended to facilitate the company's efforts to reorganize and emerge from bankruptcy. Van Hollen says that while that kind of tactic is common in bankruptcy proceedings, Chryslers' motion went a step further, also asking the court to declare that it may be relieved of non-contractual obligations imposed by laws. One such law is the Wisconsin Fair Dealership Law. Chrysler asked the court to declare that any "new Chrysler" emerging from bankruptcy would be immune from "interference" by state regulatory agencies like those that license auto dealerships.
Van Hollen says he and others are objecting to the company's attempted maneuver argument that, although bankruptcy law may allow Chrysler to avoid some contractual obligations, the same is not true of obligations and legal duties enacted by state legislatures.
"Our legislature enacted specific protections for automobile dealers precisely because they are often at a severe disadvantage when dealing with large manufacturers," said Van Hollen. "When Chrysler chose to do business in our state, with Wisconsin-based dealers, it chose to accept our rules. It should not be able to reorganize itself on the backs of these small businesses-many of whom have been pillars of their communities for decades--by walking away from our laws."
According to Van Hollen's office, some of the more significant protections that Chrysler may be trying to avoid include requirements that the company repurchase automobile and parts inventories from terminated dealers who would no longer be allowed to sell them.
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