Judge allows Chrysler dealers to sue government

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Timothy F. Geithner

Timothy F. Geithner may come under fire in a lawsuit 75 Chrysler dealers are filing against the U.S. Treasury. Image: World Economic Forum/Flickr/CC BY

In a backlash to the bailout of the U.S. auto industry, a New York judge ruled earlier this week that 75 Chrysler dealers, who were terminated as part of Chrysler’s bailout bankruptcy, have the right to sue the U.S. Treasury Department. The judge agrees that the terminations were a violation of Fifth Amendment rights. The Fifth Amendment puts limits on law enforcement procedure.

Dealership property seized in auto bailout

The 75 dealerships involved in the suit are all clients of the law firm Bellavia, Gentile & Associates, located in Mineola, N.Y. The property of all the dealerships was seized under the $12.5 billion auto industry bailout that began in 2008 and lasted into 2009. The federal government ordered the closure of 789 Chrysler dealerships in all.

Dealers should have been compensated, lawsuit states

Leonard Bellavia, owner of the law firm, said the dealers should have all been compensated and the property treated as an eminent domain issue. The dealerships involved in the suit are asking the federal government for more than $200 million in compensation. Chrysler is not named in the suit.

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Leonard Bellavia said:

“Simply because the government arranged to have this seizure of private property carried out by a third party -– Chrysler -– it is no less a ‘taking’ under long standing principles of constitutional law.”

High-ranking U.S. officials could face depositions

Judge Robert Hodges, Jr. decided on Monday that the lawsuit against the U.S. Treasury Department could go ahead. This could lead to depositions being ordered from high ranking members of the Obama administration, such as Timothy Geithner and Steven Rattner.

“We fully intend to prove at trial that President Obama’s Automotive Task Force conditioned the bailout of Chrysler on a requirement that it close 25 percent of its dealerships nationwide. The president and his task force believed that a Chrysler liquidation would destroy the U.S. economy and terminated these dealers on the belief that this had to be done for the public good. My clients, however, lost their entire life’s work without just compensation.”

Other terminated dealers expected to join in

Bellavia says, now that the judge has ruled the lawsuit lawful, he expects more of the 789 terminated Chrysler dealers to come forward and join the suit.

Bellavia said:

“We received a very important decision today. After this decision, I expect those dealers sitting on the sidelines to join the case.”

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