Chrysler still faces a legal challenge from owners of a network of auto
dealerships in the Chicago area and elsewhere, though it succeeded in removing federal
District Judge Virginia M. Kendall, on Oct. 4 in Chicago, issued an opinion on
FCA’s motion to dismiss the entire amended complaint from the Westmont-based Napleton Automotive Group, which alleged the automaker used a dealer incentive program to falsify
its vehicle sales figures, while also jiggering its dealership market
configurations to place dealers in wealthier metropolitan areas, including
those Napleton operates, at a competitive disadvantage for leverage.
On Jan. 12, two Napleton dealerships – Napleton’s
Arlington Heights Motors Inc., doing business as Napleton’s Arlington Heights
Chrysler Dodge Jeep Ram, and Napleton’s North Palm Auto Park Inc., doing
business as Napleton’s Northlake Chrysler Dodge Jeep Ram, in Lake Park, Fla. – had
filed suit in Chicago federal court against FCA US LLC, the North American arm
of Fiat Chrysler Automobiles.
The Napleton dealers are part of a network of dozens
of auto dealerships operated by the Westmont-based Napleton Automotive Group in
Chicago’s suburbs, as well as elsewhere in Illinois, Florida, Indiana, Missouri
and Pennsylvania. The dealerships sell vehicles spanning a range of automotive
brands, but many Napleton dealers are affiliated with brands sold by FCA.
refused to dismiss six of the 14 counts in the Napleton lawsuit, but granted dismissal
without prejudice on two counts and with prejudice on four; she partially
dismissed two others.
lawsuit, originally filed in January, alleged FCA engaged in fraud, as well as
violated the federal Racketeer Influenced and Corrupt Organizations Act and
other federal and state laws in Illinois and Florida, through its execution of
its so-called volume growth program, or VGP. Napleton’s said the automaker designed
the VGP to “coerce” and “strong-arm” dealers to “falsely report sales” of
vehicles so FCA could “create the appearance that FCA’s performance is better
than, in reality, it actually is.”
complaint relied on protections of the Automobile Dealers’ Day in Court Act. In
response, FCA tried to argue Napleton failed to demonstrate a failure to
perform terms of its dealer agreements. But Kendall noted Napleton did allege
“two fraudulent schemes through which FCA harmed and continues to harm them” as
well as a wrongful demand “in which sanctions would result from noncompliance.”
Further, Kendall wrote, “FCA’s arguments are more appropriate at the summary
judgment stage” after evidence is introduced.
likewise sided with Napleton on the merit of its Robinson-Patman Act antitrust
claims because the dealer sufficiently alleged FCA created a price difference
between firms that did and did not go along with the VGP. The allegations
detailed “two separate schemes each leading to $800 in price discrimination —
and therefore, a $1,600 price difference” Napleton had to pay over the course
of at least one year as opposed to other dealers.
found more success in its defense of the RICO claims, as Kendall wrote Napleton
failed to allege sufficient facts showing alleged harm to be a direct cause of
alleged FCA racketeering activity “because their alleged harm could have
resulted by factors other than the alleged acts of fraud.” FCA, for example,
could have passed over Napleton for certain popular vehicles “because they
still had many on the lot.”
also agreed to dismiss Napleton’s common law fraud and negligent
misrepresentation claims, rejecting the dealer’s contention its allegations
should be considered outside the Michigan law that governs dealer agreements
and the related economic loss doctrine, writing Napleton could not argue it was
tricked into signing the deal because it “had access to the Dealer Agreements
and (was) fully aware of the obligations that each party carried” before signing.
Napleton will be allowed to continue its breach of contract claim, sufficiently
alleging FCA “arbitrarily created (minimum sales responsibility) baselines with
the goal of threatening” compliance with the alleged schemes.
also failed to win dismissal on most of Napleton’s claims under state
automobile dealer laws in Illinois, Florida, Missouri and Pennsylvania. Kendall
did write Napleton failed to allege harm under an alleged violation of section
seven of the Illinois Motor Vehicle Franchise Act. Kendall did dismiss
Napleton’s claims of fraud in inducement and quantum meruit regarding an $18
million investment to relocate its Chrysler dealership from Des Plaines to
Arlington Heights, citing a lack of details about the allegedly fraudulent
misrepresentation that fueled the decision to invest.
Kendall’s order, discovery will proceed on the remaining counts and the parties
are to appear at a previously set status conference.
is represented in the action by attorneys with the firms of Freeborn &
Peters, of Chicago; Hagens Berman Sobol & Shapiro, of Seattle, Wash.; and Bellavia Blatt & Crossett, of
Mineola, NY; and attorney Kevin M. Hyde, of Westmont.
FCA is represented by the firms of Wilmer
Cutler Pickering Hale and Dorr, of Boston; and Barack Ferrazzano Kirschbaum
& Nagelberg, of Chicago.