Little Too Late? business experience enable him to counsel clients - PDF document

Page 2 of 10 pursuant to the Master Sale and Purchase Agreement with Vehicle Acquisitions Holdings LLC on June 2nd. Among other things, the Order provides that GM will provide notice of the assumption and assignment of executory contracts and the proposed cure amounts in connection therewith. Rather than filing a publicly- available list of such contracts with the Court, as Chrysler did, GM instead elected to send notice directly Larry Katz is a senior partner in and privately to each dealer. In addition to mailing Venable's Bankruptcy and these Notices, the order states that GM will establish a Creditors' Rights Group, where limited access website with current information, he concentrates his practice on including setting forth the cure amounts, for affected complex Chapter 11 proceedings, workouts, contracts. The order contemplates that the Notices will business restructurings, and be sent via first class mail to affected parties on or commercial litigation. before June 5. Based on objections that have been filed lakatz@Venable.com with the Court, however, it appears as though some Washington, DC Office Notices were sent as late as June 8. t 703.760.1921 f 703.821.8949 Because the list is not publicly available, dealer bankruptcy counsel do not know which parties received This edition of The Notice. Therefore, counsel will need to consult with Bankruptcy Weekly their clients to determine if timely Notice was received. was co-authored by: It appears that while some dealers received timely Notice, others did not, and some received no Notice at Aaron H. Jacoby all. Access to the cure amount schedule has also been an issue. Of those dealers receiving Notice, not all were able to obtain access and there are instances where the cure amount was not posted. Of course, the problem is that dealers may not agree with GM's indication of the cure amount and a dealer has only ten days from the date of the Notice to file an objection with the Court if the cure amount is disputed. Because that deadline might be as early as today, counsel may elect to file protective responses on behalf Aaron Jacoby is Chair of of their clients in order to preserve any objection to the Venable's Automotive Industry cure amount scheduled by GM. The objection would set Group. He focuses his practice forth the dealer's cure amount and objection in the event on class actions and consumer litigation, unfair competition, that it differs from what is ultimately posted on the federal and state regulatory website by GM. matters and government investigations affecting the automotive industry. Mr. Jacoby's industry focus and Recent Legislation and Hearings/Too broad-based litigation and Little Too Late? � business experience enable him to counsel clients on a wide variety of by Aaron Jacoby, Esq. operational, regulatory and litigation avoidance issues and Recent hearings and pending legislation regarding to offer pragmatic solutions to the legal challenges they face. dealer terminations and reinstatement may have given dealers some hope. However, while Congress may be ajacoby@Venable.com finally listening to its dealer constituents, passage of any Los Angeles Office t 310.229.9940 dealer reinstatement provision into law is unlikely. f 310.229.9901 H.R. 2743 contains a section regarding the restoration of dealers' rights that is exemplary of political efforts to This edition of the support dealers. As readers may be aware, Section 3 of Bankruptcy Weekly is the Bill would provide for the restoration of dealers' sponsored by: 6/22/2009

Page 3 of 10 economic rights as follows: "(a) In order to protect assets of the Federal Government and better assure the viability of Dedication to the automobile manufacturers in which the Federal automotive industry Government has an ownership interest, or to during difficult times. which it is a lender, an automobile manufacturer in which the Federal Government has an With Chrysler and General ownership interest, or which receives loans from Motors in bankruptcy, the the Federal Government, may not deprive an need for competent automobile dealer of its economic rights and bankruptcy and litigation shall honor those rights as they existed, for counsel - with a focus on the Chrysler LLC dealers, prior to the auto industry - is commencement of the bankruptcy case by increasing. Venable's Chrysler LLC on April 30, 2009, and for General national team has worked in Motors Corp. dealers, prior to the the automotive industry for commencement of the bankruptcy case by many years and is General Motors Corp. on June 1, 2009, including providing insight in the dealer's rights to recourse under state law. identifying issues and mitigating risks involved for (b) In order to preserve economic rights pursuant dealers, suppliers and other to subsection (a), at the request of an automobile creditors in the auto dealer, an automobile manufacturer covered manufacturers' business under this Act shall restore the franchise reorganization and agreement between that automobile dealer and restructuring. Venable's Chrysler LLC or General Motors Corp. that was auto industry bankruptcy in effect prior to the commencement of their team is led by Larry Katz respective bankruptcy cases and take assignment and Aaron Jacoby, with of such agreements." additional contributions to this week's newsletter by Many dealers and their counsel will agree with the partners Michael Volpe and sentiment behind Section 3 of the Bill and behind the Ken Murphy, Senior hearings held in recent days. However, to expect such a Legislative Advisor Jake provision to pass both houses and to be signed by Seher and associates Kristen President Obama is a stretch. The reinstatement of Burgers and Melanie Joo. dealers en masse would fly directly in the face of the Auto Task Force's, and therefore GM and Chrysler's Disclaimer. stated goals of dealer reduction. Nevertheless, political This newsletter is published efforts and action are to be applauded and may begin to by the National Association correct the public perception of the facts behind dealer of Dealer Counsel with reduction. content provided by the law firm of Venable LLP. It is Thoughts for the Road Ahead intended to provide timely summaries of recent events by Ken Murphy, Esq. that may impact dealers and should not be construed as We are well on our way on this journey to a providing legal advice or new day in the auto industry. The government legal opinions. You should consult an attorney for any intervention has occurred. The manufacturer specific legal questions or to bankruptcy proceedings became reality. address dealer-specific fact Dealer consolidation has gone from attrition as situations. a consequence of market forces to rejection as a purported solution to the crisis. There is Dealer Agreement more drama in the auto industry and its Assumptions: bankruptcy proceedings than in the daytime 6/22/2009