# Colonial Chevrolet Co., Inc. v. United States

> United States Court of Federal Claims · October 2, 2019

URL: https://www.frixlaw.com/law-library/cases/4443686

## Case

- **Court:** United States Court of Federal Claims
- **Decided:** October 2, 2019
- **Precedential status:** Published
- **Opinion:** Opinion
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

In the United States Court of Federal Claims
Nos. 10-647C, 11-100C, and 12-900C
(Filed: October 2, 2019)
CONSOLIDATED

)
COLONIAL CHEVROLET CO., )
INC., et al., )
)
Plaintiffs, )
v. ) Fifth Amendment Taking; Government
) Action Through Coercion; Economic
THE UNITED STATES, ) Value in a “But For World”
)
Defendant. )
)
********************* )
ALLEY’S OF KINGSPORT, INC., et )
al., )
)
Plaintiffs, )
v. )
)
THE UNITED STATES, )
)
Defendant. )
)
****** *************** )
UNION DODGE, INC., et al., )
)
Plaintiffs, )
v. )
)
THE UNITED STATES, )
)
Defendant. )
)

TRIAL OPINION

Roger J. Marzulla, Washington, DC, counsel for Alley’s of Kingsport, Inc., et al.,
plaintiffs, and Marquette W. Wolf, Mesquite, TX, counsel for Colonial Chevrolet Co.,
Inc., et al., plaintiffs. Nancie G. Marzulla, Washington, DC, Richard Mann, Mesquite,
TX, Leonard A. Bellavia, Mineola, NY, Thomas A. Homan, New York, NY, Stephen G.
Larson, Steven E. Bledsoe, and Lauren Wulfe, Los Angeles, CA, and Harry W. Zanville,
La Mesa, CA, of counsel.

Kenneth M. Dintzer, Civil Division, U.S. Department of Justice, Washington, DC, with
whom were Joseph H. Hunt, Assistant Attorney General, Robert E. Kirschman, Jr.,
Director, James P. Connor and Elizabeth M. Hosford, Assistant Directors, Christopher J.
Carney, Senior Litigation Counsel, for defendant. Jonathan E. Jacobson, Joshua A.
Mandlebaum, Antonia R. Soares, Zacahary J. Sullivan, and Alison S. Vicks, Washington,
DC, of counsel.

FIRESTONE, Senior Judge.

This action was brought by car dealers that had their franchise agreements with

Chrysler LLC (“Old Chrysler” or “Chrysler”) rejected when Old Chrysler went into

bankruptcy during the Great Recession in April 2009.1 These car dealer plaintiffs claim

that the United States Government (“government”) is liable for taking their franchise

agreements without just compensation in contravention of the Fifth Amendment. They

claim the government is liable because the government through its actions coerced

Chrysler into filing for bankruptcy under a government negotiated prepackaged

bankruptcy plan, which called for a reduction in Chrysler’s franchise network. The

reduction was accomplished through the rejection in the bankruptcy of 789 franchise

agreements, including plaintiffs’ agreements.2 Plaintiffs claim that had the government

not gotten involved in the Chrysler bankruptcy their franchise agreements would not have

1
The court’s use of the terms “Old Chrysler” or “Chrysler” in this opinion refer to Chrysler
before it filed for bankruptcy in 2009. The term “New Chrysler” will be used to refer to the
Chrysler that emerged after the 2009 bankruptcy. The court follows the same approach for Old
General Motors, “Old GM” or “GM,” to refer to the company before it filed for bankruptcy in
2009.
2
Under the Bankruptcy Code, 11 U.S.C. § 365, a debtor or bankruptcy trustee “may assume or
reject any executory contract . . . of the debtor.” The franchise agreements at issue in this case
are executory contracts that were rejected in bankruptcy by the debtor, Chrysler.

2
been rejected by Chrysler in bankruptcy but would have been assumed by the owner of

New Chrysler.

The taking claims addressed in this decision trace back to three separate lawsuits,

Case Nos. 10-647, 11-100 and 12-900, filed by three groups of plaintiffs that owned

franchise agreements with either Old Chrysler or Old General Motors and that had their

franchise agreements rejected in the Chrysler and GM bankruptcies. The first of these

three lawsuits, Colonial Chevrolet Co., was filed on September 27, 2010 and the

government moved to dismiss the lawsuit on January 21, 2011. On February 27, 2012 the

government’s motion to dismiss was denied and the case was certified for interlocutory

appeal. Colonial Chevrolet Co., Inc. v. United States, 103 Fed. Cl. 570 (2012); Colonial

Chevrolet Co., Inc. v. United States, 106 Fed. Cl. 619, 622 (2012). During the Federal

Circuit’s interlocutory review, two later filed cases, Alley’s of Kingsport, Inc. and Union

Dodge, Inc. (Case Nos. 11-100 and 12-900) were stayed pending the Federal Circuit’s

decision in Colonial Chevrolet Co.

On April 7, 2014, the Federal Circuit issued its decision affirming the denial of the

government’s motion to dismiss. A&D Auto Sales, Inc. v. United States, 748 F.3d 1142

(Fed. Cir. 2014). The Circuit held that the plaintiffs had alleged sufficient facts to support

potential Fifth Amendment taking claims based on a theory of coercion. The Circuit also

held, however, that the plaintiffs had failed to allege sufficient facts to show that their

franchise agreements would have had economic value in a “but for world” where the

government had not provided financial assistance to Chrysler or GM.3

3
The concept of the “but for world” is derived from the Federal Circuit’s discussion of economic
value in A&D Auto Sales. 748 F.3d at 1158-59. As the Circuit explained, in a regulatory taking
3
Regarding a taking by coercion, the Federal Circuit indicated that if the plaintiffs

could establish that Chrysler’s decision to enter bankruptcy under terms negotiated by the

government was not voluntary, a potential taking may be found. Id. at 1154. The Circuit

identified several cases where a party’s actions affecting the property of third parties was

found to be attributable to government pressure and thus a possible taking under a theory

of government coercion. Id. at 1154-55. Based on the plaintiffs’ allegations of Chrysler

and GM seeking government assistance during the Great Recession in late 2008 and early

2009, the Circuit listed several “circumstances” it deemed potentially relevant to the issue

of coercion including but not limited to (1) whether the government insisted on the

franchise terminations or targeted franchisees for termination, (2) whether the franchise

terminations would have occurred in any event, (3) whether government financing was

essential to Chrysler, and (4) whether the government had a role in creating the economic

circumstances alleged to have given rise to coercion. Id. at 1155. But the Circuit also

noted that if the government was acting only as a lender to Chrysler and GM and

negotiated bankruptcy terms necessary to protect the government’s financial interests, the

government might not be liable for a taking. Id. at 1156-57.

Regarding plaintiffs’ failure to allege that their franchise agreements had

economic value, the Circuit explained that to prove a taking the plaintiffs would need to

establish that their franchise agreements would have had value in a hypothetical “but for

world” where the government had not provided financial assistance to Chrysler or GM.

case, plaintiffs have the burden of showing what value their property would have had in the
absence of government action. Id.

4
Id. at 1157-59. If plaintiffs’ franchise agreements would not have had value in a “but for

world” without government assistance, the Circuit explained, the government did not

“take” anything of value and cannot be liable for a “taking.” Id. The Circuit remanded the

case to this court to allow plaintiffs the opportunity to amend their complaints to include

allegations of value in a “but for world” without government assistance. Id. at 1158-59.

On September 15, 2014, the plaintiffs in all three above-captioned cases filed

amended complaints in which they posited that their franchise agreements would have

had value under several “but for world” scenarios in which the government did not

provide financial assistance to Chrysler or GM. Colonial Chevrolet Co., Inc. v. United

States, 123 Fed. Cl. 134, 140-46 (2015). The government moved to dismiss the amended

complaints claiming that plaintiffs’ “but for” assumptions were either implausible or

barred by A&D Auto Sales. Id. On September 9, 2015, this court granted in part and

denied in part the government’s motion, holding that certain of plaintiffs’ “but for world”

scenarios were consistent with the Federal Circuit’s decision in A&D Auto Sales. Id. The

court also severed the GM plaintiffs from the Chrysler plaintiffs and put the GM

plaintiffs’ claims on a separate discovery time table.

Following this court’s decision granting in part and denying in part the

government’s motion to dismiss, the court, on December 4, 2015, consolidated the three

above-captioned lawsuits for the purposes of case management, discovery, and for trial

on the merits of the Chrysler plaintiffs’ taking claims. On April 6, 2016, this court denied

the Chrysler plaintiffs’ motion for class certification. Thereafter, the parties chose 10

representative Chrysler plaintiffs for purposes of discovery and trial. One of the Chrysler

5
representative plaintiffs withdrew from the litigation prior to the commencement of trial

leaving nine representative plaintiffs.

The nine representative plaintiffs were divided into two groups: the Alley’s group

with seven plaintiffs including Taylor & Sons, Inc., Cedric Theel, Inc., Whitey’s Inc.,

RFJS Company, Jim Marsh American Corp., Livonia Chrysler Jeep, Inc., Barry Dodge,

Inc., and the Colonial group with two plaintiffs including Guetterman Motors, Inc. and

Mike Finnin Motors, Inc. The two groups of plaintiffs are represented by different

attorneys and sometimes relied on different evidence to prove their taking claims.

Trial to determine principally whether there was government action through

coercion and whether plaintiffs’ franchise agreements would have had economic value in

a “but for world” without government assistance was held in Washington, D.C. between

April 8, 2019 and May 8, 2019. Post-trial arguments were held on June 19, 2019 and June

20, 2019. During trial the court heard testimony from 36 witnesses and received 542

exhibits into evidence.

Importantly, at trial the representative plaintiffs did not focus their coercion

evidence on Chrysler being forced to accept the government’s negotiated bankruptcy

terms (including a reduction in Chrysler franchises) because Chrysler needed the

government’s financial assistance, as the Federal Circuit had assumed in A&D Auto

Sales. 748 F.3d at 1155. Instead, plaintiffs presented opinion testimony to the effect that

Chrysler did not need the government’s financial assistance. Plaintiffs’ experts conceded

that Chrysler would have had to file for bankruptcy in 2009. However, they opined that

Chrysler would have had more options in bankruptcy than the one option negotiated by

the government. According to plaintiffs’ experts, Chrysler was coerced because Chrysler
6
was left with no alternative but to accept the government’s assistance after the

government took over negotiations with Chrysler’s creditors and others in early 2009.

Plaintiffs’ evidence to prove coercion by government action was somewhat

conflicting at trial. On the one hand, the plaintiffs introduced evidence to show that

Chrysler did not wish to enter bankruptcy but instead wanted the government to loan

Chrysler billions of dollars outside of bankruptcy. The plaintiffs relied on this evidence to

show (among other things) that the government, not Chrysler, wanted to use bankruptcy

to reduce Chrysler’s franchise network by rejecting plaintiffs’ franchise agreements,

rather than pursuing voluntary franchise terminations consistent with state law.

On the other hand, the plaintiffs conceded that Chrysler could not have avoided

bankruptcy in 2009 and built both their coercion and economic value theories around this

concession. The plaintiffs offered expert opinions to support a coercion theory based on

the assumption that there were many companies interested in purchasing Chrysler in late

2008 and early 2009, during the Great Recession. According to plaintiffs’ experts, these

potential purchasers would have kept Chrysler open during a Chrysler bankruptcy and

would not have had any reason to reject any franchise agreements. Plaintiffs introduced

evidence to show that the government took over negotiations with Chrysler’s creditors,

worker unions, and suppliers to accomplish the government’s public policy goals of

saving jobs and pensions. The plaintiffs asserted that their evidence demonstrated that the

decision to reduce the Chrysler franchise network involuntarily in bankruptcy was in

furtherance of these policy goals and was never part of Chrysler’s own franchise

reduction plans.

7
Plaintiffs also claimed that their franchise agreements would have had economic

value in a “but for world” where Chrysler did not accept government assistance but was

able to enter bankruptcy outside the terms negotiated by the government. Specifically,

plaintiffs presented expert valuation testimony to show that their franchise agreements

would have had value in a “but for world” without government assistance because their

franchise agreements would never have been rejected in a bankruptcy.

The Alley’s plaintiffs presented expert opinion testimony to show that if Chrysler

had entered bankruptcy without government assistance the outcome for Chrysler would

have been very similar to the bankruptcy with government assistance, but with all

franchisees remaining Chrysler franchisees. According to the evidence presented by the

Alley’s plaintiffs, franchises had value in a “but for world” because franchisees would

have had retained all their income streams, including new car sales, used car sales,

warranty and other services. They also presented expert valuation testimony to the effect

that that their income from these sources would have continued for years because any

new Chrysler owner would have assumed their franchise agreements in bankruptcy.

The Colonial plaintiffs also presented expert opinion evidence to show that their

franchise agreements would have had value in a “but for world.” The Colonial expert

also opined that franchisees would have been able to generate profits from various

income streams during a Chrysler bankruptcy without government assistance. The

Colonial plaintiffs, however, did not claim that their franchise agreements had a “fair

market value,” as the Alley’s plaintiffs’ claimed. Rather, the Colonial plaintiffs’ expert

set forth various “but for world” values based on the anticipated profits those plaintiffs

8
would have received from being able to sell their remaining Chrysler inventory and used

cars, and from performing warranty and other service work.

The government presented fact and expert evidence to refute the Alley’s and

Colonial plaintiffs’ claims of government liability based on coercion and on economic

value. The government presented evidence to show that the government did not force

Chrysler into bankruptcy or into rejecting any of the plaintiffs’ franchise agreements. The

government presented undisputed evidence to show that Chrysler had been working to

reduce its franchise network for years and that Chrysler, not the government, identified

the number and names of the franchise agreements to be rejected in bankruptcy.

The government also presented evidence from government and Chrysler witnesses

to show that Chrysler’s decision to enter bankruptcy under government negotiated

bankruptcy terms was based on Chrysler’s best business judgment after consideration of

its options. The government presented undisputed testimony from Chrysler and

government witnesses to confirm that the government did not directly threaten or force

Chrysler to accept the government’s bankruptcy plan. The undisputed evidence

established that the government was willing to allow Chrysler to pursue bankruptcy with

limited government assistance if it wished to proceed in bankruptcy on its own. In fact,

the government offered Chrysler $750 million to help finance a wind-down if Chrysler

wished to pursue other bankruptcy options. The undisputed evidence also made clear that

if all of Chrysler’s creditors had agreed to the government’s terms, the government would

have given Chrysler financial assistance outside of bankruptcy.

The government also presented undisputed testimony from Chrysler witnesses to

show that Chrysler’s financial problems pre-dated the Great Recession. The undisputed
9
evidence established that Chrysler had started to look for a partner or alliance in 2007

because Chrysler knew it was not viable without an alliance with a company having a

small car fleet. The testimony established that no car manufacturer was interested in

joining forces with Chrysler in 2007 other than Fiat, and that Fiat made clear that it was

not willing to offer Chrysler the financial assistance Chrysler needed.

The government further presented expert opinion evidence to show that the

assumptions the Alley’s and Colonial plaintiffs’ experts relied on to establish that

Chrysler could have remained open during a bankruptcy without government assistance

and would not have rejected any franchise agreements were not supported by facts. The

government presented expert evidence to establish that there were no potential purchasers

of Chrysler in 2009. The government also presented expert evidence to confirm that,

without government funding, Chrysler would not have been able to remain operational

during a bankruptcy. According to the government’s expert witnesses, Chrysler would

have faced immediate liquidation under Chapter 7 of the Bankruptcy Code if it had not

received government assistance and would have had to immediately close its factories

and reject all of its franchise agreements. Based on this evidence the government asserted

that Chrysler’s decision to accept the government’s bankruptcy plan was made

voluntarily and was not coerced.

Regarding economic value, the government’s experts opined that, in the “but for

world” without government assistance, all of Chrysler’s factories and parts depots would

have closed. The experts opined that in the “but for world” there would have been no new

cars to sell, paid warranty work or Chrysler parts. According to the government’s experts,

in the “but for world” without government assistance, Chrysler would have been forced
10
into liquidation and the bankruptcy trustee would have rejected all Chrysler franchises.

As such, the government’s experts concluded, none of Chrysler’s franchise agreements

would have had economic value.

As discussed in the opinion that follows, the court finds, after considering all of

the fact and expert evidence, that the plaintiffs failed to establish by a preponderance of

the evidence that the United States by its actions coerced Chrysler into filing for

bankruptcy under the government’s negotiated bankruptcy terms or into rejecting any of

the plaintiffs’ Chrysler franchise agreements in the Chrysler bankruptcy.4 The evidence

established that the government did not force Chrysler to accept its bankruptcy terms.

The evidence established that the government was willing to give $750 million to

Chrysler if Chrysler wished to proceed to bankruptcy alone.

The government’s evidence also established that the government through its

actions did not interfere with potential acquirers from coming forward to purchase

Chrysler in bankruptcy. The evidence established that none of the potential acquirers the

plaintiffs’ identified were interested or capable of purchasing Chrysler in April 2009. The

evidence established that Chrysler accepted the government’s prepackaged bankruptcy

plan based on Chrysler’s best business judgment after consideration of its options. The

evidence further established that had the government not provided financial assistance to

Chrysler, Chrysler would have been forced into liquidation under Chapter 7 of the

Bankruptcy Code and that, in that circumstance, all of plaintiffs’ franchise agreements

4
The plaintiffs conceded that Chrysler was not acting as the government’s agent in this case.
Tr.4821:25-4822:5. Thus their entire case hinged on their proving the government by its actions
coerced Chrysler into entering bankruptcy under prepackaged terms negotiated by the
government.
11
would have been rejected by the bankruptcy trustee. The evidence thus established that

Chrysler’s decision to accept the government’s prepackaged bankruptcy terms was a

voluntary decision and not coerced.

Because the evidence established that Chrysler would have faced immediate

liquidation in a Chapter 7 bankruptcy without government assistance, the court also finds

that plaintiffs failed to prove their franchise agreements would have had value in a “but

for world” without government assistance. The evidence established that in a Chapter 7

bankruptcy all of Chrysler’s franchise agreements would have been rejected by the

bankruptcy trustee to preserve the assets of the bankruptcy estate and that plaintiffs’

franchise agreements would have had no economic value in that circumstance. Thus,

plaintiffs failed to prove that any property of value was “taken” from them.5

In reaching these conclusions, as discussed in the opinion, the court is mindful of

the testimony it heard from the owners of each representative franchise and appreciates

the sense of betrayal they felt when they learned that Chrysler had decided to reject their

franchise agreements in the April 2009 Chrysler bankruptcy. The court sympathizes with

many of these owners who testified as to how the loss of their franchise agreements

devastated not only their businesses but their lives. Nonetheless, the court was tasked

with deciding whether the plaintiffs proved that the United States coerced Chrysler into

rejecting their franchise agreements and whether their franchise agreements would have

5
Because the court reaches these conclusions, the court does not discuss in this opinion other
issues presented at trial as to whether the taking alleged by the plaintiffs was a per se taking or
should be evaluated under the Penn Central factors. See A&D Auto Sales, 748 F.3d at 1151,
1159.

12
had any value during the Great Recession in a “but for world” without the government’s

financial assistance. For the reasons discussed below, the court was compelled to find

that the plaintiffs did not meet their burden and it is for those reasons that plaintiffs’

taking claims have been rejected.

The court’s opinion begins with a lengthy summary of the evidence presented

followed by detailed findings of fact and conclusions of law as follows: (I) Summary of

the Individual Plaintiffs’ Testimony and Claims, (II) Summary of the Plaintiffs’

Evidence, (III) Summary of the Government’s Evidence, and, finally, (IV) Findings of

Fact and Conclusions of Law.

I. SUMMARY OF INDIVIDUAL PLAINTIFFS’ TESTIMONY AND CLAIMS

Based on the evidence summarized below, the court has made the following

findings regarding the terms of the plaintiffs’ franchise agreements, the profitability of

their franchises before their Chrysler franchise agreements were rejected in the Chrysler

bankruptcy, Chrysler’s justification for rejecting their franchise agreements in

bankruptcy, and their participation or decision not to participate in an arbitration program

established by Congress after the Chrysler bankruptcy to allow Chrysler franchisees to

seek reinstatement as New Chrysler franchisees. The court also summarizes the amount

each plaintiff claims as just compensation based on their experts’ valuations.

A. Taylor & Sons Inc.
Gregory Taylor testified on behalf of the Taylor & Sons, Inc. (“Taylor”)

dealership, which for the years at issue was located at 300 Cedar Street in Sandpoint,

Idaho. Taylor was incorporated under Idaho state law. The dealership included Chrysler,

Dodge, and Jeep franchises at the time of the alleged taking. Taylor also had a GM

13
franchise allowing it to sell Chevrolet vehicles at the time of the alleged taking of its

Chrysler franchises. Taylor operated its Chrysler/Dodge/Jeep and Chevrolet dealership

under the same roof from 1988 until 2009. Taylor continues to sell Chevrolet vehicles

under its franchise agreement with New GM.

Taylor was formed in August 1988 and when it purchased a majority interest in an

existing Chevrolet, Oldsmobile, Chrysler, Dodge, and Plymouth dealership. In September

1988, Taylor was awarded a new Chrysler franchise agreement, a new Plymouth

franchise agreement,6 and a new Dodge franchise agreement. PX162 (Chrysler,

Plymouth, and Dodge Agreements). In June 1998, Taylor was awarded a Jeep franchise

which was subject to the same terms as the Chrysler, Plymouth, and Dodge franchise

agreements. DX39 (Jeep Agreement).

The Chrysler, Dodge, and Jeep franchise agreements Taylor entered into with

Chrysler were virtually identical. Entitled “Sales and Service Agreements,” the franchise

agreements provided Taylor with the “right to order and purchase from [Chrysler] and to

sell at retail . . . those specific models of [Chrysler] vehicles . . . listed on the Motor

Vehicle Addendum[.]” PX162 (Chrysler and Dodge Agreements), DX39 (Jeep

Agreement). The Motor Vehicle Addendum (“MVA”) to Taylor’s Chrysler franchise

agreement allowed it to sell “[a]ll passenger cars of the Chrysler line-make.” PX162. The

6
Chrysler stopped producing Plymouth cars in 2001 and terminated all Plymouth franchises,
including the Taylor franchise, on September 30, 2001. Taylor, along with all other Plymouth
franchise holders, received a letter from Chrysler on September 19, 2000, a year before the
termination, informing them that the Plymouth line would end with the 2001 model year. In
these letters, Chrysler agreed, consistent with the terms of the Plymouth franchise agreements, to
buy back all new vehicles, parts, accessories, and signs from terminated Plymouth franchise
holders.
14
MVA to the Dodge franchise agreement allowed it to sell “[a]ll passenger cars of the

Dodge line-make” and “[a]ll trucks of the Dodge line-make.” PX162. The MVA for the

Jeep dealership allowed Taylor to sell “all trucks in the Jeep Line-make.” DX39.

In addition to allowing Taylor to sell the above-mentioned Chrysler vehicles, the

agreement also contained a “Sales Locality” provision which identified the “territory of

DEALER’s responsibility for the sale of [Chrysler, Dodge or Jeep] vehicles, vehicle parts

and accessories.” PX162; DX39. Taylor’s sales locality ranged from twenty-five to

seventy-five miles from its dealership depending on the direction and county boundaries.

In the same Sales and Service Agreement, Taylor agreed to build a facility in a specific

area meeting the requirements set forth by Chrysler for “new and used vehicle display

areas, salesrooms, service areas, parts and accessories areas, building exterior and

grounds [that would be] satisfactory to [Chrysler] as to appearance and layout, and [that

would] be maintained and used as set forth in the Dealership Facilities and Location

Addendum.” DX1424.

Taylor’s franchise agreements with Chrysler also required that it agree to “service

[Chrysler] vehicles actively and effectively and provide and maintain, for servicing

[Chrysler] vehicles, adequate facilities equipped with the basic tools common to the trade

and with special tools and equipment peculiar to [Chrysler] products and necessary for

servicing and repairing specified [Chrysler] vehicles proper, efficiently, and

competitively.” Id. As part of its service obligation to Chrysler, Taylor was further

required to “cause its service personnel to receive such training from time to time

required by [Chrysler] to maintain their technical expertise to render competent customer

service, including the use of improved methods of repair, or the repair of new parts or
15
systems, developed by [Chrysler].” Id. Furthermore, the franchise agreements required

Taylor to “at all times keep on hand . . . the number and assortment of [] parts that in

[Chrysler’s] judgment is necessary to meet the service requirements and to meet all of

[the] obligations” under the franchise agreement. Taylor’s franchise agreements also

required franchisees to “submit to [Chrysler], in such manner, in such form, and at such

times as [Chrysler] may reasonably request, complete and accurate reports of sales and

stocks of new and used vehicles on hand and other reports, including monthly financial

statements and operating reports.” Id. These reports were admitted into evidence as

exhibits PX181, PX187, PX188, PX189, PX182, PX184 for the years between 2004 and

2009 and included information on each of the following income streams: (1) new car

sales, (2) used car sales, (3) warranty service work, (4) customer pay service work, (5)

miscellaneous (body shop, finance and insurance, etc.).

Finally, each of Taylor’s franchise agreements identified standardized additional

terms regarding Chrysler and Taylor’s rights in the event of termination. Paragraph 28

describes the various ways in which Chrysler and a dealer can terminate the franchise:

(a) DEALER may terminate this Agreement on not less
than thirty (30) days written notice. (b) [Chrysler] may
terminate this Agreement on not less than (60) days
written notice for the following reasons: . . . failure of
DEALER to meet its minimum service satisfaction
requirements . . . failure of DEALER to perform fully any
of DEALER’s undertakings or obligations as set forth in
this Agreement . . . the conviction of DEALER . . . of any
crime . . . impairment of the reputation or financial
standing of DEALER . . . (c) Notwithstanding the
provision above this Agreement will terminate
automatically without notice from either party on: . . . (v)
the discontinuance by [Chrysler] of the production or

16
distribution of all [Chrysler] vehicles listed on the Motor
Vehicle Addendum[.]
DX1424.
Under the agreements, if Chrysler terminates a franchise pursuant to Paragraph 28,

Chrysler agreed

to buy and DEALER agrees to sell, free and clear of any liens
and encumbrances, within ninety (90) days after the effective
date of any termination under Paragraph 28: (a) All new,
unused and unsold specified [Chrysler] vehicles . . . (b) All
new, unused and undamaged [Chrysler] parts that are priced
and identified as eligible for return . . .(c) All new, unused
and undamaged [Chrysler] accessories or accessories
packages for the yearly model current at the effective date of
termination . . . (d) All signs of a type required by [Chrysler]
belonging to DEALER, showing the name ‘Chrysler
Corporation’ or one of the designated trade names applicable
only to [Chrysler] products or [Chrysler’s] affiliated
companies. . . (e) Special tools (in complete sets), of a type
recommended by [Chrysler], adapted only to the servicing of
[CHRYSLER] vehicles and purchased by DEALER during
the thirty-six (36) months immediately preceding the effective
date of termination at a price and under terms and conditions
to be agreed upon by [Chrysler] and DEALER.

Id.

Mr. Taylor and each of the other plaintiffs who testified explained that they

understood that, regardless of the above-cited termination provisions in the franchise

agreements, each of their franchise agreements were also subject to state laws precluding

the termination of dealerships under state law unless certain criteria were met.7

7
Idaho state law provides that “a manufacturer shall not cancel, terminate or fail to renew any
franchise agreement with a dealer unless the manufacturer has satisfied the notice requirement of
subsection (2) of this section and has good cause for cancellation, termination or nonrenewal.”
Idaho Code Ann. § 49-1614(1) (West 2009). Specifically, Idaho law provides that
“[n]otwithstanding the terms, provisions or conditions of any franchise agreement or of any
waiver, good cause shall exist for the purposes of termination, cancellation or nonrenewal when
there is a failure by the dealer to comply with a provision of the franchise agreement, where the
17
On May 13, 2009, after Chrysler had filed for bankruptcy on April 30, 2009,

Taylor received a letter from Chrysler stating that all three of its Chrysler franchise

agreements would be rejected in bankruptcy. The letter stated in full:

As you know, we are in the process of seeking
approval of the sale of our primary operating assets to a new
company. The unprecedented decline in the industry has had
a significant impact upon sales and requires the new company
to reduce production levels to better match ongoing demand.
With the downsizing of operations following the sale and
reduction of plants and production, similar reductions must be
made in the size of the dealer body.
With regret, this letter is to inform you that on May
14th, 2009, we are filing a motion in bankruptcy court
rejecting the Sales and Service Agreement(s) between
Chrysler Motors LLC and the dealership listed above. Upon
approval from the court, your agreement will be rejected on
or about June 9, 2009.
We intend to maintain “business as usual” with you
until the rejection takes place. We intend to honor warranty
and incentive payments, during the period that you remain an
active dealer subject to available financing. It is necessary to
work together to make this transition as seamless as possible
to your customers. After rejection, we want to work with you
to assist in the redistribution of new vehicles and parts to ease
the burden on you. Attached to this letter, please find further
details regarding the transition period. Your business center
will be in touch to offer assistance.
These are extraordinary times, and they call for
extraordinary efforts. It is with a sense of profound sadness

provision is both reasonable and of material significance to the franchise agreement relationship,
and provided that the dealer has been notified in writing of the failure within one hundred eighty
(180) days prior to termination, cancellation or nonrenewal. A protest may be filed in accordance
with the provision of section 49-1617, Idaho Code.” Idaho Code Ann. § 49-1614(4). However,
the Idaho Code provides that a franchise agreement cannot be terminated because its owner has a
franchise agreement with another automobile manufacturer. Idaho Code Ann. § 49-1614(5).
Furthermore, Idaho law provides that “[t]he manufacturer shall have the burden of proof under
this section concerning the issue of good cause, which shall include, but not be limited to,
termination, nonrenewal or cancellation of any franchise agreement by the manufacturer for
insolvency, license revocation, conviction of a felony, fraud by a dealer or failure by a dealer to
comply with a provision of the franchise agreement, where the provision is both reasonable and
of material significance to the franchise agreement relationship.” Idaho Code Ann. § 49-1614(6).

18
that we must take this step and reject some of our dealer Sales
and Service Agreement(s), but it’s a necessary step in the
process of pursuing and completing the sale of our assets to
the new company. We wish there was a better way, but there
isn’t.
We are grateful for the support you and your company
have provided Chrysler over the years and we wish you the
best under these circumstances.

PX178.

The justification for rejecting Taylor’s Chrysler franchises in bankruptcy were

explained by Peter Grady, Chrysler’s Director of Dealer Operations at the time of the

Chrysler bankruptcy. In his testimony, Mr. Grady explained that Chrysler examined

several criteria in selecting which franchisees to reject in bankruptcy. These criteria, he

further explained, grew out of an earlier voluntary effort by Chrysler to rationalize or

reduce its dealership network under a program called “Project Genesis.” Project Genesis,

which is discussed in greater detail later in the opinion, identified several criteria which

Chrysler employed in an effort to get all of its dealers to sell all Chrysler brands under

one roof and to ensure that each such dealer would have sufficient market share to

maximize profitability. The Project Genesis criteria were modified in the month leading

up to the Chrysler bankruptcy when the option of rejecting franchise agreements in

bankruptcy without regard to state law became more likely.

As discussed in more detail infra by the plaintiffs’ bankruptcy expert Judge

Fitzgerald and the government’s bankruptcy expert Judge Gerber, under the Bankruptcy

Code, executory contracts can be rejected in bankruptcy without regard to state law in

order to preserve estate assets. Judge Fitzgerald and Judge Gerber also explained that

rejecting a franchise agreement in bankruptcy is legally distinct from terminating a

19
franchise agreement. Rejection excuses the party filing for bankruptcy from having to

continue performance under the contract. To the extent the contracting party has a breach

of contract claim arising from the rejection of the agreement, the contracting party, here

the franchisee, has an unsecured claim in the bankruptcy.

According to Mr. Grady, Chrysler consulted with Fiat, the New Chrysler owner, to

determine which franchisees out of the total number of 3100 should have their franchise

agreements rejected in bankruptcy. Eventually Chrysler selected 789 franchisees for

rejection. In determining which 789 franchisees to reject in bankruptcy, Mr. Grady

testified that Chrysler examined the following: (1) whether the franchise was meeting its

Minimum Sale Responsibility (“MSR”)8, (2) the franchise’s Scorecard for Sales,9 Share,

Shipments, Warranty, etc., (3) whether the franchise facility had adequate capacity and

met Chrysler’s standards, (4) the franchise location, (5) the franchise’s financial strength,

(6) the franchise’s management, (7) whether the franchise had a “dual” or competitor’s

dealership under the same roof, and (8) whether it was a single point franchise, meaning

it did not have all three Chrysler brands under one roof. Tr.3598:8-3602:21.

8
Each franchise agreement required franchisees to meet MSR. Steven Landry, Chrysler’s
Executive Vice President of sales and marketing, explained that the MSR was calculated by
taking the number of new Chrysler vehicles registered in a state and comparing that number to
the number of total new vehicles registered in that state to determine the market share for
Chrysler vehicles in that location. Tr.3471:14-3472:19. An MSR was then set based on the
number of new vehicles the franchisee would need to sell for Chrysler to maintain its market
share. Id. Put another way, the MSR was used to determine if a dealership held the same market
share in its sales locality as Chrysler held either on the state or national level. Id.
9
Mr. Grady explained that each dealer received a scorecard which was “made up of a total of
1000 points, and the detail within the scorecard mainly focused on sales versus targets, market
share within the dealer’s geographic area, shipments versus targets, and then customer profile
targets,” customer satisfaction, and warranty work. Tr.3599:7-3600:2.
20
Mr. Grady explained that Taylor’s three franchises were rejected by Chrysler in

bankruptcy because together they had only met 36% of its MSR, sold less than 100 new

Chrysler vehicles the previous year, and were co-located under one roof with a Chevrolet

franchise. Tr.3809:23-3810:23; DX1315.

After Taylor received the May 13, 2009 letter informing it that all of its Chrysler

franchise agreements would be rejected, Taylor sold its remaining new Chrysler brand

vehicles either “a few thousand dollars over net . . .[but] for far less than [Taylor] paid

Chrysler to purchase them[,]” “for net cost, meaning that [Taylor] made no profit on them

despite housing and advertising the vehicles for months[,]” or by “trad[ing] [the]

remaining Chrysler new inventory, Chrysler for GM, with another dealer who had been

notified that his GM franchise would be terminated.” Tr.294:13-25. Regarding the

Chrysler parts Taylor had in stock, Taylor explained that the dealership “traded some

parts to the same terminated General Motors dealer, to the extent [it] could, and used

some of the parts on Chrysler vehicles that [it] continued to service. [Taylor] eventually

threw the remaining parts in the dumpster.” Tr.295:4-8. Finally, Taylor disposed of

Chrysler specialized tools and equipment in an auction “but could only earn pennies on

the dollar.” Tr.295:11-13.

In December 2009, eight months after Chrysler had filed for bankruptcy, Congress

enacted Section 747 of the Consolidated Appropriations Act of 2010, Pub. L. 111-117

(“Section 747”) to allow dealerships to seek a franchise with New Chrysler under an

arbitration program. If a dealer won in arbitration it would receive a customary and usual

letter of intent to enter into a franchise agreement with New Chrysler. Taylor elected not

to participate in the arbitration program “because there was nothing left and [Taylor]
21
would have had to buy something [it] previously owned, and it would have cost a lot of

money.” Tr.326:14-17.

Taylor’s 2010 financial statement for its Chevrolet franchise showed that Taylor

received a net income of $94,122 from that dealership. DX614. As noted, Taylor

continues to operate as a Chevrolet dealer to the present day. Tr.299:10-13.

Taylor claims that the rejection of its three Chrysler franchise agreements in the

Chrysler bankruptcy amounts to a taking because the government coerced Chrysler into

bankruptcy with a plan that included the rejection of its franchise agreements. Taylor

claims it is entitled to just compensation. Plaintiffs’ valuation expert Diane Anderson

Murphy,10 based on instructions she received from the Alley’s plaintiffs’ counsel,

provided valuation opinions for two dates: December 2008 and April 2009. During

closing argument, counsel for the Alley’s plaintiffs stated that April 30, 2009 was the date

of any “taking” by the government and that the compensation the Alley’s plaintiffs are

seeking is based on the value of their franchise, as determined by Ms. Murphy, on that

date. See Tr.5097:23-5098:14, Tr.5109:22-5110:5. In addition to Ms. Murphy’s valuation

10
As will be described in further detail infra, Ms. Murphy is a Director with the Valuation
Services Group of Moss Adams LLP. She is the coauthor of several versions of the National
Automobile Dealers Association’s dealership valuation guide and she has managed or staffed
well over 1,500 dealership appraisal projects.

22
opinions, plaintiffs relied on the opinion testimony of the plaintiffs’ three other experts:

David Berliner,11 Judge Judith Fitzgerald,12 and Maryann Keller.13

As discussed in greater detail infra, Ms. Murphy opined that the economic loss

Taylor sustained from the rejection of its franchise agreements on either date of taking

she examined is equal to Taylor’s entire Chrysler dealership as an ongoing business.

According to Ms. Murphy, although the franchise agreement is an intangible asset, its

value is equal to all the net income generated by the dealership as well as the physical

assets associated with those income streams. Thus, in valuing the franchise agreements

on the dates selected, she considered the income streams from not only new car sales and

warranty work, which are expressly derived from Chrysler’s obligations under the

franchise agreements, but also the net income from used car sales and non-warranty

service work.

11
As will be described in further detail infra, Mr. Berliner is the partner in charge of BDO’s
Business Restructuring Services Group with advisory and consulting experience in the areas of
business restructuring, reorganizations, Section 363 sales, and debtor-in-possession financing.
He has worked on bankruptcy cases involving the liquidation of large corporations such as
Sports Authority Holdings, Malibu Lighting Corporation, Furniture Brands International,
American Home Mortgage, and Pillowtex Corporation.
12
As will be described in further detail infra, Judge Fitzgerald is a former United States
Bankruptcy Judge who sat in the Western District of Pennsylvania for over twenty-five years, the
District of Delaware for twenty years, the Eastern District of Pennsylvania for eight years and in
the District of the United States Virgin Islands for nine years. During her tenure as a Bankruptcy
Judge she presided over hundreds of Chapter 11 bankruptcies, including cases that involved the
assumption or rejection of executory contracts such as franchise agreements and licenses.
13
As will be described in further detail infra, Ms. Keller is the Principle at Maryann Keller &
Associates who provides automotive-related advisory services to companies, investors, and
professional firms. She has advised clients on issues across the automotive supply chain, from
component companies to retail sales.
23
In valuing Taylor’s franchise, Ms. Murphy also made several assumptions

regarding the fate of Chrysler in a “but for world” without government financial

assistance. Ms. Murphy assumed that all of Chrysler’s assets would have been sold in

bankruptcy to a third party. She also assumed that the new Chrysler would either (1)

continue indefinitely to produce all of Chrysler’s product lines or (2) continue

indefinitely with production of only the Chrysler trucks. She assumed production under

either scenario would not have been interrupted during the bankruptcy and that the

franchisees would have continued to receive new cars and/or trucks to sell without

significant interruption. Ms. Murphy further assumed that Taylor (and all the other

Alley’s plaintiff franchiseeships she valued) would have had their franchise agreements

assumed by any new Chrysler owner and thus would have been able to continue as

Chrysler franchisees without interruption. Ms. Murphy further testified that the terms of

the franchise agreements assumed by Chrysler’s new owner would not be altered by the

new owner. Finally, she assumed that the economy on both dates was recovering and

would grow at a healthy rate.14

Ms. Murphy based her valuations for Taylor on financial statements Taylor

submitted to Chrysler for 2004, 2005, 2006, 2007, 2008, and from January to May 2009.

PX181, PX187, PX188, PX189, PX182, PX184. These financial statements reported

income on Taylor’s three major income streams: new car sales, used car sales, and fixed

services (warranty service, customer pay service, and parts). In addition, for plaintiffs,

14
Much of Ms. Murphy’s testimony was devoted to explaining the local economy of each of the
Alley’s plaintiffs’ market and how those economic conditions were improving during the early
portion of 2009.
24
like Taylor, with franchise agreements with another automobile manufacturer, Ms.

Murphy applied a “used to new formula” to determine the proportion of new car sales,

used car sales, service, and parts that should be attributed to only to the Chrysler

franchise. Based on this “used to new formula,” Ms. Murphy calculated that Taylor’s

Chrysler franchises gave Taylor a net income of $117,514 in 2004, $75,901 in 2005,

$89,634 in 2006, $103,287 in 2007, $83,555 in 2008, and $24,200 from January to May

2009. See PX244.1B.

Using the above-cited income amounts and the assumptions she made about

Chrysler and the economy, Ms. Murphy opined that the value of Taylor’s franchise

agreements, in a “but for world” without government assistance, would have been worth:

(1) $686,000 where Chrysler enters bankruptcy but continues to produce cars and trucks

or (2) $558,000 for where Chrysler enters bankruptcy but continues to produce only

trucks. Tr.1406:6-7.

B. Cedric Theel Inc.

Cedric Theel testified on behalf of the Cedric Theel Inc. (“Theel”) dealership

which for the years at issue was located at 3955 Trenton Drive Bismarck, North Dakota.

Theel was incorporated under the laws of North Dakota. The dealership included a Dodge

franchise at the time of the alleged taking. Theel also had a Toyota franchise at the time

of the alleged taking.

Theel was incorporated in 1983 and in 1985 Theel purchased a Dodge dealership

in Bismarck, North Dakota. Tr.408:4-24. The Dodge franchise agreement that was

eventually rejected in bankruptcy was awarded to Theel on February 1, 2000. In 1990

25
Theel obtained the right to sell Mitsubishi. Tr.409:14-15. In 1992 Mr. Theel and his wife

purchased the Toyota and Hyundai dealership that was next door to the Theel Dodge

dealership and placed ownership of that dealership under a new company, Cedric Theel

Ltd. In 1995, the Dodge and Toyota dealerships were consolidated under one roof and

under the ownership of Theel. Tr.408:4-409:21.

The Dodge franchise agreement that Theel entered into in February 2000 is

identical in form and substance to the Dodge franchise agreement described and quoted

in the preceding section describing the Taylor franchise agreements and is not repeated

here. See PX191 (Dodge Agreement). Mr. Theel explained that he understood regardless

of the above-quoted termination provisions in his franchise agreement that his Dodge

franchise agreement was also subject to state law protection. 15 Tr.417:7-13.

On May 13, 2009, Theel received a letter from Chrysler stating that its Dodge

franchise agreement would be rejected in bankruptcy. The letter is identical to that

received by Taylor and the other representative plaintiffs in this case. DX449. Mr. Grady,

Director of Dealer Operations, explained that Theel’s Dodge franchise agreement was

rejected by Chrysler in bankruptcy because Theel’s MSR was only 70%, it was a single

Dodge franchise dealer, and it had a dual dealership with Toyota. Tr.3801:4-3803:14;

DX1315.

15
North Dakota law provides that a manufacturer may not “[a]ttempt or threaten to terminate,
cancel, or fail to renew or substantially change the competitive circumstances of the dealership
contracts for any reason other than failure of the automobile or truck retailer to comply with the
terms of the contract between the parties, if the attempt or threat is based on the results of a
circumstance beyond the retailer’s control, including a natural disaster in the dealership market
area or a labor dispute.” N.D. Cent. Code Ann. § 51-07-02.3(5) (West 2009).
26
After Theel received the May 13, 2009 letter informing it that its Dodge franchise

agreement would be rejected, Theel had “about 60 new Dodge vehicles on hand at the

time.” Tr.421:15. Theel sold “most of the new Dodge cars to customers at fire sale prices

. . . [and] [s]ome [other dealers] bought the remainder of [its] new Dodge inventory” all

at a loss. Tr.421:22-24. Theel also had “approximately $200,000 in Dodge parts” which it

sold “to a warehouse for 25 to 75 percent less than what [it] paid for them.” Tr.422:2-6.

Additionally, Theel “tried to convert [the] servicing area for Toyota servicing, but a lot of

the equipment was not suited for Toyotas, including all of the diesel engine service

equipment, which was for Dodge vehicles only.” Tr.422:20-23. Theel also sold a $30,000

sign that it had purchased shortly before its Dodge franchise was rejected to another

Chrysler dealer for only $16,000. Tr.423:10-13. Mr. Theel testified that he elected not to

participate in the Section 747 arbitration process because he never got an answer as to

why his Dodge franchise was terminated. Tr.452:4-8. Theel’s 2010 financial statement

for its Toyota franchise showed that Theel earned a net income of $606,447 from that

dealership. DX621. Theel’s 2011 financial statement shows that its Toyota dealership

earned a net income of $674,499. DX653. Theel continues to operate as a Toyota dealer

to the present day.

Theel claims that the rejection of its Dodge franchise agreement in the Chrysler

bankruptcy amounts to a taking and, for the same reasons as relied on by Taylor, seeks

just compensation. As with Taylor, Theel relies on Ms. Murphy to establish the value of

the franchise agreement at the time of the alleged taking. After reviewing Theel’s 2004,

2005, 2006, 2007, 2008 and January to May 2009 financial statements, DX77, DX107,

DX139, DX197, DX312, Ms. Murphy calculated that Theel’s Dodge franchise agreement
27
generated a net income of $130,323 in 2004, $175,006 in 2005, $97,377 in 2006,

$142,333 in 2007, and $69,279 in 2008. See PX244.1E.

Using these values and her assumptions, Ms. Murphy calculated the amount of just

compensation Theel is seeking for the claimed taking of its Dodge franchise agreement.

Under Ms. Murphy’s income valuation approach, the amount of just compensation Theel

is seeking for the claimed taking of the franchise agreement on April 30, 2009 is either

(1) $709,000 where Chrysler enters bankruptcy but continues to produce cars and trucks

or (2) $621,000 for where Chrysler enters bankruptcy but continues to produce only

trucks. Tr.1406:12-13.

C. Mansfield Motor Group/Whitey’s Auto Group

Dirk Schluter testified on behalf of Mansfield Motor Group, d/b/a Whitey’s Auto

Group (“Whitey’s”) which for the years at issue was located at 1493 Park Avenue West,

Mansfield, Ohio. Whitey’s was incorporated under the laws of Ohio. The dealership

included a Chrysler franchise at the time of the alleged taking. Tr.817:12-13. Whitey’s

also had a Lincoln-Mercury franchise under the same roof as the Chrysler franchise at the

time of the alleged taking. Whitey’s was incorporated in 1947 and received its first

Chrysler franchise agreement in the mid-1960s. Tr.818:14-17, 819:16-18.

In August 2001, Whitey’s was awarded a new Chrysler agreement when Mr.

Schluter and his brother became the new owners of Whitey’s. Tr.820:5-15. The 2001

franchise agreement is the agreement that was rejected in the Chrysler bankruptcy. The

Chrysler franchise agreement that Whitey’s entered into in August 2001 is identical in

form and substance to the Chrysler franchise agreement described in the preceding

section regarding Taylor & Sons. PX224. Mr. Schluter explained that he understood that
28
regardless of the above-cited termination provisions that his franchise agreement was also

subject to state laws precluding the termination of franchise agreements under state law.16

Tr.824:15-21.

On May 13, 2009 Whitey’s received a letter from Chrysler stating that its Chrysler

franchise agreement would be rejected in bankruptcy. The letter is identical to the ones

received by other representative plaintiffs in this case. PX239. Mr. Grady, Director of

Dealer Operations, explained that Whitey’s Chrysler franchise was rejected by Chrysler

in bankruptcy because it only met 45% of its MSR, was a dual dealership with a Lincoln

franchise, and was only a single Chrysler franchise dealer. Tr.3806:21-3803:13; DX1315.

After Whitey’s received the May 13, 2009, it was able to “place[] [its] [new]

inventory with another dealer, [although it] lost money on the vehicles.” Tr.831:15-17.

Whitey’s also lost money on its “inventory of used Chrysler vehicles because [it] could

no longer sell them with a certified status of used cars and with the manufacturer

16
Ohio law provides that “no franchisor shall terminate or fail to continue or renew a franchise
except for good cause.” Ohio Rev. Code Ann. § 4517.54(A) (West 2009). Ohio law also provides
that “[i]n determining whether good cause has been established by the franchisor for terminating
or failing to continue to renew a franchise, the motor vehicle dealers board shall take into
consideration the existing circumstances, including, but not limited to: (1) The amount of retail
sales transacted by the franchisee during a five-year period immediately preceding such notice as
compared to the business available to the franchisee; (2) the investment necessarily made and
obligations incurred by the franchisee to perform its part of the franchise; (3) the permanency of
the franchisee’s investment; . . . (7) the extent and materiality of the franchisee’s failure to
comply with the terms of the franchise and the reasonableness and fairness of the franchise terms
. . . .” Ohio Rev. Code Ann. § 4517.55(A) (West 2009). Ohio law also specified that
“[n]otwithstanding the terms, conditions, or provisions of any franchise or waiver, the following
do not constitute good cause for terminating or failing to continue or renew a franchise: (1)
Refusal by the franchisee to purchase or accept delivery of any new motor vehicle, parts,
accessories, or any other commodity or service not ordered by the franchisee; (2) The fact that
the franchisee or the owner of any interest therein, owns, has an investment in, participates in the
management of, or holds a license for the sale of the same or any other line-make of new motor
vehicle; . . . (5) Failure of the franchisee to achieve any unreasonable or discriminatory
performance criteria.” Ohio Rev. Code Ann. § 4517.55(B) (West 2009).
29
warranty,” and sold them often at a loss. Tr.831:18-22. Whitey’s lost money on the

inventory of Chrysler-specific parts although it was able to use some of the parts in

customer-pay service. Tr.832:14-18. Whitey’s also “threw out the remaining Chrysler

signage, as well as the Chrysler brochures and other advertising material.” Tr.832:20-23.

Whitey’s filed a request for arbitration and received $10,000 in settlement from New

Chrysler. Tr.833:15-21.

In August of 2008 Whitey’s acquired franchise agreements to sell Volvo and

Mercedes-Benz vehicles. Whitey’s financial statement for its Lincoln, Volvo, and

Mercedes-Benz franchises showed that Whitey’s earned a net income of $157,562 in

2010, the first full year without the Chrysler franchise. Tr.891:17-19; DX1493.

Whitey’s claims that the rejection of its Chrysler franchise agreement in the

Chrysler bankruptcy amounts to a taking for the same reasons as relied on for plaintiffs

Taylor and Theel. Whitey’s relies on Ms. Murphy for the valuation of the franchise

agreement. Ms. Murphy, after reviewing Whitey’s 2005, 2006, 2007, 2008, and January

to May 2009 financial statements, PX223, PX233, calculated that Whitey’s Dodge

franchise agreement resulted in a net income of $195,853 in 2004, $127,940 in 2005,

$159,309 in 2006, $120,535 in 2007, $61,415 in 2008 and $30,292 between January and

May 2009. PX244.1D.

Using these values and her assumptions, Ms. Murphy calculated the amount of just

compensation Whitey’s is seeking for the claimed taking of the franchise agreement.

Under Ms. Murphy’s income valuation approach, the amount of just compensation

Whitey’s is seeking for the April 30, 2009 taking date is either (1) $524,000 where

30
Chrysler enters bankruptcy but continues to produce cars and trucks, or (2) $292,000 for

where Chrysler enters bankruptcy but continues to produce trucks. Tr.1406:10-11.

D. RFJS Company, LLC
Robert L. Frederick II and John Scotford Jr. testified on behalf of RFJS Company,

LLC (“RFJS”), which for the years at issue was located at 7871 Market Street Boardman,

Ohio. RFJS was incorporated under Ohio state law. Tr.967:13. The dealership at the time

of the rejection of the franchise agreements included Chrysler, Dodge, and Jeep

franchises. Tr.972:14-15. RFJS did not have any franchise agreements with other auto

manufacturers at that time. RFJS was formed in 2006. Mr. Fredrick contributed the

Dodge franchise agreement that he owned to RFJS and Mr. Scotford contributed the cash

that was used to purchase a Chrysler/Jeep dealership. Tr.966:34-967:8. The Dodge

franchise agreement that Mr. Fredrick contributed was awarded to RFJS in October 2006.

DX130. This Dodge franchise agreement was identical in form and substance to the

franchise agreements described above.

RFJS’s Chrysler and Jeep franchise agreements, however, were different from

those described above. RFJS’s “Sales and Service Agreement[s]” contained different

terms. DX131; DX132. Instead of having an indefinite franchise agreement that could

only be terminated upon specified events, RFJS’s Chrysler and Jeep franchise agreements

provided that they only continued “in effect until the expiration of 24 months after the

execution date at which time this Term Agreement will terminate automatically without

notice to or by either party.” Id. The agreements went on to state that “[i]f this Term

Agreement is not terminated as provided herein or in Paragraph 28 of said Terms and

Provisions, and thus continue in effect for the period set forth in the immediately

31
forgoing Paragraph, [Chrysler], at the expiration of such period, will enter into the

Standard Chrysler Corporation Sales and Service Agreement current at the date of said

expiration, for such specified [Chrysler] vehicles with DEALER, provided that DEALER

has fulfilled each and every condition set forth in [the Agreement].” Id. RFJS received its

Term Sales and Service Agreements for its Chrysler and Jeep franchises on October 27,

2006. Id. As part of the term franchise agreements RFJS had to build a satisfactory

dealership facility at 7870 Market Street, Boardman, Ohio within twelve months of the

execution of the Chrysler and Jeep franchise agreements. Id.

As of October 2007, RFJS had not met its obligation to build a facility at 7871

Market Street to Chrysler’s standards. On May 20, 2008, RFJS got a one-year extension

of its Chrysler and Jeep franchise agreements in order to complete the construction of a

facility at 7871 Market Street. DX253.

Mr. Fredrick and Mr. Scotford testified that they understood that, despite the

above-cited termination provisions, their Chrysler, Dodge, and Jeep franchise agreements

were subject to state laws and could not be terminated or not renewed unless certain

criteria were met.17

17
Ohio law provides that “no franchisor shall terminate or fail to continue or renew a franchise
except for good cause.” Ohio Rev. Code Ann. § 4517.54(A) (West 2009). Ohio law also provides
that “[i]n determining whether good cause has been established by the franchisor for terminating
or failing to continue to renew a franchise, the motor vehicle dealers board shall take into
consideration the existing circumstances, including, but not limited to: (1) The amount of retail
sales transacted by the franchisee during a five-year period immediately preceding such notice as
compared to the business available to the franchisee; (2) the investment necessarily made and
obligations incurred by the franchisee to perform this part of the franchise; (3) the permanency of
the franchisee’s investment; . . . (7) the extent and materiality of the franchisee’s failure to
comply with the terms of the franchise and the reasonableness and fairness of the franchise terms
. . . .” Ohio Rev. Code Ann. § 4517.55(A) (West 2009). Ohio law also specified that
“[n]otwithstanding the terms, conditions, or provisions of any franchise or waiver, the following
do not constitute good cause for terminating or failing to continue or renew a franchise: (1)
32
On May 13, 2009, RFJS received a letter from Chrysler stating that its Chrysler,

Dodge, and Jeep franchise agreements would be rejected in bankruptcy. The letter is

identical to that received by the other representative plaintiffs in this case. Tr.970:17-19.

Mr. Grady, Director of Dealer Operations, explained that RFJS’s Chrysler, Dodge, and

Jeep franchise agreements were rejected by Chrysler in bankruptcy because RFJS

dealership was an excess point, i.e. a location that Chrysler determined was no longer

valuable and because the dealership was operating at a loss and had been placed on a

finance hold by Chrysler Financial.18 DX1315.

After RFJS received the May 13, 2009 letter informing it that its Chrysler, Dodge,

and Jeep franchise agreements would be rejected, “all of [its] new cars either ended up

being retailed or wholesaled to other dealers [it] had good relationships with,” but “that

really didn’t help[.]” Tr.972: 7-10. RFJS “made the best deal [it could for] parts. [Its]

tools and equipment were sold at an auction,” but it got “virtually nothing.” Tr.972:20-

Refusal by the franchisee to purchase or accept delivery of any new motor vehicle, parts,
accessories, or any other commodity or service not ordered by the franchisee; (2) The fact that
the franchisee or the owner of any interest therein, owns, has an investment in, participates in the
management of, or holds a license for the sale of the same or any other line-make of new motor
vehicle; . . . (5) Failure of the franchisee to achieve any unreasonable or discriminatory
performance criteria.” Ohio Rev. Code Ann. § 4517.55(B) (West 2009).
18
Leland Wilson, the Chief Financial Officer of Chrysler Financial between 2007 and 2010,
explained the significance of a dealer being placed on a financial hold and not being able to
obtain floor plan financing to finance their purchase of new and used cars. He explained that
floor plan financing involved dealers “order[ing] cars through Chrysler, Chrysler would ship
those cars to the dealers. Each of those dealers that [Chrysler Financial] financed would have a
dealer . . . credit line” that would be used to finance the purchase. Tr.3855:9-11. He went on to
explain that “the first lien collateral [for the loan] was the vehicle” and that when the car was
sold the proceeds were used to pay off the loan the dealer incurred to purchase the car and
allowed the dealer to continue purchasing new vehicles. Tr.3855:17-23. RFJS was one of the
Chrysler franchisees that relied on Chrysler Financial for floor plan financing. “Financial hold”
meant that Chrysler Financial was no longer willing to extend floor plan financing to RFJS and
thus it could not obtain new inventory through its Chrysler Financial credit line. Tr.3806:3-8.
33
25. Ultimately, RFJS “shut down the dealership” and “did not consider staying open as a

service and used car dealership because [its] business ran on the new car franchise.”

Tr.973:1-11. After its Chrysler, Dodge, and Jeep franchise agreements were rejected,

RFJS pursued arbitration under Section 747 and settled with New Chrysler for $200,000.

Tr.1029:13-25. Because RFJS did not continue as either a new car dealership or used car

and service dealership there are no financial statements for RFJS past June 2009.

RFJS claims that the rejection of its Chrysler, Dodge, and Jeep franchise

agreements in the Chrysler bankruptcy amounts to a taking of its franchises for the same

reasons relied on by Taylor, Theel, and Whitey’s. RFJS relies on Ms. Murphy’s valuation

as the basis for the just compensation it is seeking. Ms. Murphy, after reviewing RFJS’s

2006, 2007, 2008, and January to May 2009 financial statements, PX153, calculated that

RFJS’s Chrysler, Dodge, and Jeep franchise agreements resulted in a net income of

$104,940 in 2006, $331,375 in 2007, lost $45,125 in 2008, and earned $24,065 from

January to May 2009. PX244.1F.

Using these values and her assumptions, Ms. Murphy calculated the amount of just

compensation RFJS is seeking for the claimed taking of the franchise agreements. Under

Ms. Murphy’s income valuation approach, the amount of just compensation RFJS seeks

for the claimed taking for the April 30, 2009 date is (1) $1,766,000 where Chrysler enters

bankruptcy but continues to produce cars and trucks, or (2) $1,329,000 for where

Chrysler enters bankruptcy but continues to produce only trucks. Tr.1406:14-15.

E. Jim Marsh American Corporation
Jim Marsh testified on behalf of Jim Marsh American Corporation (“Marsh”)

which for the years at issue was located 8555 West Centennial Parkway, Las Vegas,

34
Nevada. Tr.367:7. Marsh is incorporated under the laws of Nevada. The dealership

included a Chrysler and Jeep franchise at the time of the alleged taking. In early 2009,

Marsh purchased a Kia, Suzuki, and Mitsubishi dealership. Tr.379:9-12. The Suzuki

dealership closed in 2014 when Suzuki filed for bankruptcy and Marsh sold the

Mitsubishi dealership in 2017. Tr.378:23-25. Marsh still operates a Kia dealership. The

Chrysler and Jeep franchise agreements that were rejected by Chrysler in the Chrysler

bankruptcy were awarded to Marsh on December 21, 2000. Tr.367:21-25. Prior to

receiving these franchise agreements, Marsh had other Chrysler and Jeep franchise

agreements dating back to 1995 and 1971. Tr.366:17-367:20. Marsh’s 2000 Chrysler and

Jeep franchise agreements were identical in form and substance to those of the other

representative plaintiffs in this case. DX44.

Mr. Marsh explained that he knew that state laws protected his franchise

agreements from unjust termination and testified that throughout his several decades of

experience as a new vehicle franchise owner he had never heard of an involuntary

termination of a franchise agreement other than when an owner was convicted of a felony

or some form of fraud.19 Tr.369:21-370:2.

19
Nevada state laws provide that “[n]otwithstanding the terms of the franchise, a manufacturer
or distributor shall not terminate or refuse to continue any franchise unless it has received the
written consent of the dealer or: (a) It has given written notice of its intention to the dealer and
the Director; and (b) Either the following conditions occurs: (1) The dealer does not file a protect
with the Director within the time allowed by this section; or (2) After the dealer has filed a
protest and the Director has conducted a hearing on the matter, the Director issues an order
authorizing the manufacturer or distributor to terminate the franchise or permit it to lapse.” Nev.
Rev. Stat. Ann. § 482.36352(1) (West 2009). Furthermore, Nevada state law states that “[i]n
determining whether good cause has been established for permitting a manufacturer or
distributor to terminate, refuse to continue, modify or replace a franchise, the Director shall
consider without limitation: (1) The amount of business transacted by the dealer, as compared to
the business available to the dealer . . . (2) The investment necessarily made and obligations
incurred by the dealer to perform its part of the franchise . . . (6) The extent of the dealer’s
35
On May 13, 2009, Marsh received a letter from Chrysler stating that its Chrysler

and Jeep franchise agreements would be rejected in bankruptcy. The letter is identical to

that received by the other representative plaintiffs in this case. PX147. Mr. Grady,

Director of Dealer Operations, explained that Marsh’s Chrysler and Jeep franchise

agreements were rejected by Chrysler in bankruptcy because Marsh had only met 38% of

its MSR, it lacked a Dodge franchise agreement, and because Chrysler wanted a third-

party candidate to run a Chrysler, Dodge, and Jeep dealership in a different part of Las

Vegas. DX1315.

After Marsh received the May 13, 2009 letter informing it that its Chrysler and

Jeep franchise agreements would be rejected, it had to “liquidate [its] inventory of new

cars, leaving [it] with an inventory of Chrysler-specific tools that [it[ could no longer use

for warranty service and which [it] could no long use to access the manufacturer’s

computer to perform new car service.” Tr.373:8-12. Also, Marsh “obtained most of [its]

used car inventory from trade-ins associated with the purchase of new cars [and] [l]osing

new car sales meant [it] had fewer used cars to sell.” Tr.373:13-16. Marsh also “lost the

after-sale income and the after-market warranties and service contracts that [it] could no

longer sell in connection with the sale of Chrysler-Jeep projects.” Tr.373:16-19. Marsh

participated in the Section 747 arbitration process and won a letter of intent from New

Chrysler. In January 2017, Marsh opened a new Chrysler-Jeep dealership but was

required to spend significant amounts of money to open this new dealership. Tr.374:11-

18.

failure, if any, to comply with the terms of the franchise.” Nev. Rev. Stat. Ann. § 482.36355
(West 2009).
36
Marsh claims that the rejection of its Chrysler and Jeep franchise agreements in

the Chrysler bankruptcy amounts to a taking for the same reasons relied on by plaintiffs

Taylor, Theel, Whitey, and RFJS. Marsh relies on Ms. Murphy's valuations of his

franchise agreements to support a claim for just compensation. Ms. Murphy, relying on

the same income streams and same calculation methods as described above, and after

reviewing Marsh’s 2004, 2005 2006, 2007, 2008, and January to May 2009 financial

statements, PX145, calculated that Marsh’s Chrysler and Jeep franchise agreements

resulted in a net income of $860,020 in 2004, $1,032,818 in 2005, $1,396,370 in 2006,

$932,272 in 2007, $816,019 in 2008, and earned $746,431 from January to May 2009.

PX244.1G.

Using these values and her assumptions, Ms. Murphy calculated the amount of just

compensation Marsh is seeking for the claimed taking of the franchise agreement. Under

Ms. Murphy’s income valuation approach, the amount of just compensation Marsh seeks

for the claimed taking of the franchise agreement for the April 30, 2009 date is (1)

$8,972,000 where Chrysler enters bankruptcy but continues to produce cars and trucks or

(2) $7,037,000 for where Chrysler enters bankruptcy but continues to produce only

trucks. Tr.1406:14-15.

F. Livonia Chrysler-Jeep

Collen and David MacDonald testified on behalf of Livonia Chrysler-Jeep

(“Livonia”) which for the years at issue was located at 30777 Plymouth Road, Livonia,

Michigan. Livonia is incorporated under the laws of Michigan. The dealership included a

Chrysler and Jeep franchise at the time of the alleged taking. Tr.1290:5-9.

37
The Chrysler and Jeep franchise agreements that were rejected in the Chrysler

bankruptcy were awarded to Livonia on April 24, 1998. These Chrysler and Jeep

franchise agreements were identical in form and substance to the franchise agreements

that the other representative plaintiffs had with Chrysler. PX136. Both Mr. and Mrs.

MacDonald explained that they understood that, regardless of the termination terms in

those agreements, the agreements could only be terminated consistent with the franchise

laws in Michigan.20 Tr.1293:5-14.

On May 13, 2009, Livonia received a letter from Chrysler stating that its Chrysler

and Jeep franchise agreements would be rejected in bankruptcy. The letter is identical to

that received by the other representative plaintiffs in this case. PX139. Mr. Grady,

Director of Dealer Operations, testified that Livonia’s Chrysler and Jeep franchise

agreements were rejected by Chrysler in bankruptcy because Chrysler did not like the

location of the dealership and thought that it would be more profitable to move the

Chrysler and Jeep franchises to a Dodge dealership a few miles away. DX1315.

After it received the May 13, 2009 letter informing it that its Chrysler and Jeep

franchise agreements would be rejected, Livonia had to “sell [its] parts inventory and new

car inventory at a substantial loss.” Tr.1295:21-23. Additionally, Livonia was unable to

get out of contracts, such as an advertising contract, and “had to continue to pay them,

though [it] no longer needed their services.” Tr.1295:23-1296:1. Livonia participated in

20
Michigan law provides that an automobile manufacturer can only terminate or not renew a
franchise agreement if they have acted in good faith and have good cause. Mich. Comp. Laws
Ann. § 445.1567. Michigan law provided that the following alone did not constitute good cause
for termination: a change in ownership of the dealership, refusal of the dealership to purchase or
accept delivery of any automobile parts; or if the owner of the dealership has a franchise with
another auto manufacturer. Mich. Comp. Laws Ann. § 445.1568.
38
the Section 747 arbitration process and was ultimately awarded a letter of intent from

New Chrysler and has since signed new Chrysler and Jeep franchise agreements with

New Chrysler. Tr.1362:5-25.

Livonia claims that the rejection of its Chrysler and Jeep franchise agreements in

the Chrysler bankruptcy amounts to a taking for the same reasons relied on by the other

Alley’s plaintiffs. Livonia relies on Ms. Murphy’s valuation to support the amount of just

compensation seeks. Ms. Murphy, relying on the same income streams and same

calculation methods as described above, and after reviewing Livonia’s 2006, 2007, 2008,

and January to May 2009 financial statements, calculated that Livonia’s Chrysler and

Jeep franchise agreements resulted in a net income of $659,903 in 2006, $595,052 in

2007, $718,631 in 2008, and $130,224 from January to May 2009. PX244.1A.

Using these values and her assumptions, Ms. Murphy calculated the amount of just

compensation Livonia is seeking for the claimed taking of the franchise agreement.

Under Ms. Murphy’s income valuation approach, the amount of just compensation

Livonia is seeking for the claimed taking of the franchise agreement on the April 30,

2009 taking date is (1) $4,464,000 where Chrysler enters bankruptcy but continues to

produce cars and trucks or (2) $3,705,000 for where Chrysler enters bankruptcy but

continues to produce only trucks. Tr.1406:4-5.

G. Barry Dodge Inc.
Andrew Riexinger testified on behalf of Barry Dodge Inc. (“Barry”), which for the

years at issue was located at 4579 South Main Street, Brockport, New York. Barry was

incorporated under the laws of New York. Barry’s dealership included Chrysler, Dodge,

and Jeep franchises at the time of the alleged taking.

39
The Chrysler and Dodge franchise agreements that were rejected in the Chrysler

bankruptcy were awarded to Barry on August 9, 1993. The Jeep franchise agreement that

was rejected in the Chrysler bankruptcy was awarded to Barry on December 19, 1997.

Barry’s Chrysler, Dodge, and Jeep franchise agreements are identical in form and

substance to the other franchise agreements owned by the other representative plaintiffs.

PX2. Mr. Riexinger also testified that he understood that, regardless of the termination

provisions in these franchise agreements, state law precluded the termination of

dealerships for unjust reasons.21 Tr.1218:23-1219:1.

On May 13, 2009, Barry received a letter from Chrysler stating that its Chrysler,

Dodge, and Jeep franchise agreements would be rejected in bankruptcy. The letter is

identical to that received by the other representative plaintiffs in this case. PX4. Mr.

Grady, Director of Dealer Operations, explained that Barry’s Chrysler, Dodge, and Jeep

franchise agreements were rejected by Chrysler in bankruptcy because it only met 42% of

its MSR and because it was considered an excess point because Chrysler wanted to

reduce the number of dealers in the Brockport area. DX1315.

After Barry received the May 13, 2009 letter informing it that its franchise

agreements would be rejected it had to “salvage what money [it] could from [its] existing

inventory.” Tr.1220:14-16. Barry “sold [its] inventory of vehicles to other [dealers] and

21
New York state law provides that a franchisor cannot terminate or refuse to renew a franchise
“except for due cause, regardless of the terms of the franchise.” N.Y. Vehicle and Traffic Law §
463.2(d)(1). New York state law specifies that “[i]f the termination is based upon performance of
the dealer in sales and services there shall be no due cause if the dealer substantially complies
with the reasonable performance provisions of the franchise during such cure period and no due
cause if the failure to demonstrate such substantial compliance was due to factors which were
beyond the control of such dealer.” N.Y. Vehicle and Traffic Law § 463.2(e)(3).
40
parts to one of [its] former competitors . . . for 50 grand.” Tr.1220:16-18. Barry also “sold

some of [its] specialized tools to former competitors, which [it] could no longer use since

[it] no longer provided warranty services for new vehicles.” Tr.1220:18-21. Barry

continued to operate under the name “Barry’s Auto Center” as a used car dealership that

also sells campers and cargo trailers. Tr.1221:7, Tr.1221:16-17. Barry’s 2010 financial

statement for its used car dealership showed that it earned a net income of $239,417.

DX618. Barry chose not to file for arbitration under Section 747. Tr.1269:13-16.

Barry claims that the rejection of its Chrysler, Dodge, and Jeep franchise

agreements amounts to a taking for the same reasons as relied on by the other Alley’s

plaintiffs. Barry relies on Ms. Murphy’s valuations to support the amount of just

compensation it seeks. Ms. Murphy, relying on the same income streams and same

calculation methods as described above, and after reviewing Barry’s 2004, 2005, 2006,

2007, 2008, and January to May 2009 financial statements, calculated that Barry’s

Chrysler, Dodge, and Jeep franchise agreements resulted in a net income of $172,181 in

2004, $68,367 in 2005, $55,878 in 2006, $186,534 in 2007, $163,704 in 2008, and earned

$124,052 from January to May 2009. PX244.1C.

Using these values and her assumptions, Ms. Murphy calculated the amount of just

compensation Barry is seeking for the claimed taking of the franchise agreement. Under

Ms. Murphy’s income valuation approach, the amount of just compensation Barry is

seeking for the April 30, 2009 taking date is (1) $1,124,000 where Chrysler enters

bankruptcy but continues to produce cars and trucks, or (2) $859,000 for where Chrysler

enters bankruptcy but continues to produce trucks. Tr.1406:8-9.

41
H. Guetterman Motors

Jack Guetterman testified on behalf of Guetterman Motors (“Guetterman”), one of

the two representative Colonial plaintiffs, which for the years at issue was located at

2210 Sycamore Street, Cairo, Illinois. Guetterman was incorporated under the laws of

Illinois. Guetterman’s dealership included Chrysler, Dodge and Jeep franchises as well as

a Ford franchise at the time of the alleged taking.

The Chrysler, Dodge and Jeep franchise agreements that were rejected in the

Chrysler bankruptcy were awarded to Guetterman on February 11, 1993. Guetterman’s

Chrysler, Dodge, and Jeep franchise agreements are identical in form and substance to

the other franchise agreements owned by other representative plaintiffs. DX16 (Chrysler

Agreement), DX21 (Dodge Agreement), DX22 (Jeep Agreement). Mr. Guetterman also

testified that he understood that, regardless of the termination provisions in these

franchise agreements, state law precluded the termination of dealerships for unjust

reasons.22 Tr.2179:6-10.

22
Illinois state law provides that an automobile manufacturer cannot terminate or fail to renew a
franchise agreement without good cause and without giving sufficient notice as outline in Illinois
state law. 815 Ill. Comp. Stat. Ann. § 710/4(d)(6). The Illinois Board of Motor Vehicles
determines if there is sufficient good cause not to renew or cancel a franchise and Illinois law
provides that it shall consider, but is not limited to, the following factors: “(1) The amount of
retail sales transacted by the franchise during a 5-year period immediately before the date of the
notice of proposed actions as compared to the business available to the franchisee. (2) The
investment necessarily made and obligations incurred by the franchisee to perform its part of the
franchise. (3) The permanency of the franchisee’s investment. . . . (5) Whether the franchisee has
adequate moto vehicle sales and service facilities, equipment, vehicle parts, and service
personnel to reasonably provide for the need of the customers of the same line make of motor
vehicles handled by the franchisee. . . . (7) The extent and materiality of the franchisee’s failure
to comply with the terms of the franchise and the reasonableness and fairness of those terms. . .
.” 815 Ill. Comp. Stat. Ann. § 710/12(d).
42
On May 13, 2009, Guetterman received a letter from Chrysler stating that its

Chrysler, Dodge, and Jeep franchise agreements would be rejected in bankruptcy. The

letter is identical to that received by the other representative plaintiffs in this case. Mr.

Grady, Director of Dealer Operations, explained that the Guetterman Chrysler, Dodge

and Jeep franchise agreements were rejected by Chrysler in bankruptcy because the

dealership only met 53% of its MSR, was considered an excess point in the Cairo area,

was placed on a financial hold by Chrysler Financial, and had a competitive dual Ford

dealership attached to the Chrysler showroom. DX1315.

After Guetterman received the May 13, 2009 letter, Mr. Guetterman testified that

Chrysler only bought “back $18,754 of parts for 68 cents on the dollar” and that the

dealership was unable to sell its remaining Chrysler parts. Tr.2180:2-10. Mr. Guetterman

explained that the “cost of the remaining parts is over $100,000.” Tr.2180:6-7. Mr.

Guetterman also testified that he “attempted to negotiate with the New Chrysler through

[the] St. Louis dealer placement manager . . . but [it] was turned down.” Tr.2176:15-19.

Mr. Guetterman further testified that he “paid the initial fee and got a date to proceed”

under the Section 747 arbitration process, but that before the arbitration date, New

Chrysler offered Guetterman a letter of intent for a new franchise agreement. Tr.2176:21-

25. Mr. Guetterman explained that he did not accept the letter of intent because it

imposed new requirements which have required between $1 million and $2 million in

new investments. Tr.2177:12-15.

Guetterman’s 2010 financial statement for its Ford franchise, which it expanded

into space previously dedicated for Chrysler vehicles, showed that Guetterman received a

net income of $120,920 from that dealership. DX613. Guetterman’s 2011 financial
43
statement for its Ford franchise showed that Guetterman received a net income of

$82,813 from that dealership. DX648. Guetterman continues to operate as a Ford dealer

to the present day.

Guetterman claims that the rejection of its three Chrysler franchise agreements in

the Chrysler bankruptcy amounts to a taking based on the same theory of coercion relied

on by the Alley’s plaintiffs and discussed infra. Guetterman is seeking just compensation

in various amounts based on two different “but for” Chrysler Chapter 11 liquidation

scenarios. Unlike, the Alley’s plaintiffs, discussed above, Guetterman relies on the

testimony of Ted Stockton23 as its valuation expert. As will be explained in greater detail

later in the opinion, Mr. Stockton’s valuation approach is very different from the one

employed by Ms. Murphy. For example, while Ms. Murphy assumes that at least some

Chrysler cars or trucks will continue to be produced in her “but for world,” Mr. Stockton

assumes that Chrysler would have been liquidated in a Chapter 11 bankruptcy and that

Chrysler vehicles would no longer have been produced. He assumes that there would be

no new vehicles manufactured once Chrysler entered into bankruptcy. He assumed,

however, that Chrysler parts would continue to be produced by entities that would have

licensed Chrysler’s name and would have offered those parts to the dealers for a price.

Ms. Murphy and Mr. Stockton also used different methods to calculate just

compensation. Ms. Murphy calculated the amount of just compensation based on the

income valuation approach assuming each of the Alley’s plaintiffs would have continued

23
As will be described in further detail infra, Mr. Stockton is the Vice President of Economics
Services at the Fontana Group Inc. During his employment at Fontana he has worked 30,000
hours, focused on issues related to the automotive retail industry, and has conducted studies of
hundreds of franchise operations that sell a wide array of branded vehicles.
44
as franchisees with a new Chrysler car manufacturer. Mr. Stockton calculated just

compensation based largely on a “lost profits” method.

Specifically, Mr. Stockton posited two “but for worlds” where Chrysler liquidates

in bankruptcy at some point in April 2009. The two “but for worlds” are as follows (1) a

Chapter 11 bankruptcy where there is an orderly wind-down of Chrysler’s operations and

Guetterman continues to operate under its existing franchise agreements either for (i)

three years or (ii) seventeen months, depending on how long the wind-down takes to

complete, and (2) immediate liquidation of Chrysler in which Guetterman’s Chrysler

dealership continues to operate indefinitely as a “branded” Chrysler dealer, under a

licensing agreement with third party. Mr. Stockton testified that these “but for worlds”

were provided to him by counsel. Tr.2544:17-21.

Under the orderly wind-down scenarios that either last for three years or seventeen

months, Mr. Stockton made the following assumptions. He assumed that the franchise

agreements were not terminated in bankruptcy and are kept in effect for the period of the

wind-down. He further assumed that the United States would have guaranteed the

warranty obligations for the incumbent Chrysler customers. As part of this scenario, Mr.

Stockton assumed that Chrysler would attempt to sell off-lease vehicle returns to the

Chrysler franchisees which would provide the plaintiffs with additional used cars to sell

during the wind-down period.

Under the second scenario, immediate liquidation, Mr. Stockton testified that he

assumed that the United States would have again guaranteed the warranty obligations for

the incumbent Chrysler customers. He further assumed that a consortium of Chrysler

dealerships would have acquired the rights to certain propriety parts and intellectual
45
property, i.e. the Chrysler brand, in the Chrysler bankruptcy and that the plaintiffs would

have been able to operate as Chrysler branded dealerships for the purposes of serving and

selling used Chrysler vehicles, although not with any franchise agreement.24 Under this

second scenario, there is no “Chrysler” and thus no continuing franchise agreement

between Chrysler and the plaintiffs. Further, under this second scenario, the plaintiffs

would continue as “branded” dealers for between seven to ten years.

To set a value for what was “taken” by the government in Mr. Stockton’s “but for

world,” Mr. Stockton calculated how much net profit Guetterman lost under these two

liquidation scenarios by using Guetterman’s 2006, 2007 and 2008 financial statements.

DX138, DX196, DX311. Under Mr. Stockton’s approach, the amount of just

compensation Guetterman is seeking varies depending on the scenario, as follows: (1)

$122,761 for the immediate liquidation scenario; (2) $112,942 for a Chapter 11 three-

year orderly wind-down scenario; and (3) $61,047 for a Chapter 11 17-month orderly

wind-down scenario. Tr.2456:11-19.

I. Mike Finnin Motors

Mike Finnin testified on behalf of Mike Finnin Motors (“Finnin”), the second

Colonial plaintiff, which for the years at issue was located at 4355 Dodge Street,

Dubuque, Iowa. Finnin was incorporated under the laws of Iowa. Finnin’s dealership

included Chrysler and Jeep franchises as well as a Kia franchise acquired in 2007.

24
Mr. Stockton also testified on cross examination that if a consortium of dealers did not
purchase the proprietary parts and intellectual property from Chrysler during the Chrysler
bankruptcy, some unidentified third party would have and then would have licensed these parts
and the brand to the Chrysler plaintiffs, who would thus have been able to continue as Chrysler-
branded dealers. Tr.2446:5-10.
46
The Chrysler and Jeep franchise agreements that were rejected in the Chrysler

bankruptcy were awarded to Finnin on November 21, 1994. Finnin’s Chrysler and Jeep

franchise agreements are identical in form and substance to the other franchise

agreements owned by the other representative plaintiffs. DX29 (Jeep Agreement), DX32

(Chrysler Agreement). Mr. Finnin also testified that he understood that, regardless of the

termination provisions in these franchise agreements, state law precluded the termination

of dealerships for unjust reasons.25

On May 13, 2009, Finnin received a letter from Chrysler stating that its Chrysler

and Jeep franchise agreements would be rejected in bankruptcy. The letter is identical to

that received by the other representative plaintiffs in this case. DX446. Mr. Grady,

Director of Dealer Operations, explained that Finnin’s Chrysler and Jeep franchise

agreements were rejected by Chrysler in bankruptcy because the dealership only met 66%

of its MSR and because Chrysler believed that a nearby Dodge dealer was a better dealer

and wanted that dealer to have the Finnin Chrysler and Jeep franchises. DX1315.

After Finnin received the May 13, 2009 letter, Finnin lost use of half of a “10,000

new square foot showroom at [its] main facility” that was dedicated to its Chrysler and

25
Iowa state law provides that a “franchiser shall not terminate or refuse to continue any
franchise unless the franchiser has first established, in a hearing held under the provisions of this
chapter, that both of the following apply: a. The franchiser has good cause for termination or
noncontinuance. b. Upon termination or noncontinuance, another franchise in the same line-
make will become effective in the same community, without diminution of the motor vehicle
service formerly provided, or that the community cannot be reasonably expected to support such
a dealership.” Iowa Code Ann. § 322A.2(1) (West 2009). Iowa state law further provides that
“[u]pon hearing, the franchiser shall have the burden of proof to establish that under the
provisions of this chapter the franchiser should be granted permission to terminate or not
continue the franchise, or to enter into a franchise establishing an additional motor vehicle
dealership, or to alter a franchisee’s community.” Iowa Code Ann. § 322A.9 (West 2009).

47
Jeep franchises. Tr.2244:19-21. Finnin also lost the income it could have derived from

“selling the Jeep-Chrysler products, not selling those trade [ins], not performing warranty

work on the Chrysler-Jeep vehicles, not selling parts to our individual clients and our

wholesale accounts, and . . . the blue-sky value for the franchise.” Tr.2249:1-8. Finnin

“sought to get [its] Chrysler franchise back through 747 arbitration [and] spent over

$180,000 trying to get it back, but it was denied by the arbitrator.” TR2249:9-12. Finnin’s

2010 financial statement from the Kia franchise that had been co-located with its

Chrysler franchises showed that Finnin received an annual net profit of $291,742 from

that dealership. DX620. Finnin’s 2011 financial statement from its Kia franchise showed

that it received an annual net profit of $473,108 from that dealership. DX650.

Finnin claims that the rejection of its Chrysler and Jeep franchise agreements in

the Chrysler bankruptcy amounts to a taking of its two franchises based on a theory of

coercion that is the same as that relied on by the Alley’s plaintiffs. Finnin is seeking just

compensation in various amounts depending on two different “but for” liquidation

scenarios posited by its valuation expert Mr. Stockton. As explained above regarding

Guetterman, Mr. Stockton posits two “but for worlds” where Chrysler liquidates in

bankruptcy to establish the value of Finnin’s franchise agreements. Mr. Stockton

calculated the profit Finnin allegedly lost based on these two liquidation scenarios by

using Finnin’s 2006, 2007 and 2008 financial statements. DX137, DX195, and DX310.

Under Mr. Stockton’s valuation approach, the amount of just compensation Finnin is

seeking is as follows: (1) $1,591,912 for the immediate liquidation scenario; (2)

$1,391,138 for the three-year orderly wind-down scenario; (3) $775,040 for the 17-month

orderly wind-down scenario. Tr.2453:15-19.
48
II. SUMMARY OF PLAINTIFFS’ FACT AND EXPERT EVIDENCE

A. Plaintiffs’ Fact Witnesses

i. Steven Rattner

Steven Rattner testified for both the plaintiffs and the United States at trial. He

explained that he was appointed by Timothy Geithner, President Obama’s Secretary of

Treasury, at the end of February 2009 to head a newly formed Auto Team Task Force

(“Auto Team”) at the United States Department of Treasury.26 According to Mr. Rattner,

his role was to assemble and oversee “a team of people who were going to address the

growing crisis in the automobile industry [in 2008-09] and . . . come up with some

policies to ameliorate the situation.” Tr.1607:7-10. He remained in this position from

February 2009 until July 2009. Tr.1607:12-15.

Mr. Rattner testified that he understood that his job on the Auto Team “was a

restructuring exercise in that the Government had put some bridge loans into [Chrysler]

at the end of 2008 . . . [and] it would be the [Obama] Administration that would have to

figure out what, if anything, the Government should do, could do by the way of

permanent financing to make [Chrysler] viable.” Tr.1623:8-18. Mr. Rattner explained

that in carrying out the goals of the Auto Team there was a principle called “shared

sacrifice” which meant they “felt that all the stakeholders in [Chrysler] . . . were going to

26
Mr. Rattner came to the Auto Team with a journalism and finance background. Mr. Rattner
was a reporter for the New York Times for over eight years and had been an investment banker
for both Lehman Brothers and Lazard Freres before cofounding a private equity firm, the
Quadrangle Group. Tr.1606:15-1607:4. After leaving the Auto Team, Mr. Rattner returned to his
earlier work in finance and today he is chairman and chief executive officer of Willett Advisors,
which manages the personal and philanthropic assets of former New York City Mayor Michael
Bloomberg. Tr.1607:16-23.
49
have to make sacrifices and share in them.” Tr.1626:11-16. These sacrifices, Mr. Rattner

testified, would come from “the lenders, the shareholders, the employees, the workers,

the suppliers, and the dealers.” Tr.1627:7-9. Mr. Rattner explained that, for the lenders,

this meant that they would not be able to recover the entirety of the outstanding debt that

Chrysler owed to them. Tr.1628:3-12. Mr. Rattner testified that, for the employees,

shared sacrifice was that their contracts would be renegotiated and that Chrysler’s

obligations to them would be restructured or reduced. Tr.1628:15-17. At that time, the

shared sacrifice of the auto dealers was not discussed.

Mr. Rattner explained that prior to Obama taking office, Chrysler had received a

bridge loan from the Trouble Asset Relief Fund (“TARP”) from the Bush Administration

in the amount of $4 billion on December 31, 2008, and that under the terms of the bridge

loan Chrysler was required to submit a “Viability Plan” to the U.S. Department of

Treasury by February 17, 2009. DX996. Mr. Rattner explained that Chrysler was required

to produce “a plan showing how, in their judgment, with whatever tools and adjustments

or financial support or whatever it was that they thought they needed, a plan that would

allow them to become profitable again and remain viable or profitable . . . for the

indefinite future.” Tr.1630:5-12.

Chrysler’s Viability Plan was prepared by Chrysler, with the help of Robert

Manzo, a restructuring specialist from the Capstone consulting firm who was retained by

Chrysler starting in 2008. Tr.3928:18-24; DX1056. In its plan, Chrysler offered the

following three options: (1) a stand-alone plan, in which Chrysler would continue with

the same management but with an additional $5 billion from Treasury and $6 billion from

the Department of Energy for a total of $11 billion in additional government funding, (2)
50
an alliance with Fiat plan, under which the two companies would work together to

rebuild Chrysler with lighter and more fuel efficient vehicles and also would receive $11

billion in additional government funding, and (3) an orderly wind-down of Chrysler in

bankruptcy plan, which would require $24 billion in debtor-in-possession or “DIP”

financing for a two-year wind-down of operations to allow for the continued production

of cars and trucks. Tr.1720:9-25; DX1056. Upon receiving Chrysler’s Viability Plan,

members of the Auto Team and their experts, including Mr. Mosquet,27 were asked to

review Chrysler’s plan. Mr. Ronald Bloom,28 Mr. Rattner’s deputy who later testified for

the government, was primarily responsible for reviewing Chrysler’s Viability Plan along

with other members of the Auto Team including Brian Osias and Clay Calhoon.29 After

reviewing Chrysler’s Viability Plan, the Auto Team determined that Chrysler could not

survive under the terms proposed. On March 30, 2009 President Obama announced that

Chrysler’s Viability Plan was rejected, and that Chrysler would be given until the end of

April to revise its Viability Plan. DX1133.

Mr. Rattner testified that the Auto Team gave serious consideration to allowing

Chrysler to liquidate in bankruptcy without government involvement but came to

27
As discussed infra, Mr. Mosquet is a senior partner and managing director in the Detroit office
of Boston Consulting Group. Since 2005, Mr. Mosquet has worked mainly in the automotive
industry. Tr.1858:7-1859:14.
28
As discussed infra, Mr. Bloom was the deputy to Mr. Rattner and later became the head of the
Auto Team. Tr.2685:7-15. Mr. Bloom, prior to joining the Auto Team, had worked for the
United Steelworkers Union from 1996 to 2008, where he negotiated their collective bargaining
contracts and managed their relationship with Wall Street firms interested in investing in steel
companies that are unionized. Tr.2682:25-2683:7.
29
Brian Oasis testified, as discussed in greater detail infra, that he was an analyst who worked
alongside with Mr. Calhoon and by March 2009 was focused exclusively on Chrysler.
Tr.3138:21-3139:2.
51
understand that Chrysler needed to survive in some form so that its suppliers would also

survive. Specifically, Mr. Rattner testified that if Chrysler was no longer making cars and

trucks and instead was liquidated “many of those suppliers would have also been forced

into some form of liquidation, and the problem was not just those jobs that were lost, but

suppliers in this industry typically do not supply just one manufacturer. They supply

multiple, maybe all of them. And so you have Ford, you would have GM, you would

have Toyota, and all the people who operate in the south, potentially not being able to get

parts they needed to make their cars, and it was not inconceivable -- and I don’t think we

were being doomsday folks to say this -- that we thought the whole industry could shut

down, at least for a bit, in a Chrysler liquidation.” Tr.1725:9-22. Mr. Rattner also

explained that the Obama Administration was concerned about unemployment,

particularly in the auto industry, and therefore concluded that keeping Chrysler alive was

important for this reason as well. Tr.1725:8-22.

After Chrysler’s initial Viability Plan was rejected by the Auto Team, but before

another plan was submitted, Mr. Rattner explained that the Auto Team largely took

control of Chrysler’s viability planning and began meeting with Chrysler’s stakeholders,

including its creditors, represented by JP Morgan (the administrative agent for the nearly

$7 billion in debt owned by Chrysler’s first lien lenders), Fiat (Chrysler’s prospective

purchaser), the United Auto Workers (“UAW”), and suppliers. The evidence established

that many of these meetings took place without Chrysler management present.30 As Mr.

30
The evidence established that Chrysler, without the Auto Team’s support, continued to work
on an alternative Viability Plan that required government assistance, but which Chrysler hoped
would meet the government’s requirements without Chrysler having to enter bankruptcy. As
52
Rattner testified, “between March 30th and the end of April, [the Auto Team], Chrysler,

ultimately the banks, the UAW, various interested parties, attempted and ultimately

succeeded in negotiating a set of go-forward arrangements that each party could live with

and that [the Auto Team] determined would allow Chrysler to achieve viability.”

Tr.1636:10-15.

Mr. Rattner testified that in his role as leader of the Auto Team he negotiated with

Chrysler’s first lien lenders, represented by JP Morgan. Tr.1650:4-1651:16. Mr. Rattner

testified in detail how the Auto Team set the terms and pace of the negotiations with JP

Morgan, where he understood that his “first offer was not going to be [his] last offer, so

[he] deliberately started low[.]” Tr.1652:15-18. He explained that he “spent a good bit of

time -- many hours in a short period of time negotiating with [JP Morgan] and [JP

Morgan] negotiating with [the] other [lenders]” to try and modify the terms of the $7

billion in loans so that Chrysler would not have to file for bankruptcy, but that those

negotiations failed. Tr.1653:21-1654:11. Eventually, the first lien lenders received $2

billion in an agreement approved by the Bankruptcy Court. Tr.1653:8-11.31

Mr. Rattner testified that his deputy, Mr. Bloom, was charged with negotiating an

arrangement with UAW. Tr.1637:4-15. Mr. Rattner testified that the Auto Team “[sat]

down with UAW and attempted to negotiate some restructuring of the [employee’s]

described in more detail in the discussion of Mr. Nardelli and Mr. Bloom’s testimony, this effort
by Chrysler failed.
31
As discussed infra, JP Morgan’s advisor John Haeckel testified that after reviewing Chrysler’s
Viability Plan, he came to believe that the first lien lenders would never get more than $2 billion
from Chrysler if Chrysler entered bankruptcy without government assistance. He thus advised JP
Morgan to accept the government’s proposal to relinquish the debt held by first lien lenders for
the government’s $2 billion. Tr.2865:25-2866:3.
53
contract and of Chrysler’s obligation to [its employees].” Tr.1628:15-17. These

negotiations eventually led to UAW pension funds receiving shares in New Chrysler.

Specifically, under the prepackaged bankruptcy plan, negotiated by the government’s

Auto Team, in exchange for forgiving $8 billion in fixed obligations owed by Chrysler to

the UAW’s Voluntary Employees’ Beneficiary Association Plan or “VEBA,” UAW

agreed to accept a $4.6 billion unsecured note and stock in New Chrysler. Tr.2720:7-13.

Mr. Rattner explained that the Auto Team also took charge of the negotiations

with Fiat regarding a potential merger with Chrysler. Mr. Rattner described it as “a kind

of three-way negotiation in which Chrysler, Fiat, and the U.S. Government all

participated.” Tr.1636:16-24. The evidence established that under the final negotiated

prepackaged bankruptcy plan, Fiat would take over management of New Chrysler and

receive stock in new Chrysler. Fiat would not, however, have to pay Chrysler for its

interest in New Chrysler. Mr. Rattner stated that consistent with its financing role, the

government had to approve the deal with Fiat. Tr.1636:25-1637:3. Mr. Rattner

acknowledged that the government’s power in this circumstance is known as the “Golden

Rule,” meaning “he who has the gold makes the rules.” Tr.1683:9-12.

Mr. Rattner explained that reducing the number of Chrysler franchises was in

Chrysler’s proposed Viability Plan before the government got involved and thus was

always a part of Chrysler’s viability planning. Tr.1665:13-20. Known in the auto industry

as “dealership rationalization,” the government understood from Chrysler’s submissions

that Chrysler planned to reduce the total number of franchisees and wanted to combine all

brands under one roof to make Chrysler viable. Id. For this reason, “dealer

rationalization,” which was initiated by Chrysler well before the financial crisis, was
54
always going to be part of a final Chrysler Viability Plan. Tr.1665:13-20, Tr.1641:12-21,

Tr.16380:14-17. Mr. Rattner, explained however, that the Auto Team “never got into the

question of which dealers, how, or anything of that sort” but rather was looking at it from

a macro level of how many. Tr.1664:20-1665:12. He also agreed that one of the positives

of moving forward with a Chrysler bankruptcy was that it would allow Chrysler to reduce

its dealership network without having to comply with state franchise laws, which, as

identified in the footnotes for each representative plaintiff, provide significant protections

to car franchisees and limit the circumstances under which dealerships can be terminated.

Put another way, bankruptcy would allow Chrysler to reject franchise agreements without

having to first comply with state laws. Tr.1642:13-25.

Mr. Rattner further explained that the government had hoped that Chrysler would

not have to file for bankruptcy and testified that up to the last minute the government was

willing to provide funding under the terms the government negotiated with Chrysler’s

lenders and others. Tr.1653:24-25, Tr.1654:9-11. However, he also testified that everyone

understood from the beginning of the Auto Team’s review of Chrysler’s Viability Plan

that bankruptcy was an option. Tr.1640:6-22, Tr.1642:4-11. When JP Morgan was not

able to get an agreement from all of Chrysler’s lenders, the government concluded that if

Chrysler, in some form, was going to continue to manufacture cars and trucks, Chrysler

would have to file for bankruptcy under the terms the Auto Team negotiated. Tr.1661:12-

18.

Per the court’s pre-trial order, the government also elicited testimony and evidence

from Mr. Rattner during the plaintiffs’ case-in-chief. In his testimony for the government,

Mr. Rattner explained that Chrysler understood that “it could not be viable unless it had
55
significant sacrifice” from all interested parties including dealers, shareholders, suppliers,

the UAW, and credit groups. Tr.1719:12-16. He explained that he understood at the time

that JP Morgan and the other first lien lenders would not provide Chrysler with any

financing in order to allow Chrysler to continue to operate as an ongoing concern while

in bankruptcy. Without this debtor-in-possession or “DIP” financing, Chrysler could not

continue to manufacture new cars and trucks. Thus, if Chrysler was to continue to make

cars and trucks during bankruptcy, Mr. Rattner explained that Chrysler needed the federal

government’s assistance. Tr.1722:13-1723:5. Mr. Rattner also made clear in his

testimony that the Auto Team never targeted specific dealers for rejection. Tr.1737:1-6.

ii. Xavier Mosquet

The plaintiffs also presented the testimony of Xavier Mosquet to support their

coercion claim. Mr. Mosquet is a senior partner and managing directing for Boston

Consulting Group (“BCG”) in its Detroit office, and was an advisor to the Auto Team.

Tr.1858:7-20. Mr. Mosquet explained that BCG is a “managing consulting firm present

in several countries around the world” that gives advice to corporations about operation

issues. Tr.1858:21-1859:14. He explained that he is an expert in the automotive industry

and further explained that BCG was retained by the Auto Team in 2009, with Mr.

Mosquet as the team leader, to analyze the Viability Plans submitted by GM and Chrysler

in February 2009. Tr.1859:24-1860:12.

Regarding the Chrysler Viability Plan, Mr. Mosquet explained that Chrysler’s plan

was not viable. The plaintiffs, however, focused Mr. Mosquet’s testimony on his

understanding of Chrysler’s “Project Genesis” plan, which, as described above in

connection with the testimony of the individual plaintiffs, was a voluntary Chrysler
56
program designed to reduce or “rationalize” Chrysler’s dealership network without forced

dealership closures. Tr.1873:3-6, Tr.1874:3-8, Tr.1885:19-23. Mr. Mosquet testified that

neither he nor anyone else at BCG criticized Project Genesis. Tr.1909:17-1910:8. He also

testified that, in comparison to GM, which had not begun to rationalize its dealership

network, BCG had concluded that Chrysler had already done significant dealership

closures and was thus ahead of GM. PX704; Tr.1892:13-20. Mr. Mosquet testified that

BCG concluded that Chrysler had “already gone through a significant number of low

performing consolidations.” Tr.1936:15-20; PX704. Mr. Mosquet further testified that

BCG concluded that any further reduction in the dealership network could result in

eliminating additional good dealers with “limited upside potential.” Tr.1894:11-17;

PX704.

Mr. Mosquet explained that in evaluating Chrysler’s Viability Plan, BCG had not

done any analysis concerning whether further reducing the number of Chrysler dealers

would positively impact Chrysler’s sales or increase its profitability. He also testified that

no one at BCG had analyzed the health of the overall dealership network. Tr.1900:11-

1901:5, Tr.1901:15-18. He testified that he understood that Fiat’s plan for the Chrysler

dealerships was the same as Project Genesis. Tr.1882:1-4. Mr. Mosquet concluded by

stating that only Chrysler was in the position to determine the appropriate size of its

dealership network. Tr.1962:12-23, Tr.1963:4-6.

iii. Alfredo Altavilla

In accordance with the court’s pre-trial order, the court allowed the parties to

introduce the video deposition of Alfredo Altavilla, Fiat’s Head of Business Development

and CEO of Fiat Powertrain Technology, in lieu of his attendance at trial. In his
57
deposition, Mr. Altavilla testified regarding the negotiations between the government and

Fiat and regarding Fiat’s interest in the size and composition of Chrysler’s dealership

network.

Mr. Altavilla explained that there had been an initial term sheet negotiated

between Fiat and Chrysler regarding an “alliance” before the Auto Team got involved.

He testified that the second term sheet between Fiat and Chrysler was significantly

renegotiated by the Auto Team. Depo. 60:8-25. Specifically, Mr. Altavilla explained that

during his first meeting with Mr. Bloom from the Auto Team, Mr. Altavilla learned that

the government would be Fiat’s “main counterpart for executing the alliance[.]” Depo.

67:20-68:5. He went on to explain that the second term sheet had no provisions that were

promoted or suggested by Chrysler and that in negotiating the second term sheet it was

understood that the Auto Team expected additional concessions from both sides. Depo.

177:15-178:3. Mr. Altavilla explained, however, that neither in the first or second term

sheet executed between Chrysler and Fiat was there any mention of reducing the

dealership network by a specific number of dealers. Depo. 154:4-22, Depo. 152:23-153:4.

Mr. Altavilla testified that part of the reason that Fiat was interested in Chrysler was

because Chrysler had an extensive dealership network. Depo. 140:20-25. He testified that

Fiat eventually came to understand from Chrysler why a reduction in the size of the

dealership network made sense and deferred to Chrysler’s judgment when Chrysler

proposed accelerating Project Genesis with the more ambitious “Project Tiger.”

58
Ultimately, Project Tiger became the basis for Chrysler deciding which franchise

agreements to reject in the bankruptcy.32 Depo. 146:4-147:11.

B. The Plaintiffs’ Experts

i. Dr. Donald Marron

The plaintiffs presented the testimony of Dr. Donald Marron, Ph.D., an economist

and Institute Fellow and Director of Economic Policy Initiatives at the Urban Institute in

Washington D.C. and president of Marron Economics, LLC, an economic consulting

firm. Tr.2047:1-6. Dr. Marron was called to explain why, in his view, the terms the Auto

Team negotiated in its prepackaged bankruptcy plan did more than protect the

government’s financial interests. Dr. Marron opined that the government’s negotiated

terms were designed to achieve valid public policy goals including saving jobs and

pensions.

Dr. Marron holds an A.B. in mathematics from Harvard University and a Ph.D. in

economics from the Massachusetts Institute of Technology and is an expert in the fields

of public finance and industrial organization. Tr.2047:7-11. From 2002 through early

2009, Dr. Marron served in senior economic policy positions in the United States

Congress and the White House. Tr.2047:19-21. His positions included being the

Executive Director of the Joint Economic Committee, Acting Director of the

Congressional Budget Office (“CBO”), and Senate-confirmed member of the Council of

Economic Advisors. Tr.2047:21-25. In his role at CBO he “directed a staff of about 230

employees that were charged with working on a broad range of economic and budget

32
As will be discussed in greater detail infra, Project Tiger was a plan proposed by Chrysler in
April 2009 just before it entered bankruptcy. DX1167.
59
issues.” Tr.2047:25-2048:2. From August 2007 until January 2009 he served at the White

House Council of Economic Advisors as a consultant, then senior economic advisor, and

then as member where he was “actively engaged in responding to the financial crisis,

including the creation and use of the Troubled Asset Relief Program.” Tr.2048:5-11. He

has published numerous articles and papers on the economics of public policy and has

provided testimony to committees of the U.S. Congress on more than twenty occasions.

Tr.2048:19-24.

Dr. Marron offered several opinions relevant to the government’s motivation in

providing Chrysler with financial support during the economic crisis and opined that the

government, in providing funding and in requiring certain actions in exchange for

government financing, was acting in its governmental capacity and not simply as a

private lender. Dr. Marron’s opinions are summarized as follows.

First, Dr. Marron opined that “[t]he United States experienced a remarkably severe

financial crisis and economic downturn starting in 2007. The main causes include[d]

excesses in mortgage lending and fragility of a highly leveraged financial system reliant

on ample liquidity.” He further testified that “[g]overnment policy errors contributed to

the financial crisis and the severity of the economic downturn.” Tr.2055:23-2056:4.

Second, Dr. Marron opined that “[t]he government had unique power to combat

the financial crises and was correct to use it. Many companies directly benefited from

that support, but the purpose was not to help individual companies. Instead, the goal was

to support essential parts of the economy, and, in so doing, stem job losses and avoid an

even more severe economic downturn. The Chrysler . . . bailout[], for example, [was]

intended to support the domestic auto industry as a whole, including suppliers and other
60
auto manufacturers[.]” Tr.2058:25-2059:10. Dr. Marron explained that having learned its

lesson from inaction during the Great Depression, the government acted in order “to

support the economy as a whole and [to] avoid a downturn as severe or worse than in the

Great Depression.” Tr.2061:17-19.

Third, Dr. Marron testified that it was his opinion that “[t]he government did not

act in a commercial manner in rescuing Chrysler. The government did not have a

commercial motive. It sought to protect the broader economy, not earn a commercial

return. The government did not seek commercial returns. Instead, it gave Chrysler

substantial subsidies.” Tr.2062:24-2063:4. Dr. Marron explained that during the financial

crisis the “government did not have a commercial motivation in enacting TARP” but

rather aimed to support the American economy and prevent job loss. Tr.2063:10-14. Dr.

Marron noted that the government’s concern of “shared sacrifice” is not something a

private lender would have considered but is a public policy consideration made by the

government when acting in its governmental capacity. Tr.2065:5-9. Additionally, Dr.

Marron opined that the “government knowingly subsidized Chrysler, offering financial

terms much more generous than private investors would accept” and that this was further

evidence that the government was not acting as a private lender. Tr.2065:9-11. Dr.

Marron

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4443686. Public record. Not legal advice.