Marzulla Law, LLC is the nation's leading law firm for takings claims against the federal government. ML represents landowners, developers, water districts, Indian tribes, business, and corporate interests in litigation of property rights and contract claims. ML also represents clients in environmental enforcement actions, and litigation involving natural resources and permitting issues, in federal district courts and courts of appeal.


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Nancie and Roger Marzulla     

Marzulla Law, LLC  

Tel.: 202.822.6760     

Taking Property, Taking Livelihoods: Former Chrysler Dealers Pursue Just Compensation After Government's Auto Bailout Forces Them To Close  


Uncompensated government takings impact lives. This is a sobering truth that tends to become lost in the dizzying maelstrom of legal proceedings that take place in our courts; lost in the necessarily dispassionate and often arid landscape of briefs, motions, oral arguments, and trials.


This story is one of lives affected and livelihoods lost, victims of a government decision borne of a collision of politics and economic crises.


In 2009, 789 Chrysler automobile dealerships were forced to close after the federal Government determined that Chrysler would be more financially healthy with a smaller dealership network. Therefore, as a condition of receiving any federal relief money under the Troubled Asset Relief Program (TARP), President Obama's Auto Task Force required Chrysler to enter into bankruptcy and utilize the bankruptcy proceeding to terminate 25% of its dealerships. The stated objective of the closures of 25% of all Chrysler dealership franchises was to promote stability in the U.S. financial system and U.S. markets by preventing a significant disruption of the automotive industry.


Shortly after the termination of the franchise agreements, 75 of the terminated Chrysler dealership owners ---- many of whom had been in business for generations ---- filed suit in the U.S. Court of Federal Claims seeking monetary relief for the loss of their businesses, losses which were in fact uncompensated takings of their property in violation of the Fifth Amendment. Marzulla Law is representing these dealership owners.


Background --- Financial Crisis and Bailouts of U.S. Automakers


The events which precipitated the dealership owners' suit against the government played out before the nation as a whole.


The Global Financial Crisis


On October 3, 2008, Congress enacted the Emergency Economic Stabilization Act of 2008 ("EESA") to restore liquidity and stability to the American financial system. Under the EESA, Congress created the Troubled Asset Relief Program ("TARP"), which granted the Secretary of the Treasury broad authority to purchase troubled assets from financial institutions. Specifically, Congress authorized the Secretary of the Treasury "to purchase, and to make and fund commitments to purchase, troubled assets from any financial institution." Congress funded TARP with approximately $787 billion in federal funds, and gave the President broad powers to disburse the funds.


Although TARP was aimed at financial institutions, the Secretary of the Treasury determined that TARP funds could also be used to aid automobile manufacturers (such as Chrysler) that provided credit to auto purchasers. Shortly after this determination, the Secretary of the Treasury created the Automotive Industry Financing Program to permit the Treasury Department to invest in the automakers and their financing arms with the goal of preventing the mass collapse of the U.S. automotive industry.


The Bailout


In February 2009, after a year of investing billions in TARP funds to assist Chrysler and other major automobile industries, President Obama established the President's Auto Task Force to oversee the restructuring of Chrysler. The government's restructuring plan required that Chrysler terminate a substantial number of dealer franchises. In April 2009, Chrysler and its affiliated companies filed a petition for bankruptcy in the District Court for the Southern District of New York, which ultimately issued the Rejection Order terminating 789 dealership franchise agreements.


Terminating the Dealerships' Contracts Was a Taking


The Government has asserted that the termination of the franchise agreements with the 75 dealership owners does not constitute a taking, specifically because "their purported expectation of a continued dealership relationship with Chrysler ---- even after the manufacturer became insolvent ---- never constituted 'property' the loss of which could be actionable under the Fifth Amendment," according to the Government's motion to dismiss the dealership owners' complaint. But in Cienega Gardens v. United States, 331 F.3d 1319 (Fed. Cir. 2003), the Federal Circuit held that contracts are property protected against uncompensated taking by the Fifth Amendment. Prior to the Government's actions in this case, the 75 dealership owners had valuable franchise agreements with Chrysler and operated valuable dealership businesses by virtue of those agreements.


And in Boise Cascade Corp. v. United States, 296 F.3d 1339 (Fed. Cir. 2002), the Federal Circuit confirmed that if the Government uses the judicial system to take private property for public use, the Government must still pay compensation. In this present matter, the federal Auto Task Force, an agency of the Government, decided that 25% of Chrysler dealerships must be terminated through a bankruptcy proceeding for a public purpose.


It is worth noting that here, too, the Government was advised that requiring the termination of 25% of the Chrysler dealership via bankruptcy would likely result in takings liability.


Steven Rattner, Head of the Auto Task Force, made several statements after he resigned from the Government supporting these allegations. In a magazine article, Rattner observed that the Government would have to resort to the bankruptcy process to trim the dealer network: "I had doubted whether fundamental restructurings could be accomplished outside of bankruptcy." He further observed that the Government's "best idea was to employ a little used part of the bankruptcy code, Section 363, which greatly streamlines the process by allowing a newly formed company to buy the operating assets from the bankrupt entity."


Then in his book, Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry, Rattner wrote that the Government chose Bankruptcy Court over legislation after being advised that shortcutting the bankruptcy process might lead to takings liability: "Finally we were advised that efforts to shortcut bankruptcy procedures could well run afoul of the 'takings clause' of the U.S. Constitution . . . ."


Family Businesses Destroyed by Government Actions Designed to Benefit the Public as a Whole


As a direct result of the Government's taking, the monetary damages experienced by the dealership owners reaches into the millions of dollars.


Consider two of the closed dealerships' owners, James Painter of Painter's Sun Country Chrysler Dodge Jeep, and Mitch Lunt of Lunt Motor Company, both located in southern Utah. Their dealerships have been loyal family-owned Chrysler franchisees for decades, with James Painter's father opening up his dealership in 1945, and Lunt's family having sold Chrysler automobiles since the 1930's.


The closures have been devastating to both their businesses and their livelihoods.


In an August 2009 article in the Spectrum & Daily News in southern Utah, Mitch Lunt said his business dropped fifty percent after his franchise license was terminated.


"By taking out bankruptcy, it gave them a chance to cut our throats," Lunt said of Chrysler's government-mandated dealership closures.


Calling the situation a "rotten deal," Lunt's company is struggling to stay afloat.


Adding insult to injury, just three months following the bankruptcy and franchise terminations, Chrysler sought to authorize new dealership contracts in southern Utah. However, instead of approaching James Painter or Mitch Lunt, Chrysler signed agreements with another dealer in the same locale.


Stephen Wade, the dealer who accepted the agreement in order to keep the brand local, sympathized deeply with what James Painter and Mitch Lunt have had to endure.


"These people are good people who gave their lives to this for a lot of years, and what happened to them is not right," Wade said.


Court Denies Government's Motion to Dismiss the Case


The United States Court of Federal Claims recently denied the Government's motion to dismiss the case. The court agreed with our contention that, contrary to the Government's contention that the dealership owners are challenging the district court's bankruptcy decision, the dealership owners are in fact suing the United States Government for the uncompensated taking of their constitutionally protected property rights, which was accomplished via the mechanism of bankruptcy proceedings.




Courts measure damages in dollars. It's the nature of the system we occupy and work in. And while our clients rightfully seek just compensation for their losses, dollars ultimately can never reflect nor fully heal the deeper human impact, such as was experienced by our clients whose livelihoods were destroyed by the government's auto bailout.

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What People Are Saying About Marzulla Law...
"Nancie and Roger are first-rate litigators. They are creative yet they pay close attention to the details of the matter. It is obvious to me that the Marzullas want to achieve the very best result for their clients. It is a real pleasure to work with the Marzullas and their highly professional and thoroughly competent staff."

Thomas A. Holman
Holman Law
Attorney Spotlight
Thomas A. Holman and Leonard A. Bellavia


Attorneys Thomas A. Holman and Leonard A. Bellavia are co-counsel with Marzulla Law in Alley's of Kingsport, Inc., v. United States.



Thomas A. Holman

Tom Holman received his law degree from Fordham Law School in 1972. Immediately after passing the bar exam in 1973, he began to handle cases for trial, specializing in federal court and New York State court litigation at the trial and appellate level. He has handled hundreds of cases in the New York and New Jersey area, including business fraud litigation.

 In 2003 he founded Holman Law in the Midtown West area of New York City, and currently focuses his practice on breach of contract, business disputes, business fraud, class action defense, employment fraud, securities and stock fraud, consumer fraud defense, declaratory judgments, emergency commercial litigation, federal and NY whistleblower protection, noncompete litigation, preliminary and temporary restraining orders, resolving disputes outside of court (arbitration & mediation), and wrongful termination of franchisees or distributors.


Leonard A. Bellavia


Leonard A. Bellavia received his J.D. from St. John's University School of Law in 1982. He is the founding partner of Bellavia Gentile & Associates, LLP in New York, and specializes in Automotive Franchise Law, Dealership Buy-Sell Transactions, Complex Federal and State Court Litigation, and Dealership Corporate Matters.


Mr. Bellavia is a nationally recognized authority in the field of automotive franchise law. He represents hundreds of automobile and marine dealerships across the country in all aspects of commercial litigation and buy-sell transactions, and has been instrumental in negotiating the sale of hundreds of dealerships. He has achieved national recognition for advocating the mass action litigation model on behalf of franchised automobile dealers, and has successfully implemented this strategy to achieve an important settlement in a litigation to recover reasonable compensation for warranty parts reimbursement. Mr. Bellavia has commenced mass action lawsuits on behalf of hundreds of dealers in the United States District Courts against Daimler Chrysler, Ford, GM, Snap-On Tools, and the Tribune Company.


"Having represented the largest group of individual dealers in the Chrysler bankruptcy, our next step was to file a lawsuit alleging an unconstitutional taking of private property under the Fifth Amendment," said Mr. Bellavia regarding his role as co-counsel in Alley's of Kingsport, Inc., v. United States. "I was charged with the awesome responsibility of vetting some of the most noted constitutional lawyers in the country. All roads lead to Nancie and Roger Marzulla, and the Opinion and Order handed down recently by the U.S. Court of Federal Claims allowing our case to proceed to trial reaffirms my view that I made the best decision on behalf of my 75 dealer clients."


James Painter and Painter's Sun Country Chrysler Dodge Jeep

James Painter is one of the Plaintiffs in Alley's of Kingsport, Inc., v. United States, the suit against the government seeking just compensation for the 2009 forced closure of hundreds of Chrysler dealerships throughout the country. Jim was among several whose livelihoods were painfully impacted by the loss of his business, which had been in his family for nearly 70 years. What follows is a brief story of that family business, in his own words:


Painter Motor Company, which is noted as being the oldest GMC Truck dealer in the state [of Utah], actually had its beginning in Ogden in 1935. That was the year Fred and Ila Painter moved to Ogden with their five-year old son, Jim.


As that son, I saw my dad start working for Red Devil Coal Company at a starting salary of 30 cents for each ton of coal shoveled onto the truck, delivered to customers, and shoveled off. By 1942 he had worked himself up to manager of the company, my little sister Ranee had been added to the family, and Mom was working at the Ogden Arsenal, building artillery shells and bombs.


After saving their money to build a home, my parents sold that home in 1945 and decided to return to Nephi. The proceeds from their home were used as capital in an automobile venture.


In 1945, Dad and his brother Reese formed a partnership in the name of Painter Motor Company. ... I started working for $14 per week along with our first employees. Since no new cars were available due to World War II, we scoured the area and bought all the old used cars and trucks we could find.


By 1946 we secured Chrysler-Plymouth and GMC Truck franchises. In 1961 I was taken on as a full partner. By 1966 business had grown so much that we purchased an adjacent property. But we continued to grow, and in 1977 we purchased yet more property and ultimately moved our business into a brand new facility. By this time many of our family members were employees: myself, my dad, and my sons Randy, Rodney, and Pat. We also had ten other employees with us who handled sales, service, parts, and accounting.


In 1984, coming right out of some very challenging times, we opened a Chrysler franchise in nearby Saint George, Utah. It was risky, but we made it happen with hard work and determination that are the hallmark of the Painter family.


Over the next 25 years, after having weathered economic storms, the Painter family continued to enjoy growth and success with its dealership. But in 2009 they could not survive the government's decision that forced their family business to close. And only a few months after they closed, the family was dealt a final insulting blow when Chrysler decided to open a new dealership in the area.  


The devastating events leveled upon the Painter family in 2009 brought a very sad and sudden conclusion to a long and admirable history of dedication by a family that worked hard over three generations to achieve success. With our case against the government, we hope the Painter family will experience a measure of much deserved justice.

About Marzulla Law 


Marzulla Law, LLC is a Washington D.C.-based law firm. Nancie G. Marzulla and Roger J. Marzulla help property owners get paid just compensation when the Government takes their property through inverse condemnation.


ML lawyers practice in the federal courts, especially the U.S. Court of Federal Claims, the Federal Circuit Court of Appeals, and the U.S. District Court for District of Columbia, as well as other federal district courts, appellate courts, and the U.S. Supreme Court. ML also represents clients in administrative agencies, such as the District of Columbia Office of Administrative Hearings or the Interior Board of Indian Appeals.   


Chambers has recognized Marzulla Law as one of the top ten water rights litigation firms in the country. Nancie Marzulla and Roger Marzulla have been selected by their peers to be included on the list of Best Lawyers in America, and their firm has the highest AV-rating from Martindale-Hubble.  Nancie and Roger Marzulla have been recognized by Best Lawyers as a Top Tier law firm by U.S. News & World Report for environmental law, and Marzulla Law is a proud member of the International Network of Boutique Law Firms. 

DisclaimerThe information you obtain in this newsletter is not, nor is it intended to be, legal advice. Results are not guaranteed.  You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established