Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—N.D. Ill.: Automobile dealer’s federal and state claims survive franchisor’s motion to dismiss, (Apr 28, 2025)

By Patricia K. Ruiz, J.D.

The complaint alleged the franchisor arbitrarily determined how to distribute vehicles to dealers, intentionally depriving the plaintiff of enough inventory to stay in business.

The U.S. District Court for the Northern District of Illinois granted in part and denied in part a motion to dismiss a franchisee’s claims under the Illinois Motor Vehicle Franchise Act (IMVFA), but denied a motion to dismiss the dealer’s federal Automobile Dealers’ Day in Court Act (ADDCA) claim. The court held the dealer plausibly alleged that the franchisor of Chrysler Jeep, Dodge, and RAM, branded motor vehicles, FCA US LLC, “starved” the dealer of an adequate allocation of vehicles to sell and even suggested plausible motives for FCA’s poor treatment of the dealer—the dealer’s participation in arbitration against FCA and the dealer’s refusal to prioritize FCA’s goals at the expense of its own. The court also denied the motion to dismiss as to the franchisee’s breach of contract claims (Burke Automotive Group, Inc. v. FCA US, LLC, No. 1:24-cv-12263 (N.D. Ill. Apr. 25, 2025)).

Allegations. Burke Automotive Group, Inc., was an automobile dealership offering FCA US LLC’s vehicles and parts. Burke Auto and FCA entered into several service agreements and addenda in November 2012. Under the agreements, Burke Auto became a dealer of FCA’s vehicles, which include the Chrysler, Jeep, Dodge, and RAM brands. FCA was required to provide vehicles and parts to Burke Auto, which was required to sell the goods within its market area. FCA employed a purported “turn and earn” system of allocating vehicles, under which faster turnover of inventory resulted in an increased allocation of vehicles while slower turnover would reduce the vehicles sent to a dealership. Dealerships with higher earn rates would receive more vehicles to sell, and those with lower earn rates received fewer.

Burke Auto alleged the system, when properly implemented, is rational; however, it alleged FCA manipulated the system, doling out vehicles arbitrarily, pushing Burke Auto into a “death spiral.” Burke Auto alleged FCA intentionally deprived Burke Auto of enough inventory to meet the needs of its customers or to allow it to satisfy sales goals and relative performance measures. The depletion of Burk Auto’s inventory made it increasingly difficult to participate in the “turn and earn” system, starving it out of business and forcing it to sell its assets to a third party in the summer of 2022. Meanwhile, Burke Auto alleged, favored dealers received sufficient supply.

ADDCA claims. The ADDCA imposes liability on automobile manufacturers who fail to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating, canceling, or not renewing the franchise with said dealer. Burke Auto must show a lack of good faith not in the ordinary sense, but in which coercion, intimidation, or threats thereof are at least implicit. FCA moved to dismiss, arguing Burke Auto has not alleged coercion or intimidation, instead relying on vague allegations of arbitrariness. The court found that Burke Auto is not required to allege an explicit demand from FCA that it refused. Burke Auto sufficiently alleged that FCA controlled and manipulated its allocation system seemingly to starve Burke Auto out of inventory by failing to deliver sufficient vehicles to satisfy customer demand while offering more vehicles to other dealers. The complaint further suggests plausible motives for FCA’s actions. The court denied the motion to dismiss Burke Auto’s ADDCA claims.

IMVFA claims. Burke Auto brought claims under various provisions of the IMVFA. The court first granted FCA’s motion to dismiss the claim under section 4(a), as the statute merely proclaims that the subsequent provisions describe violations of the IMVFA and do not create a private cause of action. However, the court denied the motion as to Burke Auto’s section 4(b) claim, as this section clearly provides for a cause of action, making it a violation for any manufacturer to engage in any action with respect to a franchise which is arbitrary, in bad faith or unconscionable and which causes damage to any of the parties or to the public. Because the complaint contains numerous allegations that FCA implemented a plan that arbitrarily allocated vehicles to Burke Auto, the court denied the motion as to the section 4(d)(1) claim.

The court granted the motion to dismiss the section 4(d)(2) claim, as the section requires a written request for information on vehicle allocation. Because Burke Auto met the requirements of section 4(d)(3) by alleging FCA advertised in Illinois that its vehicles were available for immediate delivery, the court denied the motion to dismiss. The court denied the motion to dismiss as to section 4(d)(4) claim, finding that the complaint sufficiently describes a campaign against Burke Auto aimed at reducing its vehicle allocation in retaliation for Burke Auto’s participation in arbitration. Further, the court dismissed without prejudice the section 4(d)(6) claim, as Burke Auto failed to substantively respond to FCA’s jurisdictional argument. Finally, the court granted the motion to dismiss as to the section 9(a) claim, agreeing with FCA that violation of the provision only occurs where a manufacturer fails to renew, terminate, or restrict the transfer of a franchise, none of which is alleged to have occurred.

Breach of contract. Because Burke Auto adequately alleged FCA breached contractual obligations and because it alleged FCA violated the covenant of good faith and fair dealing, the court denied FCA’s motion to dismiss Burke Auto’s breach of contract claim.

The Case is No. 1:24-cv-12263.

Judge: Bucklo, E.

Attorneys: Francine Beth Goodman (Bellavia Blatt, PC) for Burke Automotive Group, Inc. Lina Ragep Powell (Nelson Mullins Riley & Scarborough LLP) for FCA US, LLC.

Companies: Burke Automotive Group, Inc.; FCA US, LLC

MainStory: TopStory FranchisingDistribution IllinoisNews