Texas AG opposes GM's bankruptcy plan

Chris Rizo Jun. 18, 2009, 10:00am

AUSTIN (Legal Newsline)- General Motors Corp.'s bankruptcy plan would force car dealers in Texas into a contract that violates state law, Texas Attorney General Greg Abbott said.

In an objection filed in U.S. Bankruptcy Court for the Southern District of New York, the attorney general said General Motors unfairly wants dealers to sign contracts that prevent them from selling other brands and require them to order new GM cars they may not want to sell.

Abbott, a Republican, said General Motors is also trying to limit Texas dealers' warranty claims and is seeking to skirt a state law that allows dealerships the right to protest the opening of another dealership if it is located within the same county or within a 15-mile radius and carries the same line-make.

"In an unprecedented move, GM - which will be majority owned by the federal government - claims that states' rights and states' laws that protect dealerships can be ignored at GM's choosing," Abbott said. "In doing so, federally-owned GM guts Texas statutes that regulate car dealers - and flaunts U.S. Supreme Court precedent that upholds our state-based dealership structure."

The Texas Automobile Dealers Association says there are 415 franchised GM auto dealers in the Lone Star State.

A court hearing in Detroit-based General Motor's Chapter 11 case is scheduled for June 30.

"GM is seeking to place short-term profit above long-held principles, short-term accounting above long-term accountability," Abbott said. "America deserves better; Texas is demanding it."

From Legal Newsline: Reach staff reporter Chris Rizo at chrisrizo@legalnewsline.com.

Is the GM bankruptcy plan fair to Texas auto dealers? Vote in our online poll on the Southeast Texas Record home page.

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