Compass Lexecon’s Client the United States Prevails in $1 Billion Chrysler Dealers Takings Litigation

Court Relies on Testimony of Compass Lexecon President Professor Daniel R. Fischel

After struggling for years, in late 2008 Chrysler Corporation was forced to seek Government assistance to avoid failure. As part of the TARP program, the U.S. Treasury provided Chrysler a bridge loan which required Chrysler to develop a plan to achieve long term viability. In April 2009, Chrysler filed for bankruptcy, in the process rejecting 789 dealer franchise agreements. Several groups of rejected dealers sued the United States claiming that the Government, in its role as lender of last resort, coerced Chrysler into rejecting the franchise agreements and claiming the rejection was an illegal taking under the Fifth Amendment. Plaintiffs claimed that, but for the rejections, the dealers would have survived and retained value under several scenarios. The dealers sought $1 billion in damages.

Compass Lexecon and its President, Professor Daniel Fischel, were retained by the Department of Justice to respond to plaintiffs’ various alleged scenarios. A trial was held in the Court of Federal Claims in April and May 2019. Professor Fischel testified, among other things, that Plaintiffs’ scenarios were implausible and unsupported, that Chrysler was insolvent and could not have survived absent Government support, that Plaintiffs’ experts claims that Chrysler could have been bought by various other auto companies were not plausible, that financing necessary for a restructuring with continued production was not available in the market, and the Government’s terms, rather than being coercive, were consistent with terms commonly requested by commercial lenders to protect their capital.

On October 3, 2019, Judge Nancy B. Firestone of the Court of Federal Claims rejected the Plaintiffs’ claims in their entirety, holding that “the evidence established that Chrysler would have faced immediate liquidation” absent Government assistance and that Plaintiffs “failed to prove their franchise agreements would have had value” absent Government assistance. Her opinion extensively discussed and repeatedly relied upon Professor Fischel’s testimony. The court emphasized, for example, that “Professor Fischel, with his extensive expertise, provided persuasive testimony which confirmed to the court that [Plaintiffs’ expert’s] opinions were based on pure speculation,” and that Professor Fischel’s testimony “systematically and convincingly explained” why Plaintiffs’ claims had no merit.

Professor Fischel was supported by a Compass Lexecon team led by Jessica Mandel in Compass Lexecon’s Chicago office that included Todd Kendall, Clifford Ang, Avisheh Mohsenin, Robin Stahl, Kevin Hartt, Andrew Lin and Heather Freilich. We worked closely with attorneys at the United States Department of Justice including Kenneth Dintzer, Elizabeth Hosford, James Connor, Alison Vicks and Zachary Sullivan.