Springs Auto, Yankton Motor Co. sue GM to stay open

Two South Dakota car dealers are suing General Motors, claiming state law bars the Detroit automaker from ending its franchise with them, at least without a hearing.

Springs Auto Inc. in Wessington Springs and Yankton Motor Co. in Yankton filed the federal complaint in Sioux Falls.

The lawsuit, brought before GM filed for bankruptcy, asks a judge to declare that GM's May 14 notice to close the dealerships on Oct. 31, 2010, is against the law, void and can't be enforced.

"South Dakota has a statute that says you can't end a franchise with a dealer before having a hearing," said Michael Dady, the attorney representing the two dealers.

"We'd like you to revoke the letters, schedule a hearing and you can tell the hearing examiner why you have the right to do it and we can tell them why you don't," he said of the notice sent to GM.

Dady said he's negotiating with GM's attorney in hopes a hearing can be scheduled.

GM's in-house lawyer handling the issue could not immediately be reached for comment.

Dady said South Dakota is one of a few states - or maybe the only one - with such a requirement.

"It's not typical," he said.

Since the complaint was brought May 29, before GM filed for bankruptcy, such laws will have to be considered, but the question about the dealers' rights still must be resolved, Dady said.

The complaint cites four reasons the GM letter violates South Dakota law: GM didn't notify the state, hasn't given a good reason to close the franchises, failed to show that the needs of the communities will be served without them, and the dealers have a right to a new contract if they fulfilled their obligations.

"An actual controversy exists between dealers and GM as to whether GM may refuse to continue their franchises on the grounds set forth in the refusal to continue letter. As a result, plaintiffs seek a declaration from this court ... that GM may not terminate, may not refuse to continue their agreements, and that their agreements shall remain in force after October 2010," the lawsuit states.

GM has not answered the complaint, according to the court file.

Springs Auto has been a GM dealer for 29 years and sells Chevrolet, Pontiac and Buick automobiles. Yankton Motor has carried GM vehicles for 12 years and sells GMC trucks and Pontiac vehicles.

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