MEMORANDUM AND ORDER
The plaintiffs in this action assert that certain state statutes directed toward the relationships between vehicle manufacturers and their dealership franchises violate the Supremacy Clause because they are contrary to provisions of the federal Bankruptcy Code, 11 U.S.C. §§ 363, 365, et seq., as well as the orders of the bankruptcy court in In re Old Carco LLC (f/k/a Chrysler LLC), et al., Case No. 09-50002(AJG) (the “Bankruptcy Court”). Separately, the plaintiffs contend that the statutes unlawfully interfere with the parties’ reasonable contractual expectations, thereby violating the Contract Clause of the Constitution and the Kentucky State Constitution. In an Order dated April, 2011, this Court withdrew the automatic reference to the Bankruptcy Court, concluding that non-core issues of federal law predominated. (Docket # 5.) The plaintiffs move for summary judgment in their favor, and officials from the state of Kentucky move to dismiss the Complaint.
For the reasons explained below, plaintiffs motion for summary judgment is granted as to the claim of preemption under the Supremacy Clause against the Kentucky defendants. The motion to dismiss filed by the Kentucky defendants is denied. The claim against Colorado is dismissed without prejudice for the reasons discussed below. I do not reach the plaintiffs Contract Clause claim as it is unnecessary to do so. Familiarity with my opinion in
In re Old Carco LLC,
The facts of this case are largely undisputed. Except as noted, the facts asserted by the plaintiffs, as they are set forth below, are admitted by all defendants. Every reasonable inference is drawn in favor of the non-moving parties.
Allen v. Coughlin,
Plaintiffs Old Careo and Old Careo Motors (collectively, the “Debtor Plaintiffs”) are, along with twenty-four of their affiliates, debtors in the above-captioned Chapter 11 bankruptcy proceedings. (PI. 56.1 ¶ 1; Col. 56.1 Opp. ¶ 1; Ken. 56.1 Opp. ¶ 1) Old Careo formerly manufactured Chrysler, Jeep and Dodge brand vehicles, with Old Careo Motors acting as distributor to authorized dealers in the United States. (PI. 56.1 ¶ 2; Col. 56.1 Opp. ¶2; Ken. 56.1 Opp. ¶2) Plaintiff Chrysler Group LLC (“New Chrysler”) is a newly created entity that assumed certain liabilities of Chrysler debtors, including non-parties to this action. (PI. 56.1 ¶ 4; Col. 56.1 Opp. ¶4; Ken. 56.1 Opp. ¶ 4) New Chrysler both manufactures and distributes the Chrysler, Jeep and Dodge vehicle brands. (PI. 56.1 ¶ 4; Col. 56.1 Opp. ¶ 4; Ken. 56.1 Opp. ¶ 4) It is not a debtor in the bankruptcy action.
Three separate rulings of the Bankruptcy Court are relevant to the preemption claim. Each of these rulings bears on the plaintiffs’ obligations to vehicle dealership franchises, the state-law regimes that govern relations between manufacturers, distributors and dealers, and the nexus between the Bankruptcy Code and state dealer laws.
I. The Sale Opinion and the Sale Order
The Debtor Plaintiffs entered into a purchase agreement with New Chrysler and Fiat S.p.A. (“Fiat”) dated April 30, 2009 (the “Purchase Agreement”). (PL 56.1 ¶ 3; Col. 56.1 Opp. ¶ 3; Ken. 56.1 Opp. ¶ 3.) As summarized in an opinion of the Bankruptcy Court approving the transaction, New Chrysler acquired the debtors’ assets and liabilities for $2 billion, while Fiat acquired an ownership interest in New Chrysler and provided it with technological support.
In re Chrysler, LLC,
II. The Assumed Agreements and the Rejected Dealer Agreements
Pursuant to the Purchase Agreement and the Sale Order, New Chrysler’s “purchased assets” included assumed and assigned dealer agreements for Chrysler, Dodge and Jeep vehicle lines (the “Assumed Agreements”). (PI. 56.1 ¶ 13; Col. 56.1Opp. ¶ 13; Ken. 56.1 Opp. ¶ 13.) Cer
On June 9, 2009, following argument and an evidentiary hearing, the Bankruptcy Court entered an order, pursuant to 11 U.S.C. §§ 105 and 365, that authorized the debtors’ rejection of the executory contracts and unexpired leases with the Rejected Dealers (the “Rejection Order”). (PI. 56.1 ¶ 115; Col. 56.1 Opp. ¶ 15; Ken. 56.1Opp. ¶ 15.) On June 19, 2009, the Bankruptcy Court issued an opinion explaining the basis for the Rejection Order, particularly as to the debtors’ “persuasive showing” that the rejection of existing dealer contracts would benefit the estate and was the product of sound business judgment.
In re Old Carco LLC,
III. Preemption of Rejected-Dealer Claims Brought Under State Law
On August 13, 2009, the debtors and New Chrysler filed a joint motion in the Bankruptcy Court to enjoin legal actions brought by Rejected Dealers in Arkansas, Ohio and Wisconsin as contrary to the Sale Order, the Sale Opinion, the Rejection Order and the Rejection Opinion, as well as the Bankruptcy Code’s automatic stay provision, 11 U.S.C. § 362. (PI. 56.1 ¶ 22; Col. 56.1 Opp. ¶ 22; Ken. 56.1 Opp. ¶22.) In an unpublished opinion dated August 31, 2009, the Bankruptcy Court held that the Sale Order barred the dealers’ lawsuits, since the Sale Order “clearly prohibited any successor or transferee liabilities against New Chrysler.” (Compl. Ex. F at 5-6.) The Bankruptcy Court stated that “a crucial condition” of its approval of the Fiat transaction was that New Chrysler would not be required to assume all then-existing dealer agreements, and it concluded that the actions against New Chrysler brought pursuant to the state franchise laws were “enjoined by the Sale Order.” (Compl. Ex. F at 6.)
The Bankruptcy Court also held that the state franchise laws were “preempted by the Bankruptcy Code to the extent that the enforcement of such laws conflict with
are in direct conflict with the terms of the Rejection Order because the Dealers are seeking to burden New Chrysler with the obligation of either continuing the previously rejected dealer agreements or suffering other unfavorable consequences as a result of the rejected dealer agreements. The Rejection Order ended the Dealers’ right to act as authorized dealers while the Wisconsin, Ohio and Arkansas statutes resurrect precisely those rights and compel New Chrysler, the successor/transferee of Debtors, to resume the dealer agreements. As there is a direct conflict between the Rejection Order and the statutes under which the Subject Actions are based, the state statutes are preempted under the Rejection Order and the Dealers are enjoined under the Sale Order from bringing any actions pursuant to these statutes in any court.
(Compl. Ex. F at 8.) The Bankruptcy Court further held that because the state lawsuits “would undermine and frustrate the benefit achieved through the rejection process, such statutes were preempted.” (Compl. Ex. F at 9.) In an unpublished memorandum and order dated July 2, 2010, Judge McMahon affirmed the Bankruptcy Court’s opinion. In re Old Carco Liquidation Trust, 09 Civ. 8875(CM) (S.D.N.Y. July 2, 2010).
IV. Allegations in the Present Action
The Complaint asserts that federal preemption bars state officials from enforcing certain dealership laws, and seeks declaratory and injunctive relief. In March 2010, Colorado amended several sections of its state dealer laws. (PL 56.1 ¶ 25; Col. 56.1 Opp. ¶ 25) In June 2010, Colorado also enacted an additional amendment to its dealer law. (PL 56.1 ¶ 26; Col. 56.1 Opp. ¶ 26.) Kentucky enacted an amendment to its state dealer law in July 2010. (PL 56.1 ¶ 27; Ken. 56.1 Opp. ¶ 29.) The defendants are government officials of the states of Colorado and Kentucky whose responsibilities include the enforcement of state automobile dealer laws. (Pl. 56.1 ¶¶ 5-9; Col. 56.1 Opp. ¶¶ 5-9; Ken. 56.1 Opp. ¶¶ 5-9.) As discussed in greater detail below, these state dealer amendments granted protections to preexisting dealerships in the event that a manufacturer or distributor were to contract with a new or different dealership in the same geographic area.
On April 23, 2010, the Debtors and New Chrysler filed a Complaint in the Bankruptcy Court, asserting that the Bankruptcy Code and the final orders of the Bankruptcy Court preempt the dealer amendments of Colorado and Kentucky. The Debtor Plaintiffs and New Chrysler also allege that the state dealer laws violate the Contract Clause of the U.S. Constitution, U.S. Const, art. I, § 10. The Debtor Plaintiffs and New Chrysler seek a declaration pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201(a), which, with exceptions not relevant here, provides that “any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.”
PROCEDURAL HISTORY
The Colorado defendants filed a motion in this Court to withdraw the reference pursuant to either the mandatory or discretionary withdrawal provisions of 28
The present motion followed. In addition, the Kentucky defendant moves to dismiss the Complaint. The Court heard oral argument on the pending motions.
THE DECLARATORY JUDGMENT ACT AND THE ELEVENTH AMENDMENT
This is an action for declaratory and injunctive relief against public officials in Colorado and Kentucky. The defendants concede that this court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1367 but assert that the case is barred by the Eleventh Amendment. (Col. Opp. at 10; Ken. Mem. at 8; Ken. Rep. at 4.) In
Ex parte Young,
The Declaratory Judgment Act provides that “[i]n a case of actual controversy within its jurisdiction ... any court of the United States ... may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). “[T]he phrase ‘case of actual controversy’ in the Act refers to the type of ‘Cases’ and ‘Controversies’ that are justiciable under Article III.”
MedImmune, Inc. v. Genentech, Inc.,
Judges within this district, but not the Second Circuit, have had occasion to apply
Medlmmune. See, e.g., Ass’n for Molecular Pathology v. U.S. Patent & Trademark Office,
According to the Complaint and the record on summary judgment, the defendants are officers of states that have adopted laws alleged to be contrary to the Supremacy Clause and the Contract Clause. For the plaintiffs, the alternative to pursuing declaratory relief would be to test the constitutionality of the state dealer laws by violating them. As
Medlmmune
notes, this is the very conduct that the Declaratory Judgment Act seeks to avoid.
STANDING, RIPENESS AND VENUE
Kentucky contends that the plaintiffs, and Old Careo specifically, lack standing to assert these claims against the Kentucky Motor Vehicle Commission. “Standing is a federal jurisdictional question ‘determining the power of the court to entertain the suit.’ ”
Carver,
This court may entertain a suit as long as one plaintiff has standing and need not establish whether other plaintiffs also have standing before proceeding to the merits of a case.
Bowsher v. Synar,
New Chrysler would like to award its vehicle lines to a dealer of its choice in the St. Matthews area of Louisville, Kentucky but that dealer will not be granted a license under the Kentucky statute unless New Chrysler first offers the same agreement to a former, rejected dealer in that market. (See Tangeman Decl. ¶¶ 12-14.) Kentucky implies that New Chrysler’s dealer should have to apply for, and presumably be denied, a license for this claim to be ripe, but this ignores the negative impact the Kentucky statute is having on New Chrysler’s ability to attract dealers on competitive terms in these markets. The issues are fit for judicial determination and withholding consideration will cause plaintiffs hardship as New Chrysler seeks new dealers. The claim is sufficiently ripe for adjudication.
At oral argument, Colorado argued that the claim against it was not ripe because the Colorado statutes, on their face, do not apply to any of the plaintiffs in this action, an argument not raised in its written submissions. “It’s clear that the statute, as a matter of ... statutory interpretation, ... applies to an auto manufacturer that went through an insolvency proceeding or [to] its successor; and that by virtue of the orders entered in bankruptcy court, New Chrysler isn’t either.” (Trial Transcript of January 28, 2012 Hearing at 14-15.) Colorado acknowledges that it is bound by the Bankruptcy Court’s Orders and Opinions that are discussed in further detail below, which found that New Chrysler is not a successor to Old Careo.
“It’s always been Colorado’s view that we’re bound by the sale order. We had notice of the Chrysler bankruptcy.... We did not object to the sale.... It’s always been our view that the sale order is a final order. We’ve not challenged in in this litigation or in any other forum. The sale order states that New Chrysler is not a legal successor for any purpose of Old Careo.... [W]e accept that order of the Court.” (Tr. Trans, at 12-13.)
For these reasons, I conclude that the claim against Colorado is not ripe, dismiss it without prejudice and retain continuing jurisdiction over the matter.
Lastly, Kentucky argues that venue is not proper in this district. Because this case is within the core jurisdiction of
This court also denies Kentucky’s request to transfer the case to the Eastern District of Kentucky. District courts should consider a number of factors in determining whether transfer is appropriate, including: “(1) the plaintiffs choice of forum, (2) the convenience of witnesses, (3) the location of relevant documents and relative ease of access to sources of proof, (4) the convenience of parties, (5) the locus of operative facts, (6) the availability of process to compel the attendance of unwilling witnesses, [and] (7) the relative means of the parties.”
D.H. Blair & Co. v. Gottdiener,
SUMMARY JUDGMENT STANDARD
Summary judgment “shall” be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Rule 56(a), Fed.R.Civ.P. It is the initial burden of a movant on a summary judgment motion to come forward with evidence on each material element of his claim or defense, demonstrating that he or she is entitled to relief. A fact is material if it “might affect the outcome of the suit under the governing law....”
Anderson v. Liberty Lobby, Inc.,
An issue of fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”
Anderson,
I. Overview of the Disputed State Dealer Laws
The disputed dealer amendments passed by Colorado and Kentucky are directed toward the ability of a manufacturer or distributor to contract with a dealership franchise in a geographic market area recently occupied by a terminated dealer of the same vehicle brand. Each of the statutes became effective after the Sale Opinion of May 31, 2009 and the Rejection Order of June 9, 2009. An analysis of the plaintiffs’ preemption and Contract Clause claims begins with the text of these statutory amendments. I review each in turn.
A. Colorado
Colorado Dealer Law prohibits a variety of practices between automobile manufacturers and franchisees. The disputed amendments to that law are set forth in Colorado House Bill 10-1049, which became effective on March 22, 2010. The statute prohibits a successor manufacturer from establishing any new dealerships, or relocating existing dealerships, within a 5-10 mile radius of a Rejected Dealer for five years without first offering the dealership to the Rejected Dealer on the same terms. Colo.Rev.Stat. § 12-6-120.3(5)(c). In the alternative, the Rejected Dealer may opt to have the successor manufacturer pay the Rejected Dealer the “fair market value of the [rejected] motor vehicle dealer’s goodwill” within ninety days of rejection. Colo.Rev.Stat. § 12-6-120(r). The successor manufacturer would also have to reimburse Rejected Dealers for “any upgrades or alterations” made to the dealership in the five years preceding the rejection. Colo.Rev.Stat. § 12-6-120(v). The penalty for failure to comply with these requirements is $10,000-25,000 per day and the Executive Director of the Colorado Department of Revenue may take action to suspend or revoke the successor manufacturer’s license. Colo.Rev.Stat. § 12-6-105.
Colorado argues that this statute does not apply to any of the plaintiffs in this case. The statute would not apply to Old Careo Liquidation Trust, the successor to Old Careo and Old Careo Motors, because it does not manufacture or distribute cars in Colorado or hold a license to do so. Colorado also argues that the statute does not apply to New Chrysler because it is not a successor of Old Careo and Old Careo Motors and thus, has never terminated any franchises as the result of insolvency. In support, Colorado cites to the Sale Order, which states that New Chrysler “shall not be deemed, as a result of any action taken in connection with the Purchase Agreement or any of the transactions of documents ancillary thereto or contemplated thereby or the acquisition of the Purchased Assets, to: (a) be a legal successor, or otherwise be deemed a successor to the Debtors.... ” (Sale Order, p. 40 ¶ 35.) The Sale Order also states that “the Purchaser shall not have any successor ... liability[y] ... for any Claims ... on any theory of successor or transferee liability, ... whether known or unknown
B. Kentucky
The disputed Kentucky amendments became effective on July 14, 2010 and preclude the Kentucky Motor Vehicle Commission from granting new dealer licenses to applicants within a ten mile radius of a Rejected Dealer for ten years unless the Rejected Dealer is first offered, and rejects, “substantially similar terms” by New Chrysler. Ky.Rev.Stat. § 190.0451. This amendment also applies to dealers that wish to relocate existing dealerships to these areas. Id. There is no dispute that this amendment applies to New Chrysler.
II. The Bankruptcy Code and the Orders of the Bankruptcy Court Preempt the State Dealer Laws
The Constitution’s Supremacy Clause, Article VI, Clause 2, states that federal law “shall be the supreme Law of the Land ... any Thing in the Constitutions or Laws of any State to the contrary notwithstanding.” Since
Gibbons v. Ogden,
(1) express preemption, where Congress has expressly preempted local law; (2) field preemption, “where Congress has legislated so comprehensively that federal law occupies an entire field of regulation and leaves no room for state law”; and (3) conflict preemption, where local law conflicts with federal law such that it is impossible for a party to comply with both or the local law is an obstacle to the achievement of federal objectives.
New York SMSA Ltd. Partnership v. Town of Clarkstown,
“By their nature, field preemption and conflict preemption are usually found based on implied manifestations of congressional intent.”
New York SMSA Ltd.,
Preemption is presumed not to apply in areas traditionally regulated by the States.
See, e.g., Wyeth v. Levine,
555
The exclusive authority of Congress and the federal courts to pass and enforce the bankruptcy laws has long been recognized, and the federal courts have guarded against the states’ encroachment into bankruptcy.
Int’l Shoe,
Courts including the Second Circuit have discussed in detail the Bankruptcy Code’s preemption of state-law claims in the context of tort claims asserting injury from a defendant’s conduct in bankruptcy proceedings. In each case, a plaintiff commenced an action asserting that a defendant’s action in bankruptcy court were contrary to state law, and raised the claim in a tribunal other than bankruptcy court. Courts have uniformly concluded that the Bankruptcy Code preempted the state law claims.
In
Eastern Equipment & Services Corp. v. Factory Point Nat’l Bank,
(1) Congress placed bankruptcy jurisdiction exclusively in the district courts under 28 U.S.C. § 1334(a); (2) Congress created a lengthy, complex and detailed Bankruptcy Code to achieve uniformity; (3) the Constitution grants Congress exclusive power over the bankruptcy law, see U.S. Const, art. I, § 8, cl. 4; (4) the Bankruptcy Code establishes several remedies designed to preclude the misuse of the bankruptcy process; and (5) the mere threat of state tort actions could prevent individuals from exercising their rights in bankruptcy, thereby disrupting the bankruptcy process.
While the facts of
Eastern Equipment
were limited to claims alleging noncompliance with the automatic stay, in
Astor Holdings, Inc. v. Roski,
Eastern Equipment
and
Astor Holdings
both relied on the Ninth Circuit’s
MSR Exploration
opinion, which Judge Lynch described as using “sweeping language” comparable to
Eastern Equipment. Id.
at 263.
MSR Exploration
observed that even a minor incursion into federal bankruptcy was tantamount to “state courts, in effect, interfering with the whole complex, reticulated bankruptcy process itself.”
Id.; accord In re Miles,
Eastern Equipment, Astor Holdings
and
MSR Exploration
all arose out of collateral litigations that challenged the conduct of bankruptcy proceedings. The state dealer laws, in their current form, pose similar obstacles to the enforcement of the Bankruptcy Code and the lawful judicial orders issued thereunder. Claims brought under the states’ dealer amendments would necessarily revisit the Rejection Opinion and the Rejection Order, amounting to a use of state law to mount a collateral attack on the Bankruptcy Court’s Rejection Order. The Bankruptcy Code explicitly grants a bankruptcy court the power to reject an executory contract. 11 U.S.C. § 365(a) (“the trustee, subject to the court’s approval, may assume or reject any executory contract or unexpired lease of the debtor.”). As noted in the Rejection Opinion, the authority to reject an executo-ry contract has been described by the Supreme Court as “ ‘vital to the basic purpose to a Chapter 11 reorganization....’”
The Rejection Opinion based its reasoning on the business judgment standard, which applies when a Bankruptcy
The defendants argue that the Supremacy Clause and preemption doctrine do not apply to federal judicial rulings, and instead apply only to regulations and statutes. But the Bankruptcy Code is not self-executing. In approving the assumption and rejection of certain dealer agreements, the Bankruptcy Court implemented 11 U.S.C. § 365(a). The Bankruptcy Code vests the bankruptcy courts with authority to implement the federal statutory scheme, and grants them the power to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.” 11 U.S.C. § 105(a);
see also Adelphia Business Solutions, Inc. v. Abnos,
The principles of conflict preemption preclude application of the challenged state dealer amendments to deny the debt- or and the purchaser the benefits of a judicially approved rejection of certain dealer franchise agreements in accordance with the Bankruptcy Code. Based on the record before me, the plaintiffs have established that compliance with the state dealer amendments would frustrate and undermine lawful actions taken pursuant to the Bankruptcy Code.
Freightliner Corp. v. Myrick,
The Bankruptcy Court has previously discussed the preemptive effect of its rulings. In holding that claims brought by Rejected Dealers in Arkansas and Ohio were preempted by the Rejection Order and the Rejection Opinion, the Bankruptcy Court held as follows:
The Subject Actions are in direct conflict with the terms of the Rejection Order because the Dealers are seeking to burden New Chrysler with the obligation of either continuing the previously rejected dealer agreements or suffering other unfavorable consequences as a result of the rejected dealer agreements.The Rejection Order ended the Dealers’ rights to act as authorized dealers while Wisconsin, Ohio, and Arkansas statutes resurrect precisely those rights to compel New Chrysler, the successor/transferee of Debtors, to resume the dealer agreements. As there is a direct conflict between the Rejection Order and the statutes under which the Subject Actions are based, the state statutes are preempted under the Rejection Order and the Dealers are enjoined under the Sale Order from bringing any actions pursuant to these statutes in any court.
Both the Rejection Order and the Rejection Opinion found that, in their business judgment, the Debtors’ rejection of the agreements was necessary and appropriate to consummate the Fiat Transaction and transfer to the purchaser, New Chrysler, a smaller, more effective, and more profitable dealer network without disruption while limiting the Debtors’ potential postpetition obligations to the rejected dealers. Since the actions undertaken ... pursuant to the so-called “blocking statutes” would frustrate the benefit achieved through the rejection process, such statutes were preempted and the Subject Actions precluded.
(Compl. Ex. F at 8-9.) The Rejection Order included the following statement:
To the extent that any Dealer Laws conflict with the terms of this Order or the impact of the rejection of the Rejected Agreements under the Bankruptcy Code and applicable case law, such laws are preempted by the Bankruptcy Code, pursuant to the Supremacy Clause of the United States Constitution.
(Rejection Order ¶ J.) The Bankruptcy Court’s reasoning applies with equal force to the plaintiffs’ challenge to the amendments.
In at least two other instances, federal courts have held that the Bankruptcy Code preempts the application of state laws governing the relationship between automobile franchises and manufacturers.
In re Dan Hixson Chevrolet Co.,
The Kentucky statute conflicts with the Rejection Order and the Rejection Opinion, which have already approved New Chrysler’s termination of Rejected Dealer Agreements. The Rejection Opinion specifically states that “blocking rights ... impose limitations on ... manufacturers ... [that] ... frustrate § 365” of the Bankruptcy Code. (Rejection Opinion at 32.) The parties do not dispute that the Kentucky statute, if enforced, would prevent New Chrysler from licensing a new franchisee in the area of a Rejected Dealer
The Kentucky statute purports to revive the Rejected Dealer rights that were specifically extinguished in the Rejection Opinion and thus, is incompatible with the ruling of the Bankruptcy Court. The statute identifies a state-sanctioned method for rejecting a dealer; if a manufacturer, in good faith and with good cause, notifies a dealer of its termination ninety days prior to the effective date of termination, then § 190.0451 of the statute is not triggered, and the rejected dealer acquires no blocking rights. See Ky.Rev. Stat. §§ 190.045-190.0451. Good cause includes failure to comply with a term of the franchise agreement and poor sales performance, and the notification requirement decreases to fifteen days in the case of termination due to insolvency. Id. Because a rejection order from a federal bankruptcy court does not satisfy the state-sanctioned method of rejection, a manufacturer wishing to establish a new, or relocate an existing, dealership within ten miles of the rejected dealer in the next ten years must first offer the rejected dealer the franchise on substantially similar terms, effectively granting the rejected dealer the blocking rights extinguished by the Bankruptcy Court. See Ky.Rev.Stat. § 190.0451; (Rejection Opinion at 32.) The Kentucky statutory scheme renders full enforcement of the orders of the Bankruptcy Court impossible. The Supremacy Clause of the U.S. Constitution resolves the direct conflict in favor of the federal statute.
Kentucky’s argument that it may not decide to enforce the statute against New Chrysler does not alter the fact that the statute conflicts with federal law. Similarly, that this prohibition is effectuated not by prohibiting New Chrysler from contracting with a new dealer but by denying the license directly to the dealer seeking the franchise does not change the analysis. The coercive effect is the same.
For the foregoing reasons, I conclude that the federal Bankruptcy Code, as enforced by the orders of the Bankruptcy Court, preempts the disputed statutory amendments of Kentucky as they apply to the plaintiffs. Summary judgment is therefore granted to the plaintiffs on that claim.
III. Defendant Kentucky’s Motion to Dismiss is Denied
The motion to dismiss filed by Kentucky does not set forth any arguments distinguishable from those raised in their opposition to summary judgment. For the reasons already explained, the motion to dismiss filed by Kentucky is denied. CONCLUSION
The plaintiffs’ motion for summary judgment is GRANTED as to their preemption claim against Kentucky defendant Cottrell. (Docket # 29, No. 10-05010.) The motion to dismiss filed by Kentucky is DENIED. (Docket # 17, No. 10-05010.) The Amended Complaint is DISMISSED without prejudice as to the Colorado defendants, but this court retains continuing jurisdiction over the matter.
The parties are directed confer as to a proposed form of judgment that sets forth both the declaratory and injunctive relief sought in the Complaint. The proposed form of judgment should be submitted to the Court no later than March 23, 2012. In the event that the parties are unable to agree on a proposed form of judgment, the plaintiffs shall submit a proposed judgment and the defendants may set forth the basis for their disagreements via letter-brief within three days.
SO ORDERED.
Notes
. The Rejection Order and Rejection Opinion were never appealed, although more than six months after the order and opinion were filed, certain Rejected Dealers filed a motion to reconsider, which the Bankruptcy Court denied.
In re Old Carco LLC,