Presently, two automakers have been formed as a result of bankruptcy and with financial assistance from the federal government: Chrysler Group LLC and General Motors Company. 2743 and S. 1304 , appear intended to renew statutory and contractual obligations that were owed from Old Chrysler and Old GM to their respective dealers before bankruptcy. 2796 , has similar requirements without naming the auto manufacturers to which it applies. This report will address various constitutional concerns raised by these bills. The three areas of concern are (1) whether the bills violate the uniformity requirement of the Bankruptcy Clause of the U.S. Constitution; (2) whether mandatory assignment of the contractual and statutory obligations associated with the dealer contracts in question to the New GM and the New Chrysler would violate either substantive due process or the Fifth Amendment's Takings Clause; and (3) whether such mandatory assignment would make the United States liable for damages under a theory of breach of implied contract. Current Legislative Proposals

The current legislative proposals appear to be Congress's response to the current bankruptcy proceedings involving Old Chrysler and Old GM and their network of former and soon-to-be-former dealers. Factors a court might consider as suggesting that the proposals, if passed, are bankruptcy laws include (1) the termination of the dealers' agreements was done during bankruptcies; (2) the dealers were unsecured creditors in the bankruptcies; (3) the assets were sold to the new entities as part of bankruptcy proceeding; and (4) the New Chrysler and New GM were formed as a result of bankruptcies. It is less clear whether these automakers would be subject to the proposals in H.R. H.R. 2796 and § 744(b) of H.R. If the provisions of these legislative proposals were to apply to Old GM and Old Chrysler, application of these sections could apply to benefit one class of claimants in a specific class of debtors by allowing them to extend their franchise agreements to a new entity that purchased the assets of the debtor. Although it is impossible to say whether a court would find that these bills meet the uniformity requirement of the Bankruptcy Clause, comparison to Gibbons makes it seem plausible that the bill, if enacted, might face legal challenges in the courts. Turning to substantive due process (and subject to the voluntary-action exclusion at the start of the takings discussion), the picture remains cloudy. Indeed, research fails to reveal any Supreme Court decision in the past half-century finding economic legislation to violate substantive due process. For the foregoing reasons, the possibility cannot be dismissed that the forced contracts (with specified terms and parties) might be judicially determined to offend substantive due process. Breach of Contract62

The facts at issue in the case United States v. Winstar may be somewhat analogous to the application of the instant legislation to the New GM and the New Chrysler. Additionally, it appears that the approval of the sale of assets by the bankruptcy court included both a plan for an infusion of federal money into the New Chrysler and New GM, and an expectation that New Chrysler and New GM would be able to avoid the statutory and contractual obligations of many of the dealership agreements.
Auto dealers, which act as intermediaries between automakers and final consumers, are independent businesses with contracts with the automakers. As General Motors Corporation (Old GM) and Chrysler LLC (Old Chrysler) have moved through bankruptcy restructuring, the presence of these dealer contracts has been an important issue. In order to allow the automakers to downsize and seek a more competitive business model, the bankruptcy courts allowed both Old Chrysler and Old GM to cut their dealership networks. This allowed the new entities that bought the assets of the bankrupt companies, Chrysler Group LLC (New Chrysler) and General Motors Company (New GM), to operate without the contractual and statutory obligations associated with those dealership agreements.
Dealers objected to the cuts, first in the bankruptcy proceedings, and later in the media and to the Congress. Several congressional hearings have been held that addressed the reduction of the automakers' dealership networks. Additionally, several bills have been introduced that appear to be intended to restore the dealership agreements with the automakers in bankruptcy or assign those agreements to the newly created automakers that purchased assets from those automakers that are currently in bankruptcy proceedings.
This report discusses the constitutionality of legislation to require that auto manufacturers receiving federal aid be subject to the contractual and statutory obligations owed to such dealers before bankruptcy. The report will address two forms of these proposals, one that addresses GM and Chrysler dealers specifically (H.R. 2743 and S. 1304), and one that addresses the issue of dealership assignment more generally (H.R. 2796 and H.R. 3170 § 744(b)). The report will address three questions: (1) whether these proposals violate the uniformity requirement of Article I, Section 8, clause 4 of the Constitution (the Bankruptcy Clause); (2) whether mandatory assignment of the dealers' contracts to the New GM and the New Chrysler would violate either substantive due process or the Fifth Amendment's Takings Clause; and (3) whether such mandatory assignments could make the United States liable for damages under a theory of breach of implied contract.
The report concludes that, of the proposals at issue, those that arguably are not limited to the GM and Chrysler bankruptcies may be less likely to be found to violate the uniformity requirement of the Bankruptcy Clause. The report also concludes that, while it is difficult to establish the long-term economic impact of these legislative proposals, the application of these bills to the New GM and the New Chrysler are not likely to be found to violate substantive due process, or to constitute a taking in violation of the Fifth Amendment of the Constitution if analyzed under current case law. However, these proposals are beyond anything the U.S. Supreme Court has previously addressed in its substantive due process decisions, which makes it impossible to dismiss the possibility that the Court might find that substantive due process was offended by forcing the new automakers to be parties to dealership contracts formed between the dealers and the bankrupt automakers. Additionally, the report concludes that it is not clear to what extent the United States might be liable under a breach of implied contract theory for the application of these bills to those two new corporate entities.