Two South Dakota car dealers who sued General Motors in May after it sent letters ending franchise agreements have informed the federal court that they are dropping their case against the Detroit automaker.
A Sioux Falls law firm representing Springs Auto Inc. of Wessington Springs and Yankton Motor Co. of Yankton on Friday informed the U.S. District Court in Sioux Falls that the action could be dismissed.
The court had sent the law firm a letter saying GM had not been served within the required 120-day window.
Attorney Steven Johnson, who represents the car dealers, said the suit was filed before GM filed for bankruptcy protection and the federal government stepped in, which left dealers with no legal avenues to pursue.
Calls to GM's communications office and were not immediately returned Wednesday.
Springs Auto and Yankton Motor filed the complaint based on a South Dakota law that says a company can't end a franchise with a dealer before having a hearing. It asked 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.
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.
The U.S. House last week approved a compromise plan to give General Motors Co. and Chrysler Group LLC dealers an appeals process to keep their showrooms open.
The provision, part of a $1.1 trillion spending bill, gives 789 Chrysler dealers closed in June and more than 1,350 GM dealers expected to be shut down next year an opportunity to challenge the automakers' decisions. The House plan would require arbitration panels to consider a number of circumstances, giving some car dealerships a better chance of surviving.
GM and Chrysler have attempted to shed dealerships as part of their government-led bankruptcies.
The two automakers earlier this month said that they would reconsider decisions to close the dealers as part of a compromise plan including face-to-face reviews with dealerships and binding arbitration for dealers who challenge the decisions.
A dozen Canadian car dealers last month sued GM for alleged breach of contract in Ontario Superior Court in an attempt to keep their businesses open, according to The Canadian Press.