Volkswagen of America, Inc. v. Bronsberg & Hughes Pontiac, Inc.BRIEF IN OPPOSITION re MOTION to Dismiss for Lack of JurisdictionM.D. Pa.April 7, 2017 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA VOLKSWAGEN OF AMERICA, INC., An Operating Unit of Volkswagen Group of America, Inc., A New Jersey Corporation, Plaintiff, v. BRONSBERG & HUGHES PONTIAC, INC. d/b/a WYOMING VALLEY VOLKSWAGEN, A Pennsylvania Corporation, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. 17-cv-00010-JEJ Judge John E. Jones III VOLKSWAGEN OF AMERICA, INC.’S OPPOSITION TO DEFENDANT’S MOTION TO DISMISS OR STAY Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 1 of 36 i TABLE OF CONTENTS INTRODUCTION................................................................................................................ 1 BACKGROUND ................................................................................................................... 4 A. The Asset and Real Estate Purchase Agreement. ................................................. 5 B. VWoA’s Filing of This Lawsuit and Its Conditional Exercise Letter to Wyoming Valley. ....................................................................................................... 6 C. VWoA’s Letter to Wyoming Valley Regarding the Emissions Settlement. ................................................................................................................. 7 D. Wyoming Valley’s Filing of the Board Action. ..................................................... 8 E. Napleton’s Motion to Intervene. ............................................................................ 8 ARGUMENT ......................................................................................................................... 9 I. Wyoming Valley’s Motion Should Be Denied Because The Board Has Limited Jurisdiction and Is Likely Biased in Favor of Dealers, Making Any Form of Abstention or Deference Inappropriate. ...................................................... 9 A. The Board Has Only Limited Jurisdiction and Restricted Purview Over Manufacturer/Dealer Disputes .................................................................. 9 B. The Board May Be Inherently Biased in Favor of Automobile Dealers ....... 11 II. Wyoming Valley’s Motion Should Be Denied Because Wyoming Valley Cannot Demonstrate That Any Particular Abstention Doctrine Should Apply in This Action. .................................................................................................... 15 A. The Wilton/Brillhart Abstention Doctrine Is Not Applicable ......................... 15 B. Colorado River Abstention Is Not Appropriate .................................................. 18 C. Burford Abstention Is Not Appropriate ............................................................. 21 D. Primary Jurisdiction Abstention is Not Appropriate ....................................... 25 III. Wyoming Valley’s Motion Should Be Denied To the Further Extent that It Seeks To Stay This Action. ........................................................................................... 29 E. This Court Should Not Stay This Action .......................................................... 29 CONCLUSION ................................................................................................................... 30 Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 2 of 36 ii TABLE OF AUTHORITIES Page(s) CASES Am. Motor Sales Corp. v. New Motor Vehicle Bd., 138 Cal. Rptr. 594 (Cal. Ct. App. 1977) ....................................................................... 13 America Honda Motor Co. v. Premier Quality Imports, LLC, No. Civ. A. 04-1205, 2005 WL 2036685 E.D. La. Aug. 10 ....................................... 24 Baykeeper v. NL Indus., Inc., 660 F. 3d 686 (3d Cir. 2011) .............................................................................. 25, 26, 28 Borough of Catasauqua v. Darwin Nat. Assur. Co., 2012 WL 1071224 (E.D. Pa. March 30, 2012) ............................................................ 24 Bowdoin v. Deckman, 997 F. Supp. 645 (E.D. Pa. 1998) ........................................................................... 18, 19 Brenner v. Pa. Bd. of Motor Vehicle Manufacturers, Dealers & Salesmen, 413 F. Supp. 639 (E.D. Pa. 1976) ................................................................................. 13 Business Edge Grp. v. Champion Mortg. Co., Inc., 519 F.3d 150 (3d. 2008) ................................................................................................. 25 Chantilly Farms, Inc. v. West Pikeland Township, No. 00-3903, 2001 WL 290645 (E.D. Pa. March 23, 2001) ...................................... 18 Colo. River Water Conservation Dist. v. United States, 424 U.S. 800 (1976) .................................................................................................. 14, 18 Crivelli v. General Motors Corp., 215 F.3d 386 (3d ) ........................................................................................................... 23 Culinary Serv. of Delaware Valley, Inc. v. Borough of Yardley, 385 Fed. Appx. 135 (3d Cir. Jun. 30, 2010) ..................................................... 21, 22, 23 Daimler Trucks N.Am. LLC v. McComb Diesel, Inc., No.15-cv-0030, Order .................................................................................................... 27 Gen. Motors Corp. v. Stan Olsen Pontiac GMC-Trucks, Inc., 2003 WL 23921745 (D. Neb. Dec. 9, 2003) ................................................................ 13 Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 3 of 36 iii Gibson v. Berryhill, 411 U.S. 564 (1973) .................................................................................................. 11, 12 Greate Bay Hotel & Casino v. Tose, 34 F.3d 1227 (3d Cir. 1994) ..................................................................................... 21, 26 Heffner v. Murphy, 866 F. Supp. 2d 358 (M.D. Pa. 2012) ........................................................................... 12 Holberts, Inc. v. Audi of America, Inc., 2012 WL 1606569 (E.D. Pa. May 8, 2012) .................................................................. 29 Litton Systems, Inc. v. Sw. Bell Tel. Co., 539 F.2d 418 (5th Cir. 1976) ......................................................................................... 26 Matusow v. Trans-County Title Agency, LLC, 545 F.3d 241 (3d Cir. 2008) ........................................................................................... 21 Mercedes-Benz USA, LLC v. Star Automobile Co., No.11-cv-73, 2011 WL 2175037 (M.D. Ga. Jun. 3, 2011) ......................................... 27 Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 103 S. Ct. 927 (1983) ...................................................................... 15, 19, 20 Nissan Motor Corp. v. Royal Nissan, Inc., 757 F. Supp. 736 (E.D. La. 1991) ................................................................................. 12 Nissan North America v. Jim M’Lady Oldsmobile, Inc., 2008 WL 4148528 (N.D. Ill. Aug. 29, 2008) ............................................................... 24 Phone-Tel Commc’ns, Inc. v. AT&T Corp., 100 F. Supp. 2d 313 (E.D. Pa. 2000) ............................................................................ 26 Rarick v. Federated Service Ins. Co., 2017 WL 1149099 (3d Cir. Mar. 28, 2017) ...................................................... 15, 16, 17 Riley v. Simmons, 45 F.3d 764 (3d Cir. 1995) ....................................................................................... 14, 21 Rosado v. Ford Motor Co., 337 F.3d 291 (3rd Cir. 2003) ......................................................................................... 23 Ryan v. Johnson, 115 F.3d 193 (3d Cir. 1997) ..................................................................................... 19, 20 Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 4 of 36 iv Schodle v. State Fram Mutual Automobile, 2017 WL 1177133 (E.D. Pa. March 30, 2017) ............................................................ 16 Southeastern Pennsylvania Transp. Auth. v. Am. Coastal Indus., Inc., 683 F. Supp. 285 (E.D. Pa. 1988) ................................................................................. 15 Sun Buick, Inc. v. Saab Cars USA, 26 F.3d 1259 (3d Cir. 1994) ........................................................................................... 13 Volkswagen of Am., Inc. v. State Bd. of Vehicles, 840 A.2d 479 (Pa. Commw. 2003) ................................................................................ 14 Volvo Group N. Am., LLC v. Truck Enters., Inc., 2016 WL 1479687 (W.D. Va. Apr. 14, 2016) .............................................................. 27 STATUTES 815 ILCS 710/16 .................................................................................................................. 24 63 P.S. § 818.3 ......................................................................................................................... 8 63 P.S. § 818.3(c) ............................................................................................................ 13, 14 63 P.S. § 818.7(7) .................................................................................................................. 11 63 P.S. § 818.8(d) .................................................................................................................. 10 63 P.S. § 818.8(d)(3) ............................................................................................................. 14 63 P.S. § 818.8(d)(5) ............................................................................................................. 11 63 P.S. § 818.11 ..................................................................................................................... 29 63 P.S. § 818.29 ..................................................................................................................... 11 LA Rev Stat § 32:1253(3)(a) ................................................................................................ 24 Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 5 of 36 1 INTRODUCTION More than three months ago, Plaintiff Volkswagen Group of America, Inc. (“VWoA”) filed this action against Defendant Bronsberg & Hughes Pontiac, Inc. d/b/a Wyoming Valley Volkswagen (“Wyoming Valley”), seeking to enjoin Wyoming Valley from closing its Asset and Real Estate Purchase Agreement (“APA”) with the Ed Napleton Automotive Group (“Napleton”). VWoA alleges in its Complaint that Wyoming Valley engaged in an extended course of bad faith conduct to thwart VWoA’s contractual and statutory right of first refusal (“ROFR”), and seeks, among other things, an order enjoining the closing of the APA to protect VWoA’s rights. At the time VWoA filed this action, it harbored concern that Wyoming Valley would later try to claim—despite its bad faith conduct—that VWoA’s deadline for exercising its ROFR had expired. Thus, acting with an excess of caution, VWoA sent a letter to Wyoming Valley explaining that it was conditionally exercising its ROFR and turning down the proposed transaction. VWoA explained in the letter that it was doing so under duress—a result of Wyoming Valley’s wrongful conduct—and stated that the exercise of its rights in the letter was subject to rescission if VWoA’s claims in this litigation succeed. Two months later, Wyoming Valley filed an administrative proceeding (the “Board Action”) with the Pennsylvania State Board of Vehicle Manufacturers, Dealers and Salespersons (the “Board”), alleging in conclusory fashion that (i) VWoA’s letter conditionally exercising its rights violated the Pennsylvania Board of Vehicles Act Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 6 of 36 2 (“Act”), and (ii) VWoA is violating the Act by holding in “escrow” settlement proceeds from a class action settlement that are subject to VWoA’s ROFR. In its filing, Wyoming Valley fails even to mention this action or its involvement in the related case initiated by Audi of America, Inc. (“AoA”), in which this Court enjoined the closing of the APA (the “Audi Action”). Much transpired in the two months between when VWoA filed this action and delivered the disputed letter to Wyoming Valley, and when Wyoming Valley filed its protest with the Board. In the Audi Action, the Court converted a temporary restraining order (the “TRO”) it had previously entered into a preliminary injunction enjoining the closing of the APA, and ordered Wyoming Valley to provide discovery to AoA. Although that discovery is only now getting underway, facts have already emerged indicating that Wyoming Valley and Napleton entered into at least two undisclosed “side deals” to the APA — one which violated the Court’s TRO, and another which directly contradicts Wyoming Valley’s sworn interrogatory responses.1 Likewise, Napleton has sought to intervene in the Audi Action to allege claims that factually and legally overlap with the claims that Wyoming Valley is seeking to pursue against VWoA before the Board. And, just this week, another manufacturer, BMW of North America, LLC, filed an action (the “BMW Action”) in this Court against 1 Specifically, Wyoming Valley and Napleton entered into an oral agreement to reduce the overall purchase price in the APA by the amount of the above-referenced class action settlement proceeds—an agreement intended to compensate Napleton for what the parties deceptively claimed was Napleton’s unilateral “waiver” of its right to those proceeds under the APA. Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 7 of 36 3 Wyoming Valley’s affiliate alleging substantially the same misconduct relating to the APA that AoA and VWoA have alleged in their respective actions. Seeking a way out, Wyoming Valley now asks the Court to dismiss this case based on its recent filing of the Board Action. Wyoming Valley is forum-shopping, plain and simple. It is attempting to escape this Court’s jurisdiction and litigate the issues arising in this action, the Audi Action, and the BMW Action in a dealer-friendly forum. The Court should reject this effort and deny Wyoming Valley’s motion. Indeed, Wyoming Valley’s motion lacks any substantive basis. In its motion, Wyoming Valley argues that dismissal is warranted under three abstention doctrines: (i) Wilton/Brillhart; (ii) Burford; and (iii) Primary Jurisdiction. None of these doctrines applies here. As an initial matter, each of Wyoming Valley’s abstention arguments depends upon two false premises. First, Wyoming Valley argues that the Board has “primary jurisdiction” over manufacturer-dealer disputes. That is not correct. Under the Act, VWoA has no right or ability to bring its claims against Wyoming Valley before the Board. But the Act does allow both VWoA and Wyoming Valley to bring their respective claims in this Court. Second, Wyoming Valley implicitly argues that the Board is a competent and unbiased tribunal. This is also incorrect. The Board is comprised mostly of motor vehicle dealers who, as the Third Circuit has explained, are likely to be partial toward dealers and their industry. The Board members, being dealers who may one day seek to sell their dealerships, have a set of incentives that are Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 8 of 36 4 directly adverse to manufacturer ROFRs, creating a particular danger of unfair bias in a case such as this. Wyoming Valley’s abstention arguments fail for various other reasons as well. For example, the Third Circuit recently held that in “mixed cases” such as this one, where a party asserts both a declaratory judgment claim and independent legal claims, the Wilton/Brillhart abstention doctrine does not apply. The Colorado River abstention doctrine applies instead. Wyoming Valley does not argue—nor could it argue—that Colorado River abstention would be appropriate here. Likewise, Wyoming Valley’s cursory argument that Burford absention should apply fails to establish that this case satisfies any of the criteria for applying the doctrine. Finally, Wyoming Valley’s one- sentence argument that the Court should abstain based on the Primary Jurisdiction doctrine falls woefully short of its burden to establish the “exceptional circumstances” necessary to justify such relief. For each of these reasons, and the additional reasons set forth below, Wyoming Valley’s motion should be denied in its entirety. BACKGROUND VWoA understands that the Court is already familiar with many of the facts relating to this dispute. Thus, for the sake of brevity, VWoA sets forth below an abbreviated recitation of facts particularly relating to Wyoming Valley’s Motion to Dismiss. VWoA refers the Court to the background section of VWoA’s Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 9 of 36 5 Memorandum in Support of Its Motion to Enjoin Board Proceeding (Filed under seal, Dkt. No. 23-1) for a more expansive discussion of the background of this dispute. A. THE ASSET AND REAL ESTATE PURCHASE AGREEMENT. This case arises out of Wyoming Valley’s decision to enter into the APA with Napleton on or about July 11, 2016 for the transfer of seven different dealerships and related real estate and other assets. (Compl. ¶ 17.) Wyoming Valley sent the APA to VWoA several months later, at which time VWoA promptly requested that Wyoming Valley provide a breakdown of the Volkswagen dealership assets from the remainder of the proposed transaction so that VWoA could determine whether to exercise its contractual and statutory rights of first refusal (“ROFR”). (Id. ¶¶ 17, 23 & Ex. 4.) This included, among other things, a specific request that Wyoming Valley provide a breakdown of the $17 million purchase price for the combined intangible assets—the “blue sky”—for all seven dealerships. Alternatively, VWoA told Wyoming Valley that it should withdraw the APA in its entirety. After several weeks of delay, Wyoming Valley ultimately elected to provide a breakdown of the APA, taking the position that the price for the “blue sky” of its Volkswagen franchise is $2.5 million. (See id. ¶ 26.) However, Wyoming Valley did not provide a breakdown of the price for any other assets attributable to the Volkswagen dealership. Through discovery, VWoA has learned that the combined breakdowns that Wyoming Valley provided to VWoA, taken together with separate breakdowns it Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 10 of 36 6 provided to two other manufacturers—AoA and BMW—totaled $17.5 million. This claimed blue sky amount for three of the seven dealerships exceeded the total $17 million blue sky price for all seven dealerships in the APA by $500,000. B. VWOA’S FILING OF THIS LAWSUIT AND ITS CONDITIONAL EXERCISE LETTER TO WYOMING VALLEY. On January 3, 2017, VWoA filed the instant lawsuit, along with its Motion for Temporary Restraining Order and Preliminary Injunction. In the companion Audi Action, the Court had already entered a TRO in favor of AoA. During its hearing on AoA’s Motion for Preliminary Injunction in the Audi Action, the Court recognized that VWoA was being protected by the terms of the injunction entered in the Audi Action and, therefore, dismissed without prejudice VWoA’s Motion for TRO and Preliminary Injunction. (Dkt. No. 14.) However, because VWoA, at the time it filed this lawsuit, was concerned that Wyoming Valley would later argue that VWoA’s contractual and statutory deadlines for exercising its ROFR or otherwise responding to the APA had expired, VWoA sent a letter to Wyoming Valley on January 4, 2017 notifying Wyoming Valley that, subject to this lawsuit and its objections to Wyoming Valley’s conduct in thwarting VWoA’s ROFR: (i) VWoA was exercising its ROFR in accordance with the contractual and statutory terms governing the ROFR (i.e., on terms representing a good faith apportionment of the APA); and (ii) VWoA was contingently disapproving the transfer to Napleton to the extent its exercise of its ROFR might be deemed invalid. Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 11 of 36 7 VWoA made clear in the letter, however, that it was acting under duress and that it was reserving its right to rescind these actions if this Court determined that Wyoming Valley had breached or violated VWoA’s ROFR. C. VWOA’S LETTER TO WYOMING VALLEY REGARDING THE EMISSIONS SETTLEMENT. Also contemporaneous with the filing of this lawsuit, VWoA sent Wyoming Valley a letter on January 3, 2017 relating to settlement proceeds for the Wyoming Valley dealership resulting from the settlement of the dealer class action pending in the multi-district emissions litigation in the Northern District of California. Under the APA, Wyoming Valley and Napleton had agreed that Wyoming Valley’s “rights and/or entitlements” arising from the pending “new motor vehicle emissions” litigation against “VW and Audi” were assigned to Napleton. (Dkt. No. 1-4, APA § 8.4.)2 In the January 3, 2017 letter, VWoA advised Wyoming Valley that it would pay Wyoming Valley the settlement proceeds (approximately $1.25 million) if Wyoming Valley would acknowledge that such proceeds were assets covered by the APA and subject to VWoA’s ROFR. To date, Wyoming Valley has not responded to that request. Accordingly, VWoA advised the Court for the Northern District of 2 Previously, Wyoming Valley and Napleton had represented to VWoA that Napleton had unilaterally “waived” its right to this payment. As it turns out, Wyoming Valley and Napleton were concealing a separate oral agreement under which the purchase price for the APA transaction as a whole was reduced by the amount of the settlement payment. Wyoming Valley made multiple misrepresentations to AoA and the Court regarding these circumstances. Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 12 of 36 8 California that, “absent further direction from the Court,” it was withholding the distribution of Wyoming Valley’s settlement proceeds due to uncertainty regarding who may be entitled to receive them. Wyoming Valley was served with VWoA’s filing and still did not respond. Consequently, VWoA is holding the settlement proceeds in “escrow.” D. WYOMING VALLEY’S FILING OF THE BOARD ACTION. On February 28, 2017, Wyoming Valley filed an administrative protest with the Board, which consists primarily of motor vehicle dealers. See 63 P.S. § 818.3. Wyoming Valley alleges that through its January 4, 2017 letter, VWoA violated the Act by improperly exercising its ROFR and improperly disapproving Napleton. (Dkt. No. 18-1). Wyoming Valley also contends that, because VWoA’s exercise of its ROFR is invalid, VWoA has violated the Act by not yet paying the emissions proceeds. (Id.) Wyoming Valley does not mention this lawsuit or the preliminary injunction. (Id.) On the same day, Wyoming Valley also filed its Motion to Dismiss or Stay (“Motion”) this action, arguing that this lawsuit should not proceed because: (i) the issues in the Board Action are the same as the issues in this case, and (ii) such issues should be decided by the Board rather than by this Court. E. NAPLETON’S MOTION TO INTERVENE. On March 2, 2017, various Napleton-affiliated entities moved to intervene in the Audi Action to assert claims against “Volkswagen Group of America, Inc.” (16- Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 13 of 36 9 cv-2470, Dkt. No. 52.) In its proposed “Intervenor Complaint,” Napleton alleges the same claims that Wyoming Valley is asserting in the Board Action. ARGUMENT I. WYOMING VALLEY’S MOTION SHOULD BE DENIED BECAUSE THE BOARD HAS LIMITED JURISDICTION AND IS LIKELY BIASED IN FAVOR OF DEALERS, MAKING ANY FORM OF ABSTENTION OR DEFERENCE INAPPROPRIATE. Wyoming Valley’s motion to dismiss on the basis of several abstention doctrines rests, in the first instance, on two false premises: (i) that the Board has primary jurisdiction over manufacturer/dealer disputes; and (ii) that the Board is an unbiased tribunal for purposes of this case. Because neither core premise is correct, all of Wyoming Valley’s abstention arguments should fail. The reason for this is simple. Under various abstention doctrines, the Court may have discretion, depending on the circumstances, to decide to relinquish its jurisdiction over a dispute or issue to a state administrative body. It is not required to do so. In this case, as discussed below, the Court should not discretionarily relinquish its jurisdiction to the Board, because the Board (i) cannot and will not hear or decide VWoA’s claims, and (ii) is comprised of motor vehicle dealers who have incentives that are likely to make them biased against VWoA’s ROFR rights. A. The Board Has Only Limited Jurisdiction and Restricted Purview Over Manufacturer/Dealer Disputes. Wyoming Valley’s Motion is premised on the fallacy that the Board has “primary jurisdiction” over manufacturer/dealer disputes. (Mem., Dkt. No. 32 (“Br.”) Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 14 of 36 10 at 9–11.) In truth, the Board has only concurrent jurisdiction over specified classes of disputes. VWoA’s claims are not among them. The Act generally regulates the relationship between manufacturers and dealers. However, the Act grants the Board only limited powers to resolve manufacturer/dealer disputes: [N]otwithstanding any other remedy available under this act, any new vehicle dealer who believes that an automobile . . . manufacturer or distributor with whom the new vehicle dealer holds a franchise agreement has violated or is violating any provision of this act may file a protest with the board setting forth the factual and legal basis for such violation. 63 P.S. § 818.8(d) (emphasis added). Three things stand out regarding this limited grant of jurisdiction. First, only a dealer may file a protest action before the Board. A manufacturer cannot. Consequently, VWoA could not have filed its claims before the Board. Second, the Board only has jurisdiction to determine whether a manufacturer has violated the Act. The Board cannot adjudicate common law contract disputes like VWoA’s claims. Third, the Board’s jurisdiction is not exclusive. Section 8(d) states that a dealer may elect to pursue a remedy by filing a protest in the Board, “notwithstanding . . . other remed[ies] available under th[e] [A]ct.” Id. Section 29 of the Act, in turn, provides that “any person who is or may be injured by a violation of a provision of this act [by] any party to a franchise”—which includes both dealers and Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 15 of 36 11 manufacturers—“may bring an action for damages and equitable relief, including injunctive relief, in any court of competent jurisdiction.” 63 P.S. § 818.29. The Act thus makes this Court an appropriate forum for both parties’ claims. Under the Act, the Board’s remedial power is also strictly limited: The board shall be empowered to direct or require the automobile, motorcycle or truck manufacturer or distributor to perform such acts as necessary in order for the manufacturer or distributor to comply with the provisions of this act. 63 P.S. § 818.8(d)(5). The Board cannot award damages or injunctive relief. The Board can obtain injunctive relief only by filing an action in a state court. 63 P.S. § 818.7(7). In short, the Pennsylvania legislature placed significant constraints and limitations on the Board’s power in manufacturer/dealer disputes. And the powers that the legislature did confer permit the Board to grant only limited remedies to dealers; none to manufacturers. The Board therefore cannot be said to have “primary jurisdiction,” priority, or broad purview over disputes under the Act. B. The Board May Be Inherently Biased in Favor of Automobile Dealers. The core of any abstention analysis is whether the alternative forum will provide the federal plaintiff with a fair and unbiased hearing. Due process requires adjudications to be decided by a fair tribunal and through a fair process. See, e.g., Gibson v. Berryhill, 411 U.S. 564, 578 (1973). Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 16 of 36 12 In Gibson, the Supreme Court held that a state administrative board—the Alabama Board of Optometry—was so biased that it was constitutionally unfit to hear the claims in the case. Id. at 578–79. The Optometry Board, which was comprised solely of optometrists in independent private practice, prosecuted charges against the plaintiffs, who, unlike the Board members, were employed by corporate providers. Id. at 578. The charges alleged that the plaintiffs had aided and abetted in the improper corporate practice of optometry. Id. The plaintiffs filed a complaint in federal court and obtained an injunction prohibiting further action by the Optometry Board based on its inherent bias. Gibson, 411 U.S at 569–70. On appeal, the Supreme Court reviewed the district court’s reasoning: [T]he District Court determined that the aim of the Board was to revoke the licenses of all optometrists in the State who were employed by business corporations such as Lee Optical, and that these optometrists accounted for nearly half of all the optometrists practicing in Alabama. Because the Board of Optometry was composed solely of optometrists in private practice for their own account, the District Court concluded that success in the Board’s efforts would possibly redound to the personal benefit of members of the Board, sufficiently so that in the opinion of the District Court the Board was constitutionally disqualified from hearing the charges filed against the appellees. Id. at 578. The Court agreed and affirmed the injunction. Id. at 579; see also Heffner v. Murphy, 866 F. Supp. 2d 358 (M.D. Pa. 2012) (entering judgment in § 1983 action against members of Pennsylvania Board of Funeral Directors, declaring certain provisions of regulatory scheme unconstitutional, and enjoining enforcement of provisions declared unconstitutional). Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 17 of 36 13 A similar analysis has been applied to the composition of various state motor vehicle boards. See, e.g., Nissan Motor Corp. v. Royal Nissan, Inc., 757 F. Supp. 736, 740 (E.D. La. 1991) (enjoining Louisiana Motor Vehicle Commission from adjudicating dispute between Nissan and two dealers because indirect and institutional financial interest raised question as to the impartiality of Commission); Gen. Motors Corp. v. Stan Olsen Pontiac GMC-Trucks, Inc., 2003 WL 23921745, at *4 (D. Neb. Dec. 9, 2003) (“[T]he Board, by its very composition, is a board of dealers, and by any fair analysis, cannot be deemed to be an impartial fact finding body.”); see also Brenner v. Pa. Bd. of Motor Vehicle Manufacturers, Dealers & Salesmen, 413 F. Supp. 639, 644 (E.D. Pa. 1976) (procedural due process claim against dealer-members of Board raised substantial federal question based on their personal pecuniary interest in maintaining a competitive advantage). Here, the Board is susceptible to the same forms of bias against manufacturer rights and interests. It has 17 members, 10 of whom are dealers and one that is a vehicle salesperson. Indeed, the Third Circuit, in reviewing whether the Board could be considered a “court” for purposes of removal, observed: [The Board’s] composition has none of the characteristics of a court such as disinterestedness, separation from the executive and learnedness in the law. . . [I]t is composed mostly of people who have jobs other than that of serving as judges, includes members of the executive branch as well as persons who are likely to be partial toward dealers and their industry. Sun Buick, Inc. v. Saab Cars USA, 26 F.3d 1259, 1266 (3d Cir. 1994) (emphasis added). Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 18 of 36 14 The Board’s susceptibility to bias is exacerbated by its constitutionally suspect procedures. Only a majority of a quorum is required to render a decision. Thus, a manufacturer-dealer dispute can be decided by nine members, all of whom could be dealers. See 63 P.S. § 818.3(c). And none of the deciding Board members need attend the hearing. C.f. 63 P.S. § 818.3(c). Further, the distributor has the burden to prove that it did not violate the Act. 63 P.S. § 818.8(d)(3). Finally, review of Board decisions is limited. Pennsylvania courts are “required to give due deference and great weight to the Board’s application of the statute . . . and may not disregard or overturn its interpretation without cogent reasons and a decision determining the Board was clearly erroneous.” Volkswagen of Am., Inc. v. State Bd. of Vehicles, 840 A.2d 479, 482–84 & n. 8 (Pa. Commw. 2003) (internal quotations omitted). In the context of this case, in particular, the potential that the Board will not be a fair or unbiased tribunal for VWoA is acute. Dealers possess incentives that are uniformly adverse to manufacturer ROFRs—preemptive rights that burden dealers’ primary assets and limit their ability to sell in the manner and to the buyer of their choosing. As a result, there is a significant danger that the Board may not be a fair and unbiased tribunal. Abstention in favor of the Board under any discretionary doctrine, therefore, would not be appropriate. Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 19 of 36 15 II. WYOMING VALLEY’S MOTION SHOULD BE DENIED BECAUSE WYOMING VALLEY CANNOT DEMONSTRATE THAT ANY PARTICULAR ABSTENTION DOCTRINE SHOULD APPLY IN THIS ACTION. Wyoming Valley urges this Court to abstain in favor of the limited jurisdiction of the Board under three abstention doctrines: (i) Wilton/Brillhart; (ii) Burford; and (iii) Primary Jurisdiction. None of these doctrines should apply here. The federal courts have a “virtually unflagging obligation ... to exercise the jurisdiction given them.” Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976). “Abstention, therefore, is the exception rather than the rule.” Riley v. Simmons, 45 F.3d 764, 771 (3d Cir. 1995). The Supreme Court has held: “[W]e emphasize that our task in cases such as this is not to find some substantial reason for the exercise of federal jurisdiction by the district court; rather, the task is to ascertain whether there exist ‘exceptional’ circumstances, the ‘clearest of justifications,’ that can suffice . . . to justify the surrender of that jurisdiction.” Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 (1983). The burden is on the movant to establish the exceptional circumstances warranting abstention. Southeastern Pa. Transp. Auth. v. Am. Coastal Indus., Inc., 682 F. Supp. 285, 286 (E.D. Pa. 1988). A. The Wilton/Brillhart Abstention Doctrine Is Not Applicable. Wyoming Valley argues the Court should abstain under the Wilton/Brillhart, which is a federal abstention doctrine that narrowly applies to declaratory judgment actions. Wyoming Valley argues that Willton/Brillhart applies because VWoA purportedly has filed a declaratory judgment action here. Wyoming Valley’s analysis, Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 20 of 36 16 however, ignores almost entirely VWoA’s non-declaratory, independent legal claims— Count I (Breach of Contract) and Count II (Violation of the Act). Wyoming Valley attempts to rely on Wilton/Brillhart abstention in the first instance—rather than on other federal abstention doctrines—because federal courts have greater discretion to abstain where the only claim in the complaint arises under the Declaratory Judgment Act. Rarick v. Federated Serv. Ins. Co., No.15-3606, No. 16- 1328, --- F.3d ----, 2017 WL 1149099, at *1 (3d Cir. Mar. 28, 2017). Wyoming Valley’s reliance on Wilton/Brillhart, however, is misplaced. The Third Circuit recently explained how courts should determine whether Willton/Brillhart or a different abstention doctrine—Colorado River—is the appropriate abstention doctrine to be considered in “mixed cases” such as this one, where the plaintiff has asserted both a declaratory judgment claim and other legal claims. Rarick, 2017 WL 1149099. Before Rarick, courts in the Third Circuit often applied the “heart of the matter test” to determine whether the “mixed case” was primarily a declaratory judgment action, thus making it appropriate to consider Willton/Brillhart absention. (Br. at 15–16.) In Rarick, however, the Third Circuit rejected the “heart of the matter” test in favor of the more widely accepted “independent claim” test. Rarick, 2017 WL 1149099, at *4.3 3 As a result, Wyoming Valley’s cited authorities, which were decided based upon the “heart of the matter” test, are no longer good law. Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 21 of 36 17 The court described the “independent claim” test as follows: When a complaint contains claims for both legal and declaratory relief, a district court must determine whether the legal claims are independent of the declaratory claims. If the legal claims are independent, the court has a “virtually unflagging obligation” to hear those claims, subject of course to Colorado River’s exceptional circumstances. If the legal claims are dependent on the declaratory claims, however, the court retains discretion to decline jurisdiction of the entire action. . . . Id. at *4 (internal citations omitted). “Non-declaratory claims are ‘independent’ of a declaratory claim when they are alone sufficient to invoke the court’s subject matter jurisdiction and can be adjudicated without the requested declaratory relief.” Id. at *4 (internal quotation and citation omitted); see Schodle v. State Farm Mut. Auto., No. 17-407, 2017 WL 1177133 (E.D. Pa. Mar. 30, 2017) (applying Rarick’s independent claim test to decline abstention where plaintiff alleged independent breach of contract claim).4 Following Rarick, therefore, Wyoming Valley’s general argument that the “heart of the matter” of this case is VWoA’s declaratory judgment action, warranting application of Wilton/Brillhart abstention, must be rejected. Instead, the Court must analyze VWoA’s action under the independent claim test. VWoA’s claims in Count I and II both independently invoke the Court’s jurisdiction. In Count I, VWoA alleges breach of the Volkswagen Dealer Agreement and seeks a permanent injunction. In Count II, VWoA alleges violation of the Act. 4 While Rarick sometimes refers to “legal vs. declaratory relief”, the sense of the opinion suggests that the dichotomy is between “non-declaratory vs. declaratory” relief. Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 22 of 36 18 Accordingly, Wilton/Brillhart abstention, which applies only to declaratory judgment actions, does not apply to this case. B. Colorado River Abstention Is Not Appropriate. Wyoming Valley does not argue for application of Colorado River abstention to this case. In light of the recent Rarick decision, however, Wyoming Valley may attempt to do so. Application of Colorado River abstention, however, would not be appropriate here. The Colorado River abstention doctrine is extremely limited: Abstention from the exercise of federal jurisdiction is the exception, not the rule. The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the State court would clearly serve an important countervailing interest. Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 813–17 (1976) (internal quotation omitted). Under Colorado River, the Court first must determine whether the Board proceeding involves “the same claims and parties or at least nearly identical allegations and parties who are essentially identical.” Bowdoin v. Deckman, 997 F. Supp. 645, 646 (E.D. Pa. 1998) (internal quotations omitted). Here, VWoA cannot bring its claims against Wyoming Valley before the Board. Further, the Board could not grant injunctive relief to VWoA. Because VWoA’s claims are not cognizable before the Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 23 of 36 19 Board, the actions are not parallel and the Colorado River doctrine does not apply. See Chantilly Farms, Inc. v. W. Pikeland Township, No. 00-3903, 2001 WL 290645, at *10 (E.D. Pa. Mar. 23, 2001) (Colorado River abstention not appropriate where appeal from zoning commission rulings would not provide a forum to assert claims raised in federal court). Moreover, even if Wyoming Valley could satisfy the requirement of parallel proceedings, it would then be required establish that the six factor test governing Colorado River abstention, Bowdoin, 997 F. Supp. at 647, makes abstention appropriate in this case. But none of the six Colorado River factors weighs in favor of abstention.5 The first factor—which forum first assumed jurisdiction in rem over any property involved—is irrelevant because neither this Court nor the Board has exercised jurisdiction in rem over property in this case. The second factor—whether the federal forum is inconvenient—weighs against abstention. The Board and the Court are located within less than three miles of one another. See Bowdoin, 997 F. Supp. at 648 (“The federal courthouse in Philadelphia is only some 34 miles from Doylestown, the county seat of Bucks County. The convenience factor weighs against abstention.”). The third factor—the desirability of avoiding piecemeal litigation—weighs against abstention. This “factor is met . . . only when there is evidence of a strong 5 No one of these factors is dispositive and the balancing of the factors should be heavily weighted in favor of a court’s exercise of jurisdiction. Moses, 460 U.S. at 16. Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 24 of 36 20 federal policy that all claims should be tried in state courts.” Ryan v. Johnson, 115 F.3d 193, 198 (3d Cir. 1997). “[T]here must be a strongly articulated congressional policy against piecemeal litigation in the specific context of the case under review.” Id. Here, Wyoming Valley has offered no strong congressional policy favoring resolution of VWoA’s claims before the Board, which is a state administrative body, nor could it. VWoA’s claims are not even cognizable in that forum. The fourth factor—the order in which the respective courts obtained jurisdiction—weighs against of abstention. Moses Cone, 460 U.S. at 22 (“priority should not be measured exclusively by which complaint was filed first, but rather in terms of how much progress has been made in the two actions”). This Court obtained jurisdiction on January 4, 2017. Wyoming Valley did not file its claims before the Board until February 28, 2017. Further, this Court has made substantial progress by virtue of its rulings in the companion Audi Action. The Board proceeding, however, has not even begun. The fifth factor—whether federal or state law applies—weighs against abstention. “[W]hile the presence of federal issues militates against abstention, the converse cannot be said; abstention cannot be justified merely because a case arises entirely under state law.” Ryan, 115 F.3d at 199. Consequently, the presence of state law issues under the Act does not mandate abstention. And Wyoming Valley has offered no overriding state policy that warrants abstention. Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 25 of 36 21 Finally, the sixth factor—whether the state court proceeding would adequately protect the federal plaintiff’s rights—weighs heavily against abstention. As set forth in Section I, supra, there is significant danger that the Board is biased against manufacturer ROFRs and would not have jurisdiction over VWoA’s claims. It certainly could not adequately protect VWoA’s rights. Thus, the Colorado River factors weigh heavily against abstention. The Court should decline to apply the doctrine in the unexceptional circumstances of this case. C. Burford Abstention Is Not Appropriate. Wyoming Valley also argues—in only a few sentences—that the Court should abstain pursuant to the Burford abstention doctrine. “‘The purpose of Burford [abstention] is to avoid federal intrusion into matters of local concern and which are within the special competence of local courts.’” Matusow v. Trans-County Title Agency, LLC, 545 F.3d 241, 247 (3d Cir. 2008) (quoting Hi Tech Trans, LLC v. New Jersey, 382 F.3d 295, 303–04 (3d Cir. 2004)). Wyoming Valley has not and cannot meet its substantial burden to justify Burford abstention in this case. Determination of whether Burford abstention applies requires a two-step analysis. Riley v. Simmons, 45 F.3d 764, 771 (3d Cir. 1995). First, the district court must determine whether “timely and adequate state-court review” is available. Id. If there is not adequate state court review, abstention is not appropriate. Culinary Serv. of Delaware Valley, Inc. v. Borough of Yardley, 385 Fed. Appx. 135, 144 (3d Cir. Jun. 30, 2010). Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 26 of 36 22 Here, Wyoming Valley cannot demonstrate that “timely and adequate” review of VWoA’s claims is available before the Board (which is not a state court). Indeed, VWoA has no ability even to bring its claims in that forum. See Riley, 45 F.3d at 773 (reversing district court ruling granting Burford abstention where plaintiff’s federal securities claims were not cognizable in state action); Greate Bay Hotel & Casino v. Tose, 34 F.3d 1227, 1235–36 (3d Cir. 1994) (“An even more telling demonstration of the inadequacy of the administrative remedy is that an individual patron does not have the right to prosecute a claim . . . before the Commission.”). On this basis alone, Burford abstention should not apply. Second, if there is adequate review available, the court examines three additional factors: (1) whether the particular regulatory scheme involves matters of substantial public concern; (2) whether it is the sort of complex, technical regulatory scheme to which Burford is usually applied; and (3) whether federal review of the plaintiff’s claims would interfere with the state’s efforts to establish and maintain a coherent regulatory policy. Culinary Serv., 385 Fed. Appx. at 144. The balance of these three factors weighs heavily against abstention. Under the first factor, “to implicate a matter of substantial public concern, the suit must be filed against a party protected by or subject to the regulatory scheme.” Id. Here, VWoA has filed against Wyoming Valley, and dealers such as Wyoming Valley are protected through the Act. But manufacturers are protected under the Act as well. In fact, as set forth in the Complaint, the Act affirmatively protects Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 27 of 36 23 manufacturer ROFRs, which gives rise to one of VWoA’s claims in this case (Count II). Moreover, the Act is not intended to protect dealers who engage in bad faith and even fraudulent conduct to deprive manufacturers of contractual and statutory rights. Thus, while this factor might normally weigh in favor of Burford abstention, Wyoming Valley has taken itself out of the class of dealers that the Act would seek to protect in these circumstances through its course of improper and fraudulent conduct. This factor weighs against abstention. Under the second factor, to implicate the technical, complex regulatory scheme to which Burford abstention is properly applied, the action must challenge the regulatory scheme itself, rather than actions taken under color of the scheme. Id. (Burford inapplicable because plaintiff did not challenge regulatory scheme at issue). Here, VWoA is not challenging the validity of the Act but, instead, is requesting relief for Wyoming Valley’s violation of the Act. The second factor weighs against abstention. Under the third factor, “the state’s interest must be very important—a federal court cannot just abstain to avoid disrupting the scheme.” Id. Here, the Act does not meet this requirement. The Act itself belies any notion that its interpretation and enforcement are entrusted to “the special competence” of the Board. Because manufacturers cannot file claims with the Board, federal courts regularly adjudicate alleged violations of the Act. See, e.g., Rosado v. Ford Motor Co., 337 F.3d 291, 293 (3rd Cir. 2003) (Third Circuit construed the Act and related Pennsylvania law); Crivelli v. Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 28 of 36 24 General Motors Corp., 215 F.3d 386, 389 (Third Circuit interpreted the Act, including ROFR issues). The state has not evinced a particular desire to advance its policies only through the Board. Because all three factors weigh against abstention, the Court should reject Wyoming Vally’s reliance on Burford. Indeed, even if the Court were to determine that the first factor weighs in favor of abstention, the Motion should be denied. See Borough of Catasauqua v. Darwin Nat. Assur. Co., No. 11–cv–03855, 2012 WL 1071224, at *5–6 (E.D. Pa. Mar. 30, 2012) (declining to exercise Burford abstention where the second and third factors weighed against abstention). Finally, it is notable that Wyoming Valley cites only one decision by a district court in another Circuit, Nissan N. Am., Inc. v. Jim M’Lady Oldsmobile, Inc., No. 07 C 6304, 2008 WL 4148528 (N.D. Ill. Aug. 29, 2008), in support of its Burford argument. But even that case is inapposite. First, the court applied the Seventh Circuit’s formulation of Burford abstention and notably did not consider whether the state forum would provide adequate relief for Nissan, as required in the Third Circuit. Id. at *3. Second, the Illinois Motor Vehicle Board, unlike the Pennsylvania Board, is composed entirely of members who have no connection to the motor vehicle industry. The Illinois Board “shall be composed of 7 members appointed by the Secretary of State. The members shall represent the public interest at large and shall not have engaged in the sale, manufacture, or distribution of motor vehicles at retail in Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 29 of 36 25 this State.” 815 ILCS 710/16. Consequently, bias was not at issue. Jim M’Lady provides no support for Burford abstention in this case.6 D. Primary Jurisdiction Abstention is Not Appropriate. Wyoming Valley’s bare-bones argument that this Court should abstain pursuant to the “primary jurisdiction” doctrine is similarly misplaced. The doctrine of primary jurisdiction comes into play “whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views.” Baykeeper v. NL Indus., Inc., 660 F. 3d 686, 691 (3d Cir. 2011) (quoting United States v. W. Pac. R.R. Co., 352 U.S. 59, 64 (1956)). The doctrine is exceedingly narrow and applies only in “exceptional cases.” Baykeeper, 660 F.3d at 692. Indeed, even when an administrative agency has expertise and purview regarding a particular issue, a federal district court should not apply the primary jurisdiction doctrine if the issue is “within the conventional experience of judges” and is “one which the courts or a jury are equally well-suited to determine.” Id. at 691; accord Bus Edge Grp. v. Champion Mortg. Co., Inc., 519 F.3d 150, 154 (3d. 2008) (reversing district court decision to refer issue to FCC under the primary jurisdiction 6 For similar reasons, Am. Honda Motor Co. v. Premier Quality Imports, LLC, No. Civ. A. 04-1205, 2005 WL 2036685 (E.D. La. Aug. 10. 2005) is inapposite. Under Louisiana law, all disputes between dealers and manufacturers are to be decided solely by three disinterested public members of the board. LA Rev. Stat. § 32:1253(A)(3)(a). Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 30 of 36 26 because, though “this case presents ‘technical questions of fact’ that are ‘within the expertise’ of the FCC, . . . the meaning of the regulation can be determined from its text”). In Baykeeper, the Third Circuit analyzed primary jurisdiction using a four-factor test: (1) Whether the question at issue is within the conventional experience of judges or whether it involves technical or policy considerations within the agency’s particular field of expertise; (2) Whether the question at issue is particularly within the agency’s discretion; (3) Whether there exists a substantial danger of inconsistent rulings; and (4) Whether a prior application to the agency has been made. 660 F.3d at 691. “The party urging the court to refer the matter in whole or in part to an administrative agency bears the burden of persuading the court” that the doctrine should apply. Phone-Tel Commc’ns, Inc. v. AT&T Corp., 100 F. Supp. 2d 313, 316 (E.D. Pa. 2000). Here, Wyoming Valley has not even attempted to meet this burden. Nor could it. First, the doctrine should be applied only “when a suit is brought in federal court and that court is of the opinion that the suit ought to have been prosecuted exclusively or initially before an administrative body.” Litton Systems, Inc. v. Sw. Bell Tel. Co., 539 F.2d 418, 420 (5th Cir. 1976). As explained above, VWoA did not have the right to prosecute its claims before the Board. It could only bring its claims in federal or state court. See supra at 9; Greate Bay Hotel & Casino, 34 F.3d at 1235. And, in any Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 31 of 36 27 event, the Board’s inherent bias makes this Court—not the Board—the appropriate forum for this dispute. See supra at 10–12. Moreover, none of the four Baykeeper factors supports application of the primary jurisdiction doctrine to this dispute. First, this Court is competent to decide the issues in this case, which primarily require consideration of common law contractual rights—i.e., VWoA’s right of first refusal. Although Wyoming Valley suggests that this case is unique because it involves a “package” sale of motor vehicle dealerships, this narrow factual distinction does not render the Court incompetent to decide the case. Indeed, numerous federal courts have addressed this very issue in the manufacturer-dealer context. See, e.g., Mercedes-Benz USA, LLC v. Star Auto. Co., No. 11-cv-73, 2011 WL 2175037, at *3 (M.D. Ga. Jun. 3, 2011) (granting preliminary injunction to prevent a package deal from closing to protect ROFR right of single manufacturer); Volvo Grp. N. Am., LLC v. Truck Enters., Inc., No. 7:16-CV-00025, 2016 WL 1479687, at *4 (W.D. Va. Apr. 14, 2016) (explaining that “[i]t is universally recognized that the holder of a right of first refusal cannot be compelled to purchase more property than is subject to the right of first refusal, or else forfeit its first refusal rights,” and adopting Fourth Circuit’s reasoning that holding otherwise would nullify right of first refusal); Daimler Trucks N.Am. LLC v. McComb Diesel, Inc., No.15-cv-0030, Order & Reasons (S.D. Miss. Mar. 22, 2016) (declining to adopt rule that would require auto manufacturer “to purchase several assets not covered by its right of first refusal, or to waive its bargained-for Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 32 of 36 28 property right” and that “may permit a creative property owner to expand the scope of a right of first refusal ad infinitum such that a rightholder’s right of first refusal would be effectively rendered a nullity[,]” and enjoining dealer from proceeding with proposed package sale). This Court is competent to do the same. Second, this matter is not particularly within the discretion of the Board because, as explained above, the Act specifically authorizes any person, including Wyoming Valley, to seek relief for any violation of the Act (including each of the claimed violations in the Protest) in federal or state court. Baykeeper, 660 F.3d at 691– 92. Third, this action does not create any risk of inconsistent rulings. Such a risk would arise only as a result of the Board proceeding, not as a result of this proceeding. Indeed, there are two additional actions pending before this Court—the Audi Action and the BMW Action—that raise essentially the same legal and factual issues as in this case. Those actions will proceed even if some or all of the issues in this action were referred to the Board. For this reason, among others, VWoA has separately moved to enjoin Wyoming Valley from proceeding with its Protest before the Board. Fourth, Wyoming Valley did not make a prior application to the Board regarding its purported rights. VWoA promptly filed this action in early January 2017 for the reasons alleged in the Complaint. Wyoming Valley waited approximately two months—until after it received multiple adverse rulings from this Court in the related Audi Action—before attempting to initiate a protest with the Board. Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 33 of 36 29 For all of these reasons, the Court should decline to apply the primary jurisdiction doctrine. III. WYOMING VALLEY’S MOTION SHOULD BE DENIED TO THE FURTHER EXTENT THAT IT SEEKS TO STAY THIS ACTION. As a final catchall, Wyoming Valley asserts that the Court should stay this action in deference to the Board proceeding. Wyoming Valley relies solely on the same abstention arguments addressed above. Accordingly, the Court should not stay this matter for the reasons already discussed. As a final salvo, Wyoming Valley argues that it must file counterclaims before this Court, which will require it to demand mediation with VWoA and will require a stay of this case. However, 63 P.S. § 818.11 does not require a stay. Instead, mediation is a prerequisite to a dealer filing a complaint against a distributor. Thus, Wyoming Valley is statutorily prohibited from filing its counterclaims until the parties have attended at least one mediation session. Wyoming Valley has demanded mediation in connection with the Board action. That demand certainly will suffice for purposes of its counterclaims here. Holberts, Inc. v. Audi of America, Inc., No. 12-725, 2012 WL 1606569 (E.D. Pa. May 8, 2012), is not to the contrary. There, the dealer had demanded mediation in connection with a protest filed two years earlier. Id. at *1. And, both parties to the case agreed that the prior mediation demand had not included the claims the dealer was advancing in the later federal court action. Id. at *2. That is not the case here. Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 34 of 36 30 CONCLUSION For the foregoing reasons, VWoA respectfully requests that the Court deny Wyoming Valley’s Motion to Dismiss and proceed to adjudicate the VWoA Action. Dated: April 7, 2017 Respectfully submitted, VOLKSWAGEN OF AMERICA, INC. An Organizational Unit of Volkswagen Group of America, Inc. By: /s/Randall L. Oyler One of Its Attorneys Thomas B. Schmidt, III (PA 19196) Tucker R. Hull (PA 306426) PEPPER HAMILTON LLP 100 Market Street, Ste. 200 Harrisburg, Pennsylvania 17108 Ph: 717.255.1155 Email: schmidtt@pepperlaw.com Email: hullt@pepperlaw.com Randall L. Oyler (IL 6209675) Owen H. Smith (IL 6307554 / NY 693627) Brandon C. Prosansky (IL 6293582) BARACK FERRAZZANO KIRSCHBAUM & NAGELBERG LLP 200 West Madison, Ste. 3900 Chicago, Illinois 60606 Ph: 312.984.3100 Email: randall.oyler@bfkn.com Email: owen.smith@bfkn.com Email: brandon.prosansky@bfkn.com Attorneys for Volkswagen of America, Inc., An Organizational Unit of Volkswagen Group of America, Inc. Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 35 of 36 CERTIFICATE OF SERVICE I, Randall L. Oyler, an attorney, certify that on the April 7, 2017, a true and correct copy of the foregoing was served via the Court’s Electronic Case Filing (ECF) system upon all counsel of record. /s/ Randall L. Oyler Case 1:17-cv-00010-JEJ Document 45 Filed 04/07/17 Page 36 of 36 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA AUDI OF AMERICA, INC., An Organizational Unit of Volkswagen Group of America, Inc., A New Jersey Corporation, Plaintiff, v. BRONSBERG & HUGHES PONTIAC, INC. d/b/a WYOMING VALLEY AUDI, A Pennsylvania Corporation, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. 3:16-cv-02470-JEJ Judge John E. Jones III COMPENDIUM OF AUTHORITIES Case Tab Am. Honda Motor Co. v. Premier Quality Imports, LLC, No. Civ. A. 04-1205, 2005 WL 2036685 (E.D. La. Aug. 10, 2005) 1 Borough of Catasauqua v. Darwin Nat. Assur. Co., No. 11-cv-03855, 2012 WL 1071224 (E. D. Pa. Mar. 30, 2012) 2 Chantilly Farms, Inc. v. W. Pikeland Township, No. 00-3903, 2001 WL 290645 (E.D. Pa. Mar. 23, 2001) 3 Daimler Trucks N. Am. LLC v. McComb Diesel, Inc., No. 15-cv-0030, Order & Reasons (S.D. Miss. Mar. 22, 2016) 4 Gen. Motors Corp. v. Stan Olsen Pontiac GMC-Trucks, Inc., 2003 WL 23921745 (D. Neb. Dec. 9, 2003) 5 Holberts, Inc. v. Audi of Am., Inc., No. 12-725, 2012 WL 1606569 (E.D. Pa. May 8, 2012) 6 Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 1 of 75 Mercedes-Benz USA, LLC v. Star Auto. Co., No. 11-cv-73, 2011 WL 2175037 (M.D. Ga. Jun. 3, 2011) 7 Nissan N. Am., Inc. v. Jim M’Lady Oldsmobile, Inc., No. 07 C 6304, 2008 WL 4148528 (N.D. Ill. Aug. 29, 2008) 8 Rarick v. Federated Serv. Ins. Co., No. 15-3606, No. 16-1328, 2017 WL 1149099 (3d Cir. Mar. 28, 2017) 9 Schodle v. State Farm Mut. Auto., No. 17-407, 2017 WL 1177133 (E.D. Pa. Mar. 30, 2017) 10 Volvo Grp. N. Am., LLC v. Truck Enters., Inc., No. 7:16-cv-00025, 2016 WL 1479687 (W.D. Va. Apr. 14, 2016) 11 Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 2 of 75 Exhibit 1 Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 3 of 75 American Honda Motor Co., Inc. v. Premier Quality Imports, LLC, Not Reported in... 2005 WL 2036685 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite Yellow Flag - Negative Treatment Opinion Amended by American Honda Motor Co., Inc. v. Premier Quality Imports, LLC, E.D.La., November 4, 2005 2005 WL 2036685 Only the Westlaw citation is currently available. United States District Court, E.D. Louisiana. AMERICAN HONDA MOTOR CO., INC. v. PREMIER QUALITY IMPORTS, LLC No. Civ.A. 04-1205. | Aug. 10, 2005. Attorneys and Law Firms Gabriel A. Crowson, Anthony Rollo, Stephen Winthrop Rider, McGlinchey Stafford, PLLC, New Orleans, LA, for American Honda Motor Co., Inc. Edwin A. Stoutz, Jr., Stoutz & Stoutz, New Orleans, LA, for Premier Quality Imports LLC. ORDER AND REASONS ZAINEY, J. *1 Before this Court is a Motion to Dismiss (Rec.Doc. 11), filed by Defendant Premier Quality Imports, LLC (hereinafter “Premier Honda”). The motion is opposed by Plaintiff, American Honda Motor Company, Inc. (hereinafter “American Honda”). Amicus curiae briefs were also filed by the Louisiana Automobile Dealers Association and the Louisiana Motor Vehicle Commission on behalf of Premier Honda. Additionally, a Partial Motion for Summary Judgment (Rec.Doc. 13) filed by American Honda is before the Court and is opposed by Plaintiff. For the following reasons, the Partial Motion for Summary Judgment is DENIED. Moreover, the Motion to Dismiss is DENIED in part and GRANTED in part and this matter is STAYED and ADMINISTRATIVELY CLOSED pending resolution of the complaint(s) currently pending before the Louisiana Motor Vehicle Commission. FACTUAL BACKGROUND Premier Honda is licensed by the Louisiana Motor Vehicle Commission to sell new Honda motor vehicles. It operates its principal place of business in New Orleans, Louisiana at the former location of Honda Town, which was the “doing business as” name of Jerome Imports, Inc. (hereinafter “Jerome Imports”). In October 2003, Jerome Imports entered into an Agreement to Purchase (hereinafter referred to as “Purchase Agreement”) with Troy Duhon, a principal of Premier Honda, to sell its dealership assets to “Troy J. Duhon or his assignee” (hereinafter also referred to as “Premier Honda”). The Purchase Agreement provided that the purchase price included “all new 2004 and 2003 Honda motor vehicles,” in addition to “all parts and accessories on hand on the date of execution.” The Purchase Agreement, however, was conditioned upon Premier Honda becoming a licensed Honda dealer, which required the approval of American Honda. Accordingly, American Honda requested Jerome Imports and Premier Honda, both together and separately, to submit certain information and documents as part of an application and approval process of the proposed sale/transfer. Many of the documents submitted to American Honda are included as Exhibit 1 to American Honda's Partial Motion for Summary Judgment (Rec.Doc. 13). For reasons to be discussed, it is noteworthy that all of the documents submitted to American Honda characterized the transaction between Jerome Imports and Premier Honda as a transfer, rather than a sale (e.g., Jerome Import's dealership resignation letter stated “this confirms that the transaction between Seller and Buyer is a transfer of Seller's assets or interest and not a termination of a dealership, and that it does not entitle Seller, Buyer, or any third party to claim any rights that might exist or arise in connection with a termination.”). After evaluating the proposed transaction and application documents submitted by Jerome Imports and Premier Honda, American Honda sent a Letter of Intent, dated December 22, 2003, to Premier Honda indicating that it conditionally consented to the ownership transfer and the appointment of Premier Honda as a Honda dealer. American Honda's final approval was conditioned upon the satisfaction of multiple requirements set forth in the Letter of Intent, only a few of which are pertinent to Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 4 of 75 American Honda Motor Co., Inc. v. Premier Quality Imports, LLC, Not Reported in... 2005 WL 2036685 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 the present matter. These relevant requirements included Premier's acknowledgment and agreement with the terms of the Letter of Intent, the return of a “Deed is Done” letter executed by Jerome Imports and Premier Honda (notably, this letter was prepared by American Honda and provided to Jerome Imports for execution, see Partial Motion for Summary Judgment, Exhibit 1, Attachment F, p. 1), payment of all amounts due to American Honda from Jerome Imports, and “written confirmation that the transaction has been consummated in accordance with documentation previously submitted to [American Honda] for approval.” *2 Additionally, Premier Honda acknowledged and agreed to the following, which was included in the Letter of Intent: In evaluating the request, [American Honda] has relied upon the following: (i) seller's and buyer's representations to [American Honda]; and (ii) the written documentation and information provided to [American Honda] including, without limitation, the buyer's application(s) (including attachments) and the Transfer Agreement. In signing this [Letter of Intent], Dealer understands and agrees that the representations and warranties made by Dealer concerning ownership, management, capitalization, facilities, and service requirements as set forth in this [Letter of Intent], Dealers dealer application and related documents signed by Dealer are being relied upon by [American Honda] and they provide the inducement to issue this [Letter of Intent] and subsequently, when all terms are met, the Agreement. Dealer agrees that [American Honda] may terminate this [Letter of Intent] immediately without any liability to Dealer if [American Honda] becomes aware of information, following the date of this [Letter of Intent], which in [American Honda's] sole opinion would have caused [American Honda] to decide not to enter into the [Letter of Intent] had it known this information beforehand. This [Letter of Intent] is also specifically conditioned upon the continued accuracy of the information Dealer has submitted to [American Honda]. Dealer understands and agrees that it is Dealer's responsibility to advise [American Honda] promptly if any changes occur in the information Dealer has provided to date. Partial Motion for Summary Judgment, Exhibit 1, Attachment F. After receiving American Honda's conditional approval, an Act of Cash Sale and an Assignment of Repurchase Rights were executed between Jerome Imports and Premier Honda. The Assignment of Repurchase Rights provided the following: [Jerome Imports], a Louisiana Corporation (“Honda Town”), hereby assigned to [Premier Honda] a Louisiana Liability Company, Honda Town's termination rights pursuant to its franchise agreement with [American Honda] and/or La. R.S. 32:1257 and hereby authorized [Premier Honda] to return to [American Honda] on [Jerome Imports] behalf, pursuant to its Dealer Sales and Service Agreement (franchise), and/or La. R.S. 32:1257 in connection with the termination of's [sic] dealership operations, Honda motor vehicles on hand at [Jerome's Imports] dealership or later removed to [Premier Honda's] dealership ... Partial Motion for Summary Judgment, Exhibit 1, Attachment H. Finally, it is noteworthy that the “Deed is Done” letter executed between Jerome Imports and Premier Honda (and prepared by American Honda) contained the following provision: [t]his further confirms that we understand that this transaction is a transfer of the dealership or “franchise” and not a termination of a dealership or “franchise,” and that it does not entitle either of us to claim any rights that might exist or arise connection with a termination. *3 Clearly, the characterizations of the transaction between Jerome Imports and Premier Honda included in the Assignment of Repurchase Rights and the Deed is Done letter were contradictory. Moreover, the characterization of the transaction as a termination in the Assignment of Repurchase Rights clearly conflicted Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 5 of 75 American Honda Motor Co., Inc. v. Premier Quality Imports, LLC, Not Reported in... 2005 WL 2036685 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 with other representations that Premier Honda and Jerome Imports made to American Honda because the transaction was referred to as a transfer in all dealings with American Honda. As a result, American Honda did not learn about the Assignment of Repurchase Rights until after it signed a Dealer Agreement with Premier Honda in January 2005. Shortly thereafter, American Honda received a letter from Premier Honda demanding that it repurchase Honda vehicles and parts that Premier Honda had just acquired from Jerome Imports. These vehicles and parts had a stated value of $856,410.09. Approximately one month later, American Honda denied Premier Honda's purchase demand on several grounds. The reason for denial most relevant to the present litigation concerns two provisions of the Dealer Agreement, which was applicable to both Jerome Imports and Premier Honda. In Section 20.4 of the Dealer Agreement, Premier Honda and Jerome Imports acknowledged and agreed that any purported change, transfer or assignment of rights under the Dealer Agreement without the prior written consent of American Honda shall be “null and void and not be binding upon American Honda.” American Honda did not provide Jerome Imports, nor Premier Honda, with written approval to transfer any rights that the dealers executed in their Assignment of Repurchase Rights. Nonetheless, the Court notes that the Assignment of Repurchase Rights assigned rights pursuant to the Dealer Agreement and/or La. R.S. 32:1257 (emphasis added). Furthermore, American Honda notes that Section 20.4.F of the Dealer Agreement prohibits Premier Honda from engaging in the “submission or participation in submission to American Honda of a false or fraudulent statement, application, report, request for issuance of reimbursement, compensation, refund, or credit ...” Not surprisingly, American Honda claims that Jerome Imports and Premier Honda submitted false and fraudulent statements to American Honda when they consistently stated that their transaction did not involve a termination, then subsequently sought to benefit from Jerome Imports' termination rights. PROCEDURAL BACKGROUND In March 2004, Premier Honda filed a complaint against American Honda with the Louisiana Motor Vehicle Commission (hereinafter the “Commission”) raising the question of whether American Honda was obligated to repurchase the new vehicles and parts that Premier Honda had purchased from Jerome Imports. In April 2004, American Honda invoked the diversity jurisdiction of this Court and initiated the present litigation seeking to have its Letter of Intent and Dealer Agreement with Premier Honda nullified/rescinded/terminated. Premier Honda asserts that American Honda's litigation is nothing more than an attempt to preempt the administrative proceedings before the Commission. *4 Premier Honda alleges that Louisiana law grants the Commission exclusive jurisdiction over the termination of a dealership agreement, such that this Court does not have jurisdiction over American Honda's complaints. Alternatively, in the event that this Court determines that it has jurisdiction over this matter, Premier Honda urges it to abstain from hearing American Honda's suit in light of the Burford abstention doctrine. In response, American Honda asserts that the Commission does not have any jurisdiction, exclusive or otherwise, to decide American Honda's claims, which are based on Louisiana contract principles. Specifically, American Honda notes that it seeks rescission of Premier Honda's dealership on the basis of Premier Honda's pre-contractual fraudulent conduct. As such, American Honda asserts that the Commission has no power to resolve this contracts issue because it only adjudicates disputes between a manufacturer and a dealer “if the dealer has a bona-fide Dealer Agreement” in the first place. In addition to the Motion to Dismiss filed by Defendant, Plaintiff has also filed a Partial Motion for Summary Judgment that is currently before the Court. In this motion, American Honda requests this Court to nullify and rescind the Letter of Intent and Dealer Agreement executed between itself and Premier Honda, in effect to terminate Premier Honda's dealership agreement with Honda. American Honda also requests that this Court award it all damages it has allegedly sustained as a result of Premier Honda's alleged fraudulent activities, including attorney's fees and costs. As it is clear that American Honda is not entitled to prevail on its partial motion for summary judgment, the Court will consider this motion before addressing the jurisdictional issues presented by Premier Honda (and the Commission and Louisiana Automobile Dealers Association (hereinafter “LADA”) in their amicus curiae briefs). Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 6 of 75 American Honda Motor Co., Inc. v. Premier Quality Imports, LLC, Not Reported in... 2005 WL 2036685 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 American Honda's Partial Motion for Summary Judgment Summary judgment is appropriate if the record discloses “that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c) and Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A court must be satisfied that no reasonable trier of fact could find for the nonmoving party or, in other words, “that the evidence favoring the nonmoving party is insufficient to enable a reasonable jury to return a verdict in her favor.” Id. The moving party bears the burden of establishing that there are no genuine issues of material fact. Lavespere v. Niagra Mach. & Tool Works, Inc., 910 F.2d 167, 178 (5th Cir.1990) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). However, the mere argued existence of a factual dispute does not defeat an otherwise properly supported motion. Id. In determining whether a party is entitled to summary judgment, the court views the evidence in the light most favorable to the non-moving party. Littlefield v. Forney Indep. School Dist., 268 F.3d 275, 282 (5th Cir.2001), citing Smith v. Brencettsy, 158 F.3d 908, 911 (5th Cir.1998). The moving party bears the burden, as an initial matter, of showing the district court that there is an absence of evidence to support the nonmoving party's claim. Id. *5 American Honda is seeking the nullification and rescission of its Letter of Intent and Dealer Agreement with Premier Honda based on the alleged fraudulent actions of Premier Honda. According to the Louisiana Supreme Court, there are three requirements that must be satisfied before a contract may be rescinded on the basis of fraud: (1) one accused of fraudulent activity must misrepresent, suppress, or omit true information; (2) with the intent to obtain an unjust advantage or inconvenience to another; and (3) the error induced by the fraudulent act must relate to a circumstance that substantially influenced the victim's consent to the contract. Shelton v. Standard/700 Associates, 798 So.2d 61, 64 (La.2001). Although American Honda cites several Fifth Circuit cases in support of the proposition that summary judgment motions may be used to determine fraudulent intent as a matter of law, none of the cases cited apply Louisiana law. Moreover, the Louisiana Supreme Court has held that questions of fraud are peculiarly within the province of the jury. Todt v. Todt, 237 La. 168, 110 So.2d 566 (La.1959). And more recently, the Louisiana First Circuit Court of Appeal has held that the existence of fraud is a question of fact. Smith v. Roussel, 2000-1028 (La.App. 1 Cir.2001). Accordingly, absent clear and uncontroverted evidence of Premier Honda's fraudulent intent, a summary judgment nullifying and/or rescinding the contracts executed between American Honda and Premier Honda would be inappropriate. In an effort to meet this burden, American Honda alleges that the undisputed facts establish that Premier Honda's intention was to obtain an unjust advantage and/or to cause damage or inconvenience to American Honda. Specifically, American Honda claims that Premier Honda misrepresented the true nature of its transaction with Jerome Imports. Subsequently, American Honda relied on the misrepresentation when it approved the transfer and appointed Premier Honda as an authorized Honda dealer. Moreover, because Premier Honda subsequently disclosed that it had entered into an “Assignment of Repurchase Rights” with Jerome Imports and sought to have American Honda repurchase its old inventory and parts, American Honda alleges that these actions clearly indicate Premier Honda's intent to obtain an unjust advantage and/or to cause damage or inconvenience to American Honda. In its opposition, however, Premier Honda alleges that it was American Honda that required Jerome Imports and Premier Honda to characterize their contract as a transfer agreement. Furthermore, Premier Honda asserts that, regardless which terminology was used by the parties, La. R.S. 32:1257 legally permitted Jerome Imports to exercise its termination rights, regardless of how it characterized the agreement with Premier Honda. In fact, in an affidavit attached to the opposition, Mr. Troy Duhon stated that the “Deed is Done” letter was presented to him for execution on the day of closing outside the presence of his counsel. Moreover, Mr. Duhon avers that he was assured by Jerome Imports' counsel that the document would be and was of no effect under Louisiana law and was, therefore, unenforceable. *6 Accordingly, under these facts, Premier Honda alleges that it was not seeking to obtain an unjust advantage, but was only seeking to exercise the rights it believed Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 7 of 75 American Honda Motor Co., Inc. v. Premier Quality Imports, LLC, Not Reported in... 2005 WL 2036685 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 it had been granted by the law to Jerome Imports by La. R.S. 32:1251, et seq. and subsequently assigned to it in the Assignment of Repurchase Rights. Clearly, a credibility determination is necessary to resolve these conflicting characterizations of Premier Honda's intent in misrepresenting the character of its transaction with Jerome Imports to American Honda. As such, Premier Honda's intent in executing the contradictory documents remains a disputed genuine issue of material fact and, therefore, American Honda has failed to carry its burden. Accordingly, the Motion for Partial Summary Judgment is DENIED. Premier Honda's Motion to Dismiss A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) challenges the court's subject matter jurisdiction. The question of subject matter jurisdiction is for the court to decide. Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir.1981). The party that invokes the federal subject matter jurisdiction bears the burden of establishing that jurisdiction. St. Paul Reins. Co., Ltd. v. Occidental Steamship Co., 287 F.2d 252, 253-54 (5th Cir.1961). There are two primary issues raised by Premier Honda's Motion to Dismiss: (1) whether the relief sought by American Honda is under the exclusive jurisdiction of the Commission, such that this Court is deprived of subject matter jurisdiction; and (2) if not, whether this Court should abstain from this matter in light of the doctrine of primary jurisdiction or the Burford abstention doctrine. Accordingly, it is necessary for this Court to consider the jurisdiction of the Commission over American Honda's claims for nullification and rescission. Subsequently, the Court will consider the matter of abstention. Both of these issues are addressed under individual headings. Jurisdiction of the Louisiana Motor Vehicle Commission The Louisiana Motor Vehicle Act (hereinafter the “LMVA”), embodied in La. R.S. 32:1251, et. seq., regulates motor vehicle manufacturers, distributors, dealers, and lessors that are doing business in Louisiana. The purpose of these statutes is to prevent fraud, imposition, and other abuses upon its citizens, and avoid undue control of the independent motor vehicle dealer by the motor vehicle manufacturing and distributive organizations. Id. (see also La. Motor Vehicle Comm. v. Wheeling Frenchman, 235 La. 332, 103 So.2d 464 (La.1958). The statutes also serve to prevent motor vehicle dealers, lessors, manufacturers, and distributing organizations from participating in unfair practices. La. R.S. 32:1257(A) grants licensed motor vehicle dealers the right to demand the repurchase of certain vehicles and inventory upon the cessation of the business: (1) In the event the licensee ceases to engage in the business of being a motor vehicle or speciality vehicle dealer, or ceases to sell a particular make of motor vehicle or speciality vehicle and after notice to the manufacturer, converter, distributor, or representative by registered or certified mail, within thirty days of the receipt of the notice by the manufacturer, converter, distributor, or representative, the manufacturer, converter, distributor, or representative shall repurchase: *7 (a) All new and unused motor and speciality vehicles of the current and last prior model year delivered to the licensee and parts on hand that have not been damaged or substantially altered to the prejudice of the manufacturer while in the possession of the licensee. Moreover, La. R.S. 32:1254(N) makes it is a violation for a manufacturer or distributor of motor vehicles to engage in the following conduct: (5) For a manufacturer of motor vehicles, a distributor, a wholesaler, distributor branch or factory branch, or officer, agent, or other representative thereof, to induce or coerce, or attempt to induce or coerce, any motor vehicle dealer: (e) To enter into a franchise with a new motor vehicle dealer or during the franchise term, use any written instrument, agreement, or waiver, to attempt to nullify or modify any provision of this Chapter, or prevent a new motor vehicle dealer from bringing an action in a particular forum otherwise available under law. Such instruments, agreements, and waivers are null and void, unless done in connection with a settlement agreement to resolve a matter pending a commission hearing or pending litigation between a manufacturer, distributor, wholesaler, distributor branch or factory branch, or officer, agent, or other representative. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 8 of 75 American Honda Motor Co., Inc. v. Premier Quality Imports, LLC, Not Reported in... 2005 WL 2036685 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 Both Premier Honda and the LADA assert that because manufacturers and distributors have more power and influence than individual motor vehicle dealers, it is important that their behavior be monitored and controlled to ensure that they do not employ discriminatory or unfair practices in dealing with Louisiana licensed dealers. LADA amicus curiae brief, p. 7. Moreover, the LADA asserts that the purpose of La. R.S. 32:1254(N)(5)(d)-(e) is intended to prevent such behavior. See Benson & Gold Chevrolet, Inc. v. Louisiana Motor Vehicle Commission, 403 So.2d 13 (La.1981) for a comprehensive discussion regarding the policies behind the creation of the LMVA and the Commission. In its own amicus curiae brief, the Commission argues that it has a declared public policy interest to adjudicate the issues presently before the Court. Commission amicus curiae brief, p. 3. Specifically, the Commission argues that Louisiana regulates substantive provisions of a franchise agreement between a distributor and a dealer and that the nullification or rescission of the Dealer Agreement is not a single contractual matter having affect only as to American Honda and Premier Honda, but a matter that has implications within the framework of regulatory laws, rules and regulations. Clearly, the Commission has jurisdiction to adjudicate Premier Honda's complaint regarding the repurchase rights and to determine whether American Honda violated the LMVA by inducing or coercing Premier Honda and/or Jerome Imports to waive rights provided by the LMVA. Nonetheless, American Honda argues that a state agency only has exclusive jurisdiction over a particular subject matter if the Louisiana constitution expressly deprives the district courts of original jurisdiction. Specifically, article V, § 16(A)(1) of the Louisiana Constitution provides: *8 Except as otherwise authorized by this constitution or except as heretofore or hereafter provided by law for administrative agency determination in workers' compensation matters, a district court shall have original jurisdiction of all civil and criminal matters. Furthermore, American Honda notes that the Louisiana Supreme Court has interpreted this constitutional provision to vest the district courts with at least concurrent original jurisdiction to adjudicate all legal matters, both civil and criminal, except for those matters that the constitution itself grants original jurisdiction to other courts or adjudicative tribunals. Plaintiff's Opposition, p. 5 citing Moore v. Roemer, 567 So.2d 75, 79 (La.1990). Accordingly, American Honda argues that its claims for rescission based on fraud is not within the jurisdiction of the Commission. Premier Honda, however, does not concede this point. Rather, it argues that the rescission sought by American Honda is no more than a termination of the Dealership Agreement-a matter that is clearly within the jurisdiction of the Commission. Regardless, the Court finds that American Honda asserts claims that are outside the jurisdiction of the Commission, and, therefore, properly within the jurisdiction of this Court. Accordingly, this Court must determine whether it should exercise such jurisdiction in light of Premier Honda's motion to dismiss. Doctrine of Primary Jurisdiction The doctrine of primary jurisdiction vests Louisiana trial courts with discretion to defer to agencies those issues that are within their particular expertise. Mills v. Davis Oil Co., 11 F.3d 1298, 1304 (5th Cir.1994). The Fifth Circuit has held that Louisiana's doctrine of primary jurisdiction is substantive and must be applied by district courts as if they were Louisiana state courts. Id. In so finding, the court found the purpose of the doctrine would be thwarted if Louisiana litigants were able to come into federal court and circumvent an otherwise applicable administrative process. Id. “The two major considerations underlying the doctrine are the need for uniformity in various areas of regulated industry, and special administrative expertise attributable to agencies due to their intimate working associations with industries they regulate.” Id. citing South-West Utilities v. S. Cent. Bell Tel., 339 So.2d 425 (La.1976). The doctrine is “designed to guide a court in determining whether to refrain from exercising its own jurisdiction in a particular case so that an administrative agency with special competence may first decide an issue presented.” Central Louisiana Elec. Co. v. Louisiana Pub. Serv. Com'n, 601 So.2d 1383, 1388 (La.1992) (Lemmon, concurring). The distinction between primary jurisdiction and the exhaustion rule (e.g., the exclusive jurisdiction asserted by Premier Honda) is that primary jurisdiction applies Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 9 of 75 American Honda Motor Co., Inc. v. Premier Quality Imports, LLC, Not Reported in... 2005 WL 2036685 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 when concurrent jurisdiction exists between the courts and the administrative agency and the exhaustion rule applies when exclusive jurisdiction exists in the administrative agency, and courts have only appellate, as opposed to original, jurisdiction to review the agency's decisions. Daily Advertiser v. Trans-La, 612 So.2d 7, 27 (La.1993). In matters where a court chooses to defer to an administrative agency for an initial decision on matters within the expertise of the agency, it is a matter that is within the sound discretion of the trial court. Magnolia Coal Terminal v. Phillips Oil Co., 576 So.2d 475, 489 (La.1991). *9 American Honda argues that the primary jurisdiction doctrine cannot apply here for three reasons: (1) American Honda's claims for rescission, nullity, and damages are independent of any termination rights it might have under the LMVA; (2) deference would not further a need for uniformity within the regulatory scheme; and (3) the Commission does not have any special expertise to adjudicate American Honda's claims for rescission and damages. Premier Honda, American Honda, and the LADA all cite the decision of Volvo Trucks North America, Inc. v. Crescent Ford Truck Sales, Inc., 2003 WL 1936356 (E.D.La.2003) as relevant to these issues. In Volvo, plaintiff filed a declaratory action asserting its right to terminate its Dealership Agreement with Crescent Ford. Id . at 2. Crescent Ford subsequently moved to dismiss the action and to stay Volvo's action for damages for Crescent Ford's alleged breach of the dealership agreement. In considering arguments very similar to those raised in the present matter, Judge Livaudais found that Volvo's substantive right to terminate the dealership agreement was limited to the administrative proceeding before the Commission, and to judicial review in the state court, as specified in La. R.S. 32:1251 et. seq. Id. at 4. Accordingly, the court held that federal court could not provide other or additional relief and dismissed Volvo's suit for a declaratory judgment for a lack of jurisdiction. Id. Notably, however, the court found that the Commission had no authority to grant monetary damages for breach of contract, even upon a legal determination by the Commission that a contract was violated. Id. at 5. As a result, the court found that it had jurisdiction over Volvo's damages claims, that there were no complex regulatory statutes or difficult questions of state law to be addressed, and, therefore, it refused to stay Volvo's claim for money damages for breach of contract. Id. American Honda also cites the cases of Harley- Davidson Motor Co ., Inc. v. Powersports, Inc., 00- C-132 (E.D.Wis.2000) and South Bay Creditors Trust v. General Motors Acceptance Corp., 82 Cal.Rptr.2d. 2 (Cal.Ct.App.1999) to support its argument that the fraud claims are sufficiently different than termination under the LMVA. In Harley Davidson, the manufacturer asserted claims of intentional misrepresentation, negligent misrepresentation, and anticipatory breach of contract. 00-C-132, p. 3. Accordingly, the Court expressly determined that the manufacturer's tort claims were not within the jurisdiction of Florida's Department of Highway Safety and Motor Vehicles and that the department had no power to grant the relief sought by Harley Davidson. In declining to apply the doctrine of primary jurisdiction, the court also found that the manufacturer's claims did not require any administrative expertise. In South Bay Creditors, the dealership filed an action against the manufacturer pleading causes of action for fraud, constructive fraud/breach of fiduciary duty, breach of contract, and breach of the implied covenant of good faith and fair dealing. 82 Cal.Rptr.2d. at 5. In a reversal of roles, the manufacturer sought to force the dealership to first exhaust its remedies with California's New Motor Vehicle Board (hereinafter the “Board”). The district court granted the manufacturer's motion for dismissal, but the court of appeal reversed. In so doing, the appeal court briefly addressed the doctrine of primary jurisdiction. Id. at 8-9. The court noted that the referral to the Board under the primary jurisdiction was inappropriate because the factual issues and common law claims raised by the plaintiff were not beyond the usual competence of the courts and it did not indicate a need for prior resort to the Board's administrative experience. Finally, the court of appeal noted that courts should “exercise great caution to prevent the Board from being used by manufacturers as ‘an extra line of defense from lawsuits by dealers,’ rather than fulfilling its intended purpose of protecting dealers from ‘undue control’ by manufacturers” Id. at 10. *10 The Court finds that these cases are distinguishable from the present matter on several accounts. First, there is no evidence in either of these cases that the appropriate state commissions voiced an interest in the cases. In the Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 10 of 75 American Honda Motor Co., Inc. v. Premier Quality Imports, LLC, Not Reported in... 2005 WL 2036685 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 present matter, not only has the Commission filed an amicus curiae brief alleging that the State of Louisiana has a declared public policy to adjudicate the issue of whether the franchise should be nullified and rescinded due to Premier Honda's alleged fraud in obtaining the franchise, but the LADA has also filed a memorandum in support of Premier Honda's motion. Next, regardless of how American Honda styles its claims for relief, it is ultimately seeking to terminate its Dealership Agreement with Premier Honda, even if the relief sought is distinct. This is distinguishable from the Harley-Davidson matter, where it is not clear that the manufacturer was seeking rescission when the district court considered the application of the doctrine of primary jurisdiction. Harley-Davidson Motor Co., Inc. v. Powersports, Inc., 319 F.3d 973, 989 n. 3 (7th Cir.2003). In Harley-Davison, the district court made no mention of rescission, or any indication that it considered the dealer's motion to dismiss in such a context. This is in stark contrast to the present matter. The LADA notes that American Honda's request for relief based on Premier Honda's fraudulent actions is of no moment because the “fraud” on which American Honda bases its complaint is not fraud at all, but the exercise of Premier Honda's statutory rights under the LMVA. LADA Memorandum, p. 9. This is an important point because it implicates that American Honda's actions also gave rise this dispute (i.e., it is not clear whether American Honda comes to this Court with clean hands). Although it is not clear whether or not American Honda compelled or coerced Jerome Imports and Premier Honda to style their transaction in a certain manner, this Court is concerned about the implications of these allegations (especially in light of the fact that American Honda prepared the Deed is Done letter that it required the parties to sign). The resolution of this matter has a direct bearing on American Honda's claims of fraud and is directly relevant to the complaint pending before the Commission. As such, this Court finds that a determination as to whether American Honda could require Jerome Imports to waive its termination rights under the LMVA must be made. If it could not, it must also be determined whether Jerome Imports could validly assign those rights to Premier Honda, such that American Honda violated the LMVA when it denied the repurchase request. If the Commission determines that American Honda improperly induced or coerced Premier Honda and/or Jerome Imports to waive the repurchase rights guaranteed by the LMVA, then American Honda's allegations of fraud are almost certainly without merit because it would support Premier Honda's claims that its intent was not to obtain an unfair advantage, but to exercise rights that it thought were due under the law. Therefore, before the Court can consider an action for nullification based on fraud, it must first be determined if American Honda induced or coerced Premier Honda and/or Jerome Imports to waive termination rights in violation of La. R.S. 32:1254(N). This is a matter that implicates a need for uniformity in the car sales industry. *11 Furthermore, like the subject matter in South Bay Creditors, this is an issue that is not beyond the competence of this court. But unlike that decision, it is a matter that implicates a need to resort to the Commission's administrative experience. In a letter dated March 2, 2004, included in Exhibit B to American Honda's Opposition to Dismiss, Mr. Stoutz, counsel for Premier Honda, notes that an assignment of rights has been included in every transaction/closing that he has prepared. Furthermore, in the same letter, Premier Honda challenges American Honda's construction of “termination” in La. 32:1257. These are issues that are specifically within the administrative expertise of the Commission. Finally, American Honda asserts that, but for its fraudulent actions, Premier Honda would have no standing to assert its claim before the Commission. See American Honda's Response to LADA, pp. 6-7. The fact remains, however, that Premier Honda has both a valid dealership license from the Commission and a valid franchise from American Honda. As such, it would be improper for this Court to entertain American Honda's complaints at this time, when several of the issues that this Court will have to resolve in order to grant American Honda's requested relief are properly and presently pending before the Commission. Therefore, although this Court finds that American Honda's claims for rescission, nullity, and damages are distinct from termination rights afforded by the LMVA, this Court defers to the Commission at this time, in accordance with the doctrine of primary jurisdiction, for the following reasons: (1) the matter which is presently pending before the Commission is directly related to Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 11 of 75 American Honda Motor Co., Inc. v. Premier Quality Imports, LLC, Not Reported in... 2005 WL 2036685 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 the factual and legal findings implicated in American Honda's request before this Court; (2) these matters are within the expertise of the Commission; and, (3) deference will further a need for uniformity within the regulatory scheme-especially as it pertains to termination rights. If, however, the Commission determines that American Honda is not required to repurchase the vehicles and parts, then this Court is prepared to move this proceeding forward. As such, this Court does not reach the matter of Burford abstention. ACCORDINGLY, IT IS ORDERED that Plaintiff's Motion for Partial Summary Judgment (Rec.Doc. 13) is DENIED; IT IS FURTHER ORDERED that Defendant's Motion to Dismiss (Rec.Doc. 11) is GRANTED in Part and DENIED in part. This matter is STAYED and ADMINISTRATIVELY CLOSED. If the Commission determines that American Honda is not required to repurchase the vehicles and parts, then American Honda may move this Court to re-open this matter. All Citations Not Reported in F.Supp.2d, 2005 WL 2036685 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 12 of 75 Exhibit 2 Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 13 of 75 Borough of Catasauqua v. Darwin Nat. Assur. Co., Not Reported in F.Supp.2d (2012) 2012 WL 1071224 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2012 WL 1071224 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. BOROUGH OF CATASAUQUA, Plaintiff, v. DARWIN NATIONAL ASSURANCE COMPANY, also known as Allied World Assurance Company (U.S.) Inc.; and Allied World National Assurance Company, Defendants. Civil Action No. 11–cv–03855. | March 30, 2012. Attorneys and Law Firms Jeffrey R. Dimmich, Esq., for Plaintiff. Lawrence J. Bistany, Esq., for Defendants. OPINION JAMES KNOLL GARDNER, District Judge. *1 This matter is before the court on Plaintiff Borough of Catasauqua's Motion to Remand the Removed Action Pursuant to 28 U.S.C. § 1477(c), which motion was filed July 13, 2011 together with Plaintiff Borough of Catasauqua's Memorandum of Law in Support of Motion to Remand the Removed Action Pursuant to 28 U.S.C. § 1477(c). On July 27, 2011, Defendant Darwin National Assurance Company and Allied World National Assuracne Company's Response in Opposition to Plaintiff's Motion to Remand was filed. For the reasons articulated below, I deny plaintiff's motion to remand this action to the Court of Common Pleas of Lehigh County, Pennsylvania. First, I deny plaintiff's motion to remand because Burford abstention is not appropriate in this action. Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943). Second, I deny plaintiff's motion to remand because plaintiff's Amended Action for Declaratory Judgment & Statutory Bad Faith filed January 25, 2012 seeks damages for defendant's alleged breach of an insurance contract, and remand of an action for damages is not permitted even when a district court finds that Burford abstention is appropriate. JURISDICTION This court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1332. Plaintiff Borough of Catasauqua is a municipal corporation established pursuant to the laws of the Commonwealth of Pennsylvania and, thus, a citizen of Pennsylvania for purposes of diversity jurisdiction. Defendant Darwin National Assurance Company (“Darwin National”) is a corporate citizen of both Delaware and Connecticut for jurisdictional purposes. 1 Defendant Allied World National Assurance Company (“Allied World”) is a corporate citizen of both New Hampshire and New York for jurisdictional purposes. 2 Thus, complete diversity of citizenship exists. 1 Notice of Removal at ¶ 4. 2 Notice of Removal at ¶ 5. Plaintiff seeks declaratory judgment concerning a Public Officials Professional Liability Insurance Policy, Policy Number 0202–1588 (the “Policy”), which has a policy limit of $1,000,000. Plaintiff also alleges statutory bad faith against defendants and seeks both compensatory and punitive damages. Thus, the amount in controversy exceeds $75,000. VENUE Venue is proper because defendant removed this action from the Court of Common Pleas of Lehigh County, Pennsylvania, which is located within this judicial district. 28 U.S.C. § 1441(a). FACTUAL AND PROCEDURAL BACKGROUND The Blue Action Plaintiff Borough's claim for declaratory judgment and bad faith against defendants Darwin National and Allied Case 1:17-cv-00010-JEJ Document 45-1 iled 04/07/17 Page 14 of 75 Borough of Catasauqua v. Darwin Nat. Assur. Co., Not Reported in F.Supp.2d (2012) 2012 WL 1071224 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 World arises from a 2010 lawsuit 3 in which Robert E. Blue Consulting Engineers, P.C. (“Blue Consulting Engineers”) asserted (1) copyright infringement against defendants Polaris Engineering, Inc., James W. Green, Corrado Builders, and the Borough of Catasauqua; (2) breach of contract against defendant Corrado Builders; and (3) unjust enrichment against Corrado Builders. 4 3 See Robert E. Blue Consulting Engineers, P.C. v. Polaris Engineering, Inc., Civil Action No.2010–cv– 04106, in the United States District Court for the Eastern District of Pennsylvania. 4 Blue Consulting Engineers filed its civil Complaint (“Blue Complaint”) in this court in Civil Action No.2010–cv–04106 on August 13, 2010. *2 The Blue Action concerned subdivision plans created by Blue Consulting Engineers for a parcel of real property owned by James W. Green. Blue Consulting Engineers alleged, among other things, that Polaris Engineering had infringed Blue's copyrights in the subdivision plans created for Mr. Green's property by copying the plans and submitting the infringing plans to the Borough of Catasauqua for review and approval. Count I of the Blue Complaint alleged that Polaris Engineering, Mr. Green, and Corrado Builders had infringed Blue Consulting Engineers' copyrights. 5 Although Count I of the Blue Complaint was labeled “Copyright Infringement” against “All Defendants”, the Blue Complaint did not allege that the Borough infringed Blue's copyrights in the subdivision plans. 6 5 Blue Complaint at ¶ 31. 6 Id. at ¶¶ 26–34. The Blue Complaint named the Borough as a party “in the event that the Court determines that the Borough is a necessary or indispensible party with respect to the relief sought” and specifically stated that Blue Consulting Engineers “does not allege any wrongdoing” by the Borough related to the subdivision plans or in concert with the other named defendants in the Blue action. 7 In addition to monetary damages, Blue Consulting Engineers sought to enjoin “any construction, excavation, and/or planning based on Plaintiff's plans or the infringing plans” and an order requiring the defendants to return all copies of plans in their possession. 8 7 Blue Complaint at ¶ 8 Id. at ¶ 34. Blue Consulting Engineers filed its Complaint on August 13, 2010. The Borough filed its motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on September 30, 2010. In its motion to dismiss, the Borough sought dismissal of the Blue Complaint because Blue Consulting Engineers did not state a claim against, or seek any relief from, the Borough; and because the Borough was neither a necessary nor indispensible party, and thus not required to be joined under Rule 19. For the reasons expressed in my Order dated June 14, 2011, and filed June 15, 2011, I concluded that Blue Consulting Engineers did not state a claim against the Borough and that the Borough was not a necessary party under Rule 19. Accordingly, I granted the Borough's motion and dismissed the Blue Complaint against the Borough with prejudice. The Instant Action On May 19, 2011, while the Blue Action was proceeding and the Borough's motion to dismiss was pending, the Borough filed an Action for Declaratory Judgment & Statutory Bad Faith in the Court of Common Pleas of Lehigh County, Pennsylvania. On June 13, 2011, the day before the Borough was dismissed from the Blue Action, defendants Darwin National and Allied World removed this action to this federal court. Plaintiff Borough of Catasauqua's Motion to Remand the Removed Action Pursuant to 28 U.S.C. § 1447(c) was filed on July 13, 2011, together with Plaintiff Borough of Catasauqua's Memorandum of Law in Support of Motion to Remand the Removed Action Pursuant to 28 U.S.C. § 1447(c). *3 While the Borough's motion to remand was pending, the Borough moved for leave of court to file an Amended Action for Declaratory Judgment & Statutory Bad Faith. 9 Defendants did not respond to the Borough's Case 1:17-cv-00010-JEJ Document 45-1 iled 04/07/17 Page 15 of 75 Borough of Catasauqua v. Darwin Nat. Assur. Co., Not Reported in F.Supp.2d (2012) 2012 WL 1071224 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 motion for leave. Accordingly, I granted the Borough's motion as unopposed and the Amended Action for Declaratory Judgment & Statutory Bad Faith was filed on January 25, 2012. 9 Plaintiff Borough of Catasauqua's Motion for Leave of Court to File an Amended Action for Declaratory Judgment and Statutory Bad Faith was filed October 26, 2011. The Borough contends that defendants had a duty to defend it in the Blue Action pursuant to the Policy. Specifically, the Borough contends that Darwin National was contractually obligated to provide a defense to the Borough in the Blue Action and to reimburse the Borough for attorney's fees and litigation costs incurred in defending against the Blue Action. 10 The Borough further contends that defendants acted in bad faith by refusing to defend or indemnify the Borough in the Blue Action. 11 10 Amended Action at ¶ 48. 11 Id. at ¶ 93. The Borough seeks the following: (1) a declaration of the rights and obligations of the parties pursuant to the Policy, and that defendants acted in bad faith; (2) $8,193.50 in defense expenses in the Borough's defense of the Blue Action; (3) attorney's fees and costs associated with the instant action ($27,600 in fees, and $53.25 in costs as of October 26, 2011); (4) interest at a rate of prime plus three percent on the sums expended by the Borough in connection with its defense in the Blue Action and in prosecuting the instant action; and (5) “all damages including punitive damages for bad faith arising out of the refusal/failure to provide a defense and indemnify” the Borough. 12 12 Id. at pages 17–18, 24–25. Motion to Remand The Borough seeks to have this action remanded to the Court of Common Pleas of Lehigh County, Pennsylvania pursuant to the Burford abstention doctrine. 13 For the reasons discussed below, I conclude the abstention pursuant to Burford is not appropriate in this matter and, therefore, deny plaintiff's motion to remand. 13 Motion to Remand at pages 3–4. DISCUSSION Burford Abstention 14 14 Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943). According to the United States Court of Appeals for the Third Circuit, “[t]he purpose of Burford [abstention] is to ‘avoid federal intrusion into matters of local concern and which are within the special competence of local courts.’ “ Matusow v. Trans–County Title Agency, LLC, 545 F.3d 241, 247 (3d Cir.2008) (quoting Hi Tech Trans, LLC v. New Jersey, 382 F.3d 295, 303–04 (3d Cir.2004). “Generally, Burford abstention is justified where a complex regulatory scheme is administered by a specialized state tribunal having exclusive jurisdiction.” United Services Automobile Association v. Muir, 792 F.2d 356, 364 (3d Cir.1986). A two-step analysis determines whether abstention under Burford is appropriate. First, I must determine whether “timely and adequate state law review is available.” Matusow, 545 F.3d at 247. Second, if timely and adequate state law review is available, I must determine whether the case (1) “involves difficult questions of state law impacting on the state's public policy”, or (2) “the district court's exercise of jurisdiction would have a disruptive effect on the state's efforts to establish a coherent public policy on a matter of important state concern.” Id. at 247–248. Burford Step 1 *4 The first step of the analysis is not in dispute. Plaintiff contends that timely and adequate state law review of this matter is available, and notes that the action was initiated in the Court of Common Pleas of Lehigh County, Pennsylvania. 15 Defendants do not dispute that adequate and timely review is available in the Pennsylvania state courts. 16 Rather, defendants ground their opposition in the second step of the Burford analysis. 17 15 Plaintiff's Memorandum at page 15. Case 1:17-cv-00010-JEJ Document 45-1 iled 04/07/17 Page 16 of 75 Borough of Catasauqua v. Darwin Nat. Assur. Co., Not Reported in F.Supp.2d (2012) 2012 WL 1071224 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 16 See Defendants' Memorandum at pages 10–16. 17 Defendants' Memorandum at pages 10–16. Burford Step 2 The parties dispute the appropriate outcome of the second step of the Burford analysis. Plaintiff contends that this court should abstain pursuant to Burford for several reasons. First, plaintiff contends the insurance coverage exclusion at the heart of the parties dispute—precluding coverage for claims “arising out of” engineering or architectural contracts—“constitutes a question of state law bearing on policy problems of substantial public import whose importance transcends the result” in this matter. 18 18 Plaintiff's Memorandum at page 19. Second, plaintiff contends that Burford abstention is proper because the insurance coverage exclusion involved relates to a municipal entity's entitlement to insurance coverage for actions—subdivision plan review—that the municipality is required to take and “should thus be rendered by a state court [because] any such decision will fundamentally impact state public policy and a municipality's continuing ability to perform its statutory obligation of subdivision plan review.” 19 19 Plaintiff's Memorandum at page 22. Although the Borough contends that a decision in this matter could amount to “an attack on the policies embodied by [Pennsylvania's] Municipalities Planning Code, making this an appropriate matter for a Burford abstention', the statements of the Third Circuit Appeals Court indicate otherwise. Specifically, in Heritage Farms, Inc. v. Solebury Township, 671 F.2d 743, 747 (3d Cir.1982), the United States Court of Appeals for the Third Circuit stated that “[t]he Pennsylvania Municipalities Planning Code does not involve the type of uniform and elaborate statewide regulation as was adopted by the State of Texas to govern the drilling of oil wells in Burford.” Id. This action does not challenge the Municipalities Planning Code or the land-use decisions of the Borough. Rather, this action challenges defendants' refusal to defend the Borough against the Blue Complaint. Third, and finally, plaintiff contends that this case does not present any federal question, and the absence of any federal question weighs in favor of Burford abstention. 20 20 Plaintiff's Memorandum at pages 22–23. Defendants oppose Burford abstention because this case is not of the extraordinary nature contemplated by the Burford doctrine, and because “a decision in this action will be limited to the application of the fundamental principles of insurance contract interpretation and the determination of any applicable coverage thereunder.” 21 21 Defendants' Memorandum at pages 9–10. Specifically, defendants contends that a decision here would not intrude on Pennsylvania's insurance or land- use regulatory schemes; and that Pennsylvania courts, though competent to hear the dispute, do not possess any “special competence” to interpret the insurance contract at issue. 22 22 Id. at pages 10–13. Upon consideration of the enumerated factors relevant to the second step of the Burford analysis, I conclude that abstention is not appropriate here. The United States Court of Appeals for the Third Circuit has explained that the second step of the Burford analysis requires that I assess several factors: (1) whether the particular regulatory scheme involves a matter of substantial public concern; (2) whether it is the sort of complex technical regulatory scheme to which the Burford abstention doctrine usually is applied; and (3) whether federal review of a party's claims would interfere with the state's efforts to establish and maintain a coherent regulatory policy. *5 Hi Tech Trans, 382 F.3d at 304. Each of these factors need not be present to warrant abstention. Culinary Service of Delaware Valley, Inc. v. Borough of Yardley, 385 Fed.Appx. 135, 144 (3d Cir.2010) (citing Lac D'Amiante du Quebec, L tee v. American Home Assurance Company, 864 F.2d 1033, 1043 (3d Cir.1988)). Case 1:17-cv-00010-JEJ Document 45-1 iled 04/07/17 Page 17 of 75 Borough of Catasauqua v. Darwin Nat. Assur. Co., Not Reported in F.Supp.2d (2012) 2012 WL 1071224 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 Substantial Public Concern First, I must consider whether the particular regulatory scheme involves a matter of substantial public concern. Hi T ech Trans, 382 F.3d at 304. The Third Circuit Court of Appeals has recognized that Pennsylvania has expressed its strong state interest in regulating insurance companies through a complex regulatory scheme, known as the Insurance Department Act, ... the stated purpose of which is “the protection of the interests of insureds, creditors, and the public generally.” General Glass Industries Corp. v. Monsour Medical Foundation, 973 F.2d 197, 201 (3d Cir.1992), overruled on other grounds, Quackenbush v. Allstate Insurance Agency, 517 U.S. 706, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996). Pennsylvania's interest in protecting its resident insureds from overreaching insurers is further reflected in its provision of a statutory cause of action for bad faith by an insurer. Kilmer v. Connecticut Indemnity Company, 189 F.Supp.2d 237, 246–247 (M.D.Pa.2002) (Vanaskie, J.). Thus, I conclude that Pennsylvania's regulatory scheme governing insurers is a matter of substantial public concern. Complex, Technical Scheme Next, I must consider whether the regulatory scheme is “the sort of complex technical regulatory scheme to which the Burford abstention doctrine usually is applied.” Hi Tech Trans, 382 F.3d at 304. According to the Third Circuit, in order to “implicate the sort of technical, complex regulatory scheme to which Burford abstention is usually applied, the action must challenge the scheme itself, rather than just actions taken under color of the scheme.” Culinary Services, 385 Fed.Appx. at 144. Here, plaintiff does not challenge the regulatory scheme applicable to insurers under Pennsylvania law, but rather alleges that defendants' actions concerning the Borough's defense in the Blue Action violated the legal rules governing insurance conduct in Pennsylvania. Specifically, plaintiff's Amended Complaint alleges that defendants had a duty to defend the Borough pursuant to the insurance policy and that defendants acted in bad faith by refusing to defend plaintiff in the underlying action. Because plaintiff does not challenge Pennsylvania's regulatory scheme governing insurers, the Opinion of the Third Circuit in Culinary Services counsels that plaintiff's suit does not implicate the type of complex, technical regulatory scheme to which Burford properly applies. Culinary Services, 385 Fed.Appx. at 144. As defendants acknowledge, federal courts have abstained pursuant to Burford in certain insurance-related cases. 23 However, as defendants also point out, those cases involved insolvent insurers who were also involved in state-administered liquidation proceedings. See General Glass, 973 F.2d at 201–202; D'Aimante, 864 F.2d at 1045. 23 Defendants' Memorandum at page 10. *6 Pennsylvania has established a legislative framework for the liquidation of insolvent insurers with the goal of centralizing the insurance liquidation process. Boyce v. Legion Insurance Company, 2002 WL 32341783, at *2 (E.D.Pa. October 31, 2002) (Surrick, J.). The Pennsylvania legislature centralized and regulates these liquidation proceedings to ensure a fair and adequate distribution of an insolvent insurer's limited amount of assets according to a legislatively mandated priority system. Id.; see also Maleski v. Conning and Company, 1995 WL 570466, at *4–5 (E.D.Pa. September 27, 1995) (Broderick, J.). “The complex regulations relating to insolvent insurance companies have to do with plans of rehabilitation and payment to policy holders.” Grode v. Mutual Fire, Marine and Inland Insurance Company, 8 F.3d 953, 959 (3d Cir.1993) Plaintiff does not allege, and I have no reason to believe, that defendants are insolvent or involved in state-administered liquidation proceedings pursuant to Pennsylvania law. Thus, plaintiff's claims is not of the sort of insurance dispute to which courts in this circuit have abstained on Burford grounds. See Grode, supra, Lac D'Amiante du Quebec, L tee v. American Home Assurance Company, 864 F.2d 1033 (3d Cir.1988). The complex legislative framework developed to address the problems associated with insolvent insurers is simply not implicated by plaintiff's action against defendants. Case 1:17-cv-00010-JEJ Document 45-1 iled 04/07/17 Page 18 of 75 Borough of Catasauqua v. Darwin Nat. Assur. Co., Not Reported in F.Supp.2d (2012) 2012 WL 1071224 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 Interference With Attempt at Uniform Regulatory Policy Finally, I must consider whether federal review of a party's claims would interfere with the state's efforts to establish and maintain a coherent regulatory policy. Hi Tech Trans, 382 F.3d at 304. Defendants contend, and I agree, that plaintiff has not provided this court with citation to any case law where a district court, applying Burford, abstained from exercising its proper jurisdiction in an action involving the interpretation of an insurance policy issued by a solvent insurer. 24 24 Defendant's Memorandum at page 10. Moreover, as a district court sitting in diversity, I am obligated to apply Pennsylvania substantive law in this action. Nationwide Mutual Insurance Co. v. Daily ex rel. Repetto, 2003 WL 22246951, *3 (E.D.Pa. September 26, 2003) (O'Neill, J.). Specifically, I am required to apply Pennsylvania's choice-of-law rules, and then to apply the state substantive law dictated by those choice-law-rules. See Amica Mutual Insurance Co. v. Fogel, 656 F.3d 167, 170–171 (3d Cir.2011). Because this action requires that I apply the same substantive law that would be applied in a Pennsylvania state court proceeding to resolve plaintiff's claims, I do not conclude that I am likely to interfere with Pennsylvania's interest in a coherent scheme of regulation of the insurance industry within the Commonwealth. For the above reasons, I conclude that abstention pursuant to the Burford doctrine is not appropriate here. Remand Impermissible *7 Plaintiff would have me remand this action to the Court of Common Pleas of Lehigh County, Pennsylvania. Defendants contend that although the Borough styles this action as one for declaratory relief, it is in fact an action for damages stemming from defendants' alleged bad faith and breach of the insurance contract between the parties. 25 Defendants contend that the Opinion of the United States Supreme Court in Quackenbush, supra, “does not permit a district court to remand an action for damages” under the Burford doctrine. 26 25 Defendants' Memorandum at pages 13–16. 26 Defendants' Memorandum at page 14. According the to the Third Circuit Court of Appeals, a district court may not abstain under Burford and dismiss the complaint when the remedy sought is legal rather than discretionary. Feige v. Sechrest, 90 F.3d 846, 850 (3d Cir.1996) (citing Quackenbush, supra ); see Brown v. Knepp, (E.D.Pa.2005) (Diamond, J.). The United States Supreme Court has stated that, in those cases where the Court has applied abstention principles to actions for damages, “we have permitted federal courts applying abstention principles in damages actions to enter a stay, but we have not permitted them to dismiss the action altogether”. Quackenbush, 517 U.S. at 730, 116 S.Ct. at 1727–1728, 135 L.Ed.2d at 22. Although the Borough styles its amended pleading as an “Amended Action for Declaratory Judgment” and seeks “a declaration of the rights and obligations under the Policy”, 27 and a declaration that defendants “acted in bad faith”, 28 the Borough seeks compensatory damages (in the form of attorney's fees and costs) and punitive damages (for insurance bad faith) damages against defendants for defendants' alleged breach of an insurance contract (the Policy). 29 27 Amended Action at page 17. 28 Id. at page 24. 29 Amended Action at pages 17–18, 24–25. Ultimately, the declarations sought by the Borough are part and parcel its legal action for damages caused by defendants' alleged breach of the insurance contract and alleged bad faith in refusing to defend the Borough in the now-terminated Blue Action. As discussed above, I concluded that Burford abstention is not proper in this matter. However, even if Burford abstention were required under the facts and circumstances in this case, I would not be permitted to remand of this action because plaintiff seeks damages rather than equitable relief. See Quackenbush, 517 U.S. at Case 1:17-cv-00010-JEJ Document 45-1 iled 04/07/17 Page 19 of 75 Borough of Catasauqua v. Darwin Nat. Assur. Co., Not Reported in F.Supp.2d (2012) 2012 WL 1071224 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 730, 116 S.Ct. at 1727–1728, 135 L.Ed.2d at 22; Feige, 90 F.3d at 850; Brown, 412 F.Supp.2d at 450. CONCLUSION The Borough moved to remand this action to the Court of Common Pleas of Lehigh County, Pennsylvania based on the Burford abstention doctrine. I deny the Borough's motion to remand based upon two conclusions. First, I conclude that abstention under the Burford doctrine is not appropriate in this matter. Second, I conclude that this is an action for damages, rather than equitable relief, and therefore remand of this action is not permitted. All Citations Not Reported in F.Supp.2d, 2012 WL 1071224 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:17-cv-00010-JEJ Document 45-1 iled 04/07/17 Page 20 of 75 Exhibit 3 Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 21 of 75 Chantilly Farms, Inc. v. West Pikeland Tp., Not Reported in F.Supp.2d (2001) 2001 WL 290645 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2001 WL 290645 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. CHANTILLY FARMS, INC. and Barbara L. Neilson, Plaintiffs, v. WEST PIKELAND TOWNSHIP, Chester County, Pennsylvania, and George Irwin, Andrew McCreight, and J. Chris Petry, individually and in their capacity as Supervisors of West Pikeland Township, and Peter Hughes, Michael Craven, Franklin Best, John Hennsler, Thomas Dinan, and David Dunwoodie, individually and in their capacity as members of the Planning Commission of West Pikeland Township, and Citizens for West Pikeland's Future, Inc., and Terri Cullen, Tom Grant, Ernie Holling, Barbara Hurt-Simmons, Howard Imhof, Suzanne Kaplan, Maurice Kring, Steve Loving and Tom Nowlan, individually, and in their capacity as directors or officers of Citizens for West Pikeland's Future, Inc., Defendants. No. CIV.A. 00-3903. | March 23, 2001. MEMORANDUM KELLY. *1 This action arises out of property claims by the Plaintiffs for damages resulting from the denial by the Township Defendants, allegedly in conspiracy with Private Defendants, of Plaintiffs' proposal for subdivision of Plaintiffs' land. 1 This suit is brought by the developers against the Township, neighbors and groups of individual citizens. The facts against the Private Defendants are that they petitioned their local government, including members of the Board of Supervisors and the Planning Commission, and made representations to these members in both public and private meetings. The governing body, it is alleged, took action against the Plaintiffs, in part relying on reasons provided by the Private Defendants. As a result, the Plaintiffs allege deprivations of their constitutional rights to develop their property and other ancillary constitutional rights. 1 The Township Defendants include West Pikeland Township, George Irwin, Andrew McCreight and J. Chris Petry, the Supervisors of West Pikeland Township, and Peter Hughes, Michael Craven, Franklin Best, John Hennsler, Thomas Dinan and David Dunwoodie, the members of the Planning Commission of West Pikeland Township. These Defendants will be collectively referred to as the Township Defendants and individually referred to as the Township, the Board of Supervisors or Supervisors, and the Planning Commission. The Private Defendants are Citizens for West Pikeland's Future, Inc., and its directors or officers, including Terri Cullen, Tom Grant, Ernie Holling, Barbara Hurt-Simmons, Howard Imhof, Suzanne Kaplan, Maurice Kring, Steve Loving and Tom Nolan. They will be collectively referred to as the Private Defendants. Presently before the Court are the motions to dismiss (1) by the Private Defendants for dismissal of all claims against them; and (2) by the Township Defendants for all claims except Count I, the civil rights claim under 42 U.S.C. section 1983. The Plaintiffs' Complaint asserts claims for violations of 42 U.S.C. sections 1983 and 1985, and state law claims for conspiracy, intentional interference with actual contractual and business relationships, intentional interference with prospective contractual relationships, and violations of the Pennsylvania Constitution, Article 1, section 26. The Defendants filed the present Motions to Dismiss on August 24, 2000 and September 15, 2000. 2 For the reasons that follow, the Private Defendants' Motion is granted and the Township Defendants' Motion is granted in part and denied in part. 2 This case was transferred to this Court from the calendar of the Honorable Thomas N. O'Neill, Jr. on September 28, 2000. I. BACKGROUND. On January 2, 1999, Plaintiff, Chantilly Farms, Inc. (“Chantilly Farms”), pursuant to an Agreement of Sale with Plaintiff, Barbara L. Neilson (“Neilson”), became the equitable owner of a 76 acre parcel of land known as Chantilly Farms located on Horseshoe Trail in West Pikeland Township, Chester County, Pennsylvania. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 22 of 75 Chantilly Farms, Inc. v. West Pikeland Tp., Not Reported in F.Supp.2d (2001) 2001 WL 290645 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 (Compl., ¶¶ 1, 13, 14.) Chantilly Farms is located in a Conservation Residence zoning district. (Id. at ¶ 15.) On June 2, 1999, the Plaintiffs filed a Sketch Plan Application with West Pikeland Township (“the Township”) for subdivision of 34 acres of Chantilly Farms into 34 one- acre single family lots in the rear portion of the property (“Lot Averaging Plan”). (Id. at ¶ 16.) The Lot Averaging Plan also provided for one 26-acre lot with deed-restricted open space which would contain and preserve the existing residence, the horse farm with stables and barn, the pond and associated wetlands which already exist on Chantilly Farms. (Id. at ¶ 17.) In addition, the Plaintiffs proposed a 3700 foot single access road from Horseshoe Trail to the home sites in the rear of the property. (Id. at ¶ 19.) The single access road required a waiver of Township Ordinance section 610(8), which the Plaintiffs also requested. (Id. at ¶ 20.) 3 3 Plaintiffs allege that waivers of this Ordinance were routinely granted to other subdivisions in the Township. (Compl., ¶ 20.) The Plaintiffs also presented a comparison Sketch Plan proposing subdivision of all 76 acres of Chantilly Farms into 38 two-acre lots (“Two Acre Plan”). (Id. at ¶ 21.) In addition, at a Planning Commission meeting in June of 1999, in its review of the Lot Averaging Plan, the Planning Commission asked the Plaintiffs to submit a Sketch Plan utilizing the Township's Cluster Overlay Ordinance even though the property was not zoned for cluster housing and the road would still require a waiver (“Cluster Sketch Plan”). (Id. at ¶ 22.) The Planning Commission conducted an informal sketch plan review of the Lot Averaging Sketch Plan and the Cluster Sketch Plan from June 2, 1999 through September 13, 1999, which included the input of the Township Engineer, the Brandywine Conservancy and the Chester County Planning Commission. (Id. at ¶ 25.) The Plaintiffs allege that the Planning Commission “failed and/or refused to ‘recommend such changes and modifications as it shall deem necessary or advisable in the public interest.’ ” (Id. at ¶ 26.) Plaintiffs further allege that the Planning Commission “failed and/or refused to send Written Notice of the action of the Planning Commission to the Supervisors or Plaintiffs within ten (10) days after its scheduled meeting review.” (Id. at ¶ 27.) As a result, the Plaintiffs submitted a Preliminary Plan Application for the Lot Averaging Plan which was accepted by the Planning Commission as a complete submission at its October 13, 1999 meeting. (Id. at ¶¶ 23, 28.) *2 The Plaintiffs also submitted the Two Acre Plan to the Township Planning Commission, the County Planning Commission and the Township Engineer. (Id. at ¶¶ 30, 31.) Plaintiffs eventually withdrew the Lot Averaging Plan. After numerous meetings, the Planning Commission recommended non-approval of the Two Acre Plan to the Board of Supervisors. (Id. at 37.) Based upon the opposition of the Private Defendants, the Plaintiffs submitted an alternative preliminary subdivision plan entitled the “By-Right Two Acre Plan” (“By-Right Plan”), which application was accepted as a complete submission by the Township on November 10, 1999. Over a period of 4 months, the Planning Commission, the Township Engineer and the Township Solicitor reviewed the By- Right Plan for compliance with the objective standards of the Township Subdivision and Zoning Ordinances, and Plaintiffs made numerous revisions in response thereto. At the March 8, 2000 Planning Commission meeting, both the Township Solicitor and the Township Engineer informed the Planning Commission that the Plaintiffs had satisfactorily addressed all review comments and the By-Right Plan was in full compliance with all objective standards of the Township Ordinances. (Id. at ¶ 36.) However, the Planning Commission, despite the opinion of the Township Solicitor and the Township Engineer, voted to recommend denial of the By-Right Plan to the Board of Supervisors. (Id. at ¶ 37.) The Supervisors requested, and the Plaintiffs agreed, to grant an additional 30 days for review of the By-Right Plan. (Id. at ¶ 39.) Additional hearings were held before the Board of Supervisors. (Id. at ¶¶ 39, 40.) At the April 17, 2000 meeting of the Board of Supervisors, evidence was presented that the By-Right Plan complied with the Township Ordinances and those facts were confirmed to the Supervisors by the Township Solicitor and the Township Engineer. (Id. at 40.) The Supervisors requested that the Plaintiffs agree that a condition for approval of the By-Right Plan would be Plaintiff's re-submission of the previously filed Lot Averaging Plan, and Plaintiffs agreed. (Id. at 41.) On April 24, 2000, the Township Supervisors voted 3-0 to deny the Plaintiffs' subdivision application. By letter dated May 8, 2000, the Township Supervisors provided Plaintiffs with written notice setting forth the following reasons for the April 24, 2000 denial: (1) road access conditions; (2) potential environmental hazards safety issues; (3) storm water runoff; (4) structures in Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 23 of 75 Chantilly Farms, Inc. v. West Pikeland Tp., Not Reported in F.Supp.2d (2001) 2001 WL 290645 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 the set backs; and (5) wetlands issues. (Id. at ¶ 43.) The Township Supervisors made references in this notice to “new information” as a basis for concern regarding environmental issues. (Id. at ¶ 44.) The Plaintiffs thus aver that this “new information” was received and discussed by the Township Supervisors on occasions outside of the public meetings in violation of the Pennsylvania Sunshine Act. (Id. at ¶ 38.) 4 4 According to the Plaintiffs, the reasons for the denial were supplied to the Township Defendants by the Private Defendants at private meetings in furtherance of their ongoing effort and conspiracy to illegally and improperly impede and obstruct the subdivision application process and to deprive the Plaintiffs of their property and equal protection rights. These meetings, it is alleged, violated the Pennsylvania Sunshine Act. 65 Pa.C.S.A. § 701, et seq. (Compl., ¶ 38.) *3 At the regular meeting of the Board of Supervisors on May 1, 2000, the Township Supervisors discussed the opinion of the Township Solicitor that the April 24, 2000 decision had no legally sufficient basis and could not be defended. (Id. at ¶ 47.) The Township Supervisors thus resolved, according to the Plaintiffs, to postpone a Special Meeting of the Board of Supervisors called to further consider Plaintiffs' Preliminary Plan Application, and to hire new legal counsel to write the decision reached by the Supervisors. (Id. at ¶ 48.) The Board of Supervisors subsequently fired the Township Solicitor. (Id.) Meanwhile, neighborhood opposition to Plaintiffs' development of Chantilly Farms, led by Defendant, Maurice Kring (“Kring”), incorporated as Citizens for West Pikeland's Future, Inc. and retained counsel. 5 During the subdivision application process, the Plaintiff alleges that these Private Defendants, acting through and in concert with Kring, 5 The Plaintiffs allege that the organization of the Citizens Group was suggested by the Defendant members of the Board of Supervisors and Planning Commission. contacted Plaintiffs' neighbors and through intimidation and threat, sought to prevent or hinder their cooperation with the lawful exercise of Plaintiffs' property rights and ... contacted government and quasi- government agencies involved in the review of Plaintiffs' application, and through intimidation and threat, sought to deprive Plaintiffs, directly and indirectly of the equal protection of the laws. (Compl., ¶¶ 87, 88.) The Plaintiffs also allege that the Defendant members of the Planning Commission and Board of Supervisors met with the Private Defendants throughout the subdivision application process and considered Plaintiffs' applications outside of the public meetings in violation of the Pennsylvania Sunshine Act. 65 Pa.C.S.A. § 701, et seq. The Defendants took these actions, according to the Plaintiffs, in furtherance of their ongoing efforts and conspiracy to deprive the Plaintiffs, directly and indirectly, of the equal protection of the law and to prevent or hinder the Township Defendants from giving or securing to the Plaintiffs the equal protection of the laws. On May 23, 2000, the Plaintiffs appealed the Board of Supervisors' land use decision to the Court of Common Pleas of Chester County, Pennsylvania. (Township Defs.' Mem. Law in Supp. Mot. Dismiss at 3.) That matter remains outstanding. (Id.) On August 2, 2000, Plaintiffs filed this Complaint against all the Defendants for violations of 42 U.S.C. sections 1983 (Count I) and 1985 (Count II), conspiracy (Count IV), and intentional interference with actual contractual and business relationships (Count V). The Plaintiffs also bring a claim against the Township Defendants for violations of the Pennsylvania Constitution, Article I, section 26 (Count III). Plaintiff Chantilly Farms brings a separate claim against all the Defendants for intentional interference with prospective contractual and business relationships (Count VI). In each Count, the Plaintiffs seek damages in excess of one million dollars, punitive damages, attorneys fees, costs of litigation and pre and post judgment interest. II. STANDARD OF REVIEW. *4 A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the pleading. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Johnsrud v. Carter, 620 F.2d 29, 32 (3d Cir.1980). A court must determine whether the party making the claim would be entitled to relief under any set of facts which could be established in support of the claim. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984) (citing Conley, 355 U.S. at 45-46); see also Wisniewski v. Johns-Manville Corp., 759 F.2d 271, 273 (3d Cir.1985). In considering a Motion to Dismiss, all allegations in the complaint must be accepted Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 24 of 75 Chantilly Farms, Inc. v. West Pikeland Tp., Not Reported in F.Supp.2d (2001) 2001 WL 290645 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 as true and viewed in the light most favorable to the non- moving party. Rocks v. City of Phila., 868 F.2d 644, 645 (3d Cir.1989) (citations omitted). III. DISCUSSION. A. Motion to Dismiss filed by Private Defendants. The Private Defendants move to dismiss the claims against them, claiming 1) they are immune from liability for all actions alleged in the Complaint by the First Amendment under the Noerr-Pennington doctrine; and 2) the doctrine of judicial estoppel, which precludes a party from asserting a position inconsistent with assertions made in prior proceedings prevents Plaintiffs from asserting that their actions caused Plaintiffs' damages. The Noerr-Pennington doctrine “protects the right of citizens to petition their government.” King v. Townsip of E. Lampeter, 17 F.Supp.2d 394, 412 (E.D.Pa.1998). The United States Court of Appeals for the Third Circuit (“Third Circuit”) “has expressly applied this doctrine to protect citizens from liability for exercising their rights to petition state and local governmental bodies.” Id. (citing Brownsville Golden Age Nursing Home, Inc. v. Wells, 839 F.2d 155, 160 (3d Cir.1988)). The Private Defendants invoke this doctrine in order to avoid liability. In opposition to this Motion, the Plaintiffs first argue that “[e]ven though the acts were toward or in association with the government, it is inappropriate to characterize these actions as petitioning the government,” and therefore the acts are not protected. (Pls.' Mem. Law in Supp. Resp. to Mot. Dismiss at 7.) On the other hand, the Private Defendants contend that “[s]o long as private defendants' actions constitute petitioning their representatives to rule favorably to their interests they are protected from liability.” (Private Defs.' Mem. Law in Supp. Mot. Dismiss at 7.) They further contend that case law recognizes that this immunity may be invoked and determined in the context of a motion to dismiss. (Id. at 7-8) (citing King, 17 F.Supp.2d at 412-413). Under the Noerr-Pennington doctrine, a defendant's motive for its conduct is irrelevant because “[a]s long as there is petitioning activity, the motivation behind the activity is unimportant.” King, 17 F.Supp.2d at 412-413 (citing Barnes Found. v. Township of Lower Merion, 927 F.Supp. 874, 877 (E.D.Pa.1996) and E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 139, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961) (stating “[t]he right of the people to inform their representatives in government of their desires with respect to the passage or enforcement of laws cannot properly be made to depend upon their intent in doing so.”)). *5 The sole restriction on the Noerr-Pennington doctrine is the “sham exception,” under which “a defendant is not protected if he or she is simply using the petition process as a means of harassment.” Id. at 413. The Defendants claim that the sham exception has no application here because the acting governmental body, the Board of Supervisors, accepted some of their positions. The result was the Board's acceptance and adoption of the Defendants' position in a written report. Conversely, the Plaintiffs state that, accepting all the facts in the Complaint as true, the Defendants' actions were (1) calculated to interfere with the subdivision process and harass the Plaintiffs, (2) intended to impede and obstruct the subdivision process, and (3) calculated to prevent or hinder the Township Defendants from giving or securing to the Plaintiffs the equal protection of the laws. Thus, the Plaintiffs argue that the Defendants sought to bar them from meaningful access to the subdivision application process through harassment and intimidation, conduct which is not afforded First Amendment protection, according to the Plaintiffs. A defendant's motive, however, is irrelevant under the Noerr-Pennington doctrine. King, 17 F.Supp.2d at 412. Here, the Private Defendants petitioned their local government in order to influence policy and obtain favorable government action. Similarly, in Barnes, the plaintiff, a non-profit foundation operating an art museum, filed a civil rights action alleging that a Township, its Commissioners and neighbors acted in concert to discriminate against and harass the foundation, thereby infringing its constitutional rights. Barnes, 927 F.Supp. 874, 875 (E.D.Pa.1996). The Barnes plaintiff's allegations included infringement of fundamental liberty and property interests, violations of the right to equal protection under the Fourteenth Amendment through selective enforcement of local laws and differential treatment of the plaintiff from other similarly situated foundations; and violations of substantive due process rights through the irrational deprivation of the plaintiff's property interest. Id. at 875. The Barnes court found the sham exception inapplicable because “[t]he Neighbors petitioned their local government in order to influence policy and Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 25 of 75 Chantilly Farms, Inc. v. West Pikeland Tp., Not Reported in F.Supp.2d (2001) 2001 WL 290645 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 obtain favorable governmental action, thus satisfying the requirements for Noerr-Pennington immunity.” Id. at 877. This Court finds no appreciable difference between the Plaintiffs' instant claims and the Barnes plaintiff's claims. Thus, the sham exception is inapplicable. Further, the Plaintiffs' conspiracy allegations do not serve as an exception to the Private Defendants' immunity since “the Supreme Court has expressly stated that there is no conspiracy exception to the Noerr-Pennington doctrine.” King, 17 F.Supp.2d at 413 (citing City of Columbia v. Omni Outdoor Adver., Inc., 499 U.S. 365, 383, 111 S.Ct. 1344, 113 L.Ed.2d 382 (1991)). Here, as in Barnes, the Plaintiffs' conspiracy theory rests on the notion that the neighbors petitioned the Township Defendants in order to influence the government's actions toward the Plaintiffs. See Barnes, 927 F.Supp. at 877. In addition, the Plaintiffs aver that “[d]uring the application process, the Defendant members of the Citizens Group acting through and in concert with Defendant Maurice Kring, contacted plaintiffs' neighbors and through intimidation and threat sought to prevent or hinder their cooperation with the lawful exercise of plaintiffs' property rights.” (Compl., ¶ 87.) The Private Defendants do not respond to this argument. Rather, they claim that this is not a short and plain statement of this claim that will give each defendant fair notice of Plaintiffs' claims and the grounds upon which each claim rests as required by Federal Rule of Civil Procedure 9. Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Although this argument may be valid, liability for any alleged conspiracy is precluded under the Noerr-Pennington doctrine, and this Court will not address the sufficiency of Plaintiffs' pleading. King, 17 F.Supp.2d at 413. Thus, the distinction between a conspiracy with the Township Defendants and a conspiracy with other “private citizens or neighbors” is meritless because there is no conspiracy exception to the Noerr-Pennington doctrine. *6 Noerr-Pennington immunity further extends to the Plaintiffs' allegations that the Private Defendants violated the Pennsylvania Sunshine Act. 6 According to the Private Defendants, Plaintiffs' Sunshine Act claim must be dismissed because private parties cannot be held liable for alleged violations of the Act, and no reported decisions hold a private party liable for such conduct. The Plaintiffs, in response, contend that because the alleged meetings were held in the confines of a private process, not in an open political arena, “[e]ven though the acts were toward or in association with the government, it is inappropriate to characterize these actions as petitioning the government.” (Pls.' Resp. at 7.) The Plaintiffs cite the United States Supreme Court case Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 108 S.Ct. 1931, 100 L.Ed.2d 497 (1988), wherein the Court held that the Noerr-Pennington doctrine did not apply when “the activity ... did not take place in the open political arena, where partisanship is the hallmark of decisionmaking, but within the confines of a private standard-setting process.” Id. at 506. The Private Defendants correctly distinguish Allied Tube because the Allied Tube Court found the defendant's efforts in attempting to influence a private association's product standards did not qualify for Noerr immunity, even if those standards were routinely adopted by state and local governments. Id. at 504. 6 The Pennsylvania Sunshine Act, codified at 65 Pa.C.S.A. section 701, et seq., states, in pertinent part, that it is “the public policy of this Commonwealth to insure the right of its citizens to have notice of and the right to attend all meetings of agencies at which any agency business is discussed or acted upon.” 65 Pa.C.S.A. § 702(b). Moreover, the private meeting distinction drawn by the Plaintiffs was rejected in Barnes, when the court opined that “it does not matter that some of the alleged meetings were semi-private, rather than full township meetings, since the private meetings still involved the citizens' participating and airing grievances to local government.” Barnes, 927 F.Supp. 874, 876 n. 4 (E.D.Pa.1996). Thus, Plaintiffs' claims against the Private Defendants for violations of the Pennsylvania Sunshine Act fail. Because this Court has determined that the Private Defendants are immune from liability under the Noerr-Pennington doctrine, the Private Defendants' arguments regarding judicial estoppel are not addressed. B. Individual Township Defendants' Motion for Dismissal of all Claims except Count I, the Section 1983 Claim. *7 The Plaintiffs have also sued West Pikeland Township, three members of the Board of Supervisors both individually and in their official capacity, and six members of the Planning Commission, individually and in their official capacity. These parties, which this Court will respectively refer to as the Township and the Township Defendants, filed a separate Motion to Dismiss in which Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 26 of 75 Chantilly Farms, Inc. v. West Pikeland Tp., Not Reported in F.Supp.2d (2001) 2001 WL 290645 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 they first argue that this Court should abstain from exercising jurisdiction. 1. Whether the Plaintiffs' Complaint Should Be Dismissed Under Younger Abstention, or Alternatively Stayed Pending an Outcome of the Ongoing State Court Action Under Colorado River Abstention. a. Younger Abstention. Abstention under Younger is appropriate only where (1) there are ongoing state proceedings that are judicial in nature; (2) the state proceedings implicate state interests; and (3) the state proceedings afford an inadequate opportunity to raise claims. Younger v. Harris, 401 U.S. 37 (1971). Abstention is not appropriate, however, if the state proceedings are being undertaken in bad faith or if extraordinary circumstances exist, such as the state proceedings are based on a thoroughly unconstitutional statute. Middlesex County Ethics Comm. v. Garden State Bar Ass'n, 457 U.S. 423, 435, 102 S.Ct. 2515, 73 L.Ed.2d 116 (1982). In this case, the Township Defendants ask this Court to take judicial notice that the Plaintiffs appealed the land use decision to the Court of Common Pleas of Chester County, Pennsylvania and that appeal remains outstanding. The Plaintiffs argue that Younger abstention is inappropriate, although they do not contest that the first Younger prong is satisfied since they filed a statutory appeal on May 25, 2000. The Plaintiffs do not agree, however, that the state proceeding implicates an important state interest, the second Younger requirement. They distinguish the state court action as involving the applicability of local land use ordinances and claim that they neither seek to enjoin any state proceedings nor challenge the legality of any township or municipal ordinance. In addition, only the Board of Supervisors in their official capacities are defendants in the state court proceedings. Thus, the Plaintiffs contend that this case does not interfere with the state court action. They liken this case to Gwynedd Properties, Inc. v. Lower Gwynedd Township, 970 F.2d 1195, 1200-1201 (3d Cir.1992), in which the Third Circuit stated that: [a]bstention under Younger presumes that the federal action would interfere with the ongoing state proceedings since, typically, the federal plaintiff's object in filing the federal action is either to seek an injunction against the state proceedings themselves or to challenge the law being applied in those proceedings. Thus, where abstention is appropriate, there is often a nexus between the claims asserted in the federal action and the defenses or claims asserted or available in the state action. ... *8 By contrast, where federal proceedings parallel but do not interfere with the state proceedings, the principles of comity underlying Younger abstention are not implicated. Thus, Younger abstention may not be appropriate where, for example, the federal plaintiff seeks only prospective relief without seeking to annul either previous state court judgments or the effect of the judgments. (Mem. Law in Supp. Resp. Mot. Dismiss at 7-8) (citing Gwynedd Props., Inc., 970 F.2d at 1200-01 (citations omitted)). Nonetheless, the Plaintiffs state that the present federal court action “may well interfere with the ongoing state proceedings, thus raising concerns for state-federal comity addressed by Younger abstention.” (Id. at 7.) The third Younger prong requires that the state proceeding affords the parties an opportunity to raise federal or constitutional claims. The Defendants contend that this prong is met because the Plaintiffs have a full and adequate opportunity to raise their federal claims in state court proceedings, and state courts are as competent as federal courts in deciding federal constitutional issues. The Defendants also contend that none of the recognized Younger exceptions apply and there is no reason for this Court to believe that the Pennsylvania state courts will not fairly and adequately address the Plaintiffs' claims. The Plaintiffs, on the other hand, argue that the proceedings in this Court parallel the state court proceedings. They filed their state court statutory appeal, and two months later filed their Complaint in this Court based upon the Defendants' alleged unlawful actions. However, the state court action only involves a request for that court to order the Supervisors to approve the By- Right Plan, and the parties in that action are the Plaintiffs and the Supervisors in their official capacities. In contrast, the present action involves the Township, the Supervisors, and the Planning Commission, both individually and in their official capacities, as well as the Private Defendants. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 27 of 75 Chantilly Farms, Inc. v. West Pikeland Tp., Not Reported in F.Supp.2d (2001) 2001 WL 290645 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 The Plaintiffs in the present action seek damages from these Defendants, whereas the Plaintiffs in the state court action merely seek approval of their By-Right Plan. Thus, the Plaintiffs allege that the state court proceedings do not afford them an opportunity to raise their federal or constitutional claims. The Plaintiffs further distinguish this proceeding from the state proceedings by concluding generally that in remedial state court proceedings, plaintiffs attempt to vindicate a wrong inflicted by the state, whereas in coercive state proceedings, the federal plaintiff is the state court defendant and the state proceedings were initiated to enforce a state law. O'Neill v. City of Phila., 32 F.3d 785, 791 n. 13 (3d Cir.1994), cert. denied, 514 U.S. 1015, 115 S.Ct. 1355, 131 L.Ed.2d 213 (1995); Tinson v. Commonwealth, No. CIV.A. 93-3985, 1995 WL 581978, at *4 (E.D.Pa. Oct. 2, 1995). In contrast, according to the Plaintiffs, when the plaintiff in the subsequent federal action has initiated the state court remedial proceeding, the federal proceeding parallels but does not interfere with the state court proceedings and “the principles of comity which underlie the Younger abstention doctrine are not implicated.” Marks v. Stinson, 19 F.3d 873, 882 (3d Cir.1994), cert. denied sub nom., 513 U.S. 1111, 115 S.Ct. 901, 130 L.Ed.2d 785 (1995) (citing Gwynedd Props., Inc., 970 F.2d at 1201). However, Younger abstention is appropriate when the state proceedings are coercive and the federal plaintiff “seek[s] to avoid an administrative proceeding into which it [was] unwillingly embroiled.” Independence Pub. Media of Phila., Inc. v. Pa. Pub. Television Network Com'n., 813 F.Supp. 335, 342 (E.D.Pa.1993). The Plaintiffs opine that the state court action is remedial and abstention by this Court is not warranted. In Barnes, the court did not abstain because the third Younger prong was not met and the court recognized that “a local zoning proceeding is an insufficient forum to raise federal civil rights claims such as § 1983 and § 1985(3) claims.” Barnes, 927 F.Supp. at 879 (citing Pennsylvania Municipalities Planning Code, 53 Pa.C.S.A. § 10909.1 (Supp.1995) for the proposition that Zoning Hearing Board jurisdiction is limited to substantive and procedural challenges to validity of land use ordinance; appeals of decisions made by zoning officers, municipal engineers and officers in charge of developmental rights and applications for variances and special exceptions). Thus, the Barnes court followed Third Circuit precedent that Younger abstention is inappropriate if the federal matter involves issues that will never be adjudicated in the state matter. Id. at 880 (citing Heritage Farms v. Solebury Township, 671 F.2d 743, 747 (3d Cir.), cert. denied, 456 U.S. 990, 102 S.Ct. 2270, 73 L.Ed.2d 1285 (1982)). The Third Circuit advised in Heritage Farms that the court should abstain if a state matter is a criminal or quasicriminal matter, or if the pending state proceeding involves the precise claims or issues before the court in the federal case. Heritage Farms, 671 F.2d at 747. Because the state court appeal is an inadequate forum to adjudicate the Plaintiffs' specific constitutional claims, the third Younger prong is not satisfied and Younger abstention is inappropriate. 7 7 Similarly, in Heritage Farms, Inc. v. Solebury Township, the court found the federal complaint neither involved nor implicated important state policies and stated: [t]he policies embodied in the Municipalities Planning Code are not being attacked-it is rather the application of those policies by a single township that is at issue.... Perhaps most importantly, this case is not simply a land use case. Rather the plaintiffs have alleged that members of the Board have used their governmental offices to further an illegal conspiracy to destroy plaintiffs' constitutional rights to conduct a legitimate business. Heritage Farms, Inc. v. Solebury Township, 671 F.2d 743, 748 (3d Cir.1982). The court further noted that district courts have been advised not to hastily dismiss claims merely because they may involve land use issues and must “examine the facts carefully to determine what the essence of the claim is. If it is an unlawful conspiracy like the one alleged here, the mere presence of land use issues should not trigger a mechanical decision to abstain.” Id. *9 b. Colorado River Abstention. Alternatively, the Defendants claim that this Court should abstain from this case under Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), a case involving a dispute over water rights in Colorado rivers and their tributaries. The Colorado River case established permission for district courts, in exceptional circumstances, “to dismiss a federal action because of parallel state-court litigation.” Bryant v. N.J. Dep't of Transp., 1 F.Supp.2d 426, 436 (D.N.J.1998) (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). Although Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 28 of 75 Chantilly Farms, Inc. v. West Pikeland Tp., Not Reported in F.Supp.2d (2001) 2001 WL 290645 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 the Supreme Court in Colorado River rejected abstention under Younger and other doctrines, the Court held that abstention was appropriate based upon “principles that rest on considerations of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.” Colo. River, 424 U.S. at 813, 817. The Court set forth the following six part test for courts to examine in determining whether to abstain, including: (1) which court first assumed jurisdiction over a relevant res, if any; (2) whether the federal court is inconvenient; (3) whether abstention would aid in avoiding piecemeal litigation; (4) which court first obtained jurisdiction; (5) whether state or federal law applies; and (6) whether the state proceedings will sufficiently protect the rights of the federal plaintiffs. Rycoline Prods., Inc. v. C & W Unlimited, 109 F.3d 883, 890-891 (3d Cir.1997) (citing Trent v. Dial Med. of Fla., Inc., 33 F.3d 217, 223 (3d Cir.1994) (citing Colo. River, 424 U.S. at 817)). The Township Defendants contend that the first and fourth Colorado River abstention requirements are satisfied and abstention is appropriate because the state court action was filed first, therefore the common pleas court was the first to assume jurisdiction. Next, these Defendants state that the third factor, whether abstention would aid in avoidance of piecemeal litigation, weighs heavily in favor of abstention because the federal suit may be resolved before the state court has an opportunity to determine the question of the validity of the land use decision. The danger, according to the Defendants, is that conflicting outcomes are possible in claims that arise from one set of facts. *10 The Defendants also contend that the fifth factor, whether state or federal law applies, is met since the Plaintiffs' federal Complaint contains more claims under Pennsylvania law rather than federal law. Thus, the Defendants contend that state law, not federal law, is heavily implicated in this federal lawsuit. Finally, the Defendants contend that the sixth Colorado River condition, whether the state proceedings will sufficiently protect the rights of the federal plaintiffs, has been satisfied. The Defendants argue that the state court proceedings will sufficiently protect the Plaintiffs' rights since the state court is a court of general jurisdiction and is fully capable of hearing the Plaintiffs' civil rights claims. The Township Defendants also attempt to distinguish this case from cases where abstention was inappropriate because here, the state and federal litigation is not contemporaneously occurring. The Plaintiffs correctly contend, on the other hand, that abstention is inappropriate because, in the state action, the court's review is limited to determining whether the Supervisors committed an error of law or abused their discretion in applying the county ordinances. As a result, the federal claims are not part of the state court action where only the Plaintiffs and the Supervisors in their official capacity are parties. Applying the Colorado River factors to this case, the Plaintiffs contend that elements one, two and four are not met because their claims for violations of 42 U.S.C. section 1983 and 42 U.S.C. section 1985 are the primary and dominant claims. According to the Plaintiffs, therefore, only the third factor, the desire to avoid piecemeal litigation, favors abstention. This Court agrees with Plaintiffs' analysis that the state court's review is limited, and although the state court case is being litigated simultaneously, the cases are not parallel due to the differences in the relief sought and the claims alleged by Plaintiffs. Here, Plaintiffs' Federal Constitutional rights and state law interests are implicated. Thus, abstention under Colorado River is inappropriate. Since abstention is inappropriate, the Township Defendants' Motion to Dismiss is hereafter examined on its merits. 2. Count II-42 U.S.C. section 1985. *11 Plaintiffs do not specify which provision of 42 U.S.C. section 1985 provides the basis for Count II of their Complaint. It is clear that section 1985(1) has no application to the facts of this case because “[a]n action under section 1985(1) applies only to conspiracies to interfere with officers of the United States or those about to take office.” Boyer v. Pottstown Borough, No. CIV.A. 94-1716, 1994 WL 385009, at *5 n. 3 (E.D.Pa. July 19, 1994) (citing 42 U.S.C. § 1985(1) and Armstrong v. Sch. Dist. of Phila., 597 F.Supp., 1309, 1314 (E.D.Pa.1984)). In order to state a cause of action for violations of 42 U.S.C. section 1985(3), the Plaintiffs must allege: (1) a conspiracy by the defendants; (2) designed to deprive plaintiff of the equal protection of the laws; (3) the commission of an overt act in furtherance of that conspiracy; (4) a resultant injury to person or Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 29 of 75 Chantilly Farms, Inc. v. West Pikeland Tp., Not Reported in F.Supp.2d (2001) 2001 WL 290645 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 property or a deprivation of any right or privilege of citizens; and (5) defendants' actions were motivated by a racial or otherwise class-based invidiously discriminatory animus. Litz v. City of Allentown, 896 F.Supp. 1401, 1413-1414 (E.D.Pa.1995) (citing Griffin v. Breckenridge, 403 U.S. 88, 102-103, 91 S.Ct. 1790, 29 L.Ed.2d 338 (1971); Robison v. Canterbury Vill., Inc., 848 F.2d 424, 430 (3d Cir.1988); Pratt v. Thornburgh, 807 F.2d 355, 357 (3d Cir.1986)). Plaintiffs fail to plead in their Complaint the fifth required element for this claim, motivation by a racial or otherwise class-based invidiously discriminatory animus. Therefore, to the extent that Plaintiffs' Complaint contains a claim under 1985(3), it is dismissed. To the extent that Plaintiffs claim a violation of 42 U.S.C. section 1985(2), however, the Defendants' Motion to Dismiss must be denied. Section 1985(2) “pertains to conspiracies to intimidate witnesses or otherwise obstruct justice.” Boyer, 1994 WL 385009, at *5 n. 3. The Plaintiffs allege that the Township Defendants with the Private Defendants and “others presently unknown to Plaintiffs, herein conspired to impede and obstruct the subdivision application process ... with the intent to deny Plaintiffs their right to equal protection of the laws, including their right to due process, for the purpose of preventing Plaintiffs from exercising their property rights as hereinbefore alleged.” (Compl., ¶ 100.) These allegations are sufficient to permit Plaintiffs' claim under section 1985(2) to withstand the current Motion to Dismiss. Accordingly, the Defendants' Motion is denied with respect to Count II of the Complaint. 3. Count III-State Constitutional Violation. Count III of Plaintiffs' Complaint contains a claim for violation of Plaintiffs' rights conferred under the Pennsylvania Constitution, Article I, section 26. 8 The Defendants move for dismissal of this claim on the basis that only injunctive relief is available for any alleged violations of this state constitutional provision. Under federal law, 42 U.S.C. section 1983 allows recovery of monetary damages by victims claiming civil rights violations under the Federal Constitution. However, there is no counterpart to section 1983 under Pennsylvania law. In this case, because the Plaintiffs seek only compensatory and punitive damages, not injunctive relief, the Township Defendants seek dismissal of Count III of the Complaint. 8 Article I, section 26 is entitled “No Discrimination by the Commonwealth and Its Political Subdivisions” and states: “[n]either the Commonwealth nor any political subdivision thereof shall deny to any person the enjoyment of any civil right, nor discriminate against any person in the exercise of any civil right.” The Plaintiffs, in response, state that in Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), the United States Supreme Court recognized an action for damages under the Fourth Amendment. The Plaintiffs also cite Coffman v. Wilson Police Dep't, 739 F.Supp. 257 (E.D.Pa.1990), in which the court held that the PSTCA did not bar the plaintiff's state constitutional claims. Id. at 266. The Plaintiffs here state that “[e]ven though it is unknown from the [Coffman ] Court's opinion as to whether the plaintiff was seeking damages, the Pennsylvania Political Subdivision Tort Claims Act provides immunity for damages only.” (Pl.'s Mem. Law in Supp. Resp. Mot. Dismiss at 15-16) (citing Pa.C.S.A. § 8541.) Thus, “[r]elying on Supreme Court precedent and the non-existence of Pennsylvania case law to the contrary, Plaintiffs request an opportunity to move forward with Count III.” (Id. at 16.) *12 In McMillan v. Philadelphia Newspapers, Inc., No. CIV.A. 99-2949, 1999 WL 570859 (E.D.Pa. Aug. 4, 1999), a former bus driver in Pennsylvania sought compensatory and punitive damages for various claims including violation of his rights under the state constitution, Article I, sections 1, 26 and 28. Id. at *2. The City moved to dismiss the claims against it on the grounds that recovery was barred by the Political Subdivision Tort Claims Act (“PSTCA”). 42 Pa.C.S.A. § 8541, et seq. Id. at *3. The court recognized that the case raised several interesting and difficult questions as to whether violations of the state constitution could support private damages actions in Pennsylvania and/or whether a state constitutional claim could be barred by the Tort Claims Act. Id. The court declined to reach these issues, however, since it found, as a threshold issue, that the plaintiff failed to state a claim for violation of his rights under the state constitution. Id. As Defendants note, the Plaintiffs here fail to properly state a claim under the Pennsylvania Constitution. In order to properly state such a claim, Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 30 of 75 Chantilly Farms, Inc. v. West Pikeland Tp., Not Reported in F.Supp.2d (2001) 2001 WL 290645 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 10 litigants [must] brief and analyze at least the following four factors: (1) the text of the Pennsylvania constitutional provision; (2) the history of the provision, including Pennsylvania case law; (3) related case law from other states; [and] (4) policy considerations, including unique issues of state and local concern, and applicability within modern Pennsylvania jurisprudence. (Township Def.'s Mem. Law in Supp. Mot. Dismiss at 13 n. 2) (quoting Blum v. Merrill Dow Pharm., Inc., 534 Pa. 97, 626 A.2d 537, 541 (Pa.1993) and citing United Artists' Theater Circuit v. City of Phila., 535 Pa. 370, 635 A.2d 612, 615 (Pa.1993)); see also Commonwealth v. Edmunds, 526 Pa. 374, 586 A.2d 887 (Pa.1991). Because the Plaintiffs fail to fulfill the necessary requirements to bring a claim under the Pennsylvania Constitution, this Court declines to reach the issue of whether violations of the Pennsylvania Constitution can support a private damages action. 9 Accordingly, Count III of the Plaintiffs' Complaint is dismissed. 9 Although the Pennsylvania Supreme Court has stated, in dicta, that “[t]he failure of a litigant to present his state constitutional arguments in the form set forth in Edmunds does not constitute a fatal defect,” the court strongly encourages adherence to that four-part format. Commonwealth v. Swinehart, 541 Pa. 500, 664 A.2d 957, 961 n. 6 (Pa.1995); but see Commonwealth v. White, 543 Pa. 45, 669 A.2d 896, 899 (Pa.1995) (reaffirming the importance of the Edmunds analysis regarding state constitutional claims, but nonetheless addressing such a claim where the litigant merely raised a constitutional claim, cited cases in support of the claim and related the cited cases to the claim), disapproved on other grounds, Pennsylvania v. Labron, 518 U.S. 938, 116 S.Ct. 2485, 135 L.Ed.2d 1031 (1996)). Plaintiffs' instant Complaint and responsive pleading fail to meet the Edmunds requirements necessary for this Court to properly address the claim. Thus, Plaintiffs' state constitutional claim will be dismissed on these grounds. 3. Count IV-Civil Conspiracy. *13 In Count IV of their Complaint, the Plaintiffs allege that all Defendants engaged in a civil conspiracy to injure and harm Plaintiffs without cause. Conspiracy requires “(1) a combination of two or more persons acting with a common purpose to do an unlawful act or to do a lawful act by unlawful means or for an unlawful purpose; (2) an overt act done in pursuance of the common purpose; and (3) actual legal damage.” Smith v. Wagner, 403 Pa.Super. 316, 588 A.2d 1308, 1311-12 (Pa.Super.1991) (citations omitted). In addition, proof of malice or an intent to injure is required. Skipworth by Williams v. Lead Indus. Assoc., Inc., 547 Pa. 224, 690 A.2d 169, 174 (Pa.1997) (citation omitted). The Defendants contend that the Plaintiffs' statements that “an illegal and illicit agreement” existed among the Planning Commission, the Board of Supervisors, the Citizens Group, “and other persons, as yet unknown to Plaintiffs” are insufficient conspiracy pleadings. Defendants further note that in order to state a section 1983 conspiracy claim, the Plaintiffs need to state (1) the period of the conspiracy; (2) the object of the conspiracy; and (3) certain actions of the alleged conspirators taken to achieve that purpose. The Defendants argue that the Plaintiffs have not fulfilled any of these requirements, therefore Count IV of the Complaint should be dismissed. In response, the Plaintiffs re-list the allegations in their Complaint, alleging that these paragraphs adequately set forth their conspiracy claim with sufficient specificity. 10 From a review of the cases cited by the Plaintiffs, it appears that the Plaintiffs have crafted their conspiracy averments in a similar fashion to those averred in Pierce v. Montgomery County Opportunity Board, Inc., 884 F.Supp. 965 (E.D.Pa.1995). In Pierce, the court denied the defendant's motion to dismiss because the plaintiff “pleaded that nine individuals conspired with the intent of depriving her of certain rights and inflicting injury on her.” Id. at 974. According to the Plaintiffs, their averments also fulfill the conspiracy pleading requirements. This Court agrees that the Motion to Dismiss must be denied since, at this stage of the litigation, the Plaintiffs have met the pleading requirements for a conspiracy claim. Accordingly, Defendants' Motion is denied with respect to Count IV of the Complaint. 10 These allegations, according to the Plaintiffs, are found at paragraphs 38, 52, 58, 71, 78, 85, 86, 87, 88, 89, 112 and 113 of the Complaint. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 31 of 75 Chantilly Farms, Inc. v. West Pikeland Tp., Not Reported in F.Supp.2d (2001) 2001 WL 290645 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 11 4. Counts V and VI-State Law Tort Claims. The Plaintiffs aver state law claims for intentional interference with actual and prospective contractual relations in Counts V and VI of their Complaint against the Individual Township Defendants since the Plaintiffs have voluntarily withdrawn Counts V and VI against West Pikeland Township. The Defendants argue that these tort claims are barred against the Individual Township Defendants under the PSTCA. However, the Plaintiffs claim that the municipal immunity exception is not applicable here and the Individual Township Defendants are not immune from their intentional tort claims, including intentional interference with actual and prospective contractual relations. Pennsylvania law provides that municipal officials are not immune from liability if they cause injury through “a crime, actual fraud, actual malice or willful misconduct.” 42 Pa.C.S.A. § 8550. The Plaintiffs claim that the Individual Township Defendants engaged in willful misconduct, therefore they are not immune under the PSTCA. Further, the Plaintiffs note that, for purposes of the PSTCA, “willful misconduct” has the same meaning as the term “intentional tort.” Delate v. Kolle, 667 A.2d 1218, 1221 (Pa.Commw.1995) (citation omitted). In Delate, the court applied the PSTCA to a zoning dispute and stated that “the mere failure to reach the correct legal conclusion in a zoning case does not constitute the type of purposeful conduct which is necessary for a finding of willful misconduct [within the meaning of § 8550].” Id. However, individual zoning board members may be held liable if they “intentionally reach the wrong decision knowing that it was wrong, acted from corrupt motives, or engaged in any type of conduct which would demonstrate willful misconduct.” Thornbury Noble, Ltd. v. Thornbury Township Bd. of Supervisors, No. CIV.A. 99-6460, 2000 WL 1358483, at *4 (E.D.Pa. Sept.20, 2000) (quoting Delate, 667 A.2d at 1221). According to the Defendants, in order for the Plaintiffs to prove willful misconduct, they must show a desire on the Defendants' part to bring about a certain result or at least an awareness that it is substantially certain to happen. Owens v. City of Phila., 6 F.Supp.2d 373 (E.D.Pa.1998). *14 The Plaintiffs counter by stressing that they allege acts by the Defendants “which do not involve the application of the Township Ordinances as the Supervisors believed appropriate.” (Pls.' Mem. Law in Supp. Resp. Mot. to Dismiss at 22) (citing Compl., ¶¶ 38, 52, 58, 71, 85-89; Township Defs.' Mem. Law in Supp. Mot. Dismiss at 16.) This allegation, according to the Plaintiffs, enables them to proceed with their claims. Because, at this stage of the litigation, it is unclear whether the Plaintiffs can show that the remaining Defendants had a desire to bring about a certain result or at least an awareness that the result was substantially certain the occur, the motion to dismiss Counts V and VI must be denied. 5. Whether Plaintiffs' Complaint Should be Dismissed as against all Township Defendants. The Township Defendants contend that all adverse action alleged by the Plaintiffs is against the Board of Supervisors or Planning Commission, and because Plaintiffs have not named these agencies, their claims against the individual members of those bodies must be dismissed. The Plaintiffs counter that they have alleged conduct by the Township Defendants both individually and in their official capacities, including conducting illegal meetings with the Private Defendants as part of the conspiracy to deprive them of their constitutional rights. These allegations are sufficient to survive the present Motion to Dismiss. The allegations against the Planning Commission members and the named Supervisors must be dismissed, according to the Defendants, because there are no express or implied provisions in the West Pikeland Township Subdivision Ordinance which grant authority to individual Planning Commissioners or individual Supervisors. Rather, the power to review subdivision plans is given to the Planning Committee as a whole. 11 The Defendants argue, therefore, that because the individual Planning Commission members can take no official action in the review of subdivision plans by themselves, and the individual Supervisors can take no official action to approve or disapprove of the recommendations of the Planning Commission, the claims against them for conduct as individuals must be dismissed. 11 Section 500 of the West Pikeland Township Subdivision Ordinance expressly provides that: “tentative subdivision or land development plans shall be reviewed by the Township Planning Commission and shall be approved or disapproved by the Board of Supervisors.” (Township Defs.' Mem. Law in Supp. Mot. Dismiss, Ex. A.) Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 32 of 75 Chantilly Farms, Inc. v. West Pikeland Tp., Not Reported in F.Supp.2d (2001) 2001 WL 290645 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 12 *15 The Plaintiffs, in response, again remind the Court that they allege actions taken by the Township Defendants, including conspiracy, and the Township Defendants were government officials performing discretionary functions. In Woodwind Estates, Ltd. v. Gretkowski, 205 F.3d 118 (3d Cir.2000), the Third Circuit concluded the supervisor defendants could not have reasonably believed their conduct in denying the plaintiff's plan did not violate the plaintiff's rights. Id. at 125-126. Thus, the court held that the defendant supervisors were not shielded by qualified immunity and the planning commissioners also were not entitled to qualified immunity for similar reasons. Id. Here, the Plaintiffs allege that the By-Right Plan should have been approved since it satisfied the Township Ordinances (Compl., ¶¶ 36, 40), but the Plan was wrongfully denied by the Township Defendants in their individual capacities. As such, the claims against the Individual Township Defendants remain. Additionally, the Defendants argue that the claims against the Planning Commission members must be dismissed because the Planning Commission does not have the power to deny approval of the Plaintiffs' land development plans. 12 Under the Pennsylvania Municipalities Planning Code, the Planning Commission Members have no binding power to render decisions-their role is only advisory. The decisional power rests with the Board of Supervisors. Although the Plaintiffs failed to sue the Planning Commission, they sued the individual Planning Commission members who advised the Board of Supervisors that Plaintiffs' plan did not meet all Township Ordinance requirements. The Plaintiffs did not sue anyone who recommended approval, according to the Defendants. The Plaintiffs respond that they have alleged conduct by the various Township Defendants, including the Planning Commission, in furtherance of their conspiracy, therefore they have adequately pled averments of actions taken by the Planning Commission and the claims against the Planning Commission should remain. Again, at this stage of the litigation, the Plaintiffs may be able to prove that the Planning Commission members acted in their official and also in their individual capacities, therefore the Defendants' Motion is denied and the Individual Planning Commission members remain in this action. 12 The West Pikeland Township Subdivision Ordinance provides that the Planning Commission “shall review the Sketch Plan and shall recommend such changes and modifications as it shall deem necessary and advisable in the public interest.” (Township Defs.' Mem. Law in Supp. Mot. Dismiss, Ex. A.) 6. Whether the Ad Damnum Clauses in the Complaint Comply with Local Rules of Civil Procedure. *16 Finally, the Defendants contend that the ad damnum clauses in the Plaintiffs' Complaint do not comply with our Local Rule of Civil Procedure 5.1.1, which provides that: No pleading asserting a claim for unliquidated damages shall contain any allegation as to the specific dollar amount claimed, but such pleadings shall contain allegations sufficient to establish the jurisdiction of the Court, to reveal whether the case is or is not subject to arbitration under Local Civil Rule 53.2, and to specify the nature of the damages claimed (e.g. “compensatory,” “punitive,” or both. (Local Rule Civ. P. 5.1.1.) According to the Defendants, the Plaintiffs' demand for relief in the form of damages “in an amount in excess of one million dollars ($1,000,000.00)” in each Count of their Complaint is improper. (Compl., ¶¶ 17, 18, 20, 21, 22, 23-24.) The Defendants further claim that these repeated demands amount to “inappropriate hyperbole,” which is not permitted in this district. See Green v. Cooper Med. Hosp., 968 F.Supp. 249, 251 n. 2 (E.D.Pa.1997) (admonishing counsel claiming damages on client's behalf for anxiety, humiliation, and lost wages in the amount of fifty million dollars ($50,000,000.00)). The Plaintiffs respond that, although Federal Rule of Civil Procedure 12(f) provides this Court with the ability to order any “redundant, immaterial, impertinent or scandalous matter” deleted from any pleading, their requested relief “in an amount in excess of one million dollars” provides the Defendants with notice of the damages sought by Plaintiffs and the Defendants cannot show that they are prejudiced by this demand. This Court agrees that the Plaintiffs' ad damnum clauses provide Defendants with notice of the large damage figure Plaintiffs seek. Accordingly, this Court will not, at this Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 33 of 75 Chantilly Farms, Inc. v. West Pikeland Tp., Not Reported in F.Supp.2d (2001) 2001 WL 290645 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 13 time, strike the Plaintiffs' prayer for relief contained in the Complaint. IV. CONCLUSION. The Plaintiffs concede their claims in Counts V and VI against West Pikeland Township. Abstention is inappropriate in this case, and the Private Defendants are immune from liability under the Noerr-Pennington doctrine. Therefore, their Motion to Dismiss is granted and they are dismissed from this action. Because the Plaintiffs fail to meet the pleading requirements to state a cause of action under the Pennsylvania Constitution, Count III of the Complaint is dismissed. The remaining claims, therefore, are Counts I (42 U.S.C. section 1983), II (42 U.S.C. section 1985(2), and IV (Conspiracy) against West Pikeland Township and the Township Defendants, and Counts V and VI (Intentional Interference with Actual and Prospective Contractual Relations) against the Township Defendants. An Order follows. ORDER AND NOW, this 23rd day of March, 2001, upon consideration of the Motions to Dismiss filed by the Defendants, and all Responses and Replies thereto, it is hereby ORDERED that: 1. the Motion to Dismiss filed by the Private Defendants (Dkt. No. 19) is GRANTED; and *17 2. the Motion to Dismiss filed by the Township Defendants (Dkt. No. 24) is GRANTED in part and DENIED in part; 3. Count III of Plaintiffs' Complaint is DISMISSED in its entirety; and 4. Counts V and VI are voluntarily DISMISSED against West Pikeland Township. All Citations Not Reported in F.Supp.2d, 2001 WL 290645 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 34 of 75 Exhibit 4 Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 35 of 75 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF MISSISSIPPI WESTERN DIVISION DAIMLER TRUCKS NORTH AMERICA LLC; * WESTERN STAR TRUCK SALES, INC.; AND * CIVIL ACTION NO. 5:15-cv-00030 DETROIT DIESEL CORPORATION * Plaintiffs * * vs. * * JUDGE: David C. Bramlette, III MCCOMB DIESEL, INC. AND * FRANCISCO JOSE MONTALVO * MAGISTRATE JUDGE: Defendants * Michael T. Parker * ORDER AND REASONS THIS MATTER came before the Court on Daimler Trucks North America LLC and Western Star Truck Sales, Inc.’s (“Plaintiffs”) Motion for Summary Judgment Regarding the Right of First Refusal [Rec. Doc. 91]. Having considered the Motion, the Memoranda, the evidence, the argument of counsel, and the law, the Court finds as follows: 1. Plaintiffs and Defendant, McComb Diesel, Inc. (“McComb Diesel”) are parties to a contract entitled “Western Star Trucks Dealer Sales and Service Agreement” (“Agreement”). The Agreement’s clear purpose is to provide for the sale and service of Western Star vehicles. The Agreement provides for a right of first refusal, granting Plaintiffs the right to purchase McComb Diesel’s “dealership assets or stock” in the event McComb Diesel desires to sell same. This is consistent with the clear purpose of the Agreement. 2. The Court finds the provision of the Agreement concerning the scope of Plaintiffs’ right of first refusal to be clear and unambiguous such that the contracting parties’ intent can be discerned from the four corners of the Agreement. The Court finds that the right of Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 36 of 75 2 JM WNR 1483604 v2 2922854-000005 02/24/2016 first refusal covers McComb Diesel’s dealership business only. The Agreement’s clear purpose, as stated in the Agreement itself, is to permit McComb Diesel to sell and service Western Star vehicles. The Agreement does not contemplate granting Plaintiffs a right of first refusal over property not contemplated by the Agreement. 3. If the Court finds that Plaintiffs’ obligation to exercise or waive its right of first refusal were triggered by the Asset Purchase Agreement between McComb Diesel, Harvest Haul, Inc., Fiber Plus, LLC, Magnolia Motors, and Old River of McComb, LLC, Plaintiffs would be required either to purchase several assets not covered by its right of first refusal, or to waive its bargained-for property right. The Court declines to adopt such a rule, which may permit a creative property owner to expand the scope of a right of first refusal ad infinitum such that a rightholder’s right of first refusal would be effectively rendered a nullity. The Court instead finds that the APA did not trigger Plaintiffs’ obligation to exercise or waive its right of first refusal. Oral argument was requested and was granted, and on the 17th day of February, 2016, at the Federal Courthouse at Natchez, Mississippi a hearing was held and the parties made their respective presentations. In the event of an appeal, a transcript of this hearing is available. NOW, THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY ORDERED THAT: 1. Daimler Trucks North America LLC and Western Star Truck Sales, Inc.’s Motion for Summary Judgment Regarding the Right of First Refusal [Rec. Doc. 91] is GRANTED. 2. Daimler Trucks North America LLC and Western Star Truck Sales, Inc.’s prayer for a Declaratory Judgment pursuant to 28 U.S.C. § 2201, et seq. is GRANTED, and the Court Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 37 of 75 3 JM WNR 1483604 v2 2922854-000005 02/24/2016 enters a Declaratory Judgment that Daimler Trucks North America LLC and Western Star Truck Sales, Inc.’s obligation to exercise or waive their right of first refusal was not triggered by the October 31, 2014 Asset Purchase Agreement. 3. Daimler Trucks North America LLC and Western Star Truck Sales, Inc.’s prayer for an injunction enjoining McComb Diesel, Inc. from proceeding with the sale contemplated by the October 31, 2014 Asset Purchase Agreement is GRANTED, and the Court enters an injunction preventing McComb Diesel, Inc. and/or Francisco Jose Montalvo from closing on the sale contemplated by the Asset Purchase Agreement. Thus, done and signed at Natchez, Mississippi, this 22nd day of March, 2016 BY THE COURT: s/David Bramlette HON. DAVID C. BRAMLETTE, III U.S. DISTRICT COURT JUDGE Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 38 of 75 Exhibit 5 Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 39 of 75 General Motors Corp. v. Stan Olsen Pontiac GMC-Trucks,..., Not Reported in... 2003 WL 23921745 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2003 WL 23921745 Only the Westlaw citation is currently available. UNPUBLISHED OPINION. CHECK COURT RULES BEFORE CITING. District Court of Nebraska. GENERAL MOTORS CORPORATION, a Delaware corporation, Applicant-Appellant, v. STAN OLSEN PONTIAC GMC-TRUCKS, INC. OF OMAHA, Nebraska, a Nebraska corporation, Protestant-Appellee. No. CI 03-2208. | Dec. 9, 2003. ORDER CHEUVRONT, J. *1 General Motors Corporation (“GM”) has appealed from a decision of the Nebraska Motor Vehicles Licensing Board (“Board”) dated June 9, 2003 denying GM's application to terminate the franchise of Stan Olsen Pontiac GMC-Trucks, Inc. of Omaha Nebraska (“Olsen”). By a letter and application dated June 29, 2001, GM requested permission of the Board to terminate Olsen's Pontiac and GMC Dealer Agreements. A hearing on the application was held March 20, 2003. The Board determined that there was no “good cause” for terminating Olsen's franchise and that GM's request was based on its desire for additional market penetration in the Omaha area which cannot constitute good cause for termination of a franchise pursuant to NEB.REV.STAT. § 60-1429(1) (Reissue 1998). The review by this court is de novo on the record. NEB.REV.STAT. § 84-917(5)(a) (Reissue 1999). In reviewing the evidence, this court reaches conclusions independent of those reached by the Board and tries factual questions de novo and, where credible evidence is in conflict on a material issue of fact, gives weight to the fact that the Board heard and observed the witnesses and accepted one version of the facts rather than another. Nebraska Dept. of Correctional Servs. v. Hansen, 238 Neb. 233, 407 N.W.2d 170 (1991). In Slack Nursing Home, Inc. v. Department of Soc. Serv ., 247 Neb. 452, 462, 528 N.W.2d 285, 293-94 (1995) our court stated: Pursuant to the 1989 amendments to § 84-917, a district court is required to conduct a de novo review of agency determinations on the record of the agency. The district court is not limited to a review subject to the narrow criteria found in § 84-917(6)(a) but is required to make independent factual determinations based upon the record. The Nebraska statutes relating to the establishment or termination of motor vehicle franchises were enacted because of the disparity in bargaining power between automobile manufacturers and their dealers. See In re Application of General Motors Corp., 232 Neb. 11, 439 N.W.2d 453 (1989). Under Section 60-1420, before a franchise can be terminated, the manufacturer must first show that (1) there is “good cause” for termination, (2) another franchise will become effective in the community, and (3) the manufacturer will comply with the “buy back” provision of Section 60-1430.02. Section 60-1433 relates to “good cause” and provides: In determining whether good cause has been established for terminating or not continuing a franchise, the board shall take into consideration the existing circumstances, including, but not limited to: (1) Amount of business transacted by the franchisee; (2) Investment necessarily made and obligations Incurred by the franchisee in the performance of his part of the franchise; (3) Permanency of the investment; (4) Whether it is Injurious to the public welfare for the business of the franchisee to be disrupted; (5) Whether the franchisee has adequate motor vehicle, combination motor vehicle and trailer, motorcycle, or trailer service facilities, equipment, parts and qualified service personnel, to reasonably provide consumer care for the motor vehicles, combination motor vehicles and trailer, motorcycles, or trailers sold at retail by the franchisee and any other Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 40 of 75 General Motors Corp. v. Stan Olsen Pontiac GMC-Trucks,..., Not Reported in... 2003 WL 23921745 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 motor vehicle, combination motor vehicle and trailer, motorcycle, or trailer of the same line-make; *2 (6) Whether the franchisee refuses to honor warranties of the franchisor to be performed by the franchisee if the franchisor reimburses the franchisee for such warranty work performed by the franchisee; (7) Except as provided in section 60-1429, failure by the franchisee to substantially comply with those requirements of the franchise which are determined by the board to be reasonable and material; and (8) Except as provided in section 60-1429, bad faith by the franchisee in complying with those terms of the franchise which are determined by the board to be reasonable and material. GM has the burden of proof to establish that termination of the franchise should be permitted under the act. NEB.REV.STAT. § 60-1427 (Reissue 1998). The statute also requires the Board to base its decision solely upon the evidence offered at the hearing. Because GM assured the Board that a qualified replacement dealer will be established if Olsen's franchise is terminated and that it will comply with the “buy-back” provisions of Section 60-1430.02, the only issue is whether GM has “good cause” to terminate Olsen's franchises. Olsen has been a Pontiac dealer for forty four years and a GMC dealer since 1991. Pursuant to the franchise agreements, GM evaluates the dealers based on retail sales, using a “Retail Sales Index” (“RSI”) and the dealer's customer satisfaction, based on Customer Satisfaction Information surveys (“CSI”). The dealers are assigned a certain geographical area within which the dealer is located and comparisons are made to other dealers in the state based on the number of vehicles sold by that dealer and the number of identical makes of vehicles registered in the service area. Adjustments are made based on the types of vehicles sold in the dealer's area. For example, while full size pickup trucks would sell better in a rural area of Nebraska, compact cars or smaller pickups would sell better in Omaha. Based on this evaluation, Olsen was the worst GMC dealer in the entire state for every year from 1999 through 2002 and the fourth worst Pontiac dealer for these same years (40 th out of 44). As GMC noted in its brief, in 2002, Olsen sold only six more GMC units in its Omaha area than the dealer in Crawford, Nebraska. GM has a program called a “Dealer Assistance Process” that is employed with dealers who are deemed to be severely under-preforming. Olsen was one of the seventeen dealers, out of a total of 1,434 in GM's south central region that was placed in this program. As a part of determining customer satisfaction, customers are surveyed to determine their views on the particular dealership. GM uses two types of surveys, a purchase and delivery survey (“PDS”) and a survey based on service transactions, referred to as a service satisfaction survey (“SSS”). GM offered evidence showing that Olsen's customer satisfaction was below the average for the region in the years 1999 through 2002. GM also offered evidence concerning the condition of Olsen's physical facilities. The main facility was constructed in 1973 and while considered an outstanding facility at that time, testimony of GM's dealer support manager for this region described the shortcomings of the physical facility in that it has remained unchanged for the past thirty years. *3 Terry Bartel, GM's area service manager for the Omaha-Lincoln area, testified that Olsen has consistently been in the lower one-half of the regional average for minimum training of service technicians and has no GM certified master technicians. GM also offered the testimony of Sharif Farhat, a consultant involved in automotive dealer performance. After discussing numerous charts and graphs comparing Olsen's historical performance to other dealers, both in the State of Nebraska and nationwide, Farhat expressed the opinion that Olsen's below average performance was attributable to the operation of the dealership by its personnel, rather than any external market forces. Olsen offered evidence that the dealership's performance had improved in the three months prior to the hearing before the Board. Stan Olsen also testified on behalf of the dealership and basically contradicted the evidence offered by GM. He felt that the physical plant was “in pretty good shape,” that the service area was adequate, that Olsen has very good service technicians and that Olsen is doing the best they can to sell Pontiac and GMC vehicles. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 41 of 75 General Motors Corp. v. Stan Olsen Pontiac GMC-Trucks,..., Not Reported in... 2003 WL 23921745 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 If should be noted that the Motor Vehicle Industry Licensing Board consists of ten members. One is the Director of Motor Vehicles, one is a factory representative, one a member of the general public, three represent new car dealers, two are used car dealers, one is a motorcycle dealer and one is a trailer or combination trailer-motor vehicle dealer. In summary, the Board consists of seven dealers, the Director, a member of the general public and one factory representative. The Board's order dated June 9, 2003, found that GM failed to show good cause with respect to every one of the eight circumstances in Section 60-1433 and denied the application to terminate Olsen's franchises. From a de novo review of the record, this court finds as follows: “AMOUNT OF BUSINESS TRANSACTED BY THE FRANCHISEE.” Section 60-1433(1) It is clear that considering the geographical and population area served by Olsen that it is woefully under performing in the sales of Pontiac and GMC vehicles. GM's methods for determining sales performance appear to be reasonable. To conclude that a dealer whose GMC sales are last in the state and whose Pontiac sales rank 40 th out of 44 dealers is transacting a sufficient amount of business obviously is erroneous. “INVESTMENT NECESSARILY MADE AND OBLIGATIONS INCURRED BY THE FRANCHISEE IN THE PERFORMANCE OF HIS PART OF THE FRANCHISE.” Section 60-1433(2) The record shows that Olsen has an original investment of approximately $950,000.00 in land and improvements. The improvements have a depreciated value of $12,807.00. The assessed value of the property is in excess of $1,500,000.00 and Olsen conceded that the present market value of the facility is in excess of the assessed value. Further, Olsen sells several other lines of vehicles from this location. When requested by GM to make improvements in the physical plant that GM felt would enhance the appearance of the dealership, Olsen refused. Obviously, this is not a case where the franchisee has made substantial current investment in a new facility or made major improvements recently. Terminating the franchises would not result in an unfair devaluation of Olsen's investment. *4 “PERMANENCY OF THE INVESTMENT.” Section 60-1433(3) The record shows that Olsen's fixed assets other than the real estate are approximately $54,000.00. This is not a significant amount. “WHETHER IT IS INJURIOUS TO THE PUBLIC WELFARE FOR THE BUSINESS OF THE FRANCHISEE TO BE DISRUPTED.” Section 60-1433(4) Olsen's sales performance and below average customer satisfaction ratings indicate that termination of the franchises would not be injurious to the public. “... ADEQUATE ... SERVICE FACILITIES, EQUIPMENT, PARTS AND QUALIFIED SERVICE PERSONNEL TO REASONABLY PROVIDE CONSUMER CARE ...” Section 60-1433(5) Although there is some evidence of inadequate parts inventory, a minimum level of training of service technicians, and below average customer satisfaction surveys, this is not significant enough to warrant terminating the franchises: “... REFUS[AL] TO HONOR WARRANTIES ...” Section 60-1433(6) There is no evidence that Olsen has failed to honor warranties: “... FAILURE BY THE FRANCHISEE TO SUBSTANTIALLY COMPLY WITH ... [REASONABLE AND MATERIAL] ... REQUIREMENTS OF THE FRANCHISE ...” Section 60-1433(7) Olsen has failed to effectively promote and sell Pontiac and GMC vehicles as required by the franchise agreement. Olson also has failed to achieve an acceptable level of customer satisfaction, which likely has an effect on sales performance. Based on the above, the court finds that GM has shown “good cause” to terminate Olsen's Pontiac and GMC franchises. Although Olsen does a substantial amount of business, it falls far short of what an effective dealer should do in Olsen's trade area. GM should not be forced to continue a franchise when that franchisee is Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 42 of 75 General Motors Corp. v. Stan Olsen Pontiac GMC-Trucks,..., Not Reported in... 2003 WL 23921745 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 woefully underperforming. As noted above, the Board, by its very composition, is a board of dealers, and by any fair analysis, cannot be deemed to be an impartial fact finding body. While appellant courts may tend to defer to the conclusions of independent hearing officers or boards, unfortunately it is difficult to defer to a non representative board. Based on a de novo review of the record, the court finds that the decision of the Board should be reversed and GM should be authorized to terminate Olsen's Pontiac and GMC franchises. IT IS ORDERED that the order of the Nebraska Motor Vehicle Licensing Board be reversed and that General Motors Corporation be given permission to terminate the Pontiac and GMC franchise agreements with Stan Olsen Pontiac GMC-Trucks, Inc. Costs are taxed to the appellees. All Citations Not Reported in N.W.2d, 2003 WL 23921745 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 43 of 75 Exhibit 6 Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 44 of 75 Holbert's Inc. v. Audi of America, Inc., Not Reported in F.Supp.2d (2012) 2012 WL 1606569 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2012 WL 1606569 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. HOLBERT'S INC. et al. v. AUDI OF AMERICA, INC. Civil Action No. 12–725. | May 8, 2012. Attorneys and Law Firms Dennis George, Jeffrey M. Scafaria, Philadelphia, PA, for Holbert's Inc. et al. John B. Consevage, Harrisburg, PA, Matthew P. Faranda-Diedrich, Philadelphia, PA, for Audi of America, Inc. MEMORANDUM McLAUGHLIN, District Judge. *1 The plaintiffs brought this suit for damages alleging a violation of the Pennsylvania Board of Vehicles Act (“BVA”). The defendant moves to dismiss for lack of subject matter jurisdiction. Because the plaintiffs did not comply with the BVA's statutory requirement before filing suit, the Court will grant the motion. I. Facts as Alleged in the Complaint The plaintiffs are Laurence and Jean Holbert and Holbert's Inc., a former Audi dealership. In December of 2009, Holbert's Inc. entered into an Asset Purchase Agreement (“APA”) with Thompson Auto Group to sell the dealership to Thompson for $4,000,000. Compl. ¶¶ 9, 10. In addition to the APA, Thompson's acquisition included an agreement to lease the dealership premises owned by the individual Holberts. Id. ¶ 11. On December 4, 2009, the APA was submitted to the defendant for approval. Id. ¶ 10. On February 11, 2010, Audi notified the plaintiffs that it was exercising its Right of First Refusal under the Pennsylvania Board of Vehicles Act (“BVA”). Id. ¶ 12. Audi refused to guarantee the lease of the dealership premises as Thompson had agreed to do. Id. ¶ 15. Believing this to be a violation of the BVA, the plaintiffs filed a Protest with the State Board of Vehicle Manufacturers, Dealers, and Salespersons (“the Board”). Id. ¶ 16. Following a hearing on June 7, 2010, the Board issued its opinion on August 6, 2010. Id. ¶ 17. The Board found that Audi violated the provisions of the BVA governing the Right of First Refusal and ordered Audi to approve the sale to Thompson. Id. ¶ 17. Audi filed and withdrew an appeal to the Commonwealth Court. Id. ¶¶ 18, 24. On December 9, 2010, after it filed a Praecipe for Discontinuance of the appeal, Audi approved the plaintiff's sale of the dealership to Thompson. Id. ¶ 27. That day, Thompson paid the plaintiffs the $4,000,000 purchase price and the lease of the premises commenced. Id. ¶¶ 25, 28. The plaintiffs bring this suit for lost interest on the $4,000,000 sale price and lost rent of the dealership premises from December 10, 2009 until December 9, 2010. Id. ¶¶ 31, 34. II. Discussion 1 1 In evaluating a motion under 12(b)(1), a court must determine if the defendant is attacking jurisdiction on facial or factual grounds. In a facial attack, a defendant argues that the pleadings, as a matter of law, fail to establish jurisdiction. The court “looks only at the allegations in the pleadings and does so in the light most favorable to the plaintiff.” United States ex rel. Atkinson v. Pa. Shipbuilding Co., 473 F.3d 506, 514 (3d Cir.2007). In a factual attack, the defendant challenges the factual assertions made in the pleadings. Where a factual attack is made, “no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.” Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir.1977). The plaintiff bears the burden of establishing jurisdiction. Atkinson, 473 F.3d at 514. The BVA says that “[a] dealer or distributor may not file a complaint ... against a manufacturer or distributor based on an alleged violation of this act ... unless the dealer or distributor serves a demand for mediation upon the manufacturer or distributor before or contemporaneous Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 45 of 75 Holbert's Inc. v. Audi of America, Inc., Not Reported in F.Supp.2d (2012) 2012 WL 1606569 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 with the filing of the complaint....” 63 Pa. Cons.Stat. § 818.11(a)(1). The statute does not contain any exceptions, and each plaintiff must make a mediation demand. Gabe Staino Motors, Inc. v. Volkswagen of Am., No. 99–5034, 2003 U.S. Dist. LEXIS 21092, at *13, 2003 WL 22735379 (E.D.Pa. Nov. 13, 2003). Unlike a nonstatutory rule of procedure, “statutory exhaustion requirements deprive [the courts] of jurisdiction” over the case. Bin Lin v. Attorney General of the U.S., 543 F.3d 114, 120 (3d Cir.2008); Metro. Life Ins. Co. v. Price, 501 F.3d 271, 278 (3d Cir.2007). *2 The plaintiffs did not serve a demand for mediation before or contemporaneous with filing this complaint. The plaintiffs argue that they did not need to file a mediation demand for two reasons. First, the plaintiffs argue that they served a mediation demand before bringing their protest to the Board in 2010, and therefore that they are not obligated by the Act to do so again. The defendant argues that the plaintiffs were required to serve a new demand letter before filing this complaint. The Court does not need to reach this issue, however, because it appears that the plaintiffs' 2010 mediation demand letter did not include “the relief sought by the dealer” in this case, as required by the statute. 63 Pa. Cons.Stat. § 818.11(a)(1). Neither party has provided the Court with a copy of the 2010 mediation demand letter. In oral argument on May 7, 2012, both parties represented to the Court that the relief sought in the plaintiff's 2010 mediation demand letter did not include damages as a result of the delayed transaction. Because the plaintiffs seek that relief in this case, the statutory requirement is not satisfied by the 2010 demand letter. The plaintiffs also argue that they did not bring this suit “based on an alleged violation” of the Act but instead on an actual violation of the Act, as determined by the Board. This argument relies on the principle of collateral estoppel: that this Court is bound by the Board's decision that the defendant violated the BVA. Collateral estoppel is not applicable when “disparate burdens of proof” apply in the two different suits. In re Braen, 900 F.2d 621, 624 (3d Cir.1990); see also Restatement (Second) of Judgments § 28 (“[R]elitigation of the issue in a subsequent action between the parties is not precluded in the following circumstances: ... (4) The party against whom preclusion is sought had a significantly heavier burden of persuasion with respect to the issue in the initial action than in the subsequent action; [or] the burden has shifted to his adversary....”); Charles Alan Wright, et al., Federal Practice and Procedure § 4422 (2d ed. 2002) (“Failure of one party to carry the burden of persuasion on an issue should not establish the issue in favor of an adversary who otherwise would have the burden of persuasion that issue in later litigation.”). In the hearing before the Board, the defendant had the burden to prove it had “not violated any provision of th[e] act as set forth in the protest filed by the new vehicle dealer.” 63 Pa. Cons.Stat. § 818.8(d)(3). In addition, the Board could prevent a protested action if it “determined there is good cause.” Id. § 818.8(d) (4). In this Court, the plaintiffs have the burden of proving their claims by a preponderance of the evidence. Because both the burden of proof and the evidentiary standard are different in this Court than they were before the Board, the plaintiffs cannot rely on the Board decision in this case. The plaintiffs are alleging a violation of the BVA and were obligated to serve a mediation demand letter prior to or contemporaneously with filing this suit. Because they have not done so, this Court lacks subject matter jurisdiction. *3 An appropriate order will issue. All Citations Not Reported in F.Supp.2d, 2012 WL 1606569 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 46 of 75 Exhibit 7 Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 47 of 75 Mercedes-Benz USA, LLC v. Star Automobile Co., Not Reported in F.Supp.2d (2011) 2011 WL 2175037 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2011 WL 2175037 Only the Westlaw citation is currently available. United States District Court, M.D. Georgia, Athens Division. MERCEDES–BENZ USA, LLC, Plaintiff, v. STAR AUTOMOBILE COMPANY; Peter W. Mankins; and Krzysztof Lenchkosz, Defendants. No. 3:11–cv–73 (CAR). | June 3, 2011. Attorneys and Law Firms Christopher P. Montville, Wheeler Trigg O'Donnell LLP, Denver, CO, Kenneth Phillip Mcduffie, Atlanta, GA, Steven M. Kelso, Wheeler Trigg O'Donnell LLP, Denver, CO, for Plaintiff. ORDER FOR PRELIMINARY INJUNCTION C. ASHLEY ROYAL, District Judge. *1 Currently before the Court is Plaintiff Mercedes– Benz USA, LLC's (“MBUSA”) Motion for Temporary Restraining Order and Preliminary Injunction [Doc. 4] seeking a preliminary injunction against the sale of Defendant Star Automobile Company's (“Star”) Mercedes–Benz of Athens dealership to Defendants Peter W. Mankins and Krzysztof Lenchkosz (the “Buyers”). After review of the entire record and hearing from the parties at the hearing held before this Court on June 1, 2011, the Court finds that MBUSA will suffer immediate and irreparable injury if this Motion is not granted. Thus, Plaintiff's Motion [Doc. 4] is GRANTED. The Court makes the following factual findings: 1. Plaintiff MBUSA distributes Mercedes–Benz passenger cars and light trucks in the United States through a network of independent dealers, who in turn sell the vehicles to customers. 2. Defendant Star is an authorized dealer of Mercedez– Benz vehicles doing business as Mercedes–Benz of Athens. 3. To be an authorized Mercedes–Benz dealer, MBUSA and Star entered into two agreements: the Mercedes–Benz Passenger Car Dealer Agreement and the Mercedes–Benz Light Truck Dealer Agreement (collectively, the “Dealer Agreements”). For purposes of this litigation, the Dealer Agreements contain identical operative terms. 4. The Dealer Agreements give MBUSA a right of first refusal over the sale of a dealership. The Agreements contain the following pertinent language: B. Right of First Refusal or Option to Purchase 1. Rights Granted If a proposal to sell Dealer's principal assets or transfer the majority ownership interest in Dealer is submitted by Dealer to MBUSA ... MBUSA has a right of first refusal or option to purchase such assets or ownership interest.... MBUSA's exercise of its right or option under this Section IX.B supersedes Dealer's right to transfer its interest in, or ownership of, the dealership. MBUSA's right or option may be assigned by it to any third party and MBUSA hereby guarantees the full payment to Dealer of the purchase price by such assignee. * * * 3. Right of First Refusal If Dealer has entered into a bona fide written buy/ sell agreement for its dealership business or assets, MBUSA's right under this Section IX.B is a right of first refusal, enabling MBUSA to assume the buyer's rights and obligations under such buy/sell agreement, and to cancel this Agreement and all rights granted Dealer.... If, as a result of MBUSA's exercise of its right of first refusal, Dealer is contractually obligated to reimburse the initial buyer for reasonable attorney's fees, broker's fees, title searches, property inspections, and other similar costs and fees that the buyer incurred in connection with the buy/sell agreement, MBUSA shall reimburse Dealer for such costs and fees in an amount up to but not exceeding Fifty Thousand Dollars ($50,000.00). Dealer shall provide MBUSA with all documents substantiating such costs and fees as MBUSA may reasonably request. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 48 of 75 Mercedes-Benz USA, LLC v. Star Automobile Co., Not Reported in F.Supp.2d (2011) 2011 WL 2175037 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 *2 5. On April 1, 2011, Defendant Star entered into a Dealership Asset Purchase Agreement with the Buyers intending to sell the Mercedes dealership together with their Nissan and Volkswagon dealerships as a package deal to the Buyers. 6. The Asset Purchase Agreement contemplated a June 1, 2011 closing date. 7. MBUSA wishes to enjoin the sale in order to exercise its contractual right of first refusal. The Court makes the following conclusions of law: 1. Due to the complexity of the issues involved in deciding this case, the Court must preserve the status quo until the Court can “fully and fairly adjudicate” the interplay between Georgia's Motor Vehicle Franchise Practices Act, O.C.G.A. § 10–1–620 to 10–1–670, and the contractual rights contained in the Dealer Agreements. Northeastern Fl. Chapter of Ass'n of Gen. Contractors of Am. v. City of Jacksonville, Fl, 896 F.2d 1283, 1284 (11th Cir.1990) (“The chief function of a preliminary injunction is to preserve the status quo until the merits of the controversy can be fully and fairly adjudicated.”). 2. MBUSA is likely to succeed on the merits of its claim. See, e.g., Parker v. State Bd. of Pardons and Paroles, 275 F.3d 1032, 1034–35 (11th Cir.2001) (A “preliminary injunction is appropriate where the movant demonstrates that: (a) there is a substantial likelihood of success on the merits[.]”). Not only do the Dealer Agreements grant MBUSA a right of first refusal, but Georgia law also grants MBUSA a statutory right of first refusal. See O.C.G.A. § 10–1–663.1. Under both New Jersey law, which governs the Dealer Agreements, and Georgia law, deals like the one in this case violate rights of first refusal. See Guaclides v. Kruse, 67 N.J.Super. 348, 170 A.2d 488, 494 (N.J.App.1961) (a property owner may not “impair or destroy the preemptive right [of first refusal] to purchase the part by sale or agreement to sell the whole to some third person[.]”); Mazzeo v. Kartman, 234 N.J.Super. 223, 560 A.2d 733 (N.J.App.1989) (right of first refusal is a “valuable perogative,” and seller breaches the right of first refusal when it accepts an offer on property without first offering to the right-holder); Hinson v. Roberts, 256 Ga. 396, 397, 349 S.E.2d 454 (1986) (“the preemptive right of first refusal may not be defeated by the offer of a third party to purchase the land in question as part of a package transaction”). Thus, it is likely that the package deal selling the Nissan and Volkswagon dealerships (over which MBUSA has no power) together with the Mercedes dealership violates MBUSA's contractual right of first refusal. 2. MBUSA would likely suffer irreparable harm in the absence of injunctive relief. See, e.g., Parker, 275 F.3d at 1034–35 (preliminary injunction appropriate where “(b) the preliminary injunction is necessary to prevent irreparable injury”). If the Court were to allow the sale of Star's Mercedes dealership to close, MBUSA would lose its right of first refusal under the Dealer Agreements. Under such circumstances, monetary damages would be difficult, if not almost impossible, to calculate; thus, an injunction is the appropriate remedy. See, e.g., Guaclides, 170 A.2d at 497 (enjoining property owner from selling burdened property without according right-holder ability to exercise its right of first refusal); Radio WEBS, Inc. v. Tele–Media Corp., 249 Ga. 598, 602, 604, 292 S.E.2d 712 (1982) (holding that trial court should have enjoined package sale that included assets burdened by right of first refusal). *3 3. The harm suffered by MBUSA by denying an injunction would likely exceed any damage the preliminary injunction may cause Defendants. See, e.g., Parker, 275 F.3d at 1034–35 (preliminary injunction appropriate where “(c) the threatened injury outweighs the harm that the ... preliminary injunction would cause to the non-movant”). If the Court does not enjoin the sale of the dealership, MBUSA would lose its right of first refusal under the Dealer Agreements, a loss that would be nearly impossible to compensate with monetary damages. As to Star, although there will be a delay in the transfer of the dealership, Star continues to benefit from the ownership and operation of the dealership and is in no worse position. Moreover, MBUSA stands prepared to perform under the terms of the right of first refusal in the Dealer Agreements. 4. Preliminarily enjoining the sale to maintain the status quo until the Court can fully and fairly resolve the issues in this case would not be against the public interest. See, e.g., Parker, 275 F.3d at 1034–35 (preliminary injunction appropriate where (d) “the preliminary injunction would not be averse to the public interest”). Indeed, enjoining the sale is in furtherance of the public's interest in preserving and maintaining contractual relations. For all of the above Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 49 of 75 Mercedes-Benz USA, LLC v. Star Automobile Co., Not Reported in F.Supp.2d (2011) 2011 WL 2175037 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 reasons, the Motion for Temporary Restraining Order and Preliminary Injunction is hereby granted. IT IS, THEREFORE, ORDERED, ADJUDGED and DECREED that: 1) Defendant Star Automobile Company and Defendants Peter W. Mankins and Krzysztof Lenckosz are hereby enjoined from closing the Asset Purchase Agreement between them dated April 1, 2011, that includes the assets of the Mercedes–Benz of Athens dealership. 2) Defendant Star Automobile Company will not sell, transfer, or otherwise encumber the Mercedes–Benz of Athens dealership or the dealership's assets, including the dealership's property, tangible assets, intangible assets, contractual rights and obligations, or goodwill. 3) Nothing in this Order shall prohibit Defendant Star Automobile Company from continuing normal dealership operations. 4) This Order does not extend or abate Defendants' obligation to file responsive pleadings pursuant to Rule 12 of the Federal Rules of Civil Procedure. 5) As stated in the hearing, the parties are to submit their briefs regarding the security requirement set forth in Fed.R.Civ.P. 65(c) within five (5) days of the date of this Order. 6) This Preliminary Injunction will remain in effect until further Order of this Court. SO ORDERED. All Citations Not Reported in F.Supp.2d, 2011 WL 2175037 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 50 of 75 Exhibit 8 Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 51 of 75 Nissan North America, Inc. v. Jim M'Lady Oldsmobile, Inc., Not Reported in F.Supp.2d... 2008 WL 4148528 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2008 WL 4148528 Only the Westlaw citation is currently available. United States District Court, N.D. Illinois, Eastern Division. NISSAN NORTH AMERICA, INC., Plaintiff, v. JIM M'LADY OLDSMOBILE, INC. d/ b/a Jim M'Lady Nissan, Defendant. No. 07 C 6304. | Aug. 29, 2008. Attorneys and Law Firms Bruce Stephen Terlep, Swanson, Martin & Bell, LLP, Lisle, IL, Mary Beth Murrane, William N. Berkowitz, Bingham McCutchen LLP, Boston, MA, for Plaintiff. Ira M. Levin, Aaron H. Stanton, Burke, Warren, Mackay & Serritella, P.C., Chicago, IL, for Defendant. MEMORANDUM OPINION AND ORDER JOAN B. GOTTSCHALL, District Judge. *1 Before the court is the defendant's motion to dismiss for lack of subject matter jurisdiction. For the reasons stated below, the motion is granted and the case is dismissed. I. BACKGROUND 1 1 The facts are largely taken from, and more fully set forth in, previous court opinions. See Nissan N. Am., Inc. v. Jim M'Lady Oldsmobile, Inc., 486 F.3d 989 (7th Cir.2007); Nissan N. Am., Inc. v. Jim M'Lady Oldsmobile, Inc., 307 F.3d 601 (7th Cir.2002). Other facts are taken from the complaint, and are treated as true for purposes of this motion. This case is the latest installment in a more than seven- year-old dispute between a car manufacturer, Nissan North America, Inc. (“Nissan”), and a car dealership, Jim M'Lady Oldsmobile, Inc. d/b/a Jim M'Lady Nissan (“M'Lady”). Nissan and M'Lady initially entered into a franchise agreement on May 21, 1992. The agreement was extended multiple times. However, the relationship became strained, in part because of M'Lady's failure to meet a deadline to complete construction of a Nissan showroom. The long-running dispute came to a head in late 1999 when Nissan attempted to terminate M'Lady's franchise agreement. In October 2000, M'Lady filed a notice of protest with the Illinois Motor Vehicle Review Board (the “Board”) regarding the proposed termination of its franchise agreement. Nissan submitted the dispute to an arbitrator pursuant to a written agreement to arbitrate contained in a contract extension that had, by its own terms, expired in April 1999. M'Lady objected to arbitration and Nissan filed a federal lawsuit (case no. 01 C 1290) seeking to compel. The arbitration case went to the Seventh Circuit twice. It was resolved in May 2007 when the Seventh Circuit affirmed this court's grant of summary judgment in favor of M'Lady, concluding that there was insufficient evidence of an agreement to arbitrate. Nissan N. Am., Inc. v. Jim M'Lady Oldsmobile, Inc., 486 F.3d 989, 990 (7th Cir.2007). The franchise dispute returned to the Board for resolution. The parties' attempts to work out a deal were unsuccessful and, in July 2007, M'Lady filed a second notice of protest with the Board. A few months later, Nissan filed this lawsuit. Now, Nissan invokes federal diversity jurisdiction for a declaratory judgment action. M'Lady has filed a motion to dismiss, asserting that this court lacks subject matter jurisdiction over the matters raised. The matter is now fully briefed. 2 2 On April 22, 2008, Nissan filed a motion for leave to file a sur-reply in support of its opposition to the defendant's motion to dismiss (docket no. 36). It failed to notice the motion for presentment in accordance with Local Rule 5.3(b); consequently, the motion was never granted. Nevertheless, M'Lady filed an objection to the proposed sur-reply (docket no. 38), which also responded to the substance of the sur-reply. Given the brevity of both filings, the court exercises its discretion to grant the motion to file a sur-reply nunc pro tunc (April 22, 2008) and considers the objection as a sur-sur reply. II. ANALYSIS Nissan asks the court to: find that the parties had no oral or written franchise agreement; determine whether Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 52 of 75 Nissan North America, Inc. v. Jim M'Lady Oldsmobile, Inc., Not Reported in F.Supp.2d... 2008 WL 4148528 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 a franchise agreement exists between the parties within the meaning of the Illinois Motor Vehicle Franchise Act, 815 Ill. Comp. Stat. 710/1 et seq. (“IMVFA”); determine whether the Board has jurisdiction over the parties' dispute given the alleged lack of an oral or written franchise agreement and its failure to follow its own procedural guidelines; find that the Board protests have been abandoned and should be dismissed; and determine that “good cause” exists for Nissan to terminate its relationship with M'Lady and to discontinue sales. 3 M'Lady argues that the court has no jurisdiction because of: (1) issues of ripeness and exhaustion of administrative remedies in light of the pending Board protests on the same issues; (2) the Burford abstention doctrine; (3) the Colorado River abstention doctrine. 3 The court notes that the legislature has explicitly committed to the Board the issue of whether “good cause” exists to terminate a franchise. See 815 Ill. Comp. Stat. 710/12(e) (expressly excepting the ability of a party to seek a remedy in court for disputes that arise “under paragraph (6) of subsection (d) ... of Section 4 of this Act”); id. 710/4(d)(6) (prohibiting the cancellation or termination of a franchise without good cause and notice). Such factual determinations are entrusted to an administrative body, not the courts, due to concerns over the separation of powers. See Fields Jeep-Eagle, Inc. v. Chrysler Corp., 163 Ill.2d 462, 206 Ill.Dec. 694, 645 N.E.2d 946, 954 (Ill.1994) (holding unconstitutional sections 4(e)(8) and 12(c) of the IMVFA which required a determination of whether “good cause” existed for the establishment or relocation of a franchise). A. Legal Standard *2 Rule 12(b)(1) provides that a party may assert the defense of lack of subject matter jurisdiction by motion or in a responsive pleading. Fed.R.Civ.P. 12(b)(1). “It is proper for the district court to look beyond the jurisdictional allegations in the complaint and to view whatever evidence has been submitted in determining whether subject matter jurisdiction exists under Rule 12(b) (1).” Roman v. U.S. Postal Serv., 821 F.2d 382, 385 (7th Cir.1987) (citing Grafon Corp. v. Hausermann, 602 F.2d 781, 782 (7th Cir.1979)). When deciding a motion to dismiss for lack of subject matter jurisdiction, “a district court must accept as true all well-pleaded factual allegations of the complaint and draw all reasonable inferences in favor of the plaintiff.” Long v. Shorebank Dev. Corp., 182 F.3d 548, 554 (7th Cir.1999). Nevertheless, the burden of proof lies with “the party asserting jurisdiction,” namely, the plaintiff. United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir.2003); see Kontos v. U.S. Dep't of Labor, 826 F.2d 573, 576 (7th Cir.1987) (requiring the nonmoving party to “submit affidavits and other relevant evidence to resolve the factual dispute regarding the court's jurisdiction”). B. Arguments This case arises in the declaratory judgment context. See 28 U.S.C. § 2201. As a preliminary matter, the court notes that Nissan has alleged that the parties are of diverse citizenship 4 and that the amount in controversy exceeds $75,000, which satisfies diversity jurisdictional requirements. See id. § 1332. M'Lady does not challenge the allegations; therefore, the court will treat them as true for purposes of this motion. Thus, the issue is not whether the court has the power to decide the issues presented, but whether circumstances are such that it should exercise its discretion not to adjudicate the controversy. See Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 719, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996) (finding abstention appropriate where “denying a federal forum would clearly serve an important countervailing interest”); Wilton v. Seven Falls Co., 515 U.S. 277, 282, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995) (noting that a court has “discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites”). 4 Nissan alleges that it is a California corporation with its principal place of business in either California or Tennessee and that M'Lady is a Delaware corporation with its principal place of business in Illinois. Compl. ¶¶ 1-2. As the Seventh Circuit has observed, abstention is an “amorphous concept,” and the bases for abstention frequently merge together. Hartford Cas. Ins. Co. v. Borg- Warner Corp., 913 F.2d 419, 425 (7th Cir.1990). In this case, Nissan asks the court to declare that no franchise exists between it and M'Lady and that the Board lacks jurisdiction, even though it has raised those exact issues as a defense to M'Lady's protest filed with the Board. 5 Such a duplication of litigation typically implicates Colorado River abstention. See Colo. River Water Conservation Dist. v. U.S., 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). However, given the potential public policy Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 53 of 75 Nissan North America, Inc. v. Jim M'Lady Oldsmobile, Inc., Not Reported in F.Supp.2d... 2008 WL 4148528 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 ramifications of the legal issues presented in this case, Burford abstention seems the best fit. See Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943) (considering abstention in the context of state regulations on oil exploration). “[T]he Burford doctrine is not concerned with the rights of the parties in the case at hand but rather is inspired by concerns of federalism.” Int'l Coll. of Surgeons v. City of Chicago, 153 F.3d 356, 361 (7th Cir.1998). Hence, Burford abstention is appropriate in only two situations: (1) “federal courts should abstain from deciding ‘difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case at bar,’ ” id. at 362 (quoting Quackenbush, 517 U.S. at 726-27); and (2) federal courts “should also abstain from the exercise of federal review that ‘would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern,’ ” id. (quoting Quackenbush, 517 U.S. at 726-27). M'Lady asserts that both situations apply. 6 The court begins with the second situation. 5 Nissan did not make the court aware of this fact; M'Lady did, via exhibits to their motion to dismiss. Because this is a Rule 12(b)(1) motion, the court may consider any evidence that bears on the jurisdictional issue. Roman v. U.S. Postal Serv., 821 F.2d 382, 385 (7th Cir.1987). 6 M'Lady actually uses a four-prong test from a district court case; however, the factors are the same as those outlined by the Seventh Circuit. See Adams v. Att'y Registration & Disciplinary Comm'n, 600 F.Supp. 390, 391 (N.D.Ill.1984). *3 M'Lady argues that the stated purpose of the IMVFA is evidence that the legislature was attempting to address a complex and important public concern. The IMVFA lays out, in thirty-two sections, rules applying to franchise agreements including: the formation and termination of agreements, acceptable locations for franchises, dealer delivery obligations, warranty agreements, permissible franchise restrictions, and resolution of disputes. See 815 Ill. Comp. Stat. 710/3-32. The preamble reads: The Legislature finds and declares that the distribution and sale of vehicles within [Illinois] vitally affects the general economy of the State and the public interest and welfare, and that in order to promote the public interest and welfare, and in the exercise of its police power, it is necessary to regulate motor vehicle manufacturers, distributors, wholesalers and factory or distributor branches or representatives, and to regulate dealers of motor vehicles doing business in this State in order to prevent frauds, impositions and other abuses upon its citizens, to protect and preserve the investments and properties of the citizens of this State, and to provide adequate and sufficient service to consumers generally. Id. 710/1.1; see Gen. Motors Corp. v. State Motor Vehicle Review Bd., 224 Ill.2d 1, 308 Ill.Dec. 611, 862 N.E.2d 209, 219-20 (Ill.2007) (interpreting § 12(c) of the IMVFA in accordance with its stated purpose). Additionally, the Illinois Supreme Court has found that the IMVFA serves the legitimate public interests of promoting fair dealing and protecting small businesses from harmful franchising practices. Gen. Motors Corp., 308 Ill.Dec. 611, 862 N.E.2d at 227. Absent any meaningful argument from Nissan in opposition, the court concludes that the IMVFA is evidence of an effort by the Illinois legislature to establish a coherent policy with respect to a matter of substantial public concern, namely automobile franchising practices. However, the Burford inquiry does not end there. The Seventh Circuit has outlined “two essential elements in order to justify abstention under the second prong of the Burford doctrine,” namely that the state offer a forum in which claims can be litigated and that the forum must be “special-it must stand in a special relationship of technical oversight or concentrated review to the evaluation of those claims.” Property & Cas. Ins. Ltd. v. Cent. Nat'l Ins. Co. of Omaha, 936 F.2d 319, 323 (7th Cir.1991). The IMVFA designates the Board as the initial place to which disputes are taken. Id. 710/16-18. The Board has the power to review notices of protest and to make factual determinations regarding whether certain franchise actions are in the public interest. See, e.g., id. 710/12(d) (outlining the factors to determine whether good cause has been established for terminating a franchise); Gen. Motors Corp., 308 Ill.Dec. 611, 862 N.E.2d at Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 54 of 75 Nissan North America, Inc. v. Jim M'Lady Oldsmobile, Inc., Not Reported in F.Supp.2d... 2008 WL 4148528 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 226 (observing that the Board was established in part to determine whether certain franchise actions were in the public interest). The IMVFA also grants the Illinois Circuit Courts of Cook County and Sangamon County the power of review over final decisions. 815 Ill. Comp. Stat. 710/31. Thus, Illinois does offer a forum in which disputes may be litigated. However, it is unclear whether the Cook and Sangaman County courts are sufficiently specialized to allow for Burford abstention. See Int'l Coll. of Surgeons, 153 F.3d at 365 (concluding that the necessary specialized expertise was not present where the decisions of the Landmarks Commission were reviewable by the Circuit Court of Cook County). Although the facts seems to support abstention, in an abundance of caution, the court also considers the applicability of the first prong of Burford, namely whether the case involves “difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case at bar.” Quackenbush, 517 U.S. at 726-27. *4 Nissan asks the court, in part, to determine that it has no franchise agreement with M'Lady. Embedded within this request is a statutory construction issue: do non-written agreements, including oral and implied agreements, fall within the scope of “franchise” agreements as defined in § 710/2(i) 7 of the IMVFA? The answer to this statutory construction question has broad public interest implications that reach far beyond the case at bar because it determines what types of contractual relationship fall within the ambit of the IMVFA. The court would be rendering this decision without the benefit of input from the Board or Illinois state courts to help determine the number of car dealerships such a ruling might affect, the ramifications on Illinois commerce, or the impact on the public interest. It may have to delve deeply into principles of Illinois contract law and unearth legislative intent to answer the question. Of note, neither party has pointed the court to any opinion (state, federal or Board) that has interpreted § 710/2(i), which makes any argument that this is an area of settled state law questionable. Indeed, the unsettled construction of this specific section of the IMVFA was noted by the Seventh Circuit, in dicta, when it observed: 7 Section 710/2(i) supplies a definition of “franchise”: [A]n oral or written arrangement for a definite or indefinite period in which a manufacturer, distributor, or wholesaler grants to a motor vehicle dealer a license to use a trade name, service mark, or related characteristic, and in which there is a community of interest in the marketing of motor vehicles or services related thereto at wholesale, resale, leasing, or otherwise. 815 Ill. Comp. Stat. 710/2(i). [Nissan] protests that franchise agreements must be in writing .... Illinois law appears to permit oral franchise agreements, however. See 815 ILCS 710/2(i). But even if oral franchise agreements are unenforceable under Illinois law, that fact is irrelevant to the dispute we have before us, which is whether these parties had a written agreement to arbitrate. Without such an agreement, it is for the Board to decide whether M'Lady has enforceable franchise rights. Nissan N. Am., Inc., 486 F.3d at 995 (emphasis added, citation in original). The Seventh Circuit thereby recognized two issues important to the resolution of this matter: (1) the scope of the Illinois statute is not crystal clear; and (2) determination of whether it encompasses the relationship between Nissan and M'Lady is a factual determination entrusted to the Board. The section of the IMVFA at issue, § 710/2(i), has rarely been cited in cases and the courts have never interpreted its scope. See Nissan N. Am., Inc., 486 F.3d at 995 (observing that “Illinois law appears to permit oral franchise agreements” but that the issue was irrelevant to whether the parties had an agreement to arbitrate); Falkner Motor Sales, Inc. v. Toyota Motor Sales, U.S.A. Inc., No. 93 C 1346, 1993 WL 524765, at *3 (N.D.Ill.Dec.14, 1993) (concluding that an individual plaintiff was not a “franchise owner” within the meaning of the statute); Northwestern Buick, Inc., 1990 WL 43316, at *3-4 (citing Knauz v. Toyota Motor Sales, USA, Inc., 720 F.Supp. 1327, 1331 (N.D.Ill.1989) for the principle that the IMVFA does not cover those who have applied for, but have not yet been granted, franchises). Of note, the Illinois state courts have never addressed the statutory construction issue Nissan raises; in fact, research did not uncover any state case that even cited the relevant statutory section. As such, this situation is analogous to that in Kelly Services, Inc. v. Johnson, 542 F.2d 31 (7th Cir.1976), where the Seventh Circuit held that it was error for the district court not to abstain. Id. at 33. *5 In Kelly Services, Inc., the issue was whether “temporary help companies” are subject to the regulatory provisions of the Illinois Private Employment Agencies Act. Id. at 32. No Illinois court had construed the Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 55 of 75 Nissan North America, Inc. v. Jim M'Lady Oldsmobile, Inc., Not Reported in F.Supp.2d... 2008 WL 4148528 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 provision, although the Attorney General of Illinois had issued a formal opinion concluding that temporary help companies were included in the scope of the statute. Id. The court noted that “the questions concerning regulation are rooted in the State's interest in protecting its citizens from unscrupulous agencies or employers.” Id. Because the issues “touch[ed] matters of traditional state concern and ha[d] not been subject to scrutiny by a state court,” the court concluded that the federal courts must “stay their hand lest they provoke needless conflict with the administration by a state of its own affairs.” Id. (citing Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943) and Ala. Pub. Serv. Comm'n v. Southern R.R. Co., 341 U.S. 341, 71 S.Ct. 762, 95 L.Ed. 1002 (1951)). Similarly, in this case, a certain category of businesses is subject to the provisions of a specifically-targeted state statute. No Illinois court has construed the relevant section of the statute, namely what constitutes a franchise agreement, and even the administrative agency responsible for adjudicating disputes has not yet had an opportunity to address the issue. As demonstrated by the stated purposes of the IMVFA and the recent commentary of the Illinois Supreme Court in General Motors Corp., the statute at issue has legitimate government purposes, including protecting the public and small businesses from harmful franchise practices. Given that Nissan asks the court to “attribute[ ] a given meaning to the state statute which [goes] to the heart” of the IMFVA, “[d]elay, misunderstanding of local law, and needless federal conflict with the State policy[ ] are the inevitable product of this double system of review.” Burford, 319 U.S. at 327 (lamenting the legislative confusion engendered by a federal court statutory interpretation that was later contradicted by a state appellate court). Nissan has a forum for its defenses with the Board and, contrary to its assertion, this decision does not render the IMVFA unconstitutional by stripping the court of its diversity jurisdiction. 8 See id. at 334-35 (Douglas, J., concurring) (rejecting any contention that abstention to avoid federal court participation in “the fashioning of the state's domestic policy” implies that the enforcement of state rights has been limited to the state courts). Given these facts, the court concludes that the first prong of the Burford doctrine is satisfied. 8 To the extent that Nissan's argument goes to whether the IMVFA mandates that an appeal be brought in a state, rather than federal court, the issue is not ripe in the context of this case and the court declines to address the issue. Although Nissan has made only cursory arguments in response to M'Lady's substantive Burford abstention arguments, it puts forth two reasons why the court should not abstain. First, it urges the court not to abstain because the district court (Judge Guzman) in the earlier case refused to apply the Burford abstention doctrine, implying that this court should do likewise. However, the cases do not involve the same legal issues. The issue before Judge Guzman was whether M'Lady should be compelled to arbitrate a dispute, an issue that falls within the ambit of a federal statute, the Federal Arbitration Act, 9 U.S.C. § 1 et seq. In contrast, here, Nissan invokes the power of the federal courts on the basis of diversity of citizenship and a prayer for declaratory relief. See 28 U.S.C. § 1332 (requiring diversity of citizenship and a minimum amount in controversy for federal jurisdiction); id. §§ 2201-02 (defining the scope of a federal court's declaratory judgment powers); Reno v. Catholic Soc. Servs., Inc., 509 U.S. 43, 57, 113 S.Ct. 2485, 125 L.Ed.2d 38 (1993) (noting the “implicit limitation” that judicial review for injunctive and declaratory judgment remedies is discretionary). The issues are squarely, and deeply, rooted in state legal principles of contract and, because there is no claim for damages, the court has considerable discretion whether to entertain the suit. Therefore, Nissan's argument is unpersuasive. *6 Nissan next argues that no Illinois court has applied the Burford abstention doctrine to any claim involving the IMVFA, implying that this court should not be the first to do so. Only one case it cites directly addresses the issue of abstention. In Rolls-Royce PLC v. Luxury Motors, Inc., 03 C 5953, 2004 WL 1375540 (N.D.Ill. June 17 2004), the court declined to abstain in a case alleging violation of the IMVFA and trademark law because “claims relating to the IMVFA have been decided by the District Courts without the need for input from the IMVR [Board].” Id. at *2. In support of its conclusion, the court in Rolls-Royce relied on three other cases from this district. See Servpro Indust., Inc. v. Schmidt, No. 94 C 5866, 1997 WL 158316 (N.D.Ill. Mar.31, 1997) (determining breach of contract and trademark claims on summary judgment); Chrysler Credit Corp. v. Anthony Dodge, Inc., No. 92 C 5273, 1996 WL 509886 (N.D.Ill. Sept.4, 1996) (determining claims of reasonableness and breach of contract on summary judgment); Northwestern Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 56 of 75 Nissan North America, Inc. v. Jim M'Lady Oldsmobile, Inc., Not Reported in F.Supp.2d... 2008 WL 4148528 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 Buick, Inc. v. Nissan Motor Corp. in U.S.A., No. 89 C 9062, 1990 WL 43316 (N.D.Ill. Mar.29, 1990) (dismissing case for lack of standing where the plaintiff was not yet a franchisee of the defendant). However, these cases were all filed prior to the expansion of the role of the Board in 1995, 9 a fact that the court in Rolls-Royce did not address. The early cases are factually distinguishable in that Illinois had yet to establish a comprehensive non- judicial review system for franchise actions and there were not, therefore, currently pending parallel actions before the Board to consider. In light of the factual distinctions between the posture of the cases, the court rejects Nissan's argument and concludes that abstention is appropriate. In light of this ruling, the court does not fully reach M'Lady's arguments on ripeness, exhaustion, and primary jurisdiction, or Nissan's arguments on concurrent jurisdiction. 9 The Illinois Supreme Court found that the provision of the IMVFA that granted courts discretion to determine whether certain franchise actions were in the public interest violated the doctrine of separation of powers because the authority to determine public interest is vested in the legislature and may not be delegated. Fields Jeep-Eagle, Inc. v. Chrysler Corp., 163 Ill.2d 462, 206 Ill.Dec. 694, 645 N.E.2d 946, 954 (Ill.1994). Subsequently, procedures were instituted granting the Board fact-finding functions as an administrative board. See 815 Ill. Comp. Stat. § 710/29; Gen. Motors Corp. v. State Motor Vehicle Bd., 224 Ill.2d 1, 308 Ill.Dec. 611, 862 N.E.2d 209, 226 (Ill.2007). Although in some situations a stay is appropriate, that is not the situation here. Nissan has raised before the Board, as defenses to M'Lady's protest regarding Nissan's attempted termination of the franchise agreement, the issues of whether it has a franchise agreement with M'Lady and whether the Board has jurisdiction. In November 2007, upon filing this case, Nissan filed a motion to stay the Board proceedings pending resolution of this case. The matter will now return to the Board for resolution. Once the Board rules, it will have necessarily resolved the issues that Nissan seeks to have this court determine and the declaratory judgment claims will be moot. Therefore, a stay is inappropriate and the case is dismissed. III. CONCLUSION For the reasons above, the court grants the defendant's motion to dismiss. The case is terminated. All Citations Not Reported in F.Supp.2d, 2008 WL 4148528 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 57 of 75 Exhibit 9 Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 58 of 75 Rarick v. Federated Service Insurance Company, --- F.3d ---- (2017) 2017 WL 1149099 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2017 WL 1149099 Only the Westlaw citation is currently available. United States Court of Appeals, Third Circuit. Bryan RARICK, Individually and on behalf of a class of similarly situated persons v. FEDERATED SERVICE INSURANCE COMPANY, Appellant Terry Easterday; Linda Easterday, h/w individually and on behalf of a class of similarly situated persons v. The Federated Mutual Insurance Company, Appellant No. 15-3606, No. 16-1328 | Argued November 2, 2016 | (Filed: March 28, 2017) Synopsis Background: Injured employees brought actions in state court against insurers, seeking declaratory relief and damages for breach of contract, based on the denial of their claims for uninsured motorist (UM) and underinsured motorist (UIM) benefits under their employers' business automobile policies. Following removal, the United States District Court for the Eastern District of Pennsylvania, Joseph F. Leeson, Jr., 2015 WL 5677295, and Lawrence F. Stengel, J., 2016 WL 492481, declined to exercise jurisdiction and remanded. Insurers appealed. [Holding:] As matter of first impression, the Court of Appeals, Hardiman, Circuit Judge, held that independent claim test is the applicable legal standard for review of a complaint that seeks both legal and declaratory relief, abrogating Elec. Claims Processing, Inc. v. M.R. Sethi, M.D., S.C., 2013 WL 243594; ITT Indus., Inc. v. Pac. Emp'rs. Ins., 427 F.Supp.2d 552; Columbia Gas of Pa. v. Am. Int'l Grp., 2011 WL 294520; and Franklin Commons E. P'ship v. Abex Corp., 997 F.Supp. 585. Vacated and remanded. West Headnotes (7) [1] Federal Courts Abstention Court of Appeals typically reviews a district court's decision to decline jurisdiction under the Declaratory Judgment Act for abuse of discretion; however, when a district court declines jurisdiction of non-declaratory matters, it reviews the underlying legal questions de novo but the court's decision to abstain for abuse of discretion. 28 U.S.C.A. § 2201(a). Cases that cite this headnote [2] Federal Courts Abstention In determining whether a district court applied the appropriate legal standard to ascertain its discretion to decline jurisdiction under Declaratory Judgment Act, Court of Appeals reviews that question of law de novo. 28 U.S.C.A. § 2201(a). Cases that cite this headnote [3] Federal Courts Discretion of court Federal Courts Declaratory judgment A federal district court's discretion to decline jurisdiction depends on whether the complaint seeks legal or declaratory relief; when an action seeks legal relief, federal courts have a virtually unflagging obligation to exercise jurisdiction, and there are but a few extraordinary and narrow exceptions to this rule. 28 U.S.C.A. § 2201(a). Cases that cite this headnote [4] Federal Courts Discretion of court Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 59 of 75 Rarick v. Federated Service Insurance Company, --- F.3d ---- (2017) 2017 WL 1149099 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 Federal Courts Declaratory judgment Courts have greater discretion to decline jurisdiction over actions for declaratory judgments than actions for legal relief because they seek an adjudication of rights and obligations prior to the enforcement of a remedy. 28 U.S.C.A. § 2201(a). 1 Cases that cite this headnote [5] Federal Courts Right to Decline Jurisdiction; Abstention Federal Courts Colorado River abstention Federal Courts Declaratory judgment Under independent claim test for determining whether a district court may decline jurisdiction when a complaint contains claims for both legal and declaratory relief, a district court must determine whether the legal claims are independent of the declaratory claims; if the legal claims are independent, the court has a virtually unflagging obligation to hear those claims, subject of course to Colorado River's exceptional circumstances. 28 U.S.C.A. § 2201(a). Cases that cite this headnote [6] Federal Courts Declaratory judgment Under independent claim test for determining whether a district court may decline jurisdiction when both declaratory and legal relief are claimed, if the legal claims are dependent on the declaratory claims, the court retains discretion to decline jurisdiction of the entire action. 28 U.S.C.A. § 2201(a). Cases that cite this headnote [7] Federal Courts Abstention The independent claim test, under which a district court may decline jurisdiction over entire action if legal claims are dependent on declaratory claims, but must adjudicate legal claims if they are independent of declaratory claims, is the applicable legal standard for review of a complaint that seeks both legal and declaratory relief; abrogating Elec. Claims Processing, Inc. v. M.R. Sethi, M.D., S.C., 2013 WL 243594; ITT Indus., Inc. v. Pac. Emp'rs. Ins., 427 F.Supp.2d 552; Columbia Gas of Pa. v. Am. Int'l Grp., 2011 WL 294520; Franklin Commons E. P'ship v. Abex Corp., 997 F.Supp. 585. 28 U.S.C.A. § 2201(a). Cases that cite this headnote On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2-13- cv-03286) District Judge: Honorable Joseph F. Leeson, Jr. On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 5-14- cv-01415) District Judge: Honorable Lawrence F. Stengel Attorneys and Law Firms Charles E. Spevacek [Argued], William M. Hart, Tiffany M. Brown, Julia J. Nierengarten, Meagher & Geer, 33 South Sixth Street, Suite 4400, Minneapolis, MN 55402, Attorneys for Defendants-Appellants James C. Haggerty [Argued], Suzanne T. Tighe, Esq., Haggerty Goldberg Schleifer & Kupersmith, 1835 Market Street, Suite 2700, Philadelphia, PA 19103, Attorneys for Plaintiffs-Appellees Before: CHAGARES, HARDIMAN, and SCIRICA, Circuit Judges. OPINION OF THE COURT HARDIMAN, Circuit Judge. *1 In Brillhart v. Excess Insurance Company of America, 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942), the Supreme Court held that federal courts have broad discretion to decline to hear actions arising under the Declaratory Judgment Act. Decades later Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 60 of 75 Rarick v. Federated Service Insurance Company, --- F.3d ---- (2017) 2017 WL 1149099 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 the Court reminded federal courts that they have a “virtually unflagging obligation” to exercise jurisdiction over actions seeking legal relief. Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). But this “unflagging obligation” does not undermine the discretion inherent in the Declaratory Judgment Act as interpreted in Brillhart. See Wilton v. Seven Falls Co., 515 U.S. 277, 286–88, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). What about complaints that seek both declaratory and legal relief? Our sister courts of appeals and district courts within the Third Circuit have disagreed over the legal standard applicable in such cases. The United States District Court for the Eastern District of Pennsylvania in the two appeals we consider here adopted a “heart of the matter” test and, after finding that the essence of each action was declaratory, declined to exercise jurisdiction. In our view, the heart of the matter test is problematic because it enables plaintiffs to avoid federal subject matter jurisdiction through artful pleading. Accordingly, we will vacate the orders of the District Court and remand the cases for further proceedings. I A A resident of Pennsylvania, Brian Rarick worked for a company that insured its vehicles under a business automobile policy provided by Federated Service Insurance Company, a Minnesota corporation. Under that policy, Rarick's employer waived uninsured motorist coverage for most of its employees, including Rarick. In his complaint, Rarick alleged that he suffered injuries after he crashed a company car insured by Federated Service when an unidentified vehicle forced him off the road. Rarick reported the accident and submitted a claim to Federated Service for uninsured motorist benefits, in accordance with the Pennsylvania Motor Vehicle Financial Responsibility Law, 75 Pa. Cons. Stat. §§ 1701, et seq. Federated Service denied the claim, citing its waiver of uninsured motorist coverage for employees like Rarick. After his claim was denied, Rarick filed a class action lawsuit in the Court of Common Pleas of Philadelphia County, Pennsylvania. Rarick sought, inter alia, a judgment declaring that Pennsylvania's Motor Vehicle Financial Responsibility Law required Federated Service to provide Rarick with uninsured motorist coverage. Rarick also requested damages for breach of contract alleging—in nearly identical language to his prayer for declaratory relief—that Federated Service breached its contract by failing to provide him with uninsured motorist coverage. Federated Service removed Rarick's civil action to the District Court under 28 U.S.C. §§ 1441 (removal) and 1332 (diversity jurisdiction). After the removal, no related case remained pending in state court. Later, the District Court issued an order to show cause why it should not remand the case to the Court of Common Pleas consistent with its discretion under the Declaratory Judgment Act. *2 The District Court adopted a “heart of the matter” test to determine whether it had discretion to decline jurisdiction. The Court determined that the crux of the litigation was declaratory because Rarick sought a declaration that he is entitled to uninsured motorist benefits. The Court then considered whether it should decline jurisdiction over the entire case under our decision in Reifer v. Westport Insurance Corp., 751 F.3d 129 (3d Cir. 2014). Under Reifer, the absence of a pending state case created a rebuttable presumption in favor of jurisdiction. In light of “the nature and novelty of the state law issues,” the Court found the presumption was rebutted, so it declined jurisdiction and remanded the case to the Court of Common Pleas. Rarick v. Federated Serv. Ins. Co., 2015 WL 5677295, at *5 (E.D. Pa. Sept. 28, 2015). Federated Service appealed. B Terry Easterday, a resident of Pennsylvania, worked for an affiliate of Federated Service called Federated Mutual Insurance Company, which is a Minnesota company. Federated Mutual had a business automobile policy that waived underinsured motorist coverage. In his complaint, Easterday alleged that he sustained injuries in two rear-end collisions while driving a car owned and insured by Federated Mutual. Easterday submitted insurance claims seeking tort damages and he later sought recovery of underinsured motorist benefits Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 61 of 75 Rarick v. Federated Service Insurance Company, --- F.3d ---- (2017) 2017 WL 1149099 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 from Federated Mutual. The company denied Easterday's claim citing the waiver of underinsured motorist benefits. Easterday, along with his wife Linda, sued in the Court of Common Pleas of Philadelphia County, Pennsylvania. The Easterdays sought, inter alia, a declaration that Pennsylvania law required Federated Mutual to provide underinsured motorist coverage. The Easterdays also requested damages for breach of contract, alleging—in nearly identical language to their prayer for declaratory relief—that Federated Mutual breached its contract by failing to provide Easterday with underinsured motorist coverage. Federated Mutual removed the case to the District Court under 28 U.S.C. §§ 1441 (removal) and 1332 (diversity jurisdiction). After the removal, no related case remained pending in state court. At a Rule 16 conference in the District Court, Easterday raised the issue of subject matter jurisdiction. In light of the factual similarities between the two cases, the District Court followed Rarick, 2015 WL 5677295. The Court found that the heart of the matter was declaratory because “[t]he crux of th[e] litigation is whether the insurance policy in question provides coverage to the plaintiffs.” Easterday v. Federated Mut. Ins. Co., 2016 WL 492481, *4 (E.D. Pa. Feb. 9, 2016). The Court then turned to Reifer to determine whether it should decline jurisdiction. As in Rarick, the Court found that although there was no pending parallel state court proceeding, it should nonetheless decline jurisdiction because of the novel nature of the state law claim and the absence of a federal interest. Id. Federated Mutual appealed. II [1] [2] The District Court had jurisdiction in both cases under 28 U.S.C. §§ 1441 and 1332. We have appellate jurisdiction under 28 U.S.C. § 1291. See Reifer, 751 F.3d at 133 (holding that “a remand order entered pursuant to the [Declaratory Judgment Act] is an appealable final decision”). We typically review a district court's decision to decline jurisdiction under the Declaratory Judgment Act for abuse of discretion. Id. at 138–39. However, when a district court declines jurisdiction of non-declaratory matters, we “review[ ] the underlying legal questions de novo but the court's decision to abstain for abuse of discretion.” Nat'l City Mortg. Co. v. Stephen, 647 F.3d 78, 82 (3d Cir. 2011) (citations omitted). Here, we must first decide whether the District Court applied the appropriate legal standard to ascertain its discretion to decline jurisdiction. We review that question of law de novo. III A *3 [3] A federal district court's discretion to decline jurisdiction depends on whether the complaint seeks legal or declaratory relief. When an action seeks legal relief, federal courts have a “virtually unflagging obligation” to exercise jurisdiction. Colo. River, 424 U.S. at 817, 96 S.Ct. 1236. There are but a few “extraordinary and narrow exception[s]” to this rule. Id. at 813, 96 S.Ct. 1236. [4] When an action seeks declaratory relief, however, federal courts may decline jurisdiction under the Declaratory Judgment Act. 28 U.S.C. § 2201(a) (“In 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....” (emphasis added)). Courts have greater discretion to decline jurisdiction over actions for declaratory judgments because they seek an adjudication of rights and obligations prior to the enforcement of a remedy. See Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671–72, 70 S.Ct. 876, 94 L.Ed. 1194 (1950); see also Step-Saver Data Sys., Inc. v. Wyse Tech., 912 F.2d 643, 649 (3d Cir. 1990) (“The idea behind the [Declaratory Judgment Act] was to clarify legal relationships so that plaintiffs (and possibly defendants) could make responsible decisions about the future.”); 10B Charles A. Wright & Arthur R. Miller, Fed. Prac. & Proc. Civ. § 2751 (4th ed.) (“[The Act] gives a means by which rights and obligations may be adjudicated in cases involving an actual controversy that has not reached the stage at which either party may seek a coercive remedy and in cases in which a party who could sue for coercive relief has not yet done so.”). The Supreme Court first confirmed federal courts' discretion to decline jurisdiction over declaratory judgment actions in Brillhart, 316 U.S. at 495–96, 62 S.Ct. 1173, and reaffirmed this discretion in Wilton, 515 U.S. at 288, 115 S.Ct. 2137. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 62 of 75 Rarick v. Federated Service Insurance Company, --- F.3d ---- (2017) 2017 WL 1149099 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 B Before today “[w]e have never ruled on the legal standard a district court must apply when addressing whether it may decline jurisdiction when both declaratory and legal relief are claimed.” Reifer, 751 F.3d at 135 n.5. Federal courts opining on the matter have developed three main approaches. The United States Courts of Appeals for the Second, Fourth, and Fifth Circuits have adopted a bright line rule that prioritizes a federal court's duty to hear claims for legal relief over its discretion to decline jurisdiction to hear declaratory judgment actions. Under that rule, “[t]he Colorado River standard applies to all mixed claims —even when the ‘claims for coercive relief are merely “ancillary” to [a party's] request for declaratory relief.’ ” VonRosenberg v. Lawrence, 781 F.3d 731, 735 (4th Cir. 2015), as amended (Apr. 17, 2015) (alterations in original) (quoting Black Sea Inv., Ltd. v. United Heritage Corp., 204 F.3d 647, 652 (5th Cir. 2000)); see also New Eng. Ins. Co. v. Barnett, 561 F.3d 392, 397 (5th Cir. 2009) (per curiam) (“[W]hen an action contains any claim for coercive relief, the Colorado River abstention doctrine is ordinarily applicable.” (citation omitted)); Vill. of Westfield v. Welch's, 170 F.3d 116, 124 n.5 (2d Cir. 1999). These courts generally have found that Colorado River's “unflagging obligation” to entertain legal claims supersedes any discretion to decline jurisdiction over a declaratory claim in the same suit. See VonRosenberg, 781 F.3d at 735 (depriving access to a federal forum simply because there is a request for declaratory relief “seems especially unwarranted given that nearly all claims, including those for damages or injunctive relief, effectively ask a court to declare the rights of the parties to the suit”). *4 The United States Courts of Appeals for the Seventh Circuit and Ninth Circuit have taken a slightly different approach, applying an independent claim test, which balances the court's duty to hear legal claims with its discretion to decline jurisdiction over claims for declaratory relief. Under this test, the district court first determines whether claims seeking legal relief are independent of claims for declaratory relief. R.R. St. & Co., Inc. v. Vulcan Materials Co., 569 F.3d 711, 716–17 (7th Cir. 2009). “Non-declaratory claims are ‘independent’ of a declaratory claim when they are alone sufficient to invoke the court's subject matter jurisdiction and can be adjudicated without the requested declaratory relief.” Id. at 715 (citing United Nat'l Ins. Co. v. R&D Latex Corp., 242 F.3d 1102, 1113 (9th Cir. 2001)). If the legal claims are dependent on the declaratory claims, the court may decline jurisdiction over the entire action. Id. at 716–17. But if they are independent, the court must adjudicate the legal claims unless there are exceptional circumstances as described in Colorado River. Id. When the legal claims are independent, courts generally will not decline the declaratory judgment action in order to avoid piecemeal litigation. R.R. St. & Co., 569 F.3d at 715–16. “Where the [legal] claims are not independent, the district court has discretion under Wilton/Brillhart to abstain from hearing the entire action.” Id. at 716. Finally, district courts in the Third Circuit, following the approach taken by the United States Court of Appeals for the Eighth Circuit in Royal Indem. Co. v. Apex Oil Co., 511 F.3d 788 (8th Cir. 2008), primarily have applied the “heart of the matter” or “essence of the lawsuit” test. Under that test, the court “examines the relationship between the claims, and determines what the ‘essence of the dispute’ concerns.” Elec. Claims Processing, Inc. v. M.R. Sethi, M.D., S.C., 2013 WL 243594, at *3 (W.D. Pa. Jan. 22, 2013) (quoting ITT Indus., Inc. v. Pac. Emp'rs. Ins., 427 F.Supp.2d 552, 566–67 (E.D. Pa. 2006)). This approach seeks to “balance between the various interests at stake” by examining the crux of the litigation. Id. (quoting Columbia Gas of Pa. v. Am. Int'l Grp., 2011 WL 294520, at *2 (W.D. Pa. Jan. 27, 2011)). Courts applying this test have found that the “administrative, jurisprudential, and other concerns” of mixed action litigation make it “fundamentally reasonable to pull a dependent coercive claim within the ambit of the discretion afforded its declaratory counterpart.” Columbia Gas, 2011 WL 294520, at *2. On this view, to allow an ancillary or dependent legal claim to eliminate the court's discretion under the Declaratory Judgment Act, “would be the tail wagging the dog.” Id. (quoting Franklin Commons E. P'ship v. Abex Corp., 997 F.Supp. 585, 592 (D.N.J. 1998)). C The District Court in both cases under review here adopted the “heart of the matter” test. In Rarick, the Court was persuaded that the “Supreme Court's specific Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 63 of 75 Rarick v. Federated Service Insurance Company, --- F.3d ---- (2017) 2017 WL 1149099 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 recognition that declaratory judgment actions necessitate a different treatment than other types of cases” required the court to analyze the facts of a mixed claim before deciding whether it should decline jurisdiction. 2015 WL 5677295, at *4 (quoting ITT Indus., Inc., 427 F.Supp.2d at 557). Using similar reasoning, the District Court in Easterday adopted the heart of the matter test because it found “that the outcome of the plaintiffs' claims for breach of contract and bad faith are dependent on how the insurance policies are interpreted for the declaratory judgment claim.” 2016 WL 492481, at *3 n.2. [5] [6] After careful consideration of the various tests applied in the decisions mentioned, we hold that the independent claim test is the most appropriate one. When a complaint contains claims for both legal and declaratory relief, a district court must determine whether the legal claims are independent of the declaratory claims. If the legal claims are independent, the court has a “virtually unflagging obligation” to hear those claims, subject of course to Colorado River's exceptional circumstances. Colo. River, 424 U.S. at 817–19, 96 S.Ct. 1236. If the legal claims are dependent on the declaratory claims, however, the court retains discretion to decline jurisdiction of the entire action, consistent with our decision in Reifer, 751 F.3d at 144–46. *5 The independent claim test is superior to the others principally because it prevents plaintiffs from evading federal jurisdiction through artful pleading. Although Rarick and Easterday included declaratory claims in their complaints, they requested a legal remedy—damages —for breach of contract. Because both cases satisfied the requirements for diversity jurisdiction, Rarick and Easterday could have obtained their desired relief in federal courts without requesting a declaratory judgment. By including a declaratory claim in their pleadings, however, Rarick and Easterday invited the District Court to avoid Colorado River's “virtually unflagging obligation” in favor of the more expansive discretion afforded under Reifer. This outcome is inconsistent with the purpose of the Declaratory Judgment Act, which is to “clarify legal relationships” in order to help putative litigants “make responsible decisions about the future.” Step-Saver Data Sys., 912 F.2d at 649. The Declaratory Judgment Act was intended to “enlarge[ ] the range of remedies available in the federal courts” by authorizing them to adjudicate rights and obligations even though no immediate remedy is requested. Skelly Oil Co., 339 U.S. at 671, 70 S.Ct. 876 (emphasis added). The heart of the matter test enables plaintiffs to subvert this goal by using the Declaratory Judgment Act to avoid federal subject matter jurisdiction over claims that are ripe for adjudication and in which the plaintiffs seek immediate relief. Another virtue of the independent claim test is that it gives district courts the flexibility that the bright line test precludes. We agree with the Seventh Circuit when it opined: “we do not think the mere fact that a litigant seeks some non-frivolous, non-declaratory relief in addition to declaratory relief means that a district court's Wilton/ Brillhart discretion to decline to hear the declaratory claim should be supplanted by the narrow Colorado River doctrine.” R.R. Street & Co, Inc., 569 F.3d at 716. We also agree that while the bright line test is more easily applied by courts, “it unduly curtails a district court's ‘unique and substantial discretion’ to abstain from hearing claims for declaratory relief.” Id. (quoting Wilton, 515 U.S. at 286, 115 S.Ct. 2137). IV [7] We hold that the independent claim test is the applicable legal standard for review of a complaint that seeks both legal and declaratory relief. In these cases, both Plaintiffs' legal claims were independent of their declaratory claims. Accordingly, we will vacate the judgments of the District Court and remand the cases for a determination whether exceptional circumstances exist under Colorado River. All Citations --- F.3d ----, 2017 WL 1149099 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 64 of 75 Exhibit 10 Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 65 of 75 Schodle v. State Farm Mutual Automobile Insurance Company, Slip Copy (2017) 2017 WL 1177133 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2017 WL 1177133 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. Matthew SCHODLE v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY CIVIL ACTION NO. 17-407 | Filed 03/30/2017 MEMORANDUM Bartle, District Judge *1 Plaintiff Matthew Schodle has moved to remand this action to the Court of Common Pleas of Philadelphia County, Pennsylvania. Schodle originally brought this action in the state court against his insurer, defendant State Farm Mutual Automobile Insurance Company. State Farm subsequently removed the case to this court pursuant to the court's diversity jurisdiction. Schodle is a citizen of Florida, while State Farm is incorporated in and has its principal place of business in Illinois. The amount in controversy exceeds $75,000, exclusive of interest and costs. See 28 U.S.C. § 1332. Schodle's complaint asserts two claims for relief, one for declaratory judgment and the second for breach of contract. His claims arise out of a March 23, 2014 motor vehicle accident during which Schodle was injured while he was a passenger in a vehicle operated by Jason Keyser. Schodle settled with Keyser for Keyser's policy limits. Schodle now seeks additional compensation pursuant to the underinsured provisions of his parents' State Farm personal automobile insurance policies under which he is an insured. There were two State Farm personal automobile insurance policies in effect at the time of the accident. The first policy was issued to the plaintiff's father, Robert H. Schodle, and the second policy was issued to the plaintiff's father and mother, Robert H. Schodle and Rita Marie Schodle. 1 According to the complaint, the plaintiff's father had also executed a form entitled “Pennsylvania Underinsured Motorist Coverage (Acknowledgment of Coverage Selection).” This form purports to limit the amount of coverage available to an insured with regard to one of the two insurance policies. However, the section of the form identifying which of the two policies it references appears to be illegible. 1 At the time of accident, Matthew Schodle lived with his parents. According to the complaint, State Farm takes the position that the form signed by the plaintiff's father limits recovery to $130,000. Although Schodle concedes that the form must apply to one of the insurance policies, he asserts that because it is illegible it must be construed in his favor as the insured. Thus, he avers that the form should be applied so as to allow him to recover up to $215,000. 2 In Count One of his complaint, Schodle seeks a declaratory judgment that he is entitled to recover $215,000 in underinsured motorist benefits under the insurance policies. In Count Two, Schodle asserts a claim for breach of contract in which he seeks an award of compensatory damages under the insurance policies. 2 At various points in the complaint, the plaintiff states that he is entitled to recover $210,000 rather than $215,000. Schodle argues that we should remand this case to the Court of Common Pleas of Philadelphia County. He contends that we should decline to exercise jurisdiction over this cause of action because his complaint includes a claim seeking a declaratory judgment that he is entitled to recover up to $215,000 in addition to a claim for breach of contract seeking $215,000 in damages. In response, State Farm argues that Count One of the complaint is not a proper claim for declaratory judgment and that remand is not appropriate because the district court is required to exercise jurisdiction over the breach of contract claim. *2 As a “general rule [ ] ‘federal courts have a strict duty to exercise the jurisdiction that is conferred upon them by Congress.’ ” See Reifer v. Westport Ins. Corp., 751 F.3d 129, 134–35 (3d Cir. 2014) (quoting Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996)). However, the Declaratory Judgment Act provides that a federal court “may declare the rights and other legal relations of Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 66 of 75 Schodle v. State Farm Mutual Automobile Insurance Company, Slip Copy (2017) 2017 WL 1177133 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 any interested party seeking such declaration, whether or not further relief is or could be sought.” See 28 U.S.C. § 2201. Thus, the Declaratory Judgment Act makes an exception to the general rule and grants federal courts discretion to decline to exercise jurisdiction over a claim for declaratory relief under certain circumstances. See Rarick v. Federated Serv. Ins. Co., ––– F.3d ––––, 2017 WL 1149099, at *1 (3d Cir. Mar. 28, 2016) (citing Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976); Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942)). Within the last few days, our Court of Appeals has “h[e]ld that the independent claim test is the applicable legal standard for review of a complaint that seeks both legal and declaratory relief.” See id. at *5. This test provides: When a complaint contains claims for both legal and declaratory relief, a district court must determine whether the legal claims are independent of the declaratory claims. If the legal claims are independent, the court has a “virtually unflagging obligation” to hear those claims, subject of course to Colorado River's exceptional circumstances. Colo. River, 424 U.S. at 817–19. If the legal claims are dependent on the declaratory claims, however, the court retains discretion to decline jurisdiction of the entire action, consistent with our decision in Reifer, 751 F.3d at 144– 46. Id. at *4. “Non-declaratory claims are ‘independent’ of a declaratory claim when they are alone sufficient to invoke the court's subject matter jurisdiction and can be adjudicated without the requested declaratory relief.” Id. (quoting R.R. St. & Co., Inc. v. Vulcan Materials Co., 569 F.3d 711, 715 (7th Cir. 2009)). If the claims are independent, the district court must retain jurisdiction over the non-declaratory claim unless the exceptional circumstances set forth in Colorado River apply. See id. Generally, the court should retain jurisdiction over the entire matter to avoid piecemeal litigation. See id. The exceptional circumstances warranting abstention in Colorado River “rest on considerations of ‘(w)ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.’ ” See Colo. River, 424 U.S. at 817 (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 183 (1952)). Those circumstances “permit[ ] the dismissal of a federal suit due to the presence of a concurrent state proceeding for reasons of wise judicial administration” after weighing “such factors as the inconvenience of the federal forum, ... the desirability of avoiding piecemeal litigation, ... and the order in which jurisdiction was obtained by the concurrent forums.” See id. at 817–18 (citations omitted). Turning to the case before us, the motion to remand must be denied. The non-declaratory breach of contract claim is independent of the declaratory judgment claim inasmuch as it is alone sufficient to invoke subject matter jurisdiction and can be adjudicated even if the claim for declaratory judgment was to be dismissed. The breach of contract claim is the essence of this lawsuit. The insured surely wants monetary relief, not simply a declaration of his rights. The case before us is somewhat unusual in that it is the insured, rather than the insurer, who seeks declaratory relief. It is puzzling that he has brought this extraneous claim which really adds nothing to his case. We need not decide if it is an effort at artful pleading designed to defeat federal jurisdiction. *3 We further find that the exceptional circumstances set forth in Colorado River do not exist here. See Colo. River, 424 U.S. at 817-19. There is no concurrent state court proceeding, the federal forum does not unduly inconvenience the parties, and this litigation will not proceed in a piecemeal fashion. Accordingly, the motion of plaintiff Matthew Schodle to remand this action to the Court of Common Pleas of Philadelphia County will be denied. All Citations Slip Copy, 2017 WL 1177133 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 67 of 75 Exhibit 11 Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 68 of 75 Volvo Group North America, LLC v. Truck Enterprises, Inc., Slip Copy (2016) 2016 WL 1479687 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2016 WL 1479687 Only the Westlaw citation is currently available. United States District Court, W.D. Virginia, Roanoke Division. Volvo Group North America, LLC d/b/a Volvo Trucks North America, et al., Plaintiff, v. Truck Enterprises, Inc., et al., Defendants. Civil Action No. 7:16-cv-00025 | Signed April 4, 2016 Attorneys and Law Firms Billy Martin Donley, David Ray Jarrett, Baker & Hostetler LLP, Houston, TX, Elizabeth Anne Scully, Baker & Hostetler, Washington, DC, for Plaintiff. Brad Darin Weiss, Michael G. Charapp, Charapp & Weiss, LLP, McLean, VA, Mark Bowman Callahan, Clark & Bradshaw, P.C., Harrisonburg, VA, for Defendants. MEMORANDUM OPINION Elizabeth K. Dillon, United States District Judge *1 By order dated April 13, 2016, the court granted in part and denied in part plaintiff Volvo Group North America, LLC's motion for a preliminary injunction. It now provides the reasons for that decision. I. BACKGROUND This case arises from the proposed sale of a group of mid- Atlantic commercial-truck dealerships. Defendants Truck Enterprises, Inc., James E. Hartman, Truck Enterprises Roanoke, Inc., Truck Enterprises Lynchburg, Inc., and Truck Enterprises Hagerstown, Inc. (collectively, Dealers) own and operate seven commercial-truck dealerships across three states—Maryland, Virginia, and West Virginia. Four of the dealerships sell both Volvo and Kenworth trucks, and two of them sell both Kenworth and Isuzu trucks. The remaining dealership offers only Kenworth trucks. The dealerships that sell two brands are known as “dualed dealerships” in the commercial-truck business. Dealers now wish to sell all of the dealerships to Transportation Equipment Company, Inc. (TEC) in a package deal. To that end, Dealers and TEC entered into a stock purchase agreement on December 18, 2015. 1 The agreement does not provide a valuation of any one dealership or of any one dealership's assets. Rather, it provides only the total purchase price for all of the outstanding shares of the dealerships. The sale is currently scheduled to close on June 1, 2016. 1 Technically, only two of the defendants (Truck Enterprises and Hartman) are parties to the stock purchase agreement with TEC. So the court's use of the term “Dealers” in this memorandum opinion may not be 100% accurate at times, but it simplifies things. The parties likewise sacrifice accuracy for simplicity in many of their filings. (See, e.g., Compl. ¶ 13, Dkt. No. 1 (“Defendants entered into a Stock Purchase Agreement, dated December 18, 2015, with non-party Transport Equipment Company, Inc. ...”).) Volvo does not want the deal to go forward. Instead, if the price is right, Volvo desires to exercise its contractual and statutory rights of first refusal and purchase just the Volvo portions of the dualed dealerships. Dealers do not dispute that Volvo has rights of first refusal under the parties' dealer agreements and Virginia law. Instead, Dealers insist that if Volvo decides to exercise those rights, then under Virginia law, it must stand in the shoes of TEC and buy all of the dealerships—not just the Volvo portions of the dualed dealerships—for at least the total purchase price set forth in the stock purchase agreement. Volvo disagrees with Dealers' assessment of Virginia law and therefore filed this suit against Dealers on January 26, 2016. In its verified complaint, Volvo claims that Dealers breached their dealer agreements and violated Virginia law by entering into the stock purchase agreement with TEC. 2 Volvo alleges that the agreement impairs or frustrates its contractual and statutory rights of first refusal because it does not segregate the Volvo portions of the dualed dealerships from the other portions, and because it does not provide a separate valuation of the Volvo portions. Consequently, Volvo asserts, Dealers have placed it “in the untenable position of choosing between: (A) waiving its valuable contractual Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 69 of 75 Volvo Group North America, LLC v. Truck Enterprises, Inc., Slip Copy (2016) 2016 WL 1479687 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 and statutory rights of refusal ... and accepting TEC, the proposed buyer, as its Volvo dealer in place of [Dealers]; or (B) exercising the rights of first refusal on [Dealers'] terms whereby Volvo buys not just the Volvo business but also [Dealers'] Kenworth and Isuzu businesses[,] which Volvo has no contractual or statutory authority to do.” (Compl. ¶ 75, Dkt. No. 1.) 2 Volvo also alleges that Dealers violated Maryland and West Virginia law, but Volvo and Dealers agree that neither of those states imposes a deadline on a manufacturer's exercise of a right of first refusal. For purposes of Volvo's preliminary injunction motion, then, the court need consider only Virginia law. *2 Volvo seeks a declaration of its and Dealers' rights and obligations under their dealer agreements and Virginia law, including that Volvo “is entitled to know the price that [it] is to pay for [Dealers'] Volvo business and what assets or interests that Volvo is to acquire” (id. ¶ A(4), at 23); that “Volvo has no contractual or statutory right of first refusal over [Dealers'] Kenworth and Isuzu businesses” (id. ¶ A(7), at 23); and that Dealers “cannot require, by contract or statute, that Volvo purchase or otherwise acquire rights to [Dealers'] Kenworth and Isuzu businesses” (id. ¶ A(8), at 23). Volvo also requests “[i]njunctive relief requiring [Dealers] to provide [it] with the terms of the sale that are specific to [their] Volvo business ..., so [it] may receive proper notice ... and have sufficiently clear information to determine whether to exercise its right[s] of first refusal.” (Id. ¶ C, at 24.) Together with its complaint, Volvo filed this motion for a preliminary injunction, pursuant to Federal Rule of Civil Procedure 65. 3 It asks the court to stop Dealers from going through with the proposed sale of the dealerships until the scope of Volvo's rights of first refusal is determined and to require Dealers to provide Volvo with the terms of the sale that are specific to the Volvo portions of the dualed dealerships. The court held two hearings on the motion. The first occurred on February 2. At the conclusion of that hearing, the court took the motion under advisement, and Volvo and Dealers agreed to extend all contractual and statutory deadlines relating to Volvo's rights of first refusal and to mediate their dispute concerning the proposed sale of the dealerships. After the mediation proved unsuccessful, the court held another hearing on March 30. Kenworth, which has intervened as a plaintiff, participated in that hearing along with Volvo and Dealers. 4 Kenworth does not object to Dealers' selling the dealerships to TEC. But Kenworth does object to Dealers' selling the dealerships to Volvo, as Dealers propose in the alternative. 3 Volvo's motion is styled as a motion for a temporary restraining order and preliminary injunctive relief. The court, however, treats the motion only as a motion for a preliminary injunction because Dealers received sufficient notice of the motion and have had a “fair opportunity to oppose it.” U.S. Dep't of Labor v. Wolf Run Mining Co., 452 F.3d 275, 283 (4th Cir. 2006); see also Fed. R. Civ. P. 65(a). Further, at the first hearing on the motion, the court informed Volvo and Dealers that it would be treating the motion as just a motion for a preliminary injunction because they were all present and represented by counsel; no party objected. (Prelim. Inj. Hr'g Tr. 3:13–17, Feb. 2, 2016, Dkt. No. 26.) 4 Unlike Kenworth, Isuzu has made no appearance in the case, so its position on the proposed sale of the dealerships is unknown. In accordance with Volvo and Dealers' stipulation, the periods for Volvo to exercise its contractual and statutory rights of first refusal restarted on March 2. Volvo has 60 days to exercise its contractual right of first refusal, and 45 days to exercise its statutory right of first refusal. Given that these periods were set to expire in the coming days, the court expedited its ruling on Volvo's motion for a preliminary injunction and entered an order on April 13, granting the motion in part and denying it in part. Specifically, the court granted the motion as to Volvo's request to suspend the periods for Volvo to exercise its contractual and statutory rights of first refusal and to stay the proposed sale of the dealerships, but denied the motion as to Volvo's request that Dealers provide the terms of sale that are specific to the Volvo portions of the dualed dealerships. The court now explains its decision. II. DISCUSSION A. Preliminary Injunction Standard “A preliminary injunction is an extraordinary remedy, to be granted only if the moving party clearly establishes entitlement to the relief sought.” Manning v. Hunt, 119 F.3d 254, 263 (4th Cir. 1997) (internal quotation marks and alteration omitted). The moving party must show (1) Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 70 of 75 Volvo Group North America, LLC v. Truck Enterprises, Inc., Slip Copy (2016) 2016 WL 1479687 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 that he is likely to succeed on the merits, (2) that he is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities tips in his favor, and (4) that an injunction is in the public interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). All four of these requirements must be met for the movant to obtain preliminary injunctive relief. Real Truth About Obama, Inc. v. FEC, 575 F.3d 342, 345–46 (4th Cir. 2009), vacated on other grounds, 559 U.S. 1089 (2010). *3 Volvo requests both prohibitory and mandatory preliminary injunctive relief. In particular, it asks that Dealers be stopped from selling the dealerships until the scope of Volvo's and Dealers' rights and obligations are determined and that Dealers be required to provide Volvo with information regarding the value of just the Volvo portions of the dualed dealerships. The court addresses these requests separately. B. Volvo is entitled to prohibitory preliminary injunctive relief. 1. Success on the Merits To be entitled to a preliminary injunction, Volvo must first establish that it is likely to win on the merits of its claims. Winter, 555 U.S. at 20. Based on the alleged facts and the evidence submitted by agreement at the hearings, the court believes that Volvo satisfies this requirement. Volvo's and Dealers' rights and obligations are governed in part by their dealer agreements and in part by state statutes. As noted above, Volvo alleges that, by entering into the stock purchase agreement with TEC, Dealers have impaired or frustrated Volvo's contractual and statutory rights of first refusal. Hence, it is necessary to review both the dealer agreements and the relevant state statutes to determine whether Volvo is likely to succeed on the merits of its claims. Volvo, through its Volvo Dealer Sales and Service Agreements, granted a franchise to Dealers to operate as independent, authorized retail dealers of Volvo products within their respective geographical areas. (Compl. ¶ 23; id., Exs. 1–4.) Article 9 of those agreements governs Volvo's and Dealers' rights and obligations in the event of a “Dealership Transfer,” which would include the proposed sale at issue here. Under that article, Volvo is entitled to a right of first refusal, which it may exercise if and when Dealers accept any “bona fide Dealership Transfer offer.” (Compl., Exs. 1–4, Arts. 9.1–9.3.) Once Dealers provide the bona fide offer with all material terms and conditions to Volvo, it has 60 days to exercise its right of first refusal. (Id., Arts. 9.3.1.) Volvo also claims a statutory right of first refusal under Virginia Code § 46.2-1569.1, which states that, “[n]otwithstanding the terms of any franchise agreement, in the event of a proposed sale or transfer of a dealership,” a manufacturer has a right of first refusal which it must exercise within 45 days after receiving the sale proposal. In relevant part, § 46.2-1569.1 reads: Manufacturer or distributor right of first refusal. Notwithstanding the terms of any franchise agreement, in the event of a proposed sale or transfer of a dealership, the manufacturer or distributor shall be permitted to exercise a right of first refusal to acquire the new vehicle dealer's assets or ownership, if such sale or transfer is conditioned upon the manufacturer's or dealer's entering into a dealer agreement with the proposed new owner or transferee, only if all the following requirements are met: 1. To exercise its right of first refusal, the manufacturer or distributor must notify the dealer in writing within 45 days of its receipt of the completed proposal for the proposed sale or transfer; 2. The exercise of the right of first refusal will result in the dealer's and dealer's owner's receiving the same or greater consideration as they have contracted to receive in connection with the proposed change of ownership or transfer; .... 4. The manufacturer or distributor agrees to pay the reasonable expenses, including attorney's fees which do not exceed the usual, customary, and reasonable fees charged for similar work done for other clients, incurred by the proposed new owner and transferee prior to the manufacturer's or distributor's exercise of its right of first refusal in negotiating and implementing the contract for the proposed sale or transfer of the dealership or dealership assets. ... *4 Va. Code § 46.2-1569.1 (emphasis added). Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 71 of 75 Volvo Group North America, LLC v. Truck Enterprises, Inc., Slip Copy (2016) 2016 WL 1479687 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 Where, as here, a dealer operates a dealership that sells more than one manufacturer's products (i.e., a dualed dealership), § 46.2-1569.1 is silent as to how the right of first refusal should work. And unfortunately, the lone case discussing § 46.2-1569.1 does not address the issue, either. See Priority Auto Grp., Inc. v. Ford Motor Co., 757 F.3d 137, 143, 144 (4th Cir. 2014) (holding that a prospective buyer of a dealership was without standing and that franchisor did not tortiously interfere with proposed sale by exercising its right of first refusal). Volvo and Dealers agree that all three manufacturers involved here—Volvo, Kenworth, and Isuzu—have a statutory right of first refusal under § 46.2-1569.1. Dealers suggest that the manufacturer that first notifies them of its decision to exercise its right of first refusal may then purchase the whole package for the total purchase price set forth in the stock purchase agreement. Volvo disagrees. It contends that where, as here, a dualed dealership is involved, each manufacturer has a right of first refusal over only the specific portion of the dealership selling the manufacturer's particular products. In sum, the primary dispute between Volvo and Dealers is whether Volvo must take the place of TEC and buy all of the dealerships for the same or greater consideration in the stock purchase agreement, or whether Volvo may instead exercise its right over only the Volvo portions of the dualed dealerships at some fraction of the total purchase price. Volvo and Dealers have not cited any Virginia or Fourth Circuit cases addressing this issue in the context of car dealerships. But Volvo cites a decision from the Supreme Court of Virginia addressing the effect of a package deal on a right of first refusal in the real estate context. In Landa v. Century 21 Simmons & Co., Inc., the Landas had a right of first refusal to purchase a 17-acre tract of land. 377 S.E.2d 416, 421 (Va. 1989). The landowner contracted with another party to sell the 17-acre tract, along with another 1.9-acre parcel. Id. The court was not persuaded by the landowner's argument that the packaged nature of the proposed sale defeated the right of first refusal. Id. Rather, the court concluded that specific performance in favor of the Landas was appropriate. 5 Id. at 422. 5 It is also worth noting that the Landa was the law in 1994, when § 46.2-1569.1 was enacted. “ ‘When the legislature ... pass[es] a new law or ... amend[s] an old one, it is presumed to act with full knowledge of the law as it stands bearing upon the subject with which it proposes to deal.’ ” Powers v. Cnty. Sch. Bd., 139 S.E. 262, 264 (Va. 1927) (quoting School Bd. v. Patterson, 69 S.E. 337, 339 (Va. 1910)). The Virginia legislature here passed a statute dealing with rights of first refusal and is thus presumed to act with knowledge of the Landa case. Had it wanted to provide for a contrary rule, it could have done so. In its decision, the Landa court cited with approval Pantry Pride Enterprises v. Stop & Shop Companies, 630 F. Supp. 637 (E.D. Va.), aff'd in part, vacated and remanded in part, 806 F.2d 1227 (4th Cir. 1986). 6 377 S.E.2d at 421. The district court in Pantry Pride held that a package deal to assign a lease and sell equipment could not defeat the right of first refusal that Stop & Shop had with regard to the lease. 630 F. Supp. at 639–40. Pantry Pride argued that Stop & Shop could exercise its right of first refusal only with regard to the lease if it purchased the whole package—the lease and the equipment. Id. at 639. In rejecting that contention, the district court explained: “It is universally recognized that the holder of a right of first refusal cannot be compelled to purchase more property than is subject to the right of first refusal, or else forfeit its first refusal rights.” Id. (citations omitted). The Fourth Circuit affirmed on this issue, reasoning that, to hold otherwise “could effectively nullify the right of first refusal by combining the lease with items that Stop & Shop may not want or cannot afford.” Pantry Pride, 806 F.2d at 1229. Moreover, Pantry Pride “could have ‘foreseen the commercial need to combine’ the lease and equipment in a single sale and could have insisted that the equipment be included ‘in the right of first refusal.’ ” Id. (quoting Radio WEBS, Inc. v. Tele-Media Corp., 292 S.E.2d 712, 715 (Ga. 1982)). 6 The case was vacated and remanded with regard to a valuation issue that is not relevant here. *5 Although the factual context of these cases was different, the court sees no reason that their reasoning should not apply here. Indeed, the reasoning of the Fourth Circuit in Pantry Pride resonates here, although in converse. There, the court chastised the parties for not considering that the assets might need to be included in the right of first refusal; here, the parties appear to have specifically contemplated that only Volvo assets would be involved in any right of first refusal. Specifically, the Dealership Agreements provide that an bona fide offer giving rise to the right of first refusal may not contain “proposed sale terms that are co-mingled with other assets” of the dealer. (Compl., Exs. 1–4, Arts. 9.3.1.) Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 72 of 75 Volvo Group North America, LLC v. Truck Enterprises, Inc., Slip Copy (2016) 2016 WL 1479687 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 Further, the same result was obtained in the context of dualed car dealerships in Mercedes-Benz USA, LLC v. Star Auto. Co., No. 3:11-cv-73, 2011 U.S. Dist. LEXIS 59258, at *4, 2011 WL 2175037 (M.D. Ga. June 3, 2011). There, a dealer sought to sell dealerships of three different brands—Mercedes-Benz, Nissan, and Volkswagen—together as a package deal. Mercedes-Benz thought such a sale violated its statutory and contractual rights of first refusal and so it sued to stop the sale from going forward. Id. at *1–3. In that case, the court granted the plaintiff's motion for preliminary injunction, concluding that “the package deal” likely “violated Mercedes-Benz's contractual right of first refusal.” Id. at *7. This case, too, supports the court's conclusion. Accordingly, the court concludes that Volvo has shown a likelihood of success on the merits. 2. Irreparable Harm Next, Volvo must show that it will likely suffer irreparable harm in the absence of a preliminary injunction. Winter, 555 U.S. at 20. The court believes that Volvo also satisfies this requirement. If Dealers are allowed to go through with the proposed sale of the dealerships to TEC at this time, then Volvo will either lose its rights of first refusal or be forced to purchase not only the Volvo portion, but also the Kenworth and Isuzu portions, which, as explained above, Volvo does not appear to have any contractual or statutory right to do. Either way, it is likely that Volvo would be irreparably harmed because it would be compelled to accept a dealer with which it has had no relationship (TEC) or to purchase portions of the dealerships (Kenworth and Isuzu) over which it has no right. Assuming that monetary damages could remedy these harms, it is difficult to see how the appropriate figure could be calculated, given that one harm would likely go well into the future (i.e., a continuing relationship with TEC) and the other would likely give rise to subsequent legal action (i.e., a suit from Kenworth or Isuzu or both). The district court in Mercedes-Benz USA was of a similar mind. 2011 U.S. Dist. LEXIS 59258, at *6, 2011 WL 2175037. It found that the package deal in that case would cause irreparable harm to Mercedes-Benz, explaining: “If the Court were to allow the sale of [dealer's] Mercedes dealership to close, [Mercedes-Benz] would lose its right of first refusal under the Dealer Agreements. Under such circumstances, monetary damages would be difficult, if not almost impossible, to calculate.” Id. 3. Balance of the Equities Volvo must also demonstrate that the balance of the equities tips in its favor. Winter, 555 U.S. at 20. The court concludes that Volvo meets this requirement, too. If Dealers were permitted to go forward with the proposed sale of the dealerships to TEC at this time, then Volvo would likely face irreparable harm, as described above. If the sale were delayed by an injunction, however, it is unlikely that Dealers would face any such harm because, as the district court in Mercedes-Benz USA reasoned, they would “continue[ ] to benefit from the ownership and operation of the dealership[s].” 2011 U.S. Dist. LEXIS 59258, at *7, 2011 WL 2175037. Further, if Volvo prevails and does exercise its rights of first refusal, then it will be required to pay the same or more for the Volvo portion of the dealerships than TEC has agreed to pay and to reimburse Dealers and TEC for the money that they spent in negotiating the deal. *6 Of course, there is a chance that if the sale were delayed, then TEC would walk away from the deal. While there is no evidence that this would in fact occur, 7 even if it did, the court still thinks that the equities weigh in favor of Volvo because, as discussed above, Dealers likely breached their dealer agreements with Volvo and violated Virginia law by negotiating such a deal in the first place. 7 Dealers did represent that TEC is not interested in pursuing the deal without the Volvo portions of the dualed dealerships, but the effect of a delay was not addressed. 4. Public Interest Lastly, Volvo must establish that a preliminary injunction is in the public interest. Winter, 555 U.S. at 20. The court concludes that Volvo also satisfies this requirement. Enjoining Dealers from going through with the sale until Volvo has had a chance to exercise its rights of first refusal would benefit the public because it has an interest in seeing contractual and statutory rights and obligations enforced. See Mercedes-Benz USA, 2011 U.S. Dist. LEXIS 59258, at *7, 2011 WL 2175037. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 73 of 75 Volvo Group North America, LLC v. Truck Enterprises, Inc., Slip Copy (2016) 2016 WL 1479687 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 * * * Because Volvo meets each of the four requirements for prohibitory preliminary injunctive relief, the court believes that it is entitled to such relief. It has thus suspended the periods for Volvo to exercise its contractual and statutory rights of first refusal and stayed the proposed sale of the dealerships until further order. This relief goes no further than what is necessary “to protect the status quo and to prevent irreparable harm during the pendency of [the case and] to preserve the court's ability to render a meaningful judgment on the merits.” In re Microsoft Corp. Antitrust Litig., 333 F.3d 517, 525 (4th Cir. 2003). C. Volvo is not entitled to mandatory preliminary injunctive relief. Volvo also seeks a mandatory injunction that requires Dealers to provide value information for the Volvo portion of the stock purchase agreement. A mandatory injunction disturbs the status quo ante, which “in any circumstance is disfavored.” League of Women Voters of N.C. v. North Carolina, 769 F.3d 224, 235 (citation omitted). The court denies this portion of the relief sought at this time because Volvo cannot establish a likelihood of irreparable harm absent an injunction, as opposed to the “possibility of some remote future injury.” Winter, 555 U.S. at 22. Because the court has now enjoined the sale pending the outcome of this litigation, and stayed Volvo's statutory and contractual deadlines, there is no risk that the sale will go forward and deprive Volvo of its rights of first refusal. Accordingly, it is not necessary at this time to require Dealers to provide a valuation of only the Volvo portion of the total purchase price set forth in the stock purchase agreement in order to prevent any irreparable harm. Instead, if the court ultimately concludes—after a determination on the merits—that it is appropriate to require Dealers to provide that information, then it can so order at that time. In the meantime, Volvo will not suffer any harm from not receiving that information. D. Volvo must post a security bond. Under Rule 65(c), a court may issue a preliminary injunction “only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.” The party to be enjoined bears the burden of establishing the appropriate bond because he is in the best position to determine the harm he will suffer from a wrongful injunction. Lab. Corp. of Am. Holdings v. Kearns, 84 F. Supp. 3d 447, 466 (M.D.N.C. 2015). The “court retains the discretion to set the bond amount as it sees fit or waive the security requirement.” Pashby v. Delia, 709 F.3d 307, 332 (4th Cir. 2013). *7 Here, the court has ordered Volvo to post a bond of $100,000. It believes that this amount is sufficient to cover whatever losses Dealers may suffer during the pendency of the injunction. See Hoechst Diafoil Co. v. Nan Ya Plastics Corp., 174 F.3d 411, 421 n.3 (4th Cir. 1999) (“The judge usually will fix security in an amount that covers the potential incidental and consequential costs as well as either the losses the unjustly enjoined or restrained party will suffer during the period he is prohibited from engaging in certain activities ....” (citation omitted)). The proposed sale is presently scheduled to close on June 1. The court does not think that the injunction will be in place for many weeks after that date. It has already scheduled a hearing on June 27 for the parties' anticipated summary judgment motions, and it expects to make a ruling on those motions soon afterward. Though Dealers requested a bond of double the total purchase price (which the court deems punitive), they produced no evidence showing that a few months' delay in the proposed sale of the dealerships would result in a loss approaching anything near such an exorbitant amount. Volvo suggested that Dealers might incur additional expense in the amount of $50,000 to $75,000. Dealers only response was that their losses would be more, but they offered no evidence as to how much more. Rather, they merely represented that they will lose the deal if Volvo eventually prevails on the merits. Moreover, the injunction does not place any restrictions on Dealers' operation of the dealerships. Dealers are therefore able to continue to run the dealerships as they do now during the pendency of the injunction. IV. CONCLUSION For the foregoing reasons, the court granted in part and denied in part Volvo's motion for a preliminary injunction, and required Volvo to post a $100,000 bond. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 74 of 75 Volvo Group North America, LLC v. Truck Enterprises, Inc., Slip Copy (2016) 2016 WL 1479687 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 All Citations Slip Copy, 2016 WL 1479687 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:17-cv-00010-JEJ Document 45-1 Filed 04/07/17 Page 75 of 75