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Blitzsafe Texas LLC v. Mitsubishi Electric Corp.

United States District Court, E.D. Texas, Marshall Division

May 22, 2019




         Before the Court is Plaintiff Blitzsafe Texas, LLC's (“Blitzsafe”) Opposed Motion for Venue Discovery (“the Motion”). (Dkt. No. 115). In the Motion, Blitzsafe seeks targeted venue discovery based on factual representations made by counsel for Defendant Bayerische Motoren Werke, AG (“BMWAG”) and BMW of North America, LLC (“BMWNA”) (collectively, “BMW”) at this Court's April 30, 2019 hearing (Dkt. No. 116) on BMW's Motion to Reconsider Denial of Motion to Dismiss for Lack of Personal Jurisdiction or Improper Venue or, in the Alternative, to Transfer (“BMW's Motion to Reconsider”) (Dkt. No. 94). Having considered the Motion, the Court finds it should be and hereby is GRANTED.

         I. Factual Background

         Following the Supreme Court's decision in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S.Ct. 1514 (2017), BMW sought to dismiss or transfer the instant case for improper venue (“BMW's Initial Venue Motion”). (Dkt. No. 60). This Court found that venue remained proper applying TC Heartland and the Federal Circuit's explication thereof in In re Cray, 871 F.3d 1355 (Fed. Cir. 2017), based on the particular business structure between BMW and BMW-brand dealers. The primary dispute was whether the established BMW-brand dealers were places “of the defendant” as required by Cray. 871 F.3d at 1360.

         The Court found that BMW-brand dealers were places “of the defendant” for at least two reasons. First, the Court found that BMW “exercises . . . attributes of possession or control over, ” accord Id. at 1363, the BMW-brand dealers in the form of warranty work that BMW-brand dealers are required to carry out, and which BMW supervises. (Dkt. No. 90 at 21-25). Since the Court found that BMW controlled the provision of warranty services, the Court found that “the defendant [BMW] . . . actually engage[d] in business” at the BMW-brand dealers, accord Cray, 871 F.3d at 1364, and thus found venue was proper. (Dkt. No. 90 at 14, 22-25).

         Second, as an independent basis for venue, the Court found that BMW had taken a number of steps to ratify the BMW-brand dealers. See Cray, 871 F.3d at 1363 (“Thus, the defendant must establish or ratify the place of business.”). BMW-brand dealers are named “BMW, ” bear the trademarked BMW logo, and are seamlessly integrated into BMW's public-facing website. BMW's website allows visitors to “Apply for Financing, ” “Get a Quote, ” “Search New Vehicle Inventory, ” “Schedule a Test Drive, ” “Build Your Own, ” “Contact a BMW Center, ” and even “Order Now” for cars that are located at the BMW-brand dealerships within this District. (Dkt. No. 90 at 15-21). In executing these functions, BMW's website does not include disclaimers that emphasize separation between BMW and the BMW-brand dealers, such as “authorized dealer” or “exclusive distributor” or “John Doe's BMW, ” and instead appears to represent that the BMW-brand dealers are merely location-specific stores of BMW-i.e., BMW of Tyler is BMW's location in Tyler. (Id. at 16). BMW's own public description of the BMW-dealers as “BMW Centers” reinforced the Court's conclusion that BMW adopted and ratified the BMW-brand dealers as its own. (Id. at 20). The Court also took judicial notice that in a previous case before this Court, BMW had expressly conceded without reservation that it “has conducted and does conduct business in [the Eastern District of Texas] by distributing automobiles to dealers.” (Id. at 13 (citing Entry Systems, LLC v. Vivint, Inc., No. 2:14-cv-1089-JRG, Dkt. No. 21 ¶ 4 (E.D. Tex. Nov. 14, 2012)). In view of BMW's concession, its public representation, and the affirmative steps it takes to integrate the operations of BMW and BMW-brand dealers, the Court found that venue was proper.

         After the Court issued its order, BMW moved for reconsideration. (Dkt. No. 94). In BMW's Motion to Reconsider, BMW substantially expanded an argument that the Texas Occupations Code (“TOC”) precludes BMW from exercising control over BMW-brand dealers. In BMW's Initial Venue Motion, BMW consigned the TOC argument to a single sentence on a single page of BMW's 28-page brief. (See Dkt. No. 60 at 19). However, in BMW's Motion to Reconsider, BMW extensively discussed the TOC as a basis for rejecting venue and also submitted an “expert declaration on TOC” from Kenneth Herring, a former administrative law judge in the Texas Department of Motor Vehicles, purporting to definitively construe Texas law. (See, e.g., Dkt. No. 94 at 8, 10-13 (arguing for reconsideration based on the TOC); Dkt. No. 94-7 (Herring Declaration)). When the Court granted oral argument on the Motion to Reconsider, BMW focused a large part of its argument on urging reconsideration based on the TOC. (See Dkt. No. 116).

         Both in BMW's Motion for Reconsideration and at the hearing thereon, BMW made a series of factual representations about the degree of control it exercises over BMW-brand dealers, in light of BMW's apparent interpretation of the TOC. BMW claimed, for example, that it believed the TOC required it to honor any request for reimbursement of warranty work, no matter how unreasonable the BMW-brand dealer's request:

THE COURT: So you're telling me if I go buy a new BMW and I have a mechanical problem within 30 days, it's covered by the warranty, and I take it to the dealership in my area and they repair that mechanical problem, if any other mechanic anywhere on the planet would charge not more than $500.00 for it but that particular dealer wants to charge $50, 000.00 for it, BMW will write them a check for $50, 000.00 and not question it in any way?
MR. LAVENUE: BMW would pay the check. Whether they would question it, I think they would question it and they would ask about it, but it's basically a relationship issue in that BMW North America wants to have good relations with the dealer.

(Id. at 13:2-14) (emphasis added). BMW went so far as to claim that BMW-brand dealers could make purchases from BMW competitors and BMW would have no choice but to grant reimbursement, effectively putting money into the pockets of its own competitors. (Id. at 12) (“MR. LAVENUE: The dealer is able to do whatever they wish. In Texas -- unlike any other state in the -- in the country, Texas has the most harsh occupational code for automotive dealerships than any. It's - it's number 1 out of 50. And basically dealerships have carte blanche to do whatever they want in Texas.”) (emphasis added).

         BMW also claimed that it believes that Texas law renders unenforceable all of its contractual rights against BMW-brand dealers. (Id. at 58:12-14). When the Court sought to confirm this description with BMW's counsel, BMW repeated its assertion:

THE COURT: So it's just a good faith handshake between BMWNA and BMW of Tyler? They just smile at each other while millions of dollars of inventory go back and forth and millions of dollars of sales take place, and because of this one state statute, they can't have any binding contractual obligations where the manufacturer would exercise ...

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