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FCA US, LLC v. Spitzer Autoworld Akron, LLC

United States District Court, E.D. Michigan, Southern Division

February 8, 2017

FCA US, LLC, Plaintiff,
Spitzer Autoworld Akron, LLC, Defendant.

          OPINION & ORDER

          Sean F. Cox United States District Court Judge

         This case is a companion case to this Court's Consolidated Dealer Action (Case No. 10-12984). The Consolidated Dealer Action involved a number of Chrysler dealers and legal issues. Defendant Spitzer was a dealer who was rejected by Chrysler during its bankruptcy, who then prevailed at its Section 747[1] Arbitration and wants to rejoin the dealer network in Ohio. Fred Martin is an existing Chrysler dealer in Ohio who opposes (because of increased competition) Spitzer rejoining the network. In the Consolidated Dealer Action, this Court declared that Section 747 did not preempt the state-law dealer acts of six different states.

         Dealers located in Michigan and Nevada appealed the preemption ruling and won. Spitzer decided not to appeal any of this Court's rulings, deciding to go ahead with the state-law protest proceeding in Ohio. But after the Sixth Circuit reversed this Court's preemption ruling as to Michigan and Nevada's state-law dealer acts, Spitzer regretted its decision not to appeal the preemption ruling as to Ohio's act. Spitzer now refuses to participate in the Ohio Protest Proceeding, arguing that Section 747 preempts Ohio's dealer act, and that administrative proceeding is now at a standstill. Chrysler filed this action, seeking a declaration that the Ohio dealer act remains in full force and effect as to Spitzer and the Ohio Protest Proceeding, and an injunction barring Spitzer from relitigating the preemption issue.

         As explained below, the Court rejects Spitzer's threshold challenges as to personal jurisdiction, venue, and standing.

         As to the merits, the Court concludes that it must grant the relief requested by Chrysler in this action - a declaratory ruling that the Ohio Dealer Act remains in full force and effect with respect to Spitzer and the Ohio Protest Proceeding. That is because this Court concludes that res judicata, more specifically issue preclusion, applies here such that the issue of whether Section 747 preempts the Ohio Dealer Act is “forever settled” as to Chrysler, Spitzer, and Fred Martin. The Court also concludes that an order enjoining Spitzer from relitigating this Court's preemption ruling in the Ohio Protest proceeding is not barred by the Anti-Injunction Act and shall issue the requested injunction.


         This current action is a companion case to this Court's previous Case Number 10-12984 (“the Consolidated Dealer Action”), which consisted of three separate cases that were consolidated by this Court. The Consolidated Dealer Action (“CDA”) has a lengthy procedural history. The Court includes here a broad overview of that case and information relevant to the issues in the present case.

         Section 747 of the Consolidated Appropriations Act of 2010 created an arbitration procedure for automobile dealerships to seek continuation or reinstatement of franchise agreements that had been terminated by Old Chrysler during its bankruptcy proceedings, with the approval of the bankruptcy court. Several dealers who had been rejected by Old Chrysler initiated, and prevailed in, Section 747 arbitrations with the newly-formed Chrysler Group LLC.[2]Those arbitration determinations gave rise to litigation in this Court because parties impacted by those determinations disagreed as to what happens next following those Section 747 arbitration determinations.

         Three different cases were filed, Case No. 10-12984, Case No. 10-13290, and Case No. 10-13908. Those three cases were consolidated by this Court, for all purposes, including trial, into Case Number 10-12984. (D.E. No. 92). In addition to Chrysler, it involved two different types of dealers: 1) “Rejected Dealers, ” (ie., a number of dealers who had been rejected during the bankruptcy proceedings but prevailed in Section 747 arbitrations with Chrysler); and 2) “Interested Like-Line Dealers” who became parties because they oppose Chrysler establishing or relocating a dealer who prevailed in a Section 747 arbitration into their area without following the provisions of state-law dealer acts.

         Various state-law dealer acts provide certain protections for existing dealers and allow them to challenge a manufacturer's establishment or relocation of a dealership within a relevant market area where the same line make is already represented.[3]

         The state-law dealer acts of six different states (Michigan, California, Florida, Nevada, Ohio, and Wisconsin) were at issue in the CDA.

         The only parties in this case are: 1) Chrysler; 2) Spitzer, a Rejected Dealer who prevailed in its Section 747 and wants to rejoin the dealer network and operate a Chrysler dealership in Ohio; and 3) Fred Martin, an Interested Like-Line Dealer, who currently operates a Chrysler dealership in Ohio and opposes Spitzer rejoining the network.

         In 2010 - while the CDA was proceeding - Fred Martin filed a protest with the Ohio Motor Vehicle Dealer Board (“the Ohio Board”) under case number 10-12-MVDB-366-JT, pursuant to the state dealership laws of Ohio, seeking to enjoin Spitzer's addition to Chrysler's dealer network (hereinafter the “Ohio Protest Proceeding”).

         All Necessary Parties Became Part Of The CDA And The Court Addressed Threshold Issues Of Personal Jurisdiction, Venue And Standing.

         In an Opinion & Order issued on May 10, 2011 (D.E. No. 195), the Court addressed Motions to Dismiss that involved personal jurisdiction, venue, and standing. All necessary parties ultimately were included in the CDA.

         This Court Ultimately Declared That Section 747 Does Not Preempt The State Dealer Laws Of Six States, Including Ohio.

         Following discovery, the parties filed numerous summary judgment motions, raising the same issues. The Court notes three relevant motions here:

Docket Entry No. 231: wherein Spitzer asked this Court to declare that Section 747 preempts the Ohio Dealer Act, and rule that New Chrysler and other dealers waived their right to challenge Spitzer' reinstatement;
Docket Entry No. 228: wherein Chrysler asked the Court to grant summary judgment in its favor and against Spitzer on Count One of its Second Amended Complaint and declare that Section 747 does not preempt the Ohio Dealer Act or permit Chrysler to ignore its obligations under state law; and
Docket Entry No. 215: wherein Fred Martin asked the Court to declare that Section 747 is unconstitutional or, in the alternative, that Section 747 does not preempt the Ohio Dealer Act.

         In an Opinion & Order issued on March 27, 2012, this Court ruled on the entire series of dispositive motions, declaring that:

1) The sole and exclusive remedy for a dealer rejected by Old Chrysler who prevails in a Section 747 arbitration with New Chrysler is a customary and usual letter of intent to enter into a sales and service agreement with New Chrysler.
2) Section 747 does not provide for reinstatement of a dealer rejected by Old Chrysler who prevails in a Section 747 arbitration with New Chrysler.
3) Section 747 does not authorize an award of monetary damages.
4) Section 747 does not provide for judicial confirmation or enforcement and neither the FAA nor the AAA's Commercial Rules govern these statutorily-mandated arbitrations or authorize a party to move to confirm an arbitrator's determination in a Section 747 arbitration.
5) Section 747 does not preempt the state dealer acts that govern the relationships between automobile manufacturers and dealers in California (Cal. Vehicle Code § 3060 et seq.), Florida (Fla. Stat. § 320.01 et seq.), Michigan (Mich. Comp. Laws § 445.1561 et seq.), Nevada (Nev. Rev. Stat. § 482.36311 et seq.), Ohio (Ohio Rev. Code. § 4517.43), or Wisconsin (Wis. Stat § 218.0101 et seq.).

(D.E. No. 361 at Pg ID 16481) (emphasis added). That Opinion & Order further provided:

IT IS FURTHER ORDERED that New Chrysler's motions for summary judgment, seeking summary judgment as to its July 14, 2011 Complaint for Declaratory Judgment against Spitzer, BGR and Boucher (D.E. Nos. 228, 243 & 229) are GRANTED. The cross-motions for summary judgment filed by Spitzer, BGR, and Boucher (D.E. Nos. 231, 234, & 220) are DENIED.

(Id. at Pg ID 16482) (emphasis added).[4]

         The Court's Ruling Following The Bench Trial, That Relates To Rejected Dealers Not At Issue Here.

         On July 9, 2013, this Court held a bench trial to determine whether Chrysler supplied the Rejected Dealers who prevailed in their Section 747 arbitrations with a “customary and usual letter of intent, ” as required by the statute. By that time, many of the Rejected Dealers in the consolidated action had reached settlements with Chrysler, and the only Rejected Dealers left were Fox Hill, Village, Jim Marsh, and Livonia. Spitzer was not involved in the bench trial.

         In any event, after the bench trial, this Court ruled that those dealers had received the customary and usual LOIs that were required under the statute. The Court then issued a final judgment on August 8, 2013, thereby closing the CDA.

         Several Parties - But Not Spitzer - Appealed To The Sixth Circuit.

         Several parties filed three different appeals in the United States Court of Appeals for the Sixth Circuit.

         Appellate case 13-2117 was filed by three of the four Rejected Dealers who proceeded to the bench trial (Fox Hills, Village, and Jim Marsh).

         Livonia, the third Rejected Dealer who had proceeded to the bench trial, filed its own appeal.

         Notably, Spitzer did not appeal any of this Court's rulings. But Fred Martin (an Interested Like-Line Dealer in Spitzer's area in Ohio) filed its own appeal, arguing that the district court erred by not considering its constitutional challenge to Section 747. In response to Fred Martin's appeal, Spitzer appeared and “defended § 747's constitutionality and claimed that Fred Martin lacked standing to raise a constitutional challenge to the act. Unlike the other prevailing dealers, Spitzer d[id] not challenge the state dealer protest laws.” Chrysler Group LLC v. Fox Hills Motor Sales, Inc., 776 F.3d 411, 422 (6th Cir. 2015).

         The Sixth Circuit consolidated all three of the appellate cases and heard oral argument on August 8, 2014. During oral argument, Counsel for Spitzer had the following colloquy with the Court:

THE COURT: So I understand your position, you don't have a problem with saying the remedy is the LOI?
MR. GIARDINI: I am conflicted, you Honor, but since we didn't appeal Judge Cox's decision, that is our official position. Believe me, my heart is with Livonia and Fox Hills, but I'm sitting with Chrysler.
THE COURT: But your client is willing to deal with just having an LOI as long as the LOI is --
MR GIARDINI: It is. We feel we have such a strong position with respect to that LOI, that we just want to get on with it. We have been stayed now for three years from even dealing with the protest that Fred Martin filed. I can't move forward until this matter is decided. So we just took the position, look, we'll deal with the protest laws of Ohio.
Our laws are the same as Michigan. We are going to be arbitrating basically the same criteria. In the protest we're going to be dealing with the same criteria. I guess my feeling is we won once, we'll win twice.
That's really why when Mr. KcKirahan says, I don't understand why any of us are here, honestly, I don't understand why Fred Martin is here. Because Fred Martin didn't lose anything. It had a Chrysler Dodge Jeep dealership before the bankruptcy. It had one after the bankruptcy. It had one before 747 was passed. It has one after 747 is passed. Even if I win my process, it will still have its dealership.
THE COURT: It just doesn't want your competition?
MR. GIARDINI: It just doesn't - which it had for 30 years prior to the Chrysler bankruptcy. Which is another - It's not really relevant to this case.
THE COURT: It's not like he doesn't have standing?
MR. GIARDINI: Your Honor, I don't think he has standing at all. Now I'll qualify that. If this court were to determine that Ohio's Dealer Act was preempted by 747, then I would argue that he had some standing because now he has a financial interest involved and he doesn't have any opportunity as a party to deal with it. He has that opportunity. So if this court decides that Judge Cox was right and that 747 didn't preempt Ohio's law, then --
THE COURT: You mean Michigan's law, right?
MR. GIARDINI: We have Ohio law, your Honor. Since we didn't appeal that issue, it isn't really before you. We're dealing 4517.50 of the Ohio Vice [sic] Code in our case.
Fred Martin does not have standing to challenge the constitutionality of this act with Judge Cox's decision and that's what Judge Cox said. Even if you looked at Fred Martin's pleadings, they clearly indicate that the only reason they're here is because of the possibility that there would be preemption. With that possibility gone with Judge Cox's decision, they were done. They're out of this thing in terms of being harmed in any way.
THE COURT: Thank you, Counsel.

(D.E. No. 21-3 at Pg ID 318) (emphasis added).

         The Sixth Circuit Reversed And Remanded As To Preemption - But Only With Respect To The State-Law Dealer Acts Of Michigan And Nevada - Not Ohio.

         The Sixth Circuit affirmed most of this Court's rulings. For example, it held that “[t]he district court correctly held that § 747 does not constitute an unconstitutional legislative reversal of a federal court judgment, and that the only relief provided to successful dealers under § 747 is the issuance of a ‘customary and usual' letter of intent.” Id. at 415. It also affirmed other rulings that are not relevant to this action. It reversed as to just two aspects.

         First, the Sixth Circuit ruled that the district court “properly found that the letters of intent at issue in this case were ‘customary and usual, ' with the exception of one contractual provision that requires reversal” as to just one dealer. Id. at 415. It found that, as to Livonia alone, remand was appropriate so that the district court could consider whether a site-approval provision rendered its particular LOI illusory. Id. at 432-33.

         Second, the Sixth Circuit disagreed as to preemption and held that Section 747 “preempts the operation of Michigan and Nevada dealer protest laws.” Id. at 430. That is, it concluded that “application of the state dealer acts of the two states in question (Michigan and Nevada) is preempted by” Section 747. Id. at 415. (emphasis added).

         Because no one - including Spitzer - had appealed this Court's preemption rulings regarding the state-law dealer acts of Ohio, California, Florida, or Wisconsin, the Sixth Circuit did not discuss any of those acts or make any rulings regarding those acts. The Sixth Circuit expressly noted that it was not ...

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