Antitrust Law Daily Wrap Up, ADVERTISING—D. Colo.: Diesel filtering dispute transferred to Texas for disposition of manifold antitrust, franchising issues, (Jul 30, 2024)

By Justin Marcus Smith, J.D.

The plaintiff alleged a competitor jeopardized the viability of its franchisees by means of baseless threats about patents and taking operative control of the franchisees’ businesses through service agreements.

A Colorado diesel particulate filter service provider failed to make a case for either general or specific jurisdiction in connection with claims that two Texas defendant entities unlawfully competed on false representations about patents, held the federal district court in Denver, Colorado. A screenshot of the defendants’ website that showed only one of the plaintiff’s own locations in Colorado did not support general jurisdiction. As for specific jurisdiction, there was no indication that the defendants intentionally directed any activity toward Colorado. In lieu of dismissal, the court ordered the case transferred to the Northern District of Texas, at plaintiff’s request. The allegations touched on a number of interrelated antitrust and franchising issues which may prove interesting as the case unfolds in Texas (DPF Alternatives, LLC v. DET Diesel Emission Technologies, LLC, No. 1:23-cv-02860-SKC-NRN (D. Colo. July 29, 2024)).

DPF Alternatives, LLC (DPF) is a provider of diesel particulate filter regeneration (cleaning) services to the diesel industry. Truck particulate filters require routine cleaning or replacement, a technically fraught regulatory matter. DPF complained that Texas defendants DET Diesel Emission Technologies, LLC (DET) and Synergy Catalyst, LLC (Synergy) (collectively, Recore) harmed DPF’s business by engaging in false marking and false advertising under the patent statute, the Lanham Act, the Sherman Act, and state tort laws. DPF also alleged the DET and Synergy defendants were single-member limited liability companies that were either alter egos of each other or comprised a single enterprise.

DPF alleged Recore was competing on the basis of false patents pertinent to diesel particulate filter core replacement. More specifically, DPF alleged Recore contacted DPF franchisees about new, allegedly patented equipment. After DPF granted one of its franchisees to do business with Recore, DPF said it later discovered that the Recore equipment was not subject to any patents. DPF also alleged Recore used threats of patent exclusivity and of selling Recore products and services to nearby competitors to coerce DPF franchisees into buying Recore products and services.

Recore tactics allegedly included using the false patent ownership statements to induce DPF franchisees into signing “master service agreements” and “financing agreements” before Recore would provide any equipment or technology. DPF characterized these service agreements as “illegal franchising agreements” under federal law, where the agreements allegedly granted DPF franchisees a license to the Recore trademarks, claimed complete operational control over the DPF franchisees’ businesses, and involved initial payments well in excess of $500. DPF said it only learned that Recore allegedly did not have any patents after DPF franchisees had signed franchising agreements with Recore. Recore was allegedly unresponsive to DPF franchisees, for example, on equipment warranty and other issues, after executing the agreements, but publicly disparaged the DPF technology and brand within the industry. DPF alleged Recore’s supposed behavior jeopardized the solvency of DPF franchisees.

DET and Synergy sought dismissal for lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2). DPF or transfer of the case to the Northern District of Texas. The court transferred the case to the Northern District of Texas.

General jurisdiction. The court concluded that it did not have general jurisdiction over Recore. DPF provided only a single screenshot of the defendants’ website listing a single Denver address for Recore. The court said this offered nothing for jurisdictional analysis. Recore said the address was that of DPF’s own franchisee stocking the defendants’ parts, and that reordering was done through the defendants’ web portal.

Specific jurisdiction. The court also determined that it did not have specific jurisdiction over Recore. The Tenth Circuit requires intentional acts “expressly aimed” at the forum state for a finding of specific jurisdiction based on claims of intentionally tortious conduct. Harm alone is not enough. The defendant must create contacts with the forum itself, not just with persons residing there, and the plaintiff cannot be the only link between the defendant and the forum.

The court said DPF’s arguments suffered from several problems. Chief among them was a lack of any contract between the parties. Even if there had been a contract, DPF still failed to meet its burden of establishing personal jurisdiction. Alleged discussions between the parties were “exceedingly light on the details” and the parties’ relationship. DPF did not specify which of its franchisees the defendants originally contacted or where such franchisees were located. Particulars like that were critical to determining whether Recore “intentionally directed” any activity toward Colorado. Nor did DPF provide any details, like location, about the alleged discussions between its franchisees and Recore.

Recore, meanwhile, alleged that DPF principals and several of its non-Colorado franchisees traveled to Texas to tour the defendants’ manufacturing facilities and to solicit the defendants to enter contracts with DPF franchisees. Altogether, DPF did not carry its burden for showing the court had any jurisdiction over Recore.

Transfer. The court transferred the matter to the Northern District of Texas because Recore did not offer effective opposition to DPF’s request that the court transfer in lieu of dismissal.

The Case is No. 1:23-cv-02860-SKC-NRN.

Judge: Crews, S.

Attorneys: Michael Benjamin Marion (Bycer & Marion PLC) for DPF Alternatives LLC. Bryan S. David (Cunningham Swaim, LLP) for DET Diesel Emission Technologies LLC and Synergy Catalyst LLC.

Companies: DPF Alternatives LLC; Diesel Emission Technologies LLC; Synergy Catalyst LLC

Cases: Advertising Antitrust FranchisingDistribution TexasNews