Antitrust Law Daily Wrap Up, ANTITRUST—D.S.C.: Declaratory judgment action proceeds on Michelin’s antitrust, RICO liability to tire dealer, (Nov 7, 2013)

By Tobias J. Gillett, J.D., LL.M.

The federal district court in Greenville, South Carolina has declined to dismiss an action by tire manufacturer Michelin North America, Inc., seeking a declaratory judgment that it was not liable to a tire dealer for alleged violations of the federal RICO and antitrust laws (Michelin North America, Inc. v. Inter City Tire and Auto Center, Inc., November 6, 2013, Herlong, H.). An order issued the same day also denied the dealer’s motion for interlocutory review of the court’s denial of its motion for a transfer of venue.

On April 19, 2013, Michelin North America filed a breach of contract claim against Inter City Tire and Auto Center, Inc., seeking a declaratory judgment that it properly terminated its dealer agreements with Inter City and that it was not liable to Inter City for violations of the federal RICO Act, the Sherman Antitrust Act, or the Robinson-Patman Act. On April 23, Inter City filed a complaint, charging that Michelin had violated the federal antitrust and RICO laws, among other claims. Inter City moved to dismiss Michelin’s declaratory judgment action.

Motion to dismiss. The court denied the motion to dismiss. The court rejected Inter City’s contention that the action “should be dismissed because a declaratory judgment is an inappropriate mechanism by which to adjudicate claims based solely on past conduct.” The court noted that Inter City had alleged in its parallel litigation that Michelin’s acts of racketeering “continue to this day,” and that Michelin had violated the Robinson-Patman Act by “discriminat[ing], and continu[ing] to discriminate, against Inter City.” Therefore, Michelin’s claim did not solely concern past conduct. Moreover, the cases cited by Inter City addressed the use of declaratory judgments to declare non-liability in tort actions, not RICO or antitrust violations, and the court noted that other courts had found that declaratory judgments could be used for declarations of non-liability in RICO and antitrust actions.

The court also rejected Inter City’s argument that the declaratory judgment action would impose “unnatural order” on the burden of proof and the presentation of evidence at trial because the court had the power to “determine generally the order in which parties will adduce proof.” The presence of significant factual questions was also not grounds for dismissal of the declaratory judgment action because it was “well-settled that declaratory judgments can be used to settle questions of fact.” Finally, Michelin did not engage in an improper “race to the courthouse” that would provide grounds for dismissal of its claim.

Interlocutory review. On the same day, the court also issued an order denying Inter City’s motion for interlocutory review of the court’s decision denying Inter City’s motion to transfer venue. The motion did not present controlling questions of law, did not demonstrate a substantial ground for difference of opinion, and would not materially advance the ultimate termination of the litigation.

The case is Civil Action No. 6:13-1067-HMH.

Attorneys: Giles M. Schanen, Jr. (Nelson Mullins Riley and Scarborough) for Michelin North America, Inc. Joseph Owen Smith (Roe Cassidy Coates and Price) for Inter City Tire and Auto Center, Inc.

Companies: Michelin North America, Inc.; Inter City Tire and Auto Center, Inc.

Cases: Antitrust FranchisingDistribution RICO SouthCarolinaNews