Antitrust Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: Partial claim preclusion from New York DMV administrative proceeding in auto franchise dispute, (Mar 7, 2024)

By Seth Abrams, J.D., M.A.

Robinson-Patman Act claims were not precluded by state administrative proceeding, but New York auto dealer law claims were.

The federal district court in White Plains, New York, granted in part and denied in part defendant Stellantis US LLC’s, f/k/a FCA US LLC (“FCA”) motion to dismiss an action brought by plaintiff, Alfredo’s Foreign Cars d/b/a Larchmont Chrysler Jeep Dodge (“Larchmont”). Larchmont alleged that discriminatory conduct by FCA was in violation of the Robinson-Patman Act, the New York Franchised Motor Vehicle Dealer Act (“Dealer Act”), and a breach of the implied covenant of good faith and fair dealing. The court held that Larchmont’s claims could proceed under the Robinson-Patman Act, but not its claims brought under the Dealer Act or its contract claims due to claim preclusion from an earlier administrative proceeding (Alfredo’s Foreign Cars, Inc. v. Stellantis US LLC, March 5, 2024, Karas, K.).

Larchmont is an auto dealership in Westchester County, New York. FCA is a dealer network which sells inventory to Larchmont. During a “supply crunch” in the auto industry, FCA allegedly began to discriminate among dealers in its network. FCA “began to offer below-invoice pricing to certain preferred dealers,” which, in turn, undercut non-favored dealers, such as Larchmont. This affected the dealership’s performance ratings, such as Market Performance Level (“MPL.”) It also resulted in changes in the sales objectives of preferred dealers. Larchmont’s performance resulted in the removal of dozens of units throughout 2021 and 2022.

Larchmont argued that the MPL metric and related discount programs are similar to the Minimum Sales Responsibility (“MSR”) metric. This metric was subject to an administrative proceeding between the parties before the New York Department of Motor Vehicles. During that proceeding, Larchmont raised allegations similar to those raised here, primarily that through the MSR metric, FCA “encouraged unlawful brokering in Larchmont’s market by giving favored treatment to its high-volume brokering dealers, including unfair and uneven allocation of extra units and secret incentive monies and better pricing for those dealers.” The DMV determined that the use of “MSR violated the Dealer Act, because it constituted an ‘arbitrary, unreasonable or unfair... standard for determining sales performance.” This decision was affirmed on administrative appeal but was not adjudicated further in state court.

Larchmont alleged that (1) FCA’s discriminatory conduct related to the MPL metric and the (2) related inventory determinations violated the Robinson-Patman Act and the Dealer Act. It also alleged that these acts constituted a breach of the implied covenant of good faith and fair dealing. Larchmont filed suit in December 2022. In October 2023, the court asked for the parties to “submit supplemental briefing regarding the applicability of res judicata to state administrative judgment that have not been reviewed by a court.” The court concluded that, as a matter of federal common law, claim preclusion does not bar its Robinson Patman Act claim. However, the DMV’s judgment bars Larchmont’s state law claims, including its Dealer Act claim.

Robinson-Patman Act. The court first looked to whether claim preclusion prevents Larchmont’s claim under the Robinson-Patman Act. The court reviewed the relevant authority to determine that federal common law does not give claim preclusive effect to unreviewed state agency judgments, at least where certain federal rights are at stake. This is supported by the weight of the authority. The administrative proceeding was of limited “substantive and remedial scope.” The court noted that although the DMV is likely “highly competent” in adjudicating claims under the Dealer Act, it is skeptical that its officials “have either the training or the experience” for the adjudication of federal antitrust claims.

Next, the court noted that there is no risk of inconsistent judgments as the “DMV cannot consider [Larchmont’s] antitrust claim, and a follow-on suit would therefore not trample on the state proceeding.” The court also pointed out that there is nothing to suggest that Congress intended that federal common law give preclusive effect to “an adjudication in a state administrative tribunal of limited jurisdiction.” Accordingly, it denied the motion to dismiss the Robinson-Patman Act claim.

Dealer Act/state law claims. The court reached the opposite conclusion on claim preclusion regarding the Dealer Act and claims brought under New York state law. Larchmont argued that the DMV’s inability to award damages made the doctrine inapplicable. It also argued that its state law claims were not part of the transaction that the DMV examined.

While res judicata does not generally apply when the “initial forum did not have the power to award full measure of relief sought in the later litigation,” it did apply here because Larchmont made the choice to bring the DMV action, even given its limitations. Larchmont chose a limited agency proceeding instead of a court of general jurisdiction and “chose an opportunity for quick relief when it could have brought all its claims in a single unified proceeding.” The consequence of this action was claim preclusion for the Dealer Act and state law claims. The court additionally found that the same facts underlie the claims here, even though the DMV proceeding focused on MSR, not MPL. It noted that, “at minimum, this is a situation where “facts essential to the [instant claim] were present in the first.” As a result, it granted the motion to dismiss the Dealer Act and state law claims.

The case is No. 7:22-cv-10478-KMK.

Attorneys: Charles Andrew Gallaer (Arnet Fox LLP) for Alfredo’s Foreign Cars, Inc. d/b/a Larchmont Chrysler Jeep Dodge. Blake Adam Gansborg (Nelson Mullins Riley & Scarborough LLP) for Stellantis US LLC f/k/a FCA US LLC.

Companies: Alfredo’s Foreign Cars, Inc. d/b/a Larchmont Chrysler Jeep Dodge; Stellantis US LLC f/k/a FCA US LLC

Cases: Antitrust FranchisingDistribution NewYorkNews