Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—N.D. Ga.: U.S. dealers seeking to recover “appointment fees” from Indian auto manufacturer denied class certification, (Mar 19, 2014)

By John W. Arden, J.D., LL.M.

The federal district court in Atlanta has denied certification of a class of dealers seeking to recover fees they paid to Indian auto manufacturer Mahindra & Mahindra, Ltd. for the right to distribute its motor vehicles in the U.S. market (Automotive Leasing Corp. v. Mahindra & Mahindra, Ltd., March 14, 2014, Thrash, T.). Because the plaintiffs’ dealings with the manufacturer and its U.S. distributor varied greatly, class certification was not appropriate.

Automotive Leasing Corporation and putative class members paid “appointment fees” to the manufacturer—through distributor Global Vehicles, Inc.—to obtain rights to distribute vehicles in the U.S. In 2006, Mahindra began marketing its light trucks and SUVs for entrance into the U.S. market and collected approximately $34 million in fees from approximately 340 dealers. The manufacturer allegedly promised to begin delivering the vehicles in 2009. However, in June 2010, it announced it would not be entering the U.S. and terminated the dealership agreements. Mahindra and Global Vehicles did not refund all of the fees collected from the dealers.

The plaintiffs sought to certify a class in order to recover restitution and damages for all dealers that paid appointment fees. They alleged four counts: (1) violation of the Georgia Motor Vehicle Franchise Practices Act; (2) violation of the federal Automobile Dealers Day-in-Court Act; (3) unjust enrichment; and (4) promissory estoppel.

The proposed class was “any and all individuals and/or entities that paid money to Global and/or Mahindra for the right to sell and market vehicles, products, and accessories manufactured by Mahindra & Mahindra, Ltd. in the United States.” Mahindra and Global Vehicles contended that the proposed class did not meet the superiority and predominance requires of Rule 23(b)(3) of the Federal Rules of Civil Procedure.

A party seeking class certification must satisfy the prerequisites of numerosity, commonality, typicality, and adequacy of representation. In addition, such party must convince a court that (1) prosecuting separate actions would create a risk of prejudice to the party opposing the class or to those members of the class who were not parties to the subject litigation; (2) the party opposing the class refused to act on grounds that apply generally to the class, necessitating final injunctive or declaratory relief; or (3) questions of law or fact common to the members of the class predominate over questions affecting only individual members and that a class action is superior to other available methods for fair and efficient adjudication of the controversy.

The proposed class of 340 individuals or entities was sufficiently numerous, according to the court. However, the plaintiffs had not demonstrated that the class satisfied the commonality requirement. They contended that (1) the proposed class was capable of generating common answers to the questions of whether Mahindra exerted sufficient control over Global and whether the fees the class paid were transferred to Mahindra and (2) equity-based Georgia law claims were capable of generating common answers because the dealership agreements required the application of Georgia law.

The court disagreed that Georgia law would apply to all dealer claims. “Indeed, the determination of which law to apply to class members’ claims for unjust enrichment and promissory estoppel would require individualized choice of law analysis, including due process analysis,” according to the district court. Under Georgia choice of law rules, Georgia law applies to claims where injury is suffered out of state when its application is consistent with due process. The court would have to conduct differing due process analyses for many of the potential class members. Because Georgia law would not necessarily apply to all of the putative class members’ claims for equitable relief, the class did not satisfy commonality for those claims.

Even though choice of law issues did not affect the federal Dealers’ Day-in-Court Act claims, the variety of agreements signed by potential class members was itself enough to defeat commonality, the court ruled. The class members signed a myriad of documents, ranging from letters of intent to informational memoranda and background authorizations. Not every class member signed every agreement; several signed only one agreement. Some dealers did not sign agreements until 2010, well after Mahindra promised to deliver vehicles to dealers who signed earlier agreements. Given the varying circumstances of many potential class members, the court concluded that the plaintiffs did not demonstrate that the class met the commonality requirement. Thus, the motion for class certification was denied.

Even if the plaintiffs could establish commonality, they failed to establish predominance and superiority under Rule 23(b)(3), the court held. The plaintiffs failed to show that issues of law or fact common to the class predominated, since the state law applicable to each members’ common law claims would require individualized due process determinations. Furthermore, the class members sought to recover varying amounts that were paid at different times and had received different refunds at different times. These facts undermined the court’s ability to resolve the question of damages on a class wide basis.

The case is Civil Action File No. 1:12-CV-2048-TWT.

Attorneys: Charles A. McCallum, III (McCallum, Hoaglund, Cook & Irby, LLP) and James Benjamin Finley (The Finley Firm, P.C.) for Automotive Leasing Corp., Ruge’s Automotive, Inc., South Main Motors, Inc., Luke Fria Motors, Inc. and Premier Motors, Inc. Brian Avery White (King & Spalding, LLP) for Mahindra & Mahindra, Ltd.

Companies: Automotive Leasing Corp.; Ruge’s Automotive, Inc.; South Main Motors, Inc.; Luke Fria Motors, Inc.; Premier Motors, Inc.; Mahindra & Mahindra, Ltd.

Cases: FranchisingDistribution GeorgiaNews