Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—S.D. Fla.: Auto dealer’s suit to prevent licensing of new competing dealership remanded, (Mar 9, 2016)

By Linda O’Brien, J.D., LL.M.

The federal district court in Miami has remanded, for lack of complete diversity, a suit filed by a BMW dealership that is seeking to prevent the auto manufacturer from establishing a new competing dealership in the existing dealership’s territory (Pompano Imports, Inc. v. BMW of North America, LLC, March 8, 2016, Moreno, F.).

Under the Florida regulatory scheme governing motor vehicle franchises and the licensing of new dealerships, a manufacturer that proposes to establish a new dealership must give written notice of its intention to the Florida Department of Highway Safety and Motor Vehicles. The Department is then required to publish that notice and send the notice to other dealers of the same line-make within a certain radius of the proposed new dealership. If a dealership protests, the new dealership is denied a license unless the manufacturer demonstrates that the existing franchised dealer is not providing adequate representation of the line-make motor vehicles in the community or territory.

BMW of North America notified the Department of its intent to establish BMW of Delray as a new BMW dealership. Pompano Imports, Inc., the owner of two BMW dealership in a neighboring county, filed a complaint in state court that sought: (1) a declaration that BMW could not establish that it was not adequately represented by existing franchised dealers; (2) an injunction preventing BMW from establishing BMW Delray; and (3) damages and injunctive relief due to BMW’s alleged breaches of contract. BMW and BMW Delray removed the case to federal district court. The court denied Pompano’s motion to remand the case to state court in October 2015.

BMW and BMW Delray each filed a motion to dismiss and the court reconsidered its earlier decision to deny Pompano’s motion to remand.

The court found that the defendants failed to show by clear and convincing evidence that there was no possibility Pompano could establish a claim against BMW of Delray Beach. A case filed in state court that was removed to federal court based on diversity jurisdiction must be remanded to state court if there is not complete diversity between the parties. There was no dispute that complete diversity was lacking unless the citizenship of BMW Delray was disregarded, the court explained.

The defendants’ argument that BMW Delray’s citizenship should be disregarded under the doctrine of fraudulent joinder was rejected. According to the court, it was unclear under Florida law that Pompano was required to exhaust its administrative remedies or that the court had exclusive jurisdiction over the adequacy-of-representation issue. Further, it was doubtful whether Pompano had a “bona fide, actual, present, and practical need” for a declaration under the state Declaratory Judgment Act, since Pompano had already used the administrative procedure under the motor vehicle franchise regulatory scheme to temporarily prevent the licensing of BMW Delray. Thus, the defendants failed to show that Pompano fraudulently joined BMW Delray. The case was remanded to state court and the defendants’ motion to dismiss was denied as moot.

The case is No. 1:15-cv-23491-FAM.

Attorneys: Hilarie Bass (Greenberg Traurig LLP) and Kendall Brindley Coffey (Coffey Burlington, P.L.) for Pompano Imports, Inc. Brandon L. Bigelow (Seyfarth Shaw, LLP) for BMW of North America, LLC.

Companies: Pompano Imports, Inc.; BMW of North America, LLC; Auto Company XXVII, Inc.

Cases: FranchisingDistribution FloridaNews