Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—S.D. Fla.: BMW franchisee could not enjoin administrative proceeding pending outcome of court proceeding, (Nov 12, 2015)

By Michael Menzhuber, J.D., LL.M.

A BMW franchisee, which filed a court action and then a protest with the Florida Department of Highway Safety and Motor Vehicles regarding BMW’s decision to open a new dealership in the area, could not stay the administrative hearing pending the outcome of the court proceedings, according to the federal district court in Miami, Florida. The court determined that the franchisee was actually seeking an injunctive relief and failed to demonstrate the elements required for granting an injunction (Pompano Imports, Inc. v. BMW of North America, LLC, November 10, 2015, Moreno, F.).

Background. Pursuant to 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 Department. The Department is then required to publish that notice and send 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(s) are not providing adequate representation of the line-make motor vehicles in the community or territory.

BMW 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 circuit court that sought, among other things: (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, based on its inability to establish that it was not adequately represented by existing franchised dealers; and (3) damages and injunctive relief due to BMW’s alleged breaches of contract and violations of statutory requirements regarding warranty reimbursements. BMW and BMW Delray removed the case to federal district court and then filed motions to dismiss.

After filing the complaint, Pompano filed protests with the Department and requested that the protests be stayed pending resolution of the court action. The Department referred the matter to the Florida Department of Administrative Hearings (DOAH), which denied Pompano’s motion to stay the protests. Having failed to obtain a stay from the DOAH, Pompano filed a motion with the court to stay or enjoin the DOAH proceedings.

Injunction. The court found that, in asking the court for an order to stay the hearing before the DOAH, Pompano was really asking that DOAH be enjoined from exercising its statutory powers. After noting that a showing of irreparable harm is a necessary requirement for granting an injunction, the court said that it did not see how allowing the DOAH to resolve Pompano’s protests would threaten harm to Pompano, particularly since Pompano instituted both the administrative and the court proceedings.

Pompano argued that a stay was necessary to prevent harm from potentially inconsistent rulings and results in the DOAH action, which Pompano only filed as a protective measure. Noting that the only issue pending before the DOAH was whether current BMW dealerships provided adequate representation, the court ruled that Pompano’s breach of contract and warranty claims were entirely distinct from that inquiry. It concluded that: (1) Pompano would have no problem seeking the best possible resolution for itself before the DOAH, while still seeking complete relief with respect to all other aspects of its claims, and (2) any incongruous rulings and results that might occur as a result of the parallel proceedings would be entirely self-inflicted because Pompano instituted both proceedings.

Pompano also argued that the DOAH should be enjoined under the “first-to-file” rule, which could suspend the proceedings in the later-filed action until the first action is resolved. The court disagreed because none of the cases cited by Pompano involved one party invoking the “first-to-file” when that party instituted both proceedings.

The court also determined that the balance of equities favored BMW and BMW Delray because abating the DOAH proceeding would consign BMW and BMW Delray to a potentially-protracted judicial proceeding that, if not ultimately fatal to their business plans, would likely delay the establishment of the new dealership.

The case is No. 15-23491-CIV.

Attorneys: Hilarie Bass (Greenberg Traurig) and Kendall Brindley Coffey (Coffey Burlington, P.L.) for Pompano Imports, Inc. d/b/a Vista Motor Co. and Pompano Imports, Inc. Brandon L. Bigelow (Seyfarth Shaw, LLP) for BMW of North America, LLC. Beth A. Levene (Williams & Connolly) for Auto Co. XXVII, Inc. d/b/a BMW of Delray Beach.

Companies: Pompano Imports, Inc. d/b/a Vista Motor Co.; Pompano Imports, Inc.; BMW of North America, LLC; Auto Co. XXVII, Inc. d/b/a BMW of Delray Beach

Cases: FranchisingDistribution FloridaNews