Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—W.D. Tex.: Kia dealer drives on with competitor false license application claims, (Oct 21, 2015)

By Greg Hammond, J.D.

A Texas Kia dealership could proceed with claims that a competitor in the same market filed a false Franchised Motor Vehicle Dealer’s License Application with the Texas Department of Motor Vehicles (DMV). In denying the competitor’s motion for summary judgment, the federal district court in El Paso determined that the Texas DMV incorrectly found that the Kia dealership lacked standing and ruled that a question of material fact existed about whether the competitor’s six-month delay in amending the Application was “reasonable” under Texas law (Paso Del Norte Motors, LP v. Tri Star Partners, LLC, October 20, 2015, Martinez, P.).

Paso Del Norte Motors, LP, doing business as Viva Kia, filed suit against Tri Star Partners, LLC, doing business as Integrity Kia, alleging that Integrity filed a false dealer’s license application with the Texas DMV. Specifically, Viva Kia alleged that Integrity violated the Texas Transportation Code and Texas Occupations Code by: (1) submitting a false application, providing a different general manager and owner, and (2) filing the application in an untimely manner. Viva Kia also filed a similar complaint with the Texas DMV, which found that Viva Kia lacked standing to bring its claim under the Texas Transportation Code and that Integrity was in compliance with all requirements.

Integrity subsequently moved for summary judgment in the district court action, alleging that res judicata barred Viva Kia from bringing its Teas Transportation Code claim and claiming that the court should defer to the Texas DMV’s decision to dismiss the complaint.

Res judicata. The court first concluded that Viva Kia’s claims were not barred by the doctrine of res judicata. Although both of the parties were identical to the action before the Texas DMV and the cause of action remained the same, the Texas DMV failed to provide a separate finding of fact with regard to each specific use. Instead, the Texas DMV made assertions without citing to the record, which circumvented the standards required in the Texas Occupations Code. The court therefore concluded that the res judicata defense failed because the court could not accord the Texas DMV decision with force and effect of a court judgment.

Chevron deference. The court did, however, afford the Texas DMV’s determinations with “respect” to the extent that its interpretations have the “power to persuade.” Nevertheless, Integrity was not entitled to summary judgment. In particular, the court found that the Texas DMV incorrectly concluded that Viva Kia lacked standing, because Viva Kia has an interest in making sure that Integrity, a competing Kia dealer, complies with the Texas Transportation Code. The Texas DMV’s finding that Viva Kia lacked standing was therefore unpersuasive.

Lastly, the court concluded (1) that there is a question of material fact about whether a six-month delay in amending a dealer license application was “reasonable” under the Texas Occupations Code, and (2) that only a fact-finder can make that determination. The Texas DMV’s determination was therefore not afforded the same “respect” as compared to “persuasive agency decisions,” and the motion for summary judgment was denied.

The case is No. EP-15-CV-33-PRM.

Attorneys: Corey W. Haugland (James & Haugland, PC) and Mitchell Madden (Holmgren Johnson) for Paso Del Norte Motors, LP. James Allen Martinez) and Timothy D. Zeiger (Shackelford, Melton & McKinley LLP) for Tri Star Partners, LLC.

Companies: Paso Del Norte Motors, LP; Tri Star Partners, LLC

Cases: FranchisingDistribution TexasNews