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From Antitrust Law Daily, April 05, 2018

Collateral estoppel bars auto dealer from relitigating preemption issue with Chrysler

By Peter Reap, J.D., LL.M.

An Ohio automobile dealer, Spitzer Autoworld Akron, was collaterally estopped from relitigating the issue of whether Section 747 of the Consolidated Appropriations Act of 2010 (Section 747) preempts the Ohio motor vehicle dealer law in a dealer protest proceeding before the Ohio Motor Vehicles Dealer Board, the U.S. Court of Appeals in Cincinnati has ruled. In addition, Younger abstention did not apply to the issue in question because the Ohio dealer protest proceeding was unlike any of the three types of cases to which Younger abstention applies. Thus, a ruling by the federal district court in Detroit was affirmed (FCA US LLC v. Spitzer Autoworld Akron, LLC, April 4, 2018, Rogers, J.).

Previous case. The parties in this case, Spitzer and another automobile dealer—Fred Martin Motor Company—and Chrysler, were previously involved in another case, a consolidated action, along with other dealers from other states whose franchise agreements were rejected during Chrysler’s bankruptcy, but who had arbitrated successfully under Section 747. In that proceeding, the district court held that Section 747 did not preempt the dealer protest laws of each of the six involved states, which grant existing dealerships certain rights to protest the installation of competing dealerships in the same vicinity. Four rejected dealers, three from Michigan and one from Nevada, appealed the district court’s preemption decision. Spitzer, a party to the consolidated action seeking reinstatement to Chrysler’s Ohio dealer network, did not.

That decision was appealed, and the Sixth Circuit held that certain provisions of the motor vehicle dealer laws of Michigan and Nevada law were preempted by Section 747, but the appellate court upheld—as unchallenged on appeal—the district court’s decision in that case that similar provisions of Ohio motor vehicle dealer law were not so preempted. Spitzer, a party to the previous case, as a party on the appeal in the previous case, explicitly declined to argue preemption of the Ohio statute, but now asserted on appeal from a decision in a subsequent, independent proceeding that the Ohio statute is preempted, based on the Sixth Circuit’s analysis of Michigan and Nevada law in the previous case.

The current proceeding. In the instant case, the parties are all involved in a protest before the Ohio vehicle board, and Chrysler filed the current action to enjoin Spitzer from relitigating the Section 747 preemption issue before the Ohio dealer board. The court below held that collateral estoppel precludes Spitzer from raising the preemption issue, and the court accordingly granted Chrysler’s request for injunctive relief barring Spitzer from relitigating the issue before the dealer board. Spitzer appealed.

Collateral estoppel. Spitzer was collaterally estopped from relitigating whether Section 747 preempts the dealer protest laws of Ohio, the Sixth Circuit opined. All four requirements for collateral estoppel were met.

First, the precise issue of whether Section 747 preempts the Ohio Dealer Act was raised and litigated during the consolidated action. Second, the district court’s preemption decision in the consolidated action with respect to Ohio’s dealer laws was necessary to the outcome in that case. Third, the district court in the consolidated action issued a final judgment on Spitzer’s claims as part of its Opinion & Order on March 27, 2012, and on June 26, 2015, it closed the consolidated action entirely when it issued its judgment on remand. Finally, Spitzer had a full and fair opportunity to litigate the preemption issue before the district court in the consolidated action, and like other similarly situated parties, to appeal the district court’s preemption decision.

Spitzer argued on appeal that the appellate court’s ruling in the consolidated action represented a significant change in the legal climate with respect to Section 747’s preemption of state dealer protest laws, and therefore issue preclusion was not applicable here. The Sixth Circuit was not persuaded. The appellate court’s ruling did not reverse the district court’s holding that Section 747 does not preempt the Ohio state dealer laws. In fact, the court in that case did not consider the preemption argument with respect to Ohio’s dealer protest law but limited its analysis to Michigan and Nevada laws.

Spitzer’s further argument that it would be inequitable to apply collateral estoppel to it was also without merit. It was Spitzer that made the free, calculated choice not to challenge in an appeal to which it was a party, the district court’s unfavorable preemption decision with respect to the Ohio dealer law, the appellate court reasoned.

Younger abstention. Contrary to Spitzer’s contentions, the district court’s injunction does not violate the Younger abstention doctrine set forth in Younger v. Harris and its progeny, because the Ohio administrative proceeding between Chrysler, Fred Martin, and Spitzer does not fall within any of the "exceptional" circumstances that warrant Younger abstention in civil cases, the court determined. While the Sixth Circuit has recognized that Younger abstention can apply to civil cases such as this, those only apply to a few narrow exceptions.

None of those exceptions applied here. The Ohio administrative proceeding is clearly not a state prosecution. Next, the Ohio administrative proceeding is not a civil enforcement proceeding. Finally, the Ohio administrative proceeding is not a state civil proceeding involving an order that is uniquely in furtherance of a state’s ability to perform its judicial function.

The case is No. 17-1161.

Attorneys: Cynthia M. Filipovich (Clark Hill PLC) and Hugh Q. Gottschalk (Wheeler Trigg O’Donnell LLP) for FCA US, LLC f/k/a Chrysler Group, LLC. David M. Zack (Blevins Sanborn Jezdimir Zack, PLC) for Spitzer Autoworld Akron, LLC.

Companies: FCA US, LLC f/k/a Chrysler Group, LLC; Spitzer Autoworld Akron, LLC

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