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From Antitrust Law Daily, July 16, 2018

Jaguar franchisee failed to exhaust administrative remedies

By Nicole D. Prysby, J.D.

Because state court review of a state agency decision concerning chargebacks of incentive payments made by a distributor to a dealership was not yet complete, the dealership’s action claiming violations of the Texas Deceptive Trade Practices Act (DTPA) was filed before it exhausted its administrative remedies, held the Fifth Circuit Court of Appeals. The Board of the Texas Department of Motor Vehicles (Board) found the chargebacks to be invalid and the distributor requested review in state court. Before the state court issued a decision, the dealership brought an action for damages under the DTPA, based on the Board’s findings. The district court then granted summary judgment to the dealership, but the Fifth Circuit vacated the decision. The parties disputed the point at which the Board’s order became final for purposes of administrative exhaustion. Under Texas law, the Board has exclusive jurisdiction and no DTPA claims may be brought in court until the party has exhausted administrative remedies to obtain a final Board decision. The Fifth Circuit held that until a decision was issued in the state appellate court action, there was no final decision and the federal district court lacked jurisdiction on the DTPA claims. And, the court held, even though the state court had eventually issued an opinion, it was not issued until after the federal district court issued its opinion granting summary judgment, so the jurisdictional defect had not been cured (Autobahn Imports LP v. Jaguar Land Rover North America, LLC, July 13, 2018, Smith, J.).

Background. As previously reported, the case involves a dispute between U.S. car distributor, Jaguar Land Rover North America ("Jaguar") and franchised dealership, Autobahn Imports ("Autobahn"), concerning chargebacks of around $300,000 in incentive payments the distributor made to the dealer. The Board of the Texas Department of Motor Vehicles (Board) found the chargebacks to be invalid and Jaguar requested review of the decision in state appellate court. While that appeal was pending, Autobahn sued in state court for damages, claiming violations of the DTPA (which would entitled it to treble damages) and breach of contract. Jaguar removed the action to federal court. Before the state court of appeals had completed its review of the Board decision, the federal district court granted summary judgment to Autobahn on its various claims. Jaguar appealed. After the appeal was filed, the Texas state appellate court affirmed the Board’s order.

Autobahn filed too soon. Under Texas law, the Board has exclusive jurisdiction and no DTPA claims may be brought in court until the party has exhausted administrative remedies to obtain a final Board decision. Jaguar argued to the lower court that Autobahn’s action was premature because Autobahn had not yet exhausted its administrative remedies. The district court rejected that argument, finding that the Board’s decision was a final enforceable order. But the Fifth Circuit agreed with Jaguar, finding that Autobahn had not exhausted its administrative remedies and therefore the district court did not have subject matter jurisdiction over the dispute.

The Board’s decision would only be final (and thus, administrative remedies exhausted) after the substantial-evidence review avenues were exhausted. Because the substantial-evidence review in the state court had not been completed at the time the federal district court entered summary judgment for Autobahn on the DTPA claims, there was no exhaustion of administrative remedies. The Fifth Circuit rejected Autobahn’s argument that the statutory language did not require it to have exhausted the appeals process before filing for damages. The court sided with Jaguar, who argued that while the Board could enforce its own orders in the interim, Autobahn could not.

Autobahn also asserted that the issue was moot because the state court of appeals has now rejected Jaguar’s challenge to the Board decision. But the court declined to accept that assertion, holding that it could not affirm the decision of the federal district court where the lower court’s judgment was jurisdictionally defective. Jurisdiction was defective at the time of filing and even if the defect could have been removed before judgment, it was not. At the time the district court granted summary judgment and at the time the appeal was filed, the defect remained.

This case is No. 17-10737.

Attorneys: Richard Wayne Wiseman (Padfield & Stout, LLP) and Jeffrey Scott Levinger (Levinger, PC) for Autobahn Imports, L.P. Thomas Joseph Williams (Haynes & Boone, LLP) and Colm A. Moran (Hogan Lovells US, LLP) for Jaguar Land Rover North America, LLC.

Companies: Autobahn Imports, L.P.; Jaguar Land Rover North America, LLC

MainStory: TopStory FranchisingDistribution LouisianaNews MississippiNews TexasNews

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