Courtesy Automotive Group, Inc. v. Subaru of America, Inc.

• Court: District Court, E.D. California
• Decided: April 19, 2024
• Docket: 2:22-cv-00997
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 COURTESY AUTOMOTIVE GROUP, INC., No. 2:22-cv-00997 WBS DMC dba COURTESY SUBARU OF CHICO, 13 Plaintiff, 14 ORDER RE: MOTION TO DISMISS v. 15 SUBARU OF AMERICA, INC. and DOES 16 1-50, inclusive, 17 Defendant. 18 SUBARU OF AMERICA, INC., 19 Counterclaimant, 20 v. 21 COURTESY AUTOMOTIVE GROUP, INC., 22 dba COURTESY SUBARU OF CHICO,

23 Counterdefendant.

24 25 ----oo0oo---- 26 Counterclaimant Subaru of America, Inc. (“Subaru”) 27 asserts two counterclaims against counterdefendant Courtesy 28 Automotive Group, Inc. (“Courtesy”): breach of contract 1 (Counterclaim 1), and declaratory relief (Counterclaim 2). (See 2 Countercl. (Docket 35-1).) Courtesy now moves to dismiss the 3 counterclaims. (See Mot. (Docket No. 36).) 4 I. Factual and Procedural Background 5 The generally relevant procedural history is set forth 6 in the court’s prior order resolving Subaru’s motion to dismiss 7 Courtesy’s First Amended Complaint. (See Order (Docket No. 30).) 8 Of specific relevance now is the parties’ March 20, 2019 9 stipulated agreement (“Stipulated Agreement”), which resolved a 10 dispute between the parties then pending before the California 11 New Motor Vehicle Board (“the Board”). (Countercl. ¶¶ 8-10.) 12 The Stipulated Agreement contained a confidentiality clause 13 stating that its terms “shall remain strictly confidential 14 between the parties” and “[n]either the [agreement] nor any part 15 of its terms shall be disclosed to any unauthorized third party 16 without the express written consent of both parties.” (Id. ¶ 17 13.) 18 Subaru now alleges that Courtesy breached this 19 confidentiality provision in three ways. First, Courtesy’s 20 initial complaint, which Courtesy first filed on April 6, 2022 in 21 Butte County Superior Court before Subaru removed the action to 22 this court, improperly referred to certain terms of the 23 Stipulated Agreement. Second, Courtesy’s June 20, 2022 petition 24 filed with the Board (“Board Petition”) included exhibits which 25 directly quoted confidential language from the Stipulated 26 Agreement. Third, Courtesy’s Board Petition caused the Board to 27 forward the Stipulated Agreement to the Department of Motor 28 Vehicles (“DMV”), along with an order directing the DMV to 1 investigate Courtesy’s claims. (Id. ¶¶ 23-29.) 2 II. Discussion 3 A. Mootness 4 “[A] case is moot when the issues presented are no 5 longer ‘live’ or the parties lack a legally cognizable interest 6 in the outcome. [. . .] [J]urisdiction, properly acquired, may 7 abate if the case becomes moot because (1) it can be said with 8 assurance that there is no reasonable expectation that the 9 alleged violation will recur, and (2) interim relief or events 10 have completely and irrevocably eradicated the effects of the 11 alleged violation.” Los Angeles Cnty. v. Davis, 440 U.S. 625, 12 631 (1979) (internal quotes and citations omitted). 13 While the burden of demonstrating mootness “is a heavy 14 one,” id., that burden is squarely met on this record. On the 15 first prong, the court can say with virtual certainty that no 16 alleged breach will recur because the Alameda County Superior 17 Court has unsealed the entire Stipulated Agreement and put it on 18 the public record.1 (See Docket No. 36-2.) The court cannot 19 contemplate how Courtesy could breach the confidentiality 20 provision of a document now publicly and permanently accessible. 21 On the second prong, the court cannot ascertain the 22 existence of any actual “effect” in the first place that Courtesy 23 1 The Stipulated Agreement entered the public domain when 24 the Alameda County Superior Court denied the parties’ motions to seal it on April 4, 2023: “Given the proliferation of litigation 25 concerning these documents and the absence of any showing of harm to any of the parties or the DMV by the public disclosure of 26 these documents, the presumption that court records are open 27 prevails over the parties’ agreement to keep them confidential.” (Docket No. 36-2.) 28 1 allegedly caused. The only “effect” that Subaru’s allegations 2 identify is the DMV’s investigation into Subaru: “As a result of 3 COURTESY’s [breach of the confidentiality provision], the 4 confidential terms of the agreement are now in the public domain 5 and have been disseminated to third parties without [Subaru’s] 6 consent exposing [Subaru] to an unjust and unnecessary DMV 7 investigation of its distributor license.” (Countercl. ¶ 35.) 8 However, the Board-ordered DMV investigation does not 9 appear to have anything to do with the confidentiality provision. 10 Courtesy filed its Board Petition pursuant to California Vehicle 11 Code § 3050(b). (See Docket No. 24 Ex. 7.) The confidentiality 12 provision certainly does not prevent Courtesy from asserting its 13 rights under that statute. In fact, Courtesy took measures to 14 safeguard the confidentiality of the Stipulated Agreement by 15 filing redacted and unredacted copies of its Board Petition, 16 along with a motion to seal the accompanying Stipulated Agreement 17 and ALJ Decision.2 3 (Docket No. 36-12.4) 18 Absent allegations of any other effects, Subaru’s 19 counterclaims contain no live controversy for this court to 20 adjudicate. Accordingly, the court will dismiss Subaru’s 21

22 2 What’s more, the record demonstrates that Subaru opposed Courtesy’s motions to seal before the Board (Docket No. 23 36-13), which the Board nonetheless granted (Docket No. 36-14).

24 3 For the same reasons, Subaru also fails to allege causation or damages with respect to its breach of contract 25 claim. 4 Courtesy’s Request for Judicial Notice (Docket No. 36- 26 1) is granted as to Exhibit 1 (Docket No. 36-2), 11 (Docket No. 27 36-12), 12 (Docket No. 36-13), and 13 (Docket No. 36-14), and denied as to all other exhibits as moot. 28 eee RII IERIE REID EI EOE OS OD OE

1 counterclaims in full. 2 B, Leave to Amend 3 Federal Rule of Civil Procedure 15 directs the court to 4 freely grant leave to amend “when justice so requires.” Fed. R. 5 Civ. P. 15(a) (2). “[T]his policy is to be applied with extreme 6 liberality.” Morongo Band of Mission Indians v. Rose, 893 F.2d 7 1074, 1079 (9th Cir. 1990). Accordingly, Subaru will be given 8 leave to amend its breach of contract counterclaim if, and only 9 if, it can properly allege actual effects of Subaru’s alleged 10 breach that the Stipulated Agreement’s subsequent unsealing did 11 not “completely and irrevocably eradicate[],” Los Angeles County, 12 440 U.S. at 631. 13 However, Subaru’s declaratory relief counterclaim is 14 entirely duplicative of its breach of contract claim. (See 15 Countercl. @ 46 (requesting declaration that Courtesy has 16 | breached its express and implied obligations stemming from 17 confidentiality provision).}) Accordingly, the court will dismiss 18 Subaru’s declaratory relief counterclaim with prejudice. 19 IT IS THEREFORE ORDERED that Courtesy’s motion to 20 dismiss counterclaims (Docket No. 36) be, and the same hereby is, 21 GRANTED. Subaru’s counterclaims (Docket No. 35-1) are DISMISSED. 22 Counterclaim 1 is dismissed without prejudice to plaintiff filing 23 an amended counterclaim consistent with this Order within 20 days 24 from the date of this Order. Counterclaim 2 is dismissed with 25 | prejudice. 26 Dated: April 19, 2024 . blew A Ph WILLIAM B. SHUBB 28 UNITED STATES DISTRICT JUDGE