Case: 22-108 Document: 22 Page: 1 Filed: 03/09/2022
United States Court of Appeals for the Federal Circuit ______________________
IN RE: VOLKSWAGEN GROUP OF AMERICA, INC., Petitioner ______________________
2022-108 ______________________
On Petition for Writ of Mandamus to the United States District Court for the Western District of Texas in No. 6:20- cv-01131-ADA, Judge Alan D. Albright.
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IN RE: HYUNDAI MOTOR AMERICA, Petitioner ______________________
2022-109 ______________________
On Petition for Writ of Mandamus to the United States District Court for the Western District of Texas in No. 6:20- cv-01125-ADA, Judge Alan D. Albright. ______________________
ON PETITION ______________________
MARK A. HANNEMANN, Shearman & Sterling LLP, New York, NY, for petitioner Volkswagen Group of America, Inc. Also represented by AHMED ELDESSOUKI, ERIC SEBASTIAN LUCAS, THOMAS R. MAKIN.
RYAN KEN YAGURA, O'Melveny & Myers LLP, Los Case: 22-108 Document: 22 Page: 2 Filed: 03/09/2022
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Angeles, CA, for petitioner Hyundai Motor America. Also represented by CLARENCE ROWLAND, NICHOLAS WHILT.
MICHAEL SONGER, White & Case LLP, Washington, DC, for respondent StratosAudio, Inc. Also represented by HENRY HUANG, HALLIE ELIZABETH KIERNAN, JONATHAN J. LAMBERSON, Palo Alto, CA; DANIEL STERNBERG, Boston, MA.
MARK S. DAVIES, Orrick, Herrington & Sutcliffe LLP, Washington, DC, for amicus curiae Alliance for Automotive Innovation. Also represented by ALEXANDRA BURSAK, New York, NY.
Before DYK, REYNA, and CHEN, Circuit Judges. PER CURIAM. ORDER Volkswagen Group of America, Inc. (Volkswagen or VW) and Hyundai Motor America (Hyundai or HMA) (col- lectively, the “Petitioners”) both seek a writ of mandamus to vacate the United States District Court for the Western District of Texas’s denial of their motions to dismiss or transfer for improper venue. The district court held venue was proper over each car distributor under 28 U.S.C. § 1400(b). The court based that conclusion on the presence of independently owned and operated Volkswagen or Hyundai car dealerships in the Western District of Texas, determining those independent dealerships constituted “a regular and established place of business” of the Petition- ers. § 1400(b). Because there has been disagreement on this issue in the district courts, we deem it appropriate to now take up the issue. We conclude that the district court clearly abused its discretion in failing to properly apply es- tablished agency law and reaching a patently erroneous re- sult. We therefore grant both petitions. Case: 22-108 Document: 22 Page: 3 Filed: 03/09/2022
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I. In December 2020, StratosAudio, Inc. (Stratos) filed these patent infringement complaints in the United States District Court for the Western District of Texas, Waco Di- vision, against Volkswagen and Hyundai, car distributors that are incorporated in New Jersey and California, respec- tively, and hence do not “reside[]” for venue purposes in the Western District. 28 U.S.C. § 1400(b); TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514 (2017). Volkswagen and Hyundai moved to dismiss or transfer the cases under 28 U.S.C. § 1406(a) and Federal Rule of Civil Procedure 12(b)(3). The district court denied the motions, concluding that venue in the Western District over Volkswagen and Hyun- dai was proper. It reached that conclusion based on inde- pendent car dealerships located in the Western District that sell and service cars after purchasing them from the Petitioners under franchise agreements imposing, inter alia, transfer restrictions, staffing and reporting require- ments, minimum inventory levels, employee training, and equipment requirements on the dealerships. The district court concluded those agreements gave the Petitioners suf- ficient control over the dealership locations to establish a regular and established place of business of the Petitioners despite the fact that Texas law prohibits auto manufactur- ers and distributors from directly or indirectly “operat[ing] or control[ling] a franchised dealer or dealership.” Tex. Occ. Code (TOC) § 2301.476(c)(2)(A). In so doing, the district court found that the agree- ments give Petitioners sufficient control over dealership operations such that the dealerships are agents of the dis- tributors. See 2022-108 Appx (VW Appx) 8–10; 2022-109 Appx (HMA Appx) 397–99. Based on similar facts, the dis- trict court found that Petitioners had ratified the dealer- ships as their own places of business. See VW Appx 4–8; HMA Appx 391–97. Additionally, the district court deter- mined that the dealerships are conducting Petitioners’ business because Volkswagen and Hyundai are “in the business of manufacturing and distributing vehicles to Case: 22-108 Document: 22 Page: 4 Filed: 03/09/2022
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consumers” and “the only way that [Volkswagen and Hyun- dai] can distribute [their] vehicles to consumers in this Dis- trict is through [their] authorized dealerships in this District.” VW Appx 10; HMA Appx 399. It similarly found the dealerships conducted Petitioners’ business of provid- ing “new purchase warranties and services to the consum- ers through [their] dealerships,” VW Appx 10; HMA Appx 399, and in the case of Volkswagen, “establish[ing] the pro- cedures for processing warranty claims and returning and disposing of defective parts,” “requir[ing] its dealers to com- ply with such procedures,” and “determin[ing] the rate or price at which a . . . dealer will be reimbursed for services,” VW Appx 10. Volkswagen and Hyundai each petitioned this court for a writ of mandamus. The two cases are now consolidated in this court. Both present similar challenges to the dis- trict court’s conclusions that the dealerships are Petition- ers’ agents, that Petitioners ratified the dealerships as their own places of business, and that Petitioners’ business is conducted from the dealership locations. Volkswagen asks us to vacate the denial of its motion and instruct the district court to dismiss or transfer the action to the United States District Court for the Eastern District of Michigan. Hyundai asks the court to direct dismissal of its case. II. A. Pursuant to the All Writs Act, this court “may issue all writs necessary or appropriate in aid of [our] respective ju- risdiction[] and agreeable to the usages and principles of law.” 28 U.S.C. § 1651(a). Before a court may issue a writ, three conditions must be satisfied: (1) the petitioner must have “no other adequate means to attain the relief he de- sires”; (2) the petitioner must show that the right to the writ is “clear and indisputable”; and (3) the court “in the exercise of its discretion, must be satisfied that the writ is appropriate under the circumstances.” Cheney v. U.S. Dist. Ct. for D.C., 542 U.S. 367, 380–81 (2004) (citation and in- ternal quotation marks omitted). Case: 22-108 Document: 22 Page: 5 Filed: 03/09/2022
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Ordinarily, mandamus relief is not available for rul- ings on motions under 28 U.S.C. § 1406(a). See In re HTC Corp., 889 F.3d 1349, 1352–53 (Fed. Cir. 2018) (“Unlike a defendant challenging the denial of a § 1404(a) transfer motion, a defendant aggrieved by the denial of an im- proper-venue motion has an adequate remedy on appeal from a final judgment.”). However, “[m]andamus may be used in narrow circumstances where doing so is important to ‘proper judicial administration,’” In re Micron Tech., Inc., 875 F.3d 1091, 1095 (Fed. Cir. 2017) (quoting La Buy v. Howes Leather Co., 352 U.S. 249, 259–60 (1957)), such as when there are “a significant number of district court decisions that adopt conflicting views on the basic legal is- sues presented in th[e] case” at hand, In re Google LLC, 949 F.3d 1338, 1342 (Fed. Cir. 2020) (Google II). Here, given the disagreement among district courts on the recurring is- sue of whether independent car dealerships are sufficient to establish venue over car distributors, compare Omega Pats., LLC v. Bayerische Motoren Weke AG, 508 F. Supp. 3d 1336 (N.D. Ga. 2020) (finding venue improper); W. View Rsch., LLC v. BMW of N. Am., LLC, Case No. 16-cv-2590, 2018 WL 4367378 (S.D. Cal. Feb. 5, 2018) (same), with Arigna Tech. Ltd. v. Volkswagen AG, Case No. 2:21-cv- 00054-JRG, Dkt. Nos. 415 & 424 (E.D. Tex. Jan. 18 & 20, 2022) (report and recommendations finding venue proper) 1; Blitzsafe Tex., LLC v. Bayerische Motoren Werke AG, Case No. 2:17-cv-00418-JRG, 2018 WL 4849345 (E.D. Tex. Sept. 6, 2018), vacated, 2019 WL 3494359 (E.D. Tex. Aug. 1, 2019) (same)), we determine that these cases
1 In a related case involving similar venue consider- ations, the same district court has stayed the proceeding to “gain the benefit of [the] guidance” provided herein. Arigna Tech. Ltd. v. Bayerische Motoren Werke AG, Case No. 2:21-cv-00172, Dkt. No. 179 at 2 (E.D. Tex. Feb. 1, 2022) [hereinafter Arigna ’172]. Case: 22-108 Document: 22 Page: 6 Filed: 03/09/2022
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involve exceptional circumstances warranting immediate review. 2 B. The burden to establish venue in patent infringement cases rests with the plaintiff. See Westech Aerosol Corp. v. 3M Co., 927 F.3d 1378, 1382 (Fed. Cir. 2019). Whether venue is appropriate in a patent infringement action is unique to patent law and therefore Federal Circuit law ap- plies. See Celgene Corp. v. Mylan Pharms. Inc., 17 F.4th 1111, 1119 n.4 (Fed. Cir. 2021); In re Cray Inc., 871 F.3d 1355, 1360 (Fed. Cir. 2017). Section 1400(b) provides, in relevant part, that “[a]ny civil action for patent infringement may be brought in the judicial district where . . . the defendant has committed acts of infringement and has a regular and established place of business.” The regular and established place of business inquiry has three general requirements:
2 The at least four disparate inter-district determi- nations on the specific issue presented here, in combination with a district court staying another case “until the Federal Circuit issues further guidance on the[se] venue issues,” Arigna ’172, distinguishes the instant case from In re Google LLC, No. 2018-152, 2018 WL 5536478, at *3 (Fed. Cir. Oct. 29, 2018) (Google I). Google I declined to entertain a venue challenge where there were only a “paucity of dis- trict court cases that ha[d] so far addressed the issue,” such that there was not, at the time, “almost-even disagreement among a large number of district courts” warranting the extraordinary remedy of mandamus. Id. The circum- stances present here are more akin to Google II, where the court exercised its discretion to provide guidance on the same issue present in Google I, based on the intervening two years producing “a significant number of district court decisions that adopt conflicting views” that “crystallized and brought clarity to the issues.” Google II, 949 F.3d at 1342–43. The inter- and intra-district uncertainty on this issue thus warrants mandamus review in this case. Case: 22-108 Document: 22 Page: 7 Filed: 03/09/2022
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“(1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant.” Cray, 871 F.3d at 1360. The second Cray factor requires “the regular, physical presence of an employee or other agent of the de- fendant conducting the defendant’s business at the alleged ‘place of business.’” Google II, 949 F.3d at 1345. We con- sider whether these requirements are met with the under- standing that the Supreme Court has repeatedly cautioned against a broad reading of the patent venue statute. See Schnell v. Peter Eckrich & Sons, Inc., 365 U.S. 260, 264 (1961); Stonite Prods. Co. v. Melvin Lloyd Co., 315 U.S. 561, 566 (1942). Petitioners do not challenge that Stratos has ade- quately alleged infringement within the Western District for venue purposes. And Petitioners do not dispute that the dealership locations are physical places within the Western District. Nor do they dispute that those physical places are regular and established places of business for the dealerships. The dispute thus boils down to three is- sues: (1) whether the dealerships are the agents of Peti- tioners; (2) whether the dealerships conduct Petitioners’ business; and (3) whether Petitioners have ratified the dealerships as Petitioners’ places of business. “If any [of these] statutory requirement[s] [are] not satisfied, venue is improper under § 1400(b).” Cray, 871 F.3d at 1360. C. We hold that the dealerships located in the Western District do not constitute regular and established places of business of Volkswagen and Hyundai under § 1400(b) be- cause Stratos has failed to carry its burden to show that the dealerships are agents of Volkswagen or Hyundai un- der a proper application of established agency law. 3
3 Because Stratos has failed to show that an agent or employee of the Petitioners conducts business at the deal- erships we need not address whether the dealerships Case: 22-108 Document: 22 Page: 8 Filed: 03/09/2022
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Per Google II, “a ‘regular and established place of busi- ness’ requires the regular, physical presence of an em- ployee or other agent of the defendant conducting the defendant’s business at the alleged ‘place of business.’” 949 F.3d at 1345. Stratos does not argue that Petitioners’ em- ployees work out of the individual dealerships or that the individual dealership employees are agents of Petitioners. See Stratos VW Br. 9; Stratos HMA Br. 9. Rather, Stratos argues, and must therefore prove, that the dealership enti- ties themselves are Petitioners’ agents. See Pac. Gas & Elec. Co. v. United States, 838 F.3d 1341, 1359 (Fed. Cir. 2016) (PG&E) (“The party asserting that a relationship of agency exists generally has the burden in litigation of es- tablishing its existence.” (quoting Restatement (Third) of Agency (Restatement) § 1.02(d))). As we noted in Google II: An agency relationship is a fiduciary relationship that arises when one person (a principal) manifests assent to another person (an agent) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents to act. Restatement (Third) of Agency § 1.01. The essential elements of agency are (1) the principal’s right to direct or control the agent’s actions, (2) the manifestation of consent by the principal to the agent that the agent shall act on his behalf, and (3) the consent by the agent to act. Meyer v. Holley, 537 U.S. 280, 286, 123 S. Ct. 824, 154 L.Ed.2d 753 (2003). 949 F.3d at 1345 (internal quotation marks and alteration brackets omitted). Google II emphasized that the control required in an agency relationship is one of “interim
conduct Petitioners’ business by selling cars to consumers or providing warranty services or whether the dealership locations can be considered the places of business of Peti- tioners. Google II, 949 F.3d at 1346; Cray, 871 F.3d at 1360. Case: 22-108 Document: 22 Page: 9 Filed: 03/09/2022
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control.” Id. at 1345–46 (“The power to give interim in- structions distinguishes principals in agency relationships from those who contract to receive services by persons who are not agents.” (citing Restatement § 1.01(f)(1))). Google II further recognized that agency relationships are narrow in scope. Id. at 1346. That is, just because a party may be a principal’s agent for a particular purpose does not mean that the party is the principal’s agent for another. See Re- statement § 1.01(c) (“Only interactions are within the scope of an agency relationship affect the principal’s legal posi- tion.”). Google II’s analysis is instructive for each of these points. In Google II, the plaintiff alleged that Internet Ser- vice Providers (ISPs) who hosted Google’s servers were Google’s agents because the ISPs were contractually re- quired to install and maintain the servers in addition to providing them with network access. See 949 F.3d at 1345– 46. As to providing network access, Google II determined that the ISPs were merely “provid[ing] Google with a ser- vice, and Google has no right of interim control over the ISP’s provision of network access beyond requiring that the ISP maintain network access to the . . . servers and allow the . . . servers to use certain ports for inbound and out- bound network traffic.” Id. at 1345. The lack of interim control over how the ISPs performed this contractual duty meant “[i]n this respect, the ISPs are not the agents of Google.” Id. (citation omitted). In contrast, the installation and maintenance provi- sions of the contract between Google and the ISPs required the ISPs to perform certain discrete tasks “based on infor- mation and instructions provided from Google,” or “only with specific and direct step-by-step instructions by Google.” Id. at 1346 (citations omitted). Although the ad- ditional, specific control by Google may have been “sugges- tive of an agency relationship” with respect to those tasks, id., the court did not need to decide that question because the one-off installations could not be considered “regular and established,” see id. And the “maintenance activities Case: 22-108 Document: 22 Page: 10 Filed: 03/09/2022
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cannot, standing alone, be considered the conduct of Google’s business.” Id. The ISPs, therefore, were not Google’s agents for venue purposes for these activities ei- ther. Google II thus distinguishes between contractual pro- visions potentially evidencing interim control (step-by-step directions for maintenance and installation) and those that merely provide constraints on how a service is provided (e.g., network access). Stated differently, Google II recog- nizes that an agency relationship requires the “principal ha[ve] the right throughout the duration of the relationship to control the agent’s acts.” PG&E, 838 F.3d at 1360 (quot- ing Restatement § 1.01(c)). And the “fact that such an agreement imposes constraints on the service provider does not mean that the service recipient has an interim right to give instructions to the provider. Thus, setting standards in an agreement for acceptable service quality does not of itself create a right of control.” Restatement § 1.01(f)(1). Questions of control often arise in the context of fran- chise agreements, and courts long have recognized that “[s]ome degree of control by the franchisor over the franchi- see would appear to be inherent in the franchise relation- ship,” but “the mere existence of a franchise relationship does not necessarily trigger a master-servant relationship.” See Drexel v. Union Prescription Ctrs., Inc., 582 F.2d 781, 786 (3d Cir. 1978). What matters is “the nature and extent of such control as defined in the franchise agreement or by the actual practice of the parties.” Id. (collecting cases); 2 Franch. & Distr. Law & Prac. § 9:42 (“Where a contract establishes an independent contractor relationship rather than an agency relationship and does not grant the princi- pal control over the details of the contractor’s work, then evidence must be produced to show that despite the con- tract terms, a true relationship between the parties gave the principal a right of control.”). Google II also stands for the proposition that the con- trol analysis must account for the scope of the alleged agency. In other words, control over one aspect of a party’s Case: 22-108 Document: 22 Page: 11 Filed: 03/09/2022
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or agent’s activities does not affect the analysis of whether that party is an agent for a different activity. See Restate- ment § 1.01(c) (“Only interactions that are within the scope of an agency relationship affect the principal’s legal posi- tion.”). For example, when assessing agency based on a contractual relationship, “an agent’s duties of performance to the principal are subject to the terms of any contract be- tween them.” Nat’l Plan Adm’rs v. Nat’l Health Ins. Co., 235 S.W.3d 695, 702 (Tex. 2007) (quoting Restatement § 8.07(a)). An agreement to act on behalf of another “only for specific purposes” does not give rise to a general duty or agency for other purposes. See id. at 703. In the franchise context, for example, “the most significant factor to con- sider is the degree of control that the franchisor maintains over the daily operations of the franchisee or more specifi- cally, the ‘manner of performing the very work in the course of which the accident occurred.’” Kerl v. Rasmussen, 267 Wis. 2d 827, 839 (Wis. Ct. App. 2003) (quoting Hart v. Marriot Int’l, Inc., 304 A.D.2d 1057, 758 N.Y.S.2d 435, 438 (2003)). Here, Stratos argues that the dealerships are Hyun- dai’s and Volkswagen’s agents for conducting Petitioners’ business of (i) selling cars to consumers and (ii) providing warranty services to consumers. Assuming that is a proper characterization of the Petitioners’ business in the Western District, 4 Stratos still must show that the Petitioners have
4 Petitioners argue that their business is to sell cars to dealerships, not consumers. See VW Pet. 26 (“VWGoA is in the business of selling vehicles to dealers, not to consum- ers”); HMA Pet. 25 (“HMA is in the business of selling Hyundai-branded vehicles to independent dealerships across the country.”). And while Petitioners appear to con- cede that part of their business is reimbursing dealers for providing warranty services to consumers, they argue they are not in the business of providing warranty services at the dealership locations. See VW Pet. 20–21 (“Reimburs- ing Texas dealers for warranty service charges, although it Case: 22-108 Document: 22 Page: 12 Filed: 03/09/2022
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the requisite control over the dealerships with respect to those activities, including the right to provide “interim in- structions.” Google II, 949 F.3d at 1345–46. Stratos argues that similar contractual provisions in both the Volkswagen and Hyundai dealership agreements give Petitioners the control required for agency. These con- tractual provisions generally require the dealerships to: (1) employ certain types of employees, such as a general manager, and service and sales staff; (2) maintain a mini- mum amount of inventory; (3) perform warranty work on consumer vehicles; (4) use specified tools when performing warranty and maintenance work; (5) use distributor-ap- proved computer hardware and software; (6) comply with the distributors’ standards regarding dealership appear- ance and use of signs and brand logos; (7) comply with the distributors’ working capital requirements; and (8) attend mandatory training sessions (Hyundai) or require staff to have certain training certifications (Volkswagen). 5 Stratos further argues that the Petitioners’ conditional ability to terminate the agreements demonstrates the requisite con- trol for agency. Petitioners contend that they do not have the right to control the day-to-day operations of the dealerships, see HMA Pet. 1, 20, and that the provisions cited above are basic “quality controls” insufficient to find agency, see VW Pet. 22. They liken whatever requirements and stand- ards may exist in this case to Andra Group, LP v. Victoria’s
may be considered doing business in the state of Texas, . . . is not doing business at the dealerships for purposes of venue.”); HMA Pet. 26 (“There is no evidence suggesting that HMA conducts any warranty or service business at a physical place of business in this district. . . .”). 5 Stratos also cites Volkswagen-specific contract pro- visions requiring dealerships to use Volkswagen-approved stationery and business forms, and to keep brochures on hand and display them as dictated by Volkswagen. See, e.g., VW Appx 66. These Volkswagen-specific provi- sions do not alter our analysis in this case. Case: 22-108 Document: 22 Page: 13 Filed: 03/09/2022
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Secret Stores, L.L.C., 6 F.4th 1283, 1289 (Fed. Cir. 2021), where we found allegations of control by several parent companies over the operations of a retail subsidiary insuf- ficient to create an agency relationship. Petitioners further point to contractual provisions in each franchise agreement with the dealers disclaiming an agency relationship, VW Appx 88; HMA Appx 168, and that state the dealer- ships have complete authority over their own operations, VW Appx 88; HMA Appx 133. Petitioners also point to TEX. OCC. CODE ANN. § 2301.476(c)(2), which prohibits distribu- tors from “operat[ing] or control[ling]” car dealerships in Texas. Furthermore, TEX. OCC. CODE ANN. § 2301.003(b) states that any contractual provision that violates chapter 2301 is “unenforceable.” Thus, according to Petitioners, any interpretation of the agreements to give Petitioners control over the dealerships would make those agreements void and unenforceable as a matter of law. We need not reach whether the Volkswagen and Hyun- dai dealership agreements violate Texas law, however, as we determine that the cited contractual provisions fail to give Petitioners “interim control” over either the dealer- ships’ car sales or warranty work. Stratos has not cited any evidence that Volkswagen or Hyundai maintain influ- ence over the sales process once they have sold a car to a dealership. Once the cars leave Petitioners’ possession, Pe- titioners “retain[] no authority over the manner in—or price for—which the [car] will be [sold].” See Johnson v. Priceline.com, Inc., 711 F.3d 271, 278 (2d Cir. 2013); see also id. at 279 (finding no agency relationship between con- sumers and website operator because the consumer “re- tains no right to instruct Priceline as to how it procures hotel reservations beyond the initial specifications”). At best, Stratos cites various constraints placed on the dealer- ships that are arguably related to sales (minimum inven- tory, sales staff, displaying the parent company’s logo, providing sales reports, etc.), but none of these provisions evidence any control over the sales process itself. These provisions are akin to the constraints placed on the Google II ISPs (use of certain ports and maintaining net- work access) that failed to make the ISPs agents of Google. Case: 22-108 Document: 22 Page: 14 Filed: 03/09/2022
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949 F.3d at 1345–46; see also Johnson, 711 F.3d at 279 (“Af- ter the customer . . . delimits the choices that the service provider has the right to make . . . he cedes all other control over the reservation process to Priceline.”) (internal cita- tion, quotation marks, and alteration brackets omitted); Kerl, 267 Wis. 2d at 839 (“[T]he most significant factor to consider is the degree of control that the franchisor main- tains over the . . . manner of performing the very work in the course of which the accident occurred.”). And, unlike Google II’s maintenance and installation provisions, there are no “step-by-step” instructions from Petitioners that dealerships must follow when selling a car to a consumer. See 949 F.3d at 1346; Andra, 6 F.4th at 1289 (taking actions which benefit a separate company does not create an agency relationship unless the alleged principal “controls this process”). Indeed, Stratos has cited no evidence that undermines the franchise agreements’ provisions giving the dealerships full control over their day-to-day operations, such as sales. VW Appx 88; HMA Appx 133. Thus, the terms and conditions set forth in the franchise agreements fail to give rise to an agency relationship between the Petitioners and dealerships when it comes to selling cars to consumers. See Arguello v. Conoco, Inc., 207 F.3d 803, 808 (5th Cir. 2000) (finding lack of day-to-day control by franchisor of franchisee’s opera- tions and hiring decisions precluded agency finding for al- leged customer-service-based harms); Schear v. Motel Mgmt. Corp. of Am., 61 Md. App. 670, 688 (Md. Ct. Spec. App. 1985) (holding that a franchisor’s lack of control over the “day-to-day operation” of the franchisee’s hotel pre- cluded agency finding with respect to harm caused through allegedly negligent security). Our holding is further bolstered by the relevant— though not dispositive—consideration that the parties to the franchise agreements disclaim an agency relationship. VW Appx 88; HMA Appx 168; see also PG&E, 838 F.3d at 1359 (“[I]t is well established that parties’ statements in a contract are not dispositive as to the existence of an agency relationship.”); Restatement § 1.02(b) (“Although such statements are relevant to determining whether the Case: 22-108 Document: 22 Page: 15 Filed: 03/09/2022
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parties consent to a relationship of agency, their presence in an agreement is not determinative and does not preclude the relevance of other indicia of consent.”). This result is further in accord with a near uniform body of case law finding that similar contractual provisions or allegations of control fail to show that independent deal- erships are agents of vehicle manufacturers or distributors. See Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 290 (5th Cir. 2004) (finding no agency relationship between General Motors and independent local dealership where General Motors did “not control [the dealership’s] daily op- erations”); Leon v. Caterpillar Indus., Inc., 69 F.3d 1326, 1334, 1335–36 (7th Cir. 1995) (finding no agency relation- ship between manufacturer and dealer due to an “express[] disavow[al of] an agency relationship” in a sales agreement and where dealer “manage[d] its operations completely in- dependent of supplier” and “ma[de] all of [its] day to day decisions”); Arnson v. Gen. Motors Corp., 377 F. Supp. 209, 212 (N.D. Ohio 1974) (“[T]he weight of authority, including decisions reviewing similar dealer agreements and dealer- ship operations, support the view that a franchised auto- mobile dealer, with regard to the sale of new vehicles, is an independent merchant and not an agent of the manufac- turer.” (collecting cases)); Poynor v. BMW of N. Am., LLC, 441 S.W.3d 315, 322 (Tex. App.–Dallas 2013, no pet.) (find- ing no agency between a distributor and dealership em- ployee concerning accident that occurred during a test drive, as plaintiff failed to present evidence that distributor “had the right to control [salesperson] or [dealership] dur- ing the act resulting in appellants’ injuries”). The same is true as to the dealerships’ performance of warranty services. The contractual provisions require the dealerships to perform warranty services, which are reim- bursed by Petitioners, 6 or require the dealerships to keep
6 Stratos argues the HMA agreement additionally requires “dealers [to] explain and provide a copy of warran- ties to customers at the time of sale.” Stratos HMA Br. 11 Case: 22-108 Document: 22 Page: 16 Filed: 03/09/2022
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certain parts on hand and use certain tools when perform- ing repairs. But Stratos fails to cite any language giving the Petitioners control over how the dealerships perform warranty services once those parameters are set. Petition- ers’ lack of “interim control” over how the dealerships per- form warranty work again precludes a finding that the dealerships are Petitioners’ agents for warranty services. Google II, 949 F.3d at 1345–46; Leon, 69 F.3d at 1330, 1336 (reimbursement for warranty work insufficient to create agency relationship); Theos & Sons, Inc. v. Mack Trucks, Inc., 431 Mass. 736, 744 (2000) (requirements that repairs are to “be done in a prompt and efficient manner, in accord- ance with Mack’s policies and standards, and . . . will uti- lize only parts manufactured or recommended by Mack[,] . . . are merely reflective of the ordinary desire of manufac- turers to set sufficient minimum performance and quality standards to protect the good name of their trademark that they are allowing another to display” and “do not establish, without more, the kind of close control . . . that would indi- cate that Vigor was serving as Mack’s agent for the work” (cleaned up)). In contrast, the cases cited by the district court and Stratos are distinguishable procedurally and factually. In Morano v. BMW of N. Am., LLC, 928 F. Supp. 2d 826 (D.N.J. 2013), the court denied BMWNA’s motion to dis- miss because it found the plaintiff’s allegations of agency
(citing HMA Appx 147). But the provision Stratos cites does not require dealerships to provide and explain HMA warranties. Rather, “DEALER agrees that, if it sells or in- stalls any part or accessory that is not a Hyundai Genuine Part or Accessory, . . . Dealer will clearly explain to the Customer the extent of any [third-party] warranty covering the equipment, part or accessory involved and will deliver a copy of such warranty to the Customer at the time of sale.” HMA Appx 147 (emphasis added). As Stratos does not allege that HMA’s business includes providing consum- ers third-party parts or warranty service, this provision does not bear on the instant analysis. Case: 22-108 Document: 22 Page: 17 Filed: 03/09/2022
IN RE: VOLKSWAGEN GROUP OF AMERICA, INC. 17
plausible. Id. at 838 (“If BMWNA is the entity that made the decision whether to cover certain losses—conveying that decision through the local dealer—it stands to reason that the dealer acted as BMWNA’s agent, or at least that the two acted together.”). Accordingly, we do not read Mo- rano as finding “that the dealer acted as BMWNA’s agent,” as the district court did. See VW Appx 9–10; HMA Appx 398. Further, the specific allegation in Morano—that BMWNA itself made the decision to decline Mr. Morano’s requested warranty service and instructed the dealership accordingly—is an allegation that BMWNA exerted in- terim control over the warranty process in that instance. Stevens v. Ford Motor Co., Case No. 2:18-CV-456, 2020 WL 12573279 (S.D. Tex. Nov. 2, 2020), and Kent v. Celozzi- Ettleson Chevrolet, Inc., Case No. 99 C 2868, 1999 WL 1021044 (N.D. Ill. Nov. 3, 1999), have both also been in- voked for the unremarkable proposition that independent dealerships may, in some circumstances, be considered agents of distributors or manufacturers. See VW Appx 9– 10; HMA Appx 397–98; Stratos HMA Br. 29. We can hardly disagree that when a distributor or manufacturer exercises the requisite level of control over a dealership for certain activities—control not present here for sales or warranty service—that an agency relationship can exist. That is why the district court in Morano allowed the plain- tiffs to take discovery as to whether BMWNA controlled the specific warranty rejections at issue. And why Stevens, which similarly involved allegations of a defective part, de- clined to dismiss a case where Ford was alleged to have “multiple controls over advertising and warranty and re- pair work.” 2020 WL 12573279, at *6. Unsurprisingly, Kent also declined to dismiss a claim against General Mo- tors because, “[t]hough it may be unlikely that Kent will be able to establish that General Motors made Celozzi-Ettle- son its agent with respect to the sale of extended warran- ties, . . . it is not out of the question that she will be able to do so.” 1999 WL 1021044, at *4. In light of the above, we conclude that Stratos has failed to carry its burden to show that the dealerships with the Western District are agents of either Volkswagen or Case: 22-108 Document: 22 Page: 18 Filed: 03/09/2022
18 IN RE: VOLKSWAGEN GROUP OF AMERICA, INC.
Hyundai under a proper application of established agency law. * * * For these reasons, we conclude the district court’s venue conclusions were a clear abuse of discretion for erro- neously interpreting governing law and reaching a pa- tently erroneous result. The district court declined to dismiss or transfer based entirely on its determination that the independent car dealerships in the Western District of Texas constituted regular and established places of busi- ness of Volkswagen and Hyundai. Because we reverse the only basis for the district court’s decisions to keep these cases in the Western District of Texas, we remand for the district court to now address whether to dismiss or transfer these two cases. Accordingly, IT IS ORDERED THAT: The petitions for a writ of mandamus are granted, the district court orders denying the motions to dismiss or transfer are vacated, and the case is remanded for further proceedings consistent with this order.
FOR THE COURT
March 9, 2022 /s/ Peter R. Marksteiner Date Peter R. Marksteiner Clerk of Court