Prevent USA Corp. v. Volkswagen AG

17 F.4th 653
Court of Appeals for the Sixth Circuit·Decided November 8, 2021·No. 21-1379·Published·Cited by 9 cases

Opinion

RECOMMENDED FOR PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b)

File Name: 21a0254p.06

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

PREVENT USA CORPORATION; EASTERN HORIZON │

GROUP NETHERLANDS B.V., │

Plaintiffs-Appellants, > No. 21-1379 │ │

v. │ │

VOLKSWAGEN AG; VOLKSWAGEN GROUP OF AMERICA, │ INC., │ Defendants-Appellees. │ ┘

Appeal from the United States District Court for the Eastern District of Michigan at Detroit.

No. 2:19-cv-13400—Bernard A. Friedman, District Judge.

Argued: October 21, 2021

Decided and Filed: November 8, 2021

Before: SUTTON, Chief Judge; BATCHELDER and LARSEN, Circuit Judges.

COUNSEL

ARGUED: Matthew S. Tripolitsiotis, BOIES, SCHILLER & FLEXNER, LLP, Armonk, New York, for Appellants. Sharon L. Nelles, SULLIVAN & CROMWELL LLP, New York, New York, for Appellees. ON BRIEF: Matthew S. Tripolitsiotis, BOIES, SCHILLER & FLEXNER, LLP, Armonk, New York, Duane L. Loft, Brianna S. Hills, BOIES, SCHILLER & FLEXNER, LLP, New York, New York, for Appellants. Sharon L. Nelles, Steven L. Holley, Suhana S. Han, Laura Kabler Oswell, Leonid Traps, SULLIVAN & CROMWELL LLP, New York, New York, Todd A. Holleman, MILLER, CANFIELD, PADDOCK & STONE, PLC, Detroit, Michigan, for Appellees.

No. 21-1379 Prevent USA Corp., et al. v. Volkswagen AG, et al. Page 2

OPINION

SUTTON, Chief Judge. This litigation has had two chapters, so far. Chapter one grew out of a dispute between Volkswagen, a company based in Germany, and a group of companies based in Europe, called the Prevent Group, that specializes in turning around distressed automotive parts suppliers. The seeds of the dispute, from Volkswagen’s vantage point, arose when the Prevent Group organized an effort to halt supplies of their car parts in order to obtain better terms from Volkswagen, and Volkswagen responded by opting not to do business with the affiliated companies. From the Prevent Group’s vantage point, Volkswagen engineered a boycott of its companies and violated several German and European antitrust laws in the process. Begun in 2016, this litigation initially involved claims of unfair business practices and anticompetitive behavior under German and European law and was handled by a number of German trial and appellate courts. Volkswagen has prevailed in most of these suits, and one case is still pending before the Regional Court in Frankfurt.

Chapter two began in 2019 and was initiated by two members of the Prevent Group:

Eastern Horizon Group, based in the Netherlands, and an American subsidiary (Prevent USA). The two of them sued Volkswagen and its American subsidiary in Michigan, alleging that the carmaker unfairly prevented them from acquiring distressed automotive-parts manufacturers. After determining that the Eastern Horizon Group and Prevent USA were trying to open another front on a dispute that should remain in Europe, the district court dismissed the complaint on the basis of forum non conveniens. Finding no errors of law or abuse of discretion in the district court’s weighing of the relevant factors, we affirm.

I.

Eastern Horizon Group is part of a network of companies called the Prevent Group. The group is located in Europe, and the affiliated companies specialize in turning around failing or underperforming automotive-parts suppliers. Prevent USA Corporation is a subsidiary formed to acquire distressed manufacturers in the United States, and it is headquartered out of an apartment

No. 21-1379 Prevent USA Corp., et al. v. Volkswagen AG, et al. Page 3

building in Pittsburgh, Pennsylvania. Prevent-owned companies have supplied Volkswagen, a German company, with parts for several years.

Roughly five years ago, the relationship soured. Eastern Horizon and Prevent USA (collectively Prevent USA from now on unless otherwise specified) claim that Volkswagen abruptly cancelled its contracts because the Prevent Group’s acquisition of several manufacturers threatened Volkswagen’s single-buyer status for car parts. Volkswagen used this position, Prevent USA claims, to keep the prices of its inputs low by buying only from small companies with little bargaining power. For its part, Volkswagen alleges that a Prevent company unexpectedly demanded millions of euros in additional payments in the middle of a contract and halted production when Volkswagen declined, prompting the carmaker to conclude that the Prevent Group could not be trusted as a business partner.

According to Prevent USA, Volkswagen launched a coordinated initiative called “Project 1” to impede well-resourced suppliers like the Prevent Group from acquiring distressed manufacturers. R.1 at 35. Volkswagen reportedly used a variety of means to frustrate the Prevent Group’s acquisition of struggling parts manufacturers. One of them involved option agreements that gave Volkswagen the right to purchase the target company if Volkswagen objected to a prospective buyer. Prevent USA claims that it learned about Project 1 through internal documents, including presentations and spreadsheets, that a Volkswagen executive leaked. In response to this conduct, Prevent Group companies sued Volkswagen at least five times in German courts.

Prevent USA alleges that Volkswagen’s anticompetitive efforts frustrated its plans to acquire struggling suppliers in the United States. When the Prevent Group attempted to buy the Brazilian manufacturing arm of the Michigan company Tower International, Tower’s CEO informed it that Volkswagen would have to approve the Group’s purchase of the Brazilian operations. Prevent USA also claims that Tower admitted to signing an option agreement to allow Volkswagen to purchase the Brazilian operations if a Prevent entity attempted to acquire them. Prevent USA infers that Project 1 likewise frustrated its efforts to acquire six other Michigan-based companies on a “Problematic Suppliers” list that Volkswagen kept. Id. at 45–46.

No. 21-1379 Prevent USA Corp., et al. v. Volkswagen AG, et al. Page 4

Prevent USA sued Volkswagen in federal court, alleging violations of §§ 1 and 2 of the Sherman Act and several state laws. Prevent USA alleges that Project 1 blocked the Prevent Group from profiting from potential American investments, “caused loss to Prevent’s industry goodwill and market reputation, and substantially decreased the overall market valuation of the Prevent Group.” Id. at 57.

Volkswagen moved to dismiss on forum non conveniens, among other grounds, arguing that the dispute should proceed in Germany. The district court agreed, reasoning that Germany was an adequate and available alternative forum, that the public and private interest factors favored dismissal, and that the choice of forum by the one American plaintiff (Prevent USA) merited little deference because it was merely a shell company acting as a “scouting party” for the Prevent Group. R.56 at 12–21.

II.

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Prevent USA Corp. v. Volkswagen AG, 17 F.4th 653 (6th Cir. 2021).

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