Opinion
CIVIL ACTION No. 02-3398, SECTION: E/4
April 22, 2003
ORDER AND REASONS
This matter is before the Court on defendant CRESCENT FORD TRUCK SALES, INC.'s ("Crescent") motion to dismiss complaint and/or to stay proceedings. Record doc. no. 3. Plaintiff VOLVO TRUCKS NORTH AMERICA, INC. ("Volvo") opposes the motion. Oral argument was heard on April 2, 2003. For the reasons that follow, the motion is granted in part and denied in part.
FACTS AND PROCEDURAL BACKGROUND
This lawsuit had its beginnings in a bankruptcy proceeding filed by Luciano Refrigerated Transport, Inc., ("Luciano") whose president is Mr. Louis Saia, III. Luciano was a customer of both Volvo and Crescent. Crescent is an authorized agent, franchise dealer and representative of Volvo pursuant to a written "Dealer Sales and Service Agreement" (the "dealership agreement"). On November 20, 1996, Volvo sold to Crescent, and Crescent leased to Luciano, a fleet of 50 Volvo trucks which had been built to order by Volvo for Luciano based on specifications approved by Luciano. A purchase order was prepared by Crescent and signed by Luciano before the trucks were built. At the time of the lease, Volvo extended to Luciano three written warranties: a Basic Truck Warranty extending for 42 months; a Basic Powertrain Warranty, and a VIP C Engine warranty. The Basic Truck Warranty and the Basic Powertrain Warranty were activated by a Warranty Registration Certificate (the "Certificate") which incorporated those two warranties.
A dispute arose between Luciano and Volvo in Luciano's bankruptcy. Luciano filed an adversary proceeding against Volvo alleging, inter alia, fraud on Volvo's part in its failure to honor what Luciano claimed was an oral "bumper to bumper" warranty that Saia negotiated directly with Russ Tedder, Vice President of Volvo's Southern Region. In discovery on that matter, Volvo learned that Saia had not actually signed the Warranty Registration Certificate, but that Saia's name had been signed by Glenn Koch, Sales Manager of Crescent at that time.
After Volvo learned that Koch had actually signed Saia's name to the Certificate, it filed a third party complaint against Crescent in the adversary proceeding. Volvo alleged that Koch signed Saia's name without Saia's knowledge or permission, thereby activating the warranties, in violation of an express contractual provision in Crescent's dealership agreement with Volvo.
Volvo settled with Luciano over Crescent's written objections, apparently paying for about $500,000.00 in repairs that Luciano alleged were covered by the warranties. The bankruptcy court subsequently dismissed Volvo's third party complaint against Crescent.
In August of 2002, Volvo's attorney sent a letter to Crescent's attorney which purported to be "formal and final notice" that Volvo was exercising its right to terminate the dealership agreement. Crescent responded on September 13, 2001, with an emergency petition to the Louisiana Motor Vehicles Commission ("LMVC")to enjoin Volvo's termination of the dealership agreement. Crescent's petition was set for hearing on February 27, 2003. Volvo then filed this action against Crescent on November, 13, 2002, to recoup as damages for breach of contract what it paid to Luciano in settlement, and for a declaratory judgment that it is entitled to terminate the dealership agreement because Koch's signing of Saia's name to the Certificate breached the dealership agreement. Volvo's complaint asks for declaratory judgement (1) that Crescent breached the dealership agreement, and (2) that the dealership agreement terminated as a matter of law pursuant to Louisiana Civil Code art. 2013, or alternatively, (3) that it has the right to terminate the agreement pursuant to Section 5.04 of the dealership agreement, "Termination by the Company for Cause."
Volvo claims that its defense to Luciano's adversary proceeding was at least weakened because the Warranty Registration Certificate clearly states that no oral warranties or representations can alter the limits and terms of the written warranties, therefore Volvo did not have to honor the oral warranty that Saia claimed Tedder negotiated. If Saia did not actually sign the Certificate, he could not be held to its terms.
La. Civ. Code art. 2013 provides in pertinent part that "[w]hen the obligor fails to perform, the obligee has the right to the judicial dissolution of the contract or, according to the circumstance, to regard the contract as dissolved."
At its hearing on February 27, 2003, the LMVC found that Crescent had "violated" its dealership agreement with Volvo, but, pursuant to § 1254(N)(c) of its regulatory statues, determined that the violation was not "just cause" for Volvo's termination of the dealership agreement with Crescent. Volvo has indicated to the court that it intends to appeal the LMVC's decision in state court.
Meanwhile, Crescent filed this motion to dismiss pursuant to F. Rule Civ. P. 12(b)(1) on February 21, 2003. Crescent moves to dismiss Volvo's declaratory judgment action asserting its right to terminate the dealership agreement, and to stay Volvo's action for damages for Crescent's alleged breach of the dealership agreement.
ANALYSIS
A motion to dismiss pursuant to Rule 12(b)(1) challenges the court's subject matter jurisdiction. The question of subject matter jurisdiction is for the court to decide. Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir.), cert. denied, 454 U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981). The party invoking federal subject matter jurisdiction bears the burden of establishing that jurisdiction. St. Paul Reinsurance Company, Ltd. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998), citing Gaitor v. Penninsular Occidental Steamship Co., 287 F.2d 252, 253-54 (5th Cir. 1961). Dismissal for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) can be based on (1) the complaint alone; (2) the complaint supplemented by undisputed facts; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts.Williamson, 465 F.2d at id.
Volvo's claim of federal jurisdiction is based on 28 U.S.C. § 1332. Crescent concedes that, on its face, Volvo's complaint establishes diversity jurisdiction, but argues that the court must look to the facts outside of the complaint to determine its jurisdictional challenge on its merits.
I. Volvo's declaratory judgment action
Volvo argues that its declaratory judgment action does not challenge the LMVC's exercise of its statutory regulatory authority, but merely asserts its right to litigate Volvo's claimed right to terminate the dealership agreement as a contract dispute pursuant to Louisiana private law outside of the regulatory authority of the LMVC.
Crescent argues that dismissal for lack of jurisdiction is proper on three bases: (1) failure to exhaust administrative remedies; (2) the doctrine of primary jurisdiction; or (3) the Burford abstention doctrine.
The administrative exhaustion doctrine is a judicially created rule limiting jurisdiction. It provides "that no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted." Rodgers v. Columbia/HCA of Central Louisiana, Inc., 961 F. Supp. 960, 965 (W.D.La. 1997). "Exhaustion applies 'where a claim is cognizable in the first instance by an administrative agency alone' and the court considers the factual and legal issues only after completion of the administrative process." Id., (citation omitted). On the other hand, the doctrine of primary jurisdiction applies where a claim is originally cognizable in court, but "enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body. . . ." Id. at pp. 695-96 (citation omitted). TheBurford abstention doctrine provides:
Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098 (1943).
[w]here timely and adequate state-court review is available, a federal court sitting in equity must decline to interfere with the proceedings or orders of state administrative agencies; (1) where there are 'difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar'; or (2) where the 'exercise of federal review of the question in a case and in similar cases would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern.'St. Paul Ins. Co. v. Trejo, 39 F.3d 585, 588 (5th Cir. 1994) (quoting New Orleans Public Serv. Inc. v. Council of New Orleans, 491 U.S. 350, 361, 109 S.Ct. 2506, 2514 (1989) (citing Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 813-14, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976)). Each of these doctrines presumes the original jurisdiction of this court, and are therefore inapplicable.
The source of the substantive rights enforced by a federal court sitting in diversity is the law of the States. Guaranty Trust Co. of New York v. York, 326 U.S. 99, 112, 65 S.Ct. 1464, 1471 (1945); Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). When adjudicating a state created right, a federal court "cannot afford recovery if the right to recover is made unavailable by the State nor can it substantially affect the enforcement of the right as given by the State." Guaranty Trust Co., 326 U.S. at 108-09, 65 S.Ct. at 1469-70.
Louisiana law regulates all aspects of the distribution and sale of motor vehicles pursuant to the Motor Vehicle Law, LSA-R.S. § 32:1251 et seq. Louisiana Motor Vehicle Commission v. The Wheeling Frenchman, 103 So.2d 464, 469 (La. 1958) ("[T]he production, transportation and marketing of automobiles is unquestionably a proper subject for regulation by the Legislature under its police power.") The Louisiana Supreme Court has explained: "Simply stated, the purpose of the law was 'to furnish the dealer with some protection against unfair treatment by the manufacturer.' The legislative purpose of providing automobile dealers with some safeguards in their transactions with automobile manufacturers is clearly evidenced in the scheme itself." Benson Gold Chev. v. Motor Veh. Com'n, 403 So.2d 13, 16 (La. 1981).
In The Wheeling Frenchman, the Louisiana Supreme Court observed that "[t]he right of the manufacturer to choose its dealers is merely the right of the freedom of contract." 103 So.2d at 469. The Louisiana Civil Code defines a contract simply as "an agreement by two or more parties whereby obligations are created, modified, or extinguished." La. Civ. Code art. 1906. The Code lists several different species of contract, both nominate and innominate. See articles 1907-1913. While all contracts are generally subject to the rules of the Title "Conventional Obligations and Contracts", article 1915, "[n]ominate contracts are subject to the special rules of the respective titles when those rules modify, complement, or depart from the rules of this title." La. Civ. Code art. 1916; Phillipe v. Lloyd's Aero Bolivano, No. CA 90-1139 (Oct. 18, 1991), 589 So.2d 536, 543 (La.App. 1st Cir. 1991), writ denied, 590 So.2d 594 (1992).
The contract at issue is such a contract subject to special rules — it is a dealership agreement, that is, a franchise agreement between a motor vehicle manufacturer and a dealer. Motor vehicle manufacturers and dealers must be licensed by the State through the Louisiana Motor Vehicle Commission ("LMVC"). LSA-R.S. § 32:1254N(1)(a). State law prohibits a motor vehicle manufacturer or distributor from threatening to cancel, or from unfairly canceling the franchise of any dealer. LSA-R.S. § 32:1254N(6)(b). The LMVC has exclusive statutory authority to determine, after an appropriate administrative procedure., whether a dealer has violated, or is threatening to violate this provision of the statute. LSA-R.S. § 32:1253E. The LMVC is authorized to order the renewal or reinstatement of a canceled franchise agreement, and to issue a cease and desist order prohibiting proscribed conduct. LSA-R.S. § 32:1256G(1) I. Judicial review of the orders of the LMVC is available in state court, initially in the 24th Judicial District Court in Jefferson Parish, the domicile of the LMVC. LSA-R.S. § 32:12531.
Pursuant to state law, Volvo's substantive right to litigate its claim that it has the right to terminate Crescent's franchise agreement is limited to the appropriate administrative procedure before the LMVC, and to judicial review in the state court, as specified by LSA-R.S. § 32:1251 et seq. Federal court cannot provide other or additional relief. Volvo's suit for a declaratory judgment must be dismissed for lack of jurisdiction.
In Joe Conte Toyota, Inc. v. Toyota Motor Sales, U.S.A., 1994 WL 67896 (E.D.La. 1994), a motion to remand was before the court. Plaintiff filed suit in state court, including the LMVC as a defendant, seeking an injunction preventing the LMVC from terminating its license. Defendant removed, asserting fraudulent joinder of the LMVC. The court held that it had no diversity jurisdiction because the LMVC was a real party in interest since pursuant to substantive state law, only the LMVC was empowered to provide the relief plaintiff sought by way of injunction.
II. Volvo's complaint for damages
Volvo's claim for money damages for Crescent's alleged breach of the dealership agreement is a different matter. Crescent argues that the claim should be stayed pending outcome of the state regulatory proceedings, including judicial review of the LMVC's decision on the termination issue. Volvo argues that the Louisiana Motor Vehicle law, as administered by the LMVC, offers no remedy in the form of money damages for an alleged breach of the dealership agreement, and that the LMVC has already decided that Crescent violated the dealership agreement although it denied Volvo's claim that the violation entitled Volvo to terminate the dealership agreement.
The LMVC has the authority to suspend or revoke a license issued and to impose a civil penalty after due administrative proceedings. LSA-R.S. § 32:1256B. It is expressly empowered and authorized to order the renewal or reinstatement of a franchise, to order the issuance of a franchise, and to enter a cease and desist order prohibiting proscribed conduct. LSA-R.S. § 32:1256G I. The LMVC may render judgment for costs against any party to its administrative proceedings, which "shall include but not be limited to court reporter fees, commission attorney fees, the mileage and per diem of the commissioners, and other applicable and reasonable costs." LSA-R.S. § 32:1256H. There is no statutory provision for money damages for breach of contract even upon a legal determination by the LMVC that a contract has been violated.
While a federal court cannot take jurisdiction where it has none, neither can it decline to exercise jurisdiction where it is given. New Orleans Public Serv. Inc., 109 S.Ct. at 2513 (citation omitted.) Diversity jurisdiction exists as to Volvo's claim for money damages for breach of contract. This court is capable of applying Louisiana contract law to that issue. The LMVC administrative proceeding is complete, pending judicial review. There are no complex regulatory statutes nor any difficult questions of state law to be addressed. The legal and factual issues are not dependent on any question pending before or decided by the LMVC, or to be considered on state judicial review of the decision of the LMVC. There is no just reason to stay Volvo's claim for money damages for breach of contract.
Accordingly,
IT IS ORDERED that Crescent Ford Truck Sales, Inc.'s motion to dismiss Volvo Truck North America, Inc.'s complaint for declaratory judgment (1) that Crescent breached its Dealer Sales and Service Agreement with Volvo Trucks, (2) that the Dealer Sales and Service Agreement terminated by operation of law under La. Civ. Code art. 2013, or alternatively (3) that Volvo Trucks is entitled to terminate the Dealer Sales and Service Agreement under the provisions of that Agreement is GRANTED; and
IT IS FURTHER ORDERED that Crescent Ford Truck Sales, Inc.'s motion to stay Volvo Truck North America, Inc.'s complaint for damages for breach of contract is DENIED.