Brentlinger Enterprises v. Volvo Cars of North America, LLC
Filing
46
OPINION AND ORDER denying 34 Brentlinger's Motion for Summary Judgment & granting 35 Volvo's Motion for Summary Judgment. Signed by Judge George C. Smith on 8/25/2016. (kk)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
BRENTLINGER ENTERPRISES
D/B/A MAG VOLVO OF DUBLIN,
Plaintiff,
v.
Case No.: 2:14–CV–360
JUDGE SMITH
Magistrate Judge Jolson
VOLVO CARS OF NORTH AMERICA, LLC,
Defendant.
OPINION AND ORDER
This matter is before the Court upon Plaintiff Brentlinger Enterprises, d/b/a MAG Volvo
of Dublin’s (“Brentlinger”) Motion for Partial Summary Judgment (Doc. 34). Also pending is
Defendant Volvo Cars of North America, LLC’s (“Volvo”) Motion for Summary Judgment
(Doc. 35). Brentlinger opposed Volvo’s Motion (Doc. 38) and replied in support of its Motion
(Doc. 41). Volvo opposed Brentlinger’s Motion (Doc. 40) and replied in support of its own
Motion (Doc. 42). These matters are now ripe for review. For the following reasons, the Court
DENIES Brentlinger’s Motion and GRANTS Volvo’s Motion.
I.
BACKGROUND
This lawsuit arises out of the business relationship between Brentlinger, Brentlinger’s
Volvo dealership (“MAG Volvo”), and Volvo. Specifically, Brentlinger challenges a program of
bonus payments to Volvo dealers called the “Facility Investment Initiative” (“FII”). Brentlinger
contends that MAG Volvo’s classification within the FII and the operation of the FII violates
numerous state and federal statutes.
The parties dispute the history between Brentlinger and Volvo as it relates to MAG
Volvo’s place within the FII and thus, a short history of the business relationship is necessary.
Brentlinger is an Ohio automobile dealer who sells and services Volvo vehicles under a 2007
agreement with Volvo (the “Dealer Agreement”). Brentlinger also includes franchises which
sell, among other brands, Porsche, Audi, Volkswagen, Ferrari, BMW, and Saab vehicles. (Doc.
34-1, Brentlinger Aff. at ¶¶ 2–4). Volvo is a Delaware corporation who makes and distributes
Volvo vehicles.
(Doc. 1, Compl. at 6).
The Dealer Agreement arose when Brentlinger
purchased a Volvo franchise from Segna Volvo in 2007. (Doc. 34-1, Brentlinger Aff. at ¶ 5).
Volvo’s approval of the sale required Brentlinger to operate a stand-alone Volvo
dealership and required that MAG Volvo comply with a Volvo design standards program called
Volvo Next Face. (Doc. 34-28, Volvo Conditional Approval of Sale). Brentlinger later agreed
with Volvo to move MAG Volvo to Brentlinger’s Dublin, Ohio campus on Perimeter Loop
Drive. (Doc. 34-1, Brentlinger Aff. at ¶ 6). Although Brentlinger initially pledged to build a
standalone building for MAG Volvo, Volvo later approved a modified plan in which Brentlinger
would include MAG Volvo as part of another building on the Brentlinger campus. (Id.). MAG
Volvo’s new location was part of a four story expansion of an existing building at the Brentlinger
Campus. (Id.). Although Volvo agreed to allow Brentlinger to move MAG Volvo to the
Brentlinger campus, it still required MAG Volvo to comply with Volvo Next Face. (Id. at ¶ 8).
In May 2010, Volvo sent a letter to Brentlinger stating:
[T]he exterior plans for the Volvo expansion do not meet our requirements for
Volvo Next Face design. Should we in the future have compensation or margin
programs tied specifically to Volvo Next Face facility standards, your exterior
facility plans as submitted may not be in compliance and therefore may not meet
eligibility. However, the interior plan for the Volvo expansion is in compliance
with the current Volvo Next Face requirements.
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(Doc. 34-7, Volvo May 3, 2010 Ltr. To MAG Volvo). However, Volvo ultimately excused
Brentlinger from complying with Volvo Next Face when it became clear that compliance at that
time was not practicable due to the zoning requirements of the City of Dublin. (Doc. 34-1,
Brentlinger Aff. at ¶ 15).
In 2013, Volvo created an incentive program called the Volvo Performance and Growth
Strategy (“VP&GS”) which awarded different bonuses to dealerships based on the dealership’s
classification into one of four categories. (See Doc. 34-12, VP&GS Guide). Each category was
based on the type of facility of each dealership.
(Id. at 3–5).
The highest tier was
“Exclusive/Metro” followed by “Dedicated,” “Shared,” and “Universal.” (Id.). Following an
assessment by Volvo, MAG Volvo’s only Volvo competitor in Columbus, Byers Volvo
(“Byers”), was designated “Exclusive” and MAG Volvo was designated as “Shared.” (Doc. 348, MAG Volvo Assessment; Doc. 34-9, Byers Assessment; Doc. 34-13, July 19, 2013 Volvo Ltr.
to Brentlinger). Volvo never implemented VP&GS for reasons irrelevant to this case but instead,
replaced VP&GS with the a bridge program for the last few months of 2013. (Doc. 45-4, Neu
Dep. at 40) In 2014, Volvo replaced the bridge program with the FII.
The FII used classification tiers similar to the VP&GS tiers titled “VNF Exclusive,”
“VNF Customer Facing Dedicated,” “VNF Customer Facing Shared,” and “Universal/Nonbranded.” (Doc. 34-16, FII Guide, PAGEID# 432). Because the standards for each tier did not
change, Byers again received a higher classification, “VNF Exclusive,” while MAG Volvo
received “VNF Customer Facing Shared.” (See Doc. 34-12, VP&GS Guide; Doc. 34-16, FII
Guide). These designations are not without consequence under the FII, as the bonus payments
for car sales are directly linked to a dealership’s classification.
(Doc. 34-16, FII Guide,
PAGEID# 432). A “VNF Exclusive” dealership receives $500 per qualified car sale while a
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“VNF Customer Facing Shared” dealership receives $250 per car.
(Id.).
However, the
classification system in the FII reaches beyond the payments provided when a dealer sells a new
Volvo. Volvo’s XC90 first came out in 2014 and are high-in-demand models. Volvo sent out an
“XC90 Demonstrator, Pre-Sell, and Allocation Policy” (“Allocation Policy”) on October 14,
2014 which noted that Exclusive dealers would receive “a 35% override on all allocations” while
Customer Facing Shared dealers such as MAG Volvo would receive a 20% override on
allocations. (Doc. 34-17, Allocation Policy at 5). Additionally, Exclusive dealers received two
XC90 demonstrator vehicles while MAG Volvo received only one demonstrator XC90. (Id. at
2).
Brentlinger brought this suit alleging that the Allocation Policy and the FII violate the
Ohio Motor Vehicle Franchise Act (“OMVFA”) codified at Ohio Revised Code 4517.59, et seq.,
the Robinson-Patman Act (“RPA”) codified at 15 U.S.C. 13, et seq., and the Automobile
Dealer’s Day in Court Act (“ADDCA”) codified at 15 U.S.C. § 1222, et seq.
Summary
judgment motions were filed by both parties and the case is now ripe for review.
II.
STANDARD OF REVIEW
Both parties moved for summary judgment pursuant to Rule 56 of the Federal Rules of
Civil Procedure. Summary judgment is appropriate “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a). The Court’s purpose in considering a summary judgment motion is
not “to weigh the evidence and determine the truth of the matter” but to “determine whether
there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). A
genuine issue for trial exists if the Court finds a jury could return a verdict, based on “sufficient
4
evidence,” in favor of the nonmoving party; evidence that is “merely colorable” or “not
significantly probative,” however, is not enough to defeat summary judgment. Id. at 249-50.
The party seeking summary judgment shoulders the initial burden of presenting the court
with law and argument in support of its motion as well as identifying the relevant portions of
“‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any,’ which it believes demonstrate the absence of a genuine issue of material fact.”
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed. R. Civ. P. 56). If this initial
burden is satisfied, the burden then shifts to the nonmoving party to set forth specific facts
showing that there is a genuine issue for trial. See Fed. R. Civ. P. 56(e); Cox v. Kentucky Dep’t of
Transp., 53 F.3d 146, 150 (6th Cir. 1995) (after burden shifts, nonmovant must “produce
evidence that results in a conflict of material fact to be resolved by a jury”). In considering the
factual allegations and evidence presented in a motion for summary judgment, the Court must
“afford all reasonable inferences, and construe the evidence in the light most favorable to the
nonmoving party.” Id.
That the parties have filed cross-motions for summary judgment does not alter the
Court’s standard of review. See Taft Broad. Co. v. United States, 929 F.2d 240, 248 (6th Cir.
1991) (“[T]he standards upon which the court evaluates the motions for summary judgment do
not change simply because the parties present cross-motions.”). Thus, in reviewing crossmotions for summary judgment, the Court must still “evaluate each motion on its own merits and
view all facts and inferences in the light most favorable to the non-moving party.” Wiley v.
United States, 20 F.3d 222, 224 (6th Cir. 1994).
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III.
DISCUSSION
Brentlinger moved for partial summary judgment on its Fourth, Fifth, Sixth, and Eighth
claims. Volvo moved for summary judgment as to all of Brentlinger’s claims. The Court will
first address the price discrimination claims by Brentlinger as the parties spend the majority of
the briefing on those claims then will move to the remaining claims.
A.
Price Discrimination Claims
Brentlinger brings price discrimination claims under two statutes: Ohio Revised Code
sections 4517.59(A)(8), 4517.59(B), and section 13 of the RPA.
Both parties moved for
summary judgment on Brentlinger claims under sections (A)(8) and (B) of the OMVFA and
Volvo moved for summary judgment on the RPA claims.
Ohio Revised Code section 4517.59(A)(8) makes it illegal for any dealer to:
[f]ail or refuse to make equally available to its same line-make franchisees all
motor vehicles, motor vehicle parts, or other products manufactured for that linemake at the same actual price, or to utilize any device including, but not limited
to, sales promotion plans or programs that result in such lesser actual price . . . .
The only limitation to this prohibition is that “incentive programs or other discounts” which “are
reasonably available to all franchisees in this state on a proportionately equal basis and are based
on the sale of individual vehicles and not increased for meeting a performance standard unless
the standard is reasonable considering all existing circumstances,” are legal. Id. Additionally,
Ohio also makes it unlawful for a dealer to “discriminate among the franchisor’s dealers in any
program that provides assistance to the franchisor’s dealers, including internet listings, sales
leads, warranty policy adjustments, marketing programs, and dealer recognition programs.”
Ohio Rev. Code § 4517.59(B). It is not clear if FII is a “dealer recognition program” or if it is a
“sales promotion plan or program” because those terms are undefined in the Ohio statute. The
FII seems to fall into both categories when using the traditional meanings of the words of “dealer
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recognition program” and “sales promotion plan or program.” The FII recognizes a dealer for
the dealer’s exclusivity by putting the dealer in a certain category. However, it is also a sales
promotion plan or program because it provides an incentive to dealers to sell more cars and
provides a payment which is directly and proportionately related to sales. Accordingly, the
Court finds that the FII must comply with both Ohio Revised Code sections 4517.59(A)(8) and
(B).
Similarly, under the RPA, it is:
unlawful for any person . . . either directly or indirectly, to discriminate in price
between different purchasers of commodities of like grade and quality, . . . where
the effect of such discrimination may be substantially to lessen competition or
tend to create a monopoly in any line of commerce, or to injure, destroy, or
prevent competition with any person who either grants or knowingly receives the
benefit of such discrimination, or with customers of either of them . . . .
15 U.S.C. § 13(a). Although not codified in the statute, a “functionally availability” defense to
the RPA has emerged from the case law surrounding the RPA. The functional availability
defense is nothing more than an attack on “two essential elements of a § 13(a) claim.” Smith
Wholesale Co. v. R.J. Reynolds Tobacco Co., 477 F.3d 854, 866 (6th Cir. 2007). Those two
elements are “either no price discrimination has occurred, or that the discrimination is not the
proximate cause of the injury.” Shreve Equip., Inc. v. Clay Equip. Corp., 650 F.2d 101, 105 (6th
Cir. 1981). The reasoning behind the defense is that “[i]f the lower prices afforded its competitor
were equally available to the plaintiff, any discrimination and competitive advantage suffered by
the plaintiff is attributed not to the defendant’s program but to the plaintiff’s failure to take
advantage of its opportunity to receive those prices.” Amer. Tara Corp. v. Int’l Paper Co., No.
79C1470, 1981 WL 375752, at *1 (N.D. Ill. July 30, 1981).
Brentlinger argues that there is no functional availability defense to a claim under Ohio
Revised Code section 4517.59(B) because a similar exception only exists in section
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4517.59(A)(8). While Brentlinger is correct that the plain language of section 4517.59(B) does
not explicitly contain an exception similar to the functional availability doctrine, “[u]nder the law
of Ohio, the plaintiffs must show that their damages are proximately caused by the specific
statutory provisions.” Earl Evans Chevrolet, Inc. v. Gen. Motors Corp., 74 Ohio App. 3d 266,
280, 598 N.E.2d 1187 (11th Dist. 1991) (citing Neff Lumber Co. v. First Nat’l Bank of St.
Clairsville, 122 Ohio St. 302, 305, 171 N.E. 327 (Ohio 1930)). As noted above, the functional
availability doctrine arose not as a statutory defense to an RPA claim but an attack on two of the
essential elements of an RPA claim—one being proximate cause. Accordingly, the Court holds
that when used as an attack against the element of proximate causation, the functional
availability defense is available to a defendant in a claim under Ohio Revised Code section
4517.59(B).
Unfortunately, there is a dearth of case law analyzing Ohio Revised Codes sections
4517.59(A)(8) and (B) and their similarities with the RPA. Additionally, no case law in Ohio
exists to explain the parameters for when a sales promotion plan or program is “reasonably
available.” The question for the Court is whether “functional availability” and “reasonably
available” are merely different phrases for the same standard or if the standards are practically
different. The Court notes that functional availability requires that a discount or program be both
theoretically and factually available to all purchasers. Edward J. Sweeney & Sons, Inc. v.
Texaco, Inc., 637 F.2d 105, 120 (3d Cir. 1980). It is difficult to imagine a scenario where a
discount is theoretically and factually available to a plaintiff but not reasonably available.
Accordingly, the Court sees no compelling reason why the terms “reasonably available” and
“functional availability” should be defined differently.
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Accordingly, the Court looks to the case law concerning “functional availability” to
determine when a program is functionally or reasonably available for the purposes of the RPA
and the OMFVA. The functional availability doctrine arose out of the Supreme Court’s decision
in Morton Salt, in which the Supreme Court actually found a discount program illegal because it
was theoretically available to small buyers, but functionally it was “so high that it was
impossible for small buyers to obtain the discounts received by large buyers.” R.J. Reynolds,
477 F.3d at 867 (citing Morton Salt, 334 U.S. at 42). As the court in R.J. Reynolds noted,
“[c]ourts have refused to find discrimination when the buyer’s inability to take advantage of the
best discount was within the control of the buyer, such as poor credit, management choices,
decisions not to hold inventory, or particular marketing strategies.” Id. at 861 (collecting cases).
In R.J. Reynolds, the plaintiffs were contesting an R.J. Reynolds (“RJR”) program which
rewarded third party sellers of RJR cigarettes whose sales of RJR cigarettes had the highest
market share of the seller’s overall cigarette sales. Id. at 858. The plaintiffs were third party
sellers whose customers preferred other brands and lower tiers of cigarettes to the RJR brand. Id.
at 859. The result was that the plaintiffs had trouble staying in the higher tiers of the RJR plan.
Id. In attempting to determine if the RJR market share program was a violation of the RPA, the
Court noted that “by definition, an incentive-based program will lead to different outcomes for
different purchasers. Incentives and concessions provide greater benefits to those purchasers
who choose to align their own competitive objectives with those of their supplier.” Id. at 866.
Both Brentlinger and Volvo assert that a New York statute in the Franchised Motor
Vehicle Dealer Act (“FMVDA”) is nearly identical to the OMVFA section at issue in this case.
Specifically, the FMVDA states that it is unlawful for a manufacturer:
to sell or offer to sell any new motor vehicle to any franchised motor vehicle
dealer at a lower actual price therefor than the actual price offered to any other
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franchised motor vehicle dealer for the same model vehicle similarly equipped or
to utilize any device including, but not limited to, sales promotion plans or
programs which result in such lesser actual price . . . This paragraph shall not be
construed to prevent the offering of incentive programs or other discounts
provided such incentives or discounts are reasonably available to all franchised
motor vehicle dealers in this state on a proportionately equal basis.”
Vehicle and Traffic Law § 463(2)(g). While mostly similar, the exception to the OMVFA
contains an additional qualifier, that the program must be “based on the sale of individual
vehicles and not increased for meeting a performance standard unless the standard is reasonable
considering all existing circumstances.” Ohio Rev. Code § 4517.59(A)(8).
Both Brentlinger and Volvo cite decisions out of New York courts which each posit are
determinative in this case but the Court does not agree. Volvo cites The Premier Collection,
LLC v. Jaguar Land Rover N. Am., LLC, a case in which franchisees sought payments which
were dependent on meeting certain building requirements set forth by the franchisor. No. 14–
CV–8329 (S.D.N.Y. June 28, 2015) (Doc. 35-5, Ex. 5 to Def.’s Mot. (“Premier Collection”)).
The similarities at the outset are notable. The franchisee owned a dealership which contained
two brand lines, Jaguar and Land Rover. Id. at 3. The franchisee and franchisor agreed that the
franchisee would build a dealership that would be compatible with the franchisor’s design and
branding guidelines. Id. For various reasons, the franchisee could not accomplish this goal. Id.
at 7–17. Later, the franchisor instituted the Business Builder Program (the “BB Program”)
which would pay a bonus of 6 or 7 percent of the manufacturer’s suggested retail price
(“MSRP”) based on a franchisee’s compliance with a set of criteria. Id. at 17. The BB Program
required that a dealer have “an approved facility or an approved facility plan.” Id. The plan had
to “meet both capacity requirements and design and image requirements.” Id. The franchisee
did not have an approved facility or plan and, accordingly, did not receive any BB Program
payments. Id. at 18. Although factual similarities exist, the legal similarities are very different.
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First, the decision denied a preliminary injunction and was not a final ruling.
Id. at 20.
Furthermore, the holding in the decision was not based on the FMVDA that is similar to Ohio
law. Id. at 28. In fact, the court noted that the franchisee did not “argue that other dealers are
being treated more favorably, nor d[id] they argue that tying BB payments to having approved
facilities is improper.” Id. Those arguments are the precise arguments made before this Court
and thus, the holding in this case provides little persuasive value regarding the application of the
“functional availability” and “reasonably available” doctrines.
Similarly, Brentlinger’s reliance on Audi of Smithtown, Inc. v. Volkswagen of Am., Inc., is
equally unpersuasive. 924 N.Y.S.2d 773 (N.Y. Sup. Ct. 2011). Audi of Smithtown concerned an
incentive program which was found to be illegal under the FMVDA because it treated new
dealerships and existing dealerships differently. The program provided monetary bonuses and
incentives based on the number of formerly leased vehicles a dealership purchased each quarter.
Id. at 775. New dealers were automatically placed at the highest level of benefits for three years,
regardless of their purchase of formerly leased vehicles. Id. A second program run by Audi was
also declared illegal because new dealers again received preferential treatment because their
benefits were based on the number of pre-owned cars sold, while existing dealers’ benefits were
based on the number of formerly leased vehicles. Id. at 775–76. The court found “[t]here is no
manner in which the bonus offered on new automobiles sales under the CPO program to new
automobile dealers is proportionately similar to the bonus offered existing dealers.” Id. at 780.
Yet, again, this case’s differences are more significant than its similarities. Besides being based
on the FMVDA which does not contain the same exception as the relevant Ohio authority, the
Audi programs at issue in Audi of Smithtown adjusted the requirements for participation in the
program based on the age of the dealership, a factor which is completely out of the control of a
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dealership. There was no argument by Audi that the program was readily or functionally
accessible to the plaintiff because it was impossible for the plaintiff to ever become a new dealer.
Brentlinger argues that the FII payments are not reasonably available to Brentlinger
because, “the full benefits under the FII are solely based upon a facility classification that is
determined solely by the Defendant.” (Doc. 34, Pl.’s Mot. at 13). Additionally, Brentlinger
argues that in order to fully comply with the FII, the changes would be “material and costly and
certain of the zoning requirements from the City of Dublin preclude full compliance with the
Defendant’s image and exclusivity requirements.” (Doc. 38, Pl.’s Opp. at 12). As Volvo has
alleged that the program is reasonably and functionally available to all franchisees, it is
Brentlinger’s burden to establish the proximate cause between the damages allegedly caused and
the alleged violation. However, Brentlinger’s arguments do not overcome Volvo’s allegation
that the full FII payments are available to MAG Volvo on the same terms as any other Volvo
dealer.
First, an argument that renovations would be costly is not evidence sufficient to
overcome a functional availability argument. Brentlinger claims that “certain non-exclusive
Volvo dealers such as MAG Volvo would necessarily have to incur substantially higher costs to
qualify for the full FII Bonus.” (Doc. 41, Pl.’s Reply at 3). But this is simply not the case.
Although Brentlinger may have to incur high costs to become Exclusive, an Exclusive Volvo
dealer such as Byers does not just appear overnight. Rather, Byers fully complied with the
Exclusive requirements before Volvo implemented FII, presumably by incurring the substantial
costs of which Brentlinger complains. In American Tara Corp. v. International Paper Co., the
court noted that when a plaintiff and the competitor have to make the same decision whether “to
suffer competitive injury if their competitors purchased at the lower price rather than assume the
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disabilities or risks in the commitment necessary to purchase at the lower price,” then the
plaintiff’s “choice, not [the] defendant’s program, [is] responsible for the price discrimination.”
Am. Tara Corp. v. Int’l Paper Co., No. 79C1470, 1981 WL 375752, at *3 (N.D. Ill. July 30,
1981).
Further, Brentlinger’s argument about high costs ignores the potential benefits an
Exclusive dealership could garner. For example, in Brentlinger’s damage report, Brentlinger
estimates that it has been damaged $112,943 in pre-trial damages and that post-trial damages
through 2023 will amount to $326,844. (Doc. 34-18, Geckil Report at 14). In total, Brentlinger
estimates that it will sustain $439,787 in damages by 2023 if Volvo continues to use the FII.
Yet, Brentlinger ignores that the damages calculations also shows the minimum amount
Brentlinger would have to gain from becoming Exclusive.
But the potential benefits
acknowledged by Brentlinger go beyond the lost sales alleged. Brentlinger also alleges that the
FII harms MAG Volvo because MAG Volvo receives fewer “high in demand new Volvo
models” than Byers and that Byers receives more demonstrator vehicles than MAG Volvo.
(Doc. 34, Pl.’s Mot.). Notably, Barry Lester, Brentlinger’s General Manager, testified that
Brentlinger build a separate Audi dealership because Audi promised more units and “hot
product[s]” from Audi if Brentlinger built a new facility. (Doc. 45-3, Lester Dep. at 87–89). Mr.
Lester testified that the additional inventory alone paid for the new Audi building. (Id.). This
admission alone is sufficient to establish that the Exclusive level is reasonably available to
Brentlinger because they have already done something similar for another car company.
Second, Brentlinger argues that Dublin zoning laws “preclude Plaintiff from complying
with the Volvo design requirements,” and that, accordingly, the Exclusive tier is unattainable for
MAG Volvo. (Doc. 38, Pl.’s Opp. at 10). However, there is no evidence that Brentlinger has
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asked for a zoning variance to comply with FII requirements or rezoning to comply with the
Volvo design requirements to become Exclusive. Although there is evidence that Brentlinger
attempted to receive a variance to comply with Volvo Next Face design requirements when it
built the current MAG Volvo building, Brentlinger did not receive those variances and built a
facility which Brentlinger knew did not comply with Volvo design requirements anyway. (Doc.
44-3, Parish Dep. at 93, 97–98). Volvo approved the design of MAG Volvo but Brentlinger has
presented no evidence that Volvo deemed MAG Volvo in compliance with Next Face design or
the requirements to be Exclusive under FII. Rather, Volvo excused MAG Volvo’s adherence to
Next Face as a prerequisite to building a dealership and approved the facility as being allowed to
house a Volvo dealership. There is no evidence that approval has been changed or modified.
Rather, Volvo now has standards that exceed what Brentlinger was willing or able to do at the
Perimeter Loop location when the building was built.
Further, many of the published decisions in which courts found a program functionally
unavailable involved manufacturer programs which were secret or where the requirements were
unknown. See Caribe BMW, Inc. v. Bayerische Motoren Werke Aktiengesellschaft, 19 F.3d 745,
752 (1st Cir. 1994) (plaintiff was unaware of the program); DeLong Equipment Co. v.
Washington Mills Abrasive Co., 887 F.2d 1499, 1516–17 (11th Cir. 1989) (defendant had no
opportunity to buy the lower-priced item); Mueller Co. v. F.T.C., 323 F.2d 44, 46 (7th Cir. 1963)
(program had no objective standards and program requirements were influenced by concern to
protect older retailers); Allied Sales and Serv. Co. v. Global Indus. Tech., Inc., No. Civ. A. 970017, 2000 WL 726216, at *18 (S.D. Ala. May 1, 2000) (question of fact as to what the program
criteria were and if plaintiff knew of the program); Calumet Breweries, Inc. v. G. Heileman
Brewing Co., Inc., 951 F. Supp. 749, 754–55 (N.D. Ind. 1994) (program requirements changed at
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the end of each period to reward favored distributor and only favored distributor received certain
inventory). Based on all of the foregoing, the Court determines that based on the evidence
presented by Brentlinger and Brentlinger’s admission that Brentlinger built a new building for
Audi to receive more cars, the Exclusive designation under the FII is reasonably and functionally
available to Brentlinger as a matter of law. Accordingly, summary judgment in favor of Volvo is
GRANTED on Brentlinger’s Eighth Claim for relief under Ohio Revised Code section
4517.59(B) and Brentlinger’s Thirteenth Claim for relief under section 13(a) of the RPA.
Having determined that the FII is functionally available to Brentlinger, the Court must
determine if the FII is available on a “proportionately equal basis,” is based on the sales of cars,
and is increased only for a reasonable performance standard. There is no real dispute that the FII
distributes money on the basis of the number of cars sold. For example, if MAG Volvo sold zero
Volvos in a given year, it would receive zero FII payments. However, as Brentlinger argues, the
FII is decreased or increased beyond the base level depending on a dealer’s exclusivity. Again,
there is no dispute that a program is still legal under § 4517.59(A)(8) even if it provides larger
payments to some dealers so long as the increase is based on a reasonable performance standard.
Thus, the only question remaining for the Court is whether the FII constitutes an unreasonable
performance standard. Unfortunately, the OMVFA does not define “performance standard.”
The most apt definition of “performance” in Black’s Legal Dictionary is “[t]he ability of a
corporation to maintain or increase earnings,” while “standard” is defined as “[a] model accepted
as correct by custom, consent, or authority” or “[a] criterion for measuring acceptability, quality,
or accuracy.” Performance, Black’s Law Dictionary (10th ed. 2014); Standard, Black’s Law
Dictionary (10th ed. 2014).
Combining those two definitions results in a definition of
“performance standard” as “a criterion measuring acceptability, quality, or accuracy used to
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maintain or increase earnings.” Under this definition, there is no doubt that FII is a performance
standard. Volvo has provided the Court with evidence that the program is designed to reward
dealers who are fully compliant with branding because Volvo saw that branding and the quality
of showroom were holding it back in consumer reports.
(Doc. 45-4, Neu Dep. at 42).
Brentlinger’s argument that the standard is unreasonable is the same as the argument that the
program is not reasonably available—that it is expensive to comply and that zoning laws prevent
compliance. But the reasonableness requirement is arguably even less constrictive than the
reasonable availability requirement because it seems possible a performance standard could be
reasonable while still not being reasonably available to all dealers in Ohio. Regardless of such a
distinction, there is no evidence that the FII is unreasonable and thus Volvo may use the FII to
increase payouts that are determined by the sales of cars. Accordingly, the FII is legal under
Ohio Revised Code Section 4517.59(A)(8) and summary judgment is GRANTED to Volvo on
Brentlinger’s Fourth Claim.
B.
Constructive Termination Claim under Ohio Revised Code § 4517.54(A)
Volvo also moved for summary judgment on Brentlinger’s First Claim for relief under
Ohio Revised Code section 4517.54(A) which requires that any termination of a franchise be
done with good cause. Brentlinger’s claim rests on the allegation Volvo’s use of the FII amounts
to a constructive termination because the FII “will result in significant and substantial damages
to be sustained by MAG Volvo, including the destruction of MAG Volvo’s business.” (Doc. 1,
Compl. at ¶ 49). Volvo argues that a franchisee “cannot claim constructive termination while
continuing to accept the benefits of the franchise agreement.” (Doc. 35, Volvo Mot. at 14–15).
However, for the same reasons listed above, functional availability remains a bar to the element
of proximate cause in Brentlinger’s prima facie case.
See discussion infra at part III.A.
Accordingly, because the Court holds that FII is functionally available to Brentlinger,
16
Brentlinger cannot show that FII will proximately cause the destruction of MAG Volvo’s
business such that it constitutes a constructive termination. Summary judgment on Brentlinger’s
First Claim for relief is GRANTED in favor of Volvo.
C.
Good Faith Claims under Ohio Revised Code § 4517.59(A)(1) and Ohio Common
Law
Volvo also moved for summary judgment on Brentlinger’s Second and Eleventh Claims
for relief.
Brentlinger’s Second Claim for relief arises under Ohio Revised Code section
4517.59(A)(1) which states that a franchisor must act in good faith when acting “under the terms,
provisions, or conditions of a franchise or in terminating, canceling, or failing to renew a
franchise . . . .” Brentlinger’s Eleventh Claim for relief alleges a breach of the duty of good faith
and fair dealing under Ohio common law. The Court will address these two claims together. See
Transamerica Servs. Tech., Supply, Inc. v. Gen. Motors Corp., 7th Dist. Jefferson No. 02 JE 48,
2004–Ohio–560 (discussing both OMVFA and common law claims without distinction). Volvo
alleges that it has “legitimate commercial reasons to support branded and exclusive Volvo
facilities.”
(Doc. 35, Def.’s Mot. at 16).
Brentlinger argues that Volvo’s use of the FII
constitutes a failure to act in good faith because it requires dealers “to become Exclusive or be
left behind to suffer adverse economic consequences arising from the disparity in the amount of
incentive payments . . . .” (Doc. 38, Pl.’s Opp. at 22).
“Good faith” as defined in Ohio Revised Code section 4517.01(BB) is “honesty in the
conduct or transaction concerned and the observance of reasonable commercial standards of fair
dealing in the trade . . . including, but not limited to, the duty to act in a fair and equitable
manner so as to guarantee freedom from coercion, intimidation, or threats of coercion or
intimidation . . . .” “Coerce” is defined in Ohio Revised Code section 4517.01(CC) as “to
17
compel or attempt to compel by failing to act in good faith or by threat of economic harm, breach
of contract, or other adverse consequences.”
In the absence of Ohio Supreme Court guidance, the Sixth Circuit has determined that the
OMVFA “forbids manufacturers only from treating their dealers in ‘commercially unjustifiable’
ways.” Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Co., 631 F. App’x 271, 273 (6th Cir.
2015) (“Franklin Park III”1) (quoting Jim White Agency Co. v. Nissan Motor Corp. in U.S.A.,
126 F.3d 832, 834 (6th Cir. 1997) (internal quotation omitted)). Although Brentlinger argues
that Volvo “failed to offer any evidence to support the justification behind the FII and its
Exclusivity requirements,” it is not Volvo’s burden to show that the FII is commercially
justifiable. Rather, once Volvo has contested Brentlinger’s claim, it is Brentlinger’s burden to
provide evidence that the FII is commercially unjustifiable. Brentlinger has not met this burden.
Brentlinger has not provided any evidence that the FII is unjustifiable commercially. Rather,
Brentlinger admits that Volvo had an initial benchmark study performed for the FII or its
predecessor and ultimately concludes that the practical effect of the FII is to drive small
disfavored dealers out of business. But there is testimony that only 20% of Volvo’s American
dealers are Exclusive and fully branded. (Doc. 45-4, Neu Dep. at 63). Brentlinger does not deny
this fact. No reasonable jury could find that Volvo intended to drive 80% of its dealers out of
business by providing an incentive for new branding based on the available evidence.
In fact, as Brentlinger admits, the evidence submitted by Volvo discloses that Volvo
“identified a gap to remaining competitive in the luxury brand market” in the 2013 J.D. Powers
1
The Court will cite three separate decisions arising from the dispute between Franklin Park Lincoln Mercury and
Ford in the Northern District of Ohio and will refer to them in chronological order: Franklin Park Lincoln-Mercury,
Inc. v. Ford Motor Co., No. 3:09–CV–792, 2011 WL 5361738 (N.D. Ohio Oct. 31, 2011) (“Franklin Park I”), aff’d,
530 F. App’x 542 (6th Cir. 2013) (“Franklin Park II”); Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Co., 631
F. App’x 271, 273 (6th Cir. 2015) (“Franklin Park III”).
18
report. (Doc. 38, Pl.’s Opp. at 22). In fact, it is undisputed that the J.D. Power report shows that
Volvo had a -5.8% gap between it and other luxury competitive brands concerning the
appearance of its facilities. (Doc. 35-1, Neu Aff. at Ex. B.). Mr. Neu also testified that the
purpose of the VP&GS bridge program was based on the “discrepancy versus our competition
and that [] discrepancy was that the customer experience based upon facility being the biggest
gap needed to be improved and that the branding and the focus was important to the customers.”
(Doc. 45-4, Neu Dep. at 42). Further, the FII program was motivated by “the fact that we had a
gap to our competition when it came to our image and typically within our facilities and we need
to look at how we would improve that image in branding . . . .” (Id. at 63). The Court finds that
as a matter of law, an undisputed 5.8% difference in customer satisfaction regarding appearance
is a sufficient business justification to begin a program which supports those who already have
made the investment in new facilities and rewards dealers who choose to make a new investment
in their facilities consistent with Volvo’s branding decisions. Accordingly, the Court cannot find
that Volvo breached its duty of good faith under common law or the OMVFA. Volvo’s Motion
for Summary Judgment as to Brentlinger’s Second and Eleventh Claims for relief is
GRANTED.
D.
Coercion Claims under Ohio Revised Code §§ 4517.59(A)(6) and 4517.59(A)(23)
Volvo next seeks summary judgment on Brentlinger’s claims of coercion in violation of
Ohio Revised Code sections 4517.59(A)(6) and (A)(23). Volvo argues that there is no coercion
inherent in the FII because the FII only asks MAG to “decide whether it is economically more
beneficial for it to make facility changes and receive higher support payments, or not to do so
and save the cost of changing its facilities.” (Doc. 35, Def.’s Mot. at 16). Brentlinger argues that
the FII is designed to compel dealers to become exclusive but that the standard required by
Volvo is “simply unattainable” for most dealers. (Doc. 38, Pl.’s Opp. at 24).
19
Under the OMVFA, a dealer may not “. . . employ any coercive techniques for any other
purposes such as obtaining franchisee participation in contests, ‘giveaways,’ or other sales
devices . . . .” Ohio Rev. Code § 4517.59(A)(6). Also relevant to this case is Ohio Revised
Code section 4517.59(A)(23) which prohibits a franchisor from coercing a franchisee “to change
location of the dealership, or to make any substantial alterations to the dealership premises or
facilities, when to do so would be unreasonable, or without written estimation of a sufficient
supply of new motor vehicles so as to justify the location change or alterations, in light of the
current market and economic conditions.” “‘Coerce’ means to compel or attempt to compel by
failing to act in good faith or by threat of economic harm, breach of contract, or other adverse
consequences. Coerce does not mean to argue, urge, recommend, or persuade.” Ohio Rev. Code
§ 4517.01(BB). Similar to the OMVFA’s price discrimination proscription, no published court
case has examined the OMVFA coercion prohibition in any context, let alone whether a facility
support bonus payment is coercive.
Again, in the absence of applicable law, both parties point to cases in other districts
which they allege support their arguments. Brentlinger cites Subaru of Am., Inc. v. State Bd. of
Vehicle Mfrs., Dealers & Salespersons in which a Pennsylvania court held Subaru failed to act in
good faith when the franchisor threatened the franchisee with termination if the dealership was
not moved.
842 A.2d 1003, 1017 (Pa. Commw. Ct. 2004).
Subaru ultimately gave the
franchisee three options “move [the dealership], sell to someone who would locate there, or face
termination.”
Id. at 1017.
Additionally, evidence showed Subaru attempted to force the
franchisee to sign an addendum to the contract which would have required the franchisee to
move the dealership. Id. It was this specific act which ran afoul of Pennsylvania’s relevant law
which stated that it was unlawful for a dealer to “coerce or attempt to coerce any new vehicle
20
dealer in this Commonwealth to . . . [e]nter into any agreement with the manufacturer or to do
any other act prejudicial to the new vehicle dealer by threatening to terminate or not renew a
franchise or any contractual agreement existing between the dealer and the manufacturer or
distributor . . . .”
Id. (quoting 63 P.S. § 818.12(a)(4)).
The Court does not find this case
persuasive on the question of whether the use of the FII is coercive because the facts alleged and
ultimately proven in Subaru clearly showed that Subaru only offered three options, two of which
were the ultimate form of coercion, which was termination of the relationship. Those facts do
not exist in this case. Cited by both parties, Miller Auto. Corp. v. Jaguar Land Rover N. Am.,
LLC, 2010 U.S. Dist. LEXIS 81654, at *5 n.3 (D. Conn. Aug. 11, 2010) is also dissimilar to the
case at bar. The dictum cited by Brentlinger does not mention coercion and as Volvo points out,
there was no claim for coercion in Miller, only bad faith and contract claims.
The Court recognizes that line between and “incentive” and “coercion” is thin as an
incentive, by definition, is designed to induce a person to do that which the person offering the
incentive wishes done. In the context of Sherman Anti-trust Law cases, courts have required a
threat of a meaningful event upon non-compliance to find coercion.
See, e.g., Bender v.
Southland Corp., 749 F.2d 1205, 1213 (6th Cir. 1984) (collecting cases showing meaningful
events can include termination of a franchise, threatening to distort inventory audits to create
shortages, and threatening to open a competing franchise nearby). The Court does not believe
that the FII crosses the line from an incentive to coercion because although Brentlinger and other
similarly situated dealers may elect to make the changes to become exclusive, the statute itself
contemplates compulsion by threat or lack of good faith. There is no evidence in the record that
any threat was made by Volvo to Brentlinger or any other non-Exclusive dealer and the Court
has already found the there was no lack of good faith in the use of the FII. Ultimately, the FII
21
provides a .6% of MSRP reward and an additional allocation of certain cars to those dealers who
have already invested in dealership remodeling and brand alignment over Brentlinger. The Court
finds that such a reward is not coercive as a matter of law. Accordingly, summary judgment is
GRANTED in favor of Volvo on Brentlinger’s Third and Sixth Claims for relief
E.
Predatory Practice Claims Under Ohio Revised Code § 4517.59(A)(15)
Brentlinger’s next claim concerns Ohio Revised Code sections 4517.59(A)(15) which
prohibits a dealer from “[e]ngag[ing] in any predatory practice or discriminat[ing] against any
new motor vehicle dealer . . . as compared to a same line-make franchisee, with regard to motor
vehicle allocation, . . . dealership facility requirements, or dealer capitalization requirements.”
Volvo argues the FII is not a “dealership facility requirement” and thus, section 4517.59(A)(15)
is not applicable in this case.
Further, Volvo argues that there is no evidence Volvo has
discriminated against Brentlinger, the FII is not a predatory practice, and that Brentlinger’s claim
for relief asks the Court to require Volvo to discriminate in Brentlinger’s favor. Brentlinger
argues that the evidence is clear that Volvo discriminates in its allocation of XC90’s against
MAG Volvo and others. The Court notes that the Complaint did not explicitly set forth a claim
based on the Allocation Policy and that Brentlinger specifically removed the words “motor
vehicle allocation” when quoting the statute. (See Doc. 1, Compl. at ¶ 83). However, the Court
assumes arguendo that the Complaint states two causes of action under section 4517.59(A)(15):
(1) that the FII is either a predatory practice or discrimination dealership regarding facility
requirements; and (2) that the Allocation Policy is a predatory practice or discrimination
regarding vehicle allocations.
Discrimination and predatory practice are not defined in the statute and nothing in the
statute clarifies the terms any further. In analyzing this statute, the court in Franklin Park I used
the standard that “predatory practice or discrimination [i]s a ‘sacrificing of present revenue with
22
the aim of driving a competitor out of the market . . . .’” 2011 WL 5361738, at * 5 (quoting
Dave Greytak Enters., Inc. v. Mazda Motors of Am., Inc., 622 A.2d 14, 20–21 (Del. Ch. 1992)
(analyzing nearly identical provision)). The Court agrees that “a manufacturer is not predatory if
it ‘acts in good faith and with good cause . . . .’” Id. (quoting Saccucci Auto Grp., Inc. v. Am.
Honda Motor Co., Inc., 2009 U.S. Dist. LEXIS 122015, *21 (D.R.I.2009) (internal quotations
omitted)). In this case, there is simply no evidence that Volvo is using the FII or the Allocation
Policy to drive Brentlinger out of business or for any reason other than Volvo’s own business
judgment. Accordingly, summary judgment in favor of Volvo is GRANTED on Brentlinger’s
Fifth Claim for relief.
F.
Claims under Ohio Revised Code Section 4517.59(A)(25)
Brentlinger’s Seventh Claim for relief relies on section 4517.59(A)(25) of the OMVFA.
Volvo argues that summary judgment is appropriate because Volvo has not required Brentlinger
to provide an exclusive facility, but rather, that Volvo “made exclusivity the criterion for
receiving a portion of the FII support payments.” (Doc. 35, Def.’s Mot. at 17–18). Brentlinger
argues that the coercive effect of the FII is to require new facilities.
Section (A)(25) of the OMVFA prohibits a franchisor from “Unreasonably requir[ing] a
franchisee to establish or maintain exclusive sales facilities . . . unless such exclusivity is
reasonable and otherwise justified by reasonable business considerations . . . .” In this case there
is no evidence that the FII is a requirement that would trigger the reasonableness analysis in
(A)(25) and Brentlinger presents no argument other than coercion, which the Court has already
denied. See infra section III.D. Accordingly, summary judgment to Volvo is GRANTED as to
Brentlinger’s Seventh Claim for relief.
23
G.
Claims under the ADDCA, 15 U.S.C. § 1221
Brentlinger’s Ninth Claim for relief alleges a breach of the requirement of good faith in
the ADDCA codified at 15 U.S.C. § 1222. Brentlinger again argues that Volvo’s use of the FII
is a constructive termination of the franchise agreement while Volvo argues that Brentlinger has
presented no evidence to satisfy the ADDCA’s specialized definition of good faith.
The ADDCA allows a dealer to bring a claim when a manufacturer fails “to act in good
faith in performing or complying with any of the terms or provisions of the franchise, or in
terminating, canceling, or not renewing the franchise with said dealer . . . .” 15 U.S.C. § 1222.
“Good faith” is defined as “the duty . . . to act in a fair and equitable manner . . . so as to
guarantee the one party freedom from coercion, intimidation, or threats of coercion or
intimidation from the other party.” 15 U.S.C. § 1221(e). The Court has already found the FII
does not constitute coercion and there is no evidence that Volvo intimidated or threatened to
intimidate Brentlinger. See infra at section III.D. Accordingly the Court GRANTS summary
judgment to Volvo on Brentlinger’s Ninth Claim for relief under the ADDCA.
H.
Breach of Fiduciary Duty
Brentlinger’s final claim is a common law breach of fiduciary duty claim. Volvo argues
that there is no statutory or contractual basis sufficient to support a fiduciary relationship.
Brentlinger maintains that this is the rare instance of a fiduciary relationship between franchisor
and franchisee because MAG Volvo is entirely reliant on parts and inventory from Volvo, MAG
Volvo must receive approval for significant business decisions, MAG Volvo’s employees must
meet Volvo training and learning requirements, and MAG Volvo must submit monthly financial
reports on Volvo’s standard forms.
Ohio courts have noted that “[a] fiduciary relationship does not exist between a
franchisor and a franchisee in the absence of a statute expressly creating such fiduciary
24
relationship or, in the alternative, absent an understanding, held by both parties to the subject
agreement, that a special trust and confidence has been reposed by the franchisee in the
franchisor.” Saydell v. Geppetto’s Pizza & Ribs Franchise Sys., Inc., 100 Ohio App. 3d 111,
130, 652 N.E.2d 218 (8th Dist. 1994). It is undisputed that there is no statutory basis for a
fiduciary relationship in this case and that Dealer Agreement specifically notes that “this
Agreement [does not] create any fiduciary or employment relationship between Retailer and the
Company.” (Doc. 34-5, Agreement at 23).
Instead, Brentlinger argues that the relationship is the rare instance where a fiduciary
relationship arises in spite of the general rule that there is no franchise relationship between a
franchisor and franchisee. Relying on Manhattan Motorcars, Inc. v. Automobili Lamborghini,
S.p.A., 244 F.R.D. 204 (S.D.N.Y. 2007), Brentlinger argues that a fiduciary duty exists because
MAG Volvo relies on Volvo for inventory, MAG Volvo must receive approval for significant
business decisions, MAG Volvo’s employees must meet Volvo training and learning
requirements, and MAG Volvo must submit monthly financial reports on Volvo’s standard
forms. In Manhattan Motorcars, the Court held that summary judgment was improper on a
fiduciary duty claim where the manufacturer required the dealer “to provide reports to [the
manufacturer] concerning sales, inventories, customer data, and all information concerning [the
dealer]’s business.” Id. at 219–20. However, in Franklin Park, the Sixth Circuit Court of
Appeals found that merely sharing sensitive business information such as a balance sheet and
profitability numbers is insufficient to create a fiduciary relationship where the dealer maintains
control of human resources decisions, customer information, and advertising. Franklin Park II,
530 F. App’x at 548 (6th Cir. 2013).
25
The Court finds that no fiduciary relationship was created in this case. First, that MAG
Volvo is reliant on Volvo for parts and inventory is exactly the sort of control one would expect
in a dealer-franchise relationship, not a rare exception. Further, Volvo’s approval of significant
business decisions such as the sale of the dealership is also well within the bounds of a normal
franchise relationship because the Ohio Revised Code specifically contemplates such a level of
control. See Ohio Rev. Code § 4517.57(C) (setting forth burdens of proof on appeal of a
franchisor’s refusal to approve a sale or transfer of a franchisee’s controlling interest). Although
Brentlinger contends Volvo’s control goes beyond the circumstances in Manhattan, the facts in
this case do not go beyond what the Sixth Circuit and the Ohio Revised Code have already
consider common levels of control in franchise agreements. Accordingly, Volvo’s Motion for
Summary Judgment on Brentlinger’s Twelfth Claim for relief is GRANTED.
IV.
CONCLUSION
Based on the foregoing, Volvo’s Motion for Summary Judgment is GRANTED and
Brentlinger’s’ Motion for Summary Judgment is DENIED.
Documents 34 and 35 from the Court’s pending motions list.
The Clerk shall REMOVE
The Clerk shall enter final
judgment in favor of Volvo and REMOVE this case from the Court’s pending cases list.
IT IS SO ORDERED.
__/s/ George C. Smith
___
GEORGE C. SMITH, JUDGE
UNITED STATES DISTRICT COURT
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