Beaver State Motorcycles, LLC et al v. BMW (US) Holding Corp et al

Filing 55

ORDER: Denying Motion for Summary Judgment 22 ; Denying Motion for an Order to Show Cause 40 ; Granting Motion for Summary Judgment 33 . This action is dismissed. Signed on 6/21/2011 by U.S. District Judge Michael R. Hogan. (jw)

f flED 21.JLN 'i116:29 USll'~·ORE

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
EUGENE DIVISION

BEAVER STATE MOTORCYCLES, LLC, and
OREGON TRAILS MOTORCYCLES, LLC,
Civil No. 10-6188-HO

Plaintiff,

v.

ORDER

BMW (US) HOLDING CORP, and BMW OF
NORTH AMERICA, LLC,
Defendants.
Plaintiffs

Beaver

State

Motorcycles

and

Oregon

Trail

Motorcycles bring this suit for declaratory relief against BMW
alleging violation of ORS § 650.158 which provides, in part:
(1) Each manufacturer, distributor or importer shall
specify in writing to each of its dealers in this state:
(a) The dealer's obligations for predelivery
preparation and warranty service on motor
vehicles of the manufacturer, distributor or
importer;

(b) The schedule of compensation to be paid
the dealer for parts, work and service in
connection with predeli very preparation and
warranty service; and
(c) The time allowances for the performance of
the predelivery preparation and warranty
service.
(2) A schedule of compensation shall include reasonable
compensation for diagnostic work, repair service and
labor. Time allowances for the diagnosis and performance
of predelivery and warranty service shall be reasonable
and adequate for the work to be performed. The hourly
rate paid to a dealer shall not be less than the rate
charged by the dealer to nonwarranty customers for
nonwarranty service and repairs. Reimbursement for parts,
other than parts used to repair the living facilities of
motor homes, purchased by the dealer for use in
performing predelivery and warranty service shall be the
amount charged by the dealer to non-warranty customers,
as long as that amount is .not unreasonable.
Specifically, plaintiffs seek reimbursement for warranty work
at the labor rate charged to non-warranty customers, reimbursement
for test rides related to warranty work at the rate charged nonwarranty customers, reimbursement for third party parts, including
Code 3 parts, related to warranty work at the rate charged nonwarranty customers, 1 and

reimbursement

for

service

and supply

expenses related to warranty work at the rate charged non-warranty
customers.2

Both parties move for summary judgment.

'Plaintiffs concede that they are unaware
parts, other then Code 3 parts, that are at issue.

of

any

third

party

plaintiff
is
entitled
to
declaratory
determine
whether
The first
the court must construe the statute in question.
step in interpreting a statute is an examination of the text and
317 Or.
606,
its context. ~GE v. f2ur§§!y Qf Lii!!2or and Industries,
of
pertinent
610-11,
(1993) •
step
is
consideration
The
second
§
ORS
174.020.
legislative history that a party may proffer.
(continued ... )
'To

relief,

2 - ORDER

Plaintiffs contend that defendant reimburses for some parts at
the

suggested

retail

price

and

other

parts

at

cost

only.

Specifically, plaintiffs contend that defendant reimburses third
party parts,

including Code

3 parts,

at

cost only.

Because

plaintiff makes less from warranty work compared to non-warranty
work, they argue that defendants have violated the above statute.
However,

the statute does not require,

as plaintiffs contend,

defendant to reimburse plaintiffs for parts not covered by their
warranty.
argue

Plaintiffs, in essence, concede this issue when they

if a distributor uses

its power to mandate a dealer IS

obligations with respect to warranty work, that warranty work is
subject to the statute.

Defendants do not mandate the warranty

work on Code 3 parts, Code 3 covers the warranty.
Code 3 parts are not warranted by defendant.

Warranty Policy

and Procedures Manual attached to Declaration of Madelyn Russell
(#25) as Exhibit 1 at p. 42
Emergency Products).

(Warranty does not apply to Code 3

The statute requires the manufacturer to

'I ... continued)
Finally,
if
the
legislature's
intent
remains
unclear
after
examining
text,
context,
and
legislative
history,
the
court
may
resort
to
general
maxims
of
statutory
construction
to
aid
in
resolving the rema~n~ng uncertainty.
PGE
317 Or.
at
612.
The
parties in this case offer little in the way of an examination of
the
statute,
thus
the
parties
apparently
believe
the
statute
is
clear on its face.
The Oregon legislature designed the statute at
issue to level the playing field between dealers and manufacturers.
However,
the statute was not intended to legitimize up-charging on
a dealer's whim.
3 -

ORDER

specify in writing the warranty on the vehicle of the manufacturer.
Defendant has done that in specifically excluding Code 3 parts.
Code 3 PSE manufactures and warrants its own products which
are manufactured for use on motorcycles of various manufactures
including defendant.

Code 3 uses defendant to act as a claim

processing facilitator for the Code 3 warranty,S but the warranty
obligations are explicitly those of Code 3 and not defendant.
Indeed,

defendant's

service

bulletin

provided

to

pla~ntiffs

indicates that Code 3 is completely separate from BMW and the Code
3 warranty is not to be confused with the warranty BMW provides.
The bulletin then outlines how to process (computerized) a warranty
claim for Code 3 parts through BMW as a processor only.

Service

Bulletin attached to Declaration of Scott Russell (#30).

Dealers

may also work directly with Code 3 on warranty issues through a
manual process.

Because defendant has specified, in writing, that

Code 3 parts are not covered by its warranty, as required by ORS

§

650.158(1), it is not obligated to compensate dealers in accordance
with ORS

§

650.158(2).

Therefore, defendant is entitled to summary

judgment with respect to Code 3 parts.

'Daniel
Drury,
director
of
quality
and
service
for
Code
3,
states that Code 3 permits BMW motorcycle dealers to submit claims
electronically
through
BMW
NA' s
labor
and parts
claim
system
and
that
it
reimburses BMW NA in accordance
with its
warranty letter
agreement behleen Code
3 and BMW NA.
That
agreement
sets
labor
rates and parts rates.
Code 3 Warranty Letter Agreement attached
as Exhibit C to
Drury Declaration at p.
10
attached to memo. in
support of motion
(#28).
Drury further states that it determines
the
scope
of.
its
product
warranty
on
all
of
the
parts
it
manufactures.

4 - ORDER

B.

Shop Supplies
Plaintiffs

assert

they are

required

to purchase

certain

supplies and incur other expenses in performing warranty work.

The

supplies and expenses include brake cleaner, solvents, lubricants,
propane/map gases, shop rags, flashlight batteries, latex/nitrile
gloves, and hazardous waste disposal costs.

Plaintiffs assert that

non-warranty customers pay between $2.00 and $10.00 for hazardous
materials disposal and up to 10% of their labor cost for shop
supplies.

Plaintiffs contend that defendant's reimbursement policy

for these expenditures items violates ORS

§

650.158(2) because it

is below the rate charged to non-warranty customers.
Plaintiffs repair orders itemize for labor, parts, sublet,
shop supplies, and hazardous materials separately.
requires defendant to specify its schedule of

The statute

compensatio~

to be

paid the dealer for parts, work and service in connection with
warranty service.

Defendant's Warranty Policy and Procedures

Manual provides that labor will be reimbursed at rate up to but not
exceeding a dealers retail rate or a rate that is both fair and
reasonable.

warranty Policy and Procedures attached to Declaration

of Madelyn Russell (#25) as Exhibit 1 at p. 80.

Sublet materials

such as required fluids, shop supplies, brake cleaner, oil, etc,
that are consumed, required or installed as a direct result of the
line on the repair order are covered under warranty as follows:

5 - ORDER

• Only that portion of a material, fluid, or supply
required and quantifiable for the repair is chargeable to
the repair order and to warranty.
• If sold in a container with more than required for the
repair, claim the portion required for the repair (at
dealer net plus 40% if available from BMW or at dealer
net plus 20% if not available from BMW) .
• Unless there is a technical reason to the contrary,
fluids should be captured and reused if their temporary
removal is needed to accomplish a repair.
• Topping off a fluid is covered when performed in
conjunction with a warranty repair.
• A service manager may open a shop ticket to purchase
containers of fluids and shop supplies that may have
portions consumed during multiple repairs throughout the
week. This alternative is one way to deal with bulk
containers, fluids, glues, etc. with a short shelf life.
• Warranty does not cover items that are in general use
throughout the day, not quantifiable, or not directly
required for a line on the repair order. These items
include, but are not limited to: hazardous waste
disposal, shop rags, speedi dry, flashlight batteries,
latex gloves, part washer tank fluids, quantities in
excess of that required for the repair, etc.
Warranty Policy and Procedures attached to Declaration of Madelyn
Russell (#25) as Exhibit 1 at p. 82.
Plaintiffs

state

they

stopped attempting

to

track

these

supplies by repair because defendant told them it would never
reimburse them for shop supplies regardless of how they tra.ck
expenses.

Plaintiff now contends that if defendant will reimburse

them if properly quantified and tracked,

then the court should

grant plaintiffs' motion and declare defendant shall reimburse them
at 10% of labor charges assessed.
6 - ORDER

However, the complaint does not

ask for a declaration as to contractual obligations, but statutory
obligations.
To the extent plaintiff's simply seek a declaration that shop
supplies are reimbursable, they already are covered to the extent
quantifiable under the Warranty Policy and Procedures.

But,

defendant contends that shop supplies are neither parts nor labor
and thus not required to be reimbursed in a manner requirec by ORS
§

650.158 (2).

As noted above, plaintiff separately charges for labor, parts
and supplies.

The statute requires that time allowances for the

diagnosis and performance of warranty service shall be reasonable
and adequate and the hourly rate shall not be less than nonwarranty work.

Similarly, the statute requires that reimbursement

for parts used in warranty service shall be the same as the amount
charged by the dealer for non-warranty service.

Thus,

to the

extent plaintiffs seek reimbursement at the same rate it charges
for

non-warranty

repairs,

the

statute

only

requires

such

reimbursement for parts and labor.
Plaintiff contends that shop supplies (as well as hazardous
waste materials charges) directly correlate to individual customer
repairs.

However, while the statute does require a compensation

schedule for "repair service" it only requires reimbursement at the
non-warranty rate for hours and parts.

As noted above, defendant

has provided the schedule with regard to shop supplies, and to the

7 - ORDER

extent such falls under "repair service," plaintiffs do not seek a
declaration that the compensation is unreasonable.'

Plaintiffs

seek a declaration of reimbursement at non-warranty rates.

Even

plaintiffs' own billing to non-warranty customers indicates that
shop supplies are neither hourly labor nor parts.

Plaintiff's

motion for summary judgment on this issue is denied, and defendants
motion is granted.

Plaintiffs contend that they are required to perform test
rides prior to performing warranty work, to determine or confirm a
customer complaint, and after repair is performed, to ensure that
repair fully addresses the problem.

Plaintiffs charge non-warranty

customers no less than half an hour of technician time for test
rides, but argue that defendant refuses to reimburse them for this
time.
Defendant's Warranty Policy and Procedures Manual provides:
Road tests by the Service Advisor, shop foreman or
quality control person where appropriate are an integral
part of defining the complaint, repair request and/or
verifying the quality and completion of the repair, and
as such are generally not considered to be diagnostic
time for the technician.
Exceptional cases where it is necessary for the
technician to road test a vehicle in order to properly
diagnose a verified complaint or defect may be considered
'Plaintiff's customary labor rate of $100
to generate sufficient revenue to operate the
its own business unit covering all expenses.

8 - ORDER

per hour is intended
service department as

for warranty reimbursement when properly explained and
documented. A dedicated and identified time punch is
required as part of this documentation (see Time
Records/Time Control System, WPPM-8).
warranty Policy and Procedures attached to Declaration of Madelyn
Russell (#25) as Exhibit 1 at pp. 85-86.
Plaintiffs

seek

a

declaration

that

all

test

rides

are

reimbursable, not just those necessary for a technician to properly
diagnose a complaint or defect. s
If this were a case in which plaintiffs openly charged its
non-warranty customers for routine test rides,
closer issue.

this might be a

However, because plaintiffs found there was a "push-

back from customers when they were being charged $500 [for] a five
hour service [and] charged an additional $50 to test ride their
vehicle when it was suggested by the manufacturer that should be
included," they would take half an hour and incorporate it in the
five-hour flat rate to bill for 5.5 hours of labor.

Deposition of

Scott Russell at p. 26 (attached to Declaration #2 of James E.
Bartels (#47)) .

Plaintiffs' billings typically show a line for a

test ride but not a charge for the $50 under that line.

A routine

test ride is not required by the warranty and at any rate is not
charged as a "test ride" to non-warranty customers and thus not
required by the statute to be reimbursed.

Accordingly, plaintiff's

'Plaintif:s state that if there is a fight over the sufficiency
of
a
particular
request
for
reimbursement,
that
is
a
fight
for
another day.
For now,
plaintiffs merely seek a
declaration that
these expense are by statute subject to reimbursement.

9 - ORDER

motion for summary judgment as to routine test rides not required
to be performed by a technician is denied.

Defendant already

reimburses for required test rides on warranty work.

D.

PUMA
Plaintiffs contend that they are required by defendant to

correspond with defendant's staff through a technical web-based
interface called Product and Measures Management Aftersales (PUMA)
for some types of warranty repair, but that defendant refuses to
reimburse for this time. s
PUMAs are required, with respect to plaintiffs, if after three
hours

of

problem.

diagnosis,

a

technician has

failed

to

identify the

It appears that the parties agree that such time should

be reimbursed, but plaintiffs provide no evidence that they have
ever submitted a required PUMA and not been reimbursed.

Plaintiffs

contend that they should be reimbursed whenever they deem it
necessary to submit a PUMA.

The statute requires reasonable and

adequate compensation for diagnostic work and manufacturers shall
allow a reasonable time for the work to be performed with regard to
warranty work.

Again, plaintiffs confuse the need to compensate at

the same "rate" as for non-warranty work as requiring compensation
for

any thing

plaintiffs

'When required,
PUMA
coromunisation
interaction.

10 - ORDER

want

to

charge

for.

depending on the complexity of
takes
an
average
of
five

There

is

no

the
repair,
a
minutes
per

allegation that the flat rate system employed by defendant with
respect to warranty work, consisting of actual time, setting-up
time, and additional time such as diagnosis, is unreasonable.

The

diagnostic and secondary activities comprise about 22% of the flat
rate unit.

The reasonableness of this system is confirmed by

plaintiff's reliance on it for non-warranty repairs.

The statute

does not require defendants to reimburse PUMA time not required by
the warranty so long as the time allowance for diagnosing warranty
service is reasonable.

Defendant's motion for summary judgment is

granted on this issue.

E.

Attorney Fees
Because defendant's motion for summary judgement is granted on

all issues, plaintiff's request for statutory attorney fees is
denied.

F.

Motion to Show Cause Why Defendant is not in Contempt of the

Stipulated Protective Order (#40)
Plaintiffs seek a hearing requiring defendant to show cause
why

it

should

not

be

adjudged

in

contempt

stipulated protective order and sanctioned.
1.

of

the

parties'

Plaintiffs ask for:

fines to be paid to plaintiffs if BMW violates the

stipulated protective order in the future in the amount of $500 per
violation;

11 -

ORDER

2.

a

bar

preventing

defendant

from

using

information

obtained in violation of the stipulated protective order;
3.

defendant

plaintiffs'
documents,

to

customers

provide
it

correspondence

plaintiffs

contacted
or

and

any

communications

with

a

and

list

all

related

of

notes,
to

each

customer contact;
4.

an award of attorney fees necessitated by this motion.

The stipulated protective order provides that information
designated as confidential shall be used solely for purposes of
litigation between the parties

and may only be

disclosed to

attorneys (and their staff), to the extent necessary any officers
or employees of a party who is required to work on this litigation,
persons from whom testimony is taken, and court staff.
Plaintiffs contend that following production of confidential
information, defendant began contacting plaintiffs' customers in
violation of the protective order and that defendant's counsel even
contacted an owner of Plaintiff's, Scott Russell (who was himself
a customer).
Defendant responds that prior to the litigation, Scott Russell
contacted it with a labor rate request with invoices and repair
orders attached (the allegedly disclosed confidential materials)
and defendant declined to reimburse the rates requested.

Then

plaintiffs commenced this action in which plaintiffs alleged, among
other things, that test rides should be reimbursed, but defendant

12 - ORDER

noted that the invoices and repair orders previously provided did
not actually show a charge for the test rides and,

therefore,

concluded that plaintiffs were asking for work at a rate that they
in fact did not charge non-warranty customers.
Defendant deposed Russell who stated that because customers
pushed back from being charged for test rides that plaintiffs
simply added the $50 to the amount of labor charged for services
performed.

Defendant became concerned about unfair trade practices

as a result.

Therefore, using the invoices that had been supplied

pre-litigation (but that were later provided in discovery and then
marked as confidential) defendant contacted customers for whom test
rides were performed to determine whether plaintiff's disclosed to
the customers that they were being charged for a test ride.

It is

not clear if defendant actually disclosed any information to the
customers or
identities.

just used the

information in obtaining customer

Using the information, appears to be permitted under

the protective order, i. e., confidential information

n

shall be used

solely for the purposes of litigation between the parties."
Russell

himself was

called,

but

apparently not

actually

reached, thus it is not clear if this is a violation the no contact
of a represented person rule.
Defendant argues that it did not use confidential information
since

it

invoices.

13 -

ORDER

contacted

customers

based

on

previously

disclosed

Plaintiffs counter that the information, even though

previously provided, was confidential at the time of the contacts.
Further, plaintiffs contend that the documents cannot be disclosed
in using them for litigation.

However, as noted above, it is not

clear that any actual disclosures of the information was made.
More importantly the protective order itself provides:
12. Notwithstanding the designation [ofl any documents,
testimony, evidence, or other material as "CONFIDENTIAL, n
such material shall not he subject to this Order,· if the
substance thereof:

has been made available to the recipient party by a third
person who obtained it by legal means and without any
obligation of confidence to the Disclosing Party.
Even

though

plaintiffs

are

the

ones

who

provided

the

materials, it was prior to the institution of this litigation and
thus the court construes the materials as not subject to the order
by virtue of the previous disclosure without any obligation of
confidence.
Plaintiffs must show by clear and convincing evidence, or at
least something more than a preponderance of evidence, a violation
of the order.

This they have not done.

The motion for sanctions

is denied.

CONCLUSION
For the reasons stated above, plaintiffs' motion for summary
judgment

14 - ORDER

(#22)

is denied,

plaintiffs'

motion for an order of

contempt

(#40)

is

denied,

and defendant's motion for

judgment (#33) is granted and this action is dismissed.

DATED this

day of June, 2011.

Dist .

15 - ORDER

e

summary