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European Motorcars of Littleton, Inc. v. Mercedes-Benz USA, LLC

United States District Court, D. Colorado

June 19, 2017



          Michael E. Hegarty United States Magistrate Judge.

         Defendants Mercedes-Benz USA (“MBUSA”) and Bobby Rahal Motorcar Company (“BRMC”) seek to dismiss the First Amended Complaint of Plaintiff European Motorcars of Littleton, Inc. d/b/a Mercedes-Benz of Littleton (“MBOL”) pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). See ECF Nos. 41, 46. Defendants' motions are fully briefed, and the Court finds oral argument will not assist in their adjudication. The Court holds that MBOL's requests for a permanent injunction and a declaratory judgment are moot in light of a local zoning ordinance prohibiting the conduct MBOL seeks to enjoin and declare illegal. Regarding the merits of MBOL's claims for damages, the Court holds that only MBOL's first cause of action states a claim. Accordingly, BRMC's motion is granted, and MBUSA's motion is granted in part and denied in part.


         I. Facts

         The following are factual allegations (as opposed to legal conclusions, bare assertions, or merely conclusory allegations) made by MBOL in its Amended Complaint, which are taken as true for analysis under Fed.R.Civ.P. 12(b)(1) pursuant to Holt v. United States, 46 F.3d 1000, 1002 (10th Cir. 1995) and under Fed.R.Civ.P. 12(b)(6) pursuant to Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         MBOL has been a franchised Mercedes-Benz automobile dealership since 1996. Am. Compl. ¶¶ 9, 11, ECF No. 39. Defendant MBUSA is the North American distributor and manufacturer representative for the Mercedes-Benz brand of vehicles. Id. at ¶ 8. To maintain its reputation, MBOL has consistently made improvements and investments in addition to those required by MBUSA. Id. at ¶ 19. Specifically, it recently purchased new vehicle lifts and upgraded its LED lighting throughout its dealership. Id. at ¶¶ 19-20. MBUSA consistently approved of MBOL's improvements. Id. at ¶ 23.

         Beginning in 2015, while MBOL continued to make improvements to its dealership, MBUSA conducted market studies and eventually invited Defendant BRMC to establish a new Mercedes-Benz dealership less than nine miles from MBOL's facility. Id. at ¶¶ 26-28. MBUSA did not inform MBOL of its intent to establish a new dealership until July 2016, when an MBUSA employee traveled to Colorado and informally notified MBOL's management of MBUSA's plan. Id. at ¶¶ 29-31. In October 2016, MBUSA sent MBOL a formal notice pursuant to Colo. Rev. Stat. § 12-6-120.3(1), which stated the exact location of the new dealership: 13831-13871 E. Arapahoe Pl. Centennial, Colorado 80112. Id. at ¶ 37. This address is nine miles and two freeway exits north of MBOL's dealership. Id. at ¶ 39. The notice also identified the new dealer operator as BRMC. Id. at ¶ 38. MBUSA and BRMC have taken material steps toward establishing the new dealership, such as executing a letter of intent. Id. at ¶¶ 41, 43.

         When MBUSA establishes a dealership, it enters into an agreement with the dealer, which governs the parties' relationship. See Id. at ¶ 13; Passenger Car Dealer Agreement 19, ECF No. 46-1.[1] The agreement gives the dealer an Area of Influence (“AOI”), which consists of zip codes and census tracts. Am. Compl. ¶ 13. MBUSA uses the AOI to judge the dealer's performance. Id. MBUSA's agreement with MBOL states that MBUSA may establish new dealerships within MBOL's AOI at any time. Passenger Car Dealer Agreement 19. However, the addition of a new dealer “will result in an alteration of adjustment of [MBOL's] AOI.” Id.

         II. Procedural History

         Based on these factual allegations, MBOL filed its Complaint in state court on December 6, 2016. Compl., ECF No. 4. On January 5, 2017, Defendants removed the case to this Court. Notice of Removal, ECF No. 1. MBOL then filed an Amended Complaint on February 22, 2017. Am. Compl. MBOL asserts five claims for relief. First, MBOL contends MBUSA unreasonably approved the new dealership in violation of Colo. Rev. Stat. §§ 12-6-120.3(1.5) and 120(1)(h). Id. ¶¶ 45-55. MBOL's second claim asserts a cause of action against MBUSA for fraudulent concealment. Id. at ¶¶ 56-65. MBOL's third claim alleges MBUSA breached the implied contractual duty of good faith and fair dealing. Id. at ¶¶ 66-73. Fourth, MBOL pleads an independent claim for a permanent injunction against MBUSA and BRMC. Id. at ¶¶ 74-80. MBOL's final cause of action contends MBUSA violated Colo. Rev. Stat. § 12-6-120(1)(w)(II) when it attempted to modify MBOL's AOI without providing ninety-days' notice. Id. at ¶¶ 80-90. MBOL seeks (1) to enjoin Defendants from establishing the dealership, (2) a declaratory judgment stating that MBUSA violated all three statutory sections, and (3) damages suffered as a result of MBUSA's statutory violations and tortious conduct. Id. at 16.

         BRMC responded to the Amended Complaint by filing its present motion to dismiss on March 1, 2017. ECF No. 41. BRMC contends MBOL's fourth claim-the only cause of action against BRMC-should be dismissed, because a permanent injunction is not an independent cause of action. Id. at 4-5. MBOL's response contends BRMC is a proper party, because BRMC has an obvious interest in the outcome of the litigation. MBOL's Resp. to BRMC's Mot. to Dismiss 2, ECF No. 50.

         On March 8, 2017, MBUSA filed its present motion to dismiss, which seeks dismissal of MBOL's Amended Complaint in its entirety. ECF No. 46. According to MBUSA, MBOL does not have standing to assert a violation of Colo. Rev. Stat. § 12-6-120.3(1.5), MBOL does not sufficiently plead its tort and contract claims, MBOL's request for a permanent injunction is not a proper independent cause of action, and MBOL's final claim does not plead a violation of the section at issue. Id. at 4-30. MBOL filed its response on April 5, 2017. MBOL's Resp. to MBUSA's Mot. to Dismiss, ECF No. 61.

         The day before MBUSA filed its Reply in Support of its Motion to Dismiss, see ECF No. 68, MBOL filed a motion to administratively close the case. ECF No. 66. MBOL informed the Court that the City of Centennial, Colorado recently repealed an ordinance that permitted MBUSA and BRMC to establish the dealership at the proposed location. Id. at 5. Because “the proposed new dealership cannot lawfully be established at the noticed location, ” MBOL sought administrative closure of the case “until the factual circumstances ripen to permit the development and awarding of the proposed dealership.” Id. On May 26, 2017, the Court held a hearing on MBOL's motion. After hearing argument from the parties, the Court denied MBOL's motion for the reasons stated on the record. See ECF No. 73. The Court took Defendants' motions to dismiss under advisement. Id.


         I. Dismissal under Fed.R.Civ.P. 12(b)(1)

         Rule 12(b)(1) empowers a court to dismiss a complaint for “lack of subject matter jurisdiction.” Fed.R.Civ.P. 12(b)(1). Dismissal under Rule 12(b)(1) is not a judgment on the merits of a plaintiff's case, but only a determination that the court lacks authority to adjudicate the matter. See Pueblo of Jemez v. United States, 790 F.3d 1143, 1151 (10th Cir. 2015) (recognizing that federal courts are courts of limited jurisdiction and may only exercise jurisdiction when specifically authorized to do so). A court lacking jurisdiction “must dismiss the cause at any stage of the proceeding in which it becomes apparent that jurisdiction is lacking.” Id. (citing Full Life Hospice, LLC v. Sebelius, 709 F.3d 1012, 1016 (10th Cir. 2013)). A Rule 12(b)(1) motion to dismiss “must be determined from the allegations of fact in the complaint, without regard to mere [conclusory] allegations of jurisdiction.” Groundhog v. Keeler, 442 F.2d 674, 677 (10th Cir. 1971). The burden of establishing subject matter jurisdiction is on the party asserting jurisdiction. Pueblo of Jemez, 790 F.3d at 1151. Accordingly, MBOL in this case bears the burden of establishing that this Court has jurisdiction to hear its claims.

         II. Dismissal Pursuant to Fed.R.Civ.P. 12(b)(6)

         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Plausibility, in the context of a motion to dismiss, means that the plaintiff pleaded facts which allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. Twombly requires a two prong analysis. First, a court must identify “the allegations in the complaint that are not entitled to the assumption of truth, ” that is, those allegations which are legal conclusions, bare assertions, or merely conclusory. Id. at 679-80. Second, the Court must consider the factual allegations “to determine if they plausibly suggest an entitlement to relief.” Id. at 681. If the allegations state a plausible claim for relief, such claim survives the motion to dismiss. Id. at 680.

         Plausibility refers “to the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs ‘have not nudged their claims across the line from conceivable to plausible.'” Khalik v. United Air Lines, 671 F.3d 1188, 1191 (10th Cir. 2012) (quoting Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008)). “The nature and specificity of the allegations required to state a plausible claim will vary based on context.” Kan. Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1215 (10th Cir. 2011). Thus, while the Rule 12(b)(6) standard does not require that a plaintiff establish a prima facie case in a complaint, the elements of each alleged cause of action may help to determine whether the plaintiff has set forth a plausible claim. Khalik, 671 F.3d at 1191.


         Before analyzing the merits of MBOL's claims for relief, the Court must first address the extent to which MBOL's claims are moot because of the City of Centennial's zoning ordinance, which prohibits the establishment of the dealership at the proposed location. The Court holds that MBOL's requests for prospective relief are moot in light of the ordinance. However, because MBOL asserts justiciable claims for damages, the Court will address the merits of MBOL's claims for relief. With the exception of MBOL's first cause of action, the Court dismisses each of MBOL's claims.

         I. Mootness and MBOL's Fourth Claim for Relief: Permanent Injunction

         Although the parties do not dispute that this case is justiciable, “a court may raise the issue sua sponte.” McClendon v. City of Albuquerque, 100 F.3d 863, 867 (10th Cir. 1996); Brown v. Buhman, 822 F.3d 1151, 1165 (10th Cir. 2016) (“No matter how vehemently the parties continue to dispute the lawfulness of the conduct that precipitated the lawsuit, the case is moot if the dispute is no longer embedded in any actual controversy about the plaintiffs' particular legal rights.” (quoting Already, LLC v. Nike, Inc., 568 U.S. 85 (2013))). “A case becomes moot when factual developments render a claim ‘no longer live and ongoing, ' such that a decision on the merits will not ‘affect the behavior of the defendant toward the plaintiff.'” Rezaq v. Nalley, 677 F.3d 1001, 1008 (10th Cir. 2012) (quoting McAlpine v. Thompson, 187 F.3d 1213, 1216 (10th Cir. 1999)). “The crux of the mootness inquiry in an action for prospective relief is whether the court can afford meaningful relief that ‘will have some effect in the real world.'” Id. (quoting Rio Grande Silvery Minnow v. Bureau of Reclamation, 601 F.3d 1096, 1110 (10th Cir. 2010)). If a party has already received the relief it seeks, that request for relief is subject to sua sponte dismissal. United States v. Fisher, 805 F.3d 982, 989 (10th Cir. 2015) (“A claim is moot if a party has already obtained the only relief it seeks.”); McClendon, 100 F.3d at 867 (“Because mootness is a matter of jurisdiction, a court may raise the issue sua sponte.”).

         Therefore, the issue before the Court is whether the repeal of the zoning ordinance accomplished for MBOL any of the types of relief it seeks. MBOL requests three forms of relief-a permanent injunction prohibiting Defendants from approving and establishing the proposed dealership, a declaratory judgment stating that MBUSA violated the Colorado Dealer Act, and damages resulting from MBUSA's violations of Colorado law. Am. Compl. 16. The Court holds that the repeal of the zoning ordinance afforded MBOL the relief it seeks on its requests for a permanent injunction and declaratory judgment. Accordingly, these requests are moot.

         Regarding an injunction, MBOL admits that “[t]he primary objective of [its] Complaint is to preclude the establishment of a new Mercedes-Benz dealership at 13831-13871 East Arapahoe Road.” MBOL's Mot. for Admin. Closure 4, ECF No. 66. Moreover, MBOL and MBUSA do not dispute that the City of Centennial took specific action to prohibit the new dealership at the proposed location. Id. at 2 (“[R]ecent legislative developments in the City of Centennial have confirmed that MBUSA and BRMC cannot lawfully establish and develop the new Mercedes-Benz dealership at the proposed Centennial location.”); MBUSA's Resp. to MBOL's Mot. for Admin. Closure 3, ECF No. 69 (stating that the City of Centennial repealed an ordinance that would have permitted the proposed dealership). Therefore, when the City of Centennial repealed the zoning ordinance and precluded the establishment of the dealership, MBOL “obtained the only relief it seeks” on its claim for a permanent injunction. Fisher, 805 F.3d at 989. In other words, regardless of whether this Court grants an injunction, MBUSA and BRMC are presently unable to build and operate the dealership at the proposed location. Indeed, MBOL acknowledges the lack of a live controversy when it states that “MBUSA wants to continue this litigation based on the theoretical possibility that the City Council will someday change its mind and reconsider its decision to revoke the ordinance.” MBOL's Reply in Support of Motion for Admin. Closure 2. ECF No. 72. The Court does not have jurisdiction to issue injunctions that will have effects in the real world only on the happening of a theoretical possibility. See S. Utah Wilderness All. v. Smith, 110 F.3d 724, 727 (10th Cir. 1997) (“A federal court has no power to . . . declare principles of law which cannot affect the matter in issue in the case before it.”).

         Accordingly, MBOL's request for a permanent injunction is moot. The Court dismisses MBOL's fourth cause of action, which requests only a preliminary injunction, and the Court grants BRMC's motion to dismiss.

         The Court also holds that MBOL's request for a declaratory judgment is moot. “[I]n the declaratory judgment context, it is critically important to determine whether the plaintiff has named, as defendants, individuals or entities that are actually situated to have their future conduct toward the plaintiff altered by the court's declaration of rights.” Jordan v. Sosa, 654 F.3d 1012, 1026 (10th Cir. 2011). MBOL seeks a declaratory judgment stating that MBUSA unreasonably approved the new dealership and gave insufficient notice of the approval. Am. Compl. 16. However, because of the ordinance, the requested judgment would not affect MBUSA's future conduct toward MBOL. If the Court were to issue a declaratory judgment stating that MBUSA unreasonably approved the location of the new dealership, MBUSA would not be permitted to build the dealership. If the Court declined to issue a declaratory judgment, MBUSA would still be unable to build the dealership as a result of the City of Centennial's ordinance. Therefore, the Court holds that the requested declaratory judgment would do nothing more than advise the parties of the legality of MBUSA's conduct; it would not settle “some dispute which affects the behavior of the [D]efendant toward the [P]laintiff.” Rio Grande Silvery Minnow, 601 F.3d at 1110.

         At the hearing on MBOL's Motion for Administrative Closure, MBUSA argued that MBOL's claims are not moot, because absent a ruling from this Court, it will continue to pursue the proposed dealership, which will include petitioning the City of Centennial to change its zoning ordinance. Therefore, MBUSA contends that a ruling from this Court will, in fact, affect the conduct of the parties. However, a case is not justiciable merely because the requested relief will affect the conduct of the parties generally. Instead, the court's ruling must affect the defendant's conduct “toward the plaintiff.” See Id. That MBUSA will continue to seek financing, attempt to change the City of Centennial's ordinance, and accomplish other tasks incident to opening a dealership does not alter MBUSA's conduct toward MBOL. Although the establishment of a new dealership would arguably alter MBUSA's conduct toward MBOL, the requested relief would not presently affect MBUSA's ability to establish the dealership. See Transwestern Pipeline Co. v. Fed. Energy Regulatory Comm'n, 897 F.2d 570, 575 (D.C. Cir. 1990) (“A case is moot if events have so transpired that the decision will neither presently affect the parties' rights nor have a more-than-speculative chance of affecting them in the future.” (emphasis added)).

         Furthermore, the Court is not convinced by MBUSA's argument that there are many uncertainties in the dealership-establishment process, the presence of which does not render all protest litigation moot. MBUSA is correct that there are many steps to establishing a dealership, such as receiving adequate financing. However, unlike the mere potential that every bank will reject financing for the dealership, the City of Centennial has specifically decided not to permit the dealership at the proposed location. Just as it would be entirely speculative to assert that a bank who rejected BRMC's financing application would reverse course and issue a loan to BRMC, it is entirely speculative to contend that the City of Centennial will choose to amend its ordinance and permit the dealership at the specified location. See Jones v. Temmer, 57 F.3d 921, 923 (10th Cir. 1995) (“[D]efendants assert that the claims are not moot because the Colorado legislature remains free to reinstate the old law at a later date. We view this possibility as too conjectural and speculative to avoid a finding of mootness.”); see also Granite State Outdoor Advert., Inc. v. Town of Orange, Conn., 303 F.3d 450, 451-52 (2d. Cir. 2002) (“[T]here is no reason to think that, having completely revised its regulations through proper procedures, the Town has any intention of returning to the prior regulatory regime.”).

         In sum, the Court holds that MBOL's claims for prospective relief are moot in light of the City of Centennial's ordinance, which prohibits the new dealership at the proposed location.[2] As such, MBOL's requests for a permanent injunction and a declaratory judgment are dismissed as moot. However, because MBOL's first, second, third, and fifth claims for relief also seek damages as a result of MBUSA's conduct, the Court will analyze the merits of Defendants' arguments for dismissal only as they relate to MBOL's request for damages.[3]

         II. First Claim for Relief: Violation of Colo. Rev. Stat. §§ 12-6-120(1)(h) and 120.3(1.5)

         MBOL alleges that MBUSA unreasonably approved the new dealership location in violation of Colo. Rev. Stat. § 12-6-120(1)(h) and § 12-6-120.3(1.5). Am. Compl. ¶¶ 45-55. Section 12-6-120(1)(h) declares it unlawful “[t]o violate any duty imposed by, or fail to comply with, any provision of section 12-6-120.3 . . . .” Section 12-6-120.3(1.5) provides:

A manufacturer shall reasonably approve or disapprove of a motor vehicle dealer facility initial site location or relocation request within sixty days after the request or after sending the notice required by subsection (1) of this section to all of its franchised dealers and former dealers whose franchises were terminated, cancelled, or not renewed in the previous five years due to the ...

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