United States District Court, D. Hawaii
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For Cycle City, Ltd., a Hawaii company, Plaintiff: Alejandro Brito, Kaari-Lynn S. Gagnon, Robert Zarco, LEAD ATTORNEYS, PRO HAC VICE, Zarco Einhorn Salkowski & Brito PA, Miami, FL; Beshoy Rizk, Robert F. Salkowski, LEAD ATTORNEYS, PRO HAC VICE, Zarco Einhorn Salkowski & Brito, P.A., Miami, FL; Jesse J.T. Smith, Kenneth J. Mansfield, William C. McCorriston, LEAD ATTORNEYS, McCorriston Miller Mukai MacKinnon LLP, Honolulu, HI.
For Harley-Davidson Motor Company, Inc., a Wisconsin corporation, Defendant: Francis P. Hogan, LEAD ATTORNEY, Honolulu, Hi; Michael W. Gibson, LEAD ATTORNEY, Honolulu, HI; Roberta F. Howell, LEAD ATTORNEY, PRO HAC VICE, Foley & Lardner, LLP, Madison, WI.
ORDER DENYING DEFENDANT HARLEY-DAVIDSON MOTOR COMPANY INC.'S MOTION TO TRANSFER CASE (ECF NO. 28), GRANTING IN PART AND DENYING IN PART DEFENDANT HARLEY-DAVIDSON MOTOR COMPANY INC.'S MOTION TO DISMISS (ECF No. 21), AND GRANTING PLAINTIFF CYCLE CITY, LTD.'S REQUEST FOR LEAVE TO AMEND
Helen Gillmor, United States District Judge.
Plaintiff Cycle City, Ltd.'s suit arises out of Defendant Harley-Davidson's allegedly unlawful failure to renew the parties' distributorship agreement for the exclusive distribution, sale and service of Harley-Davidson motorcycles, parts, and accessories in Hawaii. Plaintiff alleges violation of the Hawaii Motor Vehicle Industry Licensing Act, Haw. Rev. Stat. § 437-1, et. seq. and breach of distributorship and trademark license agreements. The parties also dispute whether this Court or a court in Wisconsin is the proper forum.
Defendant Harley-Davidson Motor Company's Motion to Transfer Case (ECF No. 28) is DENIED.
Defendant Harley-Davidson Motor Company's Motion to Dismiss (ECF No. 21) is GRANTED IN PART AND DENIED IN PART.
Plaintiff Cycle City's request for leave to amend is GRANTED.
On March 26, 2014, Plaintiff Cycle City, Ltd. (" Cycle City" or " Plaintiff" ) filed a Complaint. (ECF No. 1.)
On June 4, 2014, Defendant Harley-Davidson Motor Company, Inc. (" Harley-Davidson" or " Defendant" ) filed a Motion to Dismiss. (ECF No. 21.)
On June 19, 2014, Plaintiff filed an Opposition. (ECF No. 25.)
On July 2, 2014, Defendant filed a Reply. (ECF No. 27.)
On that the same day, Defendant filed a Motion to Transfer Case. (ECF No. 28.)
On July 9, 2014, the Court held a hearing on Defendant's Motion to Dismiss. (ECF No. 29.) The Court continued the hearing on Defendant's Motion to Dismiss to allow for briefing of the Motion to Transfer Case and set both motions for hearing on September 22, 2014.
On July 25, 2014, Plaintiff filed an Opposition to Defendant's Motion to Transfer Case. (ECF No. 35.)
On August 6, 2014, Defendant filed a Reply to Plaintiff's Opposition to Defendant's Motion to Transfer Case. (ECF No. 37.)
On September 22, 2014, Defendant's Motions to Transfer Case and to Dismiss came on for hearing.
This case involves a dispute between Harley-Davidson, a manufacturer of motorcycles and related products and services, and Cycle City, Harley-Davidson's exclusive Hawaii distributor for the past 48 years. (Compl. ¶ ¶ 2, 6.) Since 1966, Plaintiff " Cycle City has served as the exclusive distributor for the distribution, sale and service of Harley-Davidson motorcycles, OEM parts, accessories, MotorClothes®
and Officially Licensed Products through Harley-Davidson dealers and licensees appointed by distributor . . . ." (Compl. ¶ 6.) During this time, Cycle City contends that it has built an extensive customer base and dealer network. (Compl. ¶ ¶ 7, 9.) Cycle City alleges that it has " exponentially increased the brand awareness, goodwill, popularity and the reputation of the Harley-Davidson brand throughout Hawaii" and that " [a]s a direct result of the efforts of Cycle City, retail sales of Harley-Davidson motorcycles and products have surged and represent a significant amount of all motorcycle sales made in this state." (Compl. ¶ 7.)
Cycle City has served as the exclusive distributor under distributorship agreements. (Compl. ¶ 8.) Cycle City contends these distributorship agreements were renewed automatically, with the most recent Distributorship Agreement being entered into on November 24, 2008. (Compl. ¶ 8 and at Exh. A, hereinafter, " Distributorship Agreement" ).) In addition to its role as exclusive distributor, Cycle City owns and operates Harley-Davidson dealerships on Oahu and Maui. (Compl. ¶ 9.) The two other Harley-Davidson dealerships located in the State of Hawaii are owned by Aloha Auto Group, Inc., an independent third-party, and are located on the Islands of Kauai (Kauai Harley-Davidson) and Hawaii (Big Island Harley-Davidson). (Id.)
Cycle City also had a separate License Agreement with Harley-Davidson to manufacture certain goods bearing Harley-Davidson trademarks. (Compl. ¶ 10 and at Exh. B (" Nonexclusive Trademark License Agreement Between Harley-Davidson Motor Company, Inc. And Cycle City, Ltd." ), hereinafter " License Agreement" .) Under the License Agreement, Cycle City sold products bearing Harley-Davidson's trademarks to dealers in its dealer network and to independent third party retailers. (Compl. ¶ 10.) According to Cycle City, its ability to manufacture and sell products under the License Agreement is a significant form of marketing, advertising, and promotion of the brand as well as a significant source of income. (Id.)
Cycle City alleges that, through the course of its relationship with Harley-Davidson, it " has invested millions of dollars and countless hours towards the development of the Harley-Davidson brand and goodwill, the development of the Harley-Davidson dealer network, and the operation of Plaintiff's business in Hawaii." (Compl. ¶ 14.) Harley-Davidson now seeks to significantly alter the parties' relationship by not renewing the Distributorship Agreement or the License Agreement. (Compl. ¶ ¶ 17-19.) According to Harley-Davidson, on July 13, 2013, the Distributorship Agreement expired and was not renewed. (Compl. ¶ 25.) Harley-Davidson also claims it did not renew the License Agreement and it expired by its terms on December 31, 2013. (Compl. ¶ 26; License Agreement, at Amendment No. 1, § 2(b).)
The Complaint alleges that Harley-Davidson's actions in not renewing the Distributorship and License Agreements are an attempt to end Cycle City's role as the distributor in Hawaii and to limit Cycle City's role to that of a dealer. (Compl. ¶ 17.) Cycle City contends that, in doing so, Harley-Davidson aims to recapture for itself the significant benefits now being realized by Cycle City as the Harley-Davidson Hawaii distributor for over the past 48 years. (Compl. ¶ 15.)
According to the Complaint, for several months prior to the Distribution Agreement's July 31, 2013 expiration, Cycle City and Harley-Davidson engaged in negotiations regarding their ongoing relationship which resulted in an impasse. (Compl. ¶ ¶ 17-25.) Cycle City maintains that despite
termination of the parties' written agreements, Harley-Davidson has continued to sell products to Cycle City, but at " significantly and unreasonably" increased prices. (Compl. ¶ 27.) The crux of Cycle City's Complaint is that Harley-Davidson's conduct " contravenes the basic principles of the parties' long standing relationship and violates Hawaii's Motor Vehicle Industry Licensing Act, Haw. Rev. Stat. 437-1, et seq. . . ." (Compl. ¶ 28.)
Cycle City, Ltd.'s Complaint contains three counts: (1) violation of Hawaii Motor Vehicle Industry Licensing Act, Haw. Rev. Stat. 437-1, et seq (" HMVILA" ) for failure to renew the Distributorship Agreement and failure to renew the License Agreement; (2) declaratory relief based on Harley-Davidson's alleged failure to renew the most recent Distributorship Agreement; and (3) breach of the Distributorship Agreement. Counts 1 and 2 are based on the HMVILA. Count 3 is based on the Distributorship Agreement and its implied covenant of good faith and fair dealing.
STANDARD OF REVIEW
I. Motion to Transfer or Dismiss Based on a Forum Selection Clause
Generally, " a valid forum-selection clause [should be] given controlling weight in all but the most exceptional cases." A. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 134 S.Ct. 568, 581, 187 L.Ed.2d 487 (2013)(internal quotation marks and quoting citation omitted). Whether the proper vehicle for enforcing a forum selection clause is dismissal under the doctrine of forum non-conveniens or transfer pursuant to 28 U.S.C. § 1404(a) depends upon whether the forum selection clause points to a state court or to a federal court. Section 1404(a) allows transfer from a federal court to another court within the federal court system. See id. at 580. Where the forum selection clause points to a state court, the proper remedy is dismissal for forum non conveniens and not transfer pursuant to 28 U.S.C. § 1404(a). Id. (citations omitted) (where the forum selection clause points to a state court and " the appropriate way to enforce such a clause is through the doctrine of forum non conveniens, making dismissal the only possible remedy." ). Where a party moves to transfer based on a forum selection clause that points to a state court, the court will treat the party's motion to transfer as a motion to dismiss.
A motion to dismiss based on a forum-selection clause is treated as a Rule 12(b)(3) motion to dismiss for improper venue. Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996). The pleadings need not be accepted as true and the court may consider facts outside of the pleadings. Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1137 (9th Cir. 2004) (citing Richards v. Lloyd's of London, 135 F.3d 1289, 1292 (9th Cir. 1998) and Argueta v. Banco Mexicano, S. A., 87 F.3d 320, 324 (9th Cir. 1996)).
II. Motion to Dismiss Based on Failure to State a Claim
Federal Rule of Civil Procedure 12(b)(6) allows dismissal where a complaint fails " to state a claim upon which relief can be granted." Salmon Spawning & Recovery Alliance v. Gutierrez, 545 F.3d 1220, 1225 (9th Cir. 2008). The complaint must contain " a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. Rule 8(a)(2). Rule 8 of the Federal Rules of Civil Procedure " does not require 'detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me-accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868
(2009)(quoting Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). A pleading must provide " more than labels and conclusions, and a formulaic recitation of the elements of a cause of action." The factual allegations in a pleading " must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555.
A complaint survives a motion to dismiss when it contains sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). A claim is facially plausible when the factual content of the complaint allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard does not require probability, but it requires " more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 550 U.S. at 556). A complaint that pleads facts that are " merely consistent with" a defendant's liability " stops short of the line between possibility and plausibility of 'entitlement to relief.'" Id. (quoting
Twombly, 550 U.S. at 557).
When considering a Rule 12(b)(6) motion to dismiss, the Court must presume all allegations of material fact to be true and draw all reasonable inferences in favor of the non-moving party. Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998). The Court need not accept as true, however, allegations that contradict matters properly subject to judicial notice or allegations contradicting the exhibits attached to the complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010)(documents attached to the complaint and matters of public record may be considered on a motion to dismiss).
I. Defendant's Motion to Transfer Case is Denied
Harley-Davidson moves to transfer the case to Wisconsin based on the following clause in Section 19.3 of the Distributorship Agreement:
This Agreement shall be governed and construed in accordance with the laws of the State of Wisconsin . . . . [Harley-Davidson] and [Cycle City] hereby submit to the exclusive jurisdiction of the courts of State of Wisconsin. Any applicable state motor vehicle statute governing the relationship between [Harley-Davidson and Cycle City] shall be controlling in the event of a conflict between any provision of this Agreement and the state statute.
(Distributorship Agreement § 19.3, Ex. A to Compl., ECF No. 1.)
The usual analysis under 28 U.S.C. § 1404(a) or for forum non conveniens requires the Court to " evaluate both the convenience of the parties and various public-interest considerations" and " weigh the relevant factors and decide whether, on balance, a transfer [or dismissal] would serve 'the convenience of parties and witnesses' and otherwise promote 'the interest of justice.'"
A. Marine Const. Co., 134 S.Ct. at 581 (citing 28 U.S.C. § 1404(a)). " Public-interest factors may include the administrative difficulties flowing from court congestion; the local interest in having localized controversies decided at home; [and] the interest in having the trial of a diversity case in a forum that is at home with the law." Id. at 581, n.6 (citations and quotations omitted). Generally, however, " a valid forum-selection clause [should be] given controlling weight
in all but the most exceptional cases." Id. at 581 (internal quotation marks and quoting citation omitted). When there is a valid forum selection clause, " the plaintiff's choice of forum merits no weight", " the plaintiff bears the burden of establishing that transfer to the forum for which the parties bargained is unwarranted" ; and the " court . . .deem[s] the private-interest factors to weigh entirely in favor of the preselected forum." Id. at 582.
A. Section 19.3 of the Distribution Agreement
The parties do not dispute the existence of a valid forum selection clause, but rather, advocate for different interpretations of that clause. Under Section 19.3 of the Distributorship Agreement, the parties agreed to Wisconsin law and " the exclusive jurisdiction of the courts of State of Wisconsin."  But that clause is followed by a third sentence in Section 19.3 which states that " [a]ny applicable state motor vehicle statute governing the relationship between [Harley-Davidson and Cycle City] shall be controlling in the event of a conflict between any provision of this Agreement and the state statute." This means that Hawaii's applicable state motor vehicle statute - the Hawaii Motor Vehicle Industry Licensing Act (" HMVILA" ) - shall be controlling in the event of a conflict between it and any provision of the Distributorship Agreement.
Haw. Rev. Stat. Section 437-28.5(b) of the HMVILA conflicts with the first sentence of Section 19.3 providing for exclusive jurisdiction in the state of Wisconsin. Under Haw. Rev. Stat. Section 437-28.5(b), venue is proper in the Hawaii Federal District Court. Haw. Rev. Stat. Section 437-28.5(b) provides:
Notwithstanding the terms, provisions, or conditions of any dealer or distributor agreement, franchise, or waiver and notwithstanding any other legal or administrative remedies available, any person who is licensed under this chapter and whose business or property is injured by a violation of section 437-28(a)(21) or part II may bring a civil action in a court of competent jurisdiction in the State to enjoin further violations and to recover any damages together with the costs of the suit. Laws of the State of Hawaii shall apply to any action initiated under this subsection.
Haw. Rev. Stat. § 437-28.5(b).
Section 19.3 of the parties' Distribution Agreement providing for exclusive jurisdiction in the state of Wisconsin also conflicts with Haw. Rev. Stat. Section 437-52(1). Haw. Rev. Stat. Section 437-52(1) of the HMVILA, like Haw. Rev. Stat. Section 437-28.5(b), addresses venue with regard to agreements between manufacturers/distributors and dealers and prohibits the type of forum selection clause ...