Prevent USA Corporation v. Volkswagen AG

• Decision Date: 08 November 2021
• Docket Number: No. 21-1379,21-1379
• Citation: 17 F.4th 653
• Parties: PREVENT USA CORPORATION; Eastern Horizon Group Netherlands B.V., Plaintiffs-Appellants, v. VOLKSWAGEN AG ; Volkswagen Group of America, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

17 F.4th 653

PREVENT USA CORPORATION; Eastern Horizon Group Netherlands B.V., Plaintiffs-Appellants,

v.VOLKSWAGEN AG ; Volkswagen Group of America, Inc., Defendants-Appellees.

No. 21-1379

United States Court of Appeals, Sixth Circuit.

Argued: October 21, 2021

Decided and Filed: November 8, 2021

ARGUED: Matthew S. Tripolitsiotis, BOIES, SCHILLER & FLEXNER, LLP, Armonk, New York, for Appellants. Sharon L. Nelles, SULLIVAN & CROMWELL LLP, New York, New York, for Appellees. ON BRIEF: Matthew S. Tripolitsiotis, BOIES, SCHILLER & FLEXNER, LLP, Armonk, New York, Duane L. Loft, Brianna S. Hills, BOIES, SCHILLER & FLEXNER, LLP, New York, New York, for Appellants. Sharon L. Nelles, Steven L. Holley, Suhana S. Han, Laura Kabler Oswell, Leonid Traps, SULLIVAN & CROMWELL LLP, New York, New York, Todd A. Holleman, MILLER, CANFIELD, PADDOCK & STONE, PLC, Detroit, Michigan, for Appellees.

Before: SUTTON, Chief Judge; BATCHELDER and LARSEN, Circuit Judges.

SUTTON, Chief Judge.

This litigation has had two chapters, so far. Chapter one grew out of a dispute between Volkswagen, a company based in Germany, and a group of companies based in Europe, called the Prevent Group, that specializes in turning around distressed automotive parts suppliers. The seeds of the dispute, from Volkswagen's vantage point, arose when the Prevent Group organized an effort to halt supplies of their car parts in order to obtain better terms from Volkswagen, and Volkswagen responded by opting not to do business with the affiliated companies. From the Prevent Group's vantage point, Volkswagen engineered a boycott of its companies and violated several German and European antitrust laws in the process. Begun in 2016, this litigation initially involved claims of unfair business practices and anticompetitive behavior under German and European law and was handled by a number of German trial and appellate courts. Volkswagen has prevailed in most of these suits, and one case is still pending before the Regional Court in Frankfurt.

Chapter two began in 2019 and was initiated by two members of the Prevent Group: Eastern Horizon Group, based in the Netherlands, and an American subsidiary (Prevent USA). The two of them sued Volkswagen and its American subsidiary in Michigan, alleging that the carmaker unfairly prevented them from acquiring distressed automotive-parts manufacturers. After determining that the Eastern Horizon Group and Prevent USA were trying to open another front on a dispute that should remain in Europe, the district court dismissed the complaint on the basis of forum non conveniens. Finding no errors of law or abuse of discretion in the district court's weighing of the relevant factors, we affirm.

I.

Eastern Horizon Group is part of a network of companies called the Prevent Group. The group is located in Europe, and the affiliated companies specialize in turning around failing or underperforming automotive-parts suppliers. Prevent USA Corporation is a subsidiary formed to acquire distressed manufacturers in the United States, and it is headquartered out of an apartment building in Pittsburgh, Pennsylvania. Prevent-owned companies have supplied Volkswagen, a German company, with parts for several years.

Roughly five years ago, the relationship soured. Eastern Horizon and Prevent USA (collectively Prevent USA from now on unless otherwise specified) claim that Volkswagen abruptly cancelled its contracts because the Prevent Group's acquisition of several manufacturers threatened Volkswagen's single-buyer status for car parts. Volkswagen used this position, Prevent USA claims, to keep the prices of its inputs low by buying only from small companies with little bargaining power. For its part, Volkswagen alleges that a Prevent company unexpectedly demanded millions of euros in additional payments in the middle of a contract and halted production when Volkswagen declined, prompting the carmaker to conclude that the Prevent Group could not be trusted as a business partner.

According to Prevent USA, Volkswagen launched a coordinated initiative called "Project 1" to impede well-resourced suppliers like the Prevent Group from acquiring distressed manufacturers. R.1 at 35. Volkswagen reportedly used a variety of means to frustrate the Prevent Group's acquisition of struggling parts manufacturers. One of them involved option agreements that gave Volkswagen the right to purchase the target company if Volkswagen objected to a prospective buyer. Prevent USA claims that it learned about Project 1 through internal documents, including presentations and spreadsheets, that a Volkswagen executive leaked. In response to this conduct, Prevent Group companies sued Volkswagen at least five times in German courts.

Prevent USA alleges that Volkswagen's anticompetitive efforts frustrated its plans to acquire struggling suppliers in the United States. When the Prevent Group attempted to buy the Brazilian manufacturing arm of the Michigan company Tower International, Tower's CEO informed it that Volkswagen would have to approve the Group's purchase of the Brazilian operations. Prevent USA also claims that Tower admitted to signing an option agreement to allow Volkswagen to purchase the Brazilian operations if a Prevent entity attempted to acquire them. Prevent USA infers that Project 1 likewise frustrated its efforts to acquire six other Michigan-based companies on a "Problematic Suppliers" list that Volkswagen kept. Id. at 45–46.

Prevent USA sued Volkswagen in federal court, alleging violations of §§ 1 and 2 of the Sherman Act and several state laws. Prevent USA alleges that Project 1 blocked the Prevent Group from profiting from potential American investments, "caused loss to Prevent's industry goodwill and market reputation, and substantially decreased the overall market valuation of the Prevent Group." Id. at 57.

Volkswagen moved to dismiss on forum non conveniens, among other grounds, arguing that the dispute should proceed in Germany. The district court agreed, reasoning that Germany was an adequate and available alternative forum, that the public and private interest factors favored dismissal, and that the choice of forum by the one American plaintiff (Prevent USA) merited little deference because it was merely a shell company acting as a "scouting party" for the Prevent Group. R.56 at 12–21.

II.

The phrase forum non conveniens (an "unfitting forum") may suggest a more venerable history than the cases reveal. As Latin phrases go, this one has a relatively recent vintage. Minted by a Scottish court in 1845, the common law doctrine, which allows a court to dismiss a case in favor of a more convenient forum, has attained by some accounts the status of "Scotland's most significant legal export in the field of private international law." Ardavan Arzandeh, The Origins of the Scottish Forum Non Conveniens Doctrine , 13 J. Priv. Int'l L. 130, 130–32 (2017). The doctrine gained popularity in the Anglo-American legal world after the House of Lords recognized it in 1926. Société de Gaz de Paris v. Société Anonyme de Navigation , 1926 SC (HL) 13. The U.S. Supreme Court mentioned forum non conveniens for the first time in the 1930s. See Rogers v. Guar. Tr. Co. of N.Y. , 288 U.S. 123, 151, 53 S.Ct. 295, 77 L.Ed. 652 (1933) (Cardozo, J., dissenting); Can. Malting Co. v. Patterson S.S. , 285 U.S. 413, 423, 52 S.Ct. 413, 76 L.Ed. 837 (1932) (explaining "[c]ourts of equity and of law also occasionally decline, in the interest of justice, to exercise jurisdiction, where the suit is between aliens or nonresidents, or where for kindred reasons the litigation can more appropriately be conducted in a foreign tribunal").

But the Court did not provide a full explanation of the American common law doctrine and the factors bearing on its invocation until Gulf Oil Corp. v. Gilbert , 330 U.S. 501, 67 S.Ct. 839, 91 L.Ed. 1055 (1947). With Justice Jackson writing for the majority, Gilbert held that the district court's power to dismiss a case on forum non conveniens grounds is rooted in the reality that "a court may resist imposition upon its jurisdiction even when jurisdiction is authorized by the letter of a general venue statute." Id. at 507, 67 S.Ct. 839. Justice Black dissented, insisting that a court faced with a cognizable claim based on alleged violations of common law or statutory rights may not decline to exercise jurisdiction absent congressional authorization, no matter the inconvenience to the defendant. Id. at 513–15, 67 S.Ct. 839 (Black, J., dissenting). Since then, the Court has stuck to Justice Jackson's path, authorizing trial courts to dismiss a case on forum non conveniens grounds. Piper Aircraft Co. v. Reyno , 454 U.S. 235, 257, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981) ; see Lonny S. Hoffman & Keith A. Rowley, Forum Non Conveniens in Federal Statutory Cases , 49 Emory L.J. 1137, 1153–54 (2000).

In deciding whether to dismiss a case on this basis, "the central focus" is "convenience." Piper Aircraft , 454 U.S. at 249, 102 S.Ct. 252. Three questions guide a district court's discretion: Is there an adequate alternative forum? Would the chosen forum be unduly burdensome to the defendant or court given the private and public considerations at play? Are there legitimate reasons for denying the plaintiff its choice of forum? Jones v. IPX Int'l Eq. Guinea, S.A. , 920 F.3d 1085, 1090 (6th Cir. 2019).

In reviewing a forum non conveniens ruling, we ask whether the district court committed a "clear abuse of discretion." Piper Aircraft , 454 U.S. at 257, 102 S.Ct. 252. We give "substantial deference" to district court decisions that get the process right—that account for all of the "relevant public and private interest factors." Id. ; see Jones , 920 F.3d at 1093. Fresh review applies to questions of law, such as whether an adequate alternative forum exists. DRFP L.L.C. v. Republica Bolivariana de Venezuela , 622 F.3d 513, 518 (6th Cir. 2010).

1. Is there an available and adequate alternative forum?...