     Case: 17-10349      Document: 00514413464         Page: 1    Date Filed: 04/03/2018




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT      United States Court of Appeals
                                                        Fifth Circuit

                                                                                    FILED
                                                                                  April 3, 2018
                                      No. 17-10349
                                                                                 Lyle W. Cayce
                                                                                      Clerk

AUTOBAHN IMPORTS, L.P., doing business as Land Rover of Fort Worth,

               Plaintiff - Appellee

v.

JAGUAR LAND ROVER NORTH AMERICA, L.L.C.,

               Defendant - Appellant




                   Appeal from the United States District Court
                        for the Northern District of Texas
                             USDC No. 4:16-CV-1172


Before STEWART, Chief Judge, CLEMENT, and SOUTHWICK, Circuit
Judges.
PER CURIAM:*
       Autobahn Imports, LP, sued Jaguar Land Rover North America, LLC,
for damages. The claim was based on an earlier determination by the Board
of the Texas Department of Motor Vehicles that Land Rover had violated the
Texas Occupations Code by certain financial charges it made to Autobahn, its
franchisee. Land Rover asserted two counterclaims for breach of contract. The


       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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district court dismissed the counterclaims for lack of subject matter
jurisdiction after determining that the Board retained exclusive jurisdiction to
make the initial determinations on the counterclaims. We AFFIRM.


                FACTUAL AND PROCEDURAL BACKGROUND
        The plaintiff Autobahn Imports, LP, is a franchised dealer in Fort Worth,
Texas for the defendant Jaguar Land Rover North America, LLC. In addition
to a dealer agreement between the parties, Land Rover utilizes an incentive
program known as the Business Builder Program to provide dealers with a
percentage of the retail price of every vehicle sold if certain requirements are
met. The terms of the program are set forth in two documents: the Business
Builder Program Manual (“Manual”) and the Operations Bulletin, also known
as the Contests and Incentives Standard Eligibility Rules for Retail Programs
(“Rules”).   The Manual and the Rules are collectively referred to as the
Business Builder contracts.
        In 2010, Autobahn and Land Rover disagreed about certain provisions of
the 2011 Business Builder Program. Autobahn filed a complaint with the
Board of the Texas Department of Motor Vehicles (“the Board”). Before the
Board ruled, the parties executed a Settlement Agreement establishing future
policies for newly-sold vehicles as well as documentation requirements for the
delivery of new vehicles to retail purchasers. The Business Builder contracts
and the Settlement Agreement stipulated that incentive payments would be
contingent on Autobahn’s delivering newly-sold vehicles directly to the end-
user.    In addition, Autobahn was required to maintain documentation to
validate the end-user addresses.
        In 2014, Land Rover audited Autobahn’s sales records and determined
that approximately 85 vehicles sold in 2013 had not been delivered directly to
an end-user according to its interpretation of the Manual and Settlement
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Agreement. Because Autobahn allegedly delivered the vehicles to a leasing
company who then delivered the vehicles to subsequent users, Land Rover
charged back approximately $317,000 from Autobahn’s account. Autobahn
challenged the charge-back by filing a complaint with the Board in May 2014.
      Autobahn argued that the terms of the incentive program violated Texas
Occupations Code § 2301.467, barring distributors from requiring “adherence
to unreasonable sales or service standards[.]” The Board ruled in favor of
Autobahn in September 2016. Land Rover appealed to the Court of Appeals
for the Third District of Texas in Austin, which affirmed the Board’s decision
in December 2017. Jaguar Land Rover N. Am. v. Bd. of the Tex. Dep’t of Motor
Vehicles, No. 03-16-00770-CV, 2017 WL 6756997, at *1 (Tex. App.—Austin
Dec. 21, 2017, no pet.).
      Because the Texas Occupations Code does not grant the Board authority
to award damages, Autobahn filed suit in Texas state court in November 2016
for damages based on the Board’s holding. In December 2016, Land Rover
removed the case to the United States District Court for the Northern District
of Texas based on diversity of citizenship. In its answer to the suit, Land Rover
asserted as counterclaims that Autobahn breached the Business Builder
contracts and the Settlement Agreement. Autobahn moved to dismiss the
counterclaims for lack of subject matter jurisdiction. It argued that the Board
had exclusive jurisdiction over such claims, requiring Land Rover to present
them first to the Board.        In February 2017, the district court granted
Autobahn’s motion. Land Rover timely appealed the district court’s dismissal
of the two counterclaims. 1



      1 The district court later granted summary judgment in favor of Autobahn on its
damages claim, awarding nearly a million dollars in damages. See Autobahn Imps., LP v.
Jaguar Land Rover N. Am., LLC, No. 4:16-CV-1172-A, 2017 WL 2684055, at *7 (N.D. Tex.
June 20, 2017). Land Rover’s appeal of that judgment is pending. No.17-10737.
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                                    DISCUSSION
        Land Rover raises two issues on appeal. First, it argues the district court
erred in determining that the Board retains exclusive jurisdiction over its
breach of contract counterclaims. Second, it argues error in the district court’s
alternative holding, that the Board retains primary jurisdiction.
        Sitting in diversity, we apply Texas substantive law. Austin v. Kroger
Tex. LP, 746 F.3d 191, 196 (5th Cir. 2014). In determining that law, we look
“first to the final decisions of the Texas Supreme Court.” Id. If that court has
not spoken to an issue, we seek to predict its rulings “by looking to the
precedents established by intermediate state appellate courts.” Howe ex rel.
Howe v. Scottsdale Ins. Co., 204 F.3d 624, 628 (5th Cir. 2000).
        Under Texas law, whether an agency has exclusive or primary
jurisdiction is a question of law reviewed de novo. Subaru of Am., Inc. v. David
McDavid Nissan, Inc., 84 S.W.3d 212, 222 (Tex. 2002). Similarly, we review a
district court’s dismissal of claims for want of subject matter jurisdiction de
novo. SmallBizPros, Inc. v. MacDonald, 618 F.3d 458, 461 (5th Cir. 2010).


   I.      Exclusive Jurisdiction
        Under Texas law, state “district courts are authorized to resolve disputes
unless the Constitution or other law conveys exclusive jurisdiction on another
court or administrative agency.” In re Sw. Bell Tel. Co., 235 S.W.3d 619, 624
(Tex. 2007). “Whether an agency has primary or exclusive jurisdiction to
resolve an issue determines if a party must first exhaust administrative
remedies before a trial court has subject matter jurisdiction over a dispute.”
Subaru, 84 S.W.3d at 222. If exhaustion is required and has not occurred, “the
trial court lacks subject matter jurisdiction and must dismiss the claims within
the agency’s exclusive jurisdiction.” Id. at 221.


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      A Texas administrative agency “has exclusive jurisdiction when the
Legislature gives the agency alone the authority to make the initial
determination in a dispute.” Cash Am. Int’l Inc. v. Bennett, 35 S.W.3d 12, 15
(Tex. 2000). Whether an agency has such authority turns on whether “a
pervasive regulatory scheme indicates that the Legislature intended for the
regulatory process to be the exclusive means of remedying the problem to
which the regulation is addressed.” In re Sw. Bell, 235 S.W.3d at 624–25. The
determination is therefore a matter of statutory construction governed by the
plain language of the statute and legislative intent. Butnaru v. Ford Motor
Co., 84 S.W.3d 198, 203 (Tex. 2002).
      The Texas Supreme Court has held that the Texas Occupation Code
“clearly expresses the Legislature’s intent for the Board to have exclusive
jurisdiction over matters the Code governs.”      Subaru, 84 S.W.3d at 223.
Accordingly, “[t]he board has the exclusive original jurisdiction to regulate
those aspects of the distribution, sale, or lease of motor vehicles that are
governed by this chapter, including the original jurisdiction to determine its
own jurisdiction.” TEX. OCC. CODE § 2301.151(a). As to franchises, the Code
states that “[t]he terms and conditions of a franchise are subject” to the Code.
§ 2301.003(a).   That means that any “term or condition of a franchise
inconsistent with [the Code] is unenforceable.” § 2301.003(b).
      Autobahn cites to Section 2301.002(15), the definitions subsection of the
Code, to define “franchise” as it relates to the claims at issue. The definition
broadly includes “contracts between a franchised dealer as franchisee and a
manufacturer . . . including a written communication from a franchisor to a
franchisee in which a duty is imposed on the franchisee[.]” § 2301.002(15).
Autobahn also relies on general provisions of the Code: Section 2301.467
prohibits “adherence to unreasonable sales or service standards”; Section
2301.4749 requires a franchisor to provide “reasons for the rejection” when
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denying an incentive payment; and Section 2301.475 permits a charge-back of
incentive payments only upon “reasonable grounds to conclude that the dealer
committed fraud[.]”
      In interpreting whether these provisions grant exclusive jurisdiction, the
parties look primarily to three cases. The first two opinions were issued by the
Texas Supreme Court on the same day in 2002. See Butnaru, 84 S.W.3d 198;
Subaru, 84 S.W.3d 212. In addition, Land Rover relies on one of our decisions
handed down in 2003. See Saturn Distrib. Corp. v. Paramount Saturn, Ltd.,
326 F.3d 684, 686–87 (5th Cir. 2003).
      In one of the Texas Supreme Court decisions, it considered whether the
Board retained exclusive jurisdiction over a dispute between Subaru and one
of its franchisee dealers. Subaru, 84 S.W.3d at 222–23. The court held that
the statutory “language clearly and plainly evidences the Legislature’s intent
that it is a jurisdictional prerequisite that the Board resolve Code-based issues
and claims before a party proceeds in court.” Id. at 223. The plaintiff dealer
alleged that Subaru unlawfully withheld approval to relocate a dealership
contrary to an oral agreement between the parties. Id. at 226. The Code,
however, only regulates written applications to relocate, and the provision at
issue therefore could not provide the basis for exclusive jurisdiction.       Id.
Nonetheless, the court held that other provisions of the Code strictly regulated
the “facts underlying” the breach of oral contract claims because the Board
must still approve a license for any dealership location. Id. The plaintiff’s
claims were therefore “predicated on the assumption that the Board would
have allowed the relocation and granted the license[.]” Id. The Board therefore
retained exclusive jurisdiction over the claims because the underlying facts
raised Code-based issues, even though oral contracts for dealership relocation
were not expressly addressed by the Code. See id.


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      The other Texas state court decision addressed a prospective dealer’s suit
against Ford Motor Company for tortious interference with its attempted
purchase of a dealership.       Butnaru, 84 S.W.3d at 207.          Applying the
jurisdictional standard announced that same day in Subaru, the court
concluded that the language of the Code did not signal legislative intent to
replace the remedies available to a prospective purchaser of a dealership as
opposed to a current dealer. See id. at 207–08. Thus, there was no Code
provision dealing with the underlying facts of the plaintiff’s claim. See id. The
Board therefore lacked exclusive jurisdiction. See id. at 207.
      Finally, this court considered whether an arbitration clause in a
franchise agreement was sufficient to override the Board’s jurisdiction.
Saturn, 326 F.3d at 686. Land Rover principally relies on this language:
“There are no legal restraints external to the parties’ arbitration agreement
that foreclose the arbitration of their dispute because the [Board] does not have
exclusive jurisdiction of contractual disputes between franchisors and
franchisees in the motor vehicle industry.” Id. at 687. “Even if it did,” the
court held, “the strong federal policy favoring arbitration preempts state laws
that act to limit the availability of arbitration.” Id.
      Here, the district court held that “[t]he subject matters of both of [Land
Rover’s] breach of contract claims are within the exclusive jurisdiction of the
Board[.]”   Land Rover argues that the exclusive jurisdiction question is
foreclosed by our decision in Saturn. In the alternative, Land Rover argues
that Subaru and Butnaru require exclusive jurisdiction only when the claims
explicitly allege a violation of the Code or are “predicated on a regulatory
decision within the Board’s sole authority.” Because Land Rover is alleging
Autobahn violated the Business Builder Contracts and the Settlement
Agreement, not the Code, it argues this case is more like Butnaru.


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                                  No. 17-10349
      Autobahn argues that Land Rover must demonstrate a valid and
enforceable contract between the franchisor and franchisee. Werline v. E. Tex.
Salt Water Disposal Co., 209 S.W.3d 888, 898 (Tex. App.—Texarkana 2006),
aff’d, 307 S.W.3d 267 (Tex. 2010). Because (1) the Code deems unenforceable
any franchise terms and conditions contrary to the Code (Section 2301.003); (2)
all written communications imposing obligations between parties to the
franchise are encompassed by the Code (Section 2301.002(15)); and (3) the
Business Builder Contracts and Settlement Agreement imposed obligations on
Autobahn; then (4) the Board has exclusive jurisdiction to determine whether
the Business Builder Contracts and the Settlement Agreement are consistent
with the Code in order for the documents to be enforceable. Restated according
to Suburu, even if Land Rover’s breach of contract claims are not explicitly
alleging Code violations, the underlying facts still require determinations
governed by the Code.
      We first examine Saturn. Both parties go too far in characterizing our
holding.   Autobahn’s argument that our statement regarding exclusive
jurisdiction is dicta is incorrect. The Board’s lack of exclusive jurisdiction over
contractual disputes and the FAA’s preemption of the Code are alternative
holdings. See Saturn, 326 F.3d at 687. “This circuit follows the rule that
alternative holdings are binding precedent and not obiter dicta.” United States
v. Bueno, 585 F.3d 847, 850 n.3 (5th Cir. 2009) (citation omitted).
      Similarly flawed is Land Rover’s argument that Saturn forecloses the
question of the Board’s exclusive jurisdiction in all cases. Although we did not
discuss Subaru in Saturn, there is no conflict between Subaru’s holding that
the Board retains exclusive jurisdiction over matters the Code governs and
Saturn’s holding that the Board’s exclusive jurisdiction cannot serve as an
external legal restraint to arbitration clauses. In that sense, we held that the
Board’s jurisdiction is not exclusive in all respects. See Saturn, 326 F.3d at
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687. Although the Board maintains exclusive jurisdiction over matters the
Code governs, the Code does not govern every situation. In those instances,
the Board lacks exclusive jurisdiction. See Subaru, 84 S.W.3d at 223. The
Saturn arbitration clause was such an instance. See 326 F.3d at 687.
      The plain language of the Code indicates that a written agreement
between a franchisor and franchisee is unenforceable if it violates the Code.
See §§ 2301.002(15), 2301.003. A complaint that seeks to enforce a contract
between a franchisor and franchisee necessarily raises a Code question.
      Concerning Butnaru, Land Rover argues that if the Subaru test looks to
whether underlying facts raise Code-related questions, then the Butnarus’
claims would have warranted exclusive jurisdiction.         It then posits that
because the court denied exclusive jurisdiction, Autobahn’s articulation of the
Subaru test must be too broad. A closer reading of Butnaru, however, reveals
the court did suggest that the underlying facts would have brought the
Butnarus’ claims under the umbrella of the Board’s exclusive jurisdiction but
for their identity as a third party as opposed to a franchisor or franchisee. See
84 S.W.3d at 207–08.
      Land Rover’s counterclaims for breach of contract require the presence
of an enforceable contract, a question implicating the Code. Land Rover cannot
bypass the Board’s exclusive jurisdiction by choosing to avoid explicitly relying
on a Code provision as the basis for its counterclaims. Because Land Rover’s
allegation is that Autobahn breached a written agreement between a vehicle
franchisor and franchisee, a Code determination is required to determine if
there was an enforceable agreement between the parties. The Board therefore
retains exclusive jurisdiction over Land Rover’s counterclaims.
      Given the Board’s exclusive jurisdiction, we need not reach the
alternative issue of whether the Board retains primary jurisdiction.


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   II.      Dismissal vs. Abatement of the Counterclaims
         The parties dispute whether it is more appropriate to dismiss or abate
Land Rover’s counterclaims in light of the Board’s exclusive jurisdiction. The
district court dismissed the counterclaims. The parties both cite to different
passages of Subaru.       Autobahn argues that Subaru permits discretion in
determining whether to dismiss or abate the counterclaims while Land Rover
argues that Subaru requires abatement.
         As with the exclusive jurisdiction issue, we look to the decisions of the
Texas Supreme Court for guidance and, in the alternative, “to the precedents
established by intermediate state appellate courts.” Howe, 204 F.3d at 628.
The Texas Supreme Court has noted that typically, when a trial court
determines it lacks subject matter jurisdiction on account of a state agency’s
exclusive jurisdiction, the court must dismiss the claims. Subaru, 84 S.W.3d
at 227. Only when the impediment to jurisdiction can be removed may a court
abate rather than dismiss the claim. Id. at 228. Applied to the facts of Subaru,
the court held that the plaintiff had a “reasonable opportunity to cure the
jurisdictional problem” by first exhausting his claim before the Board. Id.
         At least one Texas intermediate appellate court has held that Subaru
failed to elaborate “the circumstances which justify an abatement[.]” O’Neal
v. Ector Cnty. Indep. Sch. Dist., 221 S.W.3d 286, 290 (Tex. App.—Eastland
2006), aff’d on other grounds, 251 S.W.3d 50 (Tex. 2008). That court believed
Subaru and related Texas Supreme Court opinions indicated “dismissal was
the appropriate remedy where an administrative agency . . . had exclusive
jurisdiction and had not yet ruled.” See id.
         Here, the district court noted that Land Rover is raising many of the
same arguments in support of its counterclaims as it did when challenging
Autobahn’s claims already adjudicated by the Board. Although we do not
forecast the Board’s potential evaluation of Land Rover’s counterclaims,
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Subaru indicates that abatement turns largely on the possibility that the
claims will eventually return to the trial court. See 84 S.W.3d at 227–28. The
district court therefore did not err in determining that dismissal was
appropriate given the unlikelihood of Land Rover’s claims returning to the
district court following adjudication by the Board.
      AFFIRMED.




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