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`IN THE UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF TEXAS
`WACO DIVISION
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`Plaintiff,
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`STRATOSAUDIO INC.,
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`v.
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`VOLKSWAGEN GROUP OF
`AMERICA, INC.,
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`Defendant.
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`Case No. 6:20-CV-01131-ADA
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`JURY TRIAL DEMANDED
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`STRATOSAUDIO, INC.’S OPPOSITION TO
`VOLKSWAGEN GROUP OF AMERICA, INC.’S
`MOTION TO DISMISS OR TRANSFER
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`Case 6:20-cv-01131-ADA Document 22 Filed 03/05/21 Page 2 of 21
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`I.
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`II.
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`TABLE OF CONTENTS
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`INTRODUCTION .........................................................................................................1
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`LEGAL STANDARDS ..................................................................................................2
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`III. ARGUMENT .................................................................................................................2
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`A.
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`Volkswagen Has Ratified Its Dealership As “The Place Of Business” ..................3
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`1.
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`2.
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`The Facts Alleged in StratosAudio’s Complaint Demonstrate that Venue
`Is Proper under the “Ratification” Theory .................................................3
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`Additional Facts Further Demonstrate That Venue Is Proper under the
`“Ratification” Theory ...............................................................................7
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`Venue Is Also Proper Because Volkswagen Exercises Significant Control Over Its
`Dealerships ..........................................................................................................8
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`To the Extent Helpful To the Court, Volkswagen’s Motion Should Be Denied
`Until Parties Have Completed Venue Discovery ................................................ 16
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`B.
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`C.
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`IV. CONCLUSION ............................................................................................................ 17
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`Case 6:20-cv-01131-ADA Document 22 Filed 03/05/21 Page 3 of 21
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`TABLE OF AUTHORITIES
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`FEDERAL CASES
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`Page(s)
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`Blitzsafe Tex., LLC v. Bayerische Motoren Werke AG,
`2018 U.S. Dist. LEXIS 173065 (E.D. Tex. Sep. 5, 2018), vacated by party
`stipulation by Blitzsafe Tex., LLC v. Mitsubishi Elec. Corp., 2019 U.S. Dist.
`LEXIS 129945 (E.D. Tex. Aug. 1, 2019) ...................................................................... passim
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`Blitzsafe Tex., LLC v. Mitsubishi Elec. Corp.,
`2019 U.S. Dist. LEXIS 86350 (E.D. Tex. May 22, 2019)........................................... 4, 16, 17
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`Blitzsafe Tex., LLC v. Mitsubishi Elec. Corp.,
`2019 U.S. Dist. LEXIS 129945 (E.D. Tex. Aug. 1, 2019) ...................................................... 3
`
`etradeshow.com, Inc. v. Netopia Inc.,
`2004 WL 515552 (N.D. Tex. Jan. 30, 2004) .......................................................................... 2
`
`In re Cray Inc.,
`871 F.3d 1355 (Fed. Cir. 2017) .................................................................................. 2, 3, 6, 8
`
`Langton v. CBeyond Communication, LLC,
`282 F. Supp. 2d 504 (E.D. Tex. 2003) ................................................................................... 2
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`National Steel Car Ltd. v. Greenbrier Co., Inc.,
`No. 6:19-cv-00721-ADA, Slip Op. (W.D. Tex. July 27, 2020)............................................... 6
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`Omega Patents, LLC v. Bayerische Motoren Werke AG,
`2020 U.S. Dist. LEXIS 248567 (N.D. Ga. Dec. 21, 2020) ...................................................... 5
`
`Oppenheimer Fund, Inc. v. Sanders,
`437 U.S. 340 (1978) ............................................................................................................ 16
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`TC Heartland LLC v. Kraft Foods Group Brands LLC,
`137 S. Ct. 1514 (2017) .......................................................................................................... 2
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`West View Research, LLC v. BMW of N. Am., LLC,
`2018 WL 4367378 (S.D. Cal. Feb. 5, 2018) ........................................................................... 5
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`STATE CASES
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`PHC Minden L.P. v. Kimberly-Clark Corp.,
`235 S.W.3d 163 (Tex. Sup. Ct. 2007) .................................................................................... 6
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`28 U.S.C. § 1400(b) .................................................................................................................... 2
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`FEDERAL STATUTES
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`ii
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`Case 6:20-cv-01131-ADA Document 22 Filed 03/05/21 Page 4 of 21
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`I.
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`INTRODUCTION
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`Volkswagen Group of America, Inc.’s (“Volkswagen”) Motion to Dismiss or Transfer
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`(D.I. 16) (“Motion”) presents one main argument for transfer: that Plaintiff StratosAudio, Inc.
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`(“StratosAudio”) cannot utilize Volkswagen’s dealers in this District to establish venue because
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`the dealers are “separate entities.” Motion at 4. This argument both ignores the controlling law
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`on venue determination for patent cases and the facts regarding Volkswagen’s relationship to its
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`dealers.
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`The U.S. Court of Appeals for the Federal Circuit has set forth the legal requirements for
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`venue that relate to a defendant’s “control” or “ratification” of a place of business. In re Cray,
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`871 F.3d 1355, 1363 (Fed. Cir. 2017). Notwithstanding Volkswagen’s arguments, the mere fact
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`that a defendant and an entity in a judicial district are “separate entities” is not dispositive in
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`determining venue.
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`In addition, Volkswagen’s Motion ignores the facts of its actual relations with its dealers.
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`The reality is that Volkswagen ratifies and controls almost every aspect of its dealers’ business,
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`including, but not limited to, (i) the location, structure, use, and maintenance of its dealers’
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`premises and facilities, (ii) advertising, (iii) sales, (iv) parts, (v) inventory, (vi) service and
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`warranty, (vi) pricing, (viii) personnel, and (ix) records keeping. As set forth in more detail
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`below, Volkswagen’s ratification and control over its dealers is so pervasive that Volkswagen
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`even controls what brochures the dealers must display in their waiting areas, as well as what
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`computer equipment and stationery the dealer may use.
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`Judge Gilstrap in the Eastern District of Texas has already examined the venue issue
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`raised by Volkswagen – whether a vehicle manufacturer ratifies or controls its dealers under In
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`Re Cray – and determined that venue in that judicial district was proper. Blitzsafe Tex., LLC v.
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`Bayerische Motoren Werke AG, 2018 U.S. Dist. LEXIS 173065 (E.D. Tex. Sep. 5, 2018). This
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`1
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`Case 6:20-cv-01131-ADA Document 22 Filed 03/05/21 Page 5 of 21
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`Court should apply that same analysis and reach the same conclusion: that Volkswagen’s
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`dealers’ premises are, for the purposes of venue, to be treated as Volkswagen’s own place of
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`business. Volkswagen’s Motion to Dismiss/Transfer for Improper Venue should be denied.
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`II.
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`LEGAL STANDARDS
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`A plaintiff bears the burden of establishing proper venue. In re Cray Inc., 871 F.3d at
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`1360. On a motion to dismiss for improper venue, a plaintiff need only present facts which,
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`taken as true, establish venue. Langton v. CBeyond Communication, LLC, 282 F. Supp. 2d 504,
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`508 (E.D. Tex. 2003). “Courts will accept as true uncontroverted facts in a plaintiff’s pleadings,
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`and will resolve any conflicts in the plaintiff’s favor.” Id.; see also etradeshow.com, Inc. v.
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`Netopia Inc., 2004 WL 515552, at *2 (N.D. Tex. Jan. 30, 2004).
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`Venue for domestic defendants in patent infringement cases is governed by 28 U.S.C. §
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`1400(b). TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514, 1521 (2017).
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`Section 1400(b) provides that “[a]ny civil action for patent infringement may be brought [1] in
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`the judicial district where the defendant resides, or [2] where the defendant has committed acts of
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`infringement and has a regular and established place of business.” TC Heartland, 137 S. Ct. at
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`514. As to venue under the second prong of Section 1400(b), there are “three general
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`requirements relevant to the inquiry: (1) there must be a physical place in the district; (2) it must
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`be a regular and established place of business; and (3) it must be the place of the defendant.” In
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`re Cray Inc., 871 F.3d 1355 at 1360.
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`III. ARGUMENT
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`Volkswagen meets the requirements of the second prong of Section 1400(b). First,
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`Volkswagen has not disputed – because there can be no dispute – that Volkswagen’s dealerhips
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`are both “physical places” within the District and that they are “regular and established.” See,
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`e.g., Blitzsafe Tex., LLC v. Bayerische Motoren Werke AG, 2018 U.S. Dist. LEXIS 173065, *13
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`2
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`Case 6:20-cv-01131-ADA Document 22 Filed 03/05/21 Page 6 of 21
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`(E.D. Tex. Sep. 5, 2018) (hereinafter “Blitzsafe I”), vacated by party stipulation by Blitzsafe Tex.,
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`LLC v. Mitsubishi Elec. Corp., 2019 U.S. Dist. LEXIS 129945 (E.D. Tex. Aug. 1, 2019)
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`(hereinafter “Blitzsafe III”).1 The only issue is whether Volkswagen’s dealers located in this
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`District satisfy the third requirement – that the dealerships are “places” of Volkswagen for the
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`purposes of the venue statute. A location is a “place of the defendant” if the defendant (i)
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`“exercises … attributes of possession or control over” the place or (ii) has taken steps to “ratify
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`the place of business.” In re Cray, 871 F.3d at 1363 (emphasis added). Volkswagen’s relations
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`with its dealers meet both the “ratification” and “control” tests of a “place of the defendant.”
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`Venue in this judicial district is thus proper over Volkswagen.
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`A.
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`Volkswagen Has Ratified Its Dealership As “The Place Of Business”
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`1.
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`The Facts Alleged in StratosAudio’s Complaint Demonstrate that Venue
`Is Proper under the “Ratification” Theory
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`There are at least five authorized Volkswagen dealerships (including Volkswagen and
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`Audi dealerships) in this District. D.I. 1 (Compl.), ¶ 10. New Volkswagen vehicles are available
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`for purchase exclusively through these authorized dealers. Id. The dealerships include the name
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`“Volkswagen” or “Audi” with no reservations or disclaimers. Id., ¶ 11. The dealerships also
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`prominently display the “Volkswagen” or “Audi” logos and use Volkswagen’s and Audi’s
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`trademarks, trade names, and other intellectual property associated with the distribution and sale
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`of vehicles and provision of related services. Id., ¶ 11. Moreover, Volkswagen’s websites
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`(www.vw.com and www.audiusa.com/us/web/en.html) direct users to these dealerships when
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`1 The court vacated its order in Blitzsafe I pursuant to the parties’ joint stipulation to vacate,
`not based on any consideration of the merits or its analysis in Blitzsafe I. Blitzsafe III, 2019
`U.S. Dist. LEXIS 129945, *4 (In the Motion, the Parties jointly move to vacate the Court’s
`September 6, 2019 Order Denying Defendant’s Motion to Dismiss for Lack of Personal
`Jurisdiction or Improper Venue”). Consequently, the original reasoning articulated by the
`court in Blitzsafe I remains sound.
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`3
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`Case 6:20-cv-01131-ADA Document 22 Filed 03/05/21 Page 7 of 21
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`searching for Volkswagen vehicles in this district. Id., ¶ 12. These websites will display a list of
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`these franchise dealerships when a user inputs a zip code within this District. From there, the
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`user can view inventory and trade-in information, apply for financing, and arrange a test drive at
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`these franchise dealerships. Id., ¶ 12. A Texas court has already analyzed, and confirmed, that
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`an automobile distributor (BMW North America, or “BMWNA”) can “ratify” its dealerships for
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`venue purposes under these same facts. Blitzsafe I, 2018 U.S. Dist. LEXIS 173065 at *20. In
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`reaching this conclusion, the court noted that (i) BMWNA did not permit sales of its vehicles
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`except through its authorized dealers; (ii) the dealerships were named “BMW”; (iii) BMW’s
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`dealerships prominently displayed BMW’s logo, indicating to the public that they are a place
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`where BMWNA, through its franchised dealers, sells BMW vehicles; and (iv) BMWNA’s
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`website directed its users to nearby dealerships and allowed them to search for new vehicle
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`inventory, browse bochures, schedule test drives, select vehicle models and trims, and obtain
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`pricing information for its vehicles from the dealerships. Id. at *20-22; see also Blitzsafe Tex.,
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`LLC v. Mitsubishi Elec. Corp., 2019 U.S. Dist. LEXIS 86350, *6-7 (E.D. Tex. May 22, 2019)
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`(summarizing the factors considered in finding venue proper under the ratification theory).2
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`Volkswagen does not dispute any of these factual allegations. Volkswagen merely
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`argues that the Blitzsafe I decision is “wrong” and instead argues exclusively that Volkswagen’s
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`lack of ownership interest in its dealerships defeats venue. Motion at 4 (“regardless of the fact
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`that dealerships sell cars, and use the car makers’ trademarks to do so, and regardless of the fact
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`that the car makers refer consumers to the dealers, the dealerships are nonetheless separate
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`entities from the car makers.”). Volkswagen’s argument, however, ignores the fact that the
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`Federal Circuit has not articulated such a rigid “ownership” test for venue. The test instead
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`2
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`4
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`Case 6:20-cv-01131-ADA Document 22 Filed 03/05/21 Page 8 of 21
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`focuses on “ratification” or “control” of the entity’s activities. In re Cray, 871 F.3d at 1363. As
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`noted by Judge Gilstrap, ownership is not a dispositive factor:
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`Even though [an automobile distributor] is not permitted to own or
`control, generally, the dealerships within this District, that does not
`mean that they are not places of [the automobile distributor] under
`the third In re Cray factor ... [T]he Federal Circuit expressly
`endorsed holding a location that the Defendant has advertised as its
`own to be a place of business where ‘the defendant [] actually
`engage[s] in business from that location. The considerations a
`district court may examine in determining the extent to which a
`defendant has ratified a place of business as its own include
`‘whether the defendant lists the alleged place of business on a
`website, or in a telephone or other directory; or places its name on
`a sign associated with or on the building itself.’”
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`Blitzsafe I, 2018 U.S. Dist. LEXIS 173065, *19-20 (internal citations omitted).
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`In addition to its cursory discussion of Blitzsafe I, Volkswagen relies on two cases to
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`support its argument: West View Research, LLC v. BMW of N. Am., LLC, 2018 WL 4367378
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`(S.D. Cal. Feb. 5, 2018) and Omega Patents, LLC v. Bayerische Motoren Werke AG, 2020 U.S.
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`Dist. LEXIS 248567 (N.D. Ga. Dec. 21, 2020). Neither of these cases supports a finding that
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`Volkswagen has not “ratified” the activites of its dealerships in this district. First, Omega
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`Patents expressly acknowledges that “a defendant may ‘ratify the place of business,’ even if it
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`does not own, lease, or rent it.” Omega Patents, 2020 U.S. Dist. LEXIS 248567, at *9
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`(emphases added). Second, West View Research “focused entirely on the alleged ‘control’ which
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`BMWNA exerts on its dealerships” and did not address ratification. Blitzsafe I, 2018 U.S. Dist.
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`LEXIS 173065, *30, n.15.3 For example, West View Research “did not address BMWNA’s
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`provisioning of new vehicle warranties to customers through the dealerships,” which the
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`Blitzsafe I court found to be “an independent basis for proper venue” under the ratification
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`3
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`In this regard, Volkswagen Group has it backwards. Motion at 4 (“But … the West View
`Research court … explicitly rejected this reasoning [of Blitzsafe I].”).
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`5
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`Case 6:20-cv-01131-ADA Document 22 Filed 03/05/21 Page 9 of 21
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`theory. Blitzsafe I, 2018 U.S. Dist. LEXIS 173065, at *30, n.15. Omega Patents also failed to
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`analyze venue separately under ratification and control, instead collapsing those two into a single
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`analysis.
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`Moreover, both decisions opt for a rigid rule (that a separate entity cannot be a basis to
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`support venue of another absent an alter ego relationship4) over a more flexible, fact-based
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`approach. The Federal Circuit, however, expressly cautioned against such a rigid rule-based
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`approach. In re Cray, 871 F.3d at 1362 (“In deciding whether a defendant has a regular and
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`established place of business in a district, no precise rule has been laid down and each case
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`depends on its own facts.”) (emphasis added).
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`Volkswagen’s focus on “ownership” and the cursory analyses Omega Patents and West
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`View Research is thus misplaced. Indeed, Volkswagen has all but ignored the wide scope of its
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`4
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`The alter ego test is also inapplicable in this case because StratosAudio is not alleging
`any parent-subsidiary relationship between Volkswagen Group and its dealers in this
`District. For this reason, this Court’s holding in National Steel Car Ltd. v. Greenbrier
`Co., Inc., No. 6:19-cv-00721-ADA, Slip Op. at 5 (W.D. Tex. July 27, 2020), which only
`addressed the question of establishing venue over a parent based on its subsidiary’s
`presence in this district, does not apply to this case. Further, neither West View Research
`nor Omega Patents apply the correct law or standard for determining the existence of an
`alter ego relationship. For example, the criteria for “veil-piercing” to determine alter ego
`status is different for the purposes of considering jurisdictional issues as opposed to
`liability. “Courts have acknowledged that jurisdictional veil-piercing and substantive
`veil-piercing involve different elements of proof.” PHC Minden L.P. v. Kimberly-Clark
`Corp., 235 S.W.3d 163, 174 (Tex. Sup. Ct. 2007). For jurisdictional purposes,
`jurisdiction over a parent may be imputed on its subsidiary if “the parent corporation
`exerts such domination and control over its subsidiary ‘that they do not in reality
`constitute separate and distinct corporate entities but are one and the same corporation for
`purposes of jurisdiction.’” Id. at 173. As set forth herein, Volkswagen’s control over its
`dealers is so extensive and pervasive that in reality, Volkswagen “and [its] dealer[s]
`function as an integrated, two-part seller (or lessor),” leaving little, if any, independence
`to its dealers. Blitzsafe I, 2018 U.S. Dist. LEXIS 173065, at *25. Given these facts, even
`if the alter ego test for jurisdictional purposes were to apply, Volkswagen would meet its
`requirements.
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`6
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`Case 6:20-cv-01131-ADA Document 22 Filed 03/05/21 Page 10 of 21
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`activities showing “ratification” of its dealers – activities that clearly demonstrate the connection
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`and influence by Volkswagen over its dealer entities.
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`2.
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`Additional Facts Further Demonstrate That Venue Is Proper under the
`“Ratification” Theory
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`Additional facts exist which further demonstrate Volkwagen’s ratification of its
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`dealerships activities beyond those considered in Blitzsafe I, West View Research, or Omega
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`Patents. Public records indicate that Volkswagen has the authority to approve or reject any
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`proposed locations and structures of its dealer’s premises. See e.g., Declaration of Ryuk Park
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`(“Park”), Ex. A at 1 (“VWoA5 has approved the location of Dealer’s Premises as specified in the
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`Dealer Premises Addendum”); Park Ex. D at 1 (same for Audi). Volkswagen also prohibits its
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`dealers from changing the location or structure of its premises without its approval. Park Ex. A
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`at 1 (“Dealer agrees that, without VWoA’s prior written consent, it will not (a) make any major
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`structural change in any of the Dealer’s Premises, (b) change the location of any of Dealer’s
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`Premises or (c) establish any additional premises for Dealer’s Operations” without Volkswagen’s
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`prior written consent.”); Park Ex. D at 1 (same for Audi). Volkswagen further requires its
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`dealers to construct and use its facilities according to its specifications and requirements. Park
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`Ex. A at 6 (“Dealer agrees to construct a new or renovated Volkswagen dealership facility at the
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`Fairfield Facility that complies in full with all of VWoA’s requirements for a White Frame
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`Facility …, including without limitation sufficient square footage to meet White Frame Facility
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`requirements, Corporate Identification, Branding Elements, full compliance with all current
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`Volkswagen Dealer Operating Standards.”); Park Ex. B at 3 (“Dealer will display conspicuously
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`5
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`“WVoA” stands for “Volkswagen of America, Inc.” which is “an operating unit of
`Volkswagen Group of America, Inc.” See Volkswagen of America, Inc. v. Maverick Auto
`Group 2, LLC, No. 2:13-cv-00802-JAM-EFB, ECF No. 1 at 1:17-18 (E.D. Cal. Apr. 24,
`2013).
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`Case 6:20-cv-01131-ADA Document 22 Filed 03/05/21 Page 11 of 21
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`at Dealer’s Premises such Authorized Signs at such location as VWoA reasonable may
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`require.”) (emphases added); Park Ex. E at 3 (same for Audi); Park Ex. C at 8 (Standards 19-23,
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`detailing requirements for the facility interior and exterior space, such as showrooms, reception
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`area, and lounge); Ex. F at 1-2 (detailing similar facility requirements for Audi). In other words,
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`Volkswagen adopts, and thus ratifies, the location, structure, and use of its dealers’ premises.
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`Further, Volkswagen retains title to the vehicles delivered to its dealers until Volkswagen
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`has “collected their full purchase price in cash.” Park Ex. B at 9 (Volkswagen); Park Ex. E at 9
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`(Audi). In other words, until Volkswagen collects the full purchase price for its vehicles stored
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`at its dealers’ premises, those vehicles belong to Volkswagen. And to the extent Volkswagen
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`provides “floor plan” loans to its dealers through its affiliates (e.g., Volkswagen Credit and Audi
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`Financial Services), those affiliates will likely retain title to the vehicles until the loans are
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`repaid. Compl., ¶ 14. Put differently, except where a dealer always purchases all of its inventory
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`using its own funds, a dealer effectively provides its premises to Volkswagen and/or its affiliates
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`for “the storing of materials at a place in the district so that they can be distributed or sold from
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`that place,” a relevant factor for determining whether a place is a place of the defendant. In re
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`Cray, 871 F.3d at 1363.
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`None of these additional factors were considered in West View Research or Omega
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`Patents. Yet these facts, combined with those specific facts analyzed in the Blitzsafe I decision,
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`demonstrate the breadth of Volkswagen’s “ratification” of its dealerships and the propriety of
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`venue over Volkswagen in this Court.
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`B.
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`Venue Is Also Proper Because Volkswagen Exercises Significant Control
`Over Its Dealerships
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`While ratification alone sufficiently establishes venue against Volkswagen, venue is also
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`proper against Volkswagen under the “control” theory. Volkswagen’s Motion all but ignores
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`8
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`Case 6:20-cv-01131-ADA Document 22 Filed 03/05/21 Page 12 of 21
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`this issue, as it must, because the facts demonstrate an extraordinary amount of control exerted
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`by Volkswagen over its dealers.
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`All of the above-stated facts regarding Volkswagen’s “ratification” of its dealerships
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`apply equally to demonstrating Volkwagen’s “control” of its dealerships for venue purposes.
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`These facts and other demonstrate that Volkswagen exercises authority over nearly all aspects of
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`a dealer’s business operations, including, but not limited to, (i) advertising, (ii) sales, (iii) parts,
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`(iv) service, (v) purchase of inventory, (vi) warranty to customers, and (vii) facilities
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`maintenance, and (viii) records keeping. See generally Park Ex. B at 3-4 (Volkswagen); Park
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`Ex. E at 3-4 (Audi). Volkswagen’s Dealer Agreements (Park Exs. A & D), Standard Provisions
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`(Park Ex. B & E), and Operating Standards (Park Ex. C & F). The following examples, from
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`Volkswagen’s own documents, demonstrate this control.
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`First, Volkswagen has control over the dealer premises. As noted above, Volkswagen
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`has the authority to approve or reject any proposed locations and structures of its dealer’s
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`premises. See e.g., Park Ex. A at 1; Park Ex. D at 1 (same for Audi). Volkswagen prohibits its
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`dealers from changing the location or structure of its premises without its approval. Park Ex. A
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`at 1; Park Ex. D at 1 (same for Audi). Volkswagen further requires its dealers to construct and
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`use its facilities according to its specifications and requirements, including specific designs (such
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`as the “white frame” facility). Park Ex. A at 6 Moreover, dealers are not permitted to “(a) make
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`any major structural change in any of the Dealer’s Premises, (b) change the location of any of
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`Dealer’s Premises or (c) establish any additional premises for Dealer’s Operations” without
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`Volkswagen’s approval. Park Ex. A at 1; Park Ex. D at 1.
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`Second, Volkswagen specifies how its dealers’ premises and facilities should be
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`maintained and used. See e.g., Park Ex. C at 13 (“All Dealers will comply with the facility
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`requirements as indicated in the Volkswagen Facility Supplement.”); see also id. (below):
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`See also Park Ex. F at 15-16 (requirements regarding facility exterior space), 17-21
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`(requirements regarding facility interior space, such as a customer lounge and an interior display
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`stand) (see below):
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`10
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`Third, Volkswagen specifies how its dealers should utilize its trademarks, trade names,
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`and other intellectual property in advertising and marketing. See e.g., Park Ex. B at 3 (requiring
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`Volkswagen dealers to (i) “Display conspicuously at Dealer’s Premises such Authorized Signs at
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`such locations as [Volkswagen] may require”; (ii) maintain “a listing in a principal local
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`classified telephone directory in Dealer’s Area,” (iii) “prominently display and make readily
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`available “all legally required brochures, as well as all current sales, service and parts literature
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`and promotional materials” provided by Volkswagen; and even (iv) prepare “[a]ll stationery and
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`business forms used in Dealer’s Operations … in accordance with Recommendations,” such as
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`using stationery bearing “Authorized Trademarks”); see also Ex. E at 4 (same for Audi).
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`Fourth, Volkswagen unilaterally determines the price and the terms upon which its
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`dealers purchases its vehicles. See e.g., Park Ex. B at 7-8 (“VWoA will sell Authorized Products
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`to Dealer at prices and upon terms established by VWoA” and to “transmit orders for [those
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`vehicles] … electronically, at the times and for the periods, that VWoA reasonably requires.”);
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`see also Park Ex. E at 7 (same for Audi).
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`11
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`Fifth, Volkswagen specifies the number and types of vehicle inventory its dealers must
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`maintain at their premises. See e.g., Park Ex. B at 8 (“Dealers will maintain in inventory at all
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`times the assortment and quantity of Authorized Products required by the Operating Standards,
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`Operating Plan or Recommendations.”); Park Ex. E at 8 (same for Audi).
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`Sixth, Volkswagen also specifies what parts its dealers may use and how many its dealers
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`must maintain. See e.g., Park Ex. B at 6 (requiring Volkswagen dealers to “maintain an
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`inventory of Genuine Parts which is sufficient to perform reasonably anticipated warranty
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`service and wholesale trade requirements in Dealer’s Area”); Park Ex. E at 6 (same for Audi)..
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`Seventh, Volkswagen specifies the terms and scope of warranties to be included in its
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`vehicle sales as well as requires the manner in which its dealers provide notice and advertise
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`such warranties. See e.g., Park Ex. B at 10 (requiring Volkswagen dealers to (i) ensure that all
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`customers purchasing vehicles or parts also “acquire all rights
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`in accordance with
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`[Volkswagen’s] Warranties,” (ii) “make the text of [Volkswagen’s] Warranties part of its
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`contracts for the sale of Authorized Products,” and (ii) “display the text of the warranties of all
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`products it sells in customer contact areas where Authorized Products are offered.”); see also
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`Park Ex. E at 10 (same for Audi). Further, Volkswagen, and not its dealers, establishes the
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`procedures for processing warranty claims and returning and disposing of defective parts and
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`requires its dealers to comply with such procedures. Park Ex. B at 10 (see below)6; Park Ex. E at
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`10.
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`6
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`The Court in Blitzsafe I found the control over “the provision of warranty services” as an
`independent basis for venue under the “control” theory. Blitzsafe I, 2018 U.S. Dist.
`LEXIS 173065, at *24; see also Blitzsafe Tex. LLC v. Mitsubishi Elec. Corp., 2019 U.S.
`Dist. LEXIS 86350, *6 (E.D. Tex. May 22, 2019) (hereinafter “Blitzsafe II”).
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`Eighth, Volkswagen, and not its dealer, determines the rate or price at which a
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`
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`Volkswagen or Audi dealer will be reimbursed for services. See e.g., Park Ex. B at 7 (“VWoA
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`will reimburse Dealer for performing such services at the then-current rate of reimbursement
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`specified by VWoA for Dealer.”) (emphasis added); Park Ex. D at 7 (same for Audi).
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`Ninth, Volkswagen requires each Volkswagen or Audi dealer to report its finances and
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`operations monthly, something one would ordinarily expect to be provided to an owner or a
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`shareholder only. See e.g., Park Ex. B at 11 (“Dealer will transmit … a financial and operating
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`statement reflecting the consolidated operations of Dealer.”); Park Ex. E at 11 (same for Audi).
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`Volkswagen further requires its dealers to “use accounting, sales, bookkeeping and service
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`workshop forms; business machines; data processing and transmission equipment; and other
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`office equipment which meets specifications” required by Volkswagen, and “keep accurate and
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`current records in accordance with [Volkswagen’s] uniform accounting system.” See e.g., Park
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`Ex. B at 11; Park Ex. E at 11.
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`Tenth, Volkswagen even specifies the type and quantity of IT equipment such as
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`computers its dealers must use and maintain. See e.g., Park Ex. F at 22 (requiring dealers to
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`maintain (i) one computer terminal with a minimum of 512K Internet speed for each brand
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`specialist; (ii) one computer with a minimum of 512K Internet speed for every two technicians;
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`(iii) one designated computer with a minimum of 512K Internet speed for parts department) (see
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`below).
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`Eleventh, Volkswagen specifies the number of personnel that its dealers must have on
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`
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`site and their certifications and training. See e.g., Park Ex. E at 25 (see below):
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`Twlevth, Volkswagen also conducts performance reviews on (i) the dealers’ sales,
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`service, and parts, (ii) customer satisfaction, and (iii) even the dealer’s maintenance of its
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`premises and facilities. See e.g., Park Ex. B at 12 (for Volkswagen); Park Ex. E at 12 (same for
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`Audi) (see below):
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`Lastly, Volkswagen controls and can restrict whether and to whom a dealer may sell or
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`
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`transfer its business. See e.g., Park. Ex. B at 13 (“If Dealer chooses to transfer its principal assets
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`or change owners, VWoA has the right to approve the proposed transferees … and … their
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`premises. … VWoA will notify Dealer in writing of the approval or disapproval of a proposal by
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`Dealer for transfer of principal assets or change of owners”); Park Ex. E at 12 (same for Audi).
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`These scope and breadth of these agreements directly contradict Volkswagen’s claim that
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`its dealers are “independent” franchises, at least for venue determination purposes.7 Motion at 4.
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`On the contrary, they show that Volkswagen exercises a vast amount of control over its dealers
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`by imposing various obligations and restrictions that one would ordinarily expect to be imposed
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`7
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`The Volkswagen and Audi documents were located in the public domain. To the extent
`more recent documents exist, they have not been located by StratosAudio nor cited by
`Defendant in its Motion.
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`15
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`Case 6:20-cv-01131-ADA Document 22 Filed 03/05/21 Page 19 of 21
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`on its own employees only. Given the dominant control Volkswagen exercises over its dealers,
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`venue against Volkswagen is proper in this District under the “control” theory as well.
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`C.
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`To the Extent Helpful To the Court, Volkswagen’s Motion Should Be Denied
`Until Parties Have Completed Venue Discovery
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`The facts as set forth above are sufficient to establi