David Schwartz v. Rent A Wreck of America, Inc., 4th Cir. (2015)
David Schwartz v. Rent A Wreck of America, Inc., 4th Cir. (2015)
No. 13-2189
Appeal from the United States District Court for the District of
Maryland, at Baltimore.
Peter J. Messitte, Senior District
Judge. (1:07-cv-01679-PJM)
Argued:
Decided:
the
On remand from
our first opinion, a jury found that the parties implied-infact franchise agreement does not violate California competition
law.
verdict
should
not
stand
because
the
district
court
Finding
no error, we affirm.
I.
This appeal presents a dispute between the creators of the
Rent-A-Wreck car rental brand, Plaintiffs-Appellees David S.
Schwartz and Rent-A-Wreck, Inc. (collectively, Schwartz), and
RAWA, the current owner of that brand.
car
in
West
rental
Los
Angeles,
business
under
where
the
name
he
continued
Bundy
to
RentA
Wreck.
RAWAs
efforts
to
have
this
exclusive-territory
June
2007,
States
Schwartz
District
filed
Court
for
suit
the
against
District
RAWA
of
in
the
Maryland.
enjoys
franchise
the
in
the
counterclaim
16600,
exclusive
Los
under
right
Angeles
California
seeking
to
operate
territory.
Business
declaration
Rent-A-Wreck
RAWA
and
that
filed
Professions
Schwartzs
Code
purported
generally
provided
in
restrained
Cal.
this
from
Bus.
chapter,
engaging
&
Prof.
every
in
Code
contract
lawful
16600
by
(Except
as
which
anyone
is
profession,
trade,
or
It found
[e]xclusive
[Rent-A-Wreck]
franchise
in
West
Los
After
Federal
the
Rule
thereof.
jury
of
RAWA
announced
Civil
argued
its
verdict,
Procedure
that
the
50
to
court
RAWA
moved
under
set
aside
portions
must
grant
judgment
an
exclusive
franchise
contract
because
California
law
59, Schwartz, No. 1:07-cv-01679-PJM (D. Md. July 21, 2010), ECF
No. 353.
Schwartz appealed.
B.
We
Id.
.
we
vacate[d]
the
district
courts
denial
of
submit
to
territory
jury
provision
the
question
forecloses
of
whether
competition
in
the
a
exclusive
substantial
Id.
C.
On
remand,
the
district
court
submitted
to
jury
both
and
(2)
whether
the
exclusive-territory
provision
court held that RAWA would bear the burden of proof on both
issues.
affected
of
commerce
as
the
market
for
Rent-A-Wreck
market
for
the
type
of
rental
cars
that
Rent-A-Wreck
Rent-A-Wreck
franchises
themselves.
6
J.A.
823.
In
other
rather
than
those
who
seek
to
operate
Rent-A-Wreck
franchises.
A three-day jury trial began on June 18, 2013.
On the
first day, RAWA reiterated its view that the affected line of
commerce is the sell [sic] of Rent-A-Wreck franchises, not, as
the court had ruled, the rental of cars.
explained
that,
in
light
of
the
courts
J.A. 932.
rejection
RAWA
of
its
is
therefore
invalid.
The
jury
rejected
this
over
[Schwartz]
as
is
necessary
that
Schwartzs
to
J.A. 902.
exclusive-territory
protect
RAWAs
agreement
does
not
entered
J.A. 902.
judgment
favor
of
Schwartz
RAWA appealed.
on
RAWAs
II.
This
appeal
presents
two
issues:
first,
whether
the
presenting
relevant market. 2
to
the
jury
its
preferred
definition
of
the
borne
the
RAWA
first
argues
that
Schwartz
should
have
bore the burden of proof because it was the party claiming that
the agreement violated California competition law.
We agree
with Schwartz.
2
1.
We review de novo the district courts allocation of the
burden of proof.
Natl Ins. Co., 514 F.3d 327, 329 (4th Cir. 2008).
2.
RAWA brought its counterclaim under California Business and
Professions Code 16600, which reads: Except as provided in
this chapter,[ 3] every contract by which anyone is restrained
from engaging in a lawful profession, trade, or business of any
kind is to that extent void.
that
16600
permits
an
exclusive-territory
provision
in
Now, we
exclusive-territory
provision
forecloses
competition. 4
Our task is
therefore
Court
answer it.
to
predict
how
the
California
Supreme
would
under
16600
bears
the
burden
of
showing
that
16600
who
codified
seeks
at
relief
California
from
the
Evidence
court.
Code
This
500,
principle
which
is
provides:
to
asserting.
rule
for
the
claim
for
relief
or
defense
that
he
is
claims.
In
fact,
the
Supreme
Court
of
of
16600.
action
for
unfair
competition
under
. . .
section
Dayton Time Lock Serv., Inc. v. Silent Watchman Corp., 124 Cal.
Rptr. 678, 682 (Ct. App. 1975) (noting plaintiffs failure to
develop material evidence to support its claim under 16600
that performance
of
the
[exclusive-dealing]
contract
[would]
claim
that
an
exclusive-franchise
11
agreement
is
void
under
16600. 5
determining
proof
whether
should
concerning
be
the
availability
of
the
normal
altered:
(1)
particular
the
evidence
allocation
the
fact
to
of
knowledge
to
the
be
the
of
the
proved;
parties;
burden
(3)
of
parties
(2)
the
the
most
No. 2, 78 Cal. Rptr. 3d 572, 596 (Ct. App. 2008) (quoting Lakin
v. Watkins Associated Indus., 863 P.2d 179, 189 (Cal. 1993))
(internal
courts
quotation
have
shifted
mark
omitted).
the
normal
Applying
allocation
of
these
the
factors,
burden
of
shifts
probability
to
the
the
defendant
defendant
has
where
there
engaged
in
is
substantial
wrongdoing
and
the
Bockius LLP, 51 Cal. Rptr. 3d 527, 537 (Ct. App. 2006) (quoting
Natl Council Against Health Fraud, 133 Cal. Rptr. 2d at 214)
(internal quotation mark omitted).
Here,
none
conclusion
of
that
the
four
RAWAs
factors
16600
weighs
in
counterclaim
favor
is
of
the
rare
and
second
knowledge
of
factors,
whether
Schwartz
the
Id.
would
not
have
exclusive-territory
superior
provision
Nor,
under
considerations
suggest
the
that
third
factor,
do
exclusive-territory
public
policy
provisions
in
arrangements
can
be
pro-competitive,
13
as
when
they
factor,
franchise
we
have
agreements
no
so
reason
to
frequently
believe
foreclose
that
exclusive-
competition
that
Accordingly, we affirm
next
argues
that
the
district
court
erred
by
RAWA
to
agreement
proffer
evidence
forecloses
that
competition
the
in
exclusiverental
car
For two
the
the
district
relevant
court
market
as
14
did
not
prevent
one
for
older
RAWA
rental
from
cars.
Contrary
market
to
what
it
definition
dispute
is
the
now
for
sale
argues,
trial:
of
RAWA
The
proposed
line
Rent-A-Wreck
of
the
following
commerce
brand
in
this
franchises,
for
renting and leasing used motor vehicles that are less than eight
years old.
The district court rejected that definition, but made clear that
RAWA could delineate an appropriate market for rental cars in
whatever way [it] so choose[s], defining that market as rental
cars, rental cars older than 8 years old, etc.
J.A. 823.
819.
RAWA
Having made this choice, RAWA cannot now claim that the
In our
jury
the
question
of
whether
the
exclusive
territory
for
(emphasis
RAWAs
rental
added).
preferred
cars.
Because
market
Schwartz,
468
F.
franchises
are
not
definition
was
Appx
at
rental
inconsistent
251
cars,
with
our
F.3d 263, 267 (4th Cir. 2002) ([W]hen we remand a case, the
15
lower court must implement both the letter and spirit of the .
. . mandate. (second alteration in original) (quoting United
States v. Bell, 5 F.3d 64, 66 (4th Cir. 1993)).
III.
For the foregoing reasons, the judgment of the district
court is
AFFIRMED.
16