Western District of Texas District Judge Alan D. Albright frequently found himself at odds with the Federal Circuit over his handling of transfer motions just a few years ago, peaking in a wave of mandamus rulings against him in 2021. That June, Judge Albright—at that point still swimming against the tide on transfers—issued an expansive pair of rulings that found venue to be proper against Hyundai and Volkswagen based on the presence of third-party car dealerships in his district. This prompted a sharp rebuke and reversal by the Federal Circuit, which in March 2022 precedentially held that he was wrong to find an agency relationship between the automakers and those dealerships. Now, with his conflict with the Federal Circuit largely in the rear-view mirror, Judge Albright has heeded the court’s prior warning, rejecting another dealership-based venue argument in transferring a case filed by two Intellectual Ventures LLC (IV) plaintiffs against Zhejiang Geely (Volvo) to the District of New Jersey.

The Federal Circuit Topples Judge Albright’s Earlier Dealership Rulings as “Patently Erroneous”

The aforementioned 2021 venue decisions by Judge Albright, handed down in the vehicle infotainment campaign waged by StratosAudio, Inc., both turned on the prong of the patent venue statute (28 U.S.C. § 1400(b)) establishing that venue is proper where the defendant “has committed acts of infringement” and “has a regular and established place of business”. Finding that the plaintiff had plausibly pled “acts of infringement” and that the dealerships were “physical places”, Judge Albright focused his analysis on whether the plaintiff showed that certain authorized Hyundai and Volkswagen dealerships were respectively the “place of the defendant” (called “ratification”) and whether “an employee or other agent of the defendant is regularly and physically present at that place of business conducting the defendant’s business”.

As to ratification, Judge Albright ruled that each automaker defendant “controls numerous aspects of its dealerships’ operations through a number of agreements”; that each defendant’s relationship with the dealerships is “conditioned on the dealerships’ continued presence” in West Texas, because, under Texas law, “the only way that Volkswagen can sell its vehicles to consumers in this District is through authorized dealerships that it currently has in the District”; and that each defendant “represents to the public that it has a place of business in this District” (as shown, for example, by search results appearing on each carmaker’s public website).

The court spent less time on the agency question, noting that “it is not uncommon for a district court to find a principal-agency relationship between an auto manufacturer and its dealers” and that authorized dealers conduct an automaker’s business by selling its cars in the district, by providing automaker warranties and services to consumers there, and by establishing mandatory procedures “for processing warranty claims and returning and disposing of defective parts” in the district.

However, in March 2022, the Federal Circuit overturned both decisions, ruling instead that StratosAudio “failed to carry its burden to show that the dealerships are agents of Volkswagen or Hyundai under a proper application of established agency law”. As a result, the appellate court determined that the in-district dealerships “do not constitute regular and established places of business of Volkswagen and Hyundai under [Section] 1400(b)”. Noting that the plaintiff did not argue either that automaker personnel conduct business at dealerships or that dealership personnel act as the agents of the automakers there, StratosAudio was left having to show that a dealership itself is the agent of the automaker. The patent owner sought to do so under In re: Google, the Federal Circuit’s decision addressing whether in-district servers qualified as regular and established places of business as a basis for venue. StratosAudio asserted that the automakers have the “requisite control” over the dealerships through various rules that allegedly set requirements for hiring, inventory management, warranty support, appearance and branding, working capital requirements, and mandatory training, but the Federal Circuit disagreed—concluding that there was no evidence that the automakers “maintain influence over the sales process once they have sold a car to a dealership”, and finding that at most, any sales-related restrictions do not demonstrate control over the sales process itself.

Judge Albright Follows Federal Circuit’s Lead in Order Granting Transfer of IV Case

Judge Albright’s relationship with the Federal Circuit has since grown far less contentious due to changes he has made in response to the appellate court’s pushback. In particular, prior reversals led Judge Albright to establish a “convenience transfer phase” for litigation in his courtroom, in which a motion for a convenience transfer triggers a period of venue discovery after which detailed briefing is to be considered (and during which the court is not, per Federal Circuit rulings, allowed to decide merits issues, though parties are often required to brief issues like claim construction). Judge Albright’s ensuing transfer decisions intensively scrutinize the parties’ factual assertions made in response to such discovery. As RPX has previously observed, this heavy reliance on factual details may now be insulating his decisions from appellate review, because a district court is almost always “uniquely well-positioned” to engage in “case-specific assessment” based on facts revealed during discovery—thus contributing to what some observers have identified as a greater level of deference recently shown by the Federal Circuit toward Judge Albright.

Meanwhile, Judge Albright’s opinion granting transfer in the IV case against Volvo is among a growing body of decisions in which he has changed his approach to the substantive transfer factors in response to prior appellate reversals. In that order, which was issued on September 18 and unsealed on September 26, Judge Albright addressed a dispute over whether, under the test required by Volkswagen, an agency relationship exists between Volvo and certain dealerships as a result of the “Care by Volvo” (“CbV”) lease program.

Under the CbV program, participating dealers enter into a dealer lease addendum (the “CbV Addendum”) with a Volvo entity not named as a codefendant, Volvo Car Financial Services Auto Leasing Company (“VCFSALC”). A CbV customer pays an “all-inclusive monthly fee [that in] Texas . . . covers (among other things) insurance, some assurance coverages, roadside assistance, and maintenance” (as summarized by Volvo in its venue motion). Such a customer first places a reservation on the CbV website, and after approval enters into a lease agreement with a dealer. As noted in the motion to dismiss or transfer, the defendant entities here in suit, Volvo Cars of North America, LLC (“VCNA”) and Volvo Car USA LLC (“VCUSA”), are not parties to CbV lease agreements.

The defendants argued that similar to the traditional dealership agreements at issue in Volkswagen, the CbV Addendum does “not give car distributors the necessary ‘interim control’ to support an agency relationship” (as summarized by the court). Rather, they asserted that the “[p]laintiffs’ venue allegations based on warranties, maintenance, service, sales of new vehicles and parts, marketing and branding, dealership appearance, and training” were all “addressed and deemed legally insufficient to establish an agency relationship” in Volkswagen. In contrast, plaintiffs Intellectual Ventures I LLC and Intellectual Ventures II LLC contended that such an agency relationship is in fact established, “rely[ing] heavily on an investigation report adopted by the California DMV, which found that the CbV Addendum created an agency relationship” (as summarized by the court).

Judge Albright agreed with the defendants, finding that to the extent that the CbV Addendum does create an agency relationship, it is with certain unidentified parties (their names redacted in the order’s public version) and not with the defendants. On this point, Judge Albright declined to accept the reasoning of the California DMV report, which treats the acts of defendants Volvo Cars of North America, LLC (“VCNA”) and Volvo Car USA LLC (“VCUSA”), as well as VCFSALC and another entity, Volvo Car Financial Services (“VCFS”), also involved in the CbV program, as all being imputed to Volvo, and discusses them collectively as “Volvo”. Judge Albright found that conflating all four entities is “imprecise for purposes of venue analysis” and that this disregards the legal distinction between them, explaining that “[e]ven assuming that VCFSALC’s acts can be ‘imputed to Volvo,’ this does not necessarily mean that VCFSALC’s acts can likewise be imputed to Defendants VCNA and VCUSA”.

Judge Albright thus found that the DMV report failed to establish an agency relationship, and held that venue was improper against the defendants as a result. Finding that because the defendant entities have their “principal places of business in New Jersey, this action could have been brought in the District of New Jersey”, Judge Albright transferred the case to that venue and denied the defendants’ alternative request to dismiss the case outright.

Further information on Judge Albright’s recent approach to convenience transfers can be found at “A Telling Trio of Recent Convenience Transfer Denials” (August 2024). Additional coverage of the Federal Circuit’s 2022 Volkswagen decision is also available at “Venue Analysis of Relationships Between Automaker Defendants and In-District Dealerships Led to ‘Patently Erroneous Result’” (March 2022).