Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_22-cv-00997/USCOURTS-caed-2_22-cv-00997-5/pdf.json

Parties Involved:
Courtesy Automotive Group, Inc.
Counter Defendant
Courtesy Subaru of Chico
Plaintiff
Subaru of America, Inc.
Counter Claimant

Document Text:

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF CALIFORNIA 

----oo0oo---- 

COURTESY AUTOMOTIVE GROUP, INC., dba COURTESY SUBARU OF CHICO, 

 Plaintiff, 

v. 

SUBARU OF AMERICA, INC. and DOES 

1-50, inclusive, 

 Defendant. 

No. 2:22-cv-00997 WBS DMC

ORDER RE: MOTION TO DISMISS 

SUBARU OF AMERICA, INC., 

 Counterclaimant, 

 v. 

COURTESY AUTOMOTIVE GROUP, INC., 

dba COURTESY SUBARU OF CHICO, 

 Counterdefendant. 

----oo0oo---- 

Counterclaimant Subaru of America, Inc. (“Subaru”) 

asserts two counterclaims against counterdefendant Courtesy 

Automotive Group, Inc. (“Courtesy”): breach of contract 

Case 2:22-cv-00997-WBS-DMC Document 42 Filed 04/19/24 Page 1 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

(Counterclaim 1), and declaratory relief (Counterclaim 2). (See 

Countercl. (Docket 35-1).) Courtesy now moves to dismiss the 

counterclaims. (See Mot. (Docket No. 36).) 

I. Factual and Procedural Background 

The generally relevant procedural history is set forth 

in the court’s prior order resolving Subaru’s motion to dismiss 

Courtesy’s First Amended Complaint. (See Order (Docket No. 30).) 

Of specific relevance now is the parties’ March 20, 2019 

stipulated agreement (“Stipulated Agreement”), which resolved a 

dispute between the parties then pending before the California 

New Motor Vehicle Board (“the Board”). (Countercl. ¶¶ 8-10.) 

The Stipulated Agreement contained a confidentiality clause 

stating that its terms “shall remain strictly confidential 

between the parties” and “[n]either the [agreement] nor any part 

of its terms shall be disclosed to any unauthorized third party 

without the express written consent of both parties.” (Id. ¶ 

13.) 

Subaru now alleges that Courtesy breached this 

confidentiality provision in three ways. First, Courtesy’s 

initial complaint, which Courtesy first filed on April 6, 2022 in 

Butte County Superior Court before Subaru removed the action to 

this court, improperly referred to certain terms of the 

Stipulated Agreement. Second, Courtesy’s June 20, 2022 petition 

filed with the Board (“Board Petition”) included exhibits which 

directly quoted confidential language from the Stipulated 

Agreement. Third, Courtesy’s Board Petition caused the Board to 

forward the Stipulated Agreement to the Department of Motor 

Vehicles (“DMV”), along with an order directing the DMV to 

Case 2:22-cv-00997-WBS-DMC Document 42 Filed 04/19/24 Page 2 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

investigate Courtesy’s claims. (Id. ¶¶ 23-29.) 

II. Discussion 

A. Mootness 

“[A] case is moot when the issues presented are no 

longer ‘live’ or the parties lack a legally cognizable interest 

in the outcome. [. . .] [J]urisdiction, properly acquired, may 

abate if the case becomes moot because (1) it can be said with 

assurance that there is no reasonable expectation that the 

alleged violation will recur, and (2) interim relief or events 

have completely and irrevocably eradicated the effects of the 

alleged violation.” Los Angeles Cnty. v. Davis, 440 U.S. 625, 

631 (1979) (internal quotes and citations omitted). 

While the burden of demonstrating mootness “is a heavy 

one,” id., that burden is squarely met on this record. On the 

first prong, the court can say with virtual certainty that no 

alleged breach will recur because the Alameda County Superior 

Court has unsealed the entire Stipulated Agreement and put it on 

the public record.1 (See Docket No. 36-2.) The court cannot 

contemplate how Courtesy could breach the confidentiality 

provision of a document now publicly and permanently accessible. 

On the second prong, the court cannot ascertain the 

existence of any actual “effect” in the first place that Courtesy 

1 The Stipulated Agreement entered the public domain when 

the Alameda County Superior Court denied the parties’ motions to 

seal it on April 4, 2023: “Given the proliferation of litigation 

concerning these documents and the absence of any showing of harm 

to any of the parties or the DMV by the public disclosure of 

these documents, the presumption that court records are open 

prevails over the parties’ agreement to keep them confidential.” 

(Docket No. 36-2.) 

Case 2:22-cv-00997-WBS-DMC Document 42 Filed 04/19/24 Page 3 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

allegedly caused. The only “effect” that Subaru’s allegations 

identify is the DMV’s investigation into Subaru: “As a result of 

COURTESY’s [breach of the confidentiality provision], the 

confidential terms of the agreement are now in the public domain 

and have been disseminated to third parties without [Subaru’s] 

consent exposing [Subaru] to an unjust and unnecessary DMV 

investigation of its distributor license.” (Countercl. ¶ 35.) 

However, the Board-ordered DMV investigation does not 

appear to have anything to do with the confidentiality provision. 

Courtesy filed its Board Petition pursuant to California Vehicle 

Code § 3050(b). (See Docket No. 24 Ex. 7.) The confidentiality 

provision certainly does not prevent Courtesy from asserting its 

rights under that statute. In fact, Courtesy took measures to 

safeguard the confidentiality of the Stipulated Agreement by 

filing redacted and unredacted copies of its Board Petition, 

along with a motion to seal the accompanying Stipulated Agreement 

and ALJ Decision.2 3 (Docket No. 36-12.4) 

Absent allegations of any other effects, Subaru’s 

counterclaims contain no live controversy for this court to 

adjudicate. Accordingly, the court will dismiss Subaru’s 

2 What’s more, the record demonstrates that Subaru 

opposed Courtesy’s motions to seal before the Board (Docket No. 

36-13), which the Board nonetheless granted (Docket No. 36-14). 

3 For the same reasons, Subaru also fails to allege 

causation or damages with respect to its breach of contract 

claim. 

4 Courtesy’s Request for Judicial Notice (Docket No. 36-

1) is granted as to Exhibit 1 (Docket No. 36-2), 11 (Docket No. 

36-12), 12 (Docket No. 36-13), and 13 (Docket No. 36-14), and 

denied as to all other exhibits as moot. 

Case 2:22-cv-00997-WBS-DMC Document 42 Filed 04/19/24 Page 4 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

counterclaims in full. 

B. Leave to Amend 

Federal Rule of Civil Procedure 15 directs the court to 

freely grant leave to amend “when justice so requires.” Fed. R. 

Civ. P. 15(a)(2). “[T]his policy is to be applied with extreme 

liberality.” Morongo Band of Mission Indians v. Rose, 893 F.2d 

1074, 1079 (9th Cir. 1990). Accordingly, Subaru will be given 

leave to amend its breach of contract counterclaim if, and only 

if, it can properly allege actual effects of Subaru’s alleged 

breach that the Stipulated Agreement’s subsequent unsealing did 

not “completely and irrevocably eradicate[],” Los Angeles County, 

440 U.S. at 631. 

However, Subaru’s declaratory relief counterclaim is 

entirely duplicative of its breach of contract claim. (See 

Countercl. ¶ 46 (requesting declaration that Courtesy has 

breached its express and implied obligations stemming from 

confidentiality provision).) Accordingly, the court will dismiss 

Subaru’s declaratory relief counterclaim with prejudice. 

IT IS THEREFORE ORDERED that Courtesy’s motion to 

dismiss counterclaims (Docket No. 36) be, and the same hereby is, 

GRANTED. Subaru’s counterclaims (Docket No. 35-1) are DISMISSED. 

Counterclaim 1 is dismissed without prejudice to plaintiff filing 

an amended counterclaim consistent with this Order within 20 days 

from the date of this Order. Counterclaim 2 is dismissed with 

prejudice. 

Dated: April 19, 2024 

Case 2:22-cv-00997-WBS-DMC Document 42 Filed 04/19/24 Page 5 of 5