[Cyberdemon]

If it is an automatic, then I would not worry about suing, I would worry about finding a mentally competent dealer. Over-rev's on an automatic are not a thing.

BMW USA should be deciding whether or not it is reimbursable under warranty, not the dealer. If the dealer presented them with evidence (like an over-rev code) then it's a fairly easy one.

If the OP wants to share more details that's fine, but judging by the "long story short" synopsis, he doesn't (and probably shouldn't if he's considering making a case out of this). Based on that I have to go by the general assumption that more than likely his car was over-rev'ed at some point, and whether or not it was his fault, a valets, the dealers, etc - that one is going to be tricky to disprove.

If it's possible that the dealer took your car out for a joyride/lunch run and missed a shift, blew your engine and then tried to blame you when you brought it in for an oil change - then by all means sue away.