811 F.3d 758 (5th Cir. 2016), 15-40432, Weber v. PACT XPP Technologies, AG
|Citation:||811 F.3d 758|
|Opinion Judge:||JERRY E. SMITH, Circuit Judge.|
|Party Name:||Peter WEBER, Individual, Plaintiff-Appellant, v. PACT XPP TECHNOLOGIES, AG, Defendant-Appellee.|
|Attorney:||David H. Ammons, Winstead, P.C., Houston, TX, Kelly Harrison Dove, Esq. (argued), Snell & Wilmer, L.L.P., Las Vegas, NV, Catherine O’Mara, Snell & Wilmer, Reno, NV, for Plaintiff-Appellant. Daymon Jeffrey Rambin (argued), Elizabeth L. DeRieux, Capshaw DeRieux, L.L.P., Gladewater, TX, for Defend...|
|Judge Panel:||Before SMITH, WIENER, and GRAVES, Circuit Judges.|
|Case Date:||January 26, 2016|
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
In this complex, multi-forum dispute over compensation between a German company (PACT) and its former CEO, the CEO appealed the district court's dismissal, without prejudice, based on forum nonconveniens (FNC). The court concluded that the forum selection clause in the contract at issue is mandatory and enforceable. Further, no overwhelming public interest requires retention in Texas. Given the... (see full summary)
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Appeal from the United States District Court for the Eastern District of Texas.
David H. Ammons, Winstead, P.C., Houston, TX, Kelly Harrison Dove, Esq. (argued), Snell & Wilmer, L.L.P., Las Vegas, NV, Catherine O’Mara, Snell & Wilmer, Reno, NV, for Plaintiff-Appellant.
Daymon Jeffrey Rambin (argued), Elizabeth L. DeRieux, Capshaw DeRieux,
L.L.P., Gladewater, TX, for Defendant-Appellee.
Before SMITH, WIENER, and GRAVES, Circuit Judges.
JERRY E. SMITH, Circuit Judge.
Peter Weber appeals a judgment of dismissal, without prejudice, based on forum non conveniens ("FNC"). The district court decided that the subject contract contained a valid and enforceable forum selection clause ("FSC") requiring litigation in Germany. Because the FSC is mandatory and enforceable, and no overwhelming public interest requires retention in Texas, we affirm.
This is a complex, multi-forum dispute over compensation between a German company and its former chief executive officer ("CEO"). PACT XPP Technologies, AG ("PACT"), was a technology start-up company in the field of highly parallel processing that, at some time after 2002, morphed into an intellectual-property licensing and enforcement entity. Weber joined PACT’s Supervisory Board in 2002, was elected chairman of the board in 2003, and took over as CEO in 2004. The company is incorporated in Germany, but— during the relevant period— its primary business activities were in the United States.
Weber avers that, until 2008, (1) he had served without compensation under various oral agreements providing for payments once the business became profitable; and (2) in 2008 he entered into a written contract that provided for a combination of profit shares and shares in "special proceeds" that the company earned in patent litigation. That compensation agreement, written in German, appears not to have been negotiated or executed in a single location; PACT’s agent signed in Munich, Weber in California. The agreement was approved by board resolution but not by the shareholders.
The agreement contains an FSC, the proper English translation of which is in dispute. The contract states, "Soweit gesetzlich zulä ssig, ist Gerichtsstand und Erfüllungsort der Sitz der PACT AG." Weber urges that this should be translated to read, "To the extent permitted by law, jurisdiction and place of performance shall be the residence of PACT AG." Instead of translating the word "Sitz" as "residence," PACT says, to the contrary, that it should be given what PACT contends is its more natural contextual meaning of "corporate seat"; PACT therefore avers that the clause should be understood to read, "As far as permitted by statute, jurisdiction and place of performance shall be situated at the seat of the PACT AG."1
The contents and effect of the compensation agreement came into issue as a result of a successful patent suit by PACT in the Eastern District of Texas. Weber avers that, as a result of his efforts, PACT discovered infringement by a competitor and resolved to file suit. Weber claims further that he vetted law firms, engaged counsel, and supervised the litigation, which resulted in a hefty jury verdict in May 2012 that yielded a judgment in September 2013.
A few months after the verdict, but before judgment was entered, Weber was
voted out of office as a board member of PACT. He tried to establish that PACT felt it was bound to pay his fee nonetheless, but PACT never affirmed that understanding, so Weber sued in November 2013, alleging breach of contract,
quantum meruit, and promissory estoppel and seeking damages and declaratory relief. Two days later, PACT filed the Civil Law equivalent of a declaratory judgment action in Germany, requesting a declaration that, because the compensation agreement had never been ratified by PACT’s shareholders, it was invalid under German law, which requires such ratification.
In the U.S. litigation, PACT moved to dismiss on FNC grounds, contending that both the traditional FNC factors and the Atlantic Marine FNC doctrine in the context of an FSC2 dictated that the German courts were the proper forum. That motion relied heavily on the declaration of Anatol Dutta, a German professor of law specializing in private international law. His declaration explains relevant German and European Union ("EU") legal concepts that PACT claims are applicable. The key aspects of the Dutta declaration are these: • Germany, as a Civil Law jurisdiction, does not recognize equitable causes of action as such, but there are legal concepts closely analogous to promissory estoppel and quantum meruit that can be deployed by litigants in contract disputes.
• German courts would interpret the FSC as providing for mandatory, exclusive jurisdiction in the German courts.
• The validity or enforceability of the FSC would not be affected by the invalidity of the compensation provisions of the contract.
• German choice-of-law principles would dictate application of German substantive law for two reasons: first, because the applicable EU law (the Rome I3 and Rome II4 Regulations) treat FSCs as strong evidence of an implicit election of the substantive law of the selected forum; and second, because German law treats place-of-performance clauses as strong evidence of an implicit election of the substantive law of the place of performance.
• The dispute here implicates important issues of German law and public policy relating to the compensation of board members of German corporations.
Weber’s response to the FNC motion emphasized the extent of PACT’s U.S. operations and the fact that the dispute arose in large part from the proper allocation of a money judgment obtained in a U.S. court. Weber further maintained that the FSC did not mandate German jurisdiction, because (1) PACT’s "residence" was in the United States, where its principal business was carried out (and the FSC did not explicitly vest exclusive jurisdiction and venue in Germany), (2) PACT could not simultaneously disclaim its obligation to
pay under the contract and assert the validity of the FSC, and (3) the traditional FNC factors heavily favored the Eastern District of Texas as the place for litigation. The factor that Weber stressed was the unavailability of equitable remedies under German law.
Along with a reply brief, PACT filed a supplemental declaration by Dutta emphasizing the availability of Civil Law analogies for quantum meruit and promissory estoppel claims. The declaration also engaged in a more extended discussion of the meaning of the word "Sitz" under German law; German law was quite clear on its meaning in this context and that German courts would have no doubt that the term referred to PACT’s place of incorporation in Germany. Additionally, Dutta noted that the term "Gerichtsstand," used in the FSC and initially translated by all parties as "jurisdiction," is a term of art under German law "that is used for the purpose of selecting the forum to resolve disputes. In English, its meaning would encompass court, jurisdiction, and venue." Finally, Dutta renewed his position that, under German law and general principles of private international law, an FSC is valid and severable regardless of the validity of the substance of the underlying contract.
After the briefing, Weber filed a declaration by Michael Molitoris, his German litigation counsel, who averred that, on his review of the relevant facts and law, Weber likely would have no remedy should the action proceed in Germany under German law. Molitoris explained that the compensation relationship between a member of a corporate board and the company is governed not by German contract law but by German statutory corporate law. Because the contract was never ratified by the shareholders, German corporate law would prohibit enforcement of the compensation arrangement. Because of certain presumptions in German law, Weber could not recover under the German equivalents of quantum meruit and promissory estoppel. In summary, Molitoris stated that "if the action is pursued in Germany, Mr. Weber will be most likely unable to seek any redress for the decade of uncompensated services he conferred on PACT XPP."
At the same time, Weber filed a supplemental declaration of his own stating, at some length, that he was unaware of any ratification requirement, did not consult a lawyer, was told by PACT representatives that no ratification was necessary, and was not under the impression, when the contract was signed, that the FSC specified Germany as the place for litigation.
In June 2014— during the pendency of the FNC motion-the German court issued a provisional judgment declaring that the agreement was unenforceable as to compensation for lack of shareholder ratification. In August 2014, the court entered a judgment with a more thorough explanation. The court stated that even though the agreement was unenforceable as to compensation, the FSC nonetheless vested mandatory jurisdiction over all disputes— local and international— arising from the compensation agreement in the German courts. The German judgment was by consent: Weber filed an "acceptance of claim" pleading that admitted the validity of the PACT suit but expressly reserved his right to pursue equitable claims in the U.S. courts or claims for "unjust enrichment" and "management without order" (Civil Law...
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