Bavaria Yachts United States, LLLP v. GMBH (In re Bavaria Yachts United States, LLLP)

• Decision Date: 06 October 2017
• Docket Number: Case No. 16–68583–JRS,Adversary Proceeding Case No. 17–05020–JRS
• Citation: 575 B.R. 540
• Parties: IN RE: BAVARIA YACHTS USA, LLLP, Debtor. Bavaria Yachts USA, LLLP, Plaintiff, v. Bavaria Yachtbau GmbH, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

575 B.R. 540

IN RE: BAVARIA YACHTS USA, LLLP, Debtor.Bavaria Yachts USA, LLLP, Plaintiff,

v.Bavaria Yachtbau GmbH, Defendant.

Case No. 16–68583–JRS

Adversary Proceeding Case No. 17–05020–JRS

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

Signed October 6, 2017

Filed October 10, 2017

Alexander Dombrowsky, Robert Allen Law, The Four Seasons Office Tower, Suite 1400, 1441 Brickell Avenue, Miami, FL 33131, Louis G. McBryan, McBryan, LLC, Suite 1150, 1380 West Paces Ferry Rd., Atlanta, GA 30327, for Plaintiff.

Richard L. Robbins, Robbins Ross Alloy Belinfante, Littlefield LLC, Suite 1120, 999 Peachtree Street, NE, Atlanta, GA 30309–3996, Shayna M. Steinfeld, Steinfeld & Steinfeld PC, P.O. Box 49446, Atlanta, GA 30359, for Defendant.

ORDER DENYING IN PART AND GRANTING IN PART DEFENDANT'S RENEWED PARTIAL MOTION TO DISMISS

James R. Sacca, U.S. Bankruptcy Court Judge

This case involves a broken business relationship between a German yacht manufacturer and its exclusive dealer in the United States, the Debtor in this case, the contracts for which provide that any litigation arising under or in connection with the contracts must be brought in Germany.

Debtor Bavaria Yachts USA, LLLP ("BUSA," "Plaintiff," or "Debtor") commenced this adversary proceeding with some claims arising under state law, such as fraud, negligent misrepresentation, breach of implied warranties, tortious interference with contract, and unjust enrichment, and others arising under the federal bankruptcy law, such as avoidance claims, validity, extent and priority of liens, equitable subordination and an objection to claim. Defendant Bavaria Yachtbau GmbH ("Yachtbau" or "Defendant") argues that the many of BUSA's claims should be dismissed for failure to state a claim upon which relief can be granted and because the contracts governing this business relationship have valid forum selection clauses which require certain of the claims to be dismissed and refiled in Würzburg, Germany. Before the Court is Yachtbau's Renewed Partial Motion to Dismiss Claims in Plaintiff's Amended Complaint and Supporting Memorandum of Law (the "Motion"). [Doc. 17]. BUSA contends it has stated claims upon which relief can be granted and disputes the applicability, validity and enforceability of the forum selection clauses.

FACTUAL BACKGROUND

Yachtbau is a German GmbH—or a German company with limited liability—that manufactures motor and sailing yachts, with its principal place of business in Giebelstadt, Germany. [Defendant's Answer to Amended Complaint and Counterclaim ("Def.'s Answer") ¶ 9]. BUSA is a Georgia limited liability limited partnership with its principal place of business in Atlanta, Georgia. [Def.'s Answer ¶ 8]. Generally, the parties' business relationship consisted of BUSA acting as the exclusive dealer in the United States selling yachts made by Yachtbau [Doc. 17 at p. 4] pursuant to separate contracts for the purchase and sale of the sailboats and motorboats, respectively (collectively, the "Dealer Contracts"), but there was also an agreement in July 2016, all of which are discussed below.

Yachtbau and Horizon Bavaria USA, LLC¹ entered into their first contractual agreement for the purchase and sale of sailboats (the "First Sailboat Contract") on January 17, 2011. The First Sailboat Contract was assigned to Horizon Bavaria USA, LLLP and effective March 8, 2011. [Doc. 10, Ex. 1; Doc. 16 ¶ 8]. The First Sailboat Contract was later replaced with the second agreement for the purchase and sale of sailboats (the "Second Sailboat Contract") on November 8, 2011.

The agreement covered various topics including that BUSA could not be involved with Yachtbau's competitors. [Doc. 10, Ex. 2 ¶ 4.1]. Additionally, the Second Sailboat Contract provided BUSA "a discount of 2% as a lump sum consideration for all required warranty repair work performed by [BUSA]." [Doc. 10, Ex. 2 Annex 3]. The Second Sailboat Contract also contained provisions that required BUSA to perform customer service, warranty, maintenance, and repair work for the boats as requested by those who purchase the boats. [Amended Complaint ¶ 25]. BUSA was obligated to pay out of pocket for these costs and would be provided a 2% lump sum discount from BUSA's purchase price of the boat. Id. However, BUSA claims these repair costs greatly exceeded 2% of the retail price. [Amended Complaint ¶ 26]. BUSA alleges the design and quality of the yachts were not suitable for a United States customer and Yachtbau promised it would resolve the issues. [Amended Complaint ¶¶ 19–20]. As BUSA made the necessary repairs to the yachts, it alleges that the 2% became insufficient to cover all the manufacturing defects. [Amended Complaint ¶ 164]. The Second Sailboat Contract also contained forum selection and merger clauses stating: (a) "The exclusive place of jurisdiction for all disputes arising under or in connection with this Agreement shall be in Würzburg, Germany," and (b) "This Agreement replaces any prior agreements with respect to its subject matter in its entirety. There are not [sic] verbal side agreements." [Doc. 10, Ex. 2 ¶ 15.5; Doc. 10, Ex. 2 ¶ 15.2].

On May 15, 2013, Yachtbau and Horizon Bavaria USA, LLLP entered into an amendment to the Second Sailboat Contract (the "Amendment to the Second Sailboat Contract"). [Doc. 10, Ex. 4]. BUSA alleges that this agreement was "based on continued confidence in BUSA's investments, brand building, and customer satisfaction." [Amended Complaint ¶ 16]. At this time, BUSA claims it invested another $350,000 in its relationship with Yachtbau. [Amended Complaint ¶ 17]. BUSA also argues that Yachtbau was aware that the additional investment was based on the extended commitment between the parties and Yachtbau's commitment to accelerate actions to remedy the design flaws documented in the previous years. [Amended Complaint ¶17].

After the Amendment to the Second Sailboat Contract, BUSA claims the design issues and quality flaws continued. [Amended Complaint ¶ 18]. Specifically, BUSA contends the design and manufacturing defects included significant leaks and sinking, persistent failures of air conditioning units, generator sets and electrical systems, motor yacht engine rooms excessively and prematurely rusting, and fire suppression system failures. [Amended Complaint ¶ 27]. BUSA argues it continued to invest in its relationship with Yachtbau because of the continued promises from Yachtbau to remedy the flaws and the ability to recover after-sale support costs not to exceed the 2% allowance provided in the Dealer Contracts. Id. Despite alleged defects in the inventory, the parties began discussion of expanding BUSA's dealership to include motor yachts. And, on September 25, 2014, Yachtbau and Bavaria Motor Yachts USA, LLC² entered into the Motorboat Contract. The Motorboat Contract contained similar provisions as the Second Sailboat Contract regarding BUSA's exclusivity, the 2% discount, the merger clause, and the forum selection clause. [Doc. 10, Ex. 5 ¶ 4.1 & Annex 3; Doc. 10, Ex. 5 ¶ 15.5; Doc. 10, Ex. 5 ¶ 15.2].

The Motorboat Contract was amended (the "Amendment to the Motorboat Contract") on September 29, 2014. [Doc. 10, Ex. 6]. BUSA documented and identified therein specific improvements needed to make these boats "relevant to the U.S. market demands," which BUSA alleges Yachtbau acknowledged in order to have BUSA continue to invest in their relationship. [Amended Complaint ¶ 23]. BUSA alleges that it funded its operations related to the Motorboat Contract and the Amended Motorboat Contract with an initial equity investment of $300,000, plus $300,000 secured by BUSA, and one final investment totaling $1,450,000 by mid–2015. [Amended Complaint ¶ 24]. Further, an additional $2,050,000 was allegedly invested "by numerous individuals based on commitments made by Bavaria Yachtbau." Id. When combined with the original investments, the total capital invested by BUSA in its relationship with Yachtbau (initial investments, interim investments, and those investments surrounding the Motorboat Contract) was allegedly more than $4,500,000 at the end of 2015. Id.

As a result of the alleged defects with the yachts and BUSA's obligation to pay the out of pocket costs, BUSA alleges that it was in an economic crisis resulting in a "payables gap." [Amended Complaint ¶ 30]. One last contract between Yachtbau and BUSA was entered into on July 21, 2016 (the "July 2016 Agreement"). [Doc. 10, Ex. 7]. Yachtbau alleges that in July of 2016, it met with BUSA's general partner, Kenny Feld, to learn about BUSA's current financial situation. [Def.'s Counterclaim ¶ 26]. Yachtbau argues that the purpose of the July 2016 agreement was to reduce the debts BUSA owed. [Def.'s Counterclaim ¶ 27]. Conversely, BUSA contends that it agreed to invest more in its relationship with Yachtbau in hopes that Yachtbau would honor its side of the arrangements in fixing the defective boats. [Amended Complaint ¶ 34]. The agreement provided that BUSA immediately pay Yachtbau $173,000 (or 156,000 EURO) and BUSA would agree to pay 100% of all boat revenues directly to Yachtbau. [Amended Complaint ¶ 34]. Further, BUSA alleges that Yachtbau agreed to "loan-back" to BUSA cash funds to cover its monthly operational costs and to send a team to fix all the issues with the boats. Id. At this point, BUSA claims that Yachtbau began actively soliciting dealers to take over BUSA's business in the United States. [Amended Complaint ¶ 36].

Yachtbau contends that the parties had subsequently begun negotiating termination of their business relationship, and BUSA sent a demand letter threatening to sue Yachtbau unless it bought BUSA's equity in Yachtbau. [Def.'s Counterclaim ¶¶ 29–30]. On October 4, 2016, Yachtbau terminated the Dealer Contracts. Yachtbau contends that BUSA threatened to file for bankruptcy in attempts to recover its equity from Yachtbau. [Def.'s Counterclaim ¶ 32]. BUSA filed for Chapter 11 relief two weeks later on October 18,...