Case: 15-10943 Document: 00513711272 Page: 1 Date Filed: 10/10/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 10, 2016
No. 15-10943
Lyle W. Cayce
Clerk
SGIC STRATEGIC GLOBAL INVESTMENT CAPITAL, INCORPORATED;
GRIL GERMAN RESTAURANT INVESTMENT AND LENDING,
INCORPORATED; CHRISTIAN GROENKE,
Plaintiffs - Appellants
v.
BURGER KING EUROPE GMBH,
Defendant - Appellee
Appeal from the United States District Court
for the Northern District of Texas
Before STEWART, Chief Judge, and PRADO and SOUTHWICK, Circuit
Judges.
CARL E. STEWART, Chief Judge:
This case arises from a series of disputes over Burger King franchises
located in Germany. The district court granted Defendant-Appellee’s motion
to dismiss Plaintiffs-Appellants’ claims on grounds of forum non conveniens
and denied as moot their motion for leave to file an amended complaint. For
the following reasons, we AFFIRM the districts court’s judgment dismissing
Plaintiffs-Appellants’ claims against Defendant-Appellee on grounds of forum
non conveniens. We VACATE the district court’s judgment denying Plaintiffs-
Appellants’ motion for leave to amend and REMAND for further proceedings.
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No. 15-10943
I. FACTUAL AND PROCEDURAL BACKGROUND 1
Plaintiffs-Appellants Christian Groenke (“Groenke”), SGIC Strategic
Global Investment Capital, Inc. (“SGIC”), and GRIL German Restaurant
Investment and Lending, Inc. (“GRIL”) owned and operated numerous Burger
King restaurants in Germany, 2 initially through their interest in a German
company, HEGO. 3 HEGO later became a wholly owned subsidiary of another
German company, SAVE. 4 These Burger King restaurants all operated under
franchise agreements entered into with Defendant-Appellee BKE. 5 Groenke
also signed a separate personal guarantee (the “Personal Guarantee”) with
BKE, wherein he assumed responsibility for the payment of certain franchise
fees for the Burger King restaurants operated by Plaintiffs-Appellants.
BKE is a Swiss corporation and the franchisor of Burger King
restaurants in Germany. The HEGO Burger King restaurants all had
individual franchise agreements with BKE, which required that, among other
things, the franchisees pay franchise fees. These franchise agreements each
contained a materially identical forum selection clause, which states that (1)
Munich, Germany is the exclusive venue for any disputes arising out of the
contract, and (2) the contract is governed by German law. 6
1 Throughout this opinion, the full names of foreign businesses and corporations
appear in the footnotes, rather than in the body of the text.
2 Groenke is the sole shareholder of SGIC, which in turn is the sole shareholder of
GRIL. Groenke is a resident of Texas; SGIC and GRIL are both Delaware corporations with
their principal places of business in Texas.
3 HEGO System-Gastronomie GmbH & Co. KG and its subsidiaries, herein (“HEGO”).
4 SAVE Vermogensverwoltungs GmbH & Co., Holding KG, herein (“SAVE”).
5 Burger King Europe GmbH, herein (“BKE”).
6 The text of the forum selection clause states: “The exclusive venue for any disputes
arising out of this Agreement, its application or its termination shall be Munich. . . . This
agreement and its interpretation are governed by the laws of the Federal Republic of
Germany.”
2
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In Germany, BKB 7—referred to as a Burger King “support organization”
—owned and operated a number of Burger King restaurants through its
subsidiaries. Although these restaurants had been operating at a loss, SAVE
purchased shares in BKB’s restaurants. As part of that deal, Groenke
negotiated a five-year development agreement for HEGO that included the
opportunity to purchase ninety-one additional franchises and executed the
Personal Guarantee to assume the obligations in a number of HEGO’s
franchise agreements. Although the Personal Guarantee referred to the
franchise agreements, it did not contain a forum selection clause.
After the purchase of BKB’s shares, SAVE became SAGRO. 8 A series of
mergers and restructurings resulted in ARH 9 becoming the successor in
interest to SAGRO. GRIL is the sole shareholder of ARH.
The present dispute began when Groenke and SGIC attempted to sell
their interest in GRIL. Groenke and SGIC claim that they informed BKE of
their intention to sell GRIL and that BKE initially helped identify potential
buyers. In December of 2013, SGIC entered into a term sheet with potential
buyers while the negotiations to sell GRIL progressed. Then, on April 23, 2014,
SGIC entered into a share purchase agreement with SHOKOIP Limited.
Around the same time, in March and April of 2014, BKE sent
correspondence to GRIL and the prospective buyers that purportedly
interfered with the impending deal. BKE allegedly stated, in essence, that (1)
the relevant franchise agreements required BKE’s approval for the sale of
GRIL, (2) BKE opposed the sale, and (3) BKE may unilaterally terminate the
franchise agreements if the share purchase agreement proceeded. When the
7 Burger King Beteiligungs GmbH, herein (“BKB”).
8 BK HEGRO-SAGRO Holding GmbH & Co. KG, herein (“SAGRO”).
9 American Restaurant Holding, LP, herein (“ARH”).
3
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potential buyers pulled out of the deal, Groenke, SGIC, and GRIL filed the
instant lawsuit against BKE, claiming tortious interference and seeking a
declaratory judgment regarding their rights under the relevant franchise
agreements (the “Franchise Agreement Litigation”). The Franchise
Agreement Litigation began on September 12, 2014.
On April 17, 2014—five months prior to the start of the Franchise
Agreement Litigation—BKE filed a separate suit against Groenke in the
Northern District of Texas to recover franchise fees that Groenke allegedly
owed BKE under the Personal Guarantee (the “Personal Guarantee
Litigation”). Although the Personal Guarantee Litigation’s sole cause of action
was for a breach of the Personal Guarantee, it referenced the franchise
agreements to determine the parties’ rights and obligations. The restaurants
at issue in the Franchise Agreement Litigation do not overlap with the
restaurants at issue in the Personal Guarantee Litigation.
BKE subsequently moved to dismiss the Franchise Agreement Litigation
based on lack of personal jurisdiction or, in the alternative, forum non
conveniens. Plaintiffs-Appellants opposed the motion to dismiss and also filed
a separate motion for leave to file an amended complaint. The proposed
amended complaint sought to add HEGO and Burger King Corporation
(“BKC”) 10 as parties and asserted additional claims for business
disparagement and tortious interference.
The district court dismissed the suit on grounds of forum non conveniens
based on the forum selection clause in the relevant franchise agreements. In
doing so, the court found that BKE did not waive its right to enforce the forum
selection clause by filing suit against Groenke in the Personal Guarantee
10 BKC is a Florida corporation with its principal place of business in Miami, Florida.
4
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Litigation. The district court then entered an order, without reasons,
dismissing as moot Plaintiffs-Appellants’ motion for leave to amend. Plaintiffs-
Appellants filed this appeal. 11
II. DISCUSSION
Plaintiffs-Appellants challenge the district court’s dismissal of their
claims against BKE as well as the district court’s denial of their motion for
leave to amend.
A. Forum Non Conveniens
Plaintiffs-Appellants first argue that the district court erred in
dismissing their claims on grounds of forum non conveniens. They assert that
BKE waived the forum selection clause in the franchise agreements by filing
the Personal Guarantee Litigation in Texas.
This court reviews the waiver of a contractual right de novo and the
factual findings underlying the district court’s waiver determination for clear
error. See Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 326 (5th Cir.
1999). Similarly, “[w]e review the district court’s interpretation of the [forum
selection clause] and its assessment of that clause’s enforceability de novo.”
Weber v. PACT XPP Techs., AG, 811 F.3d 758, 768 (5th Cir. 2016).
As this court has noted, “[t]here is a lack of authority determining
whether federal or state law principles control the standard for determining a
party’s waiver of rights under a forum selection clause.” Wellogix, Inc. v. SAP
Am., Inc., Nos. 15-20184, 15-20187, 2016 WL 2772280, at *2 (5th Cir. May 12,
11 While this appeal was pending, a district court entered judgment in favor of BKE
in the Personal Guarantee Litigation. Burger King Eur. Gmbh v. Groenke, No. 3:14-cv-1417,
2015 WL 6751121 (N.D. Tex. Nov. 5, 2015).
5
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2016). 12 We have previously “held that federal law governs the enforceability
of a forum selection clause, but the forum state’s choice of law rules control
what law governs the interpretation of the clause.” Id. (citing Weber, 811 F.3d
at 770). 13
One line of authority, previously acknowledged by this court, applies a
traditional waiver standard to forum selection clauses. See GP Plastics Corp.
v. Interboro Packaging Corp., 108 F. App’x 832, 835–36 (5th Cir. 2004);
Wellogix, 2016 WL 2772280, at *3 (citing Haber v. Biomet, Inc., 578 F.3d 553,
558 (7th Cir. 2009)). These cases hold that waiver of a forum selection clause
requires: “(1) an existing right, benefit, or advantage; (2) actual or constructive
knowledge of its existence; and (3) actual intent to relinquish that right.” GP
Plastics, 108 F. App’x at 836 (citation omitted). Waiver can also occur if a party
engages in “conduct so inconsistent with the intent to enforce the right as to
induce a reasonable belief that it has been relinquished.” N. Am. Specialty Ins.
Co. v. Debis Fin. Servs., Inc., 513 F.3d 466, 470 (5th Cir. 2007).
This court has also recognized “[a] second line of authority, articulating
both federal and Texas law, [which] would apply essentially the test used by
federal courts to assess waiver of arbitration clauses, which are a species of
forum selection clause.” Wellogix, 2016 WL 2772280, at *3. Under this test,
“the party to the [forum selection] clause waives its right if it ‘(1) substantially
invokes the judicial process [in derogation of the forum selection clause] and
(2) thereby causes detriment or prejudice to the other party.’” Id. at *3 (quoting
12 Although German law could potentially govern the interpretation of the forum
selection clauses at issue based on the choice of law provisions in the franchise agreements,
neither party advances that argument. Thus, we do not address it here.
13 This circuit has not yet determined whether waiver is a matter of enforceability or
interpretation, but because we conclude that BKE did not waive the forum selection clause
under either standard, we do not reach this issue here.
6
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Al Rushaid v. Nat’l Oilwell Varco, Inc., 757 F.3d 416, 421 (5th Cir. 2014));
accord In re ADM Inv’r Servs., 304 S.W.3d 371, 374 (Tex. 2010).
Plaintiffs-Appellants contend that by filing suit in the Personal
Guarantee Litigation in Texas, BKE waived its right to enforce the forum
selection clause in the Franchise Agreement Litigation. 14 We are not
persuaded by this argument. Both parties concede that the franchises at issue
in the Personal Guarantee Litigation are different franchises than those at
issue in the Franchise Agreement Litigation. Although the franchise
agreements contain materially identical language, the Franchise Agreement
Litigation involves a set of contracts wholly separate from those involved the
Personal Guarantee Litigation. Even assuming that BKE’s filing of the
Personal Guarantee Litigation resulted in waiver of the forum selection
clauses in those agreements, that waiver would not extend to the forum
selection clauses in the specific agreements at issue in the Franchise
Agreement Litigation. Therefore, we cannot conclude that BKE’s filing of the
Personal Guarantee Litigation resulted in waiver of its right to enforce the
forum selection clause in the Franchise Agreement Litigation. See N. Am.
Specialty, 513 F.3d at 470 (finding waiver can occur when a party engages in
14 In support of their argument, Plaintiffs-Appellants cite to a district court case out
of Virginia, which holds that a forum selection clause is waived when a party files suit in a
forum inconsistent with a contract’s forum selection clause. Kettler Int’l, Inc. v. Starbucks
Corp., 55 F. Supp. 3d 839, 849–51 (E.D. Va. 2014). Plaintiffs-Appellants’ reliance on Kettler
is misplaced. In Kettler, both parties brought claims under the same contract. Id. at 843–
44. Not so here. BKE filed the earlier lawsuit for breach of the Personal Guarantee. This
lawsuit, however, involves the franchise agreements themselves. See Bancroft Life & Cas.
ICC, Ltd. v. Davnic Ventures, LP, No. 12-2015, 2013 WL 1222112, *3 (S.D. Tex. Mar. 25,
2013) (finding that a forum selection clause in an insurance policy did not extend to separate
promissory notes executed between the parties).
7
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“conduct so inconsistent with the intent to enforce [its] right[s]” that it raises
a reasonable belief that the party relinquished its rights). 15
We additionally note that Plaintiffs-Appellants have not shown waiver
under the second potentially applicable test articulated in Wellogix and Al
Rushaid because they did not allege that BKE’s filing of the Personal
Guarantee Litigation resulted in their “detriment or prejudice.” Wellogix, 2016
WL 2772280, at *3; Al Rushaid, 757 F.3d at 421.
Accordingly, we uphold the district court’s judgment dismissing
Plaintiffs-Appellants’ claims against BKE on grounds of forum non conveniens.
B. Leave to Amend
Next, we turn to Plaintiffs-Appellants’ second argument that the district
court erred in denying as moot their motion for leave to amend. Plaintiffs-
Appellants argue that because the motion for leave to amend was the first time
they sought amendment of the complaint and the amendment was filed within
the scheduling order deadline, the district court abused its discretion in
denying their motion as moot without providing reasons for doing so. We
agree.
We “review[ ] a district court’s denial of leave to amend a complaint for
abuse of discretion.” Engstrom v. First Nat’l Bank of Eagle Lake, 47 F.3d 1459,
15 Plaintiffs-Appellants’ argument that the forum selection clause should be read
broadly to include the Personal Guarantee because it encompasses all disputes “arising out
of this [franchise] [a]greement, its application, or its termination” is also unconvincing. The
two out-of-circuit cases relied on by Plaintiffs-Appellants do not support their contention.
Simula, a Ninth Circuit arbitration case, distinguishes contracts with the phrase “arising in
connection with” as having a broader reach than those contracts with the more limiting
“arising out of” language present in BKE’s franchise agreements. Simula, Inc. v. Autoliv,
Inc., 175 F.3d 716, 720 (9th Cir. 1999). Electro-Mechanical found waiver of a forum selection
clause when two parties sued under a single sales contract. Electro-Mechanical Corp. v. Riter
Eng’g Co., No. 2:10-CV-975, 2011 WL 2118704, at *4 (D. Utah May 25, 2011). Nothing in
Electro-Mechanical, however, suggests that the forum selection clause in the sales contract
would extend to claims under a separate contract, such as the Personal Guarantee here.
8
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1464 (5th Cir. 1995). Federal Rule of Civil Procedure 15(a) states that the
district “court should freely give leave [to amend] when justice so requires.”
“[T]he language of this rule ‘evinces a bias in favor of granting leave to amend,’”
and “[a] district court must possess a ‘substantial reason’ to deny a request.”
Smith v. EMC Corp., 393 F.3d 590, 595 (5th Cir. 2004) (citation omitted). A
district court should “examine[ ] five considerations to determine whether to
grant a party leave to amend a complaint: 1) undue delay, 2) bad faith or
dilatory motive, 3) repeated failure to cure deficiencies by previous
amendments, 4) undue prejudice to the opposing party, and 5) futility of the
amendment.” Id. (citations omitted). Moreover, “[g]iven the policy of liberality
behind Rule 15(a), it is apparent that when a motion to amend is not even
considered, much less not granted, an abuse of discretion has occurred.”
Lowrey v. Tex. A & M Univ. Sys., 117 F.3d 242, 245–46 (5th Cir. 1997) (quoting
Marks v. Shell Oil Co., 830 F.2d 68, 69 (6th Cir. 1987)).
Notwithstanding our strong preference for explicit reasoning for denial
of a motion to amend, “when the justification for the denial is ‘readily
apparent,’ a failure to explain ‘is unfortunate but not fatal to affirmance if the
record reflects ample and obvious grounds for denying leave to amend.’”
Marucci Sports, LLC v. Nat’l Collegiate Athletic Ass’n, 751 F.3d 368, 378 (5th
Cir. 2014) (quoting Mayeaux v. La. Health Serv. & Indem. Co., 376 F.3d 420,
426 (5th Cir. 2004)).
As noted, the district court stated—without providing reasons—that the
motion for leave to amend was moot. Although “mootness is a valid basis for
denying leave to amend,” it is not clear on the record before us that all of
Plaintiffs-Appellants’ additional claims would have been moot. Carroll v. Fort
9
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James Corp., 470 F.3d 1171, 1175 (5th Cir. 2006). 16 Moreover, there is no
explanation from the district court concerning other factors that could warrant
the district court’s denial of the motion. Plaintiffs-Appellants filed the motion
within the scheduling order deadline. “Thus, on its face, the motion was timely
and evidenced no prejudice to the other parties or potential to delay the
proceeding.” Halbert v. City of Sherman, 33 F.3d 526, 529 (5th Cir. 1994). 17
Consequently, we hold that the district court abused its discretion when
it denied as moot Plaintiffs-Appellants’ motion for leave to amend without
providing reasons for doing so, when the record also lacked “ample and obvious
grounds” supporting its denial of the motion. Marucci, 751 F.3d at 378.
III. CONCLUSION
We AFFIRM the district court’s judgment dismissing Plaintiffs-
Appellants’ claims against BKE on grounds of forum non conveniens. We
VACATE the district court’s order denying Plaintiffs-Appellants’ motion for
leave to amend and REMAND for further proceedings consistent with this
opinion.
16 The amended complaint sought to add additional parties and claims that were not
fully addressed in the court’s analysis of forum non conveniens and direct benefits estoppel.
To be clear, nothing in this opinion should be construed as reaching the viability of such
claims.
17 We recognize that this court has upheld the denial of a motion for leave to amend,
when the motion was filed on the eve of the court’s disposition of that case on summary
judgement. Wimm v. Jack Eckerd Corp., 3 F.3d 137, 139–40 (5th Cir. 1993). In Wimm, the
plaintiffs also filed the motion within the court’s scheduling order deadline. Id. at 138.
However, the court in Wimm made express findings of bad faith and dilatory motive. Id. at
142. Although bad faith or dilatory motive may be present in the instant case to warrant
denial of the motion for leave to amend, it is not “ample and obvious” on the record before us.
Marucci, 751 F.3d at 378.
10