Court Opinion

ID: 1014663
Source: CourtListenerOpinion
Date Created: 2013-07-04 21:20:37.100314+00
Date Added: 2024-06-11T09:42:54.779580
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                               No. 04-1178

GRECON DIMTER, INCORPORATED,

                                                  Plaintiff - Appellee,

           versus

HORNER FLOORING COMPANY, INCORPORATED,

                                                 Defendant - Appellant.

Appeal from the United States District Court for the Western
District of North Carolina, at Charlotte. Graham C. Mullen, Chief
District Judge. (CA-02-101-3-MU)

Argued:   September 29, 2004                 Decided:   November 5, 2004

Before WILKINS, Chief Judge, and NIEMEYER and SHEDD, Circuit
Judges.

Affirmed by unpublished per curiam opinion.

ARGUED: John J. Bursch, WARNER, NORCROSS & JUDD, L.L.P., Grand
Rapids, Michigan, for Appellant. Irving Michael Brenner, HELMS,
MULLISS & WICKER, P.L.L.C., Charlotte, North Carolina, for
Appellee.   ON BRIEF: Rodrick W. Lewis, Sarah M. Riley, WARNER,
NORCROSS & JUDD, L.L.P., Grand Rapids, Michigan; G. Michael
Barnill, WOMBLE, CARLYLE, SANDRIDGE & RICE, P.L.L.C., Charlotte,
North Carolina, for Appellant.

Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:

            Horner Flooring Company, Inc. (Horner) appeals a district

court decision that claims arising out of a commercial transaction

between Horner and GreCon Dimter, Inc. (GreCon) are governed by

German law.    We affirm.

                                      I.

            Horner   is    a   Michigan    corporation   that   manufactures

hardwood flooring.         GreCon is a North Carolina corporation that

manufactures and installs mill equipment. In November 1998, Horner

entered into two contracts with GreCon to supply and install a mill

system at Horner’s Michigan plant.          The mill system was comprised

of three commercial saws and a material handling system.            The saws

were manufactured in Germany, while virtually all the components of

the material handling system were manufactured in the United

States.     Each contract contained the following choice of law

provision: “This agreement is governed by and construed under the

laws of Germany to the exclusion of all other laws of any other

state or country (without regard to the principles of conflicts of

law).”    J.A. 16, 22.     Each contract also included a forum selection

clause providing that all disputes regarding the contract would be

litigated in a German court.

            After    the    mill   system    was   installed,   Horner   was

dissatisfied with its performance and withheld certain payments due

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under    the    contracts.       On     February    1,   2002,    GreCon    filed    a

collection action in North Carolina state court. On March 8, 2002,

Horner removed the case to the Western District of North Carolina

and     asserted       various        counterclaims;     Horner     amended       its

counterclaims on March 18.              On April 22, 2002, GreCon moved to

dismiss the entire case, arguing that the forum selection clause

compelled the parties to litigate in Germany; the motion also

recited the German choice of law provision.                  On June 14, 2002,

GreCon filed a reply brief in support of its motion to dismiss,

expressly stating that GreCon was relying on German law.                            On

July    10,    2002,   the   district     court    denied   GreCon’s   motion       to

dismiss, ruling that GreCon had waived the forum selection clause

by filing its complaint in North Carolina.                  On August 12, 2002,

GreCon answered Horner’s amended counterclaims; in that answer,

GreCon    asserted     that,     in    accordance    with   the    choice    of   law

provision, German law governed this action.

               Horner subsequently moved the district court to determine

the law applicable to this case.               Horner argued that (1) GreCon

waived the German choice of law provision by relying on North

Carolina law in its complaint; (2) even if no waiver occurred, the

provision was unenforceable because Germany lacked a reasonable

relation to the parties’ transaction; and (3) in the absence of an

enforceable agreement, Michigan law controlled because it bore the

most significant relationship to the transaction.                    The district

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court rejected Horner’s waiver argument, finding that GreCon’s

complaint “mentions no specific governing law” and that nothing in

GreCon’s pleadings indicated that it intended to forgo reliance on

German law.         Id. at 234.      The district court further held that

Germany possessed a reasonable relation to the transaction because

GreCon is a subsidiary of a German company and the saws in question

were manufactured in Germany.             The court thus determined that the

choice   of    law     provision    was   enforceable         and   that     German   law

governed the litigation.            On Horner’s motion, the district court

certified its order for interlocutory appeal, see 28 U.S.C.A.

§ 1292(b) (West 1993), and we granted review.

                                          II.

              Horner     contends    that       the    district     court     erred   in

determining that German law applies here.                    We review the choice of

law rulings by the district court de novo.                    See Int’l Bus. Machs.

Corp. v. Liberty Mut. Ins. Co., 363 F.3d 137, 143 (2d Cir. 2004);

Reicher v. Berkshire Life Ins. Co. of Am., 360 F.3d 1, 4 (1st Cir.

2004).   As a federal court exercising diversity jurisdiction, we

apply the choice of law rules of the forum state--here, North

Carolina.     See    Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487,

496-97 (1941).         Under the North Carolina Uniform Commercial Code,

contracting     parties     may     agree       that   the    law   of   a   particular

jurisdiction governs their contract if the transaction has a

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“reasonable relation” to that jurisdiction.                 N.C. Gen. Stat.

§ 25-1-105(1) (2003).

                                     A.

           Horner first argues that GreCon waived the German choice

of law provision by relying on North Carolina law in its complaint.

As the district court noted, GreCon’s complaint does not expressly

rely on the law of any specific jurisdiction.           But as Horner points

out, various statements in the complaint are apparently based on

provisions of North Carolina law.          For example, GreCon’s complaint

repeatedly refers to an interest rate of “8% per annum or the

maximum rate allowed by law,” J.A. 7-10--an apparent reference to

the North Carolina legal interest rate of eight percent a year,

see N.C. Gen. Stat. § 24-1 (2003).                 Similarly, the complaint

requests   attorneys’    fees   of   “no    less    than   15%”   of   Horner’s

outstanding balance, J.A. 8-10; this figure is apparently based on

a North Carolina statute limiting recovery of attorneys’ fees under

a contract to 15 percent of the outstanding balance, see N.C. Gen.

Stat. § 6-21.2(1), (2) (2003).            Horner claims that by including

these and other references to North Carolina law in its complaint,

GreCon waived its right to rely on German law.             We disagree.

           Although     portions     of    GreCon’s     complaint      arguably

contemplate the application of North Carolina law, the complaint

does not so clearly embrace North Carolina law as to show that

GreCon intended to forgo its contractual right to have German law

                                      5
applied here.         See Guerry v. Am. Trust Co., 68 S.E.2d 272, 275

(N.C. 1951) (defining “waiver” as “an intentional relinquishment of

a    known   right”     and       explaining      that   waiver    of    a    contractual

provision may be inferred from conduct indicating an intent to

abandon      the    provision).           Indeed,    the   complaint         attaches    and

expressly incorporates by reference the contracts containing the

German choice of law provision. This suggests that GreCon intended

to preserve its right to rely on German law.

              In addition, unlike cases in which courts have held

choice of law provisions waived when parties relied on other law

throughout the litigation, here any reliance by GreCon on North

Carolina law ended early in the case.                 Cf. Cargill, Inc. v. Charles

Kowsky Res., Inc., 949 F.2d 51, 55 (2d Cir. 1991) (finding waiver

of    Massachusetts         choice    of    law     provision     when   both     parties

consistently relied on New York law in summary judgment submissions

to district court and court of appeals); Fid. & Deposit Co. of Md.

v. Krebs Eng’rs, 859 F.2d 501, 504 (7th Cir. 1988) (holding that

party that relied solely on Wisconsin law in litigating contract

damages issue in district court waived reliance on California

choice of law provision); Clarklift of N.W. Ohio, Inc. v. Clark

Equip. Co., 869 F. Supp. 533, 536 (N.D. Ohio 1994) (holding that

party   that       relied    on    Ohio    law    throughout    case,        including   in

successful motion for summary judgment, waived any contractual

right to rely on Michigan law in seeking attorneys’ fees), aff’d

                                              6
sub nom. Clark Credit Corp. v. Sterkowicz, 117 F.3d 1420, 1997 WL

382038, at *2 (6th Cir. 1997) (per curiam) (unpublished table

decision).       Less than three months after filing its complaint,

GreCon invoked the German choice of law provision in its motion to

dismiss--its first substantive filing after Horner removed the case

and asserted counterclaims.           Further, in its reply brief on the

motion to dismiss, GreCon argued that German law applied.                   And

after its motion to dismiss was denied, GreCon stated in its answer

to Horner’s counterclaims that it intended to rely on German law.

Thus,   GreCon    made   clear   at   the    pleading   stage--i.e.,   at   the

beginning of the lawsuit--that it intended to enforce the parties’

agreement to litigate their claims under German law.

                                       B.

             Horner further contends that even if GreCon did not waive

the German choice of law provision, application of German law is

improper because the parties’ transaction lacks a “reasonable

relation” to Germany, N.C. Gen. Stat. § 25-1-105(1).                We reject

this argument.      As the district court recognized, the commercial

saws--a   major     component    of    the    mill   system   at   issue--were

manufactured in Germany before being shipped to the United States.

The parties’ transaction thus has a reasonable relation to Germany,

and the German choice of law provision is enforceable.              See Kaplan

v. RCA Corp., 783 F.2d 463, 465 (4th Cir. 1986) (holding that New

Jersey choice of law provision in radio antenna contract was

                                        7
enforceable    under   §   25-1-105,       in   part   because    antenna   “was

designed,     engineered   and    tested”       in   New   Jersey);   see   also

Providence & Worcester R.R. Co. v. Sargent & Greenleaf, Inc.,

802 F. Supp. 680, 687 (D.R.I. 1992) (determining that contract for

railroad switch locks had a reasonable relation to Kentucky, in

part because locks were designed and manufactured in Kentucky and

were shipped from that state); Ford Motor Co. v. Lyons, 405 N.W.2d

354, 377 (Wisc. Ct. App. 1987) (concluding that contract between

automobile manufacturer and dealer concerning vehicle rentals bore

a   reasonable    relation       to   Michigan       because     vehicles   were

manufactured in and shipped from Michigan).

                                      III.

            For the reasons set forth above, we affirm the decision

of the district court to apply German law to this action.

                                                                       AFFIRMED

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