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Weber v.

PACT XPP Technologies


AG 811 F. 3d 758
January 26, 2016
United States Court of Appeals, Fifth Circuit
Ponente: JERRY E. SMITH, Circuit Judge

FACTS: Peter Weber served as CEO of PACT XPP Technologies, AG ("PACT"), a technology start-up company that
eventually morphed into an intellectual-property licensing and enforcement entity. PACT was incorporated in
Germany, but conducted its primary business activities in the United States for a significant period.

Weber claims that he had served without compensation under various oral agreements providing for payments once
the business became profitable, and that 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. The compensation agreement,
written in German, was approved by a board resolution but not ratified by the shareholders.

The parties dispute the English translation of the forum selection clause. Weber contends “sitz” is to be translated as
“residence”, while PACT argues that it means “corporate seat”.

Weber filed a case against PACT, alleging breach of contract, quantum meruit, and promissory estoppel and seeking
damages and declaratory relief. Two days later, PACT filed a case for declaratory judgment action in Germany,
requesting that it the compensation agreement be declared invalid as it was not ratified by PACT's shareholders, a
requirement under German law.

In the U.S. litigation, PACT moved to dismiss on the grounds of forum non conveniens (FNC), contending that the
German courts were the proper forum. PACT further claimed that the FSC is mandatory. In response, Webster
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. Further, Weber maintained that the FSC did not mandate
German jurisdiction because PACT's "residence" was in the United States, where its principal business was carried
out, and the traditional FNC factors heavily favored the Eastern District of Texas as the place for litigation (i.e. there
was an unavailability of equitable remedies under German law).

ISSUE: Whether the FSC is mandatory and enforceable

HELD: The FSC is mandatory and enforceable. A mandatory FSC affirmatively requires that litigation arising from
the contract be carried out in a given forum. By contrast, a permissive FSC is only a contractual waiver of personal-
jurisdiction and venue objections if litigation is commenced in the specified forum. An FSC is mandatory only if it
contains clear language specifying that litigation must occur in the specified forum-and language merely indicating
that the courts of a particular place "shall have jurisdiction" (or similar) is insufficient to make an FSC mandatory.

To arrive at this conclusion, the Court followed a three-step approach: (1) determine the best possible English-
language rendering of the German-language FSC; (2) determine which substantive law governs the interpretation of
the FSC; and (3) apply that substantive law to the language of the FSC to decide whether it is mandatory or
permissive.

As to the first step, the Court found merit in the declaration of Anatol Dutta, a German professor of law specializing in
private international law, that “sitz” should be translated to “corporate seat”.

As to the second step, the court used ordinary principles governing diversity litigation— a federal court sitting in
diversity applies the forum state's choice-of-law rules to determine which substantive law will apply. As the action
was brought in a Texas federal court, Texas choice-of-law rules apply. Texas follows the Restatement (Second) of
Conflict of Laws. Accordingly, the Court found that Texas courts would apply German substantive law.

As to the third step, because German substantive law applies, the FSC is mandatory. Dutta (PACT's expert), Molitoris
(Weber's expert), and the German court that heard PACT's declaratory-judgment action agree that, under German law,
a clause reading as this one does confers exclusive and mandatory jurisdiction in the specified forum.

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