## Facts

- Gita Sports Ltd. (Gita), a North Carolina bicycle-equipment distributor, entered a written “Sales Exclusive Supply Agreement” with SG Sensortechnik GmbH & Co. KG (Sensortechnik), a German manufacturer of “Ergomo” bicycle performance-measuring products.
- The agreement made Gita the exclusive distributor of specified Ergomo products (and future Ergomo products) in the United States and Canada for a term running from November 1, 2005 through December 31, 2008.
- The agreement required Sensortechnik to replace faulty products within thirty (30) days after notice.
- The agreement included a forum-selection and choice-of-law provision stating: (1) the “place of fulfillment and court of venue” is Mörfelden-Walldorf, Germany; and (2) German law is “solely applicable” to the exclusive supply agreement. The contract, including these clauses, was written in English.
- Gita alleged unusually high product return rates for service and repairs and claimed Sensortechnik failed to timely repair or replace defective products as required by the agreement.
- Sensortechnik sent Gita a termination notice asserting Gita failed to meet minimum purchase requirements; Gita disputed the basis for termination and also alleged reputational harm and sales through other distributors despite the exclusivity arrangement.
- Gita sued in North Carolina state court asserting claims including breach of contract, unfair and deceptive trade practices, fraud, conversion, open account, and account stated.
- Sensortechnik removed the case to the U.S. District Court for the Western District of North Carolina and moved to dismiss for improper venue under Rule 12(b)(3), relying on the German forum-selection clause.
- The parties disputed whether the validity and enforceability of the forum-selection clause should be evaluated under federal law, North Carolina law, or German law.

## Issues

1. In a removed diversity action, what law governs the enforceability of a contractual forum-selection clause invoked through a Rule 12(b)(3) motion: federal law, state law, or the foreign law selected in the contract?
2. Is the clause designating Mörfelden-Walldorf, Germany as the “court of venue” mandatory and enforceable, such that venue in the Western District of North Carolina is improper for claims tied to the agreement?
3. If some claims fall within the clause and others do not, should the federal court dismiss the covered claims and remand the remaining state-law claims to state court?

## Decision

- The court granted Sensortechnik’s Rule 12(b)(3) motion in part and denied it in part.
- The court enforced the forum-selection clause as mandatory and dismissed for improper venue Gita’s claims for breach of contract, unfair and deceptive trade practices, fraud, and conversion.
- The court held Gita’s open account and account stated claims were not dismissed under the forum-selection clause and remanded those claims to the North Carolina Superior Court (Mecklenburg County).

## Legal Principles

- Forum-selection clauses in international commercial contracts are generally enforced unless the resisting party makes a strong showing that enforcement would be unreasonable, unjust, the result of fraud or overreaching, or contrary to strong public policy.
- A venue clause stating a particular “court of venue” in a named location is treated as mandatory when its language indicates disputes must be brought in the designated forum rather than merely permitting suit there.
- Federal courts addressing a Rule 12(b)(3) venue challenge apply federal standards to the procedural question of dismissal for improper venue, while contractual language (including a choice-of-law provision) informs interpretation of the parties’ agreement.
- A forum-selection clause tied to an agreement may reach not only a breach-of-contract claim but also closely related statutory and tort claims that arise from the same performance, alleged nonperformance, or termination of the contract.
- In a removed case, a federal court may dismiss claims subject to an enforceable forum-selection clause and remand remaining state-law claims that are outside the clause’s scope to the state court where the action began.

## Conclusion

The Western District of North Carolina enforced the agreement’s mandatory German forum-selection clause and dismissed the contract-based and closely related tort and statutory claims for improper venue, while remanding the remaining open-account and account-stated claims to North Carolina state court because they were not treated as governed by the clause.


Gita Sports Limited v. SG Sensortechnik Gesellschaft mit beschrankter Haftung & Company Kommanditgesellschaft, 560 F. Supp. 2d 432 (2008)