SGIC Strategic Global Investment Capital Inc et al v. Burger King Europe GmbH

Filing 42

Order Accepting 36 Findings and Recommendation of the United States Magistrate Judge. The Court overrules 37 Plaintiffs' Objections in their entirety and accepts the 36 Findings, Conclusions, and Recommendation of the United States Magistrate Judge regarding Plaintiffs' Motion for Leave to Conduct Jurisdictional Discovery. (Ordered by Judge Jane J Boyle on 7/9/2015) (jrr)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
SGIC STRATEGIC GLOBAL
INVESTMENT CAPITAL, INC., et al.,
Plaintiffs,
v.
BURGER KING EUROPE GMBH,
Defendant.

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CIVIL ACTION NO. 3:14-CV-3300-B

ORDER OVERRULING PLAINTIFFS’ OBJECTIONS
AND ADOPTING THE FINDINGS AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
Before the Court is Plaintiffs’ Objections to the United States Magistrate Judge’s Findings,
Conclusions, and Recommendation on Plaintiffs’ Motion for Leave to Conduct Jurisdictional
Discovery. Doc. 37. As set forth below, Plaintiffs’ objections are OVERRULED in their entirety.
I.
BACKGROUND
A.

Factual Background1
Plaintiffs SGIC Strategic Global Investment Capital, Inc. (“SGIC”) and GRIL German

Restaurant Investment & Lending, Inc. (“GRIL”) are Delaware corporations with their principal
place of business in Dallas, Texas. Doc. 1, Compl. 1. Plaintiff SGIC is the sole shareholder of Plaintiff

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The Court incorporates in large part the factual background presented by the Magistrate Judge in
his Findings, Conclusions, and Recommendation on Plaintiffs’ Motion for Leave to Conduct Jurisdictional
Discovery, as the summary of Plaintiffs’ contentions, based on the facts alleged in their Complaint, is not the
basis for Plaintiffs’ Objections to the Magistrate Judge’s Findings, Conclusions, and Recommendation.
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GRIL. Id. Plaintiff Christian Groenke, a United States citizen and a resident of Texas, is the sole
shareholder and president of SGIC. Id. Defendant Burger King Europe GmbH (“BKE”), a Swiss
corporation with its principal place of business in Zug, Switzerland, is a franchisor of Burger King
restaurants in Germany and other European countries. Id. at 2; doc. 11, Def.’s Mot. to Dismiss 2.
Plaintiff Groenke owns and operates Burger King franchises in Germany through various
corporate entities under franchise agreements with Defendant. See Compl. 4–5. The franchise
agreements required the franchisees to pay certain franchise fees to BKE. Id. at 4. Originally, the
franchise fee payments for some of the franchises were backed by a letter of credit with a German
bank, but Plaintiff Groenke later substituted his personal guarantee for the letter of credit. Id. at 4–5.
According to Plaintiffs, in 2010, Defendant induced Plaintiff Groenke to purchase shares of
a corporation that owned nonperforming Burger King restaurants in Berlin in exchange for a
development agreement and the opportunity to purchase 91 Burger King restaurants in Germany.
Id. at 4–6. Plaintiffs allege that in 2013, Defendant terminated the development agreement, sold the
91 restaurants without giving Plaintiffs an opportunity to purchase them, and engaged in a course
of conduct designed to devalue Plaintiff Groenke’s performing restaurants. Id. at 6–8. After the
nonperforming restaurants were put into bankruptcy, Plaintiff Groenke tried to sell Plaintiff SGIC’s
interest in Plaintiff GRIL. Id. at 7–8. Plaintiffs assert that they had formed a Share Purchase
Agreement with a potential buyer—or alternatively, that they were in the process of entering into
such an agreement—but that Defendant threatened the buyer and stopped the sale. Id. at 10–15.
There are two relevant lawsuits in the Northern District of Texas that involve the underlying
parties. On April 17, 2014, Defendant BKE, as a plaintiff, filed an action for franchise fees against
Groenke, as a defendant, based on Groenke’s personal guarantee. See Burger King Europe GmbH v.
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Groenke, 3:14-CV-1417-G-BN (N.D. Tex. filed Apr. 17, 2014) (the “Guarantee Lawsuit”).
Subsequently, on September 12, 2014, Plaintiffs SGIC, GRIL, and Groenke filed this separate lawsuit
against Defendant BKE, alleging tortious interference with the Share Purchase Agreement (“SPA”)
related to SGIC’s attempt to sell its interest in GRIL to a third party. Compl. 10–15.
B.

Procedural Background
Defendant filed a Motion to Dismiss for Lack of Personal Jurisdiction and Forum Non

Conveniens (doc. 11) on January 5, 2015. On January 22, 2015, Plaintiffs filed a Motion for Leave
to Conduct Jurisdictional Discovery (doc. 19) so as to address the issues raised in Defendant’s
Motion to Dismiss. The Court referred Plaintiffs’ Motion for Leave to Conduct Jurisdictional
Discovery to United States Magistrate Judge David L. Horan (the “Magistrate Judge”) for hearing,
if necessary, and recommendation or determination. Doc. 22. On May 4, 2015, the Magistrate Judge
entered his Findings, Conclusions, and Recommendation (“Findings and Recommendation”), in
which he concluded that Plaintiffs failed to make a preliminary showing of either specific or general
jurisdiction over Defendant and that they further failed to show that jurisdictional discovery is
needed in this case. See doc. 36, Findings, Conclusions, and Recommendation (“F&R”).
Consequently, the Magistrate Judge recommended that Plaintiffs’ Motion for Leave to Conduct
Jurisdictional Discovery be denied. Id. at 9.
On May 18, 2015, Plaintiffs filed their Objections to the Magistrate Judge’s Findings,
Conclusions, and Recommendation. Doc. 37. Defendant submitted its Response to the Objections
(doc. 40) on June 3, 2015, and Plaintiffs filed their Reply (doc. 41) on June 17, 2015. The matter is
now ripe for the Court’s review.

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II.
LEGAL STANDARD
Rule 72(b) of the Federal Rules of Civil Procedure provides that within fourteen days after
being served a copy of the magistrate judge’s recommendation, a party may file specific written
objections. Fed. R. Civ. P. 72(b)(2); 28 U.S.C. § 636(b)(1). “The district must then ‘make a de novo
determination of those portions of the report or specified proposed findings or recommendations to
which objection is made’ before accepting, rejecting, or modifying those findings or
recommendations.” Habets v. Waste Mgmt., Inc., 363 F.3d 378, 381 (5th Cir. 2004) (quoting 28
U.S.C. § 636(b)(1)).2
III.
ANALYSIS
In his Findings and Recommendation, the Magistrate Judge recommended that Plaintiffs’
Motion for Leave to Conduct Jurisdictional Discovery (doc. 19) be denied based on his conclusion
(1) that Plaintiffs failed to make a preliminary showing of either specific or general jurisdiction over
Defendant and (2) that Plaintiffs further failed to show that jurisdictional discovery is needed in this
case. See F&R 4–9. In reaching his conclusions, the Magistrate Judge summarized the applicable
law—which the Court now adopts for the purpose of reviewing Plaintiffs’ objections—as follows:

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The parties disagree over the applicable standard guiding the Court’s review of the Magistrate
Judge’s Findings and Recommendation. See docs. 40, Resp. 4–5; 41, Reply 2. Because the Magistrate Judge
viewed this determination as dispositive and intended that any objection be governed by Rule 72(b), requiring
the district court to make a de novo determination, rather than by Rule 72(a), which provides for a “clearly
erroneous or contrary to law” standard, the Court applies the standard set forth in Rule 72(b). See F&R 10.
After applying the de novo standard, the Court ultimately overrules Plaintiffs’ objections. The Court notes
that the same result would be reached if the more deferential “clearly erroneous or contrary to law” standard
were applied.
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When seeking discovery on personal jurisdiction, a plaintiff must
make a “preliminary showing of jurisdiction” before being entitled to
such discovery. Fielding v. Hubert Burda Media, Inc., 415 F.3d 419,
429 (5th Cir. 2005). The decision to allow jurisdictional discovery is
within the district court’s discretion. See id. at 428. “[D]iscovery on
matters of personal jurisdiction need not be permitted unless the
motion to dismiss raises issues of fact. When the lack of personal
jurisdiction is clear, discovery would serve no purpose and should not
be permitted.” Kelly v. Syria Shell Petroleum Dev. B.V., 213 F.3d 841,
955 (5th Cir. 2000) (citations omitted). A plaintiff seeking discovery
on matters of personal jurisdiction is expected to identify discovery
needed, the facts expected to be obtained thereby, and how such
information would support personal jurisdiction. See Mello Hielo Ice,
Ltd. v. Ice Cold Vending, LLC, No. 4:11-CV-429-A, 2012 WL 104980,
at *7 (N.D. Tex. Jan. 11, 2012) (citing Kelly, 213 F.3d at 855). A
court is entitled to deny leave to conduct jurisdictional discovery
where the movant fails to specify what facts it believes discovery
would uncover and how those facts would support personal
jurisdiction. See id. [. . .]
Id. at 3–4.
Plaintiffs raise two objections to the Findings and Recommendation. First, they object to the
Magistrate Judge’s conclusion that Plaintiffs failed to make a preliminary showing of specific
jurisdiction over Defendant. Doc. 37, Objections 3. Second, they object to the conclusion that they
failed to show their entitlement to jurisdictional discovery. Id. The Court considers the parties’
respective arguments as to these objections, in turn, below.
A.

Specific Jurisdiction
Plaintiffs object to the Magistrate Judge’s conclusion that they failed to make a preliminary

showing of specific jurisdiction over Defendant. Objections 3. Plaintiffs’ basis for asserting that they
have made such a preliminary showing is their claim that Defendant purposefully availed itself of the
Court’s jurisdiction by filing the Guarantee Lawsuit.
As the Magistrate Judge correctly indicated when considering this matter, “[v]oluntarily filing
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a lawsuit may constitute purposeful availment and subject a party to personal jurisdiction in another
lawsuit when the lawsuits arise from the same general transaction.” F&R 4 (citing Int’l Transactions,
Ltd. v. Embotelladora Agral Regionmontana S.A. de C.V., 277 F. Supp. 2d 654, 667–68 (N.D. Tex.
2002)).
In addressing Plaintiffs’ argument that Defendant purposefully availed itself of the Court’s
jurisdiction by filing the Guarantee Lawsuit, the Magistrate Judge concluded that Defendant’s filing
of the Guarantee Lawsuit does not constitute purposeful availment and is insufficient to subject it
to personal jurisdiction, because the two lawsuits do not arise from the same general transaction. Id.
The Magistrate Judge determined that Plaintiffs failed to show that the two lawsuits were related,
noting that “the Guarantee Lawsuit follows Plaintiffs’ attempts to increase their ownership interests
in Defendant’s restaurants while the underlying suit follows Plaintiffs’ attempt to sell their interests
in Defendant’s restaurants.” Id. at 5. He further stated that Plaintiffs in the present case “are suing
because Defendant allegedly interfered with their attempt to sell their interest in certain restaurants
to a third party,” which is unrelated to Defendant BKE’s pursuit of franchise fees from Plaintiff
Groenke—the basis of the Guarantee Lawsuit. Id. In addition, the Magistrate Judge observed that
“the restaurants at issue in the Guarantee Lawsuit and the restaurants involved in the SPA
[underlying the present lawsuit] do not overlap, and two of the three Plaintiffs—SGIC and
GRIL—are not parties in the Guarantee Lawsuit.” Id.
In their Objections to these conclusions, Plaintiffs reiterate that the Guarantee Lawsuit and
the present lawsuit arise from the “same general transaction” and proceed to recount the details of
the parties’ dealings. Objections 4–13. In sum, Plaintiffs aver that there is a causal connection
between the two lawsuits. Id. at 12. They indicate that “Defendant induced [Plaintiff] Groenke’s
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company to purchase underperforming Burger King Restaurants in the Berlin area by promising to
deliver more profitable restaurants across Germany later. After unloading its problems on [Plaintiff]
Groenke’s companies . . . , Defendant failed to follow through with its commitments.” Id. at 5.
Plaintiffs explain that Groenke “would not have personally guaranteed franchisee fees owed by
underperforming restaurants if he had known that the promises and representations made by
[Defendant] BKE representatives would not be fulfilled.” Id. at 6. Plaintiffs then admit that “[i]t is
the obligations under the guarantee agreement for the [Burger King] Berlin restaurants that form[]
the basis for the Guarantee Action.” Id. at 6–7.
This, however, is not the transaction that forms the basis of the present lawsuit. As
Defendant indicates (and as Plaintiffs do not dispute), the present action is not based on Defendant’s
alleged breach of its promises regarding Plaintiffs’ purchase and guarantee agreements related to the
Burger King restaurants mentioned above. Doc. 40, Resp. 6. Instead, the present lawsuit is based on
Defendant’s alleged tortious interference with the sale of Plaintiff GRIL to a third party. Id.;
Objections 11. Plaintiffs’ detailed description of the events leading up to the respective lawsuits does
not alter the fact that each lawsuit is based on distinct and separate transactions.
Accordingly, the Court OVERRULES Plaintiffs’ objection to the Magistrate Judge’s
conclusion that the Guarantee Lawsuit and the present lawsuit do not arise from the same general
transaction and therefore cannot be used to show that Defendant purposeful availed itself of this
Court’s jurisdiction by filing the Guarantee Lawsuit.
B.

The Need for Jurisdictional Discovery
Plaintiffs next object to the Magistrate Judge’s conclusion that they failed to show that

jurisdictional discovery is needed in the present case. Objections 13.
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The Magistrate Judge correctly explained that “jurisdictional discovery need not be permitted
unless the motion to dismiss raises issues of fact.” F&R 8 (citing Kelly, 213 F.3d at 855). In evaluating
Plaintiffs’ Motion for Leave to Conduct Jurisdictional Discovery, he noted that Plaintiffs do not
dispute any facts asserted by Defendant in its Motion to Dismiss, but that they instead dispute “the
significance of facts for determining jurisdiction.” Id. He acknowledged Plaintiffs’ argument that
Defendant knew Plaintiffs were in Texas when it communicated with them, but he explained that
“Defendant does not deny that Plaintiffs operate in Texas and does not take a position on Plaintiffs’
location when they received Defendant’s communications.” Id. Based on the foregoing, the
Magistrate Judge concluded that “Plaintiffs have shown no disputed issue of fact that requires
jurisdictional discovery.” Id. He noted that “it appears the Court will accept Plaintiffs’ allegations in
its pleading as true and construe all factual conflicts in favor of Plaintiff[s],” thus further emphasizing
that Plaintiffs have failed to point to factual disputes requiring jurisdictional discovery. Id. at 8–9.
Additionally, to the extent Plaintiffs asserted that a factual dispute exists as to Defendant’s business
presence in Texas, the Magistrate Judge determined that “Plaintiffs have not sufficiently identified
any facts that they expect to obtain through discovery and how that information would support
personal jurisdiction.” Id. at 9. Thus, this aspect of Plaintiffs’ motion appeared to be no more than
a “fishing expedition” into jurisdictional facts, which a court need not allow. Id. (citing Bell Helicopter
Textron, Inc. v. Am. Eurocopter, LLC, 729 F. Supp. 2d 789, 797–98 (N.D. Tex. 2010)).
It is unclear what specific objections Plaintiffs raise to these conclusions; rather than pointing
to errors in the Magistrate Judge’s review of their Motion, Plaintiffs merely reiterate arguments to
show the need for jurisdictional discovery based on Defendant’s allegedly incorrect statement that
all of its communications occurred in Switzerland or Germany. Objections 13–14. They further argue
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that there are contradictory statements regarding the location of Defendant’s business operations.
Id. at 14.
After reviewing Plaintiffs’ objections, the Court concludes that they fail to identify issues of
fact in Defendant’s Motion to Dismiss whose resolution would be relevant to the question of personal
jurisdiction. Plaintiffs contend that there are disputes regarding the location of Defendant’s business
operations, but as Defendant indicates in its Response, Plaintiffs do not allege that Defendant had
a presence in Texas. Resp. 8. Thus, Plaintiffs’ objections offer speculations without indicating what
facts Plaintiffs expect to obtain and how such facts would support personal jurisdiction over
Defendant in Texas. See Freeman v. U.S., 556 F.3d 326, 342 (5th Cir. 2009). Accordingly, the Court
OVERRULES Plaintiffs’ second objection, as it fails to show that jurisdictional discovery is
necessary.
IV.
CONCLUSION
For the reasons stated above, the Court OVERRULES Plaintiffs’ Objections (doc. 37) in
their entirety and ACCEPTS the Findings, Conclusions, and Recommendation of the United States
Magistrate Judge (doc. 36) regarding Plaintiffs’ Motion for Leave to Conduct Jurisdictional
Discovery.
SO ORDERED.
SIGNED: July 9, 2015.

_________________________________
JANE J. BOYLE
UNITED STATES DISTRICT JUDGE
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