Grecon Dimter, Incorporated v. Horner Flooring Company, Incorporated

UNPUBLISHED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Affirmed by unpublished per curiam opinion.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Unpublished opinions are not binding precedent in this circuit.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).

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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

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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

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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

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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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