NEW ORLEANS -- A Fifth Circuit panel recently affirmed the dismissal of an investor suit against Burger King Europe GmbH on the grounds that the district court was not best suited to hear the case. However, the case was sent back to the district court because it refused the investor’s request to amend its complaint without an explanation.

The panel affirmed the Texas district court’s ruling to dismiss SGCI Strategic Global Investment Capital’s suit against Burger King Europe, but vacated its order that denied SGIC’s motion to amend as moot and remanded the case go back to district court. SGIC filed a suit because it alleged Burger King Europe stopped the proposed sale of several franchised restaurants in Germany to a third party by threatening the buyer.

 According to the panel, since this was the plaintiff’s first time seeking amendment of the complaint and the amendment was filed by the deadline, the district court abused its discretion when it denied the motion without explaining why.

“We affirm the district court’s judgment dismissing plaintiff-appellants’ claims against defendant-appellee on grounds of forum non conveniens,” Chief Judge Carl E. Stewart said, according to court documents. “(However) we vacate the district court’s judgment denying plaintiffs-appellants’ motion for leave to amend and remand further proceedings.”

SGIC, its sole shareholder Christian Groenke and SGIC subsidiary German Restaurant Investment & Lending (GRIL) Inc. lost its case July 2015. U.S. District Judge Jane Boyle ruled the plaintiffs hadn’t mentioned anything to change a magistrate judge’s finding that they failed to show preliminary jurisdiction over Burger King Europe, which isn’t connected to Texas in any way.

The plaintiffs also were unable to produce any facts that could come to light during discovery to back up their jurisdictional claims, Boyle said in her ruling that adopted the findings of U.S. Magistrate Judge David L. Horan in May 2015.

Magistrate Judge Horan recommended denying the plaintiffs' motion for leave to conduct jurisdictional discovery. Horan found that the court had no jurisdiction because Burger King Europe is a Swiss corporation with its principal place of business in Switzerland and doesn’t conduct business in Texas or have any physical presence in the state. Horan added BKE franchises Burger King restaurants in Germany and other European countries, but not in the United States.

Boyle agreed with Horan’s decision to reject the plaintiffs’ attempt to tie two separate suits together that spanned over different transactions in an effort to establish a Texas jurisdiction.

 The entire dispute started when Groenke and SGIC tried to sell their interest in GRIL, according to the Fifth Circuit panel’s recent ruling. The plaintiffs claimed they let Burger King Europe know of their intention to sell GRIL and then BKE offered to help them find potential buyers. SGIC entered a term sheet with potential buyers in December 2013 while negotiations to sell GRIL progressed. On April 23, 2014, SGIC and Shokoip Ltd. entered into a share purchase agreement, according to the panel. However in that same timeframe, BKE reached out to GRIL and the prospective buyers, and interfered with the impending deal, the panel said.

According to the panel, BKE allegedly stated that relevant franchise agreements required its approval for the sale of GRIL, BKE opposed the sale and it was within BKE’s rights to terminate the franchise agreements if the share purchase agreement proceeded.

“BKE allegedly stated, in essence, that (1) the relevant franchise agreements required BKE’s approval for the sale of GRIL, (2) BKE opposed the sale, and (3) BKE may unilaterally terminate the franchise agreements if the share purchase agreement proceeded,” the panel said. 

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