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Selectsun GMBH v. Porter, Inc.

United States District Court, N.D. Indiana, Fort Wayne Division

August 31, 2018




         Some boat sales lead to smooth sailing; others result in years-long litigation. This case falls into the latter category. On January 23, 2014, SelectSun filed a Complaint[1] [ECF No. 1] against Porter, Inc., in the United States District Court for the Southern District of New York. On February 19, 2014, SelectSun filed an Amended Complaint [ECF No. 3] that added International Nautic LLC as a defendant. On July 18, 2014, the case was transferred to the United States District Court for the Northern District of Indiana pursuant to 28 U.S.C. § 1404(a). (See ECF Nos. 47, 48.) No representative from International Nautic ever sat for a deposition, and while the entity initially filed an answer and motion to dismiss it appeared to abandon the litigation in late 2014. Accordingly, the Court struck International Nautic's answer and motion to dismiss, and indicated on March 31, 2016, that it would enter a default judgement against International Nautic as a sanction under Federal Rules of Civil Procedure 16(f)(1) and 37(b)(2)(A)(vi). (See ECF Nos. 130, 170.) On May 1, 2017, the litigation was reassigned to the Honorable Chief Judge Theresa L. Springmann. The matter is now before the Court after a four-day bench trial. (See ECF Nos. 222-25.)

         FINDINGS OF FACT[2]

         A. General Background

         1. The Parties and Non-Parties

         Before the Court delves into the specific details produced at trial, it will address some preliminary matters to provide context for the factual background. There are four main entities involved in this dispute. SelectSun is the end-purchaser of a luxury boat (“the Boat”). As will be described later, Erich Schwaiger operates SelectSun. He purchased the Boat through different entities from a German boat dealer, Poker-Run-Boats, which is not a party to this litigation. One Alfred Zurhausen operated Poker-Run-Boats. He worked with an entity based in Jupiter, Florida, known as International Nautic, to have the Boat delivered to Germany. International Nautic was responsible for directly ordering and purchasing the Boat from Porter, a boat manufacturer. Porter builds boats under the Formula and Thunderbird brands and tradenames. SelectSun argues that, in reality, Poker-Run-Boats, International Nautic, and Porter, were all one in the same at all relevant times.

         2. European Union Certification

         This controversy revolves around the fact that the Boat cannot be legally operated within the waters of the European Union as presently constructed. There are two pieces of documentation that were discussed frequently at trial. Both are produced by the International Marine Certification Institute (“IMCI”), an independent organization based in Belgium. If a boat manufacturer wants to market its products in the European market, then the manufacturer must work with IMCI to obtain proper certification for its products. One piece of documentation is the CE-certificate. IMCI provides a CE-certificate for standard models of boats that it has deemed to be in compliance with EU standards. Once a manufacturer receives a CE-certificate for a standard model, that model is considered CE-certifiable. But not every specific variant of that CE-certifiable model may be in compliance with EU standards-for example, certain custom features on a CE-certifiable model may not be in compliance with EU standards. Hence, a boat needs an individual Declaration of Conformity to show that it is in compliance with EU standards.

         After a boat model is deemed CE-certifiable, IMCI provides the manufacturer of that model with Declarations of Conformity. The manufacturer then completes the document with specific information about each boat bound for the European market, such as its hull number (an identifier), and engine and exhaust types. Together, these documents show that (1) a particular boat model is certifiable for use in EU waters, and (2) a specific boat of that model is in compliance with EU standards.

         3. Structure of a Boat

         The experts and other trial witnesses described the structure of the Boat for the Court. The “shell” of a boat is known as the hull, and is reinforced with stringers that form a stringer system. The stringer system is then attached to four or five transfer bulkheads. This all forms the grid, which is responsible for absorbing and distributing forces placed on a boat as it displaces water. The cockpit sole and other portions of the deck are glued on top of the grid with a very strong industrial adhesive.

         The hull and the grid are structural pieces of the boat. If either fails, the boat will take on water or sink. There are other parts of a boat that are non-structural components. These non-structural components include cabinetry, sound systems, tables, beds, and a thin film on the boat known as a gel coat. Gel coat is pigmented (not clear) polyester resin, usually at least two millimeters thick, and is placed over the paint of a boat by hand. Gel coat does not have the same structural integrity as the hull, in part due to its thinness, and can crack with frequent temperature fluctuations. Gel coat can break when there is structural damage below it, but can also crack on its own without structural damage to the hull or grid.

         B. The Boat Purchase

         Erich Schwaiger[3] is a German businessman based in Munich. He is an attorney by training, but has spent the last twenty-five years as a real estate developer. Since 1998, he has developed over 2, 500 apartments in Munich. While his business interests primarily lie in real estate, he also has side businesses. One of these side businesses is horse breeding, and is based in France. Another was a short-lived tanning salon based in Munich. Schwaiger uses an entity named Galileo SAS (“Galileo”) to operate the horse breeding business, and utilized another entity called SelectSun GmbH (“SelectSun”) to operate the tanning salon. Schwaiger has nearly 100 entities through which he operates his various business interests.

         Schwaiger has long been interested in boats. His father was an active sailor, and therefore he was involved in various sailing activities growing up. He earned a license to navigate a boat in open seas, went on a 400-mile sailing excursion in the Caribbean with a crew, and sailed in regattas in Germany and elsewhere in Europe in his youth. Based on these experiences from his childhood and adolescence, he has always had the desire to own a boat. In September 2012, he decided to purchase one, and went to a trade show known as Interboot in Friedrichshafen to find a worthy vessel.

         At Interboot, he came across the Boat: a Formula 400 FX 8.[4] Schwaiger saw the Boat at a Formula booth that was manned by one Alfred Zurhausen. Schwaiger discussed his boat preferences with Zurhausen, and found that the Boat met all his major wishes: Schwaiger wanted a boat with sleeping quarters, a generator, and some deck space for seating. He also wanted a boat with a “sporty” look, meaning that the boat looked “aggressive, ” and provided the latest technology and state of the art appearance and performance. The Boat was also a proper length at forty feet long. Schwaiger left with two brochures that he received from Zurhausen. (English Language Brochure, Pl. Ex. 2; German Language Brochure, Pl. Ex. 5.) The English Language Brochure includes the following address (the “Decatur address”):

Thunderbird Products 2200 W. Monroe Street P.O. Box 1003 Decatur, IN 46733-5003

(Pl. Ex. 2 SelectSun 0000027.) The English Language Brochure also contains a Formula tradename in all capital letters above the address, and a Thunderbird logo next to the address. (Id.) The English Language Brochure also lists two phone numbers: (260) 724-9111 and 1-800-736-7685. (Id.)

         The German Language Brochure contains the same Thunderbird logo, Formula tradename, and Decatur address as the English Language Brochure. (Pl. Ex. 5 SelectSun 0000819.) It also contains a second address (the “Jupiter address”):

FORMULA - Thunderbird Products 141 Fisherman's Way Jupiter, Florida 33477

(Id.) The German Language Brochure has a copyright notice provided by “Formula Thunderbird Products, USA, ” but does not list any phone numbers. Both brochures indicate that Formula boats could be CE-certified, which is required for legal use in the Europe Union. At that time, Schwaiger leased a boat dock in Slovenia, which at all relevant times was a member of the European Union, and desired to use the Boat in European waters.

         Schwaiger is a sophisticated businessman, and he tries to get the best possible price on any purchase. He therefore sought to buy the Boat directly from the manufacturer, and called the phone number on the back of the English Language Brochure in an attempt to do so. Schwaiger testified that when he called a number on the English Language Brochure, he was directed to the sales or marketing department and spoke to a woman there. When he informed her of his intent to purchase the Boat directly from the manufacturer to receive the best possible price for delivery to Germany, she informed him that a German representative, Zurhausen, was authorized to provide the best possible price on the Boat. From this conversation, Schwaiger testified that he thought that by contacting Zurhausen he would be purchasing the boat directly from the manufacturer. So he called up Zurhausen, and asked him to visit Munich so that they could discuss the purchase of the Boat.

         On September 29, 2012, Zurhausen visited Schwaiger in Germany. There, he presented Schwaiger with an offer for a Formula 420 FX 8 with several options and pricing. (See Pl. Exs. 7, 8.) The offer was valid until October 4, 2012, had a Thunderbird logo and the Formula tradename, and also listed Poker-Run-Boats at the top of the document.[5] Poker-Run-Boats was a boat dealer based in Germany, owned and operated by Zurhausen. The offer set out terms for, among other things, a custom switchable exhaust system and the installment payments for the Boat. Schwaiger and Zurhausen then finalized the terms of the sale on October 1, 2012, by signing a contract for the purchase of the Boat (“October 1 Contract”). (Galileo Poker-Run-Boats Contract (German), Pl. Ex. 9; Galileo Poker-Run-Boats Contract (English), Pl. Ex. 10.) The contract lists Galileo, represented by Schwaiger, as the purchaser, and Poker-Run-Boats, represented by Zurhausen, as the seller. Some relevant contract terms are provided below:

• German substantive and formal law governs the execution and interpretation of the contract, with a venue for disputes in Munich;
• At any time, Schwaiger may substitute another entity for Galileo as the purchaser;
• The Boat will be paid for in three installments ($250, 000; $340, 000; and $250, 000), and the final installment will be paid to the seller of the boat;
• Poker-Run-Boats declares that the manufacturer grants a 12-month extension on the warranty on the motors and drives, a 24-month manufacturer's warranty on all other components, and a 120-month manufacturer's warranty on the boat's hull;
• The boat will include a CE-certificate;
• The Boat will be delivered to Portoroz, Slovenia, no later than April 2013; and
• “In cooperation with the manufacturer and the importer, this boat will be used outside of the main season for two dry industry trade shows, namely to [sic] boat tradeshows in Düsseldorf, and one wet industry trade show, namely in Miami.”

(Pl. Ex. 10.) A boat lift-manufactured by some other entity than Porter-valued at $68, 816.85 was also apparently included in the deal on October 1, 2012. (See Pl. Ex. 12.) Approximately two and a half months later on December 19, 2012, Schwaiger substituted SelectSun as the purchasing entity for Galileo. (See SelectSun Poker-Run-Boats Contract (German), Pl. Ex. 18; SelectSun Poker-Run-Boats Contract (English), Pl. Ex. 19.) The contract otherwise remained the same.

         After Zurhausen and Schwaiger signed the October 1 Contract, Schwaiger prepared to make payments in installments as required by the contract. Schwaiger, however, wanted confirmation that any funds that he transferred were going to the correct source. Zurhausen provided him with four documents, marked in evidence as Plaintiff's Exhibits 14, 15, 16, and 17. None are dated. Plaintiff's Exhibit 14 is a document from Wayne Porter, Vice President of Sales, which acknowledges an entity called International Nautic as its Director of International Sales and an official representative of Formula Boats. The document also contains the Thunderbird logo, the Formula tradename in all capital letters, and the same Decatur address and phone number as the English Language Brochure. Plaintiff's Exhibit 15 appears to be an email from Leila Burger, [6] although it lacks a date and recipient email address. The email includes wire transfer instructions for International Nautic, and indicates that International Nautic is the Director of International Sales for Formula Boats. The email signature appears to include a “Formula International Sales” tradename. Also included is Leila Burger's business card. The business card contains the Thunderbird logo, Thunderbird tradename, Formula tradename in all capital letters, the Formula Boats website, the Decatur address, and the Jupiter address. The business card lists Leila Burger's email address as The email appears notarized as of October 12, 2012.

         Plaintiff's Exhibit 16 lists the procedure for international wire transfers for the sale. The document contains the Thunderbird logo and Formula tradename in all capital letters. It also instructs the paying party to deposit funds in a Deutsche Bank account in New York for further credit to International Nautic at the Jupiter address. Plaintiff's Exhibit 17 contains the same relevant information. All four documents were provided to Schwaiger by Zurhausen.

         On March 19, 2013, about six months after Schwaiger and Zurhausen signed the October 1 Contract, Leila Burger notified Zurhausen that the Boat had been paid in full. (See Pl. Ex. 26.) The confirmation includes the International Nautic tradename, a “Formula International” tradename, and the Jupiter address. The confirmation also lists Poker-Run-Boats as the dealer for the boat. Schwaiger testified that he later received the confirmation from Zurhausen via email, but did not specify precisely when he received it, or why.

         C. Porter Employees

         While Schwaiger made installment payments, other parties went about their jobs to ensure the Boat would be built and delivered on time. These other parties form a web of entities, employees, and alleged agents that provide the main basis for this dispute. Porter, one of the defendants in this litigation, built the Boat. Porter does business under multiple tradenames, including Formula Boats and Thunderbird. SelectSun alleged that Porter, Poker-Run-Boats, and International Nautic are parts of the same whole. Although there is no formal entity known as “Formula International” or the “Formula Group, ” Porter employees often say that they work for Formula or Thunderbird since these tradenames are recognizable in the marketplace, whereas Porter is not. The following Porter employees testified over the course of the bench trial, and provided details regarding what occurred after Zurhausen and Schwaiger signed a contract for the Boat:

• Wayne Porter, [7] Vice President of Sales and co-owner of Porter;
• Lori Snyder, an Internal Sales Coordinator;
• Jason Brune, a Project Engineer;
• Scott Smith, a Marketing Manager; and
• Mike Boyd, Director of Product Support and Consumer Affairs.

         1. The Sales Team Structure at Porter

         At the bench trial, Wayne Porter described the Porter sales team structure as it existed in 2012. He was the VP of Sales, and sat atop the sales team structure. Under him were three regional sales managers who handled the domestic market in three different geographical areas (Northeast, Southeast, and Midwest). The regional sales managers were Porter employees.

         At that time, Porter's international sales were handled by Peter Burger and Leila Burger through their own entity, International Nautic. Wayne Porter provided Leila Burger with the business card that Zurhausen later passed along to Schwaiger. (See Pl. Ex. 15.) Zurhausen, through Poker-Run-Boats, was also at that time the official German dealer for Porter. The business card lists Leila Burger as an International Sales Coordinator, seemingly for Formula/Thunderbird Products, but Wayne Porter denied that Leila Burger held an official role with Porter. Wayne Porter testified that at that time International Nautic, and specifically Peter Burger, served as an authorized Director of International Sales for Porter. He provided Peter Burger with a document, Plaintiffs Exhibit 14, which acknowledged International Nautic as the Director of International Sales for Formula Boats. He did so because Peter Burger asked him to provide it so that Peter Burger could secure space for booths at a ...

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