Forum Selection Clauses in Texas
David Coale and Casey Kaplan
Wednesday, November 19, 2008
Basics
 Presumptively valid.
 Opposing party must show “that enforcement would
be unreasonable and unjust, or that the clause [is]
invalid for such reasons as fraud or overreaching.”
In re Automated Collection Technologies, 156
S.W.3d 557, 559 (Tex. 2004).
 Mandamus available.
1
In re Lyon Financial Services (Tex. 2008)
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Plaintiff: McAllen North Imaging.
Defendant: Lyon Financial Services.
Court: County Court at Law # 2, Hidalgo County.
Claim: Plaintiff could not make the payments on a
large MRI machine. Sued for usury, etc., before
Lyon sued to collect the debt.
2
Lyon – Try at “Fraud or Overreaching”
“To the extent that Defendant has asserted the forum selection
clauses and confessions of judgment, it was represented to me by
Defendant that the provision only applied to Schedule 1 of the
financing, not Schedule 3, which is the one sued upon. I signed
confession of judgment based upon that representation.”
In re Lyon Financial Services, 257 S.W.3d 228, 232
(Tex. 2008).
3
Lyon – “Fraud and Overreaching” Try Rejected
 Each schedule incorporated a master document.
 Master document had a merger clause.
 Forum selection clause in master document was in
CAPITAL LETTERS.
 Would the witness have signed the master
document absent the alleged misrepresentation?
4
Lyon – Try at “Unreasonableness”
“[Plaintiff] does not have the financial or logistical ability to pursue
its claims in Pennsylvania. Because Pennsylvania is so distant, if
this Court required [Plaintiff] to pursue its claim there, MNI will be
unable to pursue its rights – [Plaintiff] is a small, local business.”
Lyon, 257 S.W.3d at 233.
5
Lyon – Try at “Unreasonableness” Rejected
“If merely stating that financial and logistical difficulties will preclude
litigation in another state suffices to avoid a forum-selection clause,
the clauses are practically useless. Financial difficulties on behalf
of one party or the other are typically part of the reason litigation
begins.”
257 S.W.3d at 234.
6
Lyon – Second Try at “Unreasonableness”
“[Plaintiff] also claims that . . . Pennsylvania law does not allow a
corporation to maintain a cause of action for usury.”
257 S.W.3d at 234.
7
Lyon – Second Try at “Unreasonableness” Rejected
 Blurs choice-of-law with forum selection
 “[A]bsent a Texas statute requiring suit to be
brought in Texas, the existence of Texas statutory
law in an area did not establish such Texas public
policy as would negate a contractual forumselection provision.” 257 S.W.3d at 228 (quoting In
re Autonation, 228 S.W.3d 663 (Tex. 2007)
(noncompetes))
8
Lyon – Cautionary Note
 Local company sues in local court.
 Trial judge denied motion to dismiss without stating
reasons.
 Court of appeals denied mandamus relief.
 Texas Supreme Court “is not a court of errorcorrection.”
9
Sterling Chemicals – MOU
 “All documentation in connection with the Proposed
Transaction shall be governed by the internal laws of the
State of Delaware . . . The District of Delaware as being the
exclusive forum for and having exclusive jurisdiction over any
disputes.”
 “The parties shall negotiated in good faith to finalize the
definitive agreements . . which will supersede this MOU . . . .”
In re Sterling Chemicals, 261 S.W.3d 805, 808 (Tex. App.
Houston [14th Dist.] 2008)
10
Sterling Chemicals – later Confidentiality Agreement
“Each party hereby (a) irrevocably submits to the
non-exclusive personal jurisdiction of any Texas
state or federal court sitting in Harris County, Texas,
over any claim or dispute arising out of or relating to
this agreement . . . .”
261 S.W.3d at 809.
11
Sterling Chemicals - Holding
“[W]e cannot ignore an obvious inconsistency
between two patently-unambiguous jurisdiction
clauses.”
261 S.W.3d at 810 n.6.
12
ADM - Waiver
 Jeda Prescott sues ADM Investor Services and its
agent, Texas Trading, in Rains County.
13
ADM - Waiver
 Jeda Prescott sues ADM Investor Services and its
agent, Texas Trading, in Rains County.
 Texas Trading moves to transfer venue to Hopkins
County.
14
ADM - Waiver
 Jeda Prescott sues ADM Investor Services and its
agent, Texas Trading, in Rains County.
 Texas Trading moves to transfer venue to Hopkins
County.
 Court agrees and transfers claims against Texas
Trading to Hopkins County.
15
ADM - Waiver
 Jeda Prescott sues ADM Investor Services and its
agent, Texas Trading, in Rains County.
 Texas Trading moves to transfer venue to Hopkins
County.
 Court agrees and transfers claims against Texas
Trading to Hopkins County.
 ADM moves to dismiss claims against it in favor of
Illinois forum.
16
ADM – Waiver Holding
Over dissent: “The granting of ADM’s motion to
dismiss would have resulted in prejudice to Prescott
because she would be required to try two suits
involving the same facts and the same witnesses in
two separate states, Texas and Illinois.”
In re ADM Investor Services, 257 S.W.3d 822 (Tex.
App.—Tyler 2008).
17
Special bonus – right of removal waived?
“In the event that any dispute shall occur between the
parties arising out of or resulting from the construction,
interpretation, enforcement, or any other aspect of this
Agreement, the parties hereby agree to accept the
exclusive jurisdiction of any Court of competent
jurisdiction sitting in and for the County of Dallas.”
18
Special bonus – removal waived.
 “In the event that any dispute shall occur between the
parties arising out of or resulting from the construction,
interpretation, enforcement, or any other aspect of this
Agreement, the parties hereby agree to accept the
exclusive jurisdiction of any Court of competent
jurisdiction sitting in and for the County of Dallas.”
 “Venue in the federal system is stated in terms of judicial
districts, not counties.” Ondova Limited Co. v. Manila
Indus., Inc., 513 F. Supp. 2d 762 (N.D. Tex. 2007).
19
Forum Selection Clauses in Texas
David Coale and Casey Kaplan
Wednesday, November 19, 2008