Energy Claims Ltd. v. Catalyst Investment Group Ltd.
2014 UT 13
| Utah | 2014Background
- Energy Claims Ltd. (ECL), a BVI company, sued as assignee of Utah corporation Eneco’s claims against former directors and foreign defendants (Catalyst, ARM, Timothy Roberts, and several U.S. director-defendants) in Utah state court.
- Dispute arises from Catalyst’s engagement to raise funds for Eneco, alleged false assurances and a resulting conversion of creditor debt to equity, board reconstitution, and transactions (including a Subscription Agreement) that ECL alleges were fraudulent or self‑dealing.
- The Subscription Agreement (and earlier Catalyst Agreement) contained broad English choice-of-law and exclusive-jurisdiction clauses.
- The Utah district court dismissed claims against Catalyst, Roberts, and the director-defendants on forum non conveniens grounds and dismissed claims against ARM for improper venue based on the forum selection clause. The Utah Court of Appeals affirmed.
- The Utah Supreme Court granted certiorari, rejected a proposed threshold choice-of-law rule, reversed the Court of Appeals’ dismissals, and remanded for reconsideration consistent with its guidance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Utah should adopt a threshold choice-of-law inquiry before forum non conveniens (i.e., bar dismissal if local law applies) | ECL: courts should determine applicable law first and, if Utah law applies, bar dismissal. | Defendants: such a rigid rule is improper; forum non conveniens must remain flexible. | Rejected: court declines the threshold test as incompatible with Piper and the need for flexibility. |
| Whether dismissal for forum non conveniens of claims against Catalyst, Roberts, and the Director Defendants was proper | ECL: its choice of Utah is entitled to deference because it sues as assignee of a Utah corporation with bona fide connections and to obtain jurisdiction over all defendants; the courts failed to weigh plaintiff’s burden to refile in England. | Defendants: England is the more appropriate forum given parties, witnesses, contracts, and forum clauses; less deference to foreign plaintiff. | Reversed: court held the appeals court undervalued ECL’s bona fide Utah connection and failed to properly weigh ECL’s burden of litigating in England; remand for rebalancing under Summa factors. |
| Whether the Subscription Agreement’s forum selection clause covers ECL’s tort claims against ARM | ECL: tort claims fall outside a contractually confined forum clause or clause is unenforceable due to conspiracy/fraud. | ARM: clause is broad (“any dispute…related to”) and encompasses torts related to the contract; enforceable. | Held: scope is broad enough to include the tort claims, but enforceability must be decided first. |
| Standard and procedure for challenging enforceability of a forum selection clause on grounds the contract was procured by fraud/ conspiracy/overreaching | ECL: alleging that the contract was a product of civil conspiracy should render the clause unenforceable. | ARM: plaintiff must specifically plead/ prove fraud as to the forum clause itself; otherwise clause stands until merits resolved. | Court adopts minority approach: a plaintiff may challenge clause by alleging fraud/overreaching that voids the contract, but must plead fraud with particularity under rule 9(b); district court may hold evidentiary hearing before including clause in forum non conveniens analysis. |
Key Cases Cited
- Piper Aircraft Co. v. Reyno, 454 U.S. 235 (Sup. Ct.) (possibility of unfavorable change in law alone should not bar forum non conveniens dismissal; retain flexibility)
- M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (Sup. Ct.) (forum selection clauses presumptively valid; enforce unless shown unreasonable or invalid for reasons such as fraud)
- Summa Corp. v. Lancer Industries, Inc., 559 P.2d 544 (Utah 1977) (articulated Utah’s forum non conveniens convenience factors)
- Iragorri v. United Techs. Corp., 274 F.3d 65 (2d Cir.) (level of deference to plaintiff’s forum choice depends on bona fide connection and legitimate reasons)
- Kish v. Wright, 562 P.2d 625 (Utah 1977) (forum non conveniens prerequisites and standards)