Equity Trust Company v. Jones
339 Ga. App. 11
| Ga. Ct. App. | 2016Background
- Ronald G. Jones, II sued multiple defendants (including Equity Trust Company) alleging he was fraudulently induced to invest $60,000 in sham investments.
- Equity moved to dismiss for improper venue relying on forum-selection clauses in two contracts sending disputes to Lorain County, Ohio.
- Jones alleged that Eddie L. Long and New Birth exercised undue influence and committed fraud that induced him to enter the transactions and sign the contracts.
- The trial court denied Equity’s motion, reasoning Jones’ allegations of undue influence by Long and New Birth were sufficient to defeat enforcement of the forum clauses; the court did not determine whether the clauses themselves were induced by fraud or overreaching by Equity.
- The Court of Appeals vacated that denial and remanded, holding the trial court relied on an erroneous legal theory and must decide whether the forum clauses were induced by fraud/overreaching specifically.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether forum-selection clauses are unenforceable because of alleged fraud/undue influence | Jones: general fraud/undue influence by Long/New Birth invalidates forum clauses and defeats dismissal | Equity: clauses are prima facie valid; plaintiff must show clause itself was induced by fraud or coercion by the party seeking to avoid the clause | Vacated trial court order; court held plaintiff must specifically allege/show the clause was included due to fraud/overreaching (not just general fraud as to the transaction) before clause is invalidated |
| Proper legal standard for evaluating challenges to forum-selection clauses | Jones: general allegations suffice to avoid enforcement | Equity: apply Bremen standard; enforce clauses unless enforcement is unreasonable or clause was induced by fraud/coercion | Court applied federal precedents: forum clauses are severable and attacks must target clause inclusion; trial court erred by not applying that test |
| Procedural effect of venue challenge (what evidence and who decides) | Jones: venue denial appropriate based on complaint allegations | Equity: venue decision may be decided on evidence; trial court should consider evidence under OCGA § 9-11-12(d) | Remanded for further proceedings; reminder that improper venue is a matter in abatement and trial court may hear affidavits, testimony and make factual findings before trial |
| Whether the trial court could refuse further evidentiary hearing | Jones: relied on its denial without findings as to clause inducement | Equity: trial court should examine whether clause was induced by fraud by the party who inserted it | Court: trial court must apply correct legal standard and may (and should) receive evidence under OCGA § 9-11-12(d); determination for the trial court, not jury |
Key Cases Cited
- The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (forum-selection clauses prima facie valid)
- Scherk v. Alberto-Culver Co., 417 U.S. 506 (forum-selection clause unenforceable if included by fraud or coercion)
- Rucker v. Oasis Legal Finance, 632 F.3d 1231 (forum clause severable; attack must target inclusion of clause)
- Lipcon v. Underwriters at Lloyd’s, London, 148 F.3d 1285 (requirement that plaintiff allege clause was included due to fraud to invalidate clause)
- Preferred Capital v. Assocs. in Urology, 453 F.3d 718 (general fraud claim against contract does not void forum-selection clause absent specific allegation about clause inducement)
- Houseboat Store v. Chris-Craft Corp., 302 Ga. App. 795 (Georgia adopts Bremen standard for enforcing forum-selection clauses)