638 S.W.3d 821
Tex. App.2021Background
- Floyd and Xia formed Garth Rollbrook, LLC (GR) in 2016 and executed an operating agreement naming Floyd manager and providing each 50% ownership.
- The operating agreement contained a "Jurisdiction and Venue/Equitable Remedies" clause requiring disputes arising from the agreement be filed exclusively in California state courts or federal courts located in Orange or Los Angeles County and consenting to personal and exclusive jurisdiction there.
- Xia sued Floyd and GR in Harris County in 2018 alleging fiduciary breaches and related claims; that proceeding was later sent to arbitration per Floyd's brief.
- In September 2020 Xia filed a new suit in Denton County asserting individual and derivative claims and seeking receivership and injunctive relief; she alleged Denton venue was proper because GR's principal place of business was in Denton County.
- Floyd moved to dismiss the Denton suit under the operating agreement's forum-selection clause and to compel arbitration; the trial court granted dismissal, awarded fees to Floyd, and dissolved the TRO.
- On appeal the court held the clause was a forum-selection clause (not a venue-selection clause), applied to Xia's individual and derivative claims, Floyd met his burden to present the agreement, Xia waived evidentiary objections, and affirmed the dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Characterization of clause: forum-selection vs. venue-selection | Clause is venue-selection; defendant waived venue defenses by failing to file a motion to transfer | Clause is a forum-selection clause enforceable by motion to dismiss | Clause is a forum-selection clause; enforceable by dismissal motion |
| Sufficiency of evidence of agreement before trial court | Floyd failed to properly verify or introduce the signed operating agreement at the hearing, so dismissal was improper | Agreement was attached to Floyd's motion; Xia did not dispute signing and raised fraud in another suit; trial court considered the motion | Attachments to the motion were properly before the court; Xia waived objections by not objecting at hearing; dismissal appropriate |
| Applicability to derivative claims and to GR | Forum clause binds only signatory members individually, not GR or derivative claims | Clause expressly binds GR and Members and applies to "any dispute or controversy" arising out of the agreement | Clause by its plain terms binds GR and Members and covers derivative claims; applies to Xia's derivative claims |
| Waiver / procedural fairness (timing, fees, other defenses) | Floyd waived venue challenge by seeking other relief first; trial court violated due process by ruling same day; fees improperly assessed | Motion substance was to enforce forum clause; timing and fee award within court's discretion | Court did not address all procedural points on appeal; dismissal and fee award were not shown to be abuse of discretion in this record |
Key Cases Cited
- In re Brookshire Grocery Co., 250 S.W.3d 66 (Tex. 2008) (distinguishes enforcement mechanism for forum-selection clauses)
- M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) (forum-selection clauses are presumptively valid and enforceable)
- Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777 (Tex. 2005) (forum-selection clauses and their enforceability)
- Int'l Software Sys., Inc. v. Amplicon, Inc., 77 F.3d 112 (5th Cir. 1996) (treating a clause naming a particular county's court as a forum-selection clause)
- In re OSG Ship Mgmt., Inc., 514 S.W.3d 331 (Tex. App.—Houston [14th Dist.] 2016) (forum-selection clause designating a federal or state court in a specified county is a forum-selection clause)
- Pinto Tech. Ventures, L.P. v. Sheldon, 526 S.W.3d 428 (Tex. 2017) (forum-selection clauses generally bind only parties to the agreement)
- Crum & Forster Specialty Ins. Co. v. Creekstone Builders, Inc., 489 S.W.3d 473 (Tex. App.—Houston [1st Dist.] 2015) (trial court may consider evidence attached to a motion to dismiss)