In Re ADM Investor Services, Inc. , 2008 Tex. App. LEXIS 4876 ( 2008 )


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  • OPINION

    JAMES T. WORTHEN, Chief Justice.

    ADM Investor Services, Inc. filed a petition for writ of mandamus challenging the trial court’s February 11, 2008 order denying its motion to dismiss.1 We deny the writ.

    Factual Background

    On March 29, 2001, Jetta Prescott and Mark Lowther signed an agreement with Texas Trading Company, Inc. for ADM to trade commodities on the Chicago Board of Trade on their behalf.2 Texas Trading, through its owner Charles Dawson, acted as ADM’s agent in all of its dealings with Prescott. Under the agreement, when Prescott’s account balance had a deficit of over $50,000.00, ADM was authorized to close the account and collect any deficiencies from Dawson. In early 2004, Prescott’s commodity account reached a negative balance of $57,844.29. ADM closed her account and collected this amount from Dawson. Dawson then filed suit in his individual capacity against Prescott and obtained a judgment against her.

    Procedural Background

    Prescott filed a suit against Texas Trading and ADM alleging they were jointly and severally liable under various legal theories, including fraud, breach of fiduciary duty, and negligence. Texas Trading filed an original answer and a motion to transfer venue from Rains County to Hopkins County. Later, ADM filed an original answer to the suit along with a motion to dismiss relying on a forum selection clause in the contract and, alternatively, a motion to transfer venue to Hopkins County, Texas.

    The forum selection clause contained in the contract states as follows:

    All actions or proceedings arising directly, indirectly or otherwise, in connection with, out of, related to, or from this Agreement or any transaction covered hereby shall be governed by the law of Illinois and may, at the discretion and election of [ADM], be litigated in courts whose situs is within Illinois.

    A motion to dismiss is the proper procedural mechanism for enforcing a forum selection clause that a party to the agreement has violated in filing suit. Deep Water Slender Wells v. Shell Intern., 234 S.W.3d 679, 687 (Tex.App.-Houston [14th Dist.] 2007, pet. filed).

    On November 6, 2007, the court set a hearing for January 11, 2008 on Texas Trading’s motion to transfer venue. By letter dated January 7, 2008, ADM requested that a hearing on its motion to dismiss be set for February 8, 2008. On January 10, 2008, the court set a hearing for February 11, 2008 on ADM’s motion to dismiss. At the hearing on Texas Trading’s motion to transfer venue, Prescott objected to the transfer, but ADM did not make an appearance. Following the hearing, the trial court entered an order granting Texas Transfer’s motion to transfer venue, severing Prescott’s suit against Texas Trading from her suit against ADM, and transferring her suit against Texas Trading to Hopkins County.

    *820A month later, the court heard ADM’s motion to dismiss Prescott’s suit against it. Following this hearing, the trial court entered an order denying ADM’s motion to dismiss. On the same date, it issued a letter explaining its ruling, which in part read as follows:

    The forum selection-clause taken alone is enforceable, and if [ADM] was the lone defendant, I would grant the dismissal.
    However the co-defendant, Texas Trading Company, which acts as an agent [for ADM] in Texas, is being sued for the same causes of action. It seems unreasonable to the Court for Plaintiff to have to pursue the same cause of action against two defendants in two different states.

    This original proceeding followed.

    Availability of Mandamus

    Ordinarily, mandamus will issue if the relator establishes a clear abuse of discretion for which there is no adequate appellate remedy. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004); Walker v. Packer, 827 S.W.2d 833, 839 (Tex.1992). A trial court abuses its discretion when it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law or if it clearly fails to correctly analyze or apply the law. In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex.2005).

    As a general rule, the relator has the burden to establish both prerequisites to mandamus relief. Canadian Helicopters Ltd. v. Wittig, 876 S.W.2d 304, 305 (Tex.1994). However, the Texas Supreme Court has held that there is no adequate remedy by appeal when a trial court refuses to enforce a forum selection clause. In re Pirelli Tire, L.L.C., 247 S.W.3d 670, 679 (Tex.2007); see also In re AutoNation, Inc., 228 S.W.3d 663, 667 (Tex.2007) (holding that mandamus relief is available to enforce forum selection clauses). Consequently, the only issue before us is whether the trial court abused its discretion by denying ADM’s motion to dismiss.

    Waiver of Forum Selection Clause

    ADM contends in this proceeding that the trial court abused its discretion in denying its motion to dismiss, which was filed to enforce the forum selection clause in Prescott’s contract. In response, Prescott alleges that ADM waived its right to enforce its forum selection clause by allowing its agent, Texas Trading, to have Prescott’s lawsuit against Texas Trading severed and transferred to Hopkins County.

    Forum Selection Clauses

    Enforcement of forum selection clauses is mandatory unless the party opposing enforcement clearly shows that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching. In re Automated Collection Technologies, Inc., 156 S.W.3d 557, 559 (Tex.2004). Forum selection clauses apply to all parties to the transaction. See CNOOC Southeast Asia Ltd. v. Paladin Resources (SUNDA) Ltd., 222 S.W.3d 889, 898 (Tex.App.-Dallas 2007, pet. denied). However, the enforcement of forum selection clauses can be waived. See, e.g., In re AIU Ins. Co., 148 S.W.3d 109, 120-21 (Tex.2004). Waiver requires intent, either the intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right. In re Gen. Elec. Capital Corp., 203 S.W.3d 314, 316 (Tex.2006).

    Analogous Clauses

    In Texas, cases concerning waiver in the arbitration context are analogous to questions of waiver relating to forum selection clauses. See Automated Collection Tech*821nologies, 156 S.W.3d at 559. The Texas Supreme Court has described an arbitration agreement as “another type of forum-selection clause” and has stated that it “see[s] no meaningful distinction between this type of forum-selection clause and arbitration clauses.” AIU Ins., 148 S.W.3d at 115, 116. The court has further concluded that the law applicable to arbitration cases concerning waiver and the availability of an adequate appellate remedy also applies by analogy to the same matters in the context of forum selection clauses. Id. at 115,121.

    Arbitration is favored by public policy. See In re Bruce Terminix Co., 988 S.W.2d 702, 704 (Tex.1998). A strong presumption exists against finding a waiver of the right to arbitration, and any doubts regarding waiver are resolved in favor of arbitration. See id. at 704-05. Whether waiver occurs depends on the individual facts and circumstances of each case. Interconex, Inc. v. Ugarov, 224 S.W.3d 523, 533 (Tex.App.-Houston [1st Dist.] 2007, no pet.).

    A party may waive its right to arbitrate by taking an action inconsistent with that right to the opposing party’s prejudice. In re Citigroup Global Markets, Inc., 202 S.W.3d 477, 481-82 (Tex. App.-Dallas 2006, orig. proceeding). One of the factors relevant in making a prejudice determination is whether a party failed to timely assert its right to arbitrate a dispute. Republic Ins. Co. v. Paico Receivables, LLC, 383 F.3d 341, 346 (5th Cir.2004). While the mere failure to assert the right to demand arbitration does not alone translate into a waiver of that right, this failure does bear on the question of prejudice, and may, along with other considerations, require a court to conclude that waiver has occurred. Id.

    Analysis

    In its contractual dealings with Prescott, Texas Trading acted as agent on behalf of its principal, ADM. Prescott alleged that ADM and Texas Trading, as principal and agent, were jointly and severally liable to her for their allegedly wrongful actions. The causes of action she asserted against both ADM and Texas Trading involved the same facts and same witnesses. ADM and Texas Trading responded separately to Prescott’s suit. The primary difference between their responses was that ADM sought to enforce the forum selection clause while Texas Trading did not. Texas Trading was bound by the forum selection clause. See CNOOC, 222 S.W.3d at 898. But instead of seeking to enforce it, Texas Trading, immediately after ADM filed its motion to dismiss, requested a hearing on its motion to transfer venue.

    By its inaction, ADM allowed its agent, Texas Trading, to irrevocably establish Hopkins County as the venue where Prescott’s suit against Texas Trading would be tried. ADM did not timely assert its motion to dismiss during the two months in which Texas Trading’s motion to transfer venue was set for hearing. Nor did ADM seek to continue the hearing on Texas Trading’s motion to transfer venue to a date after ADM’s motion to dismiss had been heard. Instead, four days before the date of the hearing on Texas Trading’s motion to transfer venue, ADM requested a setting on its motion to dismiss. The date ADM requested was February 8, 2008, approximately one month after the hearing on Texas Trading’s motion was to occur.

    Had ADM pressed forward first with its motion to dismiss, the trial court would have had no choice but to grant it due to the mandatory forum selection clause in the contract. This would have required *822Texas Trading to defend the suit alongside ADM in Illinois if Prescott had refiled there. Because of ADM’s failure to timely assert its motion to dismiss, Prescott has no choice but to try her suit against Texas Trading in Hopkins County, Texas.

    ADM’s failure to assert its motion to dismiss prior to the hearing on Texas Trading’s motion to transfer venue was inconsistent with its right to enforce the forum selection clause. 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. Therefore, we conclude that ADM waived its right to enforce the forum selection clause.

    Disposition

    Based upon our review of the record and the foregoing analysis, we conclude that the trial court did not abuse its discretion in denying ADM’s motion to dismiss based on its forum selection clause. Therefore, we deny ADM’s petition for writ of mandamus.

    HOYLE, J., dissenting.

    . Respondent is the Honorable Richard A. Beacom, Jr., Judge of the 154th Judicial District Court of Rains County, Texas.

    . Because Lowther is not a party to this proceeding, we will not refer to him further in this opinion.

Document Info

Docket Number: 12-08-00125-CV

Citation Numbers: 257 S.W.3d 817, 2008 Tex. App. LEXIS 4876, 2008 WL 2571856

Judges: Worthen, Griffith, Hoyle

Filed Date: 6/30/2008

Precedential Status: Precedential

Modified Date: 10/19/2024