in Re Talent Tree Crystal, Inc. ( 2006 )

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Opinion issued February 9, 2006

In The

Court of Appeals

For The

First District of Texas

  NO. 01-05-00686-CV

IN RE TALENT TREE CRYSTAL, Relator

Original Proceeding on Petition for Writ of Mandamus

MEMORANDUM OPINION

          Relator, Talent Tree Crystal, Inc., has filed a petition for writ of mandamus and an application for temporary relief to complain of an order, signed by the trial court on July 12, 2005, which denied relator’s motion to dismiss the fifth amended petition of the real party-in-interest, DRG, Inc., along with relator’s alternative motion to stay proceedings pending resolution of a previously filed federal court action. On July 22, 2005, we issued an order staying all proceedings in trial court cause number 2004-28558, styled DRG, Inc. v. Talent Tree, Inc. Relator contends that mandamus should issue to correct the trial court’s clear abuse of its discretion in denying the motion to dismiss, which was premised on the forum-selection clause in relator’s franchise agreement with DRG. We conditionally grant mandamus relief.                                                         Background

          Relator is a franchisor of an employment staffing agency. DRG had been a franchisee of relator for 15 years in December 2000, when the parties renewed their relationship for an additional five-year term. The December 2000 agreement consists of a renewal “Franchise Agreement” and an “Amendment Rider.” Paragraph 11 of the amendment rider obligated relator to notify and also to offer to DRG any new forms of franchise agreements that contained more favorable terms than those in the franchise agreement that relator and DRG had negotiated. Paragraph 11 also authorized DRG to elect, during the five-year renewal period and at its option, to replace its existing agreement by adopting those more favorable franchise-agreement terms. Section 10(e) of Paragraph 10 of the parties’ franchise agreement, which pertains to “general legal matters,” states, with respect to “Venue,”

Any cause of action between [relator] and [DRG] arising under this Agreement will be brought in the United States District Court for the Southern District of Texas. If that Court lacks jurisdiction, the action will be brought in the state courts in Houston, Texas, and [DRG] submits to the jurisdiction of such courts. No rights or causes of action arising from this Agreement will be lost if these venues are not available.

We agree with relator’s contention that section 10(e) of the parties’ agreement imposes a condition on state-court filing of any actions arising under the franchise agreement, specifically, that the United States District Court for the Southern District of Texas lack jurisdiction. Although DRG contends that it is no longer required to comply with section 10(e), because its current franchise agreement does not contain a similar provision, the mandamus record demonstrates that DRG’s claims in the litigation below are premised on its prior franchise agreement that contains section 10(e), as set out above.

          In June 2004, DRG sued relator, asserting that relator had offered franchise agreements containing more favorable terms to other franchisees, but had not notified DRG, in violation of paragraph 11 of the amendment rider, and had thereby deprived DRG of its right, as provided by paragraph 11 of the 2000 amendment rider, to exercise its option to elect the more favorable terms. Despite section 10(e) of the franchise agreement, DRG stated these allegations in an original petition filed in the respondent trial court and not in the United States District Court for the Southern District. As subsequently amended through its fifth amended petition, DRG states claims for specific performance, fraud, breach of contract, and for injunctive, declaratory, and equitable relief.

          Relator repeatedly moved to dismiss the original and later amended petitions based on the forum-selection provisions of section 10(e). The respondent trial court ultimately issued a signed order denying relator’s motion on July 19, 2005. Seven days later, relator filed its petition in this Court, seeking to compel the respondent trial court to dismiss DRG’s fifth amended petition.

                                      Availability of Mandamus Relief

          A court of appeals may issue a writ of mandamus, “agreeable to the principles of law regulating those writs,” against a judge of a district court. Tex. Gov’t Code Ann. § 22.221(b)(1) (Vernon 2004). Mandamus is an extraordinary remedy, that will issue only to correct a clear abuse of discretion or a violation of a duty imposed by law when there is no adequate remedy by appeal. In re Ford Motor Co., 165 S.W.3d 315, 317 (Tex. 2005) (citing In re Prudential Ins. Co. of Am., 148 S.W.3d 135–36 (Tex. 2004)); Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992); Johnson v. Honorable Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex. 1985); In re Taylor, 113 S.W.3d 385, 392 (Tex. App.—Houston [1st Dist.] 2003, orig. proceeding); see also In re AIU Ins. Co., 148 S.W.3d 109, 115–120 (Tex. 2004) (addressing inadequacy of appeal in context of refusal to enforce negotiated forum-selection clauses and emphasizing parallels to analogous refusal to enforce negotiated arbitration clause).

          A trial court abuses its discretion when it acts arbitrarily or unreasonably and without reference to any guiding rules or principles. See Walker, 827 S.W.2d at 839; In re Taylor, 113 S.W.3d at 389. A trial court has no discretion, however, in determining what the law is, which law governs, or how to apply the law, and we therefore review those rulings de novo. See Walker, 827 S.W.2d at 840; see also Phoenix Network Techs., Ltd. v. Neon Sys, Inc., 177 S.W.3d 605, 611 (Tex. App.—Houston [1st Dist.] 2005, no pet. h.) (noting that trial court’s ruling on motion to dismiss based on forum-selection clause reviewed generally for abuse of discretion, but that de novo review applies to questions pertaining to interpretation of contract containing forum-selection clause). When we review a discretionary ruling that results from the trial court’s having resolved underlying facts, we must defer to the trial court’s factual resolutions and any credibility determinations that may have affected those resolutions and may not substitute our judgment for the trial court’s judgment in those matters. See Walker, 827 S.W.2d at 839–40.

Mandamus to Enforce Forum-Selection Clause

          It is well-settled that a motion to dismiss, by which relator sought to enforce the forum-selection clause here, is the correct procedural mechanism to enforce a forum-selection clause. See Phoenix Network Techs., 177 S.W.3d at 611. When the facts are undisputed, as here, a trial court must enforce a forum-selection clause unless the opposing party clearly demonstrates that (1) enforcement would be unreasonable and unjust or (2) the clause is invalid for such reasons such as fraud or overreaching. Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 793 (Tex. 2005); In re Automated Collection Techs., Inc., 156 S.W.3d 557, 559 (Tex. 2004); In re AIU Ins. Co., 148 S.W.3d at 110, 112; see also Phoenix Network Techs., 177 S.W.3d at 611 (noting, as additional factors for consideration under Supreme Court precedent, that “‘enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision”; or that the “contractual forum will be so gravely difficult and inconvenient” that the opponent “will for all practical purposes be deprived of his day in court.’”) (quoting The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S. Ct. 1907, 1917 (1972)).           The burden rests squarely on the party opposing dismissal to the forum specified in the clause. In re Automated Collection Techs., 156 S.W.3d at 559; see Phoenix Network Techs., 177 S.W.3d at 614. If that party, in this case, DRG, does not meet its burden to defeat the forum-selection clause, the trial court must enforce the clause. See In re Automated Collection Techs., 156 S.W.3d at 559; Michiana Easy Livin’ Country, Inc., 168 S.W.3d at 793. Moreover, when a trial refuses to comply with this mandatory duty, the proponent seeking dismissal has no adequate remedy by appeal because the trial court’s ruling “vitiate[s] and render[s] illusory” any subsequent appeal. In re AIU Ins. Co., 148 S.W.3d at 115. Mandamus may issue, therefore, to enforce a forum-selection clause in a proper case. See In re Automated Collection Techs., Inc., 156 S.W.3d at 559; In re AIU Ins. Co., 148 S.W.3d at 112; In re Kyocera Wireless Corp., 162 S.W.3d 758, 764 (Tex. App.—El Paso 2005, orig. proceeding).

A.      No Invalidity Shown

          Although DRG’s pleadings include allegations of fraud against relator, DRG did not contend in the respondent trial court and does not contend here, that fraud or overreaching invalidated section 10(e) of the parties’ franchise agreement. Therefore, the second of the established challenges under Texas law does not apply. See Michiana Easy Livin’ Country, Inc., 168 S.W.3d at 793; In re Automated Collection Techs, Inc., 156 S.W.3d at 559; In re AIU Ins. Co., 148 S.W.3d at 112; Phoenix Network Techs., Ltd., 177 S.W.3d at 611.

          Within the narrowed framework of a public policy that strongly favors enforcement and an undisputedly valid forum-selection clause in the parties’ franchise agreement, we determine whether DRG met its burden to defeat the forum-selection clause on which relator relied here in seeking dismissal by clearly demonstrating that (1) enforcement of the clause would be “unreasonable and unjust,” e.g., In re Automated Collection Technologies, Inc., 156 S.W.3d at 559, or that (2) litigating its claims in the Southern District of Texas, the “contractual forum” here, “will be so gravely difficult and inconvenient” that DRG “will for all practical purposes be deprived of [its] day in court.” See The Bremen, 407 U.S. at 15, 92 S. Ct. at 1915–17; Phoenix Network Techs., Ltd., 177 S.W.3d at 611 (quoting The Bremen). B.“Dominant Jurisdiction” under Venue Law Does Not Apply

          Before proceeding with the analysis outlined above, we address a preliminary consideration raised by DRG in opposition to relator’s request that mandamus issue. As in the respondent trial court, DRG contends that section 10(e) of the franchise agreement is not a forum-selection clause but, rather, a contractual venue provision. DRG further contends, in reliance on settled venue-law principles, that the respondent trial court acquired dominant jurisdiction over the case when DRG filed its original petition in the respondent trial court. See Wyatt v. Shaw Plumbing Co., 760 S.W.2d 245, 248 (Tex. 1988). There is no issue of dominant jurisdiction here. As the supreme court clarified recently, a question of dominant jurisdiction arises only when venue is proper in two or more Texas counties. Gonzalez v. Reliant Energy, Inc., 159 S.W.3d 615, 622 (Tex. 2005); see Perry v. Del Rio, 66 S.W.3d 239, 252 (Tex. 2001) (applying ripeness doctrine to resolve issue of four competing venues).

C.      No Showing that Enforcement Unreasonable or Unjust

          As in the respondent trial court, DRG also presents a public-policy challenge to enforcing section 10(e) of its franchise agreement with relator. In reliance on State v. Standard Oil Co., 107 S.W.2d 550 (Tex. 1937), DRG argues that enforcing the forum-selection clause, by requiring that the respondent yield to the Southern District of Texas, would contravene the public policy of this State, which prohibits multiple lawsuits premised on the same transaction. Id. at 559. It is undisputed, however, that litigation filed by relator against DRG is currently pending in the United States District Court for the Southern District of Texas—the forum specified in section 10(e) of the parties’ franchise agreement. Accordingly, we agree with relator that requiring the respondent trial court to dismiss DRG’s action in accordance with section 10(e) would not risk piecemeal litigation of related claims, as DRG contends, but instead tends to avoid that risk. Moreover, as this Court emphasized in Phoenix Network Techs., Ltd., 177 S.W.3d at 611, the public policy of this State, as demonstrated by the supreme court’s recent dispositions, now strongly favors the established federal-law preference in favor of enforcing forum-selection clauses. See Michiana Easy Livin’ Country, Inc., 168 S.W.3d at 793; In re Automated Collection Techs., Inc., 156 S.W.3d at 559; In re AIU Ins. Co., 148 S.W.3d at 112. Because DRG did not meet its burden to defeat section 10(e) of the franchise agreement, the trial court had a mandatory duty to enforce the clause. See In re Automated Collection Techs., Inc., 156 S.W.3d at 559.

D.      No Showing of Grave Difficulty or Inconvenience

          Similarly, DRG did not demonstrate in the trial court and has not demonstrated here, that pursuing its claims in accordance with section 10(e) would be either gravely difficult or inconvenient. We therefore hold that DRG did not meet its burden to defeat the forum-selection clause for that reason. See The Bremen, 407 U.S. at 15, 92 S. Ct. at 1917.

E.      Lâches Does Not Apply to Preclude Mandamus Relief

          DRG also contends that mandamus should not issue because relator delayed filing its petition seeking mandamus relief. Well-settled law invokes the equitable doctrine of lâches to bar granting mandamus relief when the relator delays pursuing its right to relief. See In re Users Sys. Servs., Inc., 22 S.W.3d 331, 337 (Tex. 1999) (noting, but declining to apply, lâches doctrine); Rivercenter Assocs. v. Rivera, 858 S.W.2d 366, 367 (Tex. 1993) (applying lâches doctrine to bar mandamus relief based on four-month delay).

          DRG contends that, although the respondent trial-court denied relator’s motion to dismiss on February 11, 2005, relator delayed seeking mandamus relief until July 19, 2005. Yet, the record provided by relator in support of its petition reflects that respondent signed its order denying relator’s motion to dismiss on July 12, 2005, specifically, seven days before relator sought relief from this Court. See Tex. R. App. P. 52.3(j)(1)(A) (requiring that petition be supported with appendix that includes “certified or sworn copy of any order complained of”). The mandamus record reflects, therefore, that, although the respondent trial court may have “repeatedly denied” relator’s previously filed motions to dismiss, relator sought relief here, based on a signed order, seven days after the respondent trial court denied relator’s motion to dismiss DRG’s fifth amended petition. It is likewise undisputed that the supplemental record provided by DRG in opposition to relator’s request that mandamus issue does not demonstrate that the respondent trial court had issued an order on which relator could have premised a claim to mandamus relief on February 11, 2004. See id.; see Tex. R. App. P. 52.4(e) (authorizing supplemental appendix in support of response to petition for writ of mandamus). DRG has not demonstrated that lâches applies to bar relator’s request for relief by petition for writ of mandamus.

                                                         Conclusion

          Having concluded that DRG did not meet its burden to defeat the forum-selection provisions of section 10(e) of the parties’ franchise agreement, we lift our stay order of July 22, 2005 and conditionally grant relator’s petition for a writ of mandamus. We are confident that the respondent trial court will withdraw its order denying relator’s motion to dismiss DRG’s fifth amended petition and will rule in accordance with the forum-selection clause in relator’s franchise agreement with DRG, which requires that both relator and DRG to pursue claims related to their franchise agreement first in the United States District Court for the Southern District of Texas, to the extent that court has jurisdiction over those claims. The writ of

mandamus will issue only if the respondent trial court does not dismiss the cause in accordance with the forum-selection clause.

                                                             Elsa Alcala

                                                             Justice

Panel consists of Chief Justice Radack and Justices Jennings and Alcala.