Tim Pritchett v. Gold's Gym Franchising, LLC ( 2014 )

AFFIRM; Opinion Filed February 4, 2014.
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-13-00464-CV
TIM PRITCHETT, Appellant
V.
GOLD’S GYM FRANCHISING, LLC, Appellee
On Appeal from the 162nd Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-12-06623
MEMORANDUM OPINION
Before Justices FitzGerald, Francis, and Myers
Opinion by Justice Myers
Tim Pritchett brings this interlocutory appeal of the trial court’s order denying his special
appearance in this suit for breach of a guaranty agreement brought by Gold’s Gym Franchising,
LLC. TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(7) (West Supp. 2013). Pritchett brings
two issues on appeal contending the trial court erred by denying his special appearance (1)
because Gold’s Gym’s affidavits did not describe acts by Pritchett that are linked to Texas; and
(2) because the forum-selection clause relied on by Gold’s Gym was in a document not signed by
Pritchett. We affirm the trial court’s order denying Pritchett’s special appearance.
BACKGROUND
In 2006, Gold’s Gym and West Athletic Club, Inc. signed a franchise agreement making
West Athletic Club, Inc. a franchisee of Gold’s Gym in Ellijay, Georgia. In 2007, Pritchett’s
daughter, Mistil Langston, and her husband, Shawn Langston, applied to Gold’s Gym to have the
franchise transferred to their corporation, Bodies in Balance, Inc. Gold’s Gym told the
Langstons that besides their own personal guarantees, they needed another guarantor with greater
financial strength to personally guarantee the franchise agreement. Mistil Langston named
Pritchett as the additional guarantor.
The Share Subscription Agreement for Bodies in Balance, which was signed by Pritchett 1
and the Langstons, showed the Langstons each owned twenty-five percent of the company and
Pritchett owned fifty percent. On October 13, 2007, the Langstons, Pritchett, and representatives
of Gold’s Gym and West Athletic Club signed the “Consent to Transfer,” which transferred the
franchise to Bodies in Balance. Bodies in Balance agreed to assume all of West Athletic Club’s
obligations, covenants, and undertakings under the 2006 franchise agreement. Pritchett and the
Langstons signed the Consent to Transfer as guarantors. An exhibit to the Consent to Transfer
was the “Full Continuing Guaranty,” signed by Pritchett and the Langstons, with the guarantors
promising “to be bound personally by . . . each and every provision of the Franchise Agreement.”
Effective January 1, 2008, Gold’s Gym and Bodies in Balance entered into a new
franchise agreement and terminated the 2006 franchise agreement. Pritchett and the Langstons
initialed an exhibit to the January 1, 2008 agreement indicating their acknowledgment that the
January 1, 2008 franchise agreement replaced the 2006 franchise agreement. Pritchett and the
Langstons signed a new “Full Continuing Guaranty” effective January 1, 2008 agreeing “to be
personally bound by . . . each and every provision in the [2008 Franchise] Agreement.” The
2008 franchise agreement contained a “Consent to Jurisdiction” provision in which Bodies in
Balance and its owners agreed that the state and federal courts in Dallas County had exclusive
jurisdiction over all disputes between Gold’s Gym and Bodies in Balance and its owners. The
1
Throughout this opinion, we refer to documents as being signed by Pritchett. Whether Pritchett signed the documents was a disputed issue
in this proceeding. When we state that Pritchett signed something, we mean only that a signature appears in the place designated for his
signature.
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consent-to-jurisdiction provision stated that Bodies in Balance and its owners “irrevocably
submit to the jurisdiction of such courts and waive any objection you, he, or she may have to
either jurisdiction or venue.”
On November 17, 2011, Gold’s Gym notified Bodies in Balance, Pritchett, and the
Langstons that the franchise was terminated for failure to pay amounts owed under the franchise
agreement. Gold’s Gym demanded that they pay $165,559.37 within one week or Gold’s Gym
would bring legal action. When the money was not paid, Gold’s Gym filed suit against Bodies
in Balance, Pritchett, and the Langstons.
Pritchett filed a special appearance, asserting he was not a Texas resident, he had no
contacts with Texas, that he did not sign any of the corporate or franchise documents on which
his signature appears, and “that Mistil Langston forged my signature on one or more of the
alleged agreements.” Pritchett also denied having any interest in Bodies in Balance. Mistil
Langston also signed an affidavit stating Pritchett did not sign any of the documents. The trial
court denied Pritchett’s special appearance. 2
SPECIAL APPEARANCE
In his two issues, Pritchett contends the trial court erred by denying his special
appearance (1) because Gold’s Gym’s affidavits did not describe acts by Pritchett that are linked
to Texas; and (2) because the forum-selection clause relied on by Gold’s Gym was in a document
not signed by Pritchett.
2
After the trial court denied Pritchett’s special appearance on March 11, 2013, Pritchett filed a motion to reconsider the denial of his special
appearance. Attached to the motion was Mistil Langston’s March 20, 2013 affidavit in which she stated she signed Pritchett’s name on the
various documents without Pritchett’s authorization. Gold’s Gym filed a response to the motion to reconsider, attaching the depositions of
Pritchett and Mistil Langston. On appeal, Pritchett does not assert that the trial court erred by denying his motion to reconsider the special
appearance, and he does not cite to any of the evidence in support of the motion to reconsider and the response to that motion. Because appellant
appeals from only the denial of the special appearance and does not assert the trial court erred by denying his motion to reconsider, we do not
consider any of the evidence in support of the motion to reconsider and the response that was not before the trial court when it denied Pritchett’s
special appearance.
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Standard of Review
Whether a trial court has personal jurisdiction over a nonresident defendant is a question
of law. Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 790–91 (Tex. 2005);
BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). Because the trial
court’s exercise of personal jurisdiction over a nonresident defendant is one of law, an appellate
court reviews the trial court’s determination of a special appearance de novo. Moki Mac River
Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007); BMC Software, 83 S.W.3d at 794.
However, the trial court must frequently resolve fact questions before deciding the jurisdictional
question. BMC Software, 83 S.W.3d at 794; Capital Tech. Info. Servs., Inc. v. Arias & Arias,
Consultores, 270 S.W.3d 741, 748 (Tex. App.—Dallas 2008, pet. denied) (en banc). In a special
appearance, the trial court is the sole judge of the witnesses’ credibility and the weight to be
given their testimony. Leesboro Corp. v. Hendrickson, 322 S.W.3d 922, 926 (Tex. App.—
Austin 2010, no pet.). We do not “disturb a trial court’s resolution of conflicting evidence that
turns on the credibility or weight of the evidence.” Ennis v. Loiseau, 164 S.W.3d 698, 706 (Tex.
App.—Austin 2005, no pet.). When a trial court does not issue findings of fact or conclusions of
law, “all facts necessary to support the judgment and supported by the evidence are implied.”
BMC Software, 83 S.W.3d at 795. We will affirm the trial court’s ruling on any legal theory that
finds support in the record. See id.; Dukatt v. Dukatt, 355 S.W.3d 231, 237 (Tex. App.—Dallas
2011, pet. denied).
The plaintiff bears the initial burden of pleading sufficient allegations to bring a
nonresident defendant within the provisions of the Texas long-arm statute. Moki Mac, 221
S.W.3d at 574; BMC Software, 83 S.W.3d at 793. The nonresident defendant then has the
burden of negating all bases of jurisdiction alleged in the plaintiff’s petition. Moki Mac, 221
S.W.3d at 574; BMC Software, 83 S.W.3d at 793.
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Personal Jurisdiction
The Texas long-arm statute permits Texas courts to exercise jurisdiction over nonresident
defendants that do business in Texas. See TEX. CIV. PRAC. & REM. CODE ANN. §§ 17.041–.045
(Vernon 2008); PHC–Minden, L.P. v. Kimberly–Clark Corp., 235 S.W.3d 163, 166 (Tex. 2007);
BMC Software, 83 S.W.3d at 795. Under the statute, a nonresident does business in Texas if he:
(1) contracts by mail or otherwise with a Texas resident and either party is to perform the
contract in whole or in part in this state; (2) commits a tort in whole or in part in this state; or (3)
recruits Texas residents, directly or through an intermediary located in this state, for employment
inside or outside this state. TEX. CIV. PRAC. & REM. CODE ANN. § 17.042. The broad language
of section 17.042 extends Texas courts’ personal jurisdiction “as far as the federal constitutional
requirements of due process will permit.” PHC–Minden, 235 S.W.3d at 166 (quoting U–Anchor
Adver., Inc. v. Burt, 553 S.W.2d 760, 762 (Tex. 1977)).
The Due Process Clause of the Fourteenth Amendment operates to limit the power of a
state to assert personal jurisdiction over a nonresident defendant. Asahi Metal Indus. Co., Ltd. v.
Superior Court of Cal., Solano Cnty., 480 U.S. 102, 108 (1987); Helicopteros Nacionales de
Colom., S.A. v. Hall, 466 U.S. 408, 413–14 (1984). The Due Process Clause protects an
individual’s liberty interest in not being subject to the binding judgments of a forum with which
he has established no meaningful contacts, ties, or relations. Burger King Corp. v. Rudzewicz,
471 U.S. 462, 471–72 (1985); World–Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 294
(1980); Int’l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945). Under the Due Process Clause,
personal jurisdiction over a nonresident defendant is constitutional when the nonresident
defendant has established minimum contacts with the forum state and the exercise of jurisdiction
comports with traditional notions of fair play and substantial justice. Burger King, 471 U.S. at
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476; Int’l Shoe, 326 U.S. at 320. However, personal jurisdiction is a waivable right, and a party
may agree to a forum’s jurisdiction. Burger King, 471 U.S. at 472 n.14.
In this case, Gold’s Gym alleged the defendants had done business in Texas; had
continuing contacts with Texas; that the contract was entered into, performed, and breached in
Dallas County; and that the parties had agreed venue of the case would be in Dallas County.
FORUM-SELECTION CLAUSE
A party may waive his right to contest personal jurisdiction and consent to a court’s
personal jurisdiction. A mandatory forum-selection clause in a contract is one way a party may
consent to jurisdiction. Burger King, 471 U.S. at 472 n.14. Forum-selection clauses “are prima
facie valid and should be enforced unless enforcement is shown by the resisting party to be
‘unreasonable’ under the circumstances.” M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10
(1972). The party opposing enforcement of a forum-selection clause carries a “heavy burden” of
showing the clause should not be enforced. Id. at 17, 19.
In his second issue, Pritchett argues the trial court erred by denying his special
appearance because the forum-selection clause was in a document Pritchett did not sign.
Pritchett’s assertion has two parts: first, that the forum-selection clause was in the franchise
agreement, which was signed only by Mistil Langston on behalf of Bodies in Balance as its
president; and second, even if the forum-selection clause was incorporated into another
document on which his signature appears, Pritchett denied signing the document.
Incorporation by Reference
The forum-selection clause appears only in the 2008 franchise agreement, which Pritchett
did not sign. Gold’s Gym argues that the franchise agreement was incorporated by reference into
the guaranty signed by Pritchett.
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The franchise agreement was between Gold’s Gym and Bodies in Balance, and the
agreement made reference to Bodies in Balance’s “Owners.” The franchise agreement defined
“Owner” to mean “any person holding a direct or indirect, legal or beneficial Ownership Interest
or voting rights in you [Bodies in Balance] or in any entity that directly or indirectly holds an
Ownership Interest or voting rights in you.” “Ownership Interest” in a corporation was defined
as “shares of capital stock or other equity interests in a corporation.” The agreement defined
“Guarantors” as meaning “each Owner having an “Ownership interest in you . . . of twenty
percent (20%) or more . . . and any other Owner designated by us as a Guarantor in Exhibit A of
this Agreement.”
Section 0.8 of the franchise agreement contained the forum-selection clause:
8. Consent to Jurisdiction. Subject to our and your arbitration obligations in
Subsection O.6, you [Bodies in Balance] and your Owners agree that all judicial
actions brought by us against you or your Owners . . . must be brought exclusively
in the state courts in Dallas County, Texas or the United States District Court for
the Northern District of Texas, Dallas Division. The courts specified in this
Subsection O.8 shall have exclusive jurisdiction over all disputes, and venue shall
lie in Dallas County/Dallas Division, and shall be determined according to Texas
law, without regard to the jurisdictional, venue, or choice of law provisions of any
state or territory other than Texas. You (and each Owner) irrevocably submit to
the jurisdiction of such courts and waive any objection you, he, or she may have
to either jurisdiction or venue.
(Emphasis added.)
Exhibit A of the franchise agreement listed the “Owners” as Mistil Langston with twenty-
five percent of the shares, Shawn Langston with twenty-five percent of the shares, and Pritchett
with fifty percent of the shares. Exhibit A also listed the guarantors as Pritchett and the
Langstons. Pritchett, the Langstons, and a senior vice-president for Gold’s Gym initialed Exhibit
A.
The guaranty agreement was Exhibit B to the franchise agreement. The guaranty
agreement stated:
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Guarantors do hereby agree to be personally bound by, and personally liable for
the breach of, each and every provision in the [2008 Franchise] Agreement, both
monetary obligations and obligations to take or refrain from taking specific
actions or to engage or refrain from engaging in specific activities, including the
non-competition, confidentiality, transfer, and arbitration requirements.
(Emphasis added.) Pritchett and the Langstons signed the guaranty.
When construing a contract, our primary goal is to determine the parties’ intent as
expressed in the terms of the contract. Chrysler Ins. Co. v. Greenspoint Dodge of Hous., Inc.,
297 S.W.3d 248, 252 (Tex.2009); Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). Unsigned
documents may be incorporated into the parties’ contract by referring in the signed document to
the unsigned document. Owen v. Hendricks, 433 S.W.2d 164, 167 (Tex. 1968). The language
used to refer to the incorporated document is not important as long as the signed document
“plainly refers” to the incorporated document. Id.; In re C & H News Co., 133 S.W.3d 642, 645
(Tex. App.—Corpus Christi 2003, orig. proceeding). Documents incorporated into a contract by
reference become part of that contract. In re 24R, Inc., 324 S.W.3d 564, 567 (Tex. 2010) (orig.
proceeding) (per curiam). When a document is incorporated into another by reference, both
instruments must be read and construed together. In re C & H News Co., 133 S.W.3d at 645–46.
Plainly referring to a document requires more than merely mentioning the document. See
Trico Marine Servs., Inc. v. Stewart & Stevenson Technical Servs., Inc., 73 S.W.3d 545, 549–50
(Tex. App.—Houston [1st Dist.] 2002, mandamus denied). The language in the signed
document must show the parties intended for the other document to become part of the
agreement. See One Beacon Ins. Co. v. Crowley Marine Servs., Inc., 648 F.3d 258, 267 (5th Cir.
2011) (citing 11 SAMUEL WILLISTON & RICHARD A. LORD, A TREATISE ON THE LAW OF
CONTRACTS § 30:25, at 234 (4th ed. 1999) (“in order to uphold the validity of terms incorporated
by reference, it must be clear that the parties to the agreement had knowledge of and assented to
the incorporated terms”)); 17A C.J.S. Contracts § 402 (2011) (“For an incorporation by
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reference to be effective, it must be clear that the parties to the agreement had knowledge of and
assented to the incorporated terms.”).
In this case, the guaranty agreement provided, “Guarantors do hereby agree to be
personally bound by . . . each and every provision in the [2008 Franchise] Agreement.” This
incorporating language in the guaranty clearly shows the parties intended for the franchise
agreement and its forum-selection clause to become part of the guaranty agreement. See In re
Bank One, N.A., 216 S.W.3d 825, 826 (Tex. 2007) (orig. proceeding) (per curiam) (arbitration
agreement in Bank’s Account Rules and Regulations was incorporated by reference into
signature card stating customer agreed to be bound by the terms and agreements in the account
rules and regulations). We conclude the forum-selection clause was incorporated by reference
into the guaranty. Pritchett’s argument that the forum-selection clause does not apply to him
because he did not sign the franchise agreement lacks merit.
The forum-selection clause required all suits between Gold’s Gym and the “Owners” of
Bodies in Balance be brought in Dallas County and that the “Owners” waived any objection to
the jurisdiction of the courts in Dallas County. Exhibit A to the franchise agreement and the
share subscription agreement showed Pritchett was a fifty-percent shareholder of Bodies in
Balance and therefore was an “Owner” as defined in the franchise agreement. Thus, if Pritchett
signed the guaranty, then he was subject to the forum-selection clause and waived any
jurisdictional objection to being sued in Dallas County.
Whether Pritchett Signed the Guaranty
Pritchett also asserts he did not sign the guaranty. Pritchett states in his affidavit that he
did not sign the guaranty, and Mistil Langston also states Pritchett did not sign the guaranty.
However, the guaranty appears to contain his signature. Whether Pritchett signed the guaranty or
whether his signature was forged was a fact question for the court. This determination depended
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on the trial court’s evaluation of the credibility of Pritchett and Langston and the court’s
evaluation of the weight of the evidence.
The trial court was not requested to file and did not file findings of fact and conclusions
of law. Therefore, we must imply all facts necessary to support the order on appeal that are
supported by the evidence and affirm on any legal theory finding support in the record. BMC
Software, 83 S.W.3d at 795; Dukatt, 355 S.W.3d at 237. One legal theory that could support the
order denying the special appearance is that Pritchett waived personal jurisdiction by signing the
guaranty which incorporated by reference the forum-selection clause. This theory required the
trial court to determine that Pritchett was an “Owner” of Bodies in Balance as defined in the
franchise agreement, that Pritchett signed the guaranty, and that Pritchett and Mistil Langston’s
denials that he signed the various documents were not credible. The trial court’s determination
involved the resolution of conflicting evidence: the documents show they are signed by
Pritchett, but Pritchett and Mistil Langston denied that Pritchett signed them. We do not “disturb
a trial court’s resolution of conflicting evidence that turns on the credibility or weight of the
evidence.” Ennis, 164 S.W.3d at 706.
Because the trial court’s implied finding that Pritchett signed the guaranty supports the
conclusion that the forum-selection clause in the franchise agreement was incorporated by
reference into the guaranty, we conclude the trial court did not err by denying Pritchett’s special
appearance.
We overrule appellant’s second issue. Because the resolution of appellant’s second issue
disposes of the appeal, we do not address appellant’s first issue asserting Gold’s Gym’s
affidavits do not describe acts linking Pritchett to Texas. See TEX. R. APP. P. 47.1.
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CONCLUSION
We affirm the trial court’s order denying Pritchett’s special appearance.
130464F.P05
/Lana Myers/
LANA MYERS
JUSTICE
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
TIM PRITCHETT, Appellant On Appeal from the 162nd District Court,
Dallas County, Texas
No. 05-13-00464-CV V. Trial Court Cause No. DC-12-06623-I.
Opinion delivered by Justice Myers.
GOLD'S GYM FRANCHISING, LLC, Justices FitzGerald and Francis participating.
Appellee
In accordance with this Court’s opinion of this date, the order of the trial court denying
appellant’s special appearance is AFFIRMED.
It is ORDERED that appellee GOLD'S GYM FRANCHISING, LLC recover its costs of
this appeal from appellant TIM PRITCHETT.
Judgment entered this 4th day of February, 2014.
/Lana Myers/
LANA MYERS
JUSTICE
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