in Re: Giant Eagle, Inc.

ACCEPTED
05-15-01292-CV
05-15-01292-CV FIFTH COURT OF APPEALS
DALLAS, TEXAS
10/23/2015 7:38:11 PM
LISA MATZ
CLERK

No.
FILED IN
5th COURT OF APPEALS
DALLAS, TEXAS
In the 10/23/2015 7:38:11 PM
FIFTH COURT OF APPEALS OF TEXAS LISA MATZ
Clerk

In re Giant Eagle, Inc.,

Relator.

On Petition for Writ of Mandamus from the
68th Judicial District Court of Dallas County, Texas

INDEX TO THE RECORD

TO THE HONORABLE COURT OF APPEALS FOR THE FIFTH DISTRICT OF TEXAS:

Pursuant to Texas Rule of Appellate Procedure 52.7, Relator Giant Eagle, Inc. submits

this Index to the Record containing (1) a certified or sworn copy of every document that is

material to Relator’s claim for relieve and that was filed in any underlying proceeding; and (2) a

properly authenticated transcript of any relevant testimony from any underlying proceeding,

including any exhibits offered in evidence.

A0964036.1
 RECORD
TAB DESCRIPTION DATE PAGE
NUMBER
A. First Amended Petition 6/25/2015 R001

B. Defendant Giant Eagle’s Motion to Dismiss for
Collateral Estoppel or In the Alternative, Pursuant to 7/15/2015 R030
the Governing Forum Selection Clause

C. Plaintiff’s Response to Defendant Giant Eagle, Inc.’s
8/14/2015 R179
Motion to Dismiss

D. Plaintiff’s Supplemental Brief in Opposition to Giant
8/17/2015 R226
Eagle’s Motion to Dismiss

E. Defendant Giant Eagle’s Reply in Support of Its
Motion to Dismiss for Collateral Estoppel or, In the
8/19/2015 R286
Alternative, Pursuant to the Governing Forum
Selection Cause

F. PowerPoint Presentation used by Plaintiff’s Counsel at
Argument on 8/24/2015 – Response to Giant Eagle’s 8/24/2015 R305
Motion to Dismiss

G. Plaintiff's Letter Brief to Court providing cases in
which Texas courts construed the "arise out of" to 8/25/2015 R325
exclude the particular claims at issue

H. Giant Eagle’s Letter Brief in Support of Motion to
8/25/2015 R369
Dismiss

I. Giant Eagle’s Motion to Strike Plaintiff’s
Supplemental Brief in Opposition to Giant Eagle’s 8/25/2015 R462
Motion to Dismiss

J. Order Denying Defendant Giant Eagle Inc.’s Motion
to Dismiss for Collateral Estoppel or, In the
9/22/2015 R509
Alternative, Pursuant to the Governing Forum
Selection Clause

K. Giant Eagle’s Motion to Stay All Proceedings, Aside
from Outstanding Motions, Pending Resolution of Its
10/6/2015 R510
Forthcoming Petition for Writ of Mandamus &
Proposed Order

L. Plaintiff’s Response to Defendant Giant Eagle, Inc.’s
10/14/2015 R516
Motion to Stay All Proceedings

A0964036.1
 M. Order Denying Defendant Giant Eagle, Inc.’s Motion
to Stay All Proceedings, Aside from Outstanding
10/19/2015 R534
Motions, Pending Resolution of Its Forthcoming
Petition for Writ of Mandamus

N. Defendants Giant Eagle Inc., David Shapira, and
Daniel Shapira’s Response to Plaintiff’s [Proposed] 9/18/2015 R535
Level Three Scheduling Order

A0964036.1
Dated: October 23, 2015 Respectfully Submitted:

/s/ Orrin L. Harrison III
Orrin L. Harrison III
Bar No. 09130700
oharrison@ghetrial.com
Hayley Ellison
Bar No. 24074175
hellison@ghetrial.com
GRUBER HURST ELROD
JOHANSEN HAIL SHANK, LLP
1445 Ross Avenue, Suite 2500
Dallas, TX 75202
Telephone: 214-855-6828
Fax: 214-855-6808

-and-

Bernard Marcus
marcus@marcus-shapira.com
Scott Livingston
livingston@marcus-shapira.com
Jonathan Marcus
jmarcus@marcus-shapira.com
Daniel J. Stuart
stuart@marcus-shapira.com
MARCUS & SHAPIRA LLP
301 Grant Street, 35th Floor
One Oxford Centre
Pittsburgh, Pennsylvania 15219-6401
Telephone: 412-338-5200
Fax: 412-391-8758

Counsel for Giant Eagle, Inc., David
Shapira, and Daniel Shapira

A0964036.1
 CERTIFICATE OF SERVICE

The undersigned certifies that a copy of the foregoing Record was served upon the
attorneys of record in the above cause in accordance with the Texas Rules of Appellate
Procedure, on October 23, 2015.

/s/ Hayley Ellison
Hayley Ellison

A0964036.1
Tab A
 CAUSE NO. DC-15-03853

DICKSON PERRY, derivatively on § IN THE DISTRICT COURT
behalf of EXCENTUS §
CORPORATION, §
§
Plaintiff, §
§
v. § 68TH JUDICIAL DISTRICT
§
EXCENTUS CORPORATION, §
BRANDON LOGSDON, JIM MILLS, §
GIANT EAGLE, INC., DAVID §
SHAPIRA, DANIEL SHAPIRA, §
AUTO-GAS SYSTEMS, INC., RANDY §
NICHOLSON, AND ADS ALLIANCE DALLAS COUNTY
DATA SYSTEMS, INC.

Defendants.

FIRST AMENDED PETITION

Plaintiff Dickson Perry, derivatively on behalf of Excentus Corporation (“Excentus”),

files his First Amended Petition against Excentus Corporation, Brandon Logsdon (“Logsdon”),

Jim Mills (“Mills”), Giant Eagle, Inc. (“Giant Eagle”), Daniel Shapira, David Shapira, Auto-Gas

Systems, Inc. (“Auto-Gas”), Randy Nicholson, and Alliance Data Systems, Inc. (“ADS”)

(collectively, “Defendants”), and hereby alleges as follows:

I. SUMMARY

Dickson Perry, founder and shareholder of Excentus Corporation, sues derivatively on

behalf of Excentus certain of its officers, directors, and shareholders for breach of fiduciary duty,

fraud, and civil conspiracy. His claims stem from the decision by a cadre of self-dealing

directors and officers, and the shareholders that aided and abetted them, to pay themselves off at

Excentus’ expense.

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 Mr. Perry founded Excentus in 1996, and over the next eighteen years he led the

company as its Chairman and CEO from nothing to becoming a 200-employee, multi-million

dollar growth company and the undisputed leader in the fuel and grocery cross-marketing

programs market. But on the evening of July 31, 2014, Defendants – a cadre of shareholders

holding a little over half of Excentus’ shares, along with the Defendant officers and directors –

met in secret to oust Mr. Perry from Excentus. The following day, these officers and directors

removed Mr. Perry from every position he held in Excentus without providing a reason; they

fired his daughter and two of his friends from the company without cause; they cut off his

cellular phone; they cut-off his health benefits; they towed his car from the company lot; and

they even cancelled his national fuel rewards card, a program which Mr. Perry had himself

envisioned and created.

Defendants immediately began reaping the fruits of their illicit conspiracy. With Mr.

Perry out of the way, the officer Defendants paid themselves hundreds of thousands of dollars in

bonus payments that Mr. Perry had previously opposed; the director Defendants usurped a

corporate opportunity of Excentus that Mr. Perry had painstakingly negotiated; and the

shareholder Defendants settled litigation that Excentus, with Mr. Perry at the helm, had initiated

against them with a near total capitulation of Excentus’ rights and interests. With stunning

impunity, and while sitting as directors of the company, Nicholson, Logsdon, and the Shapiras

even caused Excentus to pay the Shapiras hundreds of thousands of dollars and to award Giant

Eagle rights it never had.

Mr. Perry brings this derivative action on behalf of a company that represents his life’s

work. He seeks to restore to it the right to conduct its business without the subversion of self-

serving directors, officers, and shareholders who are intent on plundering Excentus’ valuable

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assets for their own respective exploitation. Accordingly, he requests an award of damages to

Excentus for the harms committed by Defendants, as well as injunctive relief to stop and remove

the corrupt cadre presently running, and potentially ruining, Excentus.

II. DISCOVERY

1. Discovery shall be conducted pursuant to Texas Rule of Civil Procedure 190.4.

III. PARTIES

2. Plaintiff Dickson Perry is an individual who is a citizen of the State of Texas.

Excentus Corporation is a corporation organized and existing under the laws of the State of

Texas. Its principal place of business is in Dallas County, Texas.

3. Defendant Brandon Logsdon is an individual who is a citizen of the State of

Texas. He may be served with process at his principal place of business, located at 14241 Dallas

Parkway, Suite 1200, Dallas, TX 75254. Defendant Logsdon was served with process and has

appeared in this action.

4. Defendant Jim Mills is an individual who is a citizen of the State of Texas. He

may be served with process at his principal place of business, located at 14241 Dallas Parkway,

Suite 1200, Dallas, TX 75254. Defendant Mills was served with process and has appeared in

this action.

5. Defendant Randy Nicholson is an individual who is a citizen of the State of

Texas. He may be served with process at his principal place of business, either at 1202 Estates

Drive, Suite D, Abilene, TX 79602 or at 14241 Dallas Parkway, Suite 1200, Dallas, TX 75254.

Defendant Nicholson was served with process and has appeared in this action.

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 6. Defendant Giant Eagle, Inc. is a corporation organized and existing under the

laws of the State of Pennsylvania that conducts business in the State of Texas. It may be served

with process at its principal place of business, located at 101 Kappa Drive, Pittsburgh, PA 15238.

Defendant Giant Eagle, Inc. may also be served with process by serving the Texas Secretary of

State. Defendant Giant Eagle was served with process and has appeared in this action.

7. Defendant David Shapira is a citizen and resident of the State of Pennsylvania, a

Director of Excentus Corporation, and Executive Chairman of the Board of Directors of Giant

Eagle. David Shapira can be served c/o Giant Eagle, Inc., 101 Kappa Drive, Pittsburgh, PA

15238. Defendant David Shapira may also be served with process by serving the Texas

Secretary of State.

8. Defendant Daniel Shapira is a citizen and resident of the State of Pennsylvania, a

Director of Excentus Corporation, and an owner and/or director of Giant Eagle. Daniel Shapira

can be served at Marcus & Shapira LLP, One Oxford Center, 35th Floor, 301 Grant Street,

Pittsburgh, PA 15219. Defendant Daniel Shapira may also be served with process by serving the

Texas Secretary of State.

9. Defendant Auto-Gas Systems, Inc. (“Auto-Gas”) is a corporation organized and

existing under the laws of the State of Delaware and with its principal place of business in

Abilene, Texas. It may be served with process by serving its Texas registered agent Jeffrey F.

Upp, 1202 Estates Drive, Suite D, Abilene, TX 79602. Defendant Auto-Gas was served with

process and has appeared in this action.

10. Defendant ADS Alliance Data Systems, Inc. is a corporation organized under the

laws of the State of Delaware with its principal place of business in Gahanna, Ohio, that

conducts business in the State of Texas. It may be served with process by serving its Texas

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registered agent CT Corporation System, 1999 Bryan St. Suite 900, Dallas, TX 75201.

Defendant ADS Alliance Data Systems, Inc. was served with process and has appeared in this

action.

11. Defendant Excentus Corporation (“Excentus”) is a corporation organized and

existing under the laws of the State of Texas. It may be served with process at its principal place

of business, 14241 Dallas Parkway, Suite 1200, Dallas, TX 75254.

IV. JURISDICTION & VENUE

12. This Court has jurisdiction over this matter. Defendants either reside in the State

of Texas or transact substantial business in the State of Texas.

13. Defendants David and Daniel Shapira transact substantial business in the State of

Texas. Since approximately 2004 and 2006, Defendants David and Daniel Shapira, respectively,

have served on the Board of Directors of Excentus, a Texas corporation. As Board members, the

Shapiras have participated, both in person and via telephone, in over a dozen Excentus Board

and shareholder meetings and actions, and on information and belief continue to participate in

such meetings and actions today. Further, the Shapiras have participated in the Board and

shareholder meetings in which the tortious acts described below took place, including without

limitation the July 31, 2014 shareholder meeting and the Board meeting held on the following

day. They have also executed written consents and agreements pertaining to the business of

Excentus and executed pursuant to Texas law. They have regularly communicated – in person,

via telephone, and via email – with Excentus representatives in Texas about matters pertaining to

Excentus. The Shapiras have also, on behalf of Giant Eagle, negotiated agreements with Texas

entities and persons both in person in Texas as well as via email and telephone. Additionally, the

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Shapiras have been members of committees formed by Excentus, including without limitation its

Compensation Committee and Audit Committee, and as members have also participated in the

meetings of such committees.

14. Venue is proper in Dallas County pursuant to TEX. CIV. PRAC. & REM.

CODE § 15.002(a)(1) because a substantial part of the events or omissions giving rise to the

claim occurred in Dallas County, Texas.

V. FACTS

A. Mr. Perry Founds and Positions Excentus as an Undisputed Market Leader.

15. Mr. Perry founded Dallas-based Excentus Corporation (“Excentus”) in 1996. He

served as its first and sole investor, shareholder, and employee. For its first eight years of

existence, Mr. Perry funded the company almost exclusively with his own resources.

16. Mr. Perry envisioned Excentus creating integrated fuel marketing programs that

would allow consumers to save money on gas and at the same time allow retailers, such as

grocery and convenience stores, to increase their sales. He foresaw Excentus providing the

technology, services, and programs to grocery and convenience stores necessary to implement

these fuel cross-marketing programs. His vision included Excentus eventually launching a

national coalition of fuel cross-marketing programs for its customers and consumers. To

accomplish these goals, Excentus would have to develop the next generation of proprietary pay-

at-the-pump technology and related innovations so that consumers could receive loyalty rewards

in the form of fuel discounts when making certain purchases and then redeem their rewards to

save money when buying gas.

17. Mr. Perry’s vision has become a valuable reality for Excentus. In the eighteen

years since its founding, Excentus has led the creation and growth of fuel cross-marketing

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programs from a novel idea into a multi-billion dollar market. Today, nearly all major oil

companies – including Shell, Exxon Mobil, and Chevron – and grocery stores – such as Safeway,

Tom Thumb, Kroger, and Wal-Mart – are leveraging Excentus’ technology, services, trade

secrets, patents and programs. Excentus has helped these companies promote billions of dollars

in sales by providing the technology and services necessary to create customer loyalty programs.

These programs have also saved consumers over $2 billion dollars on fuel to date.

18. Mr. Perry made Excentus his life’s work. He put every ounce of his

entrepreneurial skills, experience, efforts and passion into its creation and success. Through his

hard work and leadership, Excentus has acquired an extensive patent portfolio; developed

valuable patent-protected technology and marketing programs; hired and nurtured over 200

employees; achieved double-digit, compounded annual revenue growth; negotiated a multitude

of major commercial agreements with important market players; accumulated tens of millions

dollars of cash to support its current business operations and future growth plans; and yielded

tens of millions dollars in shareholder equity.

B. Excentus Brings on Investors.

19. Due to its growing success, Excentus began drawing the attention of various

businesses in the fuel rewards market. Beginning in 2004, Mr. Perry and the other shareholders

agreed to take on certain companies who had expressed an interest in becoming strategic

investors in Excentus. In addition to their capital contributions, these particular companies

entered into commercial agreements with, and promised to bring strategic business opportunities

to, Excentus. These investors included Defendants Giant Eagle, ADS, and Auto-Gas.

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 1. Giant Eagle

20. Pittsburgh-based Giant Eagle was the first such major investor. Giant Eagle

operates over 400 grocery stores and convenience stores, primarily in Pennsylvania and Ohio. It

is one of the forty largest privately-held and family operated companies in the U.S., and it is

owned by, among others, Defendants David and Daniel Shapira. David Shapira has served as its

principal executive leader for many years, while Daniel Shapira has provided legal

representation to Giant Eagle through his law firm, Marcus & Shapira.

21. Prior to learning about Excentus, Giant Eagle had unsuccessfully sought to

create its own fuel and grocery cross-marketing program to generate loyalty from, and increased

sales to, its customers. But Giant Eagle lacked the technology and know-how to integrate and

implement such a program on its own. It therefore recognized the value of Excentus, which at

the time was already assisting other grocery store companies develop, integrate, and launch fuel

cross-marketing programs. As a result, in 2002 Giant Eagle and Excentus entered into a

Software License and General Services Agreement. Pursuant to that agreement, Excentus

provided Giant Eagle with the technology, services and know-how necessary for Giant Eagle to

launch its fuel cross-marketing program “fuelperks!” Without Excentus’ technology and

services, Giant Eagle could not have launched or maintained fuelperks!, which became one of its

most profitable programs.

22. Two years later, after launching their fuelperks! program and after listening to

Mr. Perry describe his vision for Excentus, Defendant David Shapira asked to invest in Excentus,

but that investment came with certain strings. First, Giant Eagle wanted a controlling interest in

Excentus. Second, Giant Eagle wanted the right to consent to various major corporate decisions

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of Excentus. Third, Giant Eagle wanted to reconstitute Excentus’ Board so as to ensure Giant

Eagle could fill it with its own representatives.

23. Mr. Perry did not agree to the first two demands. Instead, Excentus allowed

Giant Eagle to have consent rights only for a limited time. Giant Eagle nonetheless invested.

With respect to the third, Excentus allowed Giant Eagle to appoint a single director. And one

year after Giant Eagle’s initial investment, Giant Eagle again offered to purchase additional

shares. Mr. Perry and the other shareholders agreed to let Giant Eagle appoint a second board

members to Excentus’ board of directors in exchange for that second investment. Giant Eagle

appointed David and Daniel Shapira.

2. ADS

24. Excentus’ success also attracted the interest of ADS, a leader in credit card and

payment processing services for retailers. In particular, ADS coveted Excentus’ relationship

with Giant Eagle and other grocery store chains across the U.S. These grocery store chains were

potential customers for ADS, and Excentus offered ADS a way into a market it had faced

difficulty penetrating.

25. In addition to its payment card business, ADS also owned the AirMiles program,

a profitable cross-marketing marketing program in Canada. ADS therefore understood the

potential and value of Excentus' plans for a national fuel cross-marketing program. They were

also keenly aware of the success Giant Eagle and other Excentus customers were having with

fuel cross-marketing developed by Excentus.

26. Around 2007, Excentus and ADS negotiated and executed a stock purchase

agreement. Giant Eagle and the Shapiras strongly supported this new relationship with ADS, as

it more than doubled the value of Giant Eagle's interest in Excentus in just two years.

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 3. Auto-Gas

27. While negotiating and closing Excentus’ agreements with ADS, Mr. Perry had

also begun discussions with Defendant Randy Nicholson, the founder and principal executive of

Defendant Auto-Gas. Since the founding of Excentus, Auto-Gas had been a competitor of

Excentus. Nicholson and Auto-Gas had applied for and received several patents that held

potential value for Excentus and its future plans. Nicholson and Auto-Gas, however, had been

unable to capitalize on these patents or compete against Excentus. By 2008, Auto-Gas had

become primarily a holding company for these patents, neglecting even to enforce them.

28. In 2008, Mr. Perry negotiated the purchase of Auto-Gas’s patent portfolio. In

exchange, Auto-Gas became one of Excentus’ largest shareholders, along with Mr. Perry, Giant

Eagle and ADS.

29. Nicholson had additional demands, however. Faced with the prospect of having

no income, he demanded a position on Excentus’ Board of Directors, as well $300,000 for him

and his son-in-law Jeff Upp per year for five years in exchange for a non-compete agreement.

Excentus knew it was competing against others to acquire these patents, so in an effort to

appease Nicholson and close the deal, Excentus agreed.

C. Defendants Pursue a Self-Serving Agenda.

30. What Mr. Perry, along with the other Excentus directors and shareholders,

initially identified as opportunities for growth via collaboration with its new "strategic" investors

instead devolved into a race by these Defendants to subserve Excentus’ best interests to their

respective aims. What follows is a description of how each of the Defendants’ personal agenda

led them to ultimately conspire against and harm Excentus.

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 1. Giant Eagle and the Shapiras

31. The Shapiras were not on Excentus’ board to loyally serve Excentus’ best

interests. Instead, they worked tirelessly to benefit and protect Giant Eagle. And when they

could no longer subserve Excentus’ interests to those of Giant Eagle, they conspired with

Defendants to terminate Mr. Perry and reap their illicit rewards.

32. As mentioned above, Giant Eagle needed Excentus’ technology to successfully

implement and operate its fuelperks! cross-marketing program. While Excentus expected

compensation for the use of its technology, for some time, it relied on Giant Eagle and the

Shapiras’ promises that the two would enter into a trademark licensing agreement for fuelperks!

and that Giant Eagle would also agree to have its program participate in Excentus’ anticipated

national fuel cross-marketing coalition. Excentus anticipated that the fuelperks! brand would

become only one of many participating programs in Excentus’ future national coalition. But

while Giant Eagle eventually did enter into a license agreement so that Excentus had the right –

but not the obligation – to use fuelperks! as part of its programs, the Shapiras never allowed

Giant Eagle to become a member of Excentus’ national coalition. They instead wanted their own

program – fuelperks! – to be the single program promoted by Excentus, even though Excentus

had no obligation to do so and instead had the opportunity to develop a much broader and more

promising national coalition.

33. In March of 2012, the Shapiras’ true loyalties were on display. Mr. Perry

announced at one of Excentus’ board meetings that Excentus would finally launch its national

cross-marketing program, which was to be called the Fuel Rewards Network. This was due in

part to a major new agreement between Excentus and Shell Corporation for national redemption

coverage at Shell fuel stations, and it represented a monumental step for Excentus towards

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enacting Mr. Perry’s vision. Excentus would be able to engage untold partners across the

country to participate in its Fuel Rewards Network, including, as only one among many, Giant

Eagle’s fuelperks! program. But since Excentus would not exclusively be using the fuelperks!

brand (which Excentus had no obligation to do, and the brand had not agreed to participate in the

national program anyway), the Shapiras were furious. To them, this announcement did not mean

more profits for Excentus; instead, they saw it as more competition against, and thus less profits

for, Giant Eagle. Giant Eagle was a competitor of Shell, and the Shapiras had not allowed Giant

Eagle to add the fuelperks! brand to the Fuel Rewards Network. They wanted only their brand

promoted by Excentus. Following the announcement, the Shapiras began shouting angry threats

to sue Excentus and all of its individual board members. Importantly, they also began

advocating that Mr. Perry be terminated.

34. Following this meeting, Mr. Perry continued exploring ways to resolve Giant

Eagle’s disputes. After consulting with Excentus’ counsel, Mr. Perry offered that Giant Eagle

could still join the Fuel Rewards Network (as originally discussed) or alternatively license

Excentus’ technology for Giant Eagle’s use with their own fuelperks! program. But the Shapiras

(despite serving as Excentus directors) and Giant Eagle refused. Indeed, David Shapira went so

far as to state that prior to their dispute, he was willing to have Giant Eagle pay Excentus for use

of Excentus’ technology. But now he was not going to allow Giant Eagle to pay Excentus one

[expletive] penny.

35. Seeing no other options, Mr. Perry consulted with legal counsel at Fulbright &

Jaworski, LLP (now Norton Rose Fulbright), and in accordance with their advice, on December

2, 2012, Excentus filed breach of fiduciary duty, unfair competition, and patent infringement

claims against Giant Eagle and the Shapiras. Norton Rose Fulbright also advised Excentus to

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hold a board meeting to decide how to conduct the litigation while two self-dealing directors

continued serving on the Board. Following their advice, Excentus’ Board voted to create an

Executive Committee (which would exclude the Shapiras) to manage Excentus’ business affairs,

as well as a Litigation Committee to manage the litigation free from the self-serving misconduct

of the Shapiras. Defendants Nicholson, Logsdon, and Mills all either voted or expressed their

support for these measures at the time.

36. In the lawsuit filed by Norton Rose Fulbright, Excentus alleged that “Giant

Eagle has embarked on a course of action to disrupt and gain control of Excentus through breach

of fiduciary duties owed by the Shapiras to Excentus.” Excentus further alleged that “the

Shapiras have placed Giant Eagle’s interests ahead of Excentus’ interests. . . . [W]henever there

was a choice to do what was best for Excentus and what was best for Giant Eagle, the Shapiras

have consistently chosen to place Giant Eagle’s interests ahead of Excentus’ interests.”

37. Both the Shapiras and Giant Eagle zealously contested Excentus’ allegations, but

two federal courts disagreed. The Shapiras moved to dismiss the claims against themselves as

directors, but in 2014, a federal court in Pennsylvania denied their motion to dismiss the claim

that the Shapiras had breached the duties they owed to Excentus by causing Giant Eagle not to

pay royalties for the use of the Excentus patents.

38. A Texas federal court also denied a Giant Eagle motion for preliminary

injunctive relief that sought to stop Excentus from exercising an option to buy ADS’s shares

back from ADS (as described in greater detail below). Of particular relevance to this lawsuit

was that federal court’s ruling that Giant Eagle no longer held certain rights to consent to all of

Excentus’ share purchases. As part of Giant Eagle’s preliminary injunction requests, Giant

Eagle argued that Giant Eagle had the right to approve Excentus’ exercise of its option to buy

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back all of ADS’ shares. The federal court disagreed, however, explaining that any such consent

rights had expired. Giant Eagle had lost. Unable to achieve their aims legally, they resorted to

illicit, extra-judicial means.

2. ADS

39. ADS also developed an agenda that would ultimately incentivize it to conspire

with Giant Eagle, the Shapiras, and the remaining Defendants to oust Mr. Perry.

40. The original relationship between ADS and Excentus was no longer a profitable

one for Excentus. When ADS invested in Excentus, the two had entered into a Joint Marketing

Agreement pursuant to which they would jointly offer a private label payment card that grocery

store chains could provide to their customers. Giant Eagle had committed to being a first, test

customer for the offering. However, shortly after the execution of the Joint Marketing

Agreement, Giant Eagle and ADS wound up working together and excluding Excentus entirely

from the project. Excentus’ relationship with ADS quickly became a dormant one.

41. As a result, Mr. Perry began exploring Excentus’ options with respect to ADS.

Following a general agreement in principle to unwind the relationship between ADS and

Excentus, he delegated negotiations to Logsdon, whom he had promoted to Chief Operating

Officer.

42. But the calculus for ADS soon changed. Around that same time, Excentus

executed with MasterCard an agreement to launch a co-branded MasterCard for the Fuel

Rewards Network. This represented a lucrative opportunity to ADS to become the issuer of the

card, and Logsdon came to Mr. Perry with a request from ADS to become the issuer. Mr. Perry

agreed, but only if any agreement with ADS also included an option for Excentus to buy back all

of the Excentus shares that ADS had purchased. Logsdon said ADS would agree, but that it had

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one additional (and, in retrospect, highly suspect) request: ADS wanted to be indemnified if

Giant Eagle opposed the option.

43. As noted above, Giant Eagle did in fact oppose the exercise of the option, but it

failed to do so successfully. Thus, with Excentus having the right to exercise the option and buy

back all ADS shares, ADS was faced with the prospect of being bought out of Excentus at the

same time that highly lucrative opportunities were materializing – Excentus’ co-branded

MasterCard for the Fuel Rewards Network, among others.

3. Auto-Gas

44. Soon after Excentus acquired the patent portfolio from Auto-Gas, Mr. Perry

embarked on an aggressive and wildly successful patent enforcement effort. Mr. Perry achieved

tens of millions of dollars in settlements for Excentus, something that Nicholson had never been

able to achieve for Auto-Gas.

45. Following such success, Nicholson and Upp began asking about the money

Excentus was paying Auto-Gas. Their $300,000 per year payments were set to expire in

September 2013, and Nicholson made clear to Mr. Perry that he was in desperate need for

additional cash and income. He wanted his non-compete renewed, but Mr. Perry could not

agree to have Excentus pay additional consideration for essentially no value in return. The best

that Excentus could do was pay Nicholson some consulting fees for assisting in Mr. Perry’s

patent enforcement efforts. But this turned out not to be enough to meet Nicholson’s cash needs.

4. Logsdon and Mills

46. As part of his effort to develop the next crop of Excentus leaders, Mr. Perry had

promoted Logsdon to President and Chief Operating Officer and Mills to Executive Vice

President and Chief Administrative Officer. In effect, Mr. Perry delegated to Logsdon

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responsibility for the day-to-day operations and growth of both the Fuel Rewards Network and of

Centego (an Excentus subsidiary that held Excentus’ patents). This would allow Mr. Perry to

focus on Excentus’ aggressive patent enforcement plans (which at that point included its largest

enforcement action to date against one of the largest grocery store chains in the country), as well

as resolving corporate issues with Giant Eagle, ADS and Auto-Gas.

47. In late 2013, and following a sizeable settlement payment to Excentus for the use

of its patents, Mr. Perry began to look more closely into Logsdon and Mills’ performance. In

early 2014, when Logsdon and Mills presented the company's 2013 operating results and their

proposed 2014 operating plan and budget, Mr. Perry became increasingly concerned. Growth in

both Excentus’ Fuel Rewards Network and in other aspects of the business was lagging

significantly behind Logsdon and Mills’ previous projections and expenses were soaring,

particularly personnel costs, far outpacing relative revenue and gross profit growth.

48. It also became very apparent that none of the major agreements Logsdon had

negotiated for the Fuel Rewards Network were performing as had been promised by Logsdon

and his team. Key customers of Excentus, such as MasterCard and Shell, had begun voicing

their concerns to Mr. Perry regarding Excentus’ ability to deliver on its commitments under the

agreements Logsdon had negotiated with them. One even demanded Mr. Perry re-negotiate their

agreement under the threat that they may exercise their right to terminate their agreement.

49. Even more troubling, it appeared to Mr. Perry that Logsdon and Mills were

improperly accounting for revenues from one major partner so as to inflate Excentus’

performance and cover up their shortcomings. Worse yet, their 2014 operating plan and budget

did not appear to adequately address the issues with Logsdon’s performance and yet it included

sizeable proposed bonuses to Logsdon and his team. These proposed bonus payments were

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completely out of line with the actual performance of the business, including the performance of

both Logsdon and certain of his subordinates.

50. Mr. Perry made it clear that Logsdon - as President and COO - along with rest of

the senior management term were going to be held specifically accountable for the necessary

improvements. Mr. Perry also informed Logsdon that he would only approve partial payment of

some of the bonus amounts Logsdon had proposed. The other portions would be deferred for

possible payment later in the year, pending expected improvements. Logsdon was not happy

with Mr. Perry’s decisions.

51. Mr. Perry then communicated his concerns regarding the performance of Logsdon

and his senior management team to Mills, who was responsible for all HR and financial matters

for the company. During their discussions, Mills concurred with many of Mr. Perry’s concerns.

Mr. Perry shared with Mills that he was considering placing Logsdon, and possibly other senior

management members, on a Performance Improvement Plan (or “PIP”) consistent with Excentus

HR policies and precedents with other non-performing employees. But when Mr. Perry

conveyed to Mills that he would postpone any issuance of bonus payments (including one to

Mills), Mills became incensed and stormed out of the building.

D. Defendants Conspire to Oust Mr. Perry and Plunder Excentus.

52. Defendants’ interest converged during the summary of 2014. They found in

each other willing co-conspirators to hijack Excentus and use it to achieve their respective aims,

no matter the cost to the company. It is Defendants’ actions during the summer of 2014 that give

rise to Mr. Perry’s derivative claims.

53. On the evening of July 31, 2014, Defendants set their scheme in motion. The

Defendant shareholders (holding just a little over fifty percent) called a secret meeting. Present

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at the meeting were the Shapiras, Nicholson, Leigh Ann Epperson (Senior Vice President and

General Counsel of ADS), Logsdon, and Mills. They provided no notice of this meeting to

Excentus’ eight other shareholders (including, of course, Mr. Perry).

54. That night, Defendants enacted a series of changes to Excentus’ Bylaws to allow

them to take control of Excentus. The ultimate effect of their actions was:

a. Changing Excentus’ Bylaws to explicitly permit a majority of the shareholders to
remove any officer, with or without cause, from his or her position, a power
previously reserved exclusively for the Board;

b. Citing no reason for doing so, removing Mr. Perry from his positions as Chairman
of the Board, Chief Executive Officer and any other position he presently held at
the Company;

c. Ousting two other long-time directors and shareholders from the Board, Art
Hinckley and Jim Callier;

d. Electing Logsdon and Mills to the Board; and

e. Waiving Giant Eagle’s right to force Excentus to repurchase its shares in the event
Mr. Perry was no longer an executive at Excentus, a right they had originally
demanded prior to investing in Excentus.

55. The very next morning, and surrounded by new lawyers (not the Norton Rose

Fulbright lawyers who for years had represented Excentus), Defendants held a meeting of their

“reconstituted” Excentus Board. According to the company’s minutes, first, Defendants

formally abolished both the Executive Committee and the Special Litigation Committee Mr.

Perry had created upon the advice of Norton Rose Fulbright so that disinterested directors could

conduct Excentus’ affairs and litigation. Daniel Shapira then instructed that Giant Eagle be

provided with all of the Executive Committee’s records for the Shapiras’ review, even though

the litigation against the Shapiras was still pending. Second, Defendants called in a number of

the senior management members whose bonuses Mr. Perry has deferred and who worked directly

for Logsdon. They concocted a series of trumped-up charges against Mr. Perry so as to justify

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his termination (which, based on the pervious evening’s secret meeting, was evidently a foregone

conclusion). Third, and a mere minutes after concocting their trumped up charges against Mr.

Perry, Defendants authorized Logsdon to pay many of these same senior executives – including,

without limitation, Stacey Smotherman (Excentus’ General Counsel), Thomas Wightman, Scott

Schaper, and Mike Melson – tens of thousands of dollars. Fourth, the Defendants unanimously

approved indemnification for themselves, apparently well aware that their conduct would result

in personal liability. Fifth, the Defendants made Logsdon the new CEO and Nicholson the new

Chairman of the Board. And sixth, they fired Mr. Perry (again).

56. Their subsequent treatment of Mr. Perry, who had founded and successfully led

Excentus for eighteen years, evidences Defendants’ malicious intent. That same morning of

August 1, 2014, Mr. Perry received a call from Logsdon, Mills and Smotherman. They informed

him that he had been terminated by the “new majority of shareholders” for “cause.” They did

not explain to him what that supposed “cause” was. They had his car towed from the company

parking lot, at his expense; they cut off access to his cell phone; they cut off all of his health

benefits, despite knowing that Mr. Perry’s two daughters suffered from a chronic, life threatening

medical condition; and, in a final act of petty malice, they cancelled Mr. Perry’s own Fuel

Rewards Network MasterCard.

57. Defendants did not stop with Mr. Perry. That same day, Mr. Perry received a

phone call from his daughter, who was at the time also an Excentus employee. She told him she

had been pulled out of a meeting by security and was in the process of being escorted off the

premises. Mr. Perry also learned that day that Defendants had fired two long-time Excentus

employees close to Mr. Perry, and that they had removed from the Board two of his long-time

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friends. These board members also happened to be two of Excentus’ original investors and

remained Excentus shareholders.

58. With Mr. Perry out of Excentus, Defendants began to reap the fruits of their

illicit bargain. Now in control of the company, each of the Defendants set to secure for him or

itself what they had previously sought from Excentus but had been denied by Mr. Perry.

59. First, almost immediately after ousting Mr. Perry Excentus, Giant Eagle, and the

Shapira filed emergency motions stating that “[r]ecent discussions between the new Chief

Executive Officer of Plaintiff Excentus Corporation and Defendants Giant Eagle, Inc., David

Shapira, and Daniel Shapira . . . suggest that the parties may be able to reach a settlement

agreement . . .”

60. Soon after, Excentus, Giant Eagle, and the Shapiras signed a purported

settlement agreement. That “agreement,” negotiated with the Shapiras sitting on both sides of

the table, turned out to be a complete sham. It contains a near total capitulation by Excentus of

all of the rights and interests that Excentus had successfully pursued in litigation against Giant

Eagle and the Shapiras. The Shapiras and Giant Eagle awarded themselves rights that they never

had and that a Texas federal court had denied them. Defendants also had Excentus make

hundreds of thousands of dollars in payments directly to the Shapiras, for no apparent reason

whatsoever. Defendants also modified the compensation structure of certain royalties for the

fuelperks! trademark and added the Fuel Rewards Network – a mark that Giant Eagle had had no

role in developing – to the marks covered by the agreement so as to require Excentus to pay for

its own marks’ use. Defendants also built in punitive provisions to ensure that Excentus could

not pursue its rights in court against Giant Eagle. This sham settlement agreement in effect

resulted in a complete grant of impunity to Giant Eagle and the Shapiras for their conduct, and

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also in a windfall of ill-gotten profits for Giant Eagle and the Shapiras far into the foreseeable

future.

61. Second, Defendants rewarded Logsdon, Mills, Smotherman, and the other

members of senior management with promotions, increased compensation, and hundreds of

thousands of unmerited bonus payments (including payments previously deferred by Mr. Perry).

Tellingly, on the same day that these executives were paid off, Nicholson sent a letter to Mr.

Perry threatening that some of those same executives who had just been paid tens of thousands of

dollars were ready to speak ill of Mr. Perry’s performance as CEO, so as to justify his

termination.

62. Third, Defendants caused Excentus to forego the valuable option rights secured

from ADS to repurchase their shares in Excentus. ADS remains an Excentus shareholder today,

which was the result ADS sought and Giant Eagle unsuccessfully fought for in court. What ADS

and Giant Eagle could not achieve publicly and legitimately they achieved secretly and illicitly.

63. Fourth, Defendants elected Nicholson as the new Chairman of the Board and

Upp as a new board member. Nicholson finally secured the place at the head of the table he

believed he deserved and, on information and belief, both Nicholson and Upp are reaping the

cash they purported to need.

64. Fifth, because the compensation structure of certain intellectual property

agreements between Auto-Gas and Excentus mirrored the agreements between Excentus and

Giant Eagle, on information and belief the “re-negotiated” Excentus-Giant Eagle agreements

resulted in an equal increase in what Excentus would have to pay Auto-Gas. Again, Auto-Gas

and Nicholson secured the cash they desperately needed from Excentus.

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 65. In essence, over the course of a few days during the summer of 2014, Defendants

hijacked and potentially destroyed the value Mr. Perry had built for Excentus. Instead of

conducting themselves in accordance with their duties of utmost loyalty and due care, the

director and officer Defendants breached their duties and acted in their own self-interest. The

shareholder Defendants aided and abetted them. Faced with no other options, Mr. Perry asks the

Court for injunctive relief that restores Excentus to its prior promise and monetary damages that

compensates the non-Defendant shareholders of Excentus.

VI. CAUSES OF ACTION

Breach of Fiduciary Duty

66. Plaintiff incorporates the preceding paragraphs as if fully set forth herein.

67. Defendants Daniel Shapira, David Shapira, Logsdon, Mills and Nicholson owe

Excentus duties of obedience, utmost loyalty, and due care, including a duty to use their

uncorrupted business judgment for the sole benefit of the Excentus.

68. Defendants Daniel Shapira, David Shapira, Logsdon, Mills and Nicholson have

breached the duties they owe to Excentus by acting to benefit themselves at the expense of

Excentus. Their conduct in terminated Mr. Perry and the actions they took following that

termination constitute breaches of the duties they owe to Excentus.

69. These breaches of duties were willful and in bad faith and they have caused

Excentus and its shareholders damage. Excentus is entitled to injunctive relief, actual damages,

and punitive damages.

Aiding and Abetting Breach of Fiduciary Duty

70. Plaintiff incorporates the preceding paragraphs as if fully set forth herein.

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 71. Defendants Giant Eagle, ADS, and Auto-Gas knowingly participated in the

breach of duty the director and officer Defendants carried out in the late summer of 2014, and as

such they became a joint tortfeasors with the fiduciaries and are liable as such.

72. Defendants Giant Eagle’s, ADS’s, and Auto-Gas’ aiding and abetting of the

breaches of fiduciary duties was willful and in bad faith and it has caused Excentus and its

shareholders damage. Excentus is entitled to injunctive relief, actual damages, and punitive

damages.

Unfair Competition

73. Plaintiff incorporates the preceding paragraphs as if fully set forth herein.

74. The conduct of Defendants Giant Eagle, ADS, and Auto-Gas as described above

constitutes business conduct that is contrary to honest practice in commercial matters.

75. Defendants have gained an unfair advantage in the market by capitalizing on

Excentus’ customer relationships, prospective business opportunities, and trademarks, which

they have misappropriated for their own illicit use when they terminated Mr. Perry and paid

themselves off with rights and compensation they never previously had. Defendants conduct and

acts constitute unfair competition.

76. Defendants acts were willful and in bad faith and they have caused Excentus

damage. Excentus is entitled to injunctive relief, actual damages, and punitive damages.

Civil Conspiracy

77. Plaintiff incorporates the preceding paragraphs as if fully set forth herein.

78. Defendants combined to accomplish an unlawful purpose, to wit, the above-

described torts.

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 79. Defendants’ conspiracy was willful and in bad faith and it has caused Excentus

damage. Excentus is entitled to injunctive relief, actual damages, and punitive damages.

Declaratory Judgment

80. Plaintiff incorporates the preceding paragraphs as if fully set forth herein.

81. Pursuant to Chapter 37 of the Texas Civil Practice & Remedies Code, Plaintiff

seeks a declaration that (a) all actions taken by Defendants as shareholders or directors of

Excentus on behalf of Excentus on July 31, 2014 are invalid and unenforceable; (b) all actions

taken by Defendants regarding the ADS option are invalid and unenforceable; (c) all actions

taken by Excentus after July 31, 2014 regarding its relationship with Giant Eagle, ADS, or

Auto-Gas are invalid and unenforceable; (d) all bonus payments or other compensation paid to

any Defendants by Excentus are invalid; and (e) the settlement agreement entered into by

Excentus, the Shapiras and Giant Eagle is invalid and unenforceable.

Fraud by Nondisclosure

82. Plaintiff incorporates the preceding paragraphs as if fully set forth herein.

83. Despite having a duty to do so as Board members of Excentus, Defendants

David Shapira, Daniel Shapira, Logsdon, and Mills deliberately concealed from or failed to

disclose material information – Defendants’ scheme – to Excentus, including, without limitation,

to its Chief Executive Officer and Chairman of the Board. Defendants David Shapira, Daniel

Shapira, Logsdon, and Mills knew that Excentus was ignorant of the scheme and did not have an

equal opportunity to discover the scheme.

84. By failing to disclose the scheme, Defendants intended to induce Excentus to

refrain from acting. Excentus relied on Defendants’ nondisclosure.

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 85. Excentus was injured as a result of acting without the knowledge of the

undisclosed facts.

VII. APPLICATION FOR APPOINTMENT OF RECEIVER AND/OR
TEMPORARY INJUNCTIVE RELIEF.

86. Plaintiff incorporates the preceding paragraphs as if fully set forth herein.

87. Pending the resolution of Plaintiff’s claims, Defendants will continue to manage

the affairs of Excentus, including without limitation this litigation. Accordingly, there is a

substantial risk of ongoing and irreparable harm to the rights and interests of Excentus so long as

Defendants continue leading Excentus and, particularly, its conduct vis-à-vis this litigation. The

actions of the persons presently governing Excentus are illegal, oppressive, and/or fraudulent.

88. Plaintiff therefore requests that the Court appoint a receiver to manage this

litigation on behalf of Excentus. Alternatively, Plaintiff requests that the Court issue temporary

and permanent injunctive relief, as follows:

a. Order a special committee be formed and maintained, made up of members
elected by majority vote of shareholders excluding the Defendants, to review and
approve any matter or action by the company that involves the person or business
interest of any of the Defendants.

b. Order a special committee be formed and maintained, made up of members
elected by majority vote of shareholders excluding the Defendants, to manage
Excentus’ response to this litigation (including any requests for indemnification
by Defendants).

c. Order that all compensation to be paid to any director or persons reporting to the
President, CEO or any executive officer of the company be approved by the same
special committee order.

d. Order that all shareholders be notified of all meetings of the directors or
shareholders while this litigation is pending.

e. Order that all meetings of directors, whether duly called or not, involving two or
more of the Defendants be video recorded and promptly provided to all
shareholders.

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 f. Order that all information of any kind provided to directors as part of a meeting or
otherwise be promptly provided to all shareholders unless otherwise requested by
a shareholder.

g. Order that all meetings held by management to which at least a majority of
employees are invited to be made aware of the company’s business be video
recorded and promptly made available to a shareholders as requested.

VIII. REQUEST FOR EXPENSES INCURRED

89. Plaintiff has retained the undersigned counsel to represent him in this action, and

he has incurred and will continue to incur expenses for investigating and bringing the foregoing

claims on behalf of Excentus Corporation. Plaintiff requests that the Court award him all

expenses incurred, including without limitation reasonable attorneys’ fees and costs incurred, as

per to Section 21.561(b)(1) of the Texas Business Organizations Code.

IX. JURY DEMAND

90. Plaintiff demands a trial by jury.

RELIEF REQUESTED

WHEREFORE, PREMISES CONSIDERED, Plaintiff Dickson Perry respectfully prays

that the Court:

1. Enter a judgment for Plaintiff on behalf of Excentus on Plaintiff’s claims for

damages in excess of $1,000,000, including actual, consequential, incidental, and

punitive damages, plus pre- and post-judgment interest;

2. Rescind the settlement agreement executed by Excentus and Defendants Giant

Eagle, David Shapira, and Daniel Shapira;

3. Place a constructive trust on all of the bonus payments illicitly made to Logsdon,

Mills, Wightman, Melson, and Schaper;

4. Order an accounting;

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 5. Enter a declaration as described above;

6. Appoint a receiver, provisional director, and/or custodian, or, in the alternative,

enter temporary and permanent injunctive relief;

7. Award Plaintiff all expenses incurred in bringing his claims, including without

limitation reasonable attorneys’ fees and costs;

8. Award Plaintiff such other and further relief, both special and general, at law or in

equity, to which he may show himself to be justly entitled.

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DATED: June 25, 2015 Respectfully submitted,

/s/Michael P. Lynn
Michael P. Lynn, P.C.
State Bar No. 12738500
mlynn@lynnllp.com
Jeremy A. Fielding
State Bar No. 24040895
jfielding@lynnllp.com
Andrés Correa
State Bar No. 24076330
acorrea@lynnllp.com
Andrew S. Hansbrough
State Bar No. 24094700
ahansbrough@lynnllp.com
LYNN TILLOTSON PINKER & COX, LLP
2100 Ross Avenue, Suite 2700
Dallas, Texas 75201
Telephone: 214.981.3800
Facsimile: 214.981.3839
ATTORNEYS FOR PLAINTIFF DICKSON
PERRY

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 CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true and correct copy of the above and foregoing
document has been served as shown below on counsel of record on June 25, 2015:

Via Email Via Email
Orrin L. Harrison III Lisa S. Gallerano
(oharrison@ghjhlaw.com) (lgallerano@akingump.com)
GRUBER HURST ELROD JOHANSEN HAIL Patrick O’Brien
SHANK, LLP (pobrien@akingump.com)
1445 Ross Avenue, Suite 2500 AKIN GUMP
Dallas, TX 75202 1700 Pacific Avenue, Suite 4100
Attorneys for Defendants Dallas, TX 75201-4624
Giant Eagle, Inc., David Shapira, and Attorneys for Defendant
Daniel Shapira Alliance Data Systems, Inc.

Via Email Via Email
Bernard Marcus Ken Carroll
(marcus@marcus-shapira.com) (kcarroll@ccsb.com)
Scott Livingston Byran Erman
(livingston@marcus-shapira.com) (berman@ccsb.com)
Jonathan Marcus Sara Romine
(jmarcus@marcus-shapira.com) (sromine@ccsb.com)
MARCUS & SHAPIRA LLP CARRINGTON, COLEMAN, SLOMAN &
301 Grant Street, 35th Floor BLUMENTHAL, L.L.P.
One Oxford Centre 901 Main Street, Suite 5500
Pittsburgh, PA 15219-6401 Dallas, TX 75202-3767
Attorneys for Defendants Attorneys for Defendants
Giant Eagle, Inc., David Shapira, and Brandon Logsdon and Jim Mills
Daniel Shapira

Via Email
Robert B. Wagstaff
(rwagstaff@mcmahonlawtx.com)
MCMAHON SUROVIK SUTTLE
P.O. Box 3679
Abilene, TX 79604
Attorney for Defendants
Randy Nicholson and Auto-Glass Systems, Inc.

/s/ Andres Correa
Andres Correa

4813-2413-6485, v. 1

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Tab B
 CAUSE NO. DC-15-03853

DICKSON PERRY, derivatively on § IN THE DISTRICT COURT
behalf of EXCENTUS CORPORATION, §
§
Plaintiff, §
§
vs. § DALLAS COUNTY, TEXAS
§
§
EXCENTUS CORPORATION, §
BRANDON LOGSDON, JIM MILLS, §
GIANT EAGLE, INC., DAVID §
SHAPIRA, DANIEL SHAPIRA, AUTO- §
GAS SYSTEMS, INC., RANDY §
NICHOLSON, and § 68TH JUDICIAL DISTRICT
ALLIANCE DATA SYSTEMS, INC., §
§
Defendants, §

DEFENDANT GIANT EAGLE, INC.’S MOTION TO DISMISS FOR COLLATERAL
ESTOPPEL OR, IN THE ALTERNATIVE, PURSUANT TO THE GOVERNING
FORUM SELECTION CLAUSE

Defendant Giant Eagle, Inc. (“Giant Eagle”) files this motion requesting that this Court

dismiss the First Amended Petition (“First Am. Pet.”) on the basis of collateral estoppel, which

precludes Plaintiff Dickson Perry (“Perry”) from bringing this lawsuit against Giant Eagle in

Texas.1

1
Defendants David Shapira and Daniel Shapira (together, “the Shapiras”) filed a Verified Special Appearance and
Motion Objecting to Jurisdiction prior to joining Giant Eagle’s Plea to Jurisdiction, Motions to Dismiss, Plea in
Abatement, Special Exceptions, and Original Answer to Plaintiff’s Original Petition (“Original Answer”). The
Shapiras joined the Original Answer subject to their Special Appearance. See Original Answer at 1, n.1. The
Shapiras’ Special Appearance is still pending.
To avoid waiving the Shapiras’ Special Appearance, the present Motion to Dismiss for Collateral Estoppel is filed
on behalf of Giant Eagle only. However, as explained throughout, collateral estoppel also bars Perry’s claims
against the Shapiras in Texas. Accordingly, judicial efficiency would be served by hearing the present collateral
estoppel motion before requiring the parties to undertake jurisdictional discovery related to the Shapiras’ Special
Appearance. If the Court grants the present motion, the Shapiras will withdraw their Special Appearance and will
request dismissal of the claims against them on the basis of collateral estoppel.

DEFENDANT GIANT EAGLE, INC.’S MOTION TO DISMISS FOR COLLATERAL ESTOPPEL
OR, IN THE ALTERNATIVE, PURSUANT TO THE GOVERNING FORUM SELECTION CLAUSE PAGE 1
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 I. SUMMARY OF GROUNDS FOR MOTION TO DISMISS

Collateral estoppel exists precisely for cases like this, where a party unhappy with the

outcome of a previous lawsuit wants a second bite at the apple. A federal district court has

already held that Texas is not the proper forum for this litigation. Excentus Corp. v. Giant Eagle,

Inc., 3:11-cv-03331, 2012 WL 2525594, at *8-11 (N.D. Tex. July 2, 2012) (Boyle, J.) (attached

as Ex. 1). Perry, through this derivative action, is not entitled to another try.

In 2010, the Excentus Corporation (“Excentus”), in litigation led by then-Chairman and

CEO Perry, sued Giant Eagle and the Shapiras in the U.S. District Court for the Northern District

of Texas (the “First Texas Case”). The First Texas Case set forth essentially the same claims as

here, including that Giant Eagle owes Excentus additional compensation for the use of certain

Excentus technology and that the Shapiras breached their fiduciary duties as members of the

Excentus Board of Directors (the “Board”) by taking the position that Giant Eagle did not owe

additional compensation because it already had licensed the right to use the disputed technology.

Giant Eagle and the Shapiras argued that two Stock Purchase Agreements (“SP

Agreements”) between Giant Eagle and Excentus—whereby Giant Eagle invested over $7

million in Excentus, obtained a license to use Excentus’ technology, and nominated the Shapiras

to the Excentus Board—provided Giant Eagle with a defense to Excentus’ claims. Specifically,

the SP Agreements provided Giant Eagle with both a license to the disputed technology and a

warranty of non-infringement, and, as a result, Giant Eagle could not be liable for infringing

Excentus’ potential technology.

Relevant here, the SP Agreements contained a mandatory forum selection clause

requiring any claims arising out of them to be brought where the respondent’s principal offices

are located. Giant Eagle’s and the Shapiras’ principal office is in Allegheny County,

Pennsylvania. Therefore, Giant Eagle and the Shapiras moved to dismiss for improper venue,

DEFENDANT GIANT EAGLE, INC.’S MOTION TO DISMISS FOR COLLATERAL ESTOPPEL
OR, IN THE ALTERNATIVE, PURSUANT TO THE GOVERNING FORUM SELECTION CLAUSE PAGE 2
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arguing that although Excentus’ complaint did not expressly allege any breaches of the SP

Agreements, the forum selection clause still applied because it provided Giant Eagle and the

Shapiras with a defense to all claims asserted against them.

Judge Boyle agreed with Giant Eagle and held that because “resolution of [the] claims

clearly requires the Court to construe the [SP] Agreements, given Giant Eagle’s reliance on the

Agreements as a defense,” the forum-selection clause within those agreements applied and the

case could only be brought in Pennsylvania. Excentus, 2012 WL 2525594, at *8-11 (Ex. 1).2

The court dismissed the case without prejudice for improper venue. Id. As a result of this

decision, collateral estoppel plainly bars Perry’s second attempt, purportedly on behalf of

Excentus, to sue Giant Eagle and the Shapiras in Texas because it already has been decided that

Texas is not a proper forum.

All three elements of collateral estoppel are met. First, this case raises the exact same

issues that were fully and fairly litigated in the First Texas Casenamely, whether the SP

Agreements’ forum selection clause applies to claims, like those here, that require the court to

examine the parties’ respective rights under those agreements. The clause does apply, and Texas

is not a proper forum. Id. at *9 (“the Court must look to the [SP] Agreements to determine

whether Giant Eagle’s defenses are valid and therefore the forum selection clauses contained in

them are applicable.”). Second, the federal court’s enforcement of the forum selection clause

was essential to its judgment regarding the proper venue for the First Texas Case. Finally, this

case involves the same parties, as both the First Texas Case (brought by Excentus) and the

present case (brought derivatively on behalf of Excentus) purport to represent the interests of

Excentus shareholders against Giant Eagle and the Shapiras.

2
All of the documents attached to this motion were considered by the court in the First Texas Case.

DEFENDANT GIANT EAGLE, INC.’S MOTION TO DISMISS FOR COLLATERAL ESTOPPEL
OR, IN THE ALTERNATIVE, PURSUANT TO THE GOVERNING FORUM SELECTION CLAUSE PAGE 3
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 Giant Eagle first raised this collateral estoppel defense in its Original Answer (filed June

5, 2015). Perry then amended his Petition in a transparent attempt to avoid collateral estoppel.

The amendment is futile and only highlights the fact that no amount of creative pleading can

maneuver around the preclusive effect of Judge Boyle’s decision in the First Texas Case. For

example, the First Amended Petition dropped the word “patents” and instead uses “technology”;

however, this rewording has no effect because the term “technology” encompasses the “patents”

at issue, the rights to which are set forth in the SP Agreements. Compare Original Petition ¶ 29

with First Am. Pet. ¶ 32. Further, the First Amended Petition revises the unfair competition

claim by deleting the allegation that Giant Eagle unfairly capitalized on Excentus’ “proprietary

technology” and “intellectual property,” and replaces it with the allegation that Giant Eagle “paid

[itself] off with rights and compensation they never previously had.” Of course, the “rights”

Giant Eagle allegedly awarded itself are the “rights” to certain “proprietary technology” and

“intellectual property” covered by the license Giant Eagle received under the SP Agreements.

Compare Orig. Pet. ¶ 73 with First Am. Pet. ¶ 75.3

Ultimately, the First Amended Petition’s wordsmithing does not change the facts: Perry

is seeking, through his derivative action on behalf of Excentus, to bring claims against Giant

Eagle and the Shapiras arising out of actions they took with respect to the parties’ rights under

the SP Agreements. In other words, Perry seeks to reinstate—in Texas—a lawsuit that was

already dismissed from the state because it is an improper forum. Perry’s attempt to artfully

plead his way around a very straightforward case of collateral estoppel fails and, accordingly,

this case should be dismissed.

3
In the First Texas Case, Excentus, in litigation initiated and directed by Perry, similarly tried to avoid the forum
selection clause in the SP Agreements by avoiding mentioning the SP Agreements by name. This attempt to dodge
the forum selection clause through creative pleading was rejected.

DEFENDANT GIANT EAGLE, INC.’S MOTION TO DISMISS FOR COLLATERAL ESTOPPEL
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 II. FACTS SUPPORTING MOTION TO DISMISS

A. The Parties

1. Perry purports to bring this action “derivatively on behalf of Excentus

Corporation.” First Am. Pet. at p. 1. Perry is an Excentus shareholder and previously served as

its Chairman and CEO. Id.

2. Giant Eagle is a Pennsylvania corporation with its principal place of business in

Allegheny County, Pennsylvania. Id. ¶ 6.4

3. The Petition asserts that venue is proper in Dallas County “because a substantial

part of the events or omissions giving rise to the claims occurred in Dallas County, Texas.” Id. ¶

14. Defendants have specifically denied this allegation. See Original Answer ¶ 35.5

B. Excentus’ Relationship with Giant Eagle and the Shapiras

4. In 2002, Excentus and Giant Eagle entered into a Software License and General

Services Agreement (the “Software License”) (attached as Exhibit 2) under which Excentus

granted Giant Eagle a non-exclusive license to use Excentus’ fuel site controller technology in

connection with Giant Eagle’s fuelperks! program—a program that rewards customers with a

discount on their fuel based on grocery store purchases made using a customer loyalty card.

First Am. Pet. ¶ 21. The Software License remains in full force and effect.6

5. In two separate transactions in 2004 and 2005, respectively, Giant Eagle invested

over $7 million in Excentus pursuant to two nearly identical agreements, thereby becoming the

first “major investor” in Excentus. First Am. Pet. ¶¶ 19-23.

4
Defendant David Shapira is a citizen and resident of Pennsylvania, a Director of Excentus, and Executive
Chairman of the Board of Directors of Giant Eagle. Id. ¶ 7. Daniel Shapira is a citizen and resident of Pennsylvania
and a Director of Excentus. Id. ¶ 8.
5
Giant Eagle’s General Denial in its Original Answer extends to the claims asserted in the First Amended Petition.
See Tex. R. Civ. P. 92.
6
The Software License was with Excentus’ predecessor-in-interest, CCISTech, Inc.

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 6. In the 2004 transaction, Giant Eagle invested approximately $3 million in

Excentus pursuant to a Series A Stock Purchase Agreement (the “2004 SP Agreement”). See

2004 SP Agreement (attached as Ex. 3). In exchange, Excentus warranted that “none of the

Intellectual Property currently sold or licensed by [Excentus] to any Person . . . infringes upon or

otherwise violates any Intellectual Property rights of others.” Id. at ¶ 3.09(d). Excentus fully

indemnified Giant Eagle for any claim arising out of “any misrepresentation or breach of [this]

warranty” by Excentus. Id. ¶ 7.01(a). Excentus also granted Giant Eagle the “non-exclusive

right to license [Excentus’] Products and to establish retail/gas station alliances utilizing

[Excentus’] Products in any market in which [Giant Eagle] operates as of or after the Closing

Date.” Id. at ¶ 5.06. “Products,” in turn, is defined as the technology Excentus licensed to Giant

Eagle under the Software License “and all improvements and enhancements thereto . . . .” Id.

Together, this language makes clear that the 2004 SP Agreement gave Giant Eagle the right to

use whatever Excentus technology—including patented technology—it needed for its fuelperks!

program, as well as all “improvements and enhancements” to that technology.

7. Also pursuant to the 2004 SP Agreement, Excentus granted Giant Eagle “the right

to nominate one candidate . . . for election to [its] Board of Directors.” Id. at ¶ 5.07. The 2004

SP Agreement expressly designated David Shapira as Giant Eagle’s initial representative on the

Excentus Board. Id.

8. Of critical importance here, the 2004 SP Agreement provides: “VENUE FOR

ANY ACTION ARISING OUT OF THIS AGREEMENT SHALL RESIDE

EXCLUSIVELY IN THE COUNTY IN WHICH THE RESPONDENT’S PRINCIPAL

OFFICES ARE LOCATED.” Id. ¶ 8.06 (emphasis in original).

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 9. In the 2005 transaction, Giant Eagle made an additional $4 million investment

pursuant to a Series B Preferred Stock Purchase Agreement (the “2005 SP Agreement”) which

is, in all material respects, identical to the 2004 SP Agreement, including the forum selection

clause. See 2005 SP Agreement ¶ 8.06 (attached as Ex. 4). The 2005 SP Agreement allowed

Giant Eagle to nominate an additional candidate for the Excentus Board. Id. ¶ 8.06. Giant Eagle

nominated Daniel Shapira who was then appointed to the Board. First Am. Pet. ¶ 23.

10. In 2010, Excentus and Giant Eagle entered into an addendum to the Software

License, under which Excentus granted Giant Eagle an additional non-exclusive license “to

make, have made, use, reproduce, and make derivative works of, the source code” for its fuel cite

controller technology. See Addendum No. 1 to Software License and General Services

Agreement (“SL Addendum”) at ¶ 1(a) (attached as Ex. 5). As a result of the Software License

and SL Addendum, Giant Eagle obtained the right to use both the source and object codes to

Excentus’ fuel controller software.

C. Excentus sues Giant Eagle and the Shapiras in Federal District Court in Texas

11. Unfortunately, the agreements setting forth the parties’ respective rights did not

stop Perry from setting in motion an onslaught of fruitless litigation that he now – via derivative

action – seeks to relitigate in Texas, despite being precluded from doing so by the prior judgment

of a Texas federal court.

12. In 2010, Perry, while serving as Chairman and CEO of Excentus, caused

Excentus to sue Giant Eagle and the Shapiras in the U.S. District Court for the Northern District

of Texas (the “First Texas Case”). The Second Amended Complaint (“S.A.C.”) in that case

alleged Breach of Duties of Loyalty and Utmost Good Faith, Declaratory Judgment, and Patent

Infringement. See S.A.C. (attached as Ex. 6). The First Texas Case was based on the same

legally untenable position asserted here; namely, that Giant Eagle owes Excentus additional

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compensation for its use of certain Excentus technology, and that the Shapiras breached their

fiduciary duties to Excentus by taking the position that Giant Eagle did not owe additional

compensation because Giant Eagle already had rights to the disputed technology under the

parties’ SP Agreements. See generally id.

13. Giant Eagle’s defense in the First Texas Case was the same as its defense will be

here. Excentus, through the SP Agreements, granted Giant Eagle a license to use the technology

that formed the basis of Excentus’ intellectual property claims and granted Giant Eagle a

warranty of non-infringement. Excentus, 2012 WL 2525594, at *6-8. Because this defense

required the court to determine the parties’ rights under the SP Agreements, Giant Eagle and the

Shapiras moved to dismiss for improper venue, arguing that the mandatory forum selection

clause in those agreements required Excentus to sue them in Pennsylvania. Id.; see also Exs. 3, 4

§ 8.09. The principal issues before Judge Boyle were (1) whether the mandatory forum selection

clause applied even though Excentus did not directly assert a breach of those Agreements, and

(2) whether the forum selection clause applied to the Shapiras even though they were not

signatories to those agreements.

D. The Decision in the First Texas Case

14. In her decision, Judge Boyle noted that although the court was not deciding

whether the SP Agreements did, in fact, grant Giant Eagle a license to use certain Excentus

patents—i.e., the court was not deciding the merits of Giant Eagle’s defense—it had to “look to

the Stock Purchase Agreements to determine whether Giant Eagle’s defenses are valid” and,

therefore, “the forum selection clauses contained in them are applicable.” Excentus, 2012 WL

2525594, at *9 (Ex. 1). Judge Boyle noted that although “Excentus’ claims do not rely on the

[SP] Agreements, . . . resolution of these claims clearly requires the Court to construe the [SP]

Agreements, given Giant Eagle’s reliance on the Agreements as a defense.” Id. at *9-10.

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 15. The court further held that it was required to construe the SP Agreements to

resolve all of Excentus’ claims—which included breach of the duty of loyalty and good faith,

patent infringement, and unfair competition—because the claims asserted “involve[d] Giant

Eagle’s obligations under the [SP] Agreements, whether Giant Eagle had a license to the patents

at issue, or whether such purported license is a defense to Excentus’ claims.” Id. at *10. In

addition, the court held that the Shapiras, who were sued, as they are here, for breach of duties

owed as Excentus Board members, could invoke the forum selection clause “given the

relatedness of the Shapiras to the dispute between Excentus and Giant Eagle.” Id. at *10, n. 10.7

16. Accordingly, the court dismissed the case for improper venue. Id.8 Excentus re-

filed its lawsuit in the U.S. District Court for the Western District of Pennsylvania. Excentus v.

Giant Eagle, Inc., No. 2:13-cv-00178-JFC (W.D. Pa. 2013). That case was resolved by the

Settlement Agreement referenced in the First Amended Petition. See First Am. Pet. ¶¶ 59-60.

III. LEGAL ARGUMENT

Collateral estoppel precludes Perry from pursuing this misguided lawsuit in Texas.

Resolution of the claims asserted here will turn on the same issues as in the First Texas Case, in

particular, the parties’ rights to certain technology and the propriety of certain actions taken by

Giant Eagle and the Shapiras with respect to those rights, as provided in the SP Agreements. As

the Northern District of Texas held, reliance on these Agreements as a defense triggers the
7
Judge Boyle also held that the forum selection clause was “valid and enforceable” on its face because “it is neither
unfair nor unreasonable to require the party initiating litigation to sue in the county of the respondent, as agreed to
by the parties, which evidences the parties’ apparent desire to discourage litigation.” Id. at *6. Further, because the
forum selection clause provided that venue “shall reside exclusively in the county in which the respondent’s
principal offices are located,” the provision was held to be mandatory rather than permissive. Id. at *6, n.4.
8
Although Excentus argued in the First Texas Case that certain provisions in the SP Agreements had expired, the
forum selection clause was not one of them. To the contrary, Excentus expressly invoked and relied upon the forum
selection clause in companion litigation in federal court in Pennsylvania. Accordingly, any argument by Perry here
that certain provisions of the SP Agreements are expired has no impact on the preclusive effect of Judge Boyle’s
decision in the First Texas Case—the issue of whether certain provisions of the SP Agreements had expired was
raised to Judge Boyle, and she nevertheless dismissed the action based on the forum selection clause. That finding
precludes this second attempt to sue in Texas.

DEFENDANT GIANT EAGLE, INC.’S MOTION TO DISMISS FOR COLLATERAL ESTOPPEL
OR, IN THE ALTERNATIVE, PURSUANT TO THE GOVERNING FORUM SELECTION CLAUSE PAGE 9
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Agreements’ mandatory forum selection clause. That clause requires this case to be brought

against Giant Eagle (and the Shapiras) in Allegheny County, Pennsylvania.

A. Overview of Collateral Estoppel

Collateral estoppel is intended to “promote judicial efficiency, protect parties from

multiple lawsuits, and prevent inconsistent judgments by precluding the relitigation of matters

that have already been decided . . . in a prior suit.” In re Team Rocket, L.P., 256 S.W.3d 257,

260 (Tex. 2008). “[O]nce a court has decided an issue of fact or law necessary to its judgment,

that decision may preclude relitigation of the issue in a suit on a different cause of action

involving a party to the first case.’” Davillier v. Sw. Sec., FSB, No. 3:12-CV-2413-D, 2012 WL

6049014, at *2 (N.D. Tex. Dec. 5, 2012) (quoting Allen v. McCurry, 449 U.S. 90, 94 (1980)).

Collateral estoppel applies to issues of venue and forum selection clauses. Id. at *2-3; see also

Duffy & McGovern Accommodation Servs. v. QCI Marine Offshore, Inc., 448 F.3d 825, 829-30

(5th Cir. 2006) (“[T]his and other courts have held that . . . dismissals based on valid forum

selection clauses are preclusive.”). “Texas applies the doctrine of collateral estoppel in

accordance with traditional federal common law.” Hanson v. Odyssey Healthcare, Inc., 2007

WL 5186795, at *3, n.4 (citing Sysco Food Servs., Inc. v. Trapnell, 890 S.W.2d 796, 802, n.7

(Tex. 1994)).

“[T]o invoke the doctrine of collateral estoppel, a party must establish (1) the facts sought

to be litigated in the first action were fully and fairly litigated in the prior action; (2) those facts

were essential to the judgment in the first action; and (3) the parties were cast as adversaries in

the first action.” Eagle Props., Ltd. v. Scharbauer, 807 S.W.2d 714, 721 (Tex. 1990). The

doctrine does not require an identity of claims or parties in the original and subsequent actions.

Collateral estoppel, rather, “precludes the relitigation of identical issues actually litigated in a

previous action, even though the subsequent action is based upon a different cause of action.”

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Wilhite v. Adams, 640 S.W.2d 875, 876 (Tex. 1982) (emphasis added). Moreover, “[s]trict

mutuality of parties is no longer required.” Eagle Props., 807 S.W.2d at 721 (citing Petta, 44

S.W.3d at 579). Instead, “[i]t is only necessary that the party against whom collateral estoppel is

being asserted was a party or in privity with a party in the first action.” Id. Each of the three

elements for collateral estoppel is satisfied here.

B. The Applicability of the Forum Selection Clause in the SP Agreements was Fully
and Fairly Litigated in the First Texas Case

Whether the SP Agreements’ forum selection clause applies when raised as a defense was

fully litigated in the First Texas Case and is front-and-center once again. Just as in the First

Texas Case, Giant Eagle (and the Shapiras) will be asserting the SP Agreements as a defense

because the key factual allegations asserted here are, in all material respects, virtually identical to

those asserted in the First Texas Case:

(1) Perry alleges that “[t]he Shapiras were not on Excentus’ board to loyally serve
Excentus’ best interests” and that “they worked tirelessly to benefit and protect
Giant Eagle.” First Am. Pet. ¶ 31. The First Texas Case was premised on the
same theory that “in many dealings related to Excentus, the Shapiras have placed
Giant Eagle’s interests ahead of Excentus’ interests.” S.A.C. ¶ 29 (Ex. 6).

(2) Perry alleges that Giant Eagle has not properly compensated Excentus for the use
of certain technology. First Am. Pet. ¶ 32; see also id. ¶ 34 (“David Shapira went
so far as to state that prior to their dispute, he was willing to have Giant Eagle pay
Excentus for use of Excentus’ technology. But now he was not going to allow
Giant Eagle to pay one [expletive] penny.”). The First Texas Case contains
nearly identical allegations. See S.A.C. ¶ 29 (Ex. 6) (“Giant Eagle and the
Shapiras have refused to act in good faith to negotiate a license or other
agreement to provide Giant Eagle with the right to use the Excentus Patents and to
compensate Excentus fairly for such use.”).

(3) Perry alleges that the Shapiras were “furious” about the announcement of the Fuel
Rewards Network (“FRN”) when they should have been happy about it. First
Am. Pet. ¶ 33. The First Texas Case alleges the same thing. See S.A.C. ¶ 34 (Ex.
6) (“[i]nstead of cheering the rollout of the FRN which is to the great benefit of
Excentus, the Shapiras have complained of it and looked for excuses to object to
it because they have placed their own interests and those of Giant Eagle ahead of
Excentus.”).

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 (4) Perry alleges that Giant Eagle acted to “aid and abet” the Shapiras’ alleged
breaches of their fiduciary duties. First Am. Pet. ¶¶ 68, 71 (alleging that Giant
Eagle “knowingly participated” in helping the Shapiras breach their duties “by
acting to benefit themselves at the expense of Excentus.”). The First Texas Case
similarly alleged that Giant Eagle acted through the Shapiras “to disrupt and gain
control of Excentus through breaches of the Shapiras’ duties of loyalty and utmost
good faith,” S.A.C. ¶ 29 (Ex. 6), and pled that “the actions of the Shapiras . . .
constitute the acts of Giant Eagle.” Id. ¶ 28; and

(5) Likewise, Perry’s unfair competition claim is nothing more than a revised version
of the patent infringement claims set forth in the First Texas Case. Perry alleges
that Giant Eagle has “gained an unfair advantage in the market by capitalizing on
Excentus’ customer relationships, prospective business opportunities, and
trademarks which [Giant Eagle] [has] misappropriated for [its] own illicit use
when they terminated Mr. Perry and paid themselves off with rights and
compensation they never previously had.” First Am. Pet. ¶ 75 (emphasis added).
The “rights” referred to here are the rights to the technology that was at the heart
of the First Texas Case. Indeed, in the First Texas Case, Excentus alleged
essentially the exact same claims, although in language of patent infringement.
See S.A.C. ¶ 64 (Ex. 6) (“Giant Eagle gained an unfair advantage in the market by
capitalizing on Excentus’ efforts and success in its fuel discount systems by
infringing its patents and gaining access to Excentus’ confidential and proprietary
information and technology and then using these for Giant Eagle’s benefit and
against Excentus in the marketplace, which are acts that constitute unfair
competition under the common law.”).

As these examples demonstrate, the issues raised here are the same as the issues raised in

the First Texas Case and the defense will be the same. The “technology” referred to throughout

the First Amended Petitionand for which Giant Eagle is alleged to owe additional

compensationis the patents that Excentus purchased from Defendant Auto-Gas in 2008. First

Am. Pet. ¶ 28. This technology, however, either existed or was based on claimed technology

that existed (and was disclosed) before Excentus represented in the SP Agreements that none of

its technology infringed upon any other existing patents. Thus, the license granted by Excentus

to Giant Eagle in the Software License, and reaffirmed in the SP Agreements, is fatal to any

claims by Perry that (1) Giant Eagle owes additional compensation; (2) the Shapiras violated

their fiduciary duties by taking the position that Giant Eagle already had a license to the disputed

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technology; or (3) the Settlement Agreement between Excentus and Giant Eagle resolving the

parties’ claims to the disputed technology under the SP Agreements was a “complete sham.”

As Giant Eagle alleged in the First Texas Case, this license granted Giant Eagle the right

to use Excentus’ fuel site controller technology and “all improvements and enhancements

thereto.” Ex. 3 ¶ 5.06. By definition, any later acquired patents involving the same

technology—such as the patents Excentus allegedly bought from Auto-Gas, which were known

at the time of the original Software License—would provide a complete bar to any claim for

additional compensation based on Giant Eagle’s use of this licensed technology.9 This point, as

her opinion makes clear, was not lost on Judge Boyle. Moreover, Excentus’ warranty of non-

infringement (and related indemnification) in the SP Agreements covered any patents existing at

that time, which includes the patents for which Perry now claims Giant Eagle owes additional

compensation. Thus, the SP Agreements provide Giant Eagle (and the Shapiras) with a defense

to Perry’s claims, as their alleged conduct was entirely consistent with the parties’ respective

rights under the SP Agreements.

On top of that, the relief Perry seeks—including rescission of the Settlement Agreement

resolving the parties’ disputes about their rights under the SP Agreements—demonstrates why

collateral estoppel is so important here. First Am. Pet. at p.26, ¶ 2. Rescission of the Settlement

Agreement that ultimately resolved the claims asserted in the First Texas Case (and later re-filed

in Pennsylvania) would result in the reinstatement—in Texas—of the exact same litigation that

already was dismissed out of Texas by Judge Boyle. This would be a blatant end-run around the

principles of collateral estoppel. Perry cannot “sidestep the reach of a contractual forum-

9
DeForeste Radio Tel. & Tel. Co. v. United States, 273 U.S. 236, 242 (1927); Corebrace LLC v. Star Seismic LLC,
2008 WL 7071435, at *5 (D. Utah July 18, 2008) (“the licensee’s rights under that agreement remain intact and
[p]laintiff’s claims for … infringement fail to state a claim for which relief may be granted.”).

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selection clause by suing under causes of action sounding in tort.” Ginter, 536 F.3d at 445;

accord Marinechange Shipping Ltd. v. Sebastian, 143 F.3d 216, 220-21 (5th Cir. 1998).

Moreover, Perry argues that the Settlement Agreement was a “complete sham” because “[t]he

Shapiras and Giant Eagle awarded themselves rights that they never had” and that it “resulted in

a complete grant of impunity to Giant Eagle and the Shapiras for their conduct” with respect to

the parties’ usage of, and rights to, certain technology. First Am. Pet. ¶ 60. Of course, the only

way for a court to determine whether the Settlement Agreement resolving a dispute about the

parties’ rights under the SP Agreements was a “sham” would be to construe the parties’ rights

under the SP Agreements. As explained throughout, construing these Agreements triggers the

forum-selection clause.

Accordingly, because “resolution of [the] claims clearly requires the Court to construe

the [SP] Agreements, given Giant Eagle’s reliance on the Agreements as a defense,” the forum-

selection clause within those Agreements applies and this case must be brought in

Pennsylvanianot Texas. Excentus, 2012 WL 2525594, at *9-10 (Ex. 1); see also Fuchs Family

Trust v. Parker Drilling Co., No. 9986-VCN, 2015 WL 1036106 (Del. Ch. March 4, 2015)

(unpublished) (applying Texas collateral estoppel law to bar subsequent derivative litigation

where the subsequent action was “based on the same underlying operative facts” and noting

“[t]hat the two plaintiffs may have offered somewhat different theories…does not deprive the

[initial action] of preclusive effect.”). The first element of collateral estoppel is satisfied because

the applicability of the forum selection clause already has been litigated and decided.

C. The Finding that the Forum Selection Clause Applied was Essential to the
Judgment

The federal district court’s holding that the forum selection clause applied was essential

to the judgment in the First Texas Case; indeed, it was the very reason for dismissal. Excentus,

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2012 WL 2525594, at *8 (“The Court finds that the [SP] Agreements’ forum selection clauses

are applicable in this case, and therefore venue is improper.”); Davillier, 2012 WL 6049014, at

*1 (“collateral estoppel bars the parties from relitigating the enforceability or applicability of the

forum selection clause in the parties’ . . . agreement.”). The second element is satisfied.

D. The Parties Were Cast as Adversaries in the Original Texas Action

Collateral estoppel operates “against persons who have had their day in court either as a

party to the prior suit or as a privy, and, where not so, that, at the least, the presently asserted

interest was actually and adequately represented in the prior trial.” Eagle Prop., 807 S.W.2d at

721 (Tex. 1990) (quotations omitted). The doctrine does not require that the parties in both

actions be identical; “rather, it is only necessary that the party against whom the plea of collateral

estoppel is being asserted be a party or in privity with a party in the prior litigation.” Id.

(citations omitted). “People can be in privity in at least three ways: (1) they can control an action

even if they are not parties to it; (2) their interests can be represented by a party to the action; or

(3) they can be successors in interest, deriving their claims through a party to the prior action.”

Id. (citing Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 653 (Tex. 1996)). “The judgment in an

action to which the corporation is a party is binding under the rules of [collateral estoppel] in a

subsequent action by its stockholders or members suing derivatively on behalf of the corporation

. . . .” RESTATEMENT (SECOND) OF JUDGMENTS § 59(2) (1982).10

The application of these privity principles is straightforward. In the First Texas Case,

Excentus was the named Plaintiff and represented the corporation’s (i.e., the shareholder’s)

10
See also COMMERCIAL RELATIONSHIPS, 18A Fed. Prac. & Proc. Juris. § 4460 (2d ed.) (because a derivative
proceeding “is on the claim of the corporation, any judgment that precludes the claim of the corporation also
precludes a derivative action to enforce that claim.”); Foreman v. Gen. Motors Corp., 625 F. Supp. 1048 (S.D. Ohio
1985) (holding that individual shareholders could not relitigate breach of contract claims that had already pursued by
the corporation); In re Horne, 44 B.R. 796, 797 (Bankr. S.D. Fla. 1984) (citing Montana v. U.S., 440 U.S. 147, 154)
(dismissal of a prior proceeding brought by a corporation “constitutes an adjudication on the merits and this debtor,
whose present claim is derivative, is collaterally estopped from relitigating those issues.”).

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interests against Giant Eagle and the Shapiras. Perry was a major shareholder and CEO of

Excentus; his interests were well-represented. As misguided and meritless as the present case

may be, Perry is seeking, through this purported derivative action, to represent the same interests

(Excentus shareholders against Giant Eagle and the Shapiras) that Excentus represented in the

First Texas Case. See TEX. BUS. ORGS. CODE § 21.551(1) (“Derivative proceeding” means a

civil suit in the right of a domestic corporation); In re Sonus Networks, Inc. Shareholder

Derivative Litig., 499 F.3d 47, 63 (1st Cir. 2007) (applying collateral estoppel to bar second

derivative lawsuit because “[i]t is a matter of black letter law that the plaintiff in a derivative suit

represents the corporation, which is the real party in interest”).11 If this derivative suit were

successful, the relief requested would flow to Excentus. See Hanson, 2007 WL 5186795, at *5

(“an individual shareholder bringing a derivative claim is at best a nominal plaintiff. . . . The

corporation is the real party in interest; it receives the proceeds of the action and is bound by the

results of the suit. . . . Therefore, [the corporation] is the true plaintiff in this suit, just as it was in

the State Court Derivative Action.”). The privity element is satisfied.12

11
See also Hanson, 2007 WL 5186795, at *5 (holding that “because [plaintiff] and the state court plaintiffs both
represent identical interests—Odyssey and all of its shareholders—the Court finds that the parties to this suit were
indeed cast as adversaries” in the previous action); LeBoyer v. Greenspan, No. 03-cv-5603, 2006 WL 2987705, at
*3 (C.D. Cal. Oct. 16, 2006) (“differing groups of shareholders who can potentially stand in the corporation’s stead
are in privity for the purposes of issue preclusion.”). Moreover, the same reasoning that Judge Boyle applied in
finding that the Shapiras could invoke the forum selection clause—namely, “the relatedness of the Shapiras to the
dispute between Excentus and Giant Eagle,” Excentus, 2012 WL 2525594, at *10, n.10—applies to bind Perry, an
Excentus shareholder and former CEO, to the results of that dispute.
12
In the alternative, even if the Court finds the elements of collateral estoppel are not met here, the Court should
nevertheless dismiss this case based on the forum selection clause for the same reasons outlined in Judge Boyle’s
opinion. The forum selection clause applies because the Court is required to determine the parties’ rights under the
SP Agreements to resolve Perry’s claims. See Aerus L.L.C. v. Pro Team, Inc., No. 3:04-cv-1985-M, 2005 WL
1131093 (N.D. Tex. May 9, 2005) (“If enforcement of a provision in [an agreement with a forum selection clause] is
… a defense to a claim, that claim involves a right or remedy under the contract and should fall within the scope of
the forum selection clause.”); Pinnacle Interior Elements, Ltd. v. Panalpina, Inc., 3:09-cv-0430-G, 2012 WL
445927, at *5 (N.D. Tex. Feb. 9, 2010) (“When the plaintiff raises tort claims, the applicability of a contractual
forum-selection clause to those claims depends on whether resolution of the claims relates to interpretation of the
contract.”).

DEFENDANT GIANT EAGLE, INC.’S MOTION TO DISMISS FOR COLLATERAL ESTOPPEL
OR, IN THE ALTERNATIVE, PURSUANT TO THE GOVERNING FORUM SELECTION CLAUSE PAGE 16
A0927450.9/234716.docx

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 IV. CONCLUSION

Perry is collaterally estopped from bringing this case against Giant Eagle (and the

Shapiras) in Texas. Even though the Petition does not allege a breach of the SP Agreements,

resolution of Perry’s claims will require a court to construe the parties’ respective rights and

obligations under those Agreements. As previously held by the U.S. District Court for the

Northern District of Texas, the mandatory forum selection clause in the SP Agreements applies,

and Perry can only pursue these claims against Giant Eagle (and the Shapiras) in Allegheny

County, Pennsylvania. This case should be dismissed.

Respectfully Submitted,

/s/ Orrin L. Harrison III
Orrin L. Harrison III
Bar No. 09130700
oharrison@ghetrial.com
GRUBER HURST ELROD JOHANSEN
HAIL SHANK, LLP
1445 Ross Avenue, Suite 2500
Dallas, TX 75202
Telephone: 214-855-6828
Fax: 214-855-6808

-and-

Bernard Marcus
marcus@marcus-shapira.com
Scott Livingston
livingston@marcus-shapira.com
Jonathan Marcus
jmarcus@marcus-shapira.com
MARCUS & SHAPIRA LLP
301 Grant Street, 35th Floor
One Oxford Centre
Pittsburgh, Pennsylvania 15219-6401
Telephone: 412-338-5200
Fax: 412-391-8758

Attorneys for Giant Eagle, Inc., David
Shapira, and Daniel Shapira
DEFENDANT GIANT EAGLE, INC.’S MOTION TO DISMISS FOR COLLATERAL ESTOPPEL
OR, IN THE ALTERNATIVE, PURSUANT TO THE GOVERNING FORUM SELECTION CLAUSE PAGE 17
A0927450.9/234716.docx

R046
 CERTIFICATE OF SERVICE

The undersigned certifies that a copy of the foregoing instrument was served upon the

attorneys of record in the above cause via electronic filing and E-Mail, in accordance with Rule

21a, Texas Rules of Civil Procedure, on July 15, 2015.

Michael P. Lynn Ken Carroll
mlynn@lynnllp.com kcarroll@ccsb.com
Jeremy A. Fielding Bryan Erman
jfielding@lynnllp.com berman@ccsb.com
Andres Correa Sara Romine
acorrea@lynnllp.com sromine@ccsb.com
Lynn Tillotson Pinker & Cox, LLP Carrington, Coleman, Sloman & Blumenthal, LLP
2100 Ross Avenue, Suite 2700 901 Main Street, Suite 5500
Dallas, TX 75201 Dallas, Texas 75202
Counsel for Plaintiffs Counsel for Defendants Brandon Logsdon and Jim
Mills
Lisa S. Gallerano Robert Wagstaff
lgallerano@akingump.com rwagstaff@mcmahonlawtx.com
Patrick O’Brien Paul L. Cannon
obrien@akingump.com pcannon@mcmahonlawtx.com
Akin Gump Strauss Hauer & Feld LLP McMahon Surovik Suttle, PC
1700 Pacific Avenue, Suite 4100 400 Pine Street, Suite 800
Dallas, Texas 75201-4624 Abilene, Texas 79601
Counsel for Defendant Alliance Data Systems, Counsel for Defendants Randy Nicholson and Auto-
Inc. Gas

/s/ Orrin L. Harrison III
Orrin L. Harrison III

DEFENDANT GIANT EAGLE, INC.’S MOTION TO DISMISS FOR COLLATERAL ESTOPPEL
OR, IN THE ALTERNATIVE, PURSUANT TO THE GOVERNING FORUM SELECTION CLAUSE PAGE 18
A0927450.9/234716.docx

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 EXHIBIT 1

Excentus Corp. v. Giant Eagle, Inc., 3:11-cv-03331,
2012 WL 2525594 (N.D. Tex. July 2, 2012) (Boyle, J.)

Defendant Giant Eagle's Motion to Dismiss Page 19

R048
Excentus Corp. v. Giant Eagle, Inc., Not Reported in F.Supp.2d (2012)
2012 WL 2525594

technology in support of Giant Eagle's efforts to design
a loyalty rewards program for Giant Eagle grocery stores.
2012 WL 2525594
These types of programs, increasingly common across the
Only the Westlaw citation is currently available.
country, provide grocery store or other retail establishment
United States District Court,
customers with discounts at gasoline stations, gift cards,
N.D. Texas,
or other types of rewards. Pursuant to these discussions,
Dallas Division.
the parties entered into a Software License and General
EXCENTUS CORPORATION, Plaintiff, Services Agreement (“Software License”) in 2002 and a
v. later Addendum in 2010. Through the Software License,
GIANT EAGLE, INC., David Shapira, Excentus provided computer software that Giant Eagle uses
in its “fuelperks!” program, which is Giant Eagle's specific
and Daniel Shapira, Defendants.
gas-grocery cross-marketing program using fuel discounts as
Civil Action No. 3:11–CV– consumer loyalty rewards.
3331–B. | July 2, 2012.
The parties' relationship expanded over time as Giant Eagle
Attorneys and Law Firms invested in Excentus twice in 2004 and 2005 through its
Stock Purchase Agreements, becoming one of Excentus'
Brett C. Govett, Karl G. Dial, Fulbright & Jaworski, Dallas, largest shareholders and gaining two seats on Excentus' Board
TX, for Plaintiff.
of Directors. 1 Unfortunately, relations between the parties
Orrin Lea Harrison, III, Patrick G. O'Brien, Akin Gump eventually deteriorated due to Excentus' claims that Giant
Strauss Hauer & Feld, Dallas, TX, Bernard D. Marcus, Eagle failed to properly support Excentus' current and future
Brian C. Hill, Scott D. Livingston, Marcus & Shapira LLP, business plans as required by the parties' Stock Purchase
Pittsburgh, PA, for Defendants. Agreements and also failed to obtain a license to Excentus'
patents for use in Giant Eagle's fuelperks! program and failed
to pay for such license. Excentus now asserts claims against
Giant Eagle and the Shapiras, directors or officers of both
MEMORANDUM OPINION AND ORDER
Giant Eagle and Excentus, for breach of duties of loyalty
JANE J. BOYLE, District Judge. and good faith, patent infringement, and unfair competition.
Excentus also seeks declaratory judgement regarding whether
*1 Before the Court are the Motions to Dismiss for Improper Giant Eagle has a license to the patents at issue pursuant
Venue, Lack of Personal Jurisdiction, and Failure to Plead to the parties' Software License. Giant Eagle now seeks
a Legally Sufficient Claim filed by Defendants Giant Eagle, dismissal of Excentus' claims for improper venue, lack of
Inc. (“Giant Eagle”) (doc. 24) and David and Daniel Shapira personal jurisdiction, and failure to state a claim upon which
(the “Shapiras”) (doc. 27), both filed January 31, 2012. relief may be granted. Specifically, Giant Eagle argues that
For the reasons listed below, the Court finds that venue venue is improper due to forum selection clauses contained
is improper and therefore DISMISSES Excentus' Second in contracts between the parties, Defendants have insufficient
Amended Complaint (“SAC”) without prejudice to refiling in contacts with Texas that would subject them to personal
a court of proper venue. jurisdiction in this Court, and Defendants are relieved from
any liability pursuant to the parties' various contracts.

I.
II.
BACKGROUND
LEGAL STANDARD
This case concerns tort claims stemming from a soured
business relationship between the parties. Starting in 2001, *2 Federal Rule of Civil Procedure 12(b)(3) (“Rule 12(b)
the parties began discussing a project whereby Excentus (3)”) provides for the dismissal of civil actions for improper
Corporation (“Excentus”) would provide Giant Eagle with venue. In relevant part, 28 U.S.C. § 1391(b) states that a

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
Defendant Giant Eagle's Motion to Dismiss Page 20
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Excentus Corp. v. Giant Eagle, Inc., Not Reported in F.Supp.2d (2012)
2012 WL 2525594

civil action may be brought in “a judicial district in which
a substantial part of the events or omissions giving rise to
the claim occurred.”A motion to dismiss for improper venue i. Enforceability of the Forum Selection Clause.
requires that the facts be viewed in the light most favorable to “[A] forum selection clause is prima facie valid and should
the plaintiff.Ambraco, 570 F.3d at 237–38 (citation omitted). be enforced unless the resisting party shows that enforcement
Moreover, “ ‘the court is permitted to look at evidence in the would be unreasonable.”Seattle–First Nat'l Bank v. Manges,
record beyond simply those facts alleged in the complaint and 900 F.2d 795, 799 (5th Cir.1990) (citing M/S Bremen v.
Zapata Off–Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32
its proper attachments.’ ”Id. at 238 (citation omitted). 2
L.Ed.2d 513 (1972)). Federal law governs whether forum
selection clauses are enforceable.Von Graffenreid v. Craig,
246 F.Supp.2d 553, 560 (N.D.Tex.2003) (citing Haynsworth
III. v. Corp., 121 F.3d 956, 962 (5th Cir.1997)). Under Fifth
Circuit precedent, courts are to presumptively enforce forum
selection clauses with few exceptions. See Haynsworth, 121
ANALYSIS
F.3d at 962–63. The presumption can only be overcome by
Giant Eagle moves the Court to dismiss the case for improper a clear showing that the clause is unreasonable under the
venue, alleging that venue is not proper in the Northern circumstances. Id. at 963.The party resisting the enforcement
District of Texas because of forum selection clauses in two bears the “heavy burden” of showing that one of the following
of the contracts between the parties. Specifically, Giant Eagle makes the clause unreasonable: “(1) the incorporation of the
argues that its Stock Purchase Agreements with Excentus forum selection clause into the agreement was the product
granted it a full license to use any and all Excentus intellectual of fraud or overreaching; (2) the party seeking to escape
property and its purported obligations that it allegedly failed enforcement ‘will for all practical purposes be deprived of his
to meet arose out of the Stock Purchase Agreements, and day in court’ because of the grave inconvenience or unfairness
therefore the forum selection clauses in the Stock Purchase of the selected forum; (3) the fundamental unfairness of the
Agreements are applicable. In response, Excentus argues that chosen law will deprive the plaintiff of a remedy; or (4)
the two contracts containing these forum selection clauses enforcement of the forum selection clause would contravene
have nothing to do with its claims in this case and therefore a strong public policy of the forum state.”Id. (citing Carnival
the forum selection clauses are inapplicable in this case. Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595, 111 S.Ct. 1522,
113 L.Ed.2d 622 (1991); M/S Bremen, 407 U.S. at 12–13, 15,
The parties' Stock Purchase Agreements set forth as follows: 17, 18).

8.06 GOVERNING LAW; VENUE. *3 Excentus does not argue that any of the foregoing factors
This agreement shall be governed by render the forum clauses unreasonable, focusing instead on its
and construed in accordance with the contention that the forum selection clauses are inapplicable to
laws of the State of Texas without its claims. Nevertheless, the Court finds that it is neither unfair
giving effect to the conflict of laws nor unreasonable to require the party initiating litigation to
rules or choice of laws rules thereof sue in the county of the respondent, as agreed to by the parties,
or of any state. Venue for any which evidences the parties' apparent desire to discourage
action arising out of this agreement litigation. See Abbott Labs. v. Takeda Pharm. Co., 476 F.3d
shall reside exclusively in the county 421, 422 (7th Cir.2007) (“The purpose of specifying two
in which the respondent's principal forums in this way is to discourage either side from instituting
offices are located. litigation, because whoever sues must litigate on the other
party's turf.”) The Court also notes that the contracts appear to
Giant Eagle Mot.App. 53, 89. 3 Giant Eagle is located in have been negotiated at arm's length and there is no indication
Allegheny County, Pennsylvania, and Giant Eagle argues of fraud. The Court further finds that litigating Excentus'
that, given its reliance on the Stock Purchase Agreements as claims in Pennsylvania will not deprive Excentus of its day
a defense to Excentus' claims, these claims must be brought in court or any legal remedy, and enforcement of the forum
in Allegheny County. The Court will first look to whether the selection clause does not contravene a strong public policy of
forum selection clauses at issue are enforceable and then to any state. See Haynsworth, 121 F.3d at 963. Accordingly, the
whether such clauses apply to Excentus' claims in this case.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2
Defendant Giant Eagle's Motion to Dismiss Page 21
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Excentus Corp. v. Giant Eagle, Inc., Not Reported in F.Supp.2d (2012)
2012 WL 2525594

Court finds that the forum selection clauses contained in the allegations that Giant Eagle “gained an unfair advantage in
4 the market by capitalizing on Excentus' efforts and success
Stock Purchase Agreements are valid and enforceable.
in its fuel discount systems by infringing its patents ... which
are acts that constitute unfair competition under the common
ii. Does the Forum Selection Clause Apply in This Case? law ...,” SAC ¶¶ 64–65, and the complaint's allegation that
Having found that the forum selection clauses are valid, the the Shapiras breached their fiduciary duty to Excentus by
Court must determine whether they apply to Excentus' claims claiming that the Software License “granted Giant Eagle a
in this case. Giant Eagle points to several provisions of the license to the Excentus Patents,” SAC ¶ ¶ 30, 33.
Stock Purchase Agreements to argue that the forum selection
clauses apply. Specifically, Giant Eagle points to ¶ 3.09(d) *4 In response, Excentus argues that its tort claims fall
of both Agreements, in which Excentus represented that outside the scope of the forum selection clauses because its
“none of the Intellectual Property currently sold or licensed claims do not involve an interpretation of the Stock Purchase
by [Excentus] to any Person ... infringes upon or otherwise Agreements, and it also argues that none of the elements of its
violates any Intellectual Property rights of others.”See Giant claims “arise out of” the Stock Purchase Agreements. In its
Eagle Mot.App. 36, 73. Giant Eagle also points to ¶ 7.01(a) of view, it may “prove and prevail on all of its tort claims against
both Agreements, in which Excentus fully indemnified Giant Giant Eagle without reference to, or interpretation of, the
Eagle for any claim arising out of “any misrepresentation or Stock Purchase Agreements.” 6 Pl.'s Resp. Giant Eagle Mot.
breach of [this] warranty” by Excentus. Id. at App. 49, 86– 6. Excentus further argues that forum selection clauses “do
87. Giant Eagle further argues that the patents now claimed not apply when the alleged nexus between the action and the
to have been infringed, U.S. Patent Nos. 6,321,984 (the
contract arises only with respect to a claimed defense.” 7 Id.
“#984 Patent”); 6,332,128 (the ′128 Patent); and 7,383,204
at 8 (citing Philips v. Audio Active Ltd., 494 F.3d 378, 391–
(the “#204 Patent”), were issued or were based on claimed
92 (2d Cir.2007)).
technology that existed and was disclosed before Excentus
represented that none of its technology infringed any other
The Court finds that the Stock Purchase Agreements' forum
patents. It also argues that Excentus' representation included
selection clauses are applicable in this case, and therefore
the technology that Excentus licensed to Giant Eagle under
venue is improper. The Court first notes that whether a
the Software License. In its view, Excentus' warranty of non-
forum selection clause applies to a plaintiff's claims is a case-
infringement and indemnification includes the ′984, ′ 128, and
specific inquiry. See, e.g., Terra Int'l, Inc. v. Miss. Chem.
′204 Patents, which were acquired by Excentus from Auto Corp., 119 F.3d 688, 694 (8th Cir.1997). Without deciding
Gas in 2008. Giant Eagle also notes ¶ 5.06 of the 2004 Stock
whether the Stock Purchase Agreements do in fact grant Giant
Purchase Agreement, which granted Giant Eagle “the non-
Eagle a license to Excentus' patents and are a defense to
exclusive right to license [Excentus'] Products and to establish
the breach of duty of loyalty and unfair competition claims,
retail/gas station alliances utilizing [Excentus'] Products in
Giant Eagle's defense requires the Court to interpret the
any market in which [Giant Eagle] operates as of or after
Stock Purchase Agreements. As explained by the court in
the Closing Date.” 5 Giant Eagle Mot.App. 47–48. “Products” Aerus L.L.C. v. Pro Team, Inc., No. 3:04–cv–1985–M, 2005
are defined in the Stock Purchase Agreement as “the WL 1131093 (N.D.Tex. May 9, 2005), “[i]f enforcement
technology which [Excentus] has licensed to [Giant Eagle] ... of a provision in [an agreement with a forum selection
and all improvements and enhancements thereto, and the clause] is ... a defense to a claim, that claim involves a
Company's Reward Marketing Engine software module.”Id. right or remedy under the contract and should fall within
at 48, 84–85.Under these terms, Giant Eagle argues, “the the scope of the forum selection clause.”Id. at *8 (citing
2004 Stock Purchase Agreement gave Giant Eagle the right Penn, L.L.C. v. New Edge Network, Inc., No. 03 C 5496,
to use whatever Excentus technology—including patented 2003 WL 22284208, *2 (N.D.Ill. Oct. 3, 2003)); see also
technology—it needed for its fuelperks! program.”Giant Pinnacle Interior Elements, Ltd. v. Panalpina, Inc., No. 3:09–
Eagle Mot. Br. 7. In its view, it has a license granted cv–0430–G, 2010 WL 445927, *5 (N.D.Tex. Feb.9, 2010)
under the Stock Purchase Agreements, and such license is (“When the plaintiff raises tort claims, the applicability of a
a complete defense to the patent infringement claims. Giant contractual forum-selection clause to those claims ‘depends
Eagle also argues that Excentus' breach of duty of loyalty on whether resolution of the claims relates to interpretation
claims and unfair competition claims are also barred by of the contract.’”) (citations omitted). The Aerus court found
such alleged license, given the Second Amended Complaint's that the defendant's defense to a patent infringement claim

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3
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Excentus Corp. v. Giant Eagle, Inc., Not Reported in F.Supp.2d (2012)
2012 WL 2525594

*5 The Court reiterates that its finding that the forum
was based on a contract containing a forum selection clause,
selection clause is applicable does not resolve the
and therefore “the allegations in this claim [had] a ‘direct or
issue of whether the Stock Purchase Agreements are in
indirect connection, link or association with, or relation to”
fact valid defenses to Excentus' claims. However, such
that contract containing the forum selection clause. Aerus,
determination requires the Court to examine the Stock
2005 WL 1131093, at *8 (citing Smith v. Lucent Techs., Inc.,
Purchase Agreements, thereby invoking the forum selection
No. Civ.A. 02–0481, 2004 WL 515769, *11 (E.D.La. Mar.16,
clauses found in these Agreements. Accordingly, venue is
2004)). Accordingly, the court found the forum selection
not proper in the Northern District of Texas, and Excentus'
applicable to the patent infringement claim, and it later found
Second Amended Complaint is hereby DISMISSED for
that the forum selection clause was also applicable to the
improper venue.
plaintiffs' other claims, including its unfair competition claim.

Here, the Court must look to the Stock Purchase Agreements
to determine whether Giant Eagle's defenses are valid, and IV.
therefore the forum selection clauses contained in them are
applicable. Excentus' claims do not rely on the Stock Purchase
CONCLUSION
Agreements, but resolution of these claims clearly requires
the Court to construe the Stock Purchase Agreements, given For the reasons discussed above, the Court finds that venue
Giant Eagle's reliance on the Agreements as a defense. 8 See is improper in the Northern District of Texas and GRANTS
Pinnacle Interior Elements, 2010 WL 445927, at *5. Further, Giant Eagle's and the Shapiras' Motions (docs.24, 27) to the
the Court must look to the Stock Purchase Agreements in extent they seek dismissal of Excentus' Second Amended
order to resolve all of Excentus' claims, given that they Complaint under Rule 12(b)(3). The Second Amended
involve Giant Eagle's obligations under the Stock Purchase Complaint is hereby DISMISSED.This dismissal is without
Agreements, 9 whether Giant Eagle had a license to the prejudice to refiling in a court of proper venue. 11
patents at issue, or whether such purported license is a defense
to Excentus' claims. Accordingly, the Court finds both that SO ORDERED.
the forum selection clause of the Stock Purchase Agreements
applies to all of Excentus' claims and also that venue is
All Citations
improper as to all of these claims. 10
Not Reported in F.Supp.2d, 2012 WL 2525594

Footnotes
1 Although not directly referred to in the Second Amended Complaint, the Stock Purchase Agreements by which Giant
Eagle gained seats on Excentus' Board of Directors are referred to indirectly. See SAC ¶¶ 13–15. Further, a court may
look at evidence outside of the complaint in resolving a motion to dismiss for improper venue. See, e.g., Ambraco, Inc.
v. Bossclip B.V., 570 F.3d 233, 237–38 (5th Cir.2009). Accordingly, the Court looks to the Stock Purchase Agreements
and other documents in addition to the documents attached to the Second Amended Complaint in resolving Defendants'
Motions to Dismiss for Improper Venue.
2 Although courts have not been consistent as to which party bears the burden of proof on a Rule 12(b)(3) motion for
improper venue, several of them have found that the burden of proving that venue is proper lies with the plaintiff. See,
e.g., Inst. for Creation Research Graduate Sch. v. Paredes, No. 3–09–cv–693–B, 2009 WL 4333366, *2 (N.D.Tex. Dec.1,
2009); Tracfone Wireless, Inc. v. Carson, No. 3:07–cv1761–G, 2008 WL 4107584, *7 (N.D.Tex. Aug.28, 2008); Psarros
v. Avior Shipping, Inc., 192 F.Supp.2d 751, 753 (S.D.Tex.2002); Advanced Dynamics Corp. v. Mitech Corp., 729 F.Supp.
519, 519 (N.D.Tex.1990). The Court also notes the opinion of 5 Charles Alan Wright, Arthur R. Miller, and Edward H.
Cooper, Federal Practice and Procedure § 3826 (3d ed. 2007) (“The federal courts are divided on which party bears
the burden on a motion to dismiss for improper venue.... But what has been characterized as ‘the better view,’ and the
position that probably represents the weight of judicial authority, is that, when an objection has been raised, the burden
is on the plaintiff to establish that the district he or she has chosen is a proper venue.... This approach is consistent with
the plaintiff's threshold obligation to show that the case belongs in the particular district court in which suit has been
instituted.”) (citations omitted).

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Excentus Corp. v. Giant Eagle, Inc., Not Reported in F.Supp.2d (2012)
2012 WL 2525594

3 This provision is identical in both of the Stock Purchase Agreements and is numbered § 8.06 in both.
4 The Court also finds that the forum selection clauses contained in the Stock Purchase Agreements are mandatory, rather
than permissive, given that the clauses state that venue “shall reside exclusively in the county in which the respondent's
principal offices are located.”(emphasis added).See, e.g., Von Graffenreid, 246 F.Supp.2d at 560 (“Where the [forum
selection clause] contains clear language showing that jurisdiction is appropriate only in a designated forum, the clause
is mandatory.”) (citations omitted).
5 The 2005 Stock Purchase Agreement contains an identical provision. Giant Eagle Mot.App. 84–85.
6 As noted by Giant Eagle, though, Excentus does rely on, inter alia, the Stock Purchase Agreements in arguing that this
Court has both general and specific jurisdiction with respect to Excentus' claims against Giant Eagle.
7 Excentus also argues that the February 2010 Addendum to the Software License “makes it clear that Giant Eagle has
no license to the Excentus patents” and the purported warranty of noninfringement does not provide a defense because
“the warranty given expired 18 months after the closing date, and the software Excentus licensed does not contain all
the elements for infringement of the patents Excentus acquired years later.”Pl.'s Resp. Giant Eagle Mot. 9–10.
8 The Court notes the Phillips court's finding that a forum selection clause, contained in a contract that was relevant only
as a defense, was without effect, Phillips, 494 F.3d at 391, but finds persuasive the warning of the court in Penn, L.L.C.
v. New Edge Network, Inc., No. 03 C 5496, 2003 WL 22284207 (N.D.Ill. Oct.3, 2002) which found that such a rule would
allow a “clever party” to “simply avoid its contractual obligations through sophistry.”Id. at *2. The Court further notes that
the basis for the Phillips court's ruling, a narrow interpretation of phrases such as “arising out of,” has been rejected by
some courts. See, e.g., Appliance Zone, LLC v. NexTag, Inc., 2009 WL 5200572, *6 (S.D.Ind.2009) (noting that both the
Seventh and Ninth Circuits interpreted “arising out of” more broadly than the Second Circuit) (citations omitted).
9 As stated previously, at least some of the obligations allegedly not met by the Shapiras were allegedly assumed by Giant
Eagle at the time of the Stock Purchase Agreements. See, e.g., SAC ¶ 15 “As part of the investment in Excentus, Giant
Eagle committed to suport Excentus' current and future business and plans.”).
10 The Court also finds the Shapiras may invoke the forum selection clause of the Stock Purchase Agreements given the
relatedness of the Shapiras to the dispute between Excentus and Giant Eagle. See Excel Mktg. Solutions Inc. v. Direct
Fin. Solutions LLC, 2011 WL 1833022, at *6 (N.D.Tex. May 13, 2011) (“A nonparty can be bound to a forum selection
clause if the nonparty is ‘closely related to the dispute such that it becomes foreseeable that it will be bound.”) (citing,
inter alia, Hugel v. Corp. of Lloyds, 999 F.2d 206 (7th Cir.1993)). Indeed, the complaint itself explains that “the actions
of the Shapiras described herein constitute the acts of Giant Eagle” and “[r]eference to Giant Eagle is reference to these
acts.”SAC ¶ 28. Accordingly, venue is improper as to the Shapiras as a result of the forum selection clause contained in
the Stock Purchase Agreements, for the reasons discussed above.
11 Given that the Court has dismissed the Second Amended Complaint under Rule 12(b)(3), the Court does not express an
opinion on Defendants' contention that dismissal is also proper for lack of personal jurisdiction over all Defendants and
for failure to state a claim upon which relief can be granted.

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 5
Defendant Giant Eagle's Motion to Dismiss Page 24
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 EXHIBIT 2

Software License and General Services Agreement

Defendant Giant Eagle's Motion to Dismiss Page 25

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Defendant Giant Eagle's Motion to Dismiss Page 26
App. 8
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Defendant Giant Eagle's Motion to Dismiss Page 27
App. 9
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Defendant Giant Eagle's Motion to Dismiss PageApp.
28 10

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Defendant Giant Eagle's Motion to Dismiss PageApp.
29 11

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Defendant Giant Eagle's Motion to Dismiss PageApp.
30 12

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Defendant Giant Eagle's Motion to Dismiss PageApp.
31 13

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Defendant Giant Eagle's Motion to Dismiss PageApp.
32 14

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Defendant Giant Eagle's Motion to Dismiss PageApp.
33 15

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Defendant Giant Eagle's Motion to Dismiss PageApp.
34 16

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Defendant Giant Eagle's Motion to Dismiss PageApp.
35 17

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Defendant Giant Eagle's Motion to Dismiss PageApp.
36 18

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Defendant Giant Eagle's Motion to Dismiss PageApp.
37 19

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Defendant Giant Eagle's Motion to Dismiss PageApp.
38 20

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Defendant Giant Eagle's Motion to Dismiss PageApp.
39 21

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Defendant Giant Eagle's Motion to Dismiss PageApp.
40 22

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Defendant Giant Eagle's Motion to Dismiss PageApp.
41 23

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Defendant Giant Eagle's Motion to Dismiss PageApp.
42 24

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Defendant Giant Eagle's Motion to Dismiss PageApp.
43 25

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 Case 3:11-cv-03331-B Document 26-2 Filed 01/31/12 Page 20 of 23 PageID 381

Defendant Giant Eagle's Motion to Dismiss PageApp.
44 26

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Defendant Giant Eagle's Motion to Dismiss PageApp.
45 27

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Defendant Giant Eagle's Motion to Dismiss PageApp.
46 28

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Defendant Giant Eagle's Motion to Dismiss PageApp.
47 29

R076
 EXHIBIT 3

2004 Series A Preferred Stock Purchase Agreement

Defendant Giant Eagle's Motion to Dismiss Page 48

R077
 Case 3:11-cv-03331-B Document 26-3 Filed 01/31/12 Page 2 of 38 PageID 386
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SERIES A PREFERRED STOCK PURCHASE AGREEMENT

This Series A Preferred Stock Purchase Agreement (this "Agreemenf') is made and
entered into as of August 6, 2004 by and between CCISTech, Inc" a Texas corporation (the
"Company"), and Giant Eagle of Delaware, Inc" a Delaware corporation (the "Investor"). Each
of the Company and the Investor may be referred to herein as a "Party," and collectively as the
~~Parties. "

WHEREAS, the Company desires to sell to the Investor, and the Investor desires to
purchase from the Company, 83,334 shares (the "Pnrchased Shares") of the Company's Series
A Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock"), which Purchased
Shares shall have the rights, preferenCeS, privileges and restrictions set forth in the Certificate of
Designation of the Compaily attached to this Agreement as Exhibit A (the "Certificate of
Designation''), on the terms and conditions set forth in this Agreement.

NOW. THEREFORE, in consideration of the mutual promises and covenants set forth
herein and for other goses of this Agreement, "Copyrigbts" means any
foreign or United States copyright registrations and applications for registration thereof,
and any non·registered copyrights; "Patents" means any foreign or United States patents
and patent applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such applications
and whether or not such applications are modified, withdrawn or resubmitted; "Trade
Secrets" means any trade secrets, research records, processes, procedures, manufacturing
formulae, technical know-how, technology, blue prints, designs, plans, inventions
(whether patentable and whether reduced to practice), invention disclosures and
improvements thereto; "T..ademarks" means any foreign or United Slates trademarks,
service marks, trade dress, trade names, brand names, designs and logos, cOIporate

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R083
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names, product or service identifiers, whether registered or unregistered, and all
registrations and applications for registration thereof; and "Software" means any
computer software programs, source code, object code, data and documentation_

(b) Except as set forth in Schedule 3_09(b), none of the Intellectual Property
owned by the Company is subject to any outstanding judgment, decree, order, writ,
injunction, regulation, or rule of any court or Governmental Authority, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending
or, to the Company's Knowledge, threatened, which challenges the validity,
enforceability, use or ownership of the Company's Intellectual Property.

(c) The Company has performed all material obligations imposed upon it
under all Intellectual Property licenses, sublicenses, distributor agreelIlents and other
agreements under which it is either a licensor, licensee or distributor, except such
licenses, sublicenses and other agreements relating to off-the-shelf software which is
commercially available on a retail basis and used solely on the Company's computers
(collectively, the "Intellectual Property Licenses"), and is not, nor to the Company's
Knowledge is any other party thereto, in breach of or default thereunder in any respect,
nor has any event occurred which with notice or lapse of time or both would constitute a
default thereunder. All of the Intellectual Property Licenses are valid, enforceable and in
full force and effect, and will continue to be so on identical terms immediately following
the closing of the transactions contemplated by this Agreement and the Related
Agreements, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting the enforcement of creditors'
rights generally and the application of general principles of equity and judicial discretion.

(d) Except as set forth in Schedule 3.09(d), none of the Intellectual Property
currently sold or licensed by the Company to any Person, or to the Company's actual
knowledge used by or licensed to the Company by any Person, infringes upon or
otherwise violates any Intellectual Property rights of others.

(e) Except as set forth in Schedule 3.09(e), no litigation is pending and no
claim has been made against the Company or, to the Company's Kriowledge, is
threatened, contesting the right of the Company to sell or license to any Person oruse the
Intellectual PrOperty.

(f) Except as set forth in Schedule 3.09(fl, to the Company's Knowledge, no
Person is infringing upon or otherwise violating the Intellectual Property rights of the
Company.

(g) No former employer of any employee of the Company has made a claim
'. against the Company or, to the Company's Knowledge, against any other Person, that
such employee is utilizing Intellectual Property of such former employer.

(h) Except as set forth in Schedule 3.09(h), the Company is not a party to or
bound by any license or other agreement requiring the payment by the Company of any
1(-

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R084
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royalty payment, excluding such agreements relating to off-the-shelf software licensed
for use solely on the Company's computers,

(i) Except as set forth on Schedule 3.09(i), to the Company's Knowledge, no
employee of the Company is in violation of any requirements of law applicable to such
employee, or any term of any employment agreement, patent or invention disclosure
agreement or other contract or agreement relating to the relationship of such employee
with the Company or any prior employer.

G) To the Company's Knowledge, none of the Company's Trade Secrets,
wherever located, the value of which is contingent upon maintenance of confidentiality
thereof, has been disclosed to any Person other than employees, representatives and
agents of the Company, except as required pursuant to the filing of a patent application
by the Company.

(k) Except as set forth on Schedule 3.09(k1, each employee of the Company
has executed a confidential information and invention ass.ignment agreement, in the form
delivered to the Investor. Except as set forth on Schedule 3.09(]d, no employee of the
Company has excluded works or inventions made prior to his or her employment with the
Company from his or her assignment of inventions pursuant to such employee's
confidential information and invention assignment agreement. Each consultant that has
had access to the Company's Intellectual Property has entered into an agreement
containing appropriate confidentiality and invention assignment provisions. To the
Company's actual lmowledge, no officer, employee or consultant of the Company is in
violation of such confidential infonnation and invention assigiunent agreement or any
prior employee contract or proprietary infonnation agreement with any other cOIporation
or third party.

3.10 Registration Rights. The Company is not under any obligation to register any of
its currently outstanding securities or any securities issuable upon exercise or conversion of its
currently outstanding securities under the Securities Act, nor is the Company obligated to
register or qualify any such securities under any state securities or blue sky laws.

3.11 Title to Property and Assets. Except as set forth on Schedule 3.11. the Company
owtiS its properties and assets free and clear of all mortgages, deeds of trust, liens,
encumbrances, leases and security interests except for statutory liens for the payment of current
taxes that are not yet delinquent and liens, encumbrances and security interests which arise in the
ordinary course of business and which do not have a Material Adverse Effect on the Company.
With respect to the property and assets it leases, the Company is in material compliance with all
such leases and, to the Company's Knowledge, the Company holds valid leasehold interests in
such assets free of any liens, encumbrances, security interests or claims of any Person other than
the lessors of such property and assets.

3.12 ERISA Plans. Except for the Company's 401(k) plan, the Company does not
have any Employee Pension Benefit Plans as defined in Section 3 of the. Employee Retirement
Income Security Act ofl974, as amended.

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R085
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3.13 Insurance. Schedule 3.13 lists each insurance policy (including fire, theft,
casualty, general liability, professional liability, workers compensation, business interruption,
environmental, product liability and automobile insurance policies and bond and surety
arrangements) to which the Company is a party. There is no material claim pending under any
such policy as to which coverage has been questioned, denied or disputed by the underwriter of
such policy. All premiums due and payable under all such policies have been paid, the Company
may not liable for any retroactive premiums or similar paymeots, and the Company is otherwise
in compliance in all material respects with the terms of such policies applicable to it. The
Company has no Knowledge of any threatened termination of, or material premium increase
(other than increases that are consistent with the increases experienced by the industry in which
the Company does business) with respect to, any such policy.

3.14 Environmental Matters. The Company, to its Knowledge, is not in violation of
aJ)y applicable statute, law or regulation relating to the environment or occupational health and
safety, and to the Company's Knowledge, no material expenditures are or will be required in
orderto comply with any such statute, law or regulation.

3.15 Tax Elections. The Company has not elected pursuant to the Internal Revenue
Code of 1986, as amended (the "Code"), to be treated as an "S" corporation or a collapsible
corporation pursuant to Section 341(f) or Section 1362(a) ofthe Code, nor has it made any other
elections pursuant to the Code (other than elections which relate solely to matters of accounting,
depreciation or amortization) which would have a Material Adverse Effect on the Company, its
financial Condition, its business as presently conducted or presently proposed to be conducted or
any of its properties or material assets.

3.16 Taxes.

(a) Except as set forth on Schedule 3.16, the Company has (i) timely filed all returns
required to be filed by it with respect to all federal, state, local, and foreign income, payroll,
withholding, unemployment, excise, added value, social security, sales and use, real and personal
property, use and occupancy, business and occupation, mercantile, real estate, capital stock, and
franchise or other tax (including interest and penalties thereon and including estimated taXes
thereof) (hereinafter referred to collectively as "Taxes"); (ii) paid all Taxes shown to have
become due pursuant to such returns; and (iii) paid all other Taxes for which a notice of
assessment or demand for paymeJ;lt has been recci ved;

(h) All returns for Taxes filed by or on behalf of the Company have been prepared in
accordance with all applicable laws and requirements and accurately reflect the taXable income
(or other measure of Tax) of the Company;

(c) There are no Tax liens upon any of the assets o;fthe Company, and the Company
. is not aware of any audit or other proceeding or investigation, or of any position taken on a Tax
return of the Company, that could give rise to a Tax lien upon any of the Company's assets; and

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57 38

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(d) The Company has not been advised in writing (i) that any ofits returns have been
or are being audited as of the date hereof, or (ii) of any deficiency in assessment or proposed
judgment with respect to its federal, state or local taxes.

3.17 Consents. Except as sefforth on Schedule 3,17. no consent, approval, license,
permit, authorization, or order of any' Person is required in connection with the execution and
delivery of this Agreement and the Related Agreements or the consummation of the transactions
contemplated hereby or thereby by the Company.

3.18 Financial Statements; No Financial Change. The Company has previously
delivered to the Investor true, correct, and complete copies of the following financial statements:
unaudited balance sheets, statements of inco_me, statements of changes in shareholders' equity,
and statements of cash flows as of and for the years ended December 31, 2003, and an unaudited
balance sheet, statement of income, and statement of cash flows as of and for the five months
ended May 31, 2004 (the "Company Financial Statements"). The Company Financial
Statements have been prepared consistently during the periods indicated, are correct and
complete in all respects, accurately present the financial condition and results of operations of
the Company as of the dates set forth. Since the date of the Company Financial Statements,
there has not been any material adverse change in the' business, operations, prospects, assets,
results of operations or condition (financial or other) of the Company, and no event has occurred
or circumstance exists that may result in such a change. Except as set forth on Schedule 3.18,
the Company Financial Statements were prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods covered thereby.

3.19 Changes. Except as set forth on Schedule 3.19, since May 31,2004 (the date of
most recent ;financial statements provided to Investor), there has not been:

(a) any change in the assets, liabilities, financial condition or operating results
of the Company from that ref1ected in the Company Financial Statements, except changes in the
ordinary course of business, that has had a Material Adverse Effect;

(b) any damage, destruction or loss to any assets or properties of the
.Company, whether or not covered by insurance, that has had a Material Adverse Effect;

(c) any waiver by the Company ora valuable right or of a material debt owed
to it;

(d) any change or amendment to an agreement by which the Company or any
of its assets or properties is bound or subject that has had a Material Adverse Effect;

(e) any loans made by the Company 10 or for the benefit of its employees,
officers or directors, or any members of their immediate families, other than travel advances and
other advances made in the ordinary course of its business;

(1) any resignation or termination of any executive officer or key employee of
the company;

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58 39

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(g) any material change in any compensation arrangement or agreement with
any employee, director or shareholder of the Company;

(h) any sale, assignment or transfer of any Patents, Trademarks, Copyrights,
Trade Secrets or other intangible assets of the Company; .

(i) any satisfaction or discharge of any lien, claim, or encwnbrance or
payment of any obligation by the Company, except in the ordinary course of business and that is
not material to the business, properties, prospects or financial condition of the Company;

(j) any declaration, setting aside or payment or other distribution in respect of
any of the Company's capiial ~tock, or any direct or indirect redemption, purchase or other
acquisition of any of such stock by the Company;

(k) any mortgage, pledge; transfer of a security interest in, or lien, created by
. the Company; with respect to any of its material properties or aSsets, except liens for taxes not
yet due or payable;

(I) any receipt of notice that there has been a loss of, or material order
cancellation by, any major customer of the Company;

(m) to the Company's Knowledge, any other event or condition of any
character that has had a Material Adverse Effect; or

(n). any agreement or coinmitmenl by the Company to do any of the things
described in this Section 3.19.

3.20 Labor Relations; Emplovees. There are no strike, labor dispute or union
orgauization activities pending or threatened between the Company and its employees. To the
Company's Knowledge, none of its employees belongs to anyunion or collective ·bargaining unit.
as
E){cept set forth on Schedule 3.20, the Company is not a party to or bound by any currently
effective employment contract, deferred compensation agreement, bonus plan, incentive plan,
profit sharing plan, retirement agreement, or other employee compensation agreement. To the
Cpmpany's Knowledge, no officer or key employee intends to terminate his or her employment
with the Company, nor does the Company have a present intention to terminate the employment
of any officer or key employee. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is terminable at the
will of the Company.

3.21 Material Contracts. Except for the Related Agreements or any agreements listed
on Schedule· 3.21, there are no agreements, understandings, instroments, contracts, proposed
transactions, judgments, orders, writs or decrees to which the Company is a party or by which it
is bound which may involve (i) obligations of, or payments to, the Company in excess of
$10,000 (other than obligati()ns of, or payments to, the Company arising from agreements
entered into in the ordinary course of business), (ii) the license of any patent, copyright, trade

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59 40

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secret or other proprietary right to or from the Company or (iii) the grant of rights to produce,
license, market or sell the Company's products Dr affect the Company's exclusive right to
develop, manufacture, assemble, distribute, market or sell its products (each, a "Material
Contract", coJlectively the "Material Contracts"). All Material Contracts to which the
Company is a party are valid, binding and in full force and effect in all material respects, subject
to laws of general application relating to bankruptcy, insolvency and the relief of debtors and
rules oflaw governing specific performance, injunctive relief or other equitable remedies and to
general principles of equity. Neither the Company nor, to the Company's Knowledge, any other
party to any Material Contract, is in default under any of such Material Contracts.

3.22 Obligations to Related Parties. No employee, officer, director or, to the
Company's Knowledge, shareholder of the Company or member of his or her inunediate family
is indebted to the Company,' nor is the Company indebted (or committed to make loans or extend
or guarantee credit) to any of them other than (i) for payment of salary for services rendered,
(ii) reimbursement for reasonable expenses incurred on behalf of the Company and (iii) for other
standard employee benefits made generally available to all employees (including stock option
agreements outstanding under any stock option plan approved by the Company's Board of
Directors and stock purchase agreem\lIlts approved by the Company's Board of Directors). To
the Company's Knowledge, none of such persons has any direct or indirect ownership interest in
any flm! or corporation with which the COmpany is affiliated or with which the Company has a
business relationship, or any firm or corporation that competes with the Company, except in
connection with the ownershIp of stock' in publicly-traded companies. To the Company's
Knowledge, no employee, officer, director or shl)reholder of the Company, nor any member of
their immediate families, is, directly or indirectly, interested in any Material Contract with the
Company (other than such contI:acts as relate to any such person's ownership of capital stock or
other securities of the Company or such person's employment agreement with the Company).

3.23 Full Disclosure. ThCl Company has provided the Investor with all the information
regarding the Company that the Investor has requested. for deciding whether to purchase the
Purcbased Shares, as set forth on Schedule 3.23. No representation or warranty regarding the
Company made in this Agreement, the Related Agreements, the Exhibits and Schedules hereto,
or the documents to be delivered by the Company at the Closing pursuant to Article II, contains
any untrue statement of a materiill fact or omits to state a material faci necessary to make the
statements or facts contained herein not misleading in light of the circumstances under which
they were made. Each of the Schedules attached hereto is a true and complete list or description,
as appropriate, of the ittl1DS purported to be listed or described thereon. The Company represents
and warrants that any financial projections provided to the Investor were prepared in good faith.

ARTlCLEIV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

To induce the Company to enter into this Agreement and to consummate the transactions
contemplated hereby, the Investor hereby represents and warrants to the Company, as of the
Closing Date, the following:

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4.01 Organization and Good Standing. The Investor is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.

4.02 Authority. The Investor has all requisite corporate power and authority to execute
and deliver this Agreement and the Related Agreements and to consmnmate the transactions
contemplated hereby and thereby. This Agreement and the Related Agreements have been
approved by the Investor's B.oard of Directors and have been du1y authorized, executed, and
delivered by the Investor. All corporate action on the part of the Investor's directors and
shareholders necessary for the authorization, execution, delivery of, and the perfonnance of all
obligations of the Investor under t.lris Agreement and the Related Agreements has been taken or
will be taken prior to the Closing. This Agreement and the Related Agreements represent the
valid and binding obligations of the Investor, enforceable in accordance with their tenns, except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting the enforcement of creditors' rights generally and the application of general principles
of equity and judicial discretion. The Investor has delivered to the Company a copy of the
resolutions of the Investor's Board of Directors, certified as trUe and correct by the Investor's
secretary, approving this Agreement and the Related Agreements and authorizing the execution
hereofby the Investor's president .

4.03 No Violation. Neither the execution and delivery by the Investor of this
Agreement and the Related Agreements nor the consummation by the Investor of the
transactions contemplated l\ereby and thereby will (i) violate any provi~ion of the Delaware
General Corporation Law or charter or bylaws of the Investor; (ii) violate, or be iii conflict with,
or constitute a default (or an event or condition that, with notice or lapse of time, or both, would
constitute a defau1t) under, or result in the termination of, or accelerate the performance required
by, or cause th!' acceleration otthe maturity of any agreement to Which the Investor is subject, or
result iii the creation or imposition of any security interest, lien, charge, or other encumbrance
upon any of the Investor's assets under, any note, bond, mortgage, indenture, deed of trust,
license, lease, contract, commitment, understanding, arrangement, agreement, or restriction of
any kind or character to which the Investor is a party or by which the Investor may be bound or
alfected or to which any the Investor's assets is subject; or (iii) violate any statute or law or any
judgment, decree, order, writ, ipjunction, regtJlation, or rule of any court or Governmental
Authority.

4.04 Brokers. The Investor has not employed any broker, agent, or finder in
connection with any transaction contemplated by this Agreement for which the Company may be
liable or responsible to pay.

4.05 Litigation. There are nO Proceedings in progress, pending, or, to the Investor's
Knowledge, threatened against or alfectiug the Investor, the Investor's assets, or the transactions
contemplated hereby in any court or before any arbitration panel of any kind or before or by any
Governmental Authority, except such proceedings which would not have an effect, individually
or in the aggregate, that would be materially adverse to the Investor's assets.

4.06 Consents. No consent, approval, license, permit, authorization, or order of any
Person is required in connection with the execution and delivery of this Agreement or the

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61 42

R090
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Related Agreements Dr the consummation of the transactions contemplated hereby and thereby
by the Investor.

4.07 Full Disclosure. To the Investor's Knowledge, no representation or warranty
regardinll the Investor made in this Agreement, the Exlu1>its and Schedules hereto, or the
docwnents to be delivered by the Investor at the Closing pursuant to Article II, contains any
untrue statement of a material fact that affects the ability of the Investor to conswnmate the
transactions contemplated by this Agreement and the Related Agreements or omits to state a
material fact necessary to make the statements or facts contained herein not misleading.

4.08 Representations Regarding the Acquisition of the Purchased Shares and the
Conversion Shares.

(a) Purchase Entirely for Own Account. This Agreement is made with the
Investor in reliance upon the Investor's representation to the Company, which by the
Investor's execution of this Agreement the Investor hereby confirms, that the Purchased
Shares to be received by the Investor and the Conversion Shares issuable upon
conversion thereof (collectively, the "Offered Securities") will be acquired for
investment for the Investor's own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and that the Investor has no preseJ).t
intention of selling, granting any participation in or otherwise disoibnting the same. The
Investor further represents that the Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant participations to such
person or to any third person with respect to the Offered Securities.

(b) Sophistication: Accredited Investor Statlis. The Investor is a Person who
eithe~ alone or with its· purchaser representative(s) has suffipient knowledge and
experience in [mancial and business matters to be capable of evaluating the merits and
risks of an investruent in the Company. The Investor is an· "accredited investor" withil!
the meaning of Regulation D promulgated under the Securities Act.

(c) Speculative Investment. The Investor understands the speculative nature
and risks of investments associated with the Company and contlnns that it·is able to bear
the risk of the iuvestment, and that there may not be any public market for the Offered
Securities received herein.

(d) No Coercion or Solicitation. The Investor has freely entered this
Agreement and has been subject to neither pressure to make a hasty or uninformed
decision to enter into this Agreement nor solicitation to receive the Offered Securities.

(e) Transfer Resoictions. Except as otherwise set forth in this Agreement or
the Related Agreements, the Investor is not under an obligation to register or seek an
exemption under any federal andlor state securities acts for any sale or transfer of the
Offered Securities by the Investor, and the Investor hereby acknowlc:;dges that the Offered
Securities constitute resoicted securities as that term is defined in Rule 144 under the
Securities Act and that the Offered Securities may not be sold, transferred, assigned or

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62 43

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'. hypothecated unless there is an effective registration statement under the Securities Act
covering the Offered Securities, the sale is made in accordance with Rule 144 under the
Securities Act, or the Company receives an opinion of counsel of the Iovestor reasonably
satisfactory to the Company, stating that such sale, transfer, assignment or hypothecation
is exempt from the registration and prospectus delivery requirements of the Securities
Act.

(f) Disclosure of Information. To the Knowledge of the. Iovestor, the Investor
has received all the information it considers necessary or appropriate for deciding
whether to purchase the Offered Securities. The Investor furtlier represents that it haS had
the opportunity to ask questions of the Company and receive answers from the Company,
to the extent that the Company possessed such information or could acquire it without
unreasonable effort· or expense, necessary to evaluate the merits and risks of any
investment in the Company. Further, the Investor has been given an opportunity to
queStion the appropriate executive officers of the Company.

(g) Legends. It is understood that the c.ertificates evidencing the Offe!ed
Securities will bear the legend set forth below:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE" ACf"), OR
UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTIONS. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
. PE~TTED UNDER T~ ACT AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR ExEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MA-Y BE REQUIRED TO
BEAR TIlE FINANCIAL RISKS OF THIS INV£STMENT FOR AN INDEFINITE
PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.

The legend set forth above shall be removed by the Company from any certificate
evidencing Offered Securities upon delivery to the Company of an opinion by counsel,
reasonably satisfactory to the Company, that a registration statement under the Securities
Act is at that time in effect with respect to the legended security or that such security can
be freely transferred in a public sale without such a registration statement being in effect
and that such transfer will not jeopardize the exemption or exemptions from registration
pursuant to which the Company issued the Offered Securities.

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ARTICLE V
ADDmONAL AGREEMENTS

5.01 Put and Call Ootions.

(a) Within 10 days of the closing of an event that constitutes a Triggering
Event (as defmed below) of the Company, the Company shaH notify the lnvestor in
writing of such event (a "Company Notice''). In the event of a Triggering Event of the
Company, the lnvestor shall have the right to cause the Company to repurchase all, but
not less than all, of the Purchased Shares and Conversion Shares, as the case may be, held
by the Investor (collectively, the "C;overed Shares'') for a price per share of$36.00 plus
increases to such amount equal to 10% annually from the Closing Date through the date
of closing the acquisition of the Covered Shares by the Company (the "Put Price"). The
lnvestor must notify the Company of its intention to exercise the put right granted
pursuant to this Section 5.01(a) in writing (a "Put Exercise Notice") within 60 days oOts
receipt of the Company Notice. The Company shaH deliver to the Investor Cash in the
dollar amount equal to the number of Cover~d Shares multiplied by the Put Price (the
"Put Amount") within 90 days of the Company's receipt of the Put Exercise Notice (the
"Put Payment Date"). Notwithstanding anything in this Agreement to the contrary, if a
Triggering Event of the Company occurs pursuant to Section 5.01{d){iii) of this
Agreement as a resu1l Of the death or permanent disability of Mr. Dickson Perry or
pursuant to Section 5.01{d)(iv) of this Agreement, then the Company shall pay the Put
Amount to the lnvestor as foHows:

(i) the ~ompany shall deliver to the Investor 50% of the Put Amount in
Cash on or before the Put Payment Date; and

(ii) the balance of the Put Amount shaH be delivered to the lnvestor on or
before the Put Payment Date in the form of a promissory note (the "Note") payable to the
lnvestor. The Note shall expire upon payment in full on the second aruriversary of the Put
Payment Date, and shall be for the principal amount equal to 50% of the Put Amount
with interest at the aimual rate of 10% payable in 8 quarterly installments of interest to
the lnvestor, and with 50% of such principal amount due on the first anniversary of the
Put Payment Date and the balance of such principii! amount plus any accrued but unpaid
interest due on the second anniversary of the Put Payment Date.

(b) Within 10 days of the closing of an event that constitutes a Triggering
Event of the lnvestor or of Giant Eagle, Inc., a Pennsylvania corporation ("Giant Eagle,
Inc."), the Investor shall notify the' Company in writing of such event (an "Investor
Notice"). In the event of a Triggering Event of the Investor or of Giant Eagle, lnc., the
Company shall have the right to repurchase all, but not less than all, of the Covered
Shares for an amount equal to the greater of {i} the dollar amount equal to the number of

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Covered Shares multiplied by the Put Price or (ii) the CalJ Price (as defined below). The
Company must notify the Investor of its intention to exercise the call right granted
pursuant to tlris Section 5.01(b) in writing within 60 days of its receipt of the Investor
Notice. Upon its receipt of such notice from the Company, the Company and the Investor
shall have 90 days to determine the Call Price, and upon the expiration of such 90-day
period the Company shall deliver to the Investor Cash in an amount equal to the greater
of subclause (i) or (ii) oftlris Section 5.01(b).

(c) For the purposes of this Agreement, the "Call Price" shall be determined
as follows;

(i) three appraisals of the Company's value shall be conducted by three
independent appraisers (selected as described below),

(ii) the appraisal which contains a final appraised value between the final
appraised values provided in the two other appraisals (the "Balle Appraisal") shall be
added to the final appraised value of the one other appraisal that is closest in amount to .
the Base Appraisal, and that amount shaH be divided by two to determine the Company's
value; and

(iii) the Company's value as determined in subsection. (ii) above shall be
divided by (ii) the number of issued and outstanding shares of Common Stock (on an as-
converted, fully-dUuted basis, but excluding shares of Common Stock issuable pursuant
to unvested stock options) to deter$ine the Call Price per Covered Share.

For purposes of tlris Section 5.01(t). the three independent appraisers shall be
selected and compensated as follows: (x) one appraiser shall be selected by and at the
expense of the Company; (y) one appraiser shall be selected by and at the expense of the
Investor; and (z) one appraiser shall be selected by the two foregoing appraisers whose
expense shall be borne equally by the Company and the Investor. All appraisals shall be
completed no later than 90 days after the Company's notification of its inteiltion to
exercise the call right as provided in subsection (b) above.

(d) For the pUrposes of this Agreement, a "Triggering Event" shall mean (i)
the cOnsummation of il reorganization, merger or consolidation with an entity, or any
other event (or series of related events), in which the persons who hold a majority of the
outstanding capital stock of the Company, the Investor. or Giant Eagle, Inc., as the case
may be, before such transaction do not OVID at least a majority of the eqUity securities
entitled to vote to elect directors (or persons serving in a similar capacity) of the entity
surviving such transaction, (ii) a disposition of all or substantially all of the assets of the
Company, the Investor, or Giant Eagle, Inc., as· the case may be, (iii) in the case of the
Company, if Mr. Dickson Perry ceases to serve as a member of the Company's executive
management, or (iv) in the case of the Company, if the Company, due to the outcome of
any litigation set forth in Schedule 3.08, loses the right to use its Reward Marketing
Engine software module and has no replacement for such software module within 180
days of the event of such loss.

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5.02 Repurchase Restrictions. For so long as the Investor holds at least 7,5% of the
Company's issued and outstanding Common Stock (on an as-converted, fully-diluted basis), the
consent of the Investor shall be required for the repurchase or redemption by the Company of
any shares of Common Stock ot Preferred Stock from any of the Company's shareholders in
either a single or multiple transactions and from time to time for an aggregate amount if. excess
of$250,000 (except pursuant to any obli~tion or right of the Company to repurchase or redeem
shares of Common Stock or Preferred Stock upon termination of a Company shareholder's
employment or other service to the Company or pursuant to Section 5.01 (a) or (b) of this
Agreement),

5.03 Information Rights, For so long as the Investor continues to bold at least 5% of
the Company's issued and outstanding Common Stock (on an as-converted, fully-diluted basis),
the Company shall deliver to' Investor annual, quarterly and monthly financial statements, annual
budgets and other information reasonably requested by the Investor. The annual financial
statements shall be audited by an accounting :ti.nD. approved by the COmpany's board of directors.
The Investor shall have the right ho more than twice per calendar year, with reasonable notice
and at the Investor's sole expense, to inspect, or have its accountants inspect, the Company's
books and records; provided, however, that such inspection(s) shall be conducted in a manner so
as not to be unreasonably disruptive to the Company's operations.

5.04 Use of Purchase Price. The Purchase Price shall be used by the Company for
items such as working capital. capital expenditures, product development, marketing and sales
expenses and il)S\1l"lIIIce coverages (including key person Hfe insurance coverages) or as
otherwise approved by the Company's board of directors.

5.05 Stock Option Agreements. Each stock option agreement executed after the
Closing Date between the Company and any optionee (each, an "Optionee") in connection with
a Common Stock option grant shall provide, unless otherwise approved by the Investor, that (i)
upon the cessation of employment or service to the Company for any reason, such Optionee shall
iinmediately lose all unvested options; (ii) if such Optionee is terminated for cause, such
Optionee shall immediately lose all vested but unexercised options and the Company shall have
the right to repurchase any shares of Common Stock purchased by such Optionee pursuant to the
exercise of options at the actual exercise price of such options; and (iii) jf such Optionee's
employment with or service to the Company ceases for any reason other than termination for
cause (including WIthout limitation by reason of death or disability), the Optionee (or his or her
estate as the case may be) shall have 60 days to exercise any vested options, and the Company
shall have the right to repurchase any shares of Common Stock purchased by such Optionee (or
. his or her estate as the case may be) pursuant to the exercise of options at the then-current fair
market value of such share of Common Stock, as reasonably determined by the Company's
board of directors. The Company shall also use its best efforts to enter into amended stock option
agreements containing the provisions set forth in the preceding sentence with all Persons with
whom the Company has entered into stock option agreements prior to the Closing Date.

5.06 Retail/Gasoline Station Alliances. The Investor shall have the non-exclusive right
to license the Company's Products and to establish retail/gas station alliances utilizing the

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" Company's Products in any market in which the Investor operates as of or after the Closing Date.
Any exclusive license or arrangement granted to any other Person in any such market shall
provide an exception for the Investor's non"exclusive rights as set forth in the preceding
sentence. For the purposes of this Agreement, "Products" means the technology which the
Company has licensed to the Investor as of the Closing Date, and all improvements and
enhancements thenito, and the Company's Reward Marketing Engine software module.

5.07 Board Representation. For so long as the Investor holds at least 7.5% of the
Company's issued and outstanding Common Stock (on an as"converted, fully"diluted basis), the
Investor shall have the right to nominate one candidate (the "Iuvestor Designee") for election to
the Company's Board of Directors. The initial Investor Designee shall be Mr. David Shapira. In
the event of Mr. Shapira's death or disability, or if the Company requests the resignation of Mr.
Shapira (in which event the Investor shall cause Mr. Shapira to promptly resign from the
Company's Board of Directors), the Company shall make a written request (the "Board
R~quesf') to the Investor for the appointment of another designee for director by the Investor,
and tlie Investor shall provide at least two candidates for director as follows: (i) one executive-
level employee of the Investor who has significant experience in operations and
merchandising/marketing in the grocery retail business and is not directly involved in the
management of the working relaiionship between the Investor and the Company, and (ii) one
independent candidate who is not involved in the Investor's business but has significant
experience in managing investments such as the Investor's interest in Company. The remaining
members of the Company's Board of Directors shall, within 30 days of the Investor's submission
to the Company of candidates meeting such qualifications, approve one of the Investor's
candidates as set forth above and appoint such candidate as a director of the Company. In the
event that the Investor. does not submit candidates to the company within 90 days of the
Investor's receipt of a Board Request, then the Investor shall be deemed to have fully waived its
right to designate a candidate for appointment to the Company's Board of Directors, the
remaining members of the Company's Board shall fill the investor's position on the Company's
Board of Directors, and the Investor shall no longer have any right to nominate a candidate for
election to the Company's Board of Directors. Any Board Request shall clearly state the
Investor's rights and obligations pursuant to this Section 5.07, including the deemed waiver of
rights hereunder if the Investor fails to submit candidates within 90 days of the Investor's receipt
of a Board Request.

ARTICLE VI
CONDITIONS TO THE PARTIES' OBLIGATIONS AT CLOSING

6.01 Conditions to Obligations of the Company. The obligation of the Company to
hold the Closing is subject to the satisfaction of the following conditions on or before the Closing
Date unless waived in writing by the Company:

(a) Renresentations and Warranties. The representations and warranties of the
Investor contained in Article IV shall be true and complete as of the Closing Date,

(b) Deliverables. The Company shall have received the deliverables from the Investor
in accordance with the provisions of Section 2.01(b).

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(c) Certificate of Designation Effective. The Certificate of Designation shall have
been duly adopted by the Company by all requisite board and shareholder action, and
shall have been duly filed with and accepted by the Secretary of State of the State of
Texas.

(d) Securities Exemptions. The offer and sale of the Purchased Shares to the Investor
pursuant to this Agreement shall be exempt from the registration and prospectus delivery
requirements of the Securities Act, the registration and qualification requirements of all
applicable securities laws of states of the United States and all other provisions of
applicable securities laws of states of the United States. .

6.02 Conditions to Obligations of the Investor. The obligation of the Investor to hold
the Closing is subject to the satisfaction of the following conditions unless waived in writing by
the Investor:

(a) Renresentations and Warranties. The representations and warranties of the
Comp'any contained in Article ill shall be true and complete as of the Closing Date.

(b) Certificate of Designation Effective. The Certificate of Designation shall have
been duly adopted by the Company by all requisite shareholder and board action, and
shall have been duly filed with and accepted by the Secretary of State of the State of
Texas. .

(c) Ntlfleompetition Agreements. Each officer and other key employee of' the
Company shall have entered into a noncompetition agreement with the Company in a
form reasonably acceptable. to the Investor.

(d) Deliverables. The Investor shall have received the deliverables from the Company
in accordance with the provisions of Section 2.01(a).

ARTICLE VII
INDEMNIFICATION

7.01.. Indemnification by the Company. The Company shall defend, indemnify and hold
harmless the Investor and its directors, officers, employees and agents (each an "Investor
Indemnitee") from and against any and all claims (including without limitation any
investigation, action or proc.eeding, whether instituted by a third party against the Company or an
Investor Indemnitee or by an Investor Indemnitee for the purpose of enforcing its rights
hereunder), damages, losses, liabilities, costs and expenses (including without limitation
reasonable attorneys' fees and court costs) that constitote, or arise out of or in connection with:

(a) any misrepresentation or breach of warranty under Article III hereof (a
"Company Warranty Breach"); or

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(b) any default by the Company in the perfonnance or observance of any of its
covenants or agreements hereunder or under the Related Agreements or any instruments or
agreements contemplated herein or therein.

7.02. Inderrinification by the Investor. The Investor shall defend, inderrinifY and hold
harmless the Company and its directors, officers, employees and agents (each a "Company
Indemnitee") from and against any and all claims (including without limitation any
investigation, action or proceeding, Whether instituted by a third party against a Company
Indemnitee or by a Company Indemnitee for the purpose of enforcing its rights hereunder),
damages, losses, liabilities, costs and expenses (including without limitation reasonable
attorneys' fees and court costs) that constitute, or arise out of or in connection with:

(a) any misrepresentation or breach of warranty under Article IV (an "Investor
Warranty Breacb"); or

(b) any default by the Investor in the perfonnance or observance of any of its
covenants or agreements hereunder or under the Related Agreements or any instruments or
agreements contemplated herein or therein.

7.03. Rejlresentation, Settlement and Cooperation. If any investigation, action or other
proceeding (each a "Proceeding") is initiated against any Investor Indemnitee or Company
Indemnitee (each an "Indemnitee") and such Inderrinitee intends to seek inderrinification from
the Company or the Investor (each an "Indemnitor"), as applicable, under this Artiele on.
account of its involvement in such Proceeding, then such Inderrinitee shaH give prompt written
notic.e to the applicable Indemnitor of such Proceedillg. The failure to deliver prompt written
notice to the Inderrinitor after the commencement of any such action, if materially prejudicial to
its ability to defend such action, shall relieve such Indemnitor of any liability to the Indemnitee
under this Article VII to the extent of the prejUdice caused by such failure. Upon receipt of such
notice, such Indemnitor shail diligently defend against such Proceeding on behalf of sllch
Indemnitee at its own expense using counsel reasonably acceptable to such Indemnitee;
provided, that if such Indemnitor Shall fail or refuse to conduct such defense, or such Indemnitee
has been advised by counsel that it may have defenses available to it which are different from or
in addition to those available to such Indemnitor, or that its interests in such Proceeding are
adverse to such Inderrinitor's interests, then such Inderrinitee may defend against such Proceeding
at such Indemnitor's expense. Such .Indemnitor or Indemnitee, as applicable, may participate in
any Proceeding being defended against by the other at its own expense, and shall not settle any
Proceeding without the prior consent of the other, which consent shall not be unreasonably
withheld. Such Indemnitor and Indeninitee shall cooperate with each other in the conduct of any
such Proceeding.

7.04, Notice and Satisfaction of Indemnification Claims. No indemnification claim shall
be deemed to have been asserted until the applicable Indemnitor has been given notice by the
Inderrinitee of the amount of such claim and the facts on which such claim is based. For
purposes of Section 7.04, notice of an indemnification claim shall be deemed to cover claims
arising out of all related Proceedings so long as, in the case of Proceedings instituted by third
parties, the Inderrinitee complies with Section 7,03. Indemnification claims shall be paid within

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30 days after the Indemnitor's receipt of such notice and such evidence of the amount of such
claim and the Indemnitor's liability therefor as the lndemnitor may reasonably request.

ARTICLEVm
MISCELLANEOUS

8.01 Refonnation and Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during the term hereof: (a)
in lieu of such illegal, invalid, or unenforceable provision, there shall be added automatically as a
part of this Agreement a provision as similar io terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable; and (b) the legality, validity,
and enforceability of the remaining provisions hereof shall not in any way be affected or
impaired thereby.

8.02 Further Assurances. Each Party shall, from time to time after the Closing Date, at
the request of any other Party and without further consideration, execute and deliver such other
instruments of conveyance, assignments, transfer, and assumption, and take such other actions,
as such other Party may reasonably request to more effectively consummate the transactions
contemplated by this Agreement and the Related Agreements.

8.03 Notices. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be !fent by first class U.S. mail (certified mail - return
receipt requested), or by facsimile transmission (if facsimile transmission is also sent by regular
U.S. mail the s!ime day), or delivered by hand or by overnight or similar delivery service, fees
prepaid, to the Party to whOm it (s to be given at the address of such party set forth below or to
such other address for notice as such Party shall provide io accordance with the ierms of this
Section 8.03. Except as otherwise specifically provided in this Agreement, notice so given shall,
in the case of notice given l:y certified mail (or by such comparable method) be deemed to be
given and received three busioess days after the time of certification thereof (or comparable act),
in the case of notice so given by ovemight delivery service, on the date of actual delivery, and, in
the case of notice so given by facsimile transmission or personal delivery, on the date of actual
transmission or, as the case may be, personal delivery.

If to the Company: CClSTech, Inc.
Attn: Mr. DickSon Perry, President & CEO
4320 North Beltlioe Road, Suite A205
Irviog, TX 75038
Fax: (972) 258-0646
Email: dperry@Ccistech.com

With copies to: CCISTech, Inc.
Attn: Mr. Jim Mills, Vice President & Secretary
4320 North Beltline Road, Suite A205
Irving, TX 75038
Fax: (972) 258-0646

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Email: jmills@ccistech.com

Fish & Richardson P.C.
5000 Bank One Center
1717 Main Street
Dallas, Texas 75201
Attn: Steven R. Block
Fax: (214) 747-2091
Email: block@fr.com

If to the Investor: Giant Eagle of Delaware, Inc.
c/o Giant Eagle, Inc.
Attn: John Lucot, Vice President
101 Kappa Drive
Pittsburgh, PA 15238
Fax: 412.963.3522
Email: john.lucot1@gianteagle.com

With copies to: Giant Eagle, Inc.lLegal Department
Ann: Richard A. Russell, Vice President, General Counsel
261 KappaDrive
Pittsburgh, PA 15238
Fax: 412.963.3522
Email: rick.russell@gianteagle.com

Cohen & Grigsby, P .C.
11 Stanwix Street, IS1li Floor
Pittsburgh, PA 15221
Fax: 412.209.0672
Attention: David J. Kalson, Esq.
James R. Carlisle, II, Esq.

8.04 Headings. 1."he headings of sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or construction of any
p'rovision of this Agreement.

8.05 Waiver. The failure of any party to insist, in anyone or more instances, upon
performance of any of the terms, covenants, or conditions of this Agreement shall not be
construed as a waiver or a relinquisbment of any right or claim granted or arising hereunder or of
the future performance of any such term, covenant, or condition, and such failure shall il:i no way
affect the validity of this Agreement or the rights and obligations of the Parties. No waiver of
any provision or condition of this Agreement shall be valid unless executed in writing and signed
by the Party to be bound thereby, and then only to the extent specified in such waiver. No
waiver of any provision or condition of this Agreement shall be construed as a waiver of any
other provision or condition of this Agreement, and no present waiver of any proviSion or
condition of this Agreement shall be construed as a future waiver of such provision or condition.

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8.06 GOVERNING LAW; VENUE. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
RULES OR CHOICE OF LAWS RULES THEREOF OR OF ANY STATE. VENUE FOR
ANY' ACTION ARISING OUT OF THIS AGREEMENT SHALL RESIDE
EXCLUSIVELY IN THE COUNTY IN WHICH THE RESPONDENT'S PRINCIPAL
OFFICES ARE LOCATED.

8.07 Court Costs and Attorneys' Fees. If any action at law or in equity, including.an
action for declaratory relief, is brought to enforce or interpret the provisions of this Agreement,
the prevailing party shall be entitled to recover costs of court and reasonable attorneys' fees from
the other party or parties to such action, which fees may be set by the court in the trial of such
action or may be enforced in a separate action brought for that purpose, and which fees shall be
in addition to any other relief that may be awarded.

S.08 Assignability and Binding Effect. This Agreement shall inure to the benefit of
and. be binding up.on the Parties and their respective successors, heirs, and pemritted assigns.
This Agreement and the rights and obligations hereunder shall not be assignable without the
express written consent of all Parties.

8.09 Expenses. Taxes, Etc. The Company shall pay all fees, taxes, and expenses
incurred by it in connection with this Agreement, and the Investor shall pay all fees, taxes, and
expenses incurred by it in connection with the transactions contemplated by this Agreement.

8,10 Third Parties. Nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any Person other than the Parties and their successors, heirs
or permitted assigns, any rights or remedies und.er or by reason of this Agreement.

8.11 Number and Gender of Words. When the context SO requires in this Agreement,
words of gender shall include either or both genders and the singular number shall include the
plura\.

8.12 Entire Agreement, This Agreement together with the Schedules and Exhibits
attached hereto, shall constitute the entire agreement between the Parties with respect to the
transactions contemplated hereby and shall supersede all prior or contemporaneous negotiations,
understandings and agreements with respect thereto, There are no representations, agreements,
arrangements, or understandings, oral or written, between or among the Parties relating to the
.subject matter of this Agreement that are not fully expressed herein.

8,13 Survival of Representations and Warranties. All representations, warranties,
covenants, and obligations of the Parties shall survive the Closing for a period of 18 months
thereafter.

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8.14 Multiple Counterparts. This Agreement may be executed in mUltiple
counterparts, including by facsimile signature, each of which shal1 be deemed to be an original
but all of which together shall constitute one and the same instnunent.

8.15 Amendment. This Agreement may not be modified, amended, or supplemented
except by an agreement in writing signed by all of the Parties.

[The remainder of this page is intentionally left blank.]

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FROM " FAX NO. :9722580646 Au9. 06 201i!4 as: 13PM P2

IN WITNESS WHEREOF. the Parties hnve caused this Agreement to be eXe.” Merriam–Webster's Online Dictionary, http:// transfer the severed action to the appropriate court.Wyndham,
www.merriamwebster.com/dictionary/bring (last visited on 398 F.2d at 618 (“Where certain claims are properly severed,
March 7, 2014). This definition comports with the Third the result is that there are then two or more separate ‘actions,’
Circuit Court of Appeals' statutory interpretation of “any and the district court may, pursuant to § 1404(a), transfer
action brought” in Jonathan H, which was adopted by federal certain of such separate actions while retaining jurisdiction of
courts in Texas. Jonathan H, 562 F.3d at 529;see e.g., Ruben others.”)
A. v. El Paso Indep. Sch. Dist., 414 F. App'x 704, 706–
07 (5th Cir.2011); UNC Lear Servs., Inc. v. Kingdrom of In In re Nintendo Co., Ltd., Misc. No. 151, 2013 WL 5345899
Saudi Arabia, 720 F.Supp.2d 800, 804 (W.D.Tex.2010). In (Fed.Cir. Sept.25, 2013), the court noted:
Jonathan H, the court determined that “an action is “brought”
Rule 21 provides that, “the court may at any time, on just
when a plaintiff files a complaint, which is the first step that
terms, add or drop a party. The court may also sever any
invokes the judicial process.”Jonathan H, 562 F.3d at 529.
claim against a party.”The decision to deny a motion to
The common meaning of the word “brought” supports this
sever is committed to the discretion of the district court.
interpretation; indeed, the parties do not dispute the meaning
In re EMC Corp. ., 677 F.3d 1351, 1355 (Fed.Cir.2012).
of “any action brought” in this case.
This discretion is not unbridled, however; it “must be
exercised within the boundaries set by relevant statutes and
The pertinent definitions of the word “arising” are: (1) “to
precedent,” and a “district court abuses its discretion if it
originate from a source;” and (2) “to come into being or
relies on an erroneous conclusion of law.”Id. This court

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 7
Defendant Giant Eagle's Reply in Support of Its Motion to Dismiss Page 18
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Excentus Corp. v. Giant Eagle, Inc., Slip Copy (2014)
2014 WL 923520

*11 Based upon the foregoing, severance of counterclaims
generally applies Federal Circuit law, rather than regional
circuit law, to the issue of severance. Id. at 1354.We may, arising under the stock purchase agreements, i.e.,
however, look to the decisions of our sister circuits for counterclaims VI, VII, VIII, IX, X, and XII, will be severed
guidance. See id. from Excentus' claims and Giant Eagle's other counterclaims
that do not arise under the stock purchase agreements.
In re Nintendo Co., Ltd., Misc. No. 151, 2013 WL 5345899,
at *6 (Fed.Cir. Sept.25, 2013).“A district court has broad
discretion to order the severance of particular claims and III. Conclusion
For the reasons stated herein, the motion to sever and
afford them separate treatment when doing so advances the
transfer (ECF No. 147) filed by Excentus will be GRANTED.
administration of justice and no party suffers prejudice by
Pursuant to the forum selection clause in the stock purchase
virtue of the severance.”El Aguila Food Prods., Inc. v. Gruma
agreements, the standalone civil proceeding created by the
Corp., 167 F.Supp.2d 955, 959–60 (S.D.Tex.2001).
court severing counterclaims VI, VII, VIII, IX, X, and XII
from the other claims asserted in this case will be transferred
In accordance with the foregoing statement of the law,
to the United States District Court of the Northern District of
it is appropriate for a court to sever claims subject to a
Texas, Dallas Division.
valid forum selection clause. 1–Stop Fin. Serv. Ctrs. of
Am., LLC v. Astonish Results, LLC, Civ. Action No. 13–
Within fourteen days of the entry of this opinion and
961, 2014 WL 279669, at *10 (W.D.Te Jan. 23, 2014)
accompanying order, Giant Eagle must file counterclaims
(“The Court, through the above analysis, has determined
VI, VII, VIII, IX, X, and XII as claims in a separate case
the two forum selection clauses are both valid and should
in this district. The Clerk of Court will be directed not to
be enforced. Therefore, severance is appropriate.”). This
charge a filing fee for that case. After the case is filed, this
conclusion is true even where a party opposing the severance
court will enter an order to transfer those counterclaims to
argues-like Giant Eagle does in this case-that “severance
the District Court of the Northern District of Texas, Dallas
would be a waste of judicial resources, and severance would
Division. This court will coordinate with the transferee court
severely prejudice [them].”Id.The court will not “override”
to minimize duplicative discovery, if any, and to facilitate a
the parties' agreement with respect to where certain claims
prompt resolution of all claims and counterclaims between
should be tried.Id. (“Notwithstanding the fact these claims are
Excentus and Giant Eagle in an efficient manner.
interrelated and separating them forces two different courts
to handle similar cases, this Court cannot override the parties'
The motion to stay (ECF No. 160) with respect to Excentus'
contractual agreements.”). As the court noted in 1–Stop, “any
motion to sever and transfer will be DENIED as moot.
inconvenience or prejudice imposed on [the party opposing
severance], or any other private interest factor, is not be
An appropriate order will be entered.
considered in the § 1404(a) analysis given Atlantic Marine
[;]” indeed, as the court noted, a party opposing severance
“could have avoided this entire dilemma if it had read and
All Citations
understood the contracts it signed.”Id.
Slip Copy, 2014 WL 923520

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Defendant Giant Eagle's Reply in Support of Its Motion to Dismiss Page 19
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Tab G
 August 25, 2015

Via ECF and Hand Delivery
Honorable Martin Hoffman
George L. Allen, Sr. Courts Building
68th District Court
600 Commerce St., 5th Floor
Dallas, Texas 75202

Re: Cause No. DC-15-03853, In the 68th District Court, Dallas County, Dickson Perry
v. Brandon Logsdon, et al.

Dear Judge Hoffman:

Yesterday morning, we filed a 3-page supplemental brief clarifying how narrowly Texas
courts construe the terms “arising out of” (and addressing some new evidence). Such narrow
language stands in sharp contrast with broader terms, such as “related to” and, in particular, “in
connection with,” which the SP Agreements utilize when defining indemnification obligations,
see §§ 7.01 and 7.02, but not when defining venue. We refer the Court to the authority cited in
our brief.

The Court also requested cases in which Texas courts construed the “arise out of” or
similar language to exclude the particular claims at issue. I have attached highlighted copies of
the following cases: Busse v. Pac. Cattle Feeding Fund No. 1, Ltd., 896 S.W.2d 807, 812 (Tex.
App.—Texarkana 1995, writ denied) (in forum selection case, construing “arising hereto” to
exclude tort claims where “[t]he rights, obligations, and cause of action do not arise from the
contracts but from the Deceptive Trade Practices Act, the Texas Securities Act, and the common
law”); Major Help Ctr., Inc. v. Ivy, Crews & Elliott, P.C., 03-99-00285-CV, 2000 WL 298282, at
*2 (Tex. App.—Austin Mar. 23, 2000, no pet.) (in forum-selection case, construing “[a]ny action
brought by either party under this agreement” to exclude tort claims that “do not rely on the
terms of the Agreement as the[ir] basis” and plaintiffs “do not attempt to enforce duties or
obligations arising under the Agreement”); Osornia v. AmeriMex Motor & Controls, Inc., 367
S.W.3d 707, 712 (Tex. App.—Houston [14th Dist.] 2012, no pet.) (in arbitration case, construing
“any and all claims arising out of this Agreement” narrowly due to absence of “relating to”
language); Associated Air Freight, Inc. v. Meek, 01-00-00843-CV, 2001 WL 225516, at *2 (Tex.
App.—Houston [1st Dist.] Mar. 8, 2001, no pet.) (in arbitration case, construing “a dispute
hereunder” to exclude claims where “allegations in this lawsuit touch only tangentially on the”
agreements at issue); In re Wilmer Cutler Pickering Hale & Dorr LLP, 05-08-01395-CV, 2008
WL 5413097, at *4 (Tex. App.—Dallas Dec. 31, 2008, no pet.) (in arbitration case, construing

R325
Honorable Martin Hoffman
August 25, 2015
Page 2

“any action instituted under this Agreement” to apply “only if the claimant is relying on the
terms and authority of the agreement as the basis for the rights sued upon”); In re Advance
Payroll Funding, Ltd., 254 S.W.3d 710, 713 (Tex. App.—Dallas 2008, no pet.) (in arbitration
case, construing “arising out of or relating to” to exclude claims that “arose from general
obligations imposed by law” and not from the agreement). Although some of these cases address
arbitration provisions, the Texas Supreme Court looks to such cases when interpreting the scope
of forum-selection clauses. See In re Int’l Profit Associates, Inc., 274 S.W.3d 672, 677 (Tex.
2009) (listing additional authority).

The foregoing authority makes clear that “tangential” connections between the SP
Agreements and the claims in the case, see Meek, 2001 WL 225516, at *2, or agreements that
“merely created the conditions that led to” the parties dealing with each other, see In re Advance
Payroll Funding, Ltd., 254 S.W.3d at 714, do not suffice to bring the subject dispute within the
forum-selection provision. If the SP Agreements’ forum-selection clause included all disputes
“related to” the SP Agreements, or all disputes “in connection with” with the SP Agreements,
perhaps Giant Eagle’s belief that the SP Agreements may come into play as a possible partial
defense when discussing the litigation underlying the settlement transaction Mr. Perry attacks
would be (tenuously) relevant. But the SP Agreements’ forum-selection clause brings within its
scope only disputes “arising out of” the SP Agreements, which Texas courts have interpreted to
mean disputes that look to the subject agreement as the source of the obligations allegedly
breached. Here, Mr. Perry’s claims arise out of Defendants’ breaches of obligations imposed by
Texas common and statutory law, not by the SP Agreements, and his claims make no reference
to any of the rights or obligations in the SP Agreements.

Lastly, during yesterday’s hearing, I argued that the settlement agreement to which Giant
Eagle is a party, and the execution of which Mr. Perry attacks here, belied Giant Eagle’s
contention that the parties expected disputes between Giant Eagle and Excentus to be litigated
only in Pittsburgh. To be clear, Mr. Perry does not seek arbitration. But I highlighted that
provision because (a) the settlement agreement identifies Dallas, Texas as the forum for disputes
related to it, thereby directly contradicting Giant Eagle’s contention that it negotiated and expects
Pittsburgh to be the forum in all disputes involving the parties; and (b) the settlement
agreement’s broad forum-selection provision Giant Eagle agreed to stands in sharp contrast to
the narrow provision Giant Eagle negotiated in the SP Agreements.

Respectfully,

Andrés Correa
AC/ks
02708-403/4830-6859-6263

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Honorable Martin Hoffman
August 25, 2015
Page 3

cc: Via Email
Orrin L. Harrison III (oharrison@ghjhlaw.com)
Bernard Marcus (marcus@marcus-shapira.com)
Scott Livingston (livingston@marcus-shapira.com)
Jonathan Marcus (jmarcus@marcus-shapira.com)
Ken Carroll (kcarroll@ccsb.com)
Byran Erman (berman@ccsb.com)
Sara Romine (sromine@ccsb.com)
Robert B. Wagstaff (rwagstaff@mcmahonlawtx.com)
Lisa S. Gallerano (lgallerano@akingump.com)
Patrick O’Brien (pobrien@akingump.com)

R327
Associated Air Freight, Inc. v. Meek, Not Reported in S.W.3d (2001)
2001 WL 225516

2001 WL 225516
Only the Westlaw citation is currently available.

NOTICE: NOT DESIGNATED FOR PUBLICATION. UNDER TX R RAP RULE 47.7, UNPUBLISHED OPINIONS
HAVE NO PRECEDENTIAL VALUE BUT MAY BE CITED WITH THE NOTATION “(not designated for
publication).”

Court of Appeals of Texas, Houston (1st Dist.).

ASSOCIATED AIR FREIGHT, INC., Appellant,
v.
David MEEK, Nancy Meek, and Professional Logistics Management Company, Inc., Appellees.
In re Associated Air Freight, Inc., Relator.

Nos. 01-00-00994-CV, 01-00-00843-CV. | March 8, 2001.

On Appeal from the 113th District Court, Harris County, Texas, Trial Court Cause No. 00-26273.

Panel consists of MIRABAL, TAFT and DUGGAN,4 JJ.

OPINION ON REHEARING

TAFT.

*1 Relator, Associated Air Freight, Inc., has filed a motion for rehearing in Cause No. 01-00-843-CV. We deny rehearing,
but withdraw our opinion of January 25, 2001, and issue this opinion in its stead.

Cause No. 01-00-00994-CV is an attempted, interlocutory, accelerated appeal from an order denying motions by Associated
Air Freight, Inc. (Associated), appellant, which sought to enforce an arbitration clause, or, alternatively, to dismiss the cause
below under a forum-selection clause. Cause No. 01-00-00843-CV is an original proceeding in which Associated seeks
mandamus relief from this Court on similar grounds, and has moved to stay further proceedings in the trial court. We have
consolidated the causes to render a decision disposing of both simultaneously. See In re Valero Energy Corp., 968 S.W.2d
916, 916-17 (Tex.1998). We dismiss the interlocutory appeal, and deny mandamus relief, including Associated’s motion for
emergency relief.

These causes arise from a lawsuit filed by David Meek, Nancy Meek, and Professional Logistics Management Company, Inc.
(PLMC), who are appellees in Cause No. 01-00-994-CV, and real parties-in-interest in Cause No. 01-00-834-CV. The
Meeks’ and PLMC’s pleadings state that Associated is a foreign corporation doing business in Texas. The Meeks are Texas
residents, and PLMC is a Texas corporation. The Meeks and PLMC allege that Associated wrongfully terminated its sales-
agency agreement with PLMC, and executed a new sales-agency agreement with a different Texas corporation, Universal
Logistics, Inc. (ULI). The Meeks and PLMC claim Associated conspired with their former partners, Myra Hill, Ivy Dane
Mims, and David B. Rogers, who formed ULI in breach of duties owed the Meeks and PLMC, and that ULI is the alter ego
of Hill, Mims, and Rogers. Shortly after suit was filed, Associated sought to enforce an arbitration provision and a forum-
selection clause in its sales-agency agreement with PLMC.

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001

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Associated Air Freight, Inc. v. Meek, Not Reported in S.W.3d (2001)
2001 WL 225516

Appeal-Cause No. 01-00-00994-CV

A. No Jurisdiction for Appeal of Denial of Arbitration under the FAA
Associated challenges the trial court’s failure to enforce an arbitration clause under Chapter 171 of the Civil Practice and
Remedies Code, which contains the General Arbitration Act (the Texas Act). In requesting relief from the trial court,
however, Associated relied on the Federal Arbitration Act, 9 U.S.C. § 1 (1994) (the FAA).1 While the FAA permits appeals
from interlocutory orders denying arbitration, federal procedure does not apply in Texas courts, even when we apply the
FAA. Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 272 (Tex.1992); Belmont Constructors, Inc. v. Lyondell Petrochem. Co.,
896 S.W.2d 352, 355 (Tex.App.-Houston [1st Dist.] 1995, orig. proceeding). Texas procedure limits this Court’s appellate
jurisdiction to review of final orders and judgments, and interlocutory orders expressly authorized by statute. Anglin, 842
S.W.2d at 272. An order denying arbitration under the FAA is neither a final disposition, nor expressly authorized by section
171.098(a)(1)-(5) of the Civil Practice and Remedies Code, nor any other statutory exception. See Anglin, 842 S.W.2d at 272;
Stewart Title Guar. Co. v. Mack, 945 S.W.2d 330, 332 (Tex.App.-Houston [1st Dist.] 1997, writ dism’d w.o.j. [leave denied]
). Accordingly, we have no jurisdiction to address Associated’s complaint by appeal.

B. No Jurisdiction over Appeal of Interlocutory Refusal to Enforce Forum-Selection Clause
*2 Associated also challenges the trial court’s refusal to dismiss this cause based on a contractual forum-selection clause.
Here, again, the trial court’s order is not a final disposition of the case, but interlocutory, and none of the statutorily
authorized exceptions for interlocutory appeals applies. Accordingly, we lack jurisdiction to address Associated’s complaint
by appeal. SeeTEX.CIV.PRAC. & REM.CODE ANN. §§ 51.014, 171.098 (Vernon Supp.2001); Stewart Title, 945 S.W.2d at
332.

We dismiss the appeal in Cause No. 01-00-00994-CV.

Mandamus-Cause No. 01-00-00843-CV

A. Associated’s Right to Arbitrate under the FAA
Mandamus may issue when a trial court violates a duty imposed by law, or clearly abuses its discretion, and the complaining
party has no adequate remedy by appeal. Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex.1992). A party erroneously denied
its right to arbitration under the FAA has no adequate appellate remedy and is entitled to mandamus relief. EZ Pawn Corp. v.
Mancias, 934 S.W.2d 87, 88 (Tex.1996); Hou-Scape, Inc. v. Lloyd, 945 S.W.2d 202, 205 (Tex.App.-Houston [1st Dist.]
1997, orig. proceeding). We may not, however, disturb the trial court’s factual determinations on mandamus review.Mendoza
v. Eighth Court of Appeals, 917 S.W .2d 787, 789 (Tex.1996); see Walker, 827 S.W.2d at 840 (requiring deferential review
of trial court’s factual determinations unless the trial court “could reasonably have reached only one decision”). Likewise, we
may not “plumb” the trial court’s subjective reasoning; we must focus instead on the record before the trial court, and
whether, based on that record, the trial court’s decision was arbitrary and amounted “ ‘to a clear and prejudicial error of law.’
“ In re Bristol-Myers Squibb Co., 975 S.W.2d 601, 605 (Tex.1998) (quoting from Walker, 827 S.W.2d at 839, which quoted
from Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex.1985)). As with any request that mandamus issue, the
petitioner must establish a clear right to relief. ISK Biotech Corp. v. Lindsay, 933 S.W.2d 565, 568 (Tex.App.-Houston [1st
Dist .] 1996, orig. proceeding).

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Associated Air Freight, Inc. v. Meek, Not Reported in S.W.3d (2001)
2001 WL 225516

1. Factual Background
Associated is a New York company engaged in the air-freight business. In 1999, Associated and PLMC executed an
agreement (the first agency agreement) by which PLMC became Associated’s sales agent within the 100-mile radius from
Associated’s Houston facility. David L. Meek signed the agreement on behalf of PLMC on July 21, 1999. In addition to other
terms, the agreement contained the following provision concerning arbitration:

1. This Agreement shall be governed and construed in accordance with the laws of the State of New
York applicable to agreements made to be performed entirely within such State. In the event of a
dispute hereunder the parties hereto agree to submit same to arbitration before the American
Arbitration Association, as follows: in the event of a claim by [PLMC] against Associated, it shall be
made in the White Plains office of the AAA. In the event of a claim by Associated against [PLMC] it
shall be made in the office of the AAA nearest to the Agent.

*3 On February 9, 2000, Associated signed a virtually identical agency sales agreement, which contained the same arbitration
clause (the second agency agreement), with ULI. Hill, Mims, and Rogers had signed the agreement two days before, on
behalf of ULI.

The Meeks claim they were partners with Hill, Mims, and Rogers in PLMC, and advanced over $100,000 to the partnership,
which the partnership agreed to repay and which allowed PLMC to become profitable in servicing Associated’s requirements
under the first agency agreement. The Meeks contend they were induced to assign additional stock to Hill, Mims, and Rogers
after they set up PLMC, which allowed Hill, Mims, and Rogers to become majority shareholders. The Meeks claim that, once
Hill, Mims, and Rogers became majority shareholders, they conspired with Associated: to defraud the Meeks of their
ownership interest in PLMC, in breach of fiduciary duties owed the Meeks and PLMC; to usurp PLMC’s corporate
opportunities; to self-deal; to effect the resignation of Hill, Mims, and Rogers from PLMC on February 5, 2000; to terminate
the first agency agreement with PLMC;2 and to allow ULI, an alter ego entity created by Hill, Mims, and Rogers, to assume
PLMC’s operations on February 6, 2000, to the exclusion of the Meeks. As addressed above, the Meeks and PLMC seek
legal and equitable remedies premised on partnership and corporate duties owed them, and damages, for return of over
$100,000 advanced to PLMC and not paid, as well as punitive damages.3Less than a month after suit was filed, Associated
sought to enforce the arbitration clause in the first agency agreement, and later invoked the arbitration clause in the second
agency agreement as well.

2. Interstate Commerce
The party seeking to compel arbitration under the FAA carries a two-pronged burden: (1) to establish its right to arbitrate
under the act; and (2) to establish that the opponent’s claims are within the scope of the arbitration clause. See Cantella & Co.
v. Goodwin, 924 S.W.2d 943, 944 (Tex.1996); Anglin, 842 S.W.2d at 269-70; Stewart Title, 945 S.W.2d at 333. Assuming,
arguendo, that the FAA applied to the dispute, Associated did not meet its burden to establish that the Meeks’ claims were
within the scope of the arbitration clause.

3. Scope of Arbitration Clause
When a party invokes a right to arbitration under the FAA, federal law determines whether the dispute is subject to
arbitration. See Prudential Securities, Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex.1995). Federal policy strongly favors
arbitration and resolves all doubts concerning arbitrability in favor of arbitration. Moses H. Cone Mem. Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941 (1983); Prudential Securities, Inc. v. Marshall, 909 S.W.2d at 898;
Hou-Scape, 945 S.W.2d at 205. Arbitration clauses are enforced under the FAA, therefore, unless it can be said with positive
assurance that the clause is not susceptible of an interpretation that covers the dispute at issue. United Steelworkers v.
Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S.Ct. 1347, 1353 (1960); Pennzoil Exploration & Prod. Co. v.
Ramco Energy, Ltd., 139 F.3d 1061, 1067 (5th Cir.1998); Prudential Sec., 909 S.W.2d at 899; Hou-Scape, 945 S.W.2d at
205. But this strong policy favoring arbitration does not permit stretching an arbitration provision beyond its intended scope.
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Associated Air Freight, Inc. v. Meek, Not Reported in S.W.3d (2001)
2001 WL 225516

See Teamsters v. Stanley Structures, Inc., 735 F.2d 903, 905 (5th Cir.1984); Beckham v. William Bayley Co., 655 F.Supp.
288, 291-92 (N.D.Tex.1987); Belmont Constructors, 896 S.W.2d at 356.

*4 In determining whether an arbitration clause encompasses a claim, courts focus on the facts alleged, not the causes of
action asserted. Prudential Sec., 909 S.W.2d at 900; Hou-Scape, 945 S.W.2d at 205. Whether a claim is within the scope of
an agreement to arbitrate is a matter of contract interpretation and thus a question of law for the court. AT & T Technologies,
Inc. v. Communications Workers of America, 475 U.S. 643, 649, 106 S.Ct. 1415, 1418-19 (1986); see Beckham, 655 F.Supp.
at 290; We consider whether the facts alleged are “factually intertwined” with the contract containing the arbitration clause.
Anglin, 842 S.W.2d at 271; Hou-Scape, 945 S.W.2d at 205;see also Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 846
(2d Cir.1987) (whether facts alleged “touch” matters covered by the underlying agreement); American Recovery Corp. v.
Computerized Thermal Imaging, Inc., 96 F.3d 88, 93 (4th Cir.1996) (“significant relationship” to the contract); Griffin v.
Semperit of Am., Inc., 414 F.Supp. 1384, 1389 (S.D.Tex.1976) (“inextricably enmeshed” with the contract). That a tort claim
would not have arisen “but for” the parties’ contract does not necessarily determine whether that claim is arbitrable. Tracer
Research Corp. v. National Environ. Serv. Co., 42 F.3d 1292, 1295 (9th Cir.1994).

The arbitration clause Associated relies on here, excerpted in full above, is contained in agreements by which Associated
appointed first PLMC, and then ULI, as Associated’s sales agents. The arbitration provision states only that: “In the event of
a dispute hereunder, the parties hereto agree to submit same to arbitration ....“ (emphasis added) The plain language of the
clause contemplates a dispute under the sales-agency agreement.

As Judge Fitzwater, of the United States District court for the Northern District of Texas at Dallas, explained in Beckham,
arbitration clauses generally require the parties to arbitrate “ ‘any controversy or claim arising out of or relating to [the]
contract or the breach thereof,’ “ or, alternatively, “ ‘any controversy concerning the interpretation, performance, or
application of [the] contract.’ “ Beckham, 655 F.Supp. at 291 (brackets in original). An arbitration provision that omits these
broad terms indicates the parties to the contract did not agree to arbitrate all disputes arising out of their business relationship.
Id.; see Belmont Constructors, Inc., 896 S.W.2d at 358.

The Meeks’ and PLMC’s allegations in this lawsuit touch only tangentially on the agency sales agreements. The allegations
focus instead on the professional relationship between the Meeks and their former partners and shareholders, and sound
strongly in tort and legal and equitable duties beyond those encompassed by the sales-agency agreements. Given these
allegations, and the narrow arbitration clause, which restricts arbitration to disputes under the sales-agency agreement, we
conclude the arbitration clause in the agreement is not susceptible to an interpretation that covers the Meeks’ and PLMC’s
claims. E.g., Prudential Sec., 909 S.W.2d at 899. Because Associated, therefore, did not establish that the Meeks’ and
PLMC’s claims are within the scope of the arbitration provision, Associated has not established that the trial court clearly
abused its discretion by not requiring the Meeks and PLMC to arbitrate their claims under the FAA. Accordingly, Associated
has not established its right to mandamus relief on that basis.

B. Forum-Selection Clause
*5 Associated also requests mandamus relief to require the trial court to enforce a forum-selection clause in the sales-agency
agreements. Associated requests this relief based on two cases in which the supreme court has granted interlocutory relief by
mandamus because “special circumstances” warranted revising a trial court’s scheduling order. See In re Colonial Pipeline
Co., 968 S.W.2d 938, 943 (Tex.1998); General Motors Corp. v. Gayle, 951 S.W.2d 469, 477 (Tex.1997). These special
circumstances are not present here. Moreover, as Associated concedes, “it is presently unclear” whether mandamus will issue
to enforce a forum-selection clause. Because mandamus requires a clear right to relief, ISK Biotech Corp., 933 S.W.2d at
568, Associated has not established its right to the extraordinary writ on this ground.

Conclusion

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Associated Air Freight, Inc. v. Meek, Not Reported in S.W.3d (2001)
2001 WL 225516

We dismiss the interlocutory appeal in Cause No. 01-00-00994-CV for want of jurisdiction, and deny mandamus relief in
Cause No. 01-00-00843-CV, including the motion for emergency relief.

All Citations

Not Reported in S.W.3d, 2001 WL 225516

Footnotes
4
The Honorable Lee Duggan, Jr., retired Justice, Court of Appeals, First District of Texas at Houston, participating by assignment.

1
In its motion for stay pending arbitration, Associated specifically stated: “Comes now [Associated] and moves that this matter be
stayed pending arbitration pursuant to the Federal Arbitration Act....”
2
In their pleadings, the Meeks and PLMC acknowledge that Associated had a right to terminate the first agency agreement; their
complaint is that Associated was a party to a conspiracy with the Meeks’ former partners.
3
Before the trial judge ruled on the motion to stay pending arbitration, the Meeks and PLMC dismissed all claims against
Associated except the claim that Associated conspired with Hill, Mims, and Rogers, in breach of the legal, equitable, and fiduciary
duties Hill, Mims, and Rogers owed the Meeks and PLMC.

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

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Busse v. Pacific Cattle Feeding Fund No. 1, Ltd., 896 S.W.2d 807 (1995)

Legal Remedies and Proceedings
896 S.W.2d 807
Court of Appeals of Texas, Forum selection clause does not apply to tort
Texarkana. action alleging that plaintiff was induced by
misrepresentations to enter into the contract,
Lavern T. BUSSE and Jeff Busse, Appellants, where construction of the rights and liabilities of
v. the parties under the contract is not involved;
PACIFIC CATTLE FEEDING FUND # 1, LTD., where wrongs arise from misrepresentations
Appellee. inducing a party to execute the contract, and not
from breach of the contract itself, remedies and
No. 06–94–00052–CV. | Submitted Dec. 8, 1994. | limitations specified by the contract do not
Decided March 14, 1995. | Rehearing Denied March apply.
14, 1995.

14 Cases that cite this headnote
Limited partnership sued sellers of cattle for violations of
Texas Securities Act and the Deceptive Trade Practices
Act (DTPA), fraud, and breach of contract, after cattle
marketing program failed. The 14th Judicial District
Court, Dallas County, John McClellan Marshall, J., [3]
Contracts
entered judgment for partnership, and sellers appealed. Legal Remedies and Proceedings
The Court of Appeals, Cornelius, C.J., held that: (1)
contractual forum selection clause did not control; (2) Forum selection clause did not control claim by
DTPA claim was applicable to out-of-state facts; (3) partnership against majority shareholder of
feeding contracts were “securities” under Texas Securities cattle marketing enterprise, where case did not
Act; (4) out-of-court fraudulent statements admitted at involve interpretation, enforcement, or
trial were not hearsay; (5) sufficient evidence supported construction of terms of contract, but rather
fraud and DTPA award; (6) partnership was not limited to alleged deceptive practices, misrepresentations,
breach of contract damages; and (7) damages were and fraud in the inducement to sign the contract
properly limited to three times actual damages. predating the contract; thus the rights,
allegations, and cause of action did not arise
Affirmed. from the contract, but from the Deceptive Trade
Practices Act (DTPA), the Texas Securities Act,
and the common law, and where the defendants
were not parties to the contract. V.T.C.A., Bus.
& C. § 17.44; Vernon’s Ann.Texas Civ.St. art.
West Headnotes (39) 581–1 et seq.

[1]
Contracts 18 Cases that cite this headnote
Agreement as to Place of Bringing Suit;
 Forum Selection Clauses

Forum selection clauses are valid in Texas;
[4]
parties are allowed to choose forum in which to Appeal and Error
litigate their disputes. Cases Triable in Appellate Court

Choice of law question is subject to de novo
13 Cases that cite this headnote review on appeal.

2 Cases that cite this headnote
[2]
Contracts

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analysis. Restatement (Second) of Conflicts §
6(2).
[5]
Action
What Law Governs
2 Cases that cite this headnote
When determining choice of law questions,
court will generally follow statutory directives
of its own state, subject to constitutional
limitations. [9]
Antitrust and Trade Regulation
What Law Governs;  Territorial Limitations
3 Cases that cite this headnote
Texas Deceptive Trade Practices Act (DTPA)
was applicable to facts of case, even though
meeting and other facts transpired in Iowa, and
DTPA did not explicitly provide that it was to
[6]
Antitrust and Trade Regulation apply to out-of-state facts affecting Texas
Purpose and Construction in General consumers, where definition of “trade” and
“commerce” in DTPA justified application of
Texas Deceptive Trade Practices Act (DTPA) Texas rather than Iowa law, Texas plaintiff was
will be liberally construed in order to protect solicited, in part, in Texas, and was suing Texas
consumers from false, misleading, and deceptive resident and Iowa resident, and thus application
business practices, and to provide efficient and of Texas law was justified by sufficient
economical procedures to secure such significant relationships, and application of
protection. V.T.C.A., Bus. & C. § 17.44. Texas law did not render it unconstitutionally
broad, unreasonable or arbitrary. V.T.C.A., Bus.
& C. §§ 17.44, 17.45(6); Restatement (Second)
3 Cases that cite this headnote of Conflict § 6(2).

7 Cases that cite this headnote
[7]
Action
What Law Governs
[10]
If state legislature intends for statute to be Judgment
applied to out-of-state facts, courts will so apply Absence of Issue of Fact
it unless constitutional limitations forbid it, Judgment
application to out-of-state facts is permissible Presumptions and Burden of Proof
even when local law of another state would be
applicable under usual choice of law principles. Movant is entitled to summary judgment when it
shows that there is no genuine issue of material
fact and that it is entitled to judgment as a matter
1 Cases that cite this headnote of law; in deciding whether material fact issue
precludes summary judgment, court will take as
true any evidence favoring the nonmovant and
will resolve any doubts and every reasonable
[8] inference in the nonmovant’s favor. Vernon’s
Action Ann.Texas Rules Civ.Proc., Rule 166a(c).
What Law Governs

If construction of Texas statute justifies Cases that cite this headnote
application of Texas law rather than another
state’s law, and that does not offend the
Constitution, it is not necessary to engage in the
“significant relationships” choice of law
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[11]
Securities Regulation
Persons Liable 2 Cases that cite this headnote

Person or corporation who offers or sells
unregistered security is liable to the buyer, who
may sue for damages, under Texas Securities [15]
Act. Vernon’s Ann.Texas Civ.St. art. 581–33, Securities Regulation
subd. A(1). Investment Contracts

Finishing-and-feeding contracts met statutory
Cases that cite this headnote and case-law requirements for an investment
contract, and thus were “securities” for purposes
of Texas Securities Act, where investor bought
cattle and simultaneously entered into contracts
with feeding company, which provided that
[12]
Securities Regulation investor would pay for feeding the cattle, and
Persons Liable once cattle were ready for slaughter, feeding
company would repurchase them at cost plus
Person who directly or indirectly controls seller 12% of interest, reimburse investor for its
or issuer of a security is liable jointly and incurred feed cost, and pay investor $25 per
severally under Texas Securities Act statute head profit. Vernon’s Ann.Texas Civ.St. art.
providing that offerer or seller of unregistered 581–1 et seq.
security may be liable to the buyer, together
with the seller or issuer and to the same extent
as the seller or issuer. Vernon’s Ann.Texas Cases that cite this headnote
Civ.St. art. 581–33, subd. F(1).

1 Cases that cite this headnote
[16]
Securities Regulation
Fraudulent or Other Prohibited Practices

Sale of finishing-and-feeding contracts,
[13]
Securities Regulation “securities” for purposes of Texas Securities
Investment Contracts Act, violated the Act, where company that
located and managed livestock enrolled in
An investment contract involves: a common feeding company’s program sent investor
enterprise in which a person expects profits brochures constituting an advertisement in
solely from the efforts of the promoter or a third public solicitation, acting on behalf of feeding
party; such contract is a “security” for purposes company and arranging sales for cattle feeding
of the Texas Securities Act. Vernon’s operations, even though entity locating and
Ann.Texas Civ.St. art. 581–4, subd. A. managing livestock may not have been agent of
feeding company, and feeding company may not
have known of brochures, as statute requires no
Cases that cite this headnote scienter. Vernon’s Ann.Texas Civ.St. art. 581–5,
subd. I.

[14]
Cases that cite this headnote
Securities Regulation
Recovery for Fraud

Texas Securities Act does not require proof of
scienter. Vernon’s Ann.Texas Civ.St. art. 581–1 [17]
Securities Regulation
et seq. Persons Liable

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Term “control person” in Texas Securities Act is
used in same broad sense as in federal statute, Defendant waived complaint to comment by
and major shareholders and directors are control plaintiff’s counsel that court had already
persons. Vernon’s Ann.Texas Civ.St. art. determined in deciding earlier motion that
581–33, subd. F. defendant was a control person for a company
selling securities in violation of Texas Securities
Act, where not until the next day did the
5 Cases that cite this headnote defendants move for mistrial on grounds that
statement improperly informed jury of court’s
prior ruling and implied that defendant was a
wrongdoer, and failed to request curative
[18] instruction. Vernon’s Ann.Texas Civ.St. art.
Trial 581–33, subd. F.
Time for Taking

Complaint about improper comment by counsel 2 Cases that cite this headnote
is waived unless objection is timely made;
objection is not timely made unless it is made at
the earliest practical moment.
[22]
Trial
Cases that cite this headnote In General;  Duty of Court
Trial
Instruction or Admonition to Jury

[19] Improper argument is rarely cause for a mistrial
Trial and usually can be cured by an instruction.
Time for Taking

Failure to press for an instruction at the time of 2 Cases that cite this headnote
an allegedly erroneous jury argument operates
as a waiver of any complaint which may be
made as to the argument.
[23]
Appeal and Error
3 Cases that cite this headnote Rulings on Motions

Complaint regarding comment by opposing
counsel was not preserved for review, where
[20] defendants failed to get ruling on mistrial
Appeal and Error motion.
Rulings by Lower Court

Where record fails to show that motion for Cases that cite this headnote
mistrial directed to the argument of counsel was
not overruled by the trial court, no error is
preserved for review.
[24]
Evidence
Cases that cite this headnote Nature and Admissibility

Hearsay is out-of-court statement offered in
evidence to prove truth of matter asserted, and
[21] evidence of out-of-court statement is hearsay
Trial only if it is introduced to prove truth of matter
Time for Taking

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asserted. Rules of Civ.Evid., Rule 801(d). against the great weight and preponderance of
the evidence that it is clearly wrong and unjust.
3 Cases that cite this headnote
Cases that cite this headnote

[25]
Evidence
[28]
Making of Statement Fact in Issue Fraud
Elements of Actual Fraud
Out-of-court statements made by employee of
feeding company, cattle seller, and bank were Under Iowa law, as interpreted by Texas
not hearsay, as they were not offered for proof appellate court, elements of fraud are a material
of matter asserted, where investor in cattle misrepresentation, made knowingly, with intent
feeding and marketing plan offered statements to induce plaintiff to act or refrain from acting,
only as operative facts, to show that they were on which plaintiff justifiably relies, with
made, as elements of fraud that investor was damages.
trying to prove.

1 Cases that cite this headnote
2 Cases that cite this headnote

[29]
Fraud
[26]
Appeal and Error Weight and Sufficiency
Interrogatories and Special Verdicts
Appeal and Error Evidence was factually sufficient to support jury
Total Failure of Proof findings that cattle seller had committed fraud
and engaged in deceptive acts under Iowa law,
In reviewing a no evidence point, reviewing where cattle seller made misrepresentations that
court considers only evidence and inferences, product demand was outstripping supply, that he
when viewed in their most favorable light, that would use money received from investor to
tend to support the finding, and disregards all purchase more bulls and increase inventory of
evidence and inferences to the contrary; but if cattle feeder and marketer, that he had contracts
there was more than a scintilla of evidence to with certain buyers, and that he was personally
support the finding, the no evidence challenge committed to funding project to success, where
fails. there was evidence that cattle seller failed to
disclose facts that because feeding program was
unproven, bulls had serious health problems and
Cases that cite this headnote high death loss, most inventory was not
saleable; demand for products was not great;
cattle seller was company’s majority
shareholder, and also was sole secured creditor
[27] with ability to foreclose on assets, feeding
Appeal and Error company did not have funds or prospect of
Extent of Review funds to pay significant percentage of its
Appeal and Error existing obligations to investors; and cattle seller
Clear or Palpable Weight or Preponderance had threatened to cut off funds to feeding
company and was seeking buyer for company.
In reviewing factual insufficiency point,
appellate court first must examine all of the
evidence, and having considered and weighed Cases that cite this headnote
all that evidence, it will set aside the verdict
only if the evidence is so weak or the finding so
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[30] [32]
Antitrust and Trade Regulation Action
Reliance;  Causation;  Injury, Loss, or Nature of Action
Damage Damages
Antitrust and Trade Regulation Natural and Probable Consequences of Torts
Omissions and Other Failures to Act in
General;  Disclosure Plaintiff presented evidence of damages that
were primarily tort related, rather than for
For deceptive acts under Deceptive Trade breach of contract damages, and thus they could
Practices Act (DTPA), consumer may maintain be recovered in their tort action for fraudulent
action where a false, misleading, or deceptive inducement to enter transaction, even though
act or practice constitutes a producing cause of types of damages alleged could also result from
actual damages; failure to disclose information breach of contract, where plaintiff, who invested
about goods or services can be a deceptive act if in cattle for enrollment in feeding and finishing
the failure to disclose was intended to induce contracts, not only sought damages for the
consumer to enter into transaction. V.T.C.A., difference between value as represented and
Bus. & C. §§ 17.46(b)(23), 17.50(a)(1). received, but also for out-of-pocket expenses,
loss of credit, reputation, loss of time value, and
loss to business reputation.
5 Cases that cite this headnote

1 Cases that cite this headnote

[31]
Antitrust and Trade Regulation
Weight and Sufficiency
[33]
Trial
Evidence was legally and factually sufficient to Written Requests or Prayers
support jury’s findings that cattle seller was Trial
liable to investor under Deceptive Trade Sufficiency and Scope of Exceptions to
Practices Act (DTPA), as cattle seller made Failure or Refusal to Instruct
misrepresentations that were a producing cause
of investor’s damages, where, when investor Party requesting jury instruction must do three
investigated to find out why bulls were not things to preserve error: tender in writing and
being slaughtered and why investor was not request proper instruction before submission;
being paid in compliance with contracts, cattle make a specific objection to its omission; and
seller told him they had a bid order coming and obtain ruling from the court.
that investor should continue to hold onto bulls
and continue feeding them, and told investor
that he still believed in program and was buying 2 Cases that cite this headnote
more cattle and putting them on feed, and after
investor sent demand letter, seller responded
with letter asking for an additional ten days and
made representations that bid order was [34]
supposed to come in, but then told feeding Appeal and Error
company’s board that because litigation was Objection to Refusal of Requested Charge
imminent, seller was calling his note and
foreclosing on assets. V.T.C.A., Bus. & C. § Party waived alleged error in trial court’s failure
17.50(a)(1). to submit requested instruction on mitigation of
damages, even through party submitted proper
jury instruction that court rejected, where party
Cases that cite this headnote failed to object at charge conference.

1 Cases that cite this headnote
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Cases that cite this headnote

[35]
Trial
Mode of Making Objection
[38]
Antitrust and Trade Regulation
Defendants waived any complaint regarding jury Enhanced Damages;  Double or Treble
instruction on definition of “exemplary Damages
damages,” even though defendants’ attorney
specifically objected to reference to “stupid” and Legislature intended treble damages to be a cap
“mean” defendant in the definition, where on total damages recoverable in Deceptive
defendants did not renew objection after court Trade Practices Act (DTPA) action, regardless
modified the instruction. of number of defendants. V.T.C.A., Bus. & C. §
17.50(b)(1).

Cases that cite this headnote
1 Cases that cite this headnote

[36]
Appeal and Error
[39]
Instructions in General Antitrust and Trade Regulation
Appeal and Error Enhanced Damages;  Double or Treble
Damages and Amount of Recovery Damages

Jury instruction defining exemplary damages Damages were correctly reduced to $1,215,000,
was not reversible error, even though portion of three times the jury’s finding of actual damages
instruction that stated that exemplary damages of $405,000, the limit provided by Deceptive
could only be imposed against “really stupid” or Trade Practices Act (DTPA), even though jury
“really mean” defendant departed from correct found additional damages under DTPA of
standard and was improper, where standard used $729,000 against one defendant and $496,000
by court placed more onerous burden of proof against another defendant. V.T.C.A., Bus. & C.
on plaintiff than proper standard, and court did § 17.50(b)(1).
not say that defendants were “stupid and mean,”
but only that such characteristics, if found,
would justify imposition of exemplary damages. 1 Cases that cite this headnote

Cases that cite this headnote

Attorneys and Law Firms

[37]
Antitrust and Trade Regulation *811 James H. Baumgartner, Jr., David Reese, Vial,
Enhanced Damages;  Double or Treble Hamilton, Koch & Knox, Dallas, for appellants.
Damages
Orrin L. Harrison, III, Vinson & Elkins, LLP, Eric R.
Cromartie, Hughes & Luce, LLP, Thomas W. Mills, Jr.,
Consumer who prevails under Deceptive Trade
Mills Presby & Anderson, Dallas, for appellee.
Practices Act (DTPA), for knowing violation
may recover three times first $1,000 of actual Before CORNELIUS, C.J., and BLEIL and GRANT, JJ.
damages plus three times actual damages in
excess of $1,000; equal to trebling of actual
damages. V.T.C.A., Bus. & C. § 17.50(b)(1).

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OPINION with beef, and that he was carrying Lean and Free beef on
his own menus at Bonanza steakhouses. At the close of
the meeting, Lavern Busse told Bert that he should deal
CORNELIUS, Chief Justice. with ADI and that ADI would put together a group of
Busse’s bulls that Pacific could buy and place with Lean
Lavern T. Busse and his son, Jeff Busse, appeal from an and Free for feeding.
adverse judgment rendered in Pacific Cattle Feeding
Fund’s suit against them for damages resulting from After the meeting, Bert received through the mail at his
Pacific’s investment in a failed cattle marketing Texas offices some Lean and Free advertising brochures
arrangement. Pacific sued the Busses, alleging Texas that contained analyses of the rate of return investors
Securities Act and Deceptive Trade Practices Act would receive by investing in Lean and Free.
violations, common law fraud, and breach of contract.
The court rendered summary judgment for Pacific on the Bert testified that before he invested he learned that an
Securities Act claims. The jury found in Pacific’s favor on ADI officer had been convicted of fraud involving cattle
the DTPA and fraud claims. The court directed verdicts contracts. Steve Knutson, a banker at Norwest Bank in
for the Busses on Pacific’s breach of contract claims. Iowa, called Bert to tell him that ADI’s chief executive
officer, Dennis Peterson, had served some time in prison.
Stan Bert formed the Pacific Cattle Corporation, of which Bert then called Jeff Busse. Jeff Busse told Bert that they
he was president and sole shareholder, in September knew about Peterson’s history but that controls were in
1985. He formed the Pacific Cattle Feeding Fund # 1, place at ADI to protect investors. Bert and Jeff Busse had
here called “Pacific,” as a Texas limited partnership with a second phone conversation in which they discussed the
Pacific Cattle Corporation as general partner in 1986–87. difficulties Pacific was having arranging financing at
Pacific began investing in cattle in October 1988. Norwest Bank for the bull purchase. Bert testified that
Jeff Busse told him that if the financing did not come
Lean and Free, an Iowa corporation, was formed in through, Lavern Busse would sell the bulls to other
September 1987 by twenty-five investors to take buyers. Bert testified that Jeff told him he would speak to
advantage of a process developed in England by which Knutson at the bank to speed the matter along.
Holstein bulls fed a special diet purportedly produced
beef low in saturated fat, calories, and cholesterol. Lean Pacific bought 1,362 cattle from Lavern Busse on January
and Free encountered financial difficulties early, and by 25, 1990. Pacific simultaneously entered into feeding and
April or May of 1988, it approached Lavern Busse about finishing contracts with Lean and Free. The contracts
providing capital. In December of 1988, Lavern Busse provided that Pacific would pay for feeding the cattle, and
made Lean and Free a loan of $150,000, and in January once the cattle were ready for slaughter, Lean and Free
1989, he increased the loan to $243,000. In April 1989, would repurchase them at cost plus 12% interest,
Lean and Free approached Lavern Busse about additional reimburse Pacific for its incurred feed costs, and pay
monies. In response, Lavern increased the amount of his Pacific $25 per head profit.
loan and converted the loan into common and preferred
stock, making him the major stockholder. Lean and Free failed to find enough markets to support its
operations. By April 1990, it had failed to repurchase
Pacific alleged that Bert learned about Lean and Free in Pacific’s cattle, failed to reimburse Pacific for its feed
1989 from Dean Freed of Ag Dimensions International costs, and failed to pay the $25 per head profit. On June 7,
(ADI), which was locating and managing livestock 1990, Lean and Free’s directors allowed Lavern Busse, as
enrolled in the Lean and Free Program. ADI told Bert its only secured creditor, to foreclose on the company’s
about Lavern Busse, and Bert and Lavern Busse met on processed inventory and trade name. From June 1990 to
October 23, 1989, at Lavern’s office in Cedar Rapids, January 1991, Pacific continued to feed its cattle and
Iowa. Present *812 at the meeting were ADI principals gradually sold them off.
and Mike Knipp, a Lean and Free manager. Lavern Busse
already had bulls enrolled in the Lean and Free program Pacific filed suit against Lavern and Jeff Busse in August
under what were called finishing contracts. Bert testified 1991. It alleged that the Busses knew Lean and Free was
that Lavern Busse assured him that there was more failing and that they sold the bulls to Pacific as part of a
demand for Lean and Free beef than they could satisfy, scheme to liquidate the inventory before the business
that he needed to get more investors like Pacific so he went under.
could invest more of his money to increase inventory, that
Lean and Free was building inventory so it could meet The trial court granted partial summary judgment in favor
demand, that it had a contract with Amway to supply it
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of Pacific on its claims against Lavern Busse under the ticket and a ticket cancellation insurance policy. They
Texas Securities Act and granted the Busses a directed sued the travel agent and the cruise line, as principal,
verdict on Pacific’s breach of contract and alter ego when the cruise was canceled and the insurance refused to
claims. The other issues were submitted to a jury, which reimburse them. The ticket contract had a forum-selection
found in favor of Pacific, assessing actual damages, clause setting California as forum for any lawsuit “arising
additional damages under the DTPA, and punitive out of or in any manner relating” to the contract. The
damages under the common law fraud claims. The court court held that the DTPA action involved
entered judgment for Pacific on its DTPA claim, but misrepresentations and nondisclosures leading to the
reduced the additional damages by $405,000. ticket’s purchase, not a construction of the ticket contract.

The Busses contend in their first point of error that the Likewise, in this case the causes of action are based on
trial court erred in denying their motion to dismiss based alleged fraud and deceptive practices that induced Pacific
on forum selection clauses in the feeding and finishing to enter into the contracts, not to interpret or enforce
contracts. rights under the contracts. Moreover, the Busses were not
even parties to the contracts. Although Pacific alleged that
[1] [2]
Forum selection clauses are valid in Texas. Lean and Free was Lavern Busse’s alter ego, they failed
Greenwood v. Tillamook Country Smoker, 857 S.W.2d to prove that allegation.
654, 657 (Tex.App.—Houston [1st Dist.] 1993, no writ).
Parties are allowed to choose the forum in which to The Busses rely on Barnette v. United Research Co., 823
litigate their disputes. In this case, the feeding and S.W.2d 368 (Tex.App.—Dallas 1991, writ denied). That
finishing contracts between Pacific and Lean and Free case, however, is distinguishable because there the issues
contained the following clauses: arose from an employment contract and from the parties’
employer-employee relationship that implicated the
This agreement and the rights and contract terms. Here, the fraud and misrepresentation
obligations of the parties arising allegations deal not with the terms of the contract, but
hereto shall be construed in predate the contract and deal with inducement to sign the
accordance with the laws *813 of contract. Similarly, the case of Brock v. Entre Computer
the State of Iowa, with venue in Centers, Inc., 740 F.Supp. 428 (E.D.Tex.1990), involved
[certain Iowa counties]. a provision that applied to “any action” and was not
limited to actions arising under the contract itself.
A forum selection clause, however, does not apply to a Moreover, the court in Brock was construing a federal
tort action alleging that the plaintiff was induced by venue statute not involved here.
misrepresentations to enter into the contract, where
construction of the rights and liabilities of the parties For the reasons stated, we conclude that the contractual
under the contract is not involved. See Caton v. Leach forum selection clauses do not control this suit.
Corp., 896 F.2d 939, 942–43 (5th Cir.1990); Pozero v.
Alfa Travel, Inc., 856 S.W.2d 243, 245 (Tex.App.—San The Busses also contend that the court erred in denying
Antonio 1993, no writ). Where the wrongs arise from their motion for judgment notwithstanding the verdict as
misrepresentations inducing a party to execute the to Pacific’s DTPA claim because Iowa law, not Texas
contract and not from breach of the contract, remedies and law, applies to the transaction.
limitations specified by the contract do not apply. See [4] [5] [6]
Caton v. Leach Corp., supra; Decision Control Systems, A choice of law question is subject to de novo
Inc. v. Personnel Cost Control, Inc., 787 S.W.2d 98, review on appeal. See, e.g., Huddy v. Fruehauf Corp., 953
100–01 (Tex.App.—Dallas 1990, no writ). F.2d 955, 956 (5th Cir.1992). When determining choice
of law questions, a court will generally follow the
[3] statutory directives of its own state, subject to
This case does not involve an interpretation or
construction of the contracts but rather the constitutional limitations. RESTATEMENT (SECOND)
misrepresentations and fraud in the inducement to sign the OF CONFLICT OF LAWS § 6(1) (1971). The Texas
contracts. The rights, obligations, and cause of action do Deceptive Trade Practices Act will be liberally construed
not arise from the contracts but from the Deceptive Trade in order to protect consumers from false, misleading, and
Practices Act, the Texas Securities Act, and the common deceptive business practices and to provide efficient and
law. economical procedures to secure such protection.
TEX.BUS. & COM.CODE ANN. § 17.44 (Vernon 1987).
In Pozero v. Alfa Travel, Inc., a couple purchased a cruise

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The Busses do not argue that the DTPA’s reach is shows there is no genuine issue of material fact and that it
unconstitutionally broad. Here we have a Dallas-based is entitled to judgment as a matter of law. TEX.R.CIV.P.
partnership suing a Texas resident, Lavern Busse. Jeff 166a(c). In deciding whether a material fact issue
Busse, an Iowa resident, has waived any jurisdictional precludes summary judgment, the court will take as true
complaint and has subjected himself to the jurisdiction of any evidence favoring the nonmovant and will resolve
the Texas court. He does not raise the issue on appeal. any doubts and every reasonable inference in the
nonmovant’s favor. Nixon v. Mr. Property Management,
[7]
If the State Legislature intends for a statute to be 690 S.W.2d 546, 548–49 (Tex.1985).
applied to out-of-state facts, the courts will so apply it
[11] [12] [13]
unless constitutional *814 limitations forbid it. A person or corporation who offers or sells an
RESTATEMENT (SECOND) OF CONFLICT OF unregistered security is liable to the buyer, who may sue
LAWS § 6(1) cmt. b (1971). Application to out-of-state for damages. TEX.REV.CIV.STAT.ANN. art.
facts is permissible even when the local law of another 581–33A(1) (Vernon Supp.1995). A person who directly
state would be applicable under usual choice of law or indirectly controls a seller or issuer of a security is
principles. Id. liable jointly and severally under Section 33A with the
seller or issuer and to the same extent as the seller or
[8] [9]
Although the Texas DTPA does not explicitly issuer. TEX.REV.CIV.STAT.ANN. art. 581–33F(1)
provide or state an intention that it is to apply to (Vernon Supp.1995). An investment contract is a
out-of-state facts affecting Texas consumers, it is to be “security.” TEX.REV.CIV.STAT.ANN. art. 581–4A
applied liberally to protect those citizens from false, (Vernon Supp.1995). An investment contract involves (1)
misleading, and unconscionable acts, and it does not a common enterprise in which a person (2) expects profits
provide that its application will be limited to acts or (3) solely from the efforts of the promoter or a third party.
practices occurring in Texas. Moreover, the DTPA’s Securities and Exchange Commission v. W.J. Howey Co.,
definition of “trade” and “commerce” includes the sale of 328 U.S. 293, 66 S.Ct. 1100, 90 L.Ed. 1244 (1946);
any good or service “wherever situated” if the trade or Russell v. French & Associates, Inc., 709 S.W.2d 312,
commerce directly or indirectly affects the people of 314 (Tex.App.—Texarkana 1986, writ ref’d n.r.e.). A
Texas. TEX.BUS. & COM.CODE ANN. § 17.45(6) security is exempt from registration if the sale is made
(Vernon 1987); Reed v. Israel Nat’l Oil Co., 681 S.W.2d without public solicitation or advertisement and the issuer
228 (Tex.App.—Houston [1st Dist.] 1984, no writ). As sold its securities during the preceding twelve months to
noted, here we have a Texas plaintiff who was solicited, not more than fifteen persons who bought for their own
in part, in Texas, suing a Texas resident and an Iowa account. TEX.REV.CIV.STAT.ANN. art. 581–5I
resident. Even under a traditional choice of law analysis, (Vernon Supp.1995).
Texas would have sufficient contacts to Pacific’s claims
so the application of Texas law would not be Pacific’s summary judgment motion raised two grounds:
unreasonable or arbitrary. If construction of the Texas (1) Lavern Busse sold unregistered securities to Pacific in
statute justifies the application of Texas rather than Iowa violation of the Texas Securities Act, and (2) Lavern
law, and that does not offend the constitution, it is not Busse and a corporation he controlled, Lean and Free,
necessary to engage in the choice of law analysis based on offered and sold securities to Pacific by means of untrue
the significant relationships set out in RESTATEMENT statements of material fact or misleading omissions of
(SECOND) OF CONFLICT OF LAWS § 6(2) (1971). material fact or both, in violation of the Securities Act.
See, e.g., Siskind v. Villa Foundation for Education, Inc.,
642 S.W.2d 434 (Tex.1982). If such an analysis is proper, In the order granting partial summary judgment, the court
we find that the record reveals sufficient significant found that (1) Lavern Busse was a control person for Lean
relationships to justify the application of Texas law to the and Free, (2) Pacific bought a security from Lean and
controversy here. Consequently, since it does not offend Free that the Securities Act required to *815 be registered
constitutional principles to apply Texas law in this case, but was not registered, (3) the security was not exempt
we conclude that the trial court correctly refused to apply from the Act’s registration requirements, (4) the sale was
Iowa law. made through the use of materially misleading statements
and omissions on which Pacific relied in purchasing the
The Busses also contend that the trial court erred in security, and (5) Lavern Busse was liable to Pacific for its
granting Pacific’s motion for partial summary judgment damages as a result of Busse’s violations of the Act.
on its Securities Act claims against Lavern Busse.
Lavern Busse in his summary judgment response did not
[10]
A movant is entitled to a summary judgment when it dispute that the securities were sold through the use of

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materially misleading statements and omissions, so he has
[18] [19] [20]
waived that issue. Complaint about improper comment by counsel
is waived unless objection is timely made. An objection is
[14]
The Texas Securities Act does not require proof of not timely made unless it is made at the earliest practical
scienter. American General Ins. Co. v. Equitable General moment. City of Corsicana v. Herod, 768 S.W.2d 805,
Corp., 493 F.Supp. 721 (E.D.Va.1980). If there was 815–16 (Tex.App.—Waco 1989, no writ). Failure to press
adequate summary judgment proof that Lean and Free for an instruction at the time of an allegedly erroneous
sold an unregistered security that was not exempt from jury argument operates as a waiver of any complaint
registration and that Lavern Busse was a control person, which may be made as to the argument. Fowler v. Garcia,
the summary judgment was proper. 687 S.W.2d 517, 520 (Tex.App.—San Antonio 1985, no
writ). Where the record fails to show that a motion for
[15]
That Lean and Free sold the finishing-and-feeding mistrial directed to the argument of counsel was not
contracts is not disputed. On appeal the Busses argue that overruled by the trial court, no error is preserved for
a fact question remains as to whether the contracts are a review. Biard Oil Co. v. St. Louis Southwestern Ry. Co.,
security. The Busses in their memorandum in opposition 522 S.W.2d 588, 590 (Tex.Civ.App.—Tyler 1975, no
to Pacific’s summary judgment motion argue that the writ).
contracts are “forwarding” contracts. They do not argue
that the elements of the forwarding contracts are different During discussions before the court and the jury in
from an investment contract. We conclude that the connection with a hearsay objection, Pacific’s counsel
contracts meet the statutory and case-law requirements for said that the court had already determined that Lavern
an investment contract. Busse was a control person for Lean and Free. The court
had already decided that question with its ruling on
[16]
As to whether the securities were exempt, the Pacific’s motion for partial summary judgment, but the
summary judgment evidence shows that ADI sent to jurors had not been told. The next day, the Busses’ moved
Pacific two brochures: “A Profile of AG Dimensions for a *816 mistrial on grounds that the statement
International, Inc.” and “The Lean and Free Beef improperly informed the jury of the court’s prior ruling
Challenge to White Meat.” These constituted an and that the statement implied that Lavern Busse was a
advertisement and public solicitation. ADI was acting for wrongdoer. The court reserved its ruling on the motion.
Lean and Free in arranging sales for the cattle feeding
[21] [22] [23]
operations. Whether ADI was Lavern Busse’s agent or If counsel’s comment was error, the Busses
whether Lavern Busse knew of the brochures is irrelevant. waived their complaint because they failed to timely
The statute requires no scienter. object. Although there is no bright-line rule to determine
the timeliness of an objection, we conclude that an
[17]
As to whether Lavern Busse was a “control person,” objection made the day following the objectionable event
that term in the Texas statute is used in the same broad is not timely. Moreover, the Busses failed to request a
sense as in the federal statute. curative instruction. Improper argument is rarely cause for
TEX.REV.CIV.STAT.ANN. art. 581–33F cmt. (Vernon a mistrial and usually can be cured by an instruction.
Supp.1995). Major shareholders, Standard Fire Ins. Co. v. Reese, 584 S.W.2d 835, 839–40
TEX.REV.CIV.STAT.ANN. art. 581–33F cmt., and (Tex.1979). The Busses also failed to get a ruling on their
directors, Salit v. Stanley Works, 802 F.Supp. 728, 734–35 mistrial motion, so their complaint was not preserved for
(D.Conn.1992), are control persons. As Lavern Busse was review.
both the majority shareholder and a director, he was a
control person within the meaning of the statutes. The Busses also allege error because the court admitted
testimony and documentary evidence about statements
As all the statutory elements required to show a violation made by employees of Lean and Free, Ag Dimensions
of the Texas Securities Act were established by summary International, and Norwest Bank. They urge that the
judgment evidence, summary judgment for Pacific on that statements were hearsay and were highly prejudicial. The
issue was proper. Busses point to four pieces of evidence admitted over
their objections. They are two pieces of Bert’s testimony
In their fourth point of error, the Busses complain because about what Dean Freed of ADI had told him about Lavern
the court allowed Pacific’s attorney to advise the jury of Busse; Bert’s testimony about what Steve Knutson of
the court’s ruling on Pacific’s motion for partial summary Norwest Bank told him about Lavern Busse; and a
judgment. They argue that this was an impermissible brochure titled “Lean and Free Beef Challenge to White
comment on the weight of the evidence. Meat.”

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he received from Pacific to purchase more bulls and
[24]
Hearsay is an out-of-court statement offered in increase the Lean and Free inventory; that he had
evidence to prove the truth of the matter asserted. contracts with certain buyers; and that he was personally
TEX.R.CIV.EVID. 801(d). Evidence of an out-of-court committed to funding the project to success.
statement is hearsay only if it is introduced to prove the
truth of the matter asserted. Turner, Collie & Braden, Inc. *817 Jeff Busse directly reassured both Bert and the bank
v. Brookhollow, Inc., 642 S.W.2d 160, 167 (Tex.1982). that the Busses had control over the activities of ADI and
drew up the documents. He signed the contracts between
[25]
The statements in question were not offered for the Lean and Free and Pacific and prepared and signed the
proof of the matter asserted. In fact, Pacific argued that assignment documents covering Pacific’s purchase of the
they were false rather than true. They were offered only to bulls.
show that they were made, as elements of the fraud
Pacific was trying to prove, i.e., as operative facts. See There was also evidence that the Busses failed to disclose
Williams v. Jennings, 755 S.W.2d 874, 885 these facts: (1) because the Lean and Free program was
(Tex.App.—Houston [14th Dist.] 1988, writ denied); unproven, bulls had serious health problems, had damage
Yellow Freight System, Inc. v. North American Cabinet to their digestive tracts, had high death loss, and had high
Corp., 670 S.W.2d 387, 390 (Tex.App.—Texarkana 1984, disease rates; (2) the inventory being accumulated and
no writ). It was not error to admit the statements. carried at cost on the Lean and Free books had substantial
problems and most of it was not salable; (3) demand for
In their sixth point of error, the Busses contend that the the product was not great because of its high cost,
trial court erred in overruling their motions for judgment appearance, and taste; (4) Lean and Free had a going
notwithstanding the verdict and for new trial because concern qualification on its most recent audited financial
there was no or insufficient evidence to support the jury’s statements; (5) Lean and Free had low sales for years and
findings that they had committed fraud and engaged in the Busses had no reason to believe sales would improve;
deceptive acts. (6) Lavern Busse was not only Lean and Free’s majority
shareholder, but also its sole secured creditor with the
[26]
In reviewing a no evidence point, the reviewing court ability to foreclose on its assets; (7) Lean and Free had
considers only the evidence and inferences, when viewed neither the funds nor the prospect of funds based on past
in their most favorable light, that tend to support the performance, present contracts, and future promises to
finding and disregards all evidence and inferences to the pay for even a significant percentage of its existing
contrary. Davis v. City of San Antonio, 752 S.W.2d 518, obligations to investors; (8) Lavern Busse was reducing
522 (Tex.1988). If there is more than a scintilla of his unsecured exposure to Lean and Free by selling bulls
evidence to support the finding, the no evidence challenge to investors; and (9) Lavern Busse had no long-term
fails. Stafford v. Stafford, 726 S.W.2d 14, 16 (Tex.1987). commitment to Lean and Free, had threatened to cut off
funds before the sale to Pacific, and was seeking a buyer
[27] [28]
In reviewing a factual insufficiency point, the for the company.
appellate court first must examine all of the evidence,
[29]
Lofton v. Texas Brine Corp., 720 S.W.2d 804, 805 There is more than a scintilla of evidence to support
(Tex.1986), and having considered and weighed all the the jury findings. We also find, after reviewing all the
evidence, it will set aside the verdict only if the evidence evidence, that it is factually sufficient to support the jury
is so weak or the finding so against the great weight and findings.
preponderance of the evidence that it is clearly wrong and
[30]
unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986). As to deceptive acts under the DTPA, a consumer may
The court apparently held that Iowa law controlled the maintain an action where a false, misleading, or deceptive
common law fraud action. Neither side appeals that act or practice constitutes a producing cause of actual
decision. Under Iowa law the elements of fraud are: a damages. TEX.BUS. & COM.CODE ANN. § 17.50(a)(1)
material misrepresentation; made knowingly; with intent (Vernon 1987). A failure to disclose information about
to induce the plaintiff to act or refrain from acting; on goods or services can be a deceptive act if the failure to
which the plaintiff justifiably relies; with damages. Beeck disclose was intended to induce the consumer to enter into
v. Kapalis, 302 N.W.2d 90, 94 (Iowa 1981). the transaction. TEX.BUS. & COM.CODE ANN. §
17.46(b)(23) (Vernon Supp.1995); see Cameron v. Terrell
Bert testified that Lavern Busse made several & Garrett, Inc., 618 S.W.2d 535, 541 (Tex.1981).
misrepresentations: that the product demand was
[31]
outstripping supply; that he was going to use the money The evidence shows that the Busses made

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Busse v. Pacific Cattle Feeding Fund No. 1, Ltd., 896 S.W.2d 807 (1995)

misrepresentations that were a producing cause of the definition of “exemplary damages” because the
Pacific’s damages. Bert testified that when he investigated definition is an erroneous statement of the law and
to find out why the bulls were not being slaughtered and constituted an impermissible comment on the weight of
why Pacific was not being paid in compliance with the the evidence.
contracts, the Busses told him they had a big order
coming and that Pacific should continue to hold onto the The court gave the following definition:
bulls and continue feeding them. Bert also testified that
Jeff Busse told him that Lavern Busse still believed in the “EXEMPLARY DAMAGES” are
program and was buying more cattle and putting them on those damages which by law may
feed. After Bert returned to Texas and sent a demand be assessed against a really stupid
letter to the Busses, Jeff Busse responded with a letter defendant, or a really mean
asking for an additional ten days, until June 8, 1990, and defendant, or a really stupid
made representations that a big order was supposed to defendant who could have caused a
come in. On June 7, 1990, Jeff Busse told the Lean and great deal of harm by its actions but
Free board that, because litigation was imminent, Lavern who actually caused minimal harm,
Busse was calling his note and foreclosing on the assets. where actual damages have been
found, in order to make an example
[32]
The Busses also say there is no evidence of damages of such person or persons and to
to Pacific other than breach of contract damages, which deter such conduct on their part in
cannot be recovered in a tort action for fraud. We find, the future.
though, that most of the damages Pacific sought and
supported by evidence were tort-related. In addition to [35]
The Busses’ attorney specifically objected to the
seeking the difference between the value as represented reference to a stupid and mean defendant in the definition.
and received, it sought out-of-pocket expenses, loss of The court then modified the instruction as to another
credit reputation, loss of time value, and loss to business portion. The Busses did not renew their objection after the
reputation. While this kind of damage could result from a court modified the instruction, so they waived any
breach of contract, it can also result from fraudulent complaint. Wright Way Construction Co. v. Harlingen
inducement to enter into a transaction. Pacific did not sue Mall Co., supra.
to enforce the contract.
[36]
Although informing the jury that exemplary damages
We find the evidence to be both legally and factually could only be imposed against a really stupid or really
sufficient to support the jury findings. mean defendant departed from the correct standard and
was improper, we do not find it to be reversible, even if
The next complaint is that the trial court erred in failing to error had been properly preserved. Indeed, the standard
submit a requested instruction on mitigation of damages used by the court placed a more onerous burden of proof
and requested issues and instructions regarding whether on Pacific than the proper standard. We cannot see that
Pacific disposed of the bulls in a *818 commercially the instruction was harmful. The court did not say that the
reasonable manner and in good faith. Busses were “stupid and mean,” but only that such
[33] [34]
characteristics, if found, would justify the imposition of
A party requesting a jury instruction must do three exemplary damages.
things to preserve error: (1) tender in writing and request
the proper instruction before submission, (2) make a Pacific contends in its cross-point that the court erred in
specific objection to its omission, and (3) obtain a ruling reducing its damages. It argues that it is entitled to
from the court. Wright Way Construction Co. v. $1,620,000 in damages under the DTPA rather than the
Harlingen Mall Co., 799 S.W.2d 415, 418–19 $1,215,000 awarded by the trial court. The court awarded
(Tex.App.—Corpus Christi 1990, writ denied). The damages of $1,215,000, three times the jury’s finding of
Busses, although they tendered a proper jury instruction actual damages, $405,000. The jury found additional
that the court rejected, failed to object at the charge damages under the DTPA of $729,000 against Lavern
conference, and so waived their complaint. If they Busse and $486,000 against Jeff Busse, which together
preserved their complaint, they still failed to show that the also total three times actual damages.
failure to give the instruction probably caused the
rendition of an improper verdict. [37]
A consumer who prevails under the DTPA under a
knowing violation may recover three times the first
Complaint is also made that the court erred in submitting $1,000 of actual damages plus three times the actual

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damages in excess of $1,000. This is equal to a trebling of Providence Hospital v. Truly, 611 S.W.2d 127, 135
actual damages. TEX.BUS. & COM.CODE ANN. § (Tex.Civ.App.—Waco 1980, writ dism’d). We agree with
17.50(b)(1) (Vernon Supp.1995); Jim Walter Homes, Inc. the authorities that suggest that this was the legislative
v. Valencia, 690 S.W.2d 239, 241 (Tex.1985). intent and hold that the trial court correctly reduced the
damages to the limit provided by the DTPA.
Pacific argues it is entitled to $1,630,000 ($729,000 +
$405,000 + $486,000), because damages allocated to *819 For the reasons stated, the judgment is in all things
Lavern Busse ($720,000 + $405,000 = $1,134,000) are affirmed.
under the $1,215,000 legislative cap and the damages
allocated to Jeff Busse ($405,000 + $496,000 = $891,000)
also are under the legislative cap.
All Citations
[38] [39]
It appears that the Legislature intended the treble
damages to be a cap on the total damages recoverable in a 896 S.W.2d 807
DTPA action regardless of the number of defendants. See
Jim Walter Homes, Inc. v. Valencia, 690 S.W.2d at 241;
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254 S.W.3d 710
Court of Appeals of Texas,
Dallas.

In re ADVANCE PAYROLL FUNDING, LTD., Relator.
Advance Payroll Funding, Ltd., Appellant
v.
Landry Marks Partners, LP, Appellee.

No. 05–07–00992–CV. | May 21, 2008.

Synopsis
Background: Buyer of accounts receivable brought action against seller, asserting claims for fraudulent misrepresentation,
negligent misrepresentation, fraudulent transfer, unjust enrichment, and aiding and abetting fraud, alleging that seller sold the
accounts knowing that they were not real obligations. Seller filed motion to stay proceedings and compel arbitration under
arbitration clause of seller’s factoring agreement with original holder of the accounts. The 95th Judicial District Court, Dallas
County, Karen Gren Johnson, J., denied the motion, and seller filed interlocutory appeal and petition for writ of mandamus.

Holdings: The Court of Appeals, Morris, J., held that:
[1]
buyer was not required to arbitrate its claims under theory of direct-benefits estoppel;
[2]
letter agreement between buyer and seller did not incorporate factoring agreement by reference; and
[3]
buyer did not assume, and was not assigned, original holder’s obligations to seller under factoring agreement.

Petition denied; appeal dismissed.

Attorneys and Law Firms

*711 Charles Thomas Kruse, Baker & Hostetler LLP, Houston, for appellant.

Roger B. Cowie, Locke Liddell & Sapp, LLP, Charles Glen Morris, Crews, Shepherd & McCarty, LLP, Dallas, for appellee.

*712 Before Justices MORRIS, FITZGERALD, and LANG.

OPINION

Opinion by Justice MORRIS.

In this consolidated interlocutory appeal and petition for writ of mandamus, Advance Payroll Funding, Ltd. contends the trial
court erred when it denied its motion to compel arbitration of claims filed by Landry Marks Partners, LP. Advance Payroll
Funding asserts that Landry Marks, a nonparty to the agreement containing the arbitration clause, should be compelled to
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arbitrate its claims under the theory of equitable estoppel. For the reasons that follow, we deny the petition for writ of
mandamus and dismiss the interlocutory appeal.

I.

Advance Payroll Funding (APF) and Landry Marks are both engaged in the factoring business.1 In 2005, APF executed a
factoring agreement with Administrative Staffing Resources, L.L.C. (ASR). That agreement contained an arbitration clause
giving APF the right to have “any dispute or disagreement between the parties arising out of or relating to this Agreement, or
the transactions or relationships contemplated hereby, resolved by arbitration....” In 2006, Landry Marks executed a factoring
agreement with ASR for the accounts receivable then owned by APF. As a condition to that agreement, ASR was required to
terminate its agreement with APF. On December 11, 2006, ASR and APF signed a termination agreement that required ASR
to pay APF $2,676,192.37 and APF to assign back to ASR all of ASR’s accounts. On that date, Landry Marks wire-
transferred to APF the specified payoff amount on behalf of ASR. Landry Marks and APF also signed a letter agreement
providing that, upon Landry Marks’s payment of ASR’s obligations to APF, APF would provide a letter notifying account
debtors of the transfer of the accounts, terminate its UCC filings against ASR’s assets, and return any funds received on
ASR’s accounts after December 11, 2006. Shortly after acquiring the ASR accounts, Landry Marks learned that many of the
accounts were not real obligations and ASR’s president admitted he had provided false information to Landry Marks about
the accounts.

Landry Marks sued APF to recover the payoff amount, asserting claims for fraudulent misrepresentation, negligent
misrepresentation, fraudulent transfer, unjust enrichment, and aiding and abetting fraud.2 APF filed a motion to stay
proceedings and compel arbitration of Landry Marks’s claims under the Texas Arbitration Act (TAA) and the Federal
Arbitration Act (FAA) based on the arbitration clause in APF’s factoring agreement with ASR. The trial court denied the
motion. APF filed this interlocutory appeal and petition for writ of mandamus challenging the trial court’s denial.

II.
[1] [2] [3] [4]
As a preliminary matter, we note that APF urges that the FAA rather than the TAA governs the arbitration clause at
issue.3 Landry Marks does not contest *713 the applicability of the FAA. The APF–ASR contract involves an Ohio
company’s purchase of a Texas company’s accounts receivable and, thus, evidences transactions involving interstate
commerce. The FAA applies to contracts involving interstate commerce. See Jack B. Anglin, Co., Inc. v. Tipps, 842 S.W.2d
266, 272 (Tex.1992) (orig. proceeding). Moreover, the contract provides that Ohio law governs the parties’ agreement.
Where parties agree that another state’s substantive law applies to their contract, the TAA is inapplicable. See In re J.D.
Edwards World Solutions Co., 87 S.W.3d 546, 551 (Tex.2002) (orig. proceeding). We therefore dismiss APF’s interlocutory
appeal because the TAA does not apply to this case.4 Under the FAA, mandamus relief is appropriate if the trial court abused
its discretion in failing to stay the litigation and compel arbitration. In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 188
(Tex.2007) (orig. proceeding).
[5] [6] [7] [8]
APF asserts Landry Marks is equitably estopped from avoiding arbitration because (1) the liability and damages for
its claims against APF arise from or depend on the APF–ASR factoring agreement and (2) Landry Marks deliberately sought
and obtained benefits from that factoring agreement when it paid off ASR’s obligations and requested APF to take the actions
listed in the letter agreement.5 Generally, arbitration of a claim cannot be compelled unless it falls within the scope of a valid
arbitration agreement. See In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex.1999) (orig. proceeding),
abrogated in part on other grounds by In re Halliburton Co., 80 S.W.3d 566, 571–72 (Tex.2002). There are several
recognized instances, however, where a nonparty to the agreement may nevertheless be bound to arbitrate its claims. See
Merrill Lynch, 235 S.W.3d at 191; In re Weekley Homes, L.P., 180 S.W.3d 127, 131 (Tex.2005). For example, a nonparty

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may be required to arbitrate if (1) liability for its claim arises from the contract containing the arbitration provision or (2) it
deliberately seeks and obtains substantial benefits from the contract itself. Weekley Homes, 180 S.W.3d at 132–33. This
theory, known as direct-benefits estoppel, will not create liability for noncontracting parties that does not otherwise exist. Id.
at 134. Nor does it apply when the benefits alleged are insubstantial or indirect. Id.

In this case, Landry Marks’s claims do not arise from the APF–ASR factoring agreement but are based instead on APF’s
alleged misrepresentations or omissions with respect to the existence and amount of the accounts receivable Landry Marks
purchased from ASR. Simply because Landry Marks forwarded the purchase price directly to APF as the current owner of
the accounts does not mean Landry Marks’s claims arose from or are dependent upon the factoring agreement from which
APF derived its ownership interest. Contrary to APF’s position, any duty owed to Landry Marks with respect to
misrepresentations or disclosures on the accounts arose from general obligations imposed by law as a result of their dealings
and were not derived from the APF–ASR factoring *714 agreement. Likewise, the payoff amount and actions requested of
APF did not arise from the factoring agreement but from the termination agreement between ASR and APF.

In essence, the APF–ASR factoring agreement merely created the conditions that led Landry Marks to deal with APF. There
is nothing in the record to suggest Landry Marks received any substantial benefit from the factoring agreement itself or that
its claims depend on the factoring agreement. As such, direct-benefits estoppel does not apply to Landry Marks’s claims
against APF and the trial court did not abuse its discretion in denying APF’s motion to compel arbitration on this ground.

III.
[9] [10] [11]
APF also argues that the trial court erred in denying its motion to compel arbitration because (1) the APF–ASR
factoring agreement was incorporated by reference into the letter agreement between Landry Marks and APF and (2) Landry
Marks accepted assignment of the ASR accounts and, thus, assumed ASR’s obligations under the APF–ASR factoring
agreement. Neither of these arguments were presented to the trial court. It is well established that arguments not presented to
the trial court will not be considered in a petition for writ of mandamus. See American Optical, 988 S.W.2d at 714. Even if
the arguments were properly before us, however, we conclude they are without merit.

APF maintains the phrase “your receipt of $2,676,192.37 ... in full payment of ASR’s obligations to you” in the parties’ letter
agreement necessarily refers to ASR’s obligations under the factoring agreement. We disagree that this language incorporates
by reference the APF–ASR factoring agreement into the letter agreement. In fact, the payment obligation mentioned arose
directly from the agreement to terminate the APF–ASR factoring agreement.

We likewise reject APF’s contention that Landry Marks assumed or was assigned ASR’s obligations under the APF–ASR
factoring agreement. As noted above, that factoring agreement was terminated in a separate agreement executed by APF and
ASR. Any references to Landry Marks’s “assignment” of the accounts arose from the ASR–Landry Marks factoring
agreement.

We conclude the trial court did not abuse its discretion in denying APF’s motion to compel arbitration. We deny APF’s
petition for writ of mandamus and dismiss its interlocutory appeal.

All Citations

254 S.W.3d 710

Footnotes

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1
Factoring involves the purchase of accounts receivable from companies at a discounted rate.

2
Landry Marks also sued ASR and other defendants. The claims against these additional defendants are not relevant to the
disposition of this appeal.
3
APF has filed its interlocutory appeal “in the unlikely event that this Court does not agree that the FAA applies to this dispute.”

4
An interlocutory appeal is the proper vehicle for challenging the denial of a motion to compel arbitration under the TAA. See
Tipps, 842 S.W.2d at 272.
5
APF also argues that Landry Marks should be bound to the arbitration clause because it “stepped into the shoes” of ASR by
tortiously interfering with the factoring agreement’s exclusivity clause. Because APF did not present this argument to the trial
court, we will not consider it here. See In re American Optical Corp., 988 S.W.2d 711, 714 (Tex.1998) (orig. proceeding).

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2008 WL 5413097
Only the Westlaw citation is currently available.

SEE TX R RAP RULE 47.2 FOR DESIGNATION AND SIGNING OF OPINIONS.

MEMORANDUM OPINION
Court of Appeals of Texas,
Dallas.

In re WILMER CUTLER PICKERING HALE AND DORR LLP, Relator.

No. 05–08–01395–CV. | Dec. 31, 2008.

Original Proceeding from the 401st Judicial District Court, Collin County, Texas, Trial Court Cause No. 401–00568–2008,
Mark Rusch, J.

Attorneys and Law Firms

R. Paul Yetter, Gregory S. Coleman, Yetter, Warden & Coleman, LLP, Houston, TX, David E. Keltner, Kelly Hart &
Hallman, LLP, Fort Worth, TX, for Relator.

Lynda Lee Weaver, Martin E. Rose, Rose Walker, LLP, Dallas, TX, Joe Kendall, Provost Umphrey Law Firm, L.L.P.,
Steven Dominic Sanfelipo, Dallas, TX, for Real Parties in Interest.

Before Justices WHITTINGTON, FITZGERALD, and LANG–MIERS.

MEMORANDUM OPINION

Opinion by Justice FITZGERALD.

*1 Real party in interest, McAfee, Inc., sued relator, the law firm of Wilmer Cutler Pickering Hale and Dorr LLP, on several
theories of liability including fraud. Relator moved to dismiss on several grounds, including a contractual forum-selection
clause and lack of ripeness. The trial court signed an order dismissing every claim except for fraud. Relator seeks mandamus
relief, asking us to direct the trial court to dismiss the fraud claim as well. We deny relator’s petition for writ of mandamus.

I. BACKGROUND

In 2002, McAfee’s former chief financial officer, Prabhat Goyal, became the subject of a federal investigation for securities
fraud. Goyal retained relator in connection with that matter. The investigation led to the filing of a twenty-count federal
indictment against Goyal in 2004 in the Northern District of California. Goyal continued to retain relator to defend him in
that matter. He was eventually convicted of at least some counts in that case.

Goyal had an indemnity agreement with McAfee, pursuant to which McAfee was obliged to indemnify and defend Goyal
against actions brought against him by reason of his status as an agent of McAfee. In that agreement, McAfee promised to
advance Goyal’s defense costs, and Goyal promised to repay those costs if it were ultimately determined that Goyal was not

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entitled to be indemnified. Accordingly, McAfee paid Goyal’s legal bills incurred in connection with the securities-fraud
investigation and prosecution for several years. Goyal’s legal fees and expenses from the start of the federal investigation
through Goyal’s conviction were approximately $12 million.

In April 2008, McAfee sued relator in Texas state court, alleging that relator billed McAfee for roughly $6.8 million of
“unjustifiable legal fees and expenses.” McAfee asserted equitable subrogation, negligence, breach of fiduciary duty, and
fraud as its legal theories of recovery, and it also sought declaratory relief. Relator removed the case to federal court. While
in federal court, McAfee amended its pleadings to add the theories of assumpsit, theft, and gross negligence. The federal
judge later remanded the case on the ground that it was not ripe under federal law. The judge declined to speculate whether
McAfee’s claims were ripe under Texas state law.

After remand, relator filed a motion to dismiss in state court. Relator raised three grounds for dismissal: (1) lack of ripeness,
(2) a forum-selection clause in the indemnity agreement between Goyal and McAfee, and (3) the absence of Goyal, an
indispensable party, from the lawsuit. After a hearing, the judge signed an order denying the motion to dismiss as to
McAfee’s fraud claim but granting it as to all other claims asserted by McAfee. Relator seeks a writ of mandamus compelling
the trial judge to dismiss McAfee’s fraud claim as well. In its petition for writ of mandamus, relator argues only the forum-
selection clause and the lack of ripeness as grounds for relief. Our inquiry is whether relator has demonstrated that the trial
court clearly abused its discretion and that relator has no adequate remedy by appeal. In re McAllen Med. Ctr., Inc., No. 05–
0892, 2008 WL 4051053, at *1 (Tex. Aug.29, 2008).

II. FORUM–SELECTION CLAUSE

*2 In the first of its two issues, relator argues that the trial court should have dismissed McAfee’s fraud claim because of the
forum-selection clause found in the indemnity agreement between McAfee and Goyal. We reject relator’s argument for the
following reasons.

A. Standing to enforce the forum-selection clause
We first consider whether relator, which was not a party to the indemnity agreement between McAfee and Goyal, is entitled
to enforce the forum-selection clause found therein. Ordinarily, a non-party cannot enforce a contract unless it enjoys third-
party beneficiary status. See, e.g., S. Tex. Water Auth. v. Lomas, 223 S.W.3d 304, 306 (Tex.2007) (“A third party may only
enforce a contract when the contracting parties themselves intend to secure some benefit for the third party and entered into
the contract directly for the third party’s benefit.”). Relator does not directly contend that it is a third-party beneficiary of the
indemnity agreement (although, as discussed below, it does rely on an alleged admission by McAfee that relator was a third-
party beneficiary in connection with a different theory). Rather, relator relies on this Court’s holding that a “transaction
participant” can enforce a forum-selection clause even if the participant was not actually a party to the contract. Accelerated
Christian Educ., Inc. v. Oracle Corp., 925 S.W.2d 66, 75 (Tex.App.-Dallas 1996, no writ). In its reply brief, relator also
asserts the theory of equitable estoppel. Under this theory, a non-signatory defendant can invoke a forum-selection clause if
the signatory plaintiff “has sued signatory and non-signatory defendants based on substantially interdependent and concerted
misconduct by all defendants.”Phoenix Network Techs. (Europe) Ltd. v. Neon Sys., Inc., 177 S.W.3d 605, 622 (Tex.App.-
Houston [1st Dist.] 2005, no pet.)(analogizing to the law governing arbitration agreements); accord Deep Water Slender
Wells, Ltd. v. Shell Int’l Exploration & Prod., Inc., 234 S.W.3d 679, 694 (Tex.App.-Houston [14th Dist.] 2007, pet. denied).

1. Transaction participant
Relator does not fit the definition of “transaction participant” that we adopted in Accelerated Christian Education.In that
case, we defined transaction participant as “an employee of one of the contracting parties who is individually named by

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another contracting party in a suit arising out of the contract containing the forum selection clause.”925 S.W.2d at 75.From
the context, it is plain that the employee relationship must have existed at the time of the transaction containing the forum-
selection clause. See id.(“To hold otherwise would allow a nonsignatory employee, who was a transaction participant, to
defeat his company’s agreed-to forum by refusing to be bound by the employer’s contract.”). And in a subsequent
unpublished but persuasive opinion, we closely analyzed the question of whether the nonsignatory was an employee of the
signatory at the time of the transaction. Robbins & Myers, Inc. v. J.M. Huber Corp., No. 05–01–00139–CV, 2002 WL
418206, at *3 & n. 5 (Tex.App.-Dallas March 19, 2002, no pet.)(not designated for publication). Relator points to no
evidence that it was an employee of Goyal at the time the indemnity agreement was executed, or that it had any involvement
in the indemnity agreement transaction at all. Indeed, relator acknowledges in its reply brief that it is not Goyal’s employee.

*3 Relator presents two arguments in support of its position that it is a transaction participant. First, relator argues that
McAfee admitted that relator is, after all, a third-party beneficiary of the indemnity agreement. We have reviewed the
pleading cited by relator in support of this argument, and we do not agree that McAfee admitted relator’s third-party
beneficiary status. At one time McAfee pleaded for declaratory relief that it “has fulfilled and discharged any and all
liabilities to [relator] as a third party beneficiary to the agreement by paying past fees, and to declare that [McAfee] is not
obligated to pay any outstanding fees or expenses or fees for future work to [relator].” (Emphasis added). As we read this
pleading, McAfee did not concede relator’s third-party beneficiary status, but only sought a declaration that McAfee had
discharged its liabilities to relator as a third-party beneficiary if any such liabilities existed.

Second, relator argues that it is a “transaction participant” because McAfee made all of the payments at issue because of the
indemnity agreement. This argument fails because it does not address the requirement that a “transaction participant” must
have been an employee of a signatory at the time of the transaction containing the forum-selection clause. According to
relator’s own recitation of the facts, some six years passed between the execution of the indemnity agreement and Goyal’s
need to retain relator as counsel. Thus, relator fails to show that it was an employee of McAfee or Goyal when the indemnity
agreement was executed or that relator participated in that transaction in any way. Its participation in the invoice-and-
payment transactions with McAfee years later is irrelevant.

2. Equitable estoppel
This leaves relator’s equitable-estoppel theory of standing to enforce the forum-selection clause. Under this theory, relator
had to demonstrate that McAfee “has sued signatory and non-signatory defendants based on substantially interdependent and
concerted misconduct by all defendants.”See Phoenix Network, 177 S.W.3d at 622.Relator is the only defendant, so plainly
McAfee has not sued both signatory and nonsignatory defendants. Moreover, McAfee does not allege interdependent and
concerted misconduct by relator and signatory Goyal. The only misconduct at issue is the alleged fraud by relator. Relator
argues that equitable estoppel is supported by McAfee’s allegations that it required Goyal to review and approve relator’s
invoices before forwarding them to McAfee for payment. But McAfee alleges no wrongdoing by Goyal in connection with
relator’s invoices, much less that Goyal was a participant in relator’s alleged fraud. Accordingly, relator has not shown that
the facts of this case compel application of the equitable-estoppel theory of standing.

3. Conclusion
Relator has not shown that it has standing to enforce the forum-selection clause.

B. Interpretation of the forum-selection clause
*4 Even if relator had standing to enforce the forum-selection clause, we would still overrule its first issue because the
forum-selection clause does not cover McAfee’s fraud claim. Paragraph 19 of the indemnity agreement provides as follows:

Consent to Jurisdiction.[McAfee] and [Goyal] each hereby irrevocably consent to the jurisdiction of the courts of the State

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of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement
and agree that any action instituted under this Agreement shall be brought only in the state courts of the State of Delaware.

This provision has two parts: a consent to Delaware jurisdiction for any action that “arises out of or relates to” the indemnity
agreement, and a mandatory forum-selection provision for any action “instituted under” the indemnity agreement. Courts
have recognized that clauses in which parties merely “consent” or “submit” to the jurisdiction of a particular forum are
permissive rather than mandatory, and a mere consent-to-jurisdiction clause will not justify dismissing a suit that is filed in a
different forum. E.g., Dunne v. Libbra, 330 F.3d 1062, 1063 (8th Cir.2003); Keaty v. Freeport Indonesia, Inc., 503 F.2d 955,
956–57 (5th Cir.1974); see also Sw. Intelecom, Inc. v. Hotel Networks Corp., 997 S.W.2d 322, 323–26 (Tex.App.-Austin
1999, pet. denied) (clause whereby parties “stipulate to jurisdiction [in] Minnesota, as if this Agreement were executed in
Minnesota” was not a mandatory forum-selection clause); Weisser v. PNC Bank, N.A., 967 So.2d 327, 330
(Fla.Dist.Ct.App.2007) (distinguishing mandatory forum-selection clauses from permissive clauses that “constitute nothing
more than a consent to jurisdiction and venue in the named forum and do not exclude jurisdiction or venue in any other
forum”).

In construing the clause, we strive to ascertain the intent of the parties by giving the language its ordinary meaning. Valence
Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex.2005). When parties use different language in different parts of a
contract, we may ordinarily assume that they intended different things. Cf. City of Dallas v. Heard, 252 S.W.3d 98, 111
(Tex.App.-Dallas 2008, pet. denied) (“We assume the legislature used different language in each subsection for a reason.”).
In this case, the consent-to-jurisdiction clause has a scope that is different from the mandatory forum-selection clause. The
consent-to-jurisdiction clause is very broad, encompassing all actions that arise out of or relate to the agreement. The phrase
“relates to,” in particular, is recognized as a very broad term. See, e.g., Kirby Highland Lakes Surgery Ctr., L.L.P. v. Kirby,
183 S.W.3d 891 (Tex.App.-Austin 2006, no pet.)(arbitration clause); Whitten v. Vehicle Removal Corp., 56 S.W.3d 293, 308
(Tex.App.-Dallas 2001, pet. denied) (statutory preemption provision).

The mandatory forum-selection clause, by contrast, applies only to actions “instituted under” the indemnity agreement. The
use of different words indicates that the scope of the forum-selection clause is different from the scope of the consent-to-
jurisdiction clause. The phrase “instituted under” connotes a scope narrower than the expansive phrase “arises out of or
relates to.”The plain meaning of “instituted” in this context is “initiated” or “set up,” and the plain meaning of “under” is “in
accordance with” or “subject to the bidding or authority of.”WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY
OF THE ENGLISH LANGUAGE UNABRIDGED 1171, 2487 (1981). We agree with McAfee that an action is “instituted
under” the indemnity agreement only if the claimant is relying on the terms and authority of the agreement as the basis for the
rights sued upon. In other words, the forum-selection clause of section 19 applies only if the claimant is suing on rights that
are created by the indemnity agreement itself. McAfee’s fraud claim against relator does not depend on the authority or terms
of the agreement. Rather, McAfee alleges that relator defrauded McAfee with repeated misrepresentations “contained in
[relator’s] billings, related correspondence and communication together with [its] reputation as a top law firm.”Relator’s legal
duty not to defraud McAfee in the manner alleged, if any, is created by the common law, not the indemnity agreement.

*5 Relator urges that the “instituted under” requirement is satisfied because McAfee paid Goyal’s legal expenses “under” the
indemnification agreement. The forum-selection clause, however, applies only if McAfee’s action is “instituted under” the
indemnity agreement. Although the indemnity agreement may explain why McAfee was paying relator’s invoices at all, the
fact remains that McAfee is not suing relator based on any rights created by or spelled out in the indemnity agreement itself.
McAfee’s fraud claim is “instituted under” the common law, not the indemnity agreement. We decline to expand the meaning
of the language contained in the agreement. See Lewis v. Foxworth, 170 S.W.3d 900, 903 (Tex.App.-Dallas 2005, no
pet.)(“We may neither rewrite the contract nor add to its language.”).

C. Conclusion
We overrule relator’s first issue.

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III. RIPENESS

In its second issue, relator argues that McAfee’s fraud claim is not yet ripe, which deprives the trial court of subject-matter
jurisdiction over that claim. Relator’s theory is that the indemnity agreement gives McAfee the right to recoup all of its
payments from Goyal if it is ultimately determined that Goyal is not entitled to indemnification under the agreement. This
determination, relator contends, cannot be made until Goyal’s criminal case, including appeal, has run its course. Thus,
relator concludes, McAfee’s injury remains totally speculative until Goyal’s criminal case is concluded and his right to
indemnification determined. See Perry v. Del Rio, 66 S.W.3d 239, 249 (Tex.2001) (“The central concern [in a ripeness
inquiry] is whether the case involves uncertain or contingent future events that may not occur as anticipated, or indeed may
not occur at all.”).

We reject relator’s argument. It may be true that McAfee’s right of recoupment against Goyal, based on the terms of the
indemnity agreement, is not yet ripe. But McAfee’s right not to be defrauded by relator is separate and independent of any
contractual rights it may enjoy against Goyal. That is, McAfee’s right to recover against relator for fraud does not depend on
a preliminary determination that Goyal has no right to indemnification. Whether Goyal prevails or not, neither he nor relator
enjoys the right to defraud McAfee under any scenario.

In sum, McAfee’s rights against relator are concrete and do not depend on contingent or hypothetical facts, or on events that
may not come to pass. Accordingly, McAfee’s fraud claim against relator is ripe.

We overrule relator’s second issue.

IV. CONCLUSION

Relator has not shown that the trial court clearly abused its discretion by denying relator’s motion to dismiss as to McAfee’s
fraud claim.1We deny the petition for writ of mandamus.

All Citations

Not Reported in S.W.3d, 2008 WL 5413097

Footnotes
1
The author of this opinion would also deny relief on the ground that the certification at the end of relator’s petition for writ of
mandamus does not substantially comply with the requirements of Texas Rule of Appellate Procedure 52.3(j), as amended
effective September 1, 2008. See In re Butler, No. 05–08–01443–CV, 2008 WL 4952842 (Tex.App.-Dallas Nov.21, 2008, orig.
proceeding). The rule requires the person filing a petition for writ of mandamus to certify that he or she has read the petition and
concluded that “every factual statement in the petition is supported by competent evidence included in the appendix or record.”The
certificate at the end of relator’s petition contains only an averment that “the Petition truly and correctly recites the factual
allegations set forth in the pleadings and the evidence in the record.”But in light of the foregoing analysis, it is unnecessary to
address this issue.

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2000 WL 298282 FACTUAL AND PROCEDURAL BACKGROUND
Only the Westlaw citation is currently available.
In April and May of 1998, Major Help contacted each of
NOTICE: NOT DESIGNATED FOR PUBLICATION. the Lawyers for the purpose of selling them television
UNDER TX R RAP RULE 47.7, UNPUBLISHED advertising. According to Major Help’s initial
OPINIONS HAVE NO PRECEDENTIAL VALUE representations, the advertising would be a cooperative
BUT MAY BE CITED WITH THE NOTATION “(not venture among twelve local attorneys or law firms.2 Each
designated for publication).” attorney or firm would contribute a sum certain; in return,
Major Help would prepare a television advertisement
Court of Appeals of Texas, Austin.
featuring each Lawyer’s name and would purchase air
MAJOR HELP CENTER, INC. and Robert Berz, time to run the ads.
Appellants,
v. After the initial telephone contact, Berz visited the
IVY, CREWS & ELLIOTT, P.C.; Guy C. Fisher, Lawyers in person and presented a video depicting the
Esq.; Earl K. Straight, Esq.; Richard T. Jones, television advertisement that would be broadcast. Major
Esq.; James P. Borne, Esq.; and McGraw, Brinkley Help proposed to add the names of each participating
& Irwin, Appellees. lawyer to the advertisement once they had reached an
agreement. According to Berz’s representations, the
No. 03-99-00285-CV. | March 23, 2000. content of the television advertisement had been approved
by the State Bar of Texas. Berz also represented to each
of the Lawyers that the advertisements would air
From the County Court at Law No. 1 of Travis County, according to a particular schedule and that Major Help
No. 241,712; Orlinda Naranjo, Judge Presiding. would spend a certain amount of money to purchase the
air time.
Before Chief Justice ABOUSSIE, Justices KIDD and
SMITH. The advertisement included a phone number that would
be answered by Major Help. Berz represented that Major
Opinion Help would forward all incoming calls to the participating
lawyers on a rotating basis. Major Help was not to screen
SMITH.
the calls; rather, it represented that it would automatically
forward them with a recording identifying the referral as a
*1 Major Help Center, Inc. is a California corporation that “Major Help Center call.”
sold television advertising to six lawyers or small law
firms in Austin. When the dissatisfied Lawyers1 sued Each of the named Lawyers agreed to participate in the
Major Help and its Texas representative Robert Berz for cooperative advertising arrangement. Each deposited a
violations of the Deceptive Trade Practices Act (DTPA), sum of money with Major Help and agreed to deposit
the defendants moved to dismiss the cause, citing a forum additional installments throughout the course of the
selection clause in their contract with the Lawyers which agreement. Subsequently, each of the Lawyers discovered
designated Los Angeles, California as the agreed forum. that Major Help had misrepresented their proposed
The trial court denied the motion to dismiss, and a jury arrangements in several respects: the television
found Major Help and Berz each liable for deceptive trade advertisement had not been approved by the State Bar of
practices and attorneys’ fees. On appeal, Major Help Texas; the advertisements were not identical to the one
contends that the trial court erred in refusing to apply the they had previewed; the ads did not air according to the
forum selection clause to this dispute and that the promised schedule; and Major Help screened some calls
evidence was legally or factually insufficient to support rather than automatically forwarding them as it had
the DTPA violations, the alleged double recovery from represented.
each defendant, and the award of attorneys’ fees. We will
affirm the trial court’s judgment. *2 After Major Help failed to respond to the Lawyers’
demand for a refund of the funds they had paid, the
Lawyers filed suit alleging breach of contract and
violations of the Deceptive Trade Practices Act. In
response, Major Help filed a special appearance and a
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motion to dismiss based on the forum selection clause in claims to determine whether they could stand alone or are
its agreement with the Lawyers (the Agreement).3 The so interwoven with the Agreement that they could not be
Lawyers then dismissed their breach-of-contract claim maintained without reference to the Agreement. See
and proceeded solely on their DTPA claim. The trial court Valero Energy Corp. v. Wagner & Brown, II, 777 S.W.2d
denied the special appearance and the motion to dismiss, 564, 566 (Tex.App.-El Paso 1989, writ denied).
and the parties tried the case to a jury.
Major Help contends that the Lawyers’ DTPA claim
At the close of evidence, Major Help moved for an specifically implicates the written contract terms. For
instructed verdict, arguing that the only basis for the support, Major Help relies primarily on Texas Source
Lawyers’ DTPA claim was breach of contract, which Group, Inc. v. CCH, Inc., 967 F .Supp. 234
alone does not constitute a DTPA violation. The court (S.D.Tex.1997), and Accelerated Christian, 925 S.W.2d
denied the motion for an instructed verdict and submitted at 68-69. In Accelerated Christian, the appellate court
the issues to the jury. The jury found Major Help and its affirmed the trial court’s dismissal of contractual, tort, and
representative liable for DTPA violations and assessed DTPA claims, reasoning that “pleading alternate
$38,250 in actual damages and $18,000 in attorneys’ fees noncontractual theories of recovery will not alone avoid a
against each of the two defendants. forum selection clause if those alternate claims arise out
of the contractual relations and implicate the contract’s
terms.” Accelerated Christian, 925 S.W.2d at 72.
Similarly, the federal district court in Texas Source Group
enforced a forum selection clause and dismissed the
DISCUSSION plaintiffs’ contractual and noncontractual claims, holding
that the claims arose out of the parties’ contractual
On appeal, Major Help4 first argues that the trial court relationship and implicated the agreement. See Texas
erred in denying the motion to dismiss because the forum Source Group, 925 F.Supp. at 238.
selection clause was valid and should have been applied
in this case. Second, Major Help asserts that the Lawyers *3 The Lawyers counter that their DTPA suit did not arise
presented no evidence or insufficient evidence of DTPA under the Agreement and therefore the forum selection
violations and that the written contract negated any clause does not apply. Citing Busse, the Lawyers argue
reliance by the Lawyers on the alleged deceptive that where the wrongs arise from misrepresentations
misrepresentations. Third, Major Help alleges that the inducing a party to execute the contract and not from
jury’s award of damages against each of the two breach of the contract, the remedies and limitations
defendants resulted in a double recovery for the same act specified by the contract do not apply. See Busse, 896
and that the trial court should have found Berz and Major S.W.2d at 813.
Help jointly and severally liable. Finally, Major Help
contends that the Lawyers failed to establish that the Texas Source Group, Accelerated Christian, and Busse all
attorneys’ fees they sought were reasonable and turned on the issue of whether the claims pleaded
necessary. implicated the terms of the contract, thereby triggering the
forum selection clause. Accelerated Christian and Texas
Source Group included contractual and noncontractual
claims that necessarily implicated the terms of the
I. Forum Selection Clause
contract. See Accelerated Christian, 925 S.W.2d at 72;
Forum selection clauses are valid in Texas. See Busse v.
Texas Source Group, 967 F.Supp. at 237-38. Indeed, in
Pacific Cattle Feeding Fund No. 1, Ltd., 896 S.W.2d 807,
both cases the noncontractual claims were premised on
812 (Tex.App.-Texarkana 1995, writ denied). “When a
the defendant’s failure to comply with a contractual
party contractually consents to the jurisdiction of a
duty-a claim that could not have been maintained without
particular state, that state has jurisdiction over that party
reference to the terms of the contract. See Accelerated
as long as the agreed-to state will enforce the type of
Christian, 925 S.W.2d at 69; Texas Source Group, 967
forum selection clause signed by the parties.” Accelerated
F.Supp. at 237-38. Busse, on the other hand, involved
Christian Educ., Inc. v. Oracle Corp., 925 S.W.2d 66, 72
misrepresentations and fraud in the inducement to sign a
(Tex.App.-Dallas 1996, no writ). However, forum
contract and thus did not implicate the terms of the
selection clauses will not apply if construction of the
contract. See Busse, 896 S.W.2d at 813.
rights and liabilities of the parties under the contract is not
involved. See Busse, 896 S.W.2d at 813. Thus, in
In this case, the Lawyers assert a single noncontractual
determining whether the forum selection clause applies in
cause of action based on alleged misrepresentations made
this case, we must review the nature of the Lawyers’

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by Major Help prior to the date the parties signed the finding of the trier of fact and disregard all evidence and
Agreement. The Lawyers do not rely on the terms of the inferences to the contrary. See Burroughs Wellcome Co.
Agreement as the basis for their claims. They do not v. Crye, 907 S.W.2d 497, 499 (Tex.1995); Best v. Ryan
attempt to enforce duties or obligations arising under the Auto Group, Inc., 786 S.W.2d 670, 671 (Tex.1990). We
Agreement. These facts are analogous to those in the will uphold the finding if more than a scintilla of evidence
Busse decision, which we find persuasive. Consequently, supports it. See Crye, 907 S.W.2d at 499; Seideneck v.
we hold that the Lawyers’ DTPA claim is independent of Cal Bayreuther Assocs., 451 S.W.2d 752, 755
the Agreement, and the forum selection clause does not (Tex.1970); In re King’s Estate, 244 S.W.2d 660, 661
apply. To the extent Accelerated Christian or Texas (Tex.1951). The evidence supporting a finding amounts to
Source Group can be read to compel a different more than a scintilla if reasonable minds could arrive at
conclusion, we decline to follow them. We overrule the finding given the facts proved in the particular case.
Major Help’s first issue.5 See Crye, 907 S.W.2d at 499; Transportation Ins. Co. v.
Moriel, 879 S.W.2d 10, 25 (Tex.1994); see also William
Powers, Jr. & Jack Ratliff, Another Look at “No
Evidence” and “Insufficient Evidence,” 69 Tex.L.Rev.
II. DTPA Violations 515, 522 (1991); Michol O’Connor, Appealing Jury
In its second issue, Major Help asserts that the Lawyers Findings, 12 Hous. L.Rev. 65 (1974).
presented no evidence or insufficient evidence of DTPA
violations. Major Help also contends that the Lawyers We first consider Major Help’s argument that the written
failed to prove reliance on Major Help’s representations agreement between the parties negated any evidence of
because the written agreement between the parties negates reliance. Specifically, Major Help emphasizes the clause
any reliance on statements made prior to the signing of in the Agreement that places on the Lawyers the sole
the Agreement. responsibility for complying with all applicable marketing
and advertising laws, rules, and regulations pertaining to
When a case is tried to a jury, factual-insufficiency the Lawyers’ profession. This clause, according to Major
complaints must be preserved through a motion for new Help, should have alerted the Lawyers of their duty to
trial. See Tex.R.Civ.P. 324(b); Cecil v. Smith, 804 S.W.2d obtain approval from the State Bar of Texas for the
509, 510 (Tex.1991). Major Help did not file a motion for advertisements and negated any reliance they may have
new trial and thus has failed to preserve its placed on Major Help’s representations that the ads had
factual-insufficiency issues. already been approved. We disagree.

No-evidence points must be preserved through one of the The Lawyers’ burden was to prove that Major Help
following procedural steps in the trial court: (1) a motion engaged in false, misleading, or deceptive acts that were
for instructed verdict, (2) a motion for judgment the producing cause of the Lawyers’ injuries. See Church
notwithstanding the verdict, (3) an objection to the & Dwight Co. v. Huey, 961 S.W.2d 560, 567
submission of the issue to the jury, (4) a motion to (Tex.App.-San Antonio 1997, pet. denied). The Lawyers
disregard the jury’s answer to a vital fact issue, or, (5) a were not required to prove reliance before they could
motion for new trial. See Steves Sash & Door Co. v. Ceco recover under the DTPA. See Weitzel v. Barnes, 691 S
Corp., 751 S.W.2d 473, 477 (Tex.1988). Major Help filed .W.2d 598, 600 (Tex.1985). Furthermore, although the
a motion for instructed verdict asserting that a breach of Lawyers were responsible under the Agreement for
contract is not a deceptive trade practice violation, citing complying with their professional rules regarding
Rocky Mountain Helicopters, Inc. v. Lubbock County advertising, this fact does not negate Major Help’s
Hosp. Dist., 987 S.W.2d 50 (Tex.1998). The Lawyers representations that the proposed broadcast had been
claim that the stated basis for the instructed verdict was examined and approved by the State Bar. The Lawyers’
not sufficiently specific to preserve Major Help’s complaint is that their individual responsibilities would
no-evidence issues. Although Major Help’s motion for have been easier if the proposed broadcast had been
instructed verdict did not specifically address the preapproved by the State Bar of Texas as represented. The
no-evidence issues that Major Help now advances on record reflects sufficient evidence to conclude that
appeal, it did generally draw the trial court’s attention to a preapproval of the advertisements induced the Lawyers to
lack of evidence to support the DTPA violations. In the enter the Agreement.
interest of justice, we will address Major Help’s
no-evidence claims regarding the DTPA violations. Major Help also argues that the Lawyers should not have
relied on the proposed broadcast or advertising schedule
*4 In deciding a no-evidence point, we must consider because they were simply proposals and depended on the
only the evidence and inferences tending to support the
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participation of twelve lawyers; only six lawyers severally liable.
eventually signed the Agreement. As stated above, the
Lawyers were not required to prove reliance in order to We read Major Help’s third issue as a challenge to the
recover under the DTPA. Moreover, sufficient evidence measure of damages submitted by the trial court and as a
exists to support a finding that Major Help represented to complaint of excessiveness of the damages. However, a
the Lawyers that the completed television advertisement review of the record reveals that Major Help failed to
would be identical to the proposed advertisement and that preserve this error for appeal. Major Help failed to object
Major Help would obtain the requisite number of to the jury charge on the alleged improper measure of
participants. Even if the Lawyers later learned that only damages, and although Major Help submitted a motion
six attorneys would participate in the cooperative for instructed verdict, that motion did not address the
advertising venture, it was Major Help’s initial double recovery of damages. See Tex.R.Civ.P. 274, 268;
representations made prior to the Agreement that induced see also United Postage Corp. v. Kammeyer, 581 S.W.2d
the Lawyers to enter into the Agreement and forms the 716, 722 (Tex.Civ.App.-Dallas 1979, no writ). Major
basis for their DTPA claim. Help also failed to file a motion for new trial to preserve
its excessive-damages complaint. See Tex.R.Civ.P.
*5 Major Help further contends that the Lawyers 324(b)(4). In no way was the trial court given an
presented no evidence that the television advertisements opportunity to address or correct the alleged error.
violated the State Bar of Texas rules, that Major Help
failed to expend a certain amount of funds for the In its fourth issue, Major Help argues that the Lawyers
purchase of air time, that Major Help modified the presented no competent evidence to establish that their
advertising schedule, and that Major Help improperly attorneys’ fees were reasonable and necessary. Again,
screened phone calls. We disagree. Major Help has failed to preserve this error for appeal.
Major Help’s motion for instructed verdict did not address
First, it was not necessary for the Lawyers to prove that this alleged lack of evidence. See Tex.R.Civ.P. 268;
the advertisement violated State Bar rules or that Major Steves Sash & Door, 751 S.W.2d at 477. Nor did Major
Help’s method of answering phone calls was improper in Help make any other attempt to preserve this issue by
order to prevail on their DTPA claim. Rather, the bringing it to the trial court’s attention. Therefore, we
Lawyers’ claim is that Major Help engaged in false, hold that issues three and four were not preserved for
misleading, or deceptive acts that induced the Lawyers to appeal.
enter the Agreement. We hold that more than a scintilla of
evidence exists to support the Lawyers’ claims, including
misrepresentations regarding the manner in which Major
Help would answer phone calls, alleged State Bar
approval of the advertisements, the amount of funds CONCLUSION
Major Help would expend on the purchase of air time,
and the advertising schedule it would run. Because we *6 Because we determine that the forum selection clause
find legally sufficient evidence that Major Help violated did not apply to the Lawyers’ DTPA claim, we hold the
the DTPA by several misrepresentations, we overrule trial court did not err in denying Major Help’s motion to
appellant’s second issue. dismiss. We further hold that the evidence is legally
sufficient to support a violation of the DTPA and that
Major Help failed to preserve its complaints about double
recovery and attorneys’ fees for appeal. We therefore
III. Double Recovery and Unreasonable Attorneys’ affirm the trial court’s judgment.
Fees
In its third issue, Major Help argues that the evidence
does not support recovery from both Major Help and its
All Citations
representative Berz and that assessing damages against
both amounts to a double recovery for the same injury. Not Reported in S.W.3d, 2000 WL 298282
Major Help requests that this Court reform the judgment
to clarify that Major Help and Berz are jointly and

Footnotes
1 Appellees include Ivy, Crews & Elliot, P.C.; Guy C. Fisher, Esq .; Earl K. Straight, Esq.; Richard T. Jones, Esq.; James
P. Borne, Esq.; and McGraw, Brinkley & Irwin. For convenience, we will refer to appellees as the Lawyers.

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2 Ultimately only six lawyers or law firms participated in the advertising arrangement.

3 The forum selection clause provided: “Any action brought by either party under this agreement shall be instituted only
in a court in the County of Los Angeles in the State of California having the appropriate monetary limits of jurisdiction.”
4 We will refer to the appellants collectively as Major Help because their claims on appeal are identical, except as
addressed in note 5.
5 Since we hold that the trial court was correct in deciding not to apply the forum selection clause, we reject the
argument that at least the action against Berz should be dismissed because as a mere participant in the transaction,
he derives some added benefit from the forum selection clause.

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Osornia v. AmeriMex Motor & Controls, Inc., 367 S.W.3d 707 (2012)

367 S.W.3d 707
Court of Appeals of Texas,
Houston (14th Dist.).

Fernando OSORNIA, Appellant,
v.
AMERIMEX MOTORS & CONTROLS, INC., Appellee.

No. 14–11–00086–CV. | March 29, 2012.

Synopsis
Background: Mud pump motors vendor filed suit against its principal and officer and against principal and officer of
offshore rig’s project manager, asserting claims for fraud, violations of Texas Theft Liability Act, and tortious interference
with contract. The 152nd District Court, Harris County, Robert K. Schaffer, J., denied motion by vendor’s principal/officer to
compel arbitration pursuant to settlement agreement entered into in prior lawsuit that required all claims arising out of
settlement to be submitted to arbitration. Vendor’s principal/officer appealed.

Holdings: The Court of Appeals, Kem Thompson Frost, J., held that:
[1]
vendor’s claims that were assigned to it by offshore rig against principal/officer did not fall within scope of arbitration
clause of settlement agreement, and
[2]
issue of validity of rig’s assignment went to the merits of claims and therefore was not relevant to determining propriety of
the denial of application to compel arbitration.

Affirmed.

Attorneys and Law Firms

*708 Lee Keller King, Houston, for appellant.

Steve E. Couch, Charles W. Kelly, Houston, for appellee.

Panel consists of Justices FROST, SEYMORE, and JAMISON.

OPINION

KEM THOMPSON FROST, Justice.

This is an interlocutory appeal from the trial court’s order denying a defendant’s application to compel arbitration under
Texas Civil Practice and Remedies Code section 171.021. Because the claims asserted against the defendant by the plaintiff

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do not fall within the scope of the arbitration agreement, the trial court did not err in refusing to compel arbitration, and we
affirm the trial court’s order.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 2008, appellee/plaintiff AmeriMex Motor & Controls, Inc. and others filed suit against appellant/defendant Fernando *709
Osornia and others in Cause No. 2008–56215 in the 152nd District Court of Harris County (hereinafter the “First Lawsuit”).
In late October and early November of 2009, the parties to that lawsuit and other “Potential Parties” entered into a “Mutual
Release and Settlement Agreement” (hereinafter “Settlement Agreement”). The parties to that agreement agreed that “any
and all claims arising out of this Agreement ... shall be arbitrated.” Viking Offshore (USA), Inc. was not a party in the First
Lawsuit, nor was Viking a party to the Settlement Agreement, which contains no reference to Viking.

AmeriMex alleges that in June 2010, Viking assigned to AmeriMex any and all claims that Viking had against Osornia and
Daniel Becker (the “Assigned Claims”). In August 2010, AmeriMex filed suit in the trial court below against Osornia and
Becker (hereinafter the “Second Lawsuit”), alleging, in pertinent part, as follows:

• In October 2006, Becker was a principal and officer of Odin Rig Services, Inc. Odin was working under a contract
with Viking to do the project management on an upgrade of the “VIKING PRODUCER,” a semi-submersible rig.

• During that same time period, Osornia was an officer and principal of AmeriMex. Becker was aware of Osornia’s
position with AmeriMex.

• Odin’s only business was fulfilling the rig upgrade of the VIKING PRODUCER. Under the contract between Viking
and Odin, Odin was responsible for managing this project.

• Viking gave Odin substantial discretion to determine what was necessary to complete the project.

• In October 2006, Becker was in charge of this project for Odin. Becker’s major responsibilities were the acquisition of
the capital drilling equipment for the vessel.

• It was Becker’s responsibility to select the vendor from whom to buy the capital equipment to be installed on the
VIKING PRODUCER. Viking’s budget for the project was based upon Becker’s recommendations.

• Becker needed to buy six mud pump motors and three “draw work motors” for installation on the VIKING
PRODUCER.

• AmeriMex is in the business of manufacturing and selling motors that can be used for mud pumps and draw works on
drilling rigs. Osornia and Becker conspired to cause AmeriMex to assume contractual risks for the nine motors by a
series of maneuvers.

• First, contrary to proper commercial practices, Becker, rather than the vendor AmeriMex, prepared the quotation for
the nine motors.

• Second, when Becker issued the quotation, Osornia and Becker caused the quotation to come from a Mexican
company known as Motor Power Services S.A. de C.V. (hereinafter “Motor Power”). Motor Power was used as a
vehicle for illegal activity that substantially damaged AmeriMex in other transactions.

• When Becker caused Odin to issue the purchase order for the motors, he identified the vendor as Motor Power. There
was no commercial relationship between Motor Power and AmeriMex, other than Osornia’s use of Motor Power as a
vehicle to commit crimes and cheat AmeriMex out of funds properly due it.

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• Becker was acting in the course and scope of his employment for Odin, which was in the course and scope of its
employment for Viking. Becker *710 knowingly participated in the fraudulent construction of the transaction.

• Becker has testified that he considered the vendor to be AmeriMex at all material times.

• AmeriMex procured or manufactured the motors for sale to Viking. When it was time to pay for the motors, Becker, on
behalf of Odin, participated in a conspiracy with Osornia to deprive AmeriMex of receipt of its funds for the nine
motors and to divert the funds to Motor Power.

• Becker authored an email dated December 23, 2006, in which he advised Osornia to lie to Odin about why payments
were going to Motor Power. The lie that Becker concocted was for Osornia to claim that Motor Power was a subsidiary
of AmeriMex. Motor Power has never been a subsidiary of AmeriMex, and Becker knew this statement was false when
he made it.

• Becker continued on behalf of Odin, which, in turn, was acting on behalf of Viking, to take affirmative actions to cheat
AmeriMex out of its money by rushing the checks through the normal pay process and making them payable to Motor
Power.

• Motor Power’s Alejandro Moeller actively conspired with Becker and Osornia to deprive AmeriMex of its funds.

• On January 8,1 Becker caused Viking to pay Motor Power $130,500 for the draw works motors and $261,000 for the
mud pump motors.

• Because of the conduct of Becker and Osornia, Viking did not receive the six mud pump motors for which it paid
Motor Power.

• Becker has testified that he caused Viking to pay the wrong party.

• Osornia has testified that Motor Power paid him a “kickback” of $1,000 for each motor for which Motor Power
received payment.

• For good and sufficient consideration, Viking assigned its claims against Becker and Osornia to AmeriMex.
Based upon these allegations and as assignee of Viking, AmeriMex has asserted claims against Osornia for fraud, violations
of the Texas Theft Liability Act, and tortious interference with contractual relations. As assignee, AmeriMex also asserted
claims against Becker for fraud and tortious interference with contractual relations. On its own behalf, AmeriMex asserted
tort claims against Becker.

Osornia filed an application to compel arbitration, arguing that AmeriMex’s claims against Osornia fall within the scope of
the Settlement Agreement’s arbitration clause. The trial court initially granted Osornia’s application but later reconsidered
that ruling and issued an order denying the application. The trial court denied Becker’s motion to compel arbitration. Osornia
filed this interlocutory appeal from the denial of his application to compel arbitration. Becker did not file an interlocutory
appeal.

II. ISSUES PRESENTED

Osornia presents two appellate issues. In his first issue, Osornia asserts that the trial court erred in denying his application to
compel arbitration. In his second issue, Osornia asserts that the alleged assignment of claims by Viking to AmeriMex is void
and unenforceable as against public policy.

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III. STANDARD OF REVIEW

It is undisputed that Osornia and AmeriMex entered into the Settlement Agreement, and no party has challenged the validity
of that agreement or its arbitration *711 clause. Whether this clause imposes a duty upon AmeriMex to arbitrate its claims
against Osornia in the Second Lawsuit is a matter of contract interpretation and a question of law for the trial court. See
IKON Office Solutions, Inc. v. Eifert, 2 S.W.3d 688, 694 (Tex.App.-Houston [14th Dist.] 1999, no pet.). We review the trial
court’s legal determination in this regard under a de novo standard of review. See id.

IV. ANALYSIS

A. Did the trial court err in denying the application to compel arbitration?
[1]
We first examine whether the trial court erred in denying Osornia’s application to compel arbitration. The Settlement
Agreement is silent as to whether its arbitration clause is governed by the Federal Arbitration Act (“Federal Act”) or the
Texas General Arbitration Act (“Texas Act”). Osornia asserts that the Texas Act applies, and AmeriMex does not contest this
assertion. Neither party asserts that the Federal Act applies or that it preempts any aspect of the Texas Act relevant to this
case. In this situation, we need not address whether the Federal Act applies, and we treat this case as one under the Texas Act.
See Bates v. MTH Homes–Texas, L.P., 177 S.W.3d 419, 421 (Tex.App.-Houston [1st Dist.] 2005, no pet.). Even so, because
the substantive principles applicable to the analysis in this appeal are the same under both the Federal Act and the Texas Act,
we cite in this opinion cases under the Federal Act and Texas Act without stating under which statute the cases were decided.
See Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 56, n. 10 (Tex.2008).
[2]
A party seeking to compel arbitration must establish that (1) a valid arbitration agreement exists2 and (2) the claims at issue
are within the scope of the agreement. See In re D. Wilson Const. Co., 196 S.W.3d 774, 780–81 (Tex.2006) (orig.
proceeding); In re Igloo Prods. Corp., 238 S.W.3d 574, 577 (Tex.App.-Houston [14th Dist.] 2007, orig. proceeding [mand.
denied] ). If these two showings are made, the burden shifts to the party opposing arbitration to present a valid defense to the
agreement, and absent evidence supporting such a defense, the trial court must compel arbitration. See J.M. Davidson, Inc. v.
Webster, 128 S.W.3d 223, 227–28 (Tex.2003); In re J.D. Edwards World Solutions Co., 87 S.W.3d 546, 549 (Tex.2002)
(orig. proceeding); In re Igloo Prods. Corp., 238 S.W.3d at 577.

It is undisputed that Osornia and AmeriMex signed and entered into the Settlement Agreement, and no party has challenged
the validity of that agreement or its arbitration clause. Nonetheless, AmeriMex argues that Osornia failed to establish the
existence of an arbitration agreement. AmeriMex notes that (1) AmeriMex only asserts claims against Osornia as assignee of
Viking, (2) AmeriMex could have asserted the Assigned Claims in Viking’s name; and (3) there is no evidence of any
arbitration agreement between Osornia and Viking. Still, AmeriMex chose to bring suit in its own name, and AmeriMex is
asserting claims against Osornia, albeit as assignee of Viking. In this context, we conclude that Osornia carried his burden of
establishing the existence of a valid arbitration agreement between the relevant parties—AmeriMex and Osornia.

Given the existence of a valid agreement to arbitrate, the next issue is whether AmeriMex’s *712 claims against Osornia are
within the scope of the Settlement Agreement’s arbitration clause. That clause reads in its entirety as follows:
The Parties to this Agreement agree that any and all claims arising out of this Agreement, including
any misrepresentations or warranties (including disputes and interpretations), shall be arbitrated before
Judge Caroline Baker. If she is unwilling or unable to serve as arbitrator, the Parties shall agree to an
arbitrator who has served as a former State District Judge [sic] or, if no agreement can be reached, an
arbitrator shall be appointed by a Court of competent jurisdiction.3

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[3] [4] [5] [6] [7]
Any doubts as to whether AmeriMex’s claims against Osornia fall within the scope of the arbitration clause must
be resolved in favor of arbitration. See Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex.1995). A court should not
deny arbitration unless the court can say with positive assurance that an arbitration clause is not susceptible of an
interpretation that would cover the claims at issue. Id. In determining whether a claim falls within the scope of an arbitration
agreement, we focus on AmeriMex’s factual allegations, rather than the legal claims asserted by AmeriMex. Id. at 900. The
presumption of arbitrability is particularly applicable when the clause is broad; that is, it provides for arbitration of “any
dispute arising between the parties,” or “any controversy or claim arising out of or relating to the contract thereof,” or “any
controversy concerning the interpretation, performance or application of the contract.” See Babcock & Wilcox Co. v. PMAC,
Ltd., 863 S.W.2d 225, 230 (Tex.App.-Houston [14th Dist.] 1993, writ denied). We presume for the purposes of our analysis
that the Settlement Agreement’s arbitration clause is broad. In such instances, absent any express provision excluding a
particular grievance from arbitration, only the most forceful evidence of purpose to exclude the claim from arbitration can
prevail, and AmeriMex has the burden of showing that its claims against Osornia fall outside the scope of the arbitration
clause. See Marshall, 909 S.W.2d at 900; Babcock & Wilcox Co., 863 S.W.2d at 230. Nonetheless, the strong policy in favor
of arbitration cannot serve to stretch a contractual clause beyond the scope intended by the parties or to allow modification of
the unambiguous meaning of the arbitration clause. See IKON Office Solutions, Inc., 2 S.W.3d at 697.

Under the unambiguous language of the arbitration clause, AmeriMex and Osornia have agreed to arbitrate all claims arising
out of the Settlement Agreement. The parties did not agree to arbitrate all claims “relating to” or “connected with” the
Settlement Agreement. Nor did the parties agree to arbitrate all claims “arising out of” or “relating to” the First Lawsuit or
the occurrence giving rise to this lawsuit. Notably, Viking was not a party to the First Lawsuit or to the Settlement
Agreement, and no reference is made to Viking in the Settlement Agreement. Focusing on the factual allegations in
AmeriMex’s live pleading, we note the following:

• AmeriMex does not refer to the First Lawsuit or to the Settlement Agreement.

• AmeriMex does not allege that Osornia breached the Settlement Agreement or any other contract.

• AmeriMex does not allege that there is any dispute over the interpretation of the Settlement Agreement.

*713 • AmeriMex alleges tortious conduct by Becker and Osornia that allegedly occurred before the Settlement
Agreement was signed in 2009.

• AmeriMex does not allege any tortious conduct that is alleged to have occurred after the Settlement Agreement was
signed.

AmeriMex alleges that, after the Settlement Agreement was signed, Viking assigned its claims against Osornia to AmeriMex.
As alleged assignee of Viking, AmeriMex asserts three tort claims against Osornia. Assigned tort claims based upon conduct
that allegedly occurred before the Settlement Agreement was signed are simply not claims “arising out of” the Settlement
Agreement. See Washburn v. Societe Commerciale de Reassurance, 831 F.2d 149, 150–52 (7th Cir.1987) (holding that
claims based upon allegedly tortious conduct in which defendants allegedly used various agreements and other devices to
defraud various individuals did not fall within agreement to arbitrate disputes with respect to the interpretation of one of the
agreements or a party’s performance under that agreement); Texaco, Inc. v. American Trading Transp. Co., 644 F.2d 1152,
1154 (5th Cir.1981) (holding that tort claims based upon the defendants’ alleged conduct that allegedly caused damages to
plaintiff’s dock did not fall within agreement by plaintiff to arbitrate all disputes “arising out of” a time charter by the
plaintiff of one of the vessels); Coffman v. Provost * Umphrey Law Firm, L.L.P., 161 F.Supp.2d 720, 724–30 (E.D.Tex.2001)
(denying motion to compel arbitration and holding that claims based upon breaches of prior partnership agreements, that
allegedly occurred before any arbitration clause was in effect, did not fall within clause in which plaintiff agreed to arbitrate
all claims “arising under” subsequent partnership agreements). We harbor no doubts as to whether AmeriMex’s claims
against Osornia fall within the scope of the arbitration clause, and this court can say with positive assurance that the
arbitration clause is not susceptible of an interpretation that would cover AmeriMex’s claims against Osornia. See Washburn,
831 F.2d at 150–52; Texaco, Inc., 644 F.2d at 1154; Coffman, 161 F.Supp.2d at 724–30. We conclude that AmeriMex
satisfied its burden of showing that its claims against Osornia fall outside the scope of the arbitration clause.

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Osornia relies upon a line of cases containing language to the effect that “ ‘if the facts alleged ‘touch matters,’ have a
‘significant relationship’ to, are ‘inextricably enmeshed’ with, or are ‘factually intertwined’ with the contract that is subject to
the arbitration agreement, the claim will be arbitrable.’ ” AutoNation USA Corp. v. Leroy, 105 S.W.3d 190, 195 (Tex.App.-
Houston [14th Dist.] 2003, no pet.) (quoting Pennzoil Co. v. Arnold, 30 S.W.3d 494, 498 (Tex.App.-San Antonio 2000, no
pet.)). Significantly, the cases in which this formulation4 has been utilized have involved very broad arbitration clauses in
which the parties agree to arbitrate all claims arising out of or relating to a contract or in which the parties agree to arbitrate
all disputes that may arise among them. See In re Prudential Securities, Inc., 159 S.W.3d 279, 281, 283–84 (Tex.App.-
Houston [14th Dist.] 2005, orig. proceeding); In re BP America Production Co., 97 S.W.3d 366, 370–71 (Tex.App.-Houston
[14th Dist.] 2003, orig. proceeding); AutoNation USA *714 Corp., 105 S.W.3d at 195–96; Arnold, 30 S.W.3d at 498–99;
Hou–Scape, Inc. v. Lloyd, 945 S.W.2d 202, 205–06 (Tex.App.-Houston [1st Dist.] 1997, orig. proceeding); Fridl v. Cook,
908 S.W.2d 507, 510–13 (Tex.App.-El Paso 1995, writ dism’d w.o.j.). Though we have presumed that the arbitration clause
in the Settlement Agreement is broad, it is not as broad as the clauses involved in the cases resting upon this formulation.
Therefore, this line of cases is not on point. If we followed this formulation in the case under review, we would
impermissibly expand the scope of the arbitration clause beyond the plain meaning of “any and all claims arising out of this
Agreement.” See IKON Office Solutions, Inc., 2 S.W.3d at 697.

Osornia also argues that this court cannot conclude that AmeriMex’s claims are outside the scope of the arbitration clause
unless this court concludes with positive assurance that the claims are not “factually intertwined” with arbitrable claims. In
support of this argument, Osornia cites the following sentence from Prudential Securities, Inc. v. Marshall: “On this record,
we cannot conclude with positive assurance that the statements at issue here are not at least ‘factually intertwined’ with the
arbitrable claims.” 909 S.W.2d 896, 900 (Tex.1995) (per curiam). In Marshall, the Supreme Court of Texas held that various
defamation claims asserted by two former stockbrokers against their former employer fell within the scope of arbitration
agreements in which the stockbrokers agreed to arbitrate all controversies with the former employer arising out of the
employment or termination of employment of the respective stockbrokers. See id. at 897–900. The claims based upon the
alleged defamatory statements fell within the scope of the arbitration agreements without the need to rely upon a conclusion
that the claims were factually intertwined with arbitrable claims. See id.

The better reading of the Marshall opinion is that it does not stand for the broad proposition that, when no other claims
between the parties are being sent to arbitration, a claim that does not fall within the language of an arbitration clause still
must be arbitrated unless the court can say with positive assurance that the claim is not “factually intertwined” with the
arbitrable claims. See id. Significantly, in various cases the Supreme Court of Texas has relied upon the legal standard in
Marshall, yet in none of them has the high court described the “factually intertwined” standard advanced by Osornia. See,
e.g., In re Rubiola, 334 S.W.3d 220, 223–24 (Tex.2011) (stating the legal standard from Marshall without mentioning the
“factually intertwined” language upon which Osornia relies). In addition, this court has held that claims did not fall within the
scope of an arbitration agreement without addressing whether the claims were “factually intertwined” with arbitrable claims.
See In re Igloo Prods. Corp., 238 S.W.3d at 581; IKON Office Solutions, Inc., 2 S.W.3d at 693–97. In the context of this
case, to conclude that AmeriMex’s claims are outside the scope of the arbitration clause, it is unnecessary for this court to
determine whether it can conclude with positive assurance that these claims are not “factually intertwined” with arbitrable
claims.5 See In re Rubiola, 334 S.W.3d at 223–24.

*715 Under the applicable standard of review, we conclude that the trial court did not err in denying Osornia’s application to
compel arbitration.6 Accordingly, we overrule Osornia’s first issue.

B. Is the issue of whether the assignment is void relevant to this appeal?
[8]
In his second issue, Osornia argues that the alleged assignment of claims by Viking to AmeriMex is void because it is
contrary to public policy. Therefore, Osornia asserts, this court should sustain his second issue, reverse the trial court’s order,
and render a take-nothing judgment against AmeriMex on its claims against Osornia. As part of the allegations in its live
pleading, AmeriMex asserts that Viking assigned its claims against Becker and Osornia to AmeriMex. To succeed on the
merits, AmeriMex will have to prove this assignment, and in responding on the merits Osornia is free to assert any argument
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Osornia v. AmeriMex Motor & Controls, Inc., 367 S.W.3d 707 (2012)

he wishes, including that the assignment is void. But, the merits of AmeriMex’s claims are not relevant to determining
whether the trial court erred in denying Osornia’s application to compel arbitration. See AT & T Techs., Inc. v.
Communications Workers of Am., 475 U.S. 643, 649–50, 106 S.Ct. 1415, 1419, 89 L.Ed.2d 648 (1986); Universal Computer
Systems, Inc. v. Dealer Solutions, L.L.C, 183 S.W.3d 741, 749 (Tex.App.-Houston [1st Dist.] 2005, pet. denied).
Accordingly, we overrule Osornia’s second issue.

V. CONCLUSION

As Viking’s assignee, AmeriMex asserts tort claims against Osornia. These claims are based upon conduct that allegedly
occurred before the Settlement Agreement was signed. We harbor no doubts as to whether AmeriMex’s claims against
Osornia fall within the scope of the arbitration clause, and this court can say with positive assurance that the arbitration
clause is not susceptible of an interpretation that would cover AmeriMex’s claims against Osornia. These claims are not
claims “arising out of” the Settlement Agreement. AmeriMex satisfied its burden of showing that its claims against Osornia
fall outside the scope of the arbitration clause. Whether the alleged assignment is void is not an issue relevant to determining
whether AmeriMex must arbitrate these claims. Accordingly, because these claims are not within the scope of the arbitration
clause, AmeriMex cannot be compelled to arbitrate them.

The trial court’s order is affirmed.

All Citations

367 S.W.3d 707

Footnotes
1
AmeriMex does not specify a year in this allegation.

2
If all relevant parties did not sign the contract in which the arbitration agreement is found, this first prong may include issues as to
whether a non-signatory is bound by or may enforce the arbitration agreement. See In re Rubiola, 334 S.W.3d 220, 223–24
(Tex.2011). Such issues are not present in this appeal.
3
This clause does not contain any provision in which the parties agree that the arbitrator, rather than the courts, shall determine
disputes regarding the scope of the arbitration clause. See Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 61 (Tex.2008).
4
Under this formulation, courts also note that “if the facts alleged in support of the claim stand alone, are completely independent of
the contract, and the claim could be maintained without reference to the contract, the claim is not subject to arbitration.” See
AutoNation USA Corp., 105 S.W.3d at 195 (quoting Arnold, 30 S.W.3d at 498).
5
In Jack B. Anglin Co. v. Tipps, the Supreme Court of Texas concluded that because the breach-of-contract claim between the
parties was going to be arbitrated and because certain tort claims were factually intertwined with the breach-of-contract claim, the
tort claims should be arbitrated to avoid multiple determinations of the same matter. See 842 S.W.2d 266, 271 (Tex.1992). This
case is not on point because this doctrine only applies when at least one claim between the parties is already going to arbitration.
See In re Weekley Homes, L.P., 180 S.W.3d 127, 132 & n. 25 (Tex.2005); In re Prudential Securities, Inc., 159 S.W.3d at 281–84.
6
Osornia also argues that AmeriMex had notice of Viking’s claims against Osornia and Becker before AmeriMex signed the
Settlement Agreement. Any such notice is not relevant to whether the claims that AmeriMex asserts against Osornia in the Second
Lawsuit are within the scope of the arbitration clause.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 7

040

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Osornia v. AmeriMex Motor & Controls, Inc., 367 S.W.3d 707 (2012)

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 8

041

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Tab H
 FILED
DALLAS COUNTY
8/25/2015 4:11:50 PM
FELICIA PITRE
MARCUS & SHAPIRA LLP DISTRICT CLERK

ONE OXFORD CENTRE, 35TH FLOOR
301 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15219-6401
(412) 471-3490
______

Fax: (412) 391-8758
SCOTT D. LIVINGSTON
Email: Livingston@marcus-shapira.com
Direct Dial: (412) 338-4690

August 25, 2015

Via ECF and Hand Delivery

Honorable Martin Hoffman
George L. Allen, Sr. Courts Building
68th District Court
600 Commerce St., 5th Floor
Dallas, Texas 75202

Re: Cause No. DC-15-03853; Dickson Perry, derivatively on behalf of Excentus
Corporation v. Brandon Logsdon, et al.; in the 68th Judicial District Court of
Dallas County, Texas

Dear Judge Hoffman:

Plaintiff Dickson Perry (“Plaintiff” or “Perry”) does not dispute—nor can he dispute—
that the 2004 and 2005 Excentus/Giant Eagle stock purchase agreements (the “SP Agreements”)
provide a potential defense to his claims against Giant Eagle. As Perry acknowledges, the
Excentus/Giant Eagle settlement agreement (the “Settlement Agreement”)(attached as Exhibit A)
forms the “nucleus” of his claims against Giant Eagle because they all depend on proof that the
Settlement Agreement was a “complete capitulation of Excentus’ interests.” Perry PowerPoint
Slide No. 5 (attached as Exhibit B). But whether the Settlement Agreement was a good deal or a
bad deal for Excentus depends, in turn, on the strength of Giant Eagle’s defenses in the original
litigation. Giant Eagle’s principal defense in that litigation was, of course, based on the license
and other key provisions in the SP Agreements. This leaves only one question for this Court to
decide—whether a defense based on the SP Agreements is enough to trigger the forum selection
clause in those agreements.

Judge Boyle held that a defense was enough. In analyzing the plain language of the
forum selection clause, Judge Boyle rejected Excentus’ argument that a mere defense based on
the SP Agreements could not “arise out of” those agreements. Excentus Corp. v. Giant Eagle,
Inc., 2012 WL 2525594, at *4 (N.D. Tex. 2012) (Tab 17, Giant Eagle case law hearing binder).
Judge Boyle also made clear that the forum selection clause applies where, as here, a “defense
requires the Court to interpret the Stock Purchase Agreements.” Id. This Court should not re-
interpret the forum selection clause in the SP Agreements. In accordance with stare decisis, this
Court should follow Judge Boyle’s interpretation of the forum selection clause in the SP
Agreements—i.e., that clause is triggered whenever those agreements provide a possible defense.
Under Texas law, “once a definitive construction has been given to a specific writing [whether
by a state or federal court]… such a definite determination is binding and conclusive in
subsequent suits [under] [t]he doctrine of stare decisis.” Robbin v. HNG Oil Inc., 878 S.W.2d

A0948758.1
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 MARCUS & SHAPIRA LLP
Honorable Martin Hoffman
August 25, 2015
Page 2

351, 361 (Tex. App. 1994)(applying stare decisis to federal court decision interpreting a property
deed)1

Perry’s reliance on Texas state court decisions allegedly interpreting the phrase “arising
out of” narrowly is misplaced. Not one of those decisions actually interprets the phrase “any
action arising out of” found in the forum selection clause at issue, language which judges in both
Texas and Pennsylvania found must be broadly construed. Equally significant, not one of those
decisions addresses the issue presented here (and decided by Judge Boyle)—whether the
assertion of a defense based on an agreement that contains a forum selection clause satisfies the
arising under requirement. Judge Boyle did not go out on a limb when she interpreted the
“arising out of” language in the forum selection to include a defense under the SP Agreements.
In Omron Healthcare, Inc. v. Maclaren Exports Ltd., 28 F.3d 600, 601-02 (7th Cir. 1994), the
Seventh Circuit held that “all disputes the resolution of which arguably depend on the
construction of an agreement ‘arise out of’ that agreement” for the purposes of enforcing a forum
selection clause. Other courts have interpreted “arising out of” in precisely the same way when
enforcing a forum selection clause. Interactive Music Tech., LLC v. Roland Corp. U.S., No.
CIV.A. 6:07-CV-282, 2008 WL 245142, at *6-7 (E.D. Tex. Jan. 29, 2008); Skold v. Galderma
Lab., L.P., 2015 WL 1740032 at *15-17 (E.D. Pa. 2015). That is not all. None of the cases cites
by Perry involve a plaintiff whose claims attack a settlement agreement that by its terms directly
revives and implicates the agreements containing the forum selection clause at issue. (Exhibit
A at Article 5). Perry cannot avoid the “nucleus” of the parties’ relationship. “No matter how
[Perry] characterizes or artfully pleads [his] claims, the claims and alleged damages arise from
the contractual relationship between the parties, not from general obligations imposed by law.”
In re Int’l Profit Associates, Inc., 274 S.W.3d 672, 678 (Tex. 2009) (Tab 29).

The dispute resolution clause in the Settlement Agreement is a complete red herring.
That clause requires all disputes “arising out of” the Settlement Agreement to be arbitrated. But
as Perry acknowledges, he has no desire to arbitrate and thus has waived any right he may have
had to do so. Leibowitz v. Sequoia Real Estate Holdings L.P., 2015 WL 3451675, at 17 (Tex.
App.—Dallas 2015)(“Because neither side demanded arbitration, the parties waived their right to
have the dispute determined by an arbitration panel.”). Thus, the parties well understood that
this dispute would lead once again to the SP Agreements. This Court should apply the mutually
inconvenient forum selection clause in the SP Agreements, just as the parties intended.

Respectfully Submitted,

Scott D. Livingston

cc: All counsel of record (via ECF & email)

1
Robbin and other newly cited cases are attached as Exhibit C.

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EXHIBIT B
Giant Eagle's Letter Brief Page 18

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Robbins v. HNG Oil Co., 878 S.W.2d 351 (1994)

written instrument is not ambiguous and
parol evidence will not be received
Original Image of 878 S.W.2d 351 (PDF) to create ambiguity or to give written
878 S.W.2d 351 instrument different meaning from that
Court of Appeals of Texas, which its own language and wording
Beaumont. imparts.

Jewell ROBBINS, Appellant, Cases that cite this headnote
v.
HNG OIL COMPANY, et al., Appellees.
(3) Evidence
No. 09-93-107 CV. Submitted Grounds for Exclusion of Extrinsic
Evidence
Jan. 13, 1994. I Decided June 23, 1994.
Parol evidence rule prevails even to extent
Attorney-in-fact of grantee's heir brought action to prohibiting proof of circumstances
against oil companies seeking to recover unpaid surrounding transaction when written
mineral royalties for property in Spindletop oil field instrument involved is so worded that
allegedly conveyed to grantee in 1911 deed. The 136th it is not fairly susceptible to more
District Court, Jefferson County, Jack R. King, J., than one legal meaning or construction;
granted summary judgment in favor of defendant, and no intention, however discovered, can
plaintiff appealed. The Court of Appeals, Brookshire, contradict or destroy legal effect of
J., held that: (1) deed conveyed only four properties wording and language used.
specifically named in deed, and (2) decision in prior
federal action concerning same property had collateral Cases that cite this headnote
estoppel effect.
[4] Deeds
Affirmed. Questions for Jury
Identity of land conveyed by deed was
question of law for court, rather than
\Vest Headnotes ( 16) mixed question oflaw and fact required to
be determined by jury, where provision of
deed unambiguously identified four tracts
[11 Deeds to be conveyed.
Particular Words or Tenns
Recitation in deed that it conveyed all Cases that cite this headnote
property inherited through decedent could
not operate to enlarge specific description (5) Judgment
given in deed of property conveyed. Operation and EtTect
l Cases that cite this headnote Determination in federal action brought
by plaintiff on behalf of grantee's heirs
that 1911 deed conveyed to grantee only
[2] Evidence four specifically named tracts contained
Grounds for Exclusion of Extrinsic in deed, had collateral estoppel effect in
Evidence plaintiffs subsequent state action brought
If written instrument is so worded in her capacity as attorney-in-fact for one
that same can be given certain and of grantee's heirs.
defmite legal meaning or interpretation
or construction by applying relevant, Cases that cite this headnote
pertinent rules of construction, then

~~vestl.avvNext 20i 5 Thomson Reuters. No
Giant Eagle's Letter Brief Page 19

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Robbins v. HNG Oil Co., 878 S.W.2d 351 (1994)

[6] Judgment 1 Cases that cite this headnote
!viutuality of Estoppel
.Judgment (10] Courts
1\:lutuality of Estoppel in General Decisions of Higher Court or Court
Mutuality was not required for application of Last Resort
of doctrine of collateral estoppel. When reviewing court with jurisdiction
sets forth final ruling on matter of
l Cases that cite this headnote
law before appellate court, then such
ruling and determination is binding
171 Evidence and conclusive in all subsequent suits
Deeds involving same subject matter, whether
Evidence parties and property are the same or not.
Contracts in General
1 Cases that cite this headnote
Under Texas law, parol evidence will
not be received or admitted to create
ambiguity or to give contract or deed (11) Courts
meaning different from that which its Decisions ofUnited States Courts as
language imparts. Authority in State Courts
Determination by federal court that deed
2 Cases that cite this headnote conveyed only four parcels of property
was stare decisis in subsequent state court
[81 Courts action seeking to construe same deed.
Previous Decisions as Controlling or
Cases that cite this headnote
as Precedents
Once defmitive construction has been
given to specific writing or particular [12] Judgment
specified fact situation such as Identity of Su~ject-Matter
determination of true construction of Doctrine of issue preclusion barred
will or validity of deed, such definite relitigation in state court of issue of
determination is binding and conclusive whether deed conveyed more than four
in subsequent suits involving same parcels specifically named in deed after
subject matter and same deed, whether federal court construed and determined
parties and property are the same or exact effect of deed.
not; doctrine of stare decisis controls the
result. l Cases that cite this headnote

2 Cases that cite this headnote
[131 Judgment
~ Identity of Subject-1\:latter
[91 Courts Judgment
Previous Decisions as Controlling or Identity ofissues, in General
as Precedents
"Issue preclusion," or "preclusion by
Doctrine of stare decisis gives force of judgment," bars relitigation of identical
law to precedents and is broader in its questions of fact or law that were actually
scope than doctrine of collateral estoppel; litigated and which questions of fact or
commonality or privity among parties to law were essential to judgment in prior
present or prior litigation is not required suits.
by stare decisis.

2
Giant Eagle's Letter Brief Page 20

R388
Robbins v. HNG Oil Co., 878 S.W.2d 351 (1994)

l Cases that cite this headnote John G. Tucker, Orgain, Bell & Tucker, Beaumont,
Ronald G. Manning, Pogo Producing Co., Houston, for
appellee.
[14] Deeds
Evidence Before WA.LKER, C.J., and BROOKSIDRE and
Grantee's successor failed to establish BURGESS, JJ.
complete and proper chain of title for
three parcels named in deed, where deed
recited that it was conveying property OPINION
inherited from decedent, and three of
those tracts did not appear in inventory of BROOKSIDRE, Justice.
decedent's estate.
Appellant, Jewell Robbins, individually and as
Cases that cite this headnote attorney-in-fact for Abigail Meaders, timely appealed
from the granting of a summary judgment. Robbins
contends that Abigail Meaders is the heir of James
[15) Perpetuities
Meaders. Robbins takes the position that in her
Suspension of Absolute Power of
capacities she is the owner of an undivided one-eighth
Alienation
*353 interest in and to described tracts and parcels of
Restraints on alienation are contrary land located in Jefferson County, Texas. At trial and
to public policy and forbidden and on appeal-as clearly set out in her brief-Robbins
disallowed. Vernon's Ann.Texas Const. relies upon a Deed from Ephriam Garonzik to James
Art. 1, § 26. Meaders ("the Garonzik deed") dated December 14,
1911.
Cases that cite this headnote

Appellant contends that she is the owner of an
(161 Mines and l\linerals undivided one-eighth interest in over forty tracts
Actions of land alleged to have been in the estate of
lVIines and ·Minerals William McFaddin, deceased, but only four tracts were
Rights and Liabilities as to Third particularly described in the Garonzik deed. Appellant
Persons contends that certain other deeds and instruments exist
in her chain oftitle and that the remaining thirty-seven
Affidavit of president of title company
tracts of land can obtain descriptions by numerous
that land conveyed in 1911 deed was
references to the "land records of Jefferson County,
located in city considerable distance from
oil field, and that no oil or gas wells Texas, and the estate of William McFaddin". 1 But the
ever existed on the property supported "bargained, sold and conveyed" clause ofthe Garonzik
judgment in favor of oil company in deed reads:
action to recover unpaid royalties.

Cases that cite this headnote [H]ave bargained, sold and conveyed, and by these
presents do grant, sell and convey unto the said
James Meaders, of the County of Dallas, State of
Texas, an undivided one-eighth interest in and to the
Attorneys and Law Firms following described tracts and parcels of land, to-
wit:
*352 Joseph P. Conner, Brenham, Kyle Davis,
Chappell Hill, for appellant. Situated in the State of Texas, County of
Jefferson, and more fully described as hereinafter
set forth, the said property herein conveyed being

3
Giant Eagle's Letter Brief Page 21

R389
Robbins v. HNG Oil Co., 878 S.W.2d 351 (1994)
12-g-~T&Gas~Rep.541

four (4) tracts, the first of which said tracts is approximately twenty years after its date. Without
described as follows, to-wit: doubt, the Spindletop Oil Field had been in existence
and in production since the very early part of 1901.
Then the deed describes only four tracts. The four The Spindletop Oil Field was the field that brought the
tracts were: oil industry into its significant importance in January
of 1901 and it was extensively developed with prolific
FIRST TRACT: "One labor, first class, Abstract
production before December of 1911.
No. 166 ... (old Abstract No. 112)."

SECOND TRACT: "One Hundred and Sixty The companies (hereinafter Defendants) filed
(160) acres school lands ... known as Abstract No. summary judgment motions. The defendants received
181." a favorable grant of a summary judgment on several
grounds.
THIRD TRACT: "Three Hundred and Twenty
(320) acres (donation) ... (old abstract No. 119) ... (1) Robbins presents four points of error. The first
said abstract number being No. 182." point is:

FOURTH TRACT: "Three Hundred and Twenty *354 The trial court erred in
(320) acres ... Being Abstract No. l83 ... (old construing the Garonzik deed
Abstract No. 120)." as conveying solely the four
specifically described tracts
The above are condensed forms or abbreviations of
rather than an interest in all
the full descriptions in the 1911 deed.
properties inherited by the
In this litigation the appellant seeks an accounting for
McFaddin heirs from William
unpaid royalties from the real property and mineral
McFaddin as expressly stated in
interests in which appellant avers that she is entitled to
the deed.
a one-eighth interest.
In this opinion we will endeavor to address appellant's
The appellees are HNG Oil Company, Elf four point of error in order.
Aquitaine, Inc., IMC Exploration Company, Pogo
Producing Company, and Westland Oil Development Robbins does not contend that the 1911 deed was
Corporation. These companies were defendants below. ambiguous, although she contends that the intention
of the 1911 deed should be construed to cover an
The deed from Garonzik to James Meaders bore additional thirty-seven tracts of land. In her written
the date of December 14, 1911. Interestingly, the argument in her brief under Point One, Robbins does
Garonzik deed was filed for record March 21, 1931, not aver any ambiguity in what property was conveyed
at 1:30 o'clock p.m.; this deed was recorded March at each step in the Meaders chain of title. In the trial
26, 1931, in the office of the County Clerk of court Robbins made no claim of ambiguity in the 1911
Jefferson County, Texas. The deed recites that the deed.
described four tracts conveyed by the deed is all
of the property that J.H. McFaddin, R.D. McFaddin, Jewell Robbins, individually and as attorney-in-fact,
and A.J. McFaddin inherited through their ancestor, filed her response to the first motion for summary
Wm. McFaddin (spelled "McFadden" in the Garonzik judgment of the defendants. The appellant's response
deed). to the summary judgment proceedings is lengthy. And
in the response the appellant refers in considerable
Nevertheless, appellant seeks to expand the deed so detail to the Garonzik deed. In appellant's response,
that it is construed to include approximately thirty- she makes no contention that the 1911 deed was
seven additional tracts of real property comprising the ambiguous. Thus, the question of ambiguity was
Spindletop Oil Field in Jefferson County. Appellant's not presented in the district court. Although a
claim in this litigation is based upon the Garonzik second response to the defendants' second motion for
deed to James Meaders which deed was recorded summary judgment was filed, the second response

VVestlawNext 2015 Thomson
Giant Eagle's Letter Brief Page 22

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Robbins v. HNG Oil Co., 878 S.W.2d 351 (1994)

contained no contention that the 1911 Garonzik deed later language used in the instrument of perpetual right
was ambiguous. to use the water in: "being the same land conveyed
to us by Mary A. Manly, on Dec'r. 31st, 1919." In
In that posture, then, the construction of the deed the water rights conveyance, one Bertha Craig and
became a question of law for the trial court. The her husband S.A. Craig had joined and they had been
responses of appellant were not sworn to, nor did they the owners of Subdivision four. The suit was by S.S.
have proper affidavits attached. Their office was that Manly and Amos Manly, who were the grantees of
of a pleading. Generally, pleadings are not proof in the perpetual water rights against Aaron Craig Coffee
summary judgment proceedings. and Kathryn Thigpen, who were owners by inheritance
from Mrs. Bertha Craig of Subdivision four.
[2) Thus, the 1911 deed's language and wording
and its meaning becomes a question of law for the The court held that where a recitation was made to
court. See Afyers v. Gu(l Coast ABnerals iifanagement another deed or another record for the purpose of
Cmp., 361 S.\V.2d 193 (Tex.1962). If a written showing from what source the real property had been
instrument is so worded that the same can be given a derived and as a help in tracing the title, then such
certain and definite legal meaning or interpretation or a reference or *355 referral will not and could not
construction by applying the relevant, pertinent rules operate to enlarge the specific description given in
of construction, then the written instrument is not the deed which contained the reference. This principle
ambiguous and parol evidence will not be received to of law applies to the 1911 Garonzik deed because
create an ambiguity or to give the written instrument there was in that deed an adequate and specific,
a different meaning from that which its own language unambiguous description of the four tracts-hence, the !
(
and wording imparts. See Universal C. I. T Credit reference in the 1911 deed cannot be given the effect of
Cmp. v. Daniel, 150 Tex. 513,243 S.W.2d 154 (1951). enlarging the specific descriptions to include different,
additional tracts of land. This reference only serves to
[3] And this rule prevails even to the extent of show the source from which the real property has been
prohibiting proof of circumstances surrounding the derived.
transaction when the written instrument involved is
so worded that it is not fairly susceptible to more It is noteworthy that the writ was refused outright in
than one legal meaning or construction. See Le-wis Coffee v. Manly. In Cojfee, at the district court level
v. East Texas Finance Co.. 136 Tex. 149, 146 the plaintiffs demonstrated by extrinsic evidence that
S.W .2d 977 ( 1941 ). And importantly and paramountly, Mary A. Manly had conveyed Subdivision four as well
no intention, however discovered, can contradict or as Subdivisions five and six to the defendant grantors
destroy the legal effect of the wording and language on the date in question, being "on Dec'r. 31st, 1919."
used. Reynolds v. iifcA1an Oil & Gas Co., 11 S.W.2d And accordingly, the plaintiffs-grantees at trial were
778 (Tex. Comm'n App.1928, holding approved). awarded water rights on Subdivision Four. On appeal,
See and compare Stahl Petroleum Co. v. Phillips however, the court not only reversed the judgment
Petroleum Co., 550 S.W.2d 360 (Tex.Civ.App.- but rendered the judgment for the defendants, holding
Amarillo 1977), affd, 569 S. W.2d 480 (Tex.l978). See that the deed was unambiguous on its face and that
and compare Tower Contracting Company v. F7ores, extrinsic evidence could not be admitted to contradict
157 Tex. 297,302 S.\V.2d 396 (1957). the deed or to create ambiguities. Parol testimony
is not admissible. Holding that it was simply not
In Coffee v. iHcm(v, 166 S.W.2d 377 {Tex.Civ.App. permissible to give controlling effect to that which
-Eastland 1942, writ refd), the unanimous court in creates an ambiguity and destroys the certainty which
an opinion by Justice Funderburk held that a grant was expressed by other language is the holding in
unto certain grantees of a perpetual right to use the Cartwright v. Trueblood 90 Tex. 535. 39 S.W. 930
water on Subdivisions five and six of Sections Nos. (1897).
40 and 41 of the T. & P. Railroad Company lands in
Jones and Shackelford Counties, Texas, was a specific We hold that the specific descriptions such as those
description and that specific description prevailed over set out in the 1911 Garonzik deed of Abstracts 181,

V'~lestlawNexr 20i 5 Thomson 5
Giant Eagle's Letter Brief Page 23

R391
Robbins v. HNG Oil Co., 878 S.W.2d 351 (1994)

182, 183, and 166 definitely control over the reference uncertainty in the description that does not appear on
to the source of the interest in the four tracts. We the face of the deed but had its origin in extraneous
deem that the reasoning and rationale in the Cqflee fact or an ambiguity, then the identity of the land
case is compellingly persuasive because Bertha Craig, becomes a mixed question of law and fact which must
who was the owner of Subdivision four, and her be determined by the jury. We reject this argument.
husband, joined in the conveyance of the perpetual We conclude that the four tracts were not described
water rights. Nevertheless, the grantees only obtained with uncertainty-nor was the 1911 deed ambiguous.
the water rights to Subdivision five and six. Bertha The four tracts of land were identified, as *356 noted
Craig was clearly the owner of Subdivision four. Thus, above, in the 1911 deed to Meaders; neither the four
the Garonzik 1911 deed could have conveyed only the tracts nor the deed present a mixed question of fact
lands in Abstracts Nos. 166, 181, 182, and 183 and in and law. Appellant's point of error number two insists
no other tract or abstract. that the 1911 deed actually encompasses and conveys
interest in thirty-seven other tracts ofland described as
From the record before us and from the summary McFaddin property.
judgment proofs as proffered by the defendants as well
as Robbins' responses to the motions for summary The appellant under her point of error number
judgment, we determine that the Fifth Circuit in two concedes that the appellees have submitted
the Jewell Robbins and Clark cases (as hereinafter summary judgment evidence and proof by affidavits
discussed) considered, disposed of, and rejected all demonstrating that no minerals have been produced
of the arguments and positions here advanced by by any ofthe appellees from Abstracts 181, 182, 183,
Robbins. The Fifth Circuit especially rejected Robbins' and 166. However, appellant takes the position that
arguments and contentions relevant to appellant's point no evidence was introduced on nonownership and
of error number one. Thus, we are constrained to nonproduction as to Pogo Producing Company. This
overrule appellant's point of error number one for question will be discussed below. In point of error
the reason that the State trial court below properly two appellant stresses: "[n]o evidence of any kind has
construed the Garonzik 1911 deed as conveying four, been introduced, by affidavit or otherwise, on any of
and only four, specifically described tracts. There was the other thirty seven tracts of the McFaddin property
no ambiguity in the deed, nor did Jewell Robbins in about the production of minerals by these Appellees."
her various capacities present to the trial court the But as noted above, we have construed the Garonzik
issue of ambiguity. See TEX.R.ClV.P. l66a(c). We 1911 deed as being strictly limited to Abstracts 181,
have overruled appellant's point of error number one 182, 183, and 166. Thus, whether production of
pursuant to Texas precedents. Nevertheless, at least minerals by these appellees from any of the other
two ofthe Fifth Circuit decisions are also of controlling thirty-seven tracts is a non-issue. Appellants have
effect. See Robbins v. Amoco Production Co., 952 F .2d not controverted the evidence and affidavits of the
901 (5th Cir.l992); Clark v. Amoco Production Co., appellees (showing nonownership and nonproduction)
908 F.2d 29 (5th Cir.l990). Robbins had also litigated being: HNG Oil Company, Elf Aquitaine, Inc., IMC
previously in Robbins v. Chevron U.S.A., Inc., 940 Exploration Company, Westland Oil Development
F.2d 1529 (1991). Corporation. Pogo Producing Company is excepted.
Our decision on appellant's point of error one definitely
[4] Appellant's point of error number two argues that governs appellant's point of error two which is hereby
the evidence introduced by appellees in support of overruled.
their summary judgment was insufficient as a matter
of law to support the summary judgment granted by Appellant's point of error number three argues this:
the trial court. As briefed by the appellant, this point of
error two deals only with the issue of which properties The trial court erred in relying
were conveyed. First, the appellant concedes that the upon cases with different
interpretation of real property descriptions is normally parties in federal court as
a matter exclusively for the court; nevertheless, preventing full decision on the
the appellant further argues that when there is an

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Robbins v. HNG Oil Co., 878 S.W.2d 351 (1994)

merits of appellant's cause of Sam 0. Smith was personally familiar with the
action. William McFaddin Labor Abstract No. 166, said Labor
containing 177 acres and was patented by the Republic
We disagree. And equally important is that part of Texas to William McFaddin on July 24, 1845. Sam
of the record before us establishing the defendants' Smith searched for any deed, lease, or other type of
nonproduction in the four abstracts described in instrument conveying any interest in No. 166 to the
the 1911 deed. This summary judgment proof and defendants. Smith could not locate any instrument of
evidence was proper and supported the summary record in Jefferson County naming any of the entities
judgment granted by the trial court. Robbins did as grantees and indexed to any of the above described
not controvert the nonproduction of these four oil lands. Furthermore, he did not know of any oil and
companies. *357 gas wells located in the William McFaddin
Labor Abstract No. 166.

Some Background Factors Relevant to In like manner, Smith could not locate any evidence of
Appellant's Point of Error Number Three any recorded instruments which may have conveyed
any interests by deed, lease, or otherwise to Abstracts
Jewell Robbins, individually and as the legal 181, 182, and 183 to any of the above named
representative and attorney-in-fact for the heirs of entities which might affect the lands lying in any
James Meaders, has also claimed that the defendants of the Abstracts Nos. 181, 182, and 183. In view
had unlawfully produced oil, gas, and minerals from of our opinion concerning the 1911 deed, these
under the four tracts specifically described for which oil company defendants needed no evidence to
the plaintiff in her various capacities sought an support their motions for summary judgment other
accounting and damages. than the uncontested affidavits of nonownership and
nonproduction from Abstracts Nos. 181, 182, 183, and
The defendants had joined issue herein by answering 166. See Robbins
. v .Amoco Production Co.. 952 F.2d
with the following pleas of general denial, pleas of not 901 (5th Cir.l992); Clark v. Amoco Production Co.,
guilty, pleas of the statutes of limitations, res judicata, 908 F.2d 29 (5th Cir.l990).
collateral estoppel, and stare decisis. Significantly,
the defendants by appropriate and proper summary By means of amended answers, each one of the
judgment proof and evidence advance the defense defendants pleaded that the final judgments entered
that the plaintiffs claim against the defendants for in the Federal court litigation in Robbins v. .Amoco
damages fails because the defendants have not owned Production Co., supra, and Clark v. Amoco Production
or produced any oil and gas or other minerals from Co., supra, had binding effect and fmal effect under
Abstracts 181, 182, 183, or 166. several doctrines. In this case, the defensive pleaded
doctrines were, inter alia, res judicata, collateral
There exists an extensive, in depth and detailed estoppel, and stare decisis. Each of these doctrines
affidavit of one Sam 0. Smith dated April 9, 1992. were asserted in defense of this suit at the trial
In brief summary, Sam Smith had been continuously level and, in the defendants' motions for summary
engaged in the land title and abstract business in judgment, the defendants pleaded and reasserted that
Jefferson County Texas, for twenty-two years as the defendants were entitled to summary judgment
president ofthe Jefferson County Title Company, Inc., based on these same, well-established doctrines.
and as president of the Jefferson County Abstract Interestingly and importantly, the trial brief of the
Company, Inc., from 1975 through April 1990. The defendants urged these doctrines and supported and
abstract plant involved utilized and contained a argued the same with applicable authorities for such
geographical indexing of all real estate instruments defenses.
recorded in Jefferson County from the sovereignty of
the soil to the date of the affidavit. Indeed, the trial court's order granting the motion for
summary judgment cited and referred to the federal
cases as binding and possessing finality as against

7
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Robbins v. HNG Oil Co., 878 S.W.2d 351 (1994)

the plaintiff in her several capacities by establishing full and fair opportunity to litigate the issue in the
that as a matter of law the Garonzik 1911 deed prior suit" (emphasis added). [emphasis theirs]
only conveyed interest in the four tracts that were
specifically described as Abstracts Nos. 181, 182, 183, Jewell Robbins is the self-same Jewell Robbins in the
and 166-and nothing more. We have affirmed the same capacities as plaintiff in the prior litigation. In her
action of the trial court in that regard. Further, the trialindividual capacity she was the same actual party in the
court determined that the defendants were entitled to prior litigation. Jewell Robbins in her representative
summary judgment because of lack of ownership by *358 capacity or in her attorney-in-fact capacity was
the plaintiff in the other thirty-seven tracts. certainly in privity in the prior litigation. In the prior
Federal litigation she sued for two hundred heirs of
James Meaders. In this State litigation she is suing as
the attorney-in-fact for Abigail Meaders, as the heir of
The Collateral Estoppel Defense
James Meaders. Therefore, we conclude that Abigail
[5] [6] We determine that the doctrine of collateral is in privity with the two hundred heirs of the same
estoppel properly applies and is a correct basis for one James Meaders inasmuch as she claims directly under
of the separate, independent grounds for the granting James Meaders; thus, she claims she is an heir of James
of the motion for summary judgment. We think that Meaders. We conclude the trial court was correct in
the well-established rules of collateral estoppel as granting the motion on the separate basis of collateral
applied by the Supreme Court of Texas no longer make estoppel.
mutuality a requirement. Appellant has contended that
a lack of mutuality defeats summary judgment. We We perceive that there was also an identity of lawyers
disagree. In Eagle Properties, Ltd v. Scharbauer. 807 at crucial times. It is significant and important that
S.W.2d 714 (Tex.1990), the Supreme Court of Texas in the Federal court suit that Robbins as plaintiff
in a unanimous opinion written by Justice Cook held: both in the trial court and as appellant in the appeal
was represented by the legal professional who has
represented Robbins in the case at bar at the time the
A. No Requirement of Mutuality summary judgment for the defendants was granted.
In Benson v. H7anda Petroleum Co., 468 S.W.2d 361 Later this counsel withdrew. It is evident that the
(Tex.l971 ), this Court stated, same arguments and contentions were made in the
Federal court Robbins case as were made below in this
The rule [of collateral estoppel] is generally stated State court litigation and those same arguments and
as binding a party and those in privity with him .... contentions were overruled in both courts.
Due process requires that the rule of collateral
estoppel operate only against persons who have Hence, it is accurate to state that the parties here and
had their day in court either as a party to the prior in the prior Federal case were in privity in that Abigail
suit or as a privy, .... Meaders is an heir of James Meaders. Also, the identity
of the attorneys and the identity of the issues that were
This definition does not require mutuality for the
presented and determined in the prior Federal court
invocation of collateral estoppel; rather, it is only
proceeding and in the State trial court were shown as
necessary that the party against whom the plea
being the same. In the Federal court cases at the Circuit
of collateral estoppel is being asserted be a party
level each involved the issue ofthe legal interpretation
or in privity with a party in the prior litigation.
of the 1911 deed, holding that the construction of said
A~vrick v. Moody Nat'/ Bank, 590 S.W.2d 766,
deed was a question of law for the court.
769 (Tex.Civ.App.-Houston [14th Dist.] 1979,
writ refd n.r.e.); Hardy v. 1~1eming, 553 S.W.2d
Again, in Eagle Properties, Ltd v. Scharbauer, supra,
790, 793-·-93 (Tex.Civ.App.·-···-·El Paso 1977, writ
the Texas Supreme Court resolved the question of
refd n.r.e.). As this Court stated in Tarter v.
the application of the doctrine of collateral estoppel
Aff.~tropolitan Sav. & Loan Ass'n [744 S.\V.2d 926
in a state court suit, we perceive, based upon a prior
( 1988) ], "The doctrine applies when the party
federal court suit and judgment. Our Supreme Court
against whom collateral estoppel is asserted had a

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Robbins v. HNG Oil Co., 878 S.W.2d 351 (1994)

held that collateral estoppel precludes the relitigation In Clark 11; the Circuit Court passed upon and
of identical issues of fact and precludes the relitigation specifically and definitively construed the *359 1911
of identical issues of law. Our Texas Supreme Court Garonzik deed to James Meaders. There, Clark and
held this: Profitt, as administrators ofJames R. Meadors' estate,
instituted litigation in the Federal District Court of the
Under state law, collateral Eastern District of Texas against four oil companies,
estoppel only precludes the alleging that the oil companies had extracted without
relitigation of identical issues payment or permission literally billions of dollars
of fact or law which were worth of oil and gas from the lands in which James
actually litigated and essential Meadors claimed a one-eighth interest. These lands
to the prior judgment. Tarter, were perceived to include and encompass the famed
744 S.\V.2d at 927; Van Dyke
Spindletop Oil Field 3 . Judge Joe J. Fisher of the
v. Boswell, O'Toole, Davis &
District Court granted a summary judgment in favor of
Pickering. 697 S. W.2d 381, 384
the defendant oil companies, concluding that the deed
(Tex.l985).
(being the 1911 deed upon which the administrators
ld.. 807 S.W.2d at 721-···-22. Under this record, we based their claim) conveyed rights only to four specific
conclude that identical issues of law were actually tracts of land in which the companies had never held
litigated and were essential to prior decisions and any interest. The suit in the Federal District Court
judgments. We hold that the defendants have met was to establish the Meadors' interest in Jefferson
County lands in general and to obtain an accounting of
and satisfied the elements of collateral estoppel. 2 See
all minerals produced therefrom. Such an accounting,
and compare Peregoy v. Amoco Production Co., 742
the Meadors heirs and their representatives asserted,
F.Supp. 372 (E.D.Tex.l990), affd, 929 F.2d 196 (5th
would reveal that Meadors' estate was entitled to
Cir.), cert. denied, 502 U.S. 864, 112 S.Ct. 188, 116
at least twenty billion dollars in royalties from the
L.Ed.2d 149 (1991).
oil companies' unauthorized use and production from
the various properties for a period exceeding seventy
Thus, we conclude and hold that the question of law
years.
that was decided in the Robbins Federal court case as
well as the Clark Federal case (which was brought by
It is clear from the opinion that the basis of the
and on behalf of Meaders' heirs)-which question of
Meadors' estate claim is the 1911 deed from Ephriam
law resulted in fmal judgments in the United States
Garonzik to Meaders that purported to convey four
Courts determine that, as a matter of law, the 1911
specifically described tracts of land in Jefferson
deed only purported to convey interest in the four
County, being the same identical deed upon which
specifically described abstracts as numbered above
Jewell Robbins bases her claims. However, in addition,
and importantly, that the 1911 deed could not be
the Garonzik 1911 deed to Meaders stated that those
enlarged so as to include any additional tracts. By like
four parcels were all the lands in Jefferson County
reasoning and rationale, as noted later, we hold that the
that the same grantors of the McFaddin family had
doctrine of stare decisis applies and is binding upon
inherited from their ancestor, William McFaddin, and
Jewell Robbins, individually and as attorney-in-fact
further, that the intention ofthe grantors was to convey
for Abigail. Jewell Robbins, in her several capacities,
all of the properties in the thus-defined McFaddin
had a full and fair opportunity to present and litigate
inheritance. In Clark II, 908 F .2d at 31, the Fifth
her issues in a prior suit. Indeed, she did so. We
Circuit set out in a footnote the exact language,
overrule appellant's point of error number three.
wording and clauses in the 1911 deed and judicially
determined that deed's meaning and legal import. We
set out in our footnote number three the pertinent
Fifth Circuit Court of Appeals' Opinion portions of the 1911 deed specifically adjudicated and
in Clark v. Amoco Production Co., definitely determined by the Fifth Circuit 4 . The Fifth
908 f:2d 29 (5th Cir.J990)-Clark II Circuit squarely passed on the clause in the deed that
reads: "and this deed is intended to convey to the

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Robbins v. HNG Oil Co., 878 S.W.2d 351 (1994)

said James Meaders [sic] one-eights [sic] interest in contract or a deed a meaning different from that which
and to all properties ... that the said ... [McFaddens] its language imparts.
are entitled to by inheritance ... of every description
whatsoever" is to be construed-according to the
plaintiffs (in Clark II) that the 1911 deed was intended
The Opinion in {.!ewell} Robbins v. Amoco
to convey a one-eighth interest not only in the four
Production Co., 952 F.2d 9(Jl (5tll Cir.1992)
described tracts but also in all ofthe Jefferson County
land inherited through their ancestor Wm. McFaddin But Jewell Robbins has litigated before. The previous
by J.H., A.J., and R.D. McFaddin. But the Fifth litigation was based directly and squarely on the
Circuit disagreed. These other, additional lands were deed dated December 14, 1911, being the deed from
determined to have included parts of the Spindletop Ephriam Garonzik to James Meaders. Jewell Robbins
field. From the Spindletop fields the oil companies had had alleged that she individually and as attorney-in-
produced billions of dollars worth of oil and gas. fact for some two hundred heirs of James Meaders
owned and owns an undivided one-eighth interest in
*360 In Clark 11, the Fifth Circuit specifically certain lands located in Jefferson County, Texas. The
wrote that the trial court correctly held that the 1911 prior Jewell Robbins litigation involved the very same
deed unambiguously conveyed an interest only in deed determinative of this appeal.
four parcels of land. The circuit court then held
that the 1911 deed unambiguously evidenced an The 1911 deed conveyed an undivided interest in four
intent to convey only the four specifically described specifically described tracts of land. These four tracts
tracts. The deed was construed as clearly stating that of land were said to be situated at some distance
"the said property herein conveyed being four (4) between three to sixteen miles from the Spindletop
tracts". Then the deed provides a legal description of dome. In the prior litigation involving the same 1911
these four properties and the deed explains that "the deed, Robbins relied upon certain language, claiming
above described property herein conveyed is all the that the deed included also thirty-seven additional
property that the" McFaddins inherited from William tracts which did include the land upon which the
McFaddin. Spindletop dome is situated. Robbins in the prior suit
contended that various oil companies had extracted oil
[7] It was recognized that the deed redundantly stated and gas and other minerals from the land described in
that it is intended to convey one-eighth interest in all the 1911 deed without compensating Meaders or his
the lands inherited by the McFaddins from William heirs.
McFaddin, being a phrase already defined within the
instrument as equal to the four described tracts. The The United States District Court for the Eastern
issue was then clearly decided that there was no District of Texas, Judge Joe J. Fisher, held that the
merit to the Clark 1l plaintiffs' contention that the crucial 1911 Garonzik deed conveyed only the four
deed is ambiguous on its face and that therefore, specifically referenced and described tracts. The prior
extrinsic evidence, that is the inventory of the William Jewell Robbins litigation specifically dealt with the
McFaddin estate must be admitted in order to remove interpretation of the Garonzik deed of 1911 which
and resolve the ambiguity. We agree that the 1911 set forth specific descriptions of four tracts of land
deed is unambiguous and that the deed is forced designated as Abstracts 166, 181, 182, and 183. The
into a false ambiguity only when extrinsic evidence relevant, governing, operative language of the deed is
is introduced to attempt to show something contrary
set out verbatim in Robbins v. Amoco, supra, at 903 5 .
to the express terms of the deed in that the Wm.
Again, the Fifth Circuit dealt with and construed the
McFaddin estate contained more than four parcels of
exact same clauses in the 1911 deed upon which the
land. We determine that such extrinsic evidence is
same Jewell Robbins now relies upon to expand the
impermissible under the Texas law which has been
said deed to include thirty-seven additional (or more)
established to the effect that parol evidence will not be
tracts of land.
received or admitted to create an ambiguity or to give a

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Robbins v. HNG Oil Co., 878 S.W.2d 351 (1994)
129~c>Tr~r<3as "Ff9p':s4r

Robbins has previously specifically argued and unambiguous on a number of occasions, one of which
maintained that the McFaddins had *361 owned more involved Jewell Robbins. Robbins in State court has
than forty different parcels of real property in Jefferson certainly not demonstrated why Robbins v. Amoco,
County at the time of the 1911 conveyance. And supra, in Federal Fifth Circuit Court should not
Robbins has previously specifically asserted that the govern this appeal. Thus, we necessarily hold that the
language must be construed to convey not just the four 1911 deed conveyed, at the very most, an interest
specifically described parcels or tracts, but all of the in the four parcels of land (if it did so convey)
tracts owned by the McFaddins in Jefferson County. specifically described in the 1911 deed and nothing
The circuit court overruled Robbins' construction of more. The doctrine of stare decisis gives force of
the 1911 deed specifically; as we do now. Put in law to precedents and is broader in its scope than the
simplest terms, Jewell Robbins' attempt to expand the doctrine of collateral estoppel. Commonality or privity
deed beyond the four referenced tracts has failed in the among the parties to the present or prior litigation is
past in at least two squarely decided, "White Horse" not required by stare decisis. In suits involving claims
cases and must fail now. The Fifth Circuit has, at to title to land, stare decisis is particularly applicable.
least on two prior occasions in two published opinions, This is true because of the importance of establishing
squarely made the holding-an actual holding- stability of land titles, sales, and transactions. When
that the 1911 deed was not ambiguous and thus, a reviewing court with jurisdiction sets forth a fmal
extrinsic evidence had to be refused. That court ruling on a matter of law before that appellate court,
necessarily based its interpretation and construction of then such ruling and determination is binding and
the deed upon the contractual language. The Federal conclusive in all subsequent suits involving the same
appeals court specifically held that inasmuch as the subject matter, whether the parties and the property
interpretation of the unambiguous terms of a contract are the same or not. Sturgeon v. Strachan Shipping
is purely a question of law, the interpretation is one for Co., 698 F.2d 798 (5th Cir.l983); C'ase-Pmneroy Oil
the court. See Bro14'1ling v. Navarro, 743 F.2d 1069, Corporatiou v. Pure Oil Company, supra.
1080 (5th Cir.l984).

The Doctrine of Issue Preclusion;
The Stare Decisis Defense alkla Preclusion by Judgment

[8] We decide that once a defmitive construction has [12] [13] Additionally and as an independent
been given to a specific writing or a particular specified
ground of defense, we hold that the district court
fact situation such as the determination of the true ruling below was correct based on the doctrine of issue
construction of a will or the validity of a deed, such preclusion. We hold that the questions below and the
a definite determination is binding and conclusive in questions before us on appeal definitely involve the
subsequent suits involving the same subject matter and doctrine of issue preclusion, also known as preclusion
the self-same deed whether the parties and the property by judgment. This doctrine is clearly implicated by
are the same or not. The doctrine of stare decisis reason of the prior federal judgments construing and
controls the result. And Robbins loses. See Case- determining the exact effect of the Garonzik 1911
Pomeroy Oil Corporation v. Pure Oil Company, 279 deed. Issue preclusion, or preclusion by judgment,
S.W.2d 886 (Tex.Civ.App.-\Vaco 1955. writ refd). bars the relitigation of identical questions of fact or
law that were actually litigated and which questions
[9] [10] [11] Furthermore, lacking any subsequent of fact or of law were essential to the judgment
disapproval by the proper state court, the Federal in the prior suits. Van Dyke v. Boswell, O'Toole,
interpretation and construction still applies with equal Davis & Pickering, 697 S.\V.2d 381 (Tex.l985);
force to cases such as the one before us. Jewell Robbins RESTATEMENT (SECOND) OF JUDGMENTS § 27
is not in a position to demonstrate or maintain how (1980).
the quantity or quality of extraneous evidence would
explode the prohibition against considering such *362 Indeed, our Texas Supreme Court has cited
evidence when the 1911 deed has been pronounced section 87 of the RESTATEMENT (SECOND) OF

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Robbins v. HNG Oil Co., 878 S.W.2d 351 (1994)
.
·129-olr&-<3as~.Ra·IJ~·s4·r~-----~-w··---·-··~--·--·-~·--~-----__.- ~.-----·-···----··---------··-·-····---·--

JUDGMENTS, and our highest civil court has See and compare Gillum v. Temple, 546 S.W .2d 361,
determined where the earlier judgment was rendered 363 (Tex.Civ.App.-Corpus Christi 1946, writ refd
in a federal court, that intermediate State appellate n.r.e.). The correct concept of the term "chain of
courts are to follow the federal decisions based on title" under Texas law has been defmed as "[t]he
issue preclusion. See Jeanes v. Henderson, 688 S.W .2d successive conveyances, commencing with the patent
100, 103 (1985). See Acker v. City ofHuntsville, 787 from the government, each being a perfect conveyance
S.W.2d 79 (Tex.App.-Houston [14th Dist.] 1990, no of the title down to and including the conveyance
writ). Therefore, under the doctrine of issue preclusion to the present holder." See Reserve Petroleum Co.
in view of the identity of the party-plaintiff, being v. Hutcheson. 254 S.W.2d 802, 806 (Tex.Civ.App.-
Jewell Robbins in her various capacities, with the Amarillo 1952, writ refd n.r.e.).
identity of the attorneys and the identity of the
questions of law presented, we hold that the federal Under this record we hold that the 1898 agreement to
decisions and determinations in Robbins and Clark, Lucas which failed to mention or describe any specific
supra, are definitely binding upon the plaintiff here property, but only referred to the William McFaddin
and upon the State courts under the doctrine of issue estate was insufficient and inadequate to establish a
preclusion. We hold in this case that it is correct to give complete chain of title as to the three abstracts, 181,
effect to the holdings, judgments, and opinions of the 182, and 183. Pursuant to this holding, the trial court's
Fifth Circuit Court. summary judgment denying the plaintiffs claim was
properly granted on this additional basis-that basis
[14] Although it may be redundant and somewhat being the plaintiffs failure to establish a complete and
overlapping, we hold that the trial court correctly ruled proper chain of title to the three abstracts 181, 182, and
that the plaintiffs chain of title as to Abstracts 181, 183.
182, and 183 failed because the inventory of William
McFaddin's estate did not list such Abstracts as being
assets of the said estate. We conclude that the plaintiff
Appellant's Point of Error Number Four
has failed to establish a complete, correct chain of
title to any of the four tracts conveyed in the 1911 But, the appellant contends that under her point of error
deed with the exception of Abstract 166. Abstract 166 number four that Wm. McFaddin in certain instances
was listed in the proper inventory. Robbins is in a was prohibited from alienating any property during his
position of being obliged to rely upon a certain March lifetime because of the prohibition against alienation
9, 1898, agreement. This 1898 agreement is in essence in the Donation Patent. This contention was not raised
a lease which contains what might be described as or presented to the trial court at the proper time when
a five-year primary term. The agreement is between the motion for summary judgment was presented,
certain McFaddins and one Anthony Lucas. The 1898 considered, and granted. Therefore, it is clearly not
agreement is limited to a one-fourth undivided interest before this Court of Appeals for consideration. In order
in the tracts or parcels of land that are referenced in for an appellant to preserve a complaint for appellate
the William McFaddin estate. It is undisputed that the review, that appellant must have presented to the trial
inventory of the William McFaddin estate simply fails court a timely request, objection, or motion stating the
to list Abstracts Nos. 181, 182, and 183. Thus, the specific grounds for the ruling he desired the court
plaintiffs chain oftitles as to these three abstracts fails. to make and it is also necessary for the appellant to
have obtained a ruling from *363 the trial court upon
The defendants, however, never owned any interest or his contention or his issue. TEX.R.APP.P. 52( a). Rule
produced any minerals from the Abstract No. 166. The 52( a) is harmonious and consistent with Rule 166a(c)
plaintiff, of course, must establish her own title and the of the Texas Rules of Civil Procedure, especially
plaintiff can prevail only on the strength of her own pertaining to summary judgment proceedings. Rule
title. Hunt v. Heaton, 643 S.\V.2d677, 679 (Tex.1982); 166a(c) states:
Landv. Turner, 377 S.\V.2d 181, 183 (Tex.1964). In
order to succeed, a plaintiff must establish a superior Issues not expressly presented
title in himself or herself by an affirmative showing. to the trial court by

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Robbins v. HNG Oil Co., 878 S.W.2d 351 (1994)
:f29olT& Gas Rep. 541·

written motion, answer or
[16] The affidavit of Sam 0. Smith has been reviewed
and analyzed a second time. We determine that
other response shall not be
Abstract No. 166 principally exists in the northern and
considered on appeal as
western parts of the City ofBeaumont and is therefore
grounds for reversal.
removed a considerable distance from the Spindletop
Oil Field. The summary judgment proof plainly shows
[15] But it is Hornbook law and an axiomatic rule that
that the Averill Addition, the First McFaddin Addition,
restraints on alienation are squarely contrary to public
and the Second McFaddin Addition (when dedicated)
policy and are forbidden and disallowed. See Article
were parts ofBeaumont as the City then existed. These
I, § 26 of the 1876 Constitution, as amended. In 34
additions are located in Abstract No. 166. Furthermore,
TEX.JUR.3d Estates§ 61 (1984) it is written:
the proof establishes that no oil or gas wells, according
Alienability is a legal incident to the affiant, have existed or did exist in Abstract
of property and restraints No. 166. This affidavit is similar to the evidence of
against it are contrary to public nonproduction passed on and approved of in Clark
policy unless imposed under fl. Appellant does not controvert these matters. In
an active trust. Accordingly, AfcConnell v. Southside School Dist., 858 S.W.2d 337
a provision that annexes to (Tex.l993 ), our Supreme Court wrote:
a grant or devise a general
Likewise, issues a non-movant contends avoid the
restraint on the grantee's or
movant's entitlement to summary judgment must
devisee's power to convey or
be expressly presented by written answer to the
transfer the property is invalid.
motion or by other written response to the motion
Thus, a condition against
and are not expressly presented by mere reference to
alienation during the lifetime
summary judgment evidence. See City of Houston
of the grantee, contained in
v. C'lear Creek Basin Authority. 589 S.W.2d 671.
a deed purporting to convey
678 (Tex.1979) ("the non-movant must expressly
an absolute fee simple estate,
present to the trial court any reasons seeking to avoid
has been held to be void on
movant's entitlement ...").
the ground either that it is
repugnant to the estate granted,
Thus, Pogo as well as the other four defendants were
or, admitting that such a
entitled to a summary judgment. No damages were
restriction may be imposed for a
shown by plaintiff; no grounds for an accounting were
reasonable time, that it restricts
shown by plaintiff; no extraction of oil, gas, or other
alienation for an unreasonable
minerals by these defendants were shown by plaintiff.
time. (emphasis added)
The trial court's judgment is affirmed.
See O'Connor v. Thetford, 174 S.W. 680
(Tex.Civ.App.-San Antonio, 1915, writ ret1 d). AFFIRMED.

All Citations
Pogo Producing Company and Abstract No. 166
878 S.W.2d 351, 129 Oil & Gas Rep. 541

Footnotes
1 For edification, "McFaddin" will be spelled throughout this opinion with an "i", however, some re~erences
quoted spell the name with an "e". "Meaders" in this cause of action is spelled with an "ers"; agam, some
actions quoted spell the name "ors".
2 The elements of collateral estoppel are:
(1) the issue at stake being identical to the one involve~ in th.~ pr~vious litigation;
(2) the said issue has been actually litigated in the prev1ous ht1gat1on; and

13
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Robbins v. HNG Oil Co., 878 S.W.2d 351 (1994)

(3) the determination of that issue in the previous litigation had been a critical and necessary part of
the judgment in that previous litigation.
3 The Fifth Circuit in a footnote noted that "[t]he Spindletop Oil Field has been a leading source of oil production
since 1901. The discovery of the 'Lucas Gusher' at Spindletop began the East Texas oil boom. Uncounted
billions of dollars worth of oil have since been produced in the Spindletop field ... Clark v. Amoco Production
Co., [hereinafter referred to as Clark I] 794 F.2d 967, 969 n. 2 (5th Cir.1986)."
4 The pertinent portions of the deed are quoted below:
I, Ephriam Garonzik, of the County of Dallas, State of Texas, for and in consideration of the sum ofTen
( 10) Dollars and other considerations, the receipt of which is hereby acknowledged, have bargained,
sold and conveyed, and by these presents do grant, sell and convey unto the said James Meaders
[sic] of the County of Dallas, State of Texas, an undivided one-eighth interest in and to the following
described tracts and parcels of land, to-wit: Situated in the State of Texas, County of Jefferson, and
more fully described as hereinafter set forth, the said property herein conveyed being four (4) tracts ....
[A specific description of the four tracts-Abstracts 166, 181, 182, and 183-follows.]
... [T]he above described property herein conveyed is all the property that the that [sic] J.H. McFadden,
R.D. McFadden, and A.J. McFadden inherited through their ancester [sic], Wm. McFadden, and this
deed is intended to convey to the said James Meaders [sic] one-eights [sic] interest in and to all
properties properties [sic] that the said J.H. McFadden, A.J. McFadden, and R.D. McFadden are entitled
to by inheritance through their ancestor, the said Wm. McFadden, of every description whatsoever,
situated in the said County of Jefferson.
5 Quoting from Robbins:
[T]he above described property herein conveyed is all the property that ... J.H. McFadden, R.D.
McFadden, and A.J. McFadden inherited through their ancester [sic], Wm. McFadden, and this deed is
intended to convey to the said James Meaders one-eights [sic] interest in and to all properties ... that
the said J.H. McFadden, A.J. McFadden, and R.D. McFadden are entitled to by inheritance through
their ancestor, the said Wm. McFadden, of every description whatsoever, situated in the said County
of Jefferson.

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Government VVorks.
Giant Eagle's Letter Brief Page 32

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Omron Healthcare, Inc. v. Maclaren Exports ltd., 28 F.3d 600 (1994)

conferring exclusive jurisdiction on high
court of justice in England, where
Original Image of28 F.3d 600 (PDF) manufacturer contended that its conduct
28F.3d6oo in selling strollers bearing former
United States Court of Appeals, distributor's marks was justified by
Seventh Circuit. pretermination orders distributor placed
under agreement, coupled with its refusal
OMRON HEALTHCARE,
to accept delivery.
INC., Plaintiff-Appellant,
v. 12 Cases that cite this headnote
MACLAREN EXPORTS
LIMITED, Defendant-Appellee. [2] Contracts
Legal Remedies and Proceedings
No. 93-2965. Argued March
But-for causation is unsatisfactory
31, 1994. I Decided June 27, 1994.
understanding of language in forum
Former exclusive distributor brought action against selection clause referring to "disputes
baby stroller manufacturer for trademark infringement, arising out of' agreement.
based upon posttermination distribution of strollers
37 Cases that cite this headnote
with former distributor's marks. Manufacturer filed
motion to dismiss based upon forum selection
clause in distributorship agreement, which conferred [3) Contracts
exclusive jurisdiction on the high court of justice ~ Legal Remedies and Proceedings
in England. The United States District Court for That foreign court designated in forum
the Northern District of Illinois, Brian Bamett selection clause would have to interpret
Dun: J., enforced forum selection clause and federal law was no obstacle to reference.
dismissed case, and former distributor appealed.
The Court of Appeals, Easterbrook, Circuit Judge, 11 Cases that cite this headnote
held that trademark infringement suit arose out of
distributorship agreement, within meaning of forum
[4] Contracts
selection clause, in light of manufacturer's contention
~ Legal Remedies and Proceedings
that its conduct in selling strollers bearing former
distributor's marks was justified by pretermination All disputes resolution of which arguably
orders distributor placed under agreement, coupled depend on construction of agreement,
with its refusal to accept delivery. "arise out of' that agreement for purposes
of forum selection clause.
Affirmed.
42 Cases that cite this headnote

[5J Contracts
West Headnotes (6) ~ Agreement as to Place of Bringing
Suit; Forum Selection Clauses
[l] Contracts Sending trademark infringement dispute
Legal Remedies and Proceedings to England pursuant to forum selection
Former exclusive distributor's trademark clause in distributorship agreement would
infringement suit against baby stroller not offend public policy of the United
manufacturer arose out of distribution States; litigating in England would be
agreement, and thus was subject to neither immoral nor illegal, and no law or
forum selection clause in agreement policy ofthe United States demanded that

V\/estlavi!Ne.xt 201 5 Thomson
Giant Eagle's Letter Brief Page 33

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Omron Healthcare, Inc. v. Maclaren Exports Ltd., 28 F.3d 600 (1994)

every dispute be litigated in tribunal with with trademarks identifying Omron as the seller.
most experience. (Each stroller also, and more prominently, identified
Maclaren as the manufacturer.) Maclaren blames
11 Cases that cite this headnote Omron for this situation, contending that after
receiving notice of termination Omron placed firm
(61 Contracts orders for the strollers, demanded that Maclaren build
Agreement as to Place of Bringing them, and then refused to accept delivery; Omron
Suit; Forum Selection Clauses denies that it is responsible for the excess inventory.
Maclaren and its new distributor pasted labels over
Third-party interests in trademark laws
the Omron marks and included literature identifying
are not so dominant that they must
Kid Co as the reseller but did not succeed in obliterating
be protected from parties' voluntary
all traces of Omron's trademarks. Omron demands a
bargains, by refusing to enforce forum
remedy. Maclaren moved to dismiss, relying on this
selection clause conferring exclusive
portion of its contract with Omron:
jurisdiction on foreign court.
The parties hereto agree that
11 Cases that cite this headnote
all disputes arising out of
this Agreement which cannot
*602 be resolved amicably
between the parties shall be
Attorneys and Law Firms
referred to the High Court of
*601 Marcia E. Goodman, Marian C. Haney, Jeffrey Justice in England which will
S. Fowler (argued), Mayer, Brown & Platt, Chicago, have exclusive jurisdiction to
IL, for plaintiff-appellant. determine such disputes.

John L. Conlon (argued), Schwartz, Cooper, Omron protested that this dispute arose out of
Greenberger & Krauss, Chicago, IL, for defendant- trademark infringement, not out of the contract,
appellee. and that Maclaren would have been equally (if not
more) liable for its conduct had there never been an
Before POSNER, Chief Judge, and CUMJvliNGS and agreement. To this the district court replied:
EASTERBROOK, Circuit Judges.
Because the instant dispute
Opinion would not have arisen if
Omron and Maclaren Exports
EASTERBROOK, Circuit Judge. had never entered into their
Distribution Agreement, the
A few years ago the Marshall Baby Products Division
case at bar "arises out of'
ofOmron Healthcare became the exclusive distributor,
the Distribution Agreement.
in the United States, of baby strollers manufactured
The forum selection clause
by Restair Maclaren Limited, a British firm. The
in the Distribution Agreement
contract allowed Maclaren to cancel on 90 days' notice.
therefore deprives this court
Disappointed by Omron's sales, Maclaren gave notice
of jurisdiction over the matter.
terminating the distributorship as of January 22, 1993.
Accordingly, the case is
One of Omron's employees left to create a new firm,
dismissed with prejudice.
KidCo, which became Maclaren's U.S. distributor.
Omron noticed that KidCo's strollers identified Omron
as the distributor, and it sued Maclaren for trademark [2] But-for causation is an unsatisfactory
infringement. understanding of language referring to "disputes
arising out of' an agreement. Let us suppose that
[ll When Omron's distributorship ended, Maclaren while inspecting Omron's facilities, a manager of
had on hand 2,300 strollers that had been manufactured Maclaren stepped on a baby rattle and fell. Would

2
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R402
Omron Healthcare, Inc. v. Maclaren Exports Ltd., 28 F.3d 600 (1994)

the ensuing tort litigation go to the High Court of S.Ct. 1647, 114 L.Ed.2d 26 (1991) (arbitration of
Justice in the United Kingdom just because, but for the claims under the Age Discrimination in Employment
distribution agreement, none of Maclaren's employees Act); Carnival Cruise Lines, Inc. v. Shute, 499 U.S.
would have been on Omron's premises? "Arising out 585, Ill S.Ct. 1522, 113 L.Ed.2d 622 (1991) (forum
of' and "arising under" are familiar phrases, and courts selection clause sending admiralty case to Florida);
have resisted the siren call of collapsing them to but- Rodrif:ruez de Qu{ias v. Shearson:American Etpress,
for causation. An example: but for the existence of Inc., 490 U.S. 477, 109 U.S. 1917. 104 L.Ed.2d
federal drug safety standards, it would not be possible 526 ( 1989) (arbitration of claims under the Securities
to contend that noncompliance with the standards is Act of 1933); Shearson1'American E:Xpress, Inc. v.
tortious, but it does not follow that a tort suit "arises f\,fcAfahon, 482 U.S. 220, 107 S.Ct. 2332. 96 L.Ed.2d
under" those standards and thus activates federal 185 (1987) (arbitration of claims under the Securities
jurisdiction. i\1errell Dow Pharmaceuticals, Inc. v. Exchange Act of 1934 and the Racketeer Influenced
Thompson, 478 U.S. 804, 106 S.Ct. 3229, 92 L.Ed.2d and Corrupt Organizations Act); 1Hitsubishi .tlfotors
650 (1986). See also, e.g., Spearman v. Exxon Coal Corp. v. Soler Chrysler-P~vmouth. Inc., 473 U.S. 6 I 4,
us:~l. Inc .. 16 F.3d 7'22 (7th Cir.1994). 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (arbitration in
Japan of claims under U.S. antitrust laws); Scherk v.
Nonetheless, the parties' dispute arises out of the Alberto-Culver Co., 417 U.S. 506, 94 S.Ct. 2449, 41
agreement. Maclaren contends that its conduct in L.Ed.2d 270 (1974) (arbitration *603 in France of
selling the 2,300 strollers bearing Omron's marks is claims under the Securities Exchange Act of 1934);
justified by orders Omron placed under the agreement, The Bremen v. Zapata q[(-Shore Co., 407 U.S. 1, 92
coupled with its refusal to accept delivery. Although S.Ct. 1907, 32 L.Ed.2d 513 (1972) (forum selection
the distribution agreement does not provide expressly clause sending admiralty case to High Court of Justice
for the means of wrapping up the parties' affairs in England); Bonny v. Society ql Lloyd's, 3 F.3d 156
and disposing of unsold inventory, courts regularly (7th Cir.l993) (forum selection clause sending fraud
imply such terms-not as legal rules independent of and securities claims to England).
the contract, but as implicit terms under the contract.
When the contracting parties have not provided (4] We concluded in Sweet Dreams Unlimite(l, Inc.
explicitly for some contingency, courts impute to their v. Dial-A-1Hattress International, Ltd, 1 F.3d 639.
contract the provisions that they probably would have 642-43 (7th Cir.1993), that all disputes the resolution
adopted had they focused on the subject and resolved of which arguably depend on the construction of an
it explicitly. These imputed terms are justified not agreement "arise out of' that agreement for purposes
only by a desire to make contract a more productive of an arbitration clause. See also Hugel v. Cmporation
institution by holding down the costs of bargaining, of Lloyd's, 999 F.2d 206 (7th Cir.1993); S+L+H
but also by the parties' knowledge of the common law S.p.A. v. A/iller-St. Nazianz. Inc .. 988 F .2d 1518 (7th
history of judicial gap-filling. Because these parties Cir.l993). We cannot imagine why the scope ofthat
did not provide expressly for the disposition of unsold phrase would differ for purposes of a forum-selection
inventory, they invited a process of construction that clause. Neither side contends that the phrase has any
will resolve their dispute. A court might say that the special meaning in this contract, so Sweet Dreams is
agreement implicitly licensed Maclaren to use the a sufficient answer to Omron's submission. Perhaps
marks incident to a commercially reasonable means the second circuit has a more restricted view of such
of selling the inventory. There are other possible language, see Corcovado 1Husic Corp. v. Hollis Afusic,
outcomes, but all depend on an understanding of the Inc., 981 F .2d 679. 682-83 (2d Cir.1993 ), but in Sweet
parties' written bargain and of its implied terms. Dreams, 1 F.3d at 642, we expressly disagreed with
a precursor decision in that circuit, In re Kinoshita
[3] Omron's claim engages both the parties' compact & Co., 287 F.2d 951 (2d Cir.1961). When Kinoshita
and the rules of trademark law, but the fact that was decided, many judges were hostile to sending
the parties' designated forum would have to interpret questions of U.S. law to arbitration abroad. Although
federal law is no obstacle to the reference. E.g., Gilmer the panel in Corcovado was not overtly hostile to
v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 permitting the parties to choose their tribunal, it treated

3
Giant Eagle's Letter Brief Page 35

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Omron Healthcare, Inc. v. Maclaren Exports Ltd .• 28 F.3d 600 (1994)

the fact that the claim would tum on an interpretation Omron's reminder that the trademark laws are designed
of U.S. copyright law as a dispositive argument in for the benefit of consumers as well as producers
favor of decision by a federal court. It did not discuss suggests that third-party interests are at stake. But the
Gilmer or any of the other cases cited in the preceding antitrust and securities laws also are designed for the
paragraph, and we find it unpersuasive. benefit of consumers; indeed, we suppose that all U.S.
laws may be said to serve the interests of (some) U.S.
(51 According to Omron, sending this dispute to nationals. Does it follow that disputes that turn on
England would offend the public policy of the United the resolution of U.S. law must be decided in U.S.
States. What policy, in particular? The dominant courts? If so, then Scherk, Mitsubishi, and many other
policy in contract cases is enforcing the parties' *604 cases are wrongly decided, for they depend
agreement, the better to promote commerce. Bremen, on the belief that foreign tribunals will interpret U.S.
407 U.S. at 9, 92 S.Ct. at 1912-13; see also In re Oil law honestly, just as the federal courts of the United
Spill by the Amoco Cadi::. 954 F.2d 1279, 1327-30 States routinely interpret the law ofthe states and other
(7th Cir.1992). American firms can hardly expect to nations.
do international business if American courts permit
them to welch on their commitments to their trading (6] What is more, Omron cannot really tell us that
partners. third-party interests are so dominant that they must
be protected from parties' voluntary bargains. Omron
Omron tells us that the "policies" in question favor could have licensed Maclaren to use its trademarks for
sending disputes to courts that have the expertise to the 2,300 strollers. Omron fears that the High Court of
resolve them, and ensuring that courts with the interest Justice is more likely to rule in favor of a U.K. national
of Americans at heart interpret laws designed for the than a court of this nation would be. We doubt that
protection of American consumers. Notice that neither the commercial judges of the High Court, for whom
of these policies has a secure footing in any statute. international transactions are routine business, display
Public-policy arguments depend on the fact that "no such a bias-but, if they do, so what? Omron knew
court will lend its aid to one who founds a cause of this when it signed the contract, and it would have
action upon an immoral or illegal act". Paperworkers received some compensation for the risk (a lower price
v. iHisco, Inc .. 484 U.S. 29, 42, 108 S.Ct. 364, 373, of strollers, some procedural concession). If Omron
98 L.Ed.2d 286 (1987). Contracts that violate the is free to allow Maclaren to win with certainty by
rights of third parties aren't enforced; neither are licensing its marks, a slight increase in the probability
agreements designed to get 'round statutes that protect of Maclaren's prevailing cannot be objectionable. This
the contracting parties from their own improvidence. case is about how much money changes hands between
But litigating in England is neither immoral nor illegal, these parties, and not about the protection of American
and no law or policy of the United States demands consumers. Compare the Sherman Act, which bars
that every dispute be litigated in the tribunal with the firms from agreeing to fix prices no matter how much
most experience-if that were so, jurisdiction based on all of them want to do so, and the securities acts,
diversity of citizenship would be abolished (for state which forbid contractual waiver of their provisions. 15
courts have more experience with their own law than U.S.C. §§ 1, 77n, 78cc(a). Here are real restrictions on
federal courts do), federal defenses to claims filed the power of contract-yet the Supreme Court has held
in state court would all be removed to federal court, that antitrust and securities cases may be arbitrated in
and the courts of the United States would disclaim foreign nations.
any power to adjudicate disputes under foreign law.
Yet all of these things are common, even in cases of Omron signed a contract promising to litigate
exceptional complexity. In Amoco Cadiz we devoted in the High Court of Justice, or not at all. It
great energy to interpreting the law of France and broke that promise. Instead of seeking damages for
the United Kingdom, without suggesting that we were breach of contract, Maclaren is content with specific
violating a "public policy" of confining disputes to the performance. The district court properly dismissed the
tribunals with the most expertise. suit.

4
Giant Eagle's Letter Brief Page 36

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Omron Healthcare, Inc. v. Maclaren Exports Ltd.J 28 F.3d 600 (1994)

AFFIRMED. All Citations

28 F.3d 600, 31 U.S.P.Q.2d 1376

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\tv\estlav.;Next 2015 Thomson
Giant Eagle's Letter Brief Page 37

R405
Interactive Music Technology, LlC v. Roland Corp. U.S., Not Reported in F.Supp.2d •..

Accordingly, it is 0 RDERED that Defendant Roland's
2008 WL 245142
motion to transfer (Doc. No. 19); Defendant Yamaha
Only the Westlaw citation is currently available.
Corporation of America's Motion to Transfer Pursuant
United States District Court,
to 28 U.S.C. § 1404(a) (Doc. No. 25); and Defendant
E.D. Texas,
Open Labs, Inc.'s Motion to Transfer Venue Pursuant
Tyler Division.
to 28 U.S.C. § 1404(a) (Doc. No. 38) are GRANTED
INTERACTIVE MUSIC TECHNOLOGY, LLC pursuant to 28 U.S .C. § 1404(a), and Defendant
v. Roland's motion to dismiss is DENIED.
ROLAND CORP. U.S., et al.
So ORDERED.
Civil Action No. 6:07-CV-
282. I Jan. 29, 2008.
REPORT AND RECOMMENDATION OF
Attorneys and Law Firms
UNITED STATES MAGISTRATE JUDGE
Ronald P. Oines, Rutan & Tucker, Costa Mesa, CA,
JOHN D. LOVE, United States Magistrate Judge.
Jennifer Parker Ainsworth, Wilson Sheehy Knowles
Robertson & Cornelius PC, Tyler, TX, for Plaintiff. Before the Court are Defendant Roland Corporation
U.S.'s Motion to Dismiss Pursuant to Fed.R.Civ.P.
Charles W. Goehringer, Jr., Lawrence Louis Germer,
12(b)(3) For Plaintiffs Failure to Abide by Contractual
Germer Gertz, L.L.P ., Beaumont, TX, Gregory P.
Forum Selection Clause (Doc. No. 19); Defendant
Kom, Jonathan Steinsapir, Lawrence Y. Jser, Kinsella
Yamaha Corporation of America's Motion to Transfer
Weitzman Iser Kump & Aidisert, Santa Monica, CA,
Pursuant to 28 U.S.C. § 1404(a) (Doc. No. 25); and
Bryan Russell Hm1on, Kincaid Horton & Smith,
Defendant Open Labs, Inc.'s Motion to Transfer Venue
Austin, TX, 1\llelvin R. Wilcox, III, Smead Anderson &
Pursuant to 28 U.S.C. § 1404(a) (Doc. No. 38).
Dunn, Longview, TX, Ivfartin .M. Noonen, Vincent J.
Belusko, Morrison & Foerster LLP, Los Angeles, CA,
For the following reasons, Defendant Roland Corp.'s
for Defendants.
(hereinafter "Roland") motion to dismiss should
be DENIED.However, Defendants Roland, Yamaha
Corp. (hereinafter "Yamaha") and Open Labs, Inc.'s
ORDER ADOPTING REPORT (hereinafter "Open Labs") motions to transfer venue
AND RECOMMENDATION should be GRANTED.
OF MAGISTRATE JUDGE

LEONARD DAVIS, District Judge.
BACKGROUND
*1 The above entitled and numbered civil action
was referred to United States Magistrate Judge On May 10, 2004, Interactive Music Technology
John D. Love pursuant to 28 U.S.C. § 636. The (hereinafter "IMT") initiated patent infringement
Report and Recommendation of the Magistrate proceedings against Roland in the U.S. District Court
Judge, which contains his proposed findings of for the Central District of California (hereinafter
fact and recommendations, has been presented for "the California proceeding"). In the California
consideration (Doc. No. 57). The parties did not file proceeding, IMT alleged infringement of U.S. Patent
any objections to the Report and Recommendation. No. 5,908,997 1 (hereinafter "the ,997 patent"), a
The Court is of the opinion that the findings and patent which relates to electronic musical instruments
conclusions of the Magistrate Judge are correct. containing a computer-based control system. The case
Therefore, the Court hereby adopts the Report and was assigned to U.S. District Judge John F. Walter.
Recommendation of the United States Magistrate
Judge as the findings of this Court.

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Interactive Music Technology, LLC v. Roland Corp. U.S., Not Reported in F.Supp.2d ..•

During the course of the California proceeding, the the covenant not to sue in the California proceeding
parties filed answers and counterclaims and appeared settlement agreement. Pl.'s Opp'n Def.'s Mot. Dismiss
before Judge Walter for a scheduling conference, 1. Roland filed a motion to dismiss for IMT's failure
but the California court never held a Markman to comply with the contractual forum selection clause,
hearing or interpreted any of the language in the and in the alternative, Roland requests a venue transfer
,997 patent. 2 After a year of litigation, the parties for convenience purposes pursuant to 28 U.S.C. §
settled the dispute, with IMT taking nothing on the l404(a). Defendants Yamaha and Open Labs have
complaint and covenanting not to sue Roland on the filed their own motions seeking to transfer the case to
,997 patent except in certain limited circumstances. As the Central District of California pursuant to § 1404(a).
part of their settlement, Roland and IMT included a
venue provision for any further disputes, stating that In considering a motion to transfer pursuant to §
"venue over any dispute arising out of this Agreement l404(a) in a patent infringement case, the Federal
shall lie in the state or federal courts sitting in Los Circuit applies the law of the regional circuit, which in
Angeles or Orange County, California."See Def.'s this case is the Fifth Circuit. See Storage Tech. Cmp.
Mot. Dismiss 1, Ex. 4 at 4; Settlement Agreement at v. Cisco .S)•s., Inc., 329 F.3d 8:23. 836 (Fed.Cir.2003 ).
4, Interactive Music Tech., LLC v. Roland Corp., Case
No. CV 04-03285 JW (C.D.Cal.2005). Pursuant to
I. The Forum Selection Clause
the settlement agreement, Judge Walter dismissed the
Parties may designate by contract a forum in which
case in a one page order, but noted that the Central
any litigation is to take place. Ke,..,·smann and Assocs..
District of California "retains full jurisdiction over this
Inc. v. Barton-·-,'lschman Assocs., Inc., lO F.Supp.2d
action."Interactive Music Tech., LLC v. Roland Corp.,
682, 688 (S.D.Tex.l997). Any lawsuit commenced
Case No. CV 04-03285 JW; (Doc. No. 22).
elsewhere may then be subject to dismissal for
improper venue.ld (citing Carnival Crui.s·e Lines, Inc.
*2 IMT is a Wyoming corporation, Yamaha and
v. Shute, 499 U.S. 585, 111 S.Ct. 15:22, 113 L.Ed.2d
Roland are California corporations, and Open Labs
622 (1991)). The law favors enforcement of forum
is a Texas corporation headquartered in Austin,
selection clauses, and the U.S. Supreme Court has
Texas. 3 SeeVanKoeveringDecl. ~2-4;Def. Yamaha held that forum selection clauses are "prima facie
Mot. Transfer at 1. There is some uncertainty about valid and should be enforced unless enforcement is
where the inventors, all likely witnesses, currently shown by the resisting party to be 'unreasonable' under
reside. According to IMT, the nine inventors of the the circumstances."D.B. Inc. v. Nat'/ Admin. Solutions
patents-in-suit are located in Texas (though not in Corp., :2004 WL 86584:2, at* 1 (N.D.Tex.:2004) (citing
the Eastern District of Texas), Tennessee, Iowa, and lvl·'S Bremen v. Zapata Ofj.s·hore Co., 407 U.S. l, 10,
Illinois. Pl.'s Opp'n Def. Yamaha's Mot. Transfer 2; 92 S.Ct. 1907,32L.Ed.2d 513 (1972)).
(Doc. No. 32). Yamaha asserts that three inventors
have since moved from the locales in which IMT As noted above, Roland and IMT included a forum
claims they live, and notes that some may have moved selection clause in their agreement settling the
to California. Def. Yamaha Reply Br. Supp. Mot. California proceeding. The language at issue states that
Transfer 1 (citing Noonen Reply Declaration,~~ 2-7 "venue over any dispute arising out of this Agreement
and Exhs. A-B). shall lie in the state or federal courts sitting in Los
Angeles or Orange County, California."See Def.'s
Mot. Dismiss 1, Ex. 4 at 4; Settlement Agreement
ANALYSIS at 4, Interactive Music Tech., LLC v. Roland Corp.,
Case No. CV 04-03285 JW (C.D.Cal.2005). IMT
IMT filed the present suit in the U.S. District Court for does not argue that enforcement of the agreement
the Eastern District of Texas, asserting that Defendants is unreasonable, only that the settlement agreement
Roland, Yamaha and Open Labs are actively infringing does not cover the products it asserts are infringing in
the patents-atissue. IMT claims the present case the present litigation. IMT bases its argument on two
involves products that did not exist at the time of the points, which are the primary issues before the Court.
California proceeding, and which are not subject to First, IMT argues the "venue ... shall lie" language of

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Interactive Music Technology, LLC v. Roland Corp. U.S., Not Reported in F.Supp.2d ...

the forum selection clause is permissive rather than context specific, the Tenth Circuit found a general
mandatory, meaning the clause allows, but does not uniformity in the federal courts when analyzing
require, litigation in the federal courts within Los the law on this matter: where venue is specified
Angeles or Orange County, California. Second, IMT in a forum selection clause with mandatory or
claims its infringement action does not arise out of the obligatory language, the clause will be enforced,
settlement agreement. For its part, Roland argues the while where only jurisdiction is specified, the clause
present action should be dismissed or transferred to will generally not be enforced without some further
California pursuant to the mandatory forum selection language indicating the parties' intent to make venue
clause in the settlement agreement. exclusive. 4 K & V Scientific Co., li1c. v. Bayerische
itfotoren Werke Aktiengesellschqti, 314 F.3d 494,
499 (lOth Cir.2002) (emphasis added). However,
A. Mandatory v. Permissive Forum Selection
merely mentioning venue in the forum selection clause
Clauses
does not make the clause mandatory by itself. See
*3 Before determining whether a forum selection
Bentley v. 1\futual Benejlts Corp., 237 F.Supp.2d
clause should be enforced, the Court must first
699, 702 (S.D.!v1iss.2002) (fmding clause providing
determine whether the clause is mandatory or
"[t]his Agreement shall be construed under the laws of
permissive.Ca/das & Sons, Inc. v. 1'Villinham, 17
Florida, and the parties stipulated to venue in Broward
F.3d 123, 127 (5th Cir.1994 ). A party's consent to
County," was permissive because the parties merely
jurisdiction in one forum does not necessarily waive
agreed to a venue without excluding others). Also, the
that party's right to have an action heard in a different
Fifth Circuit has stated that even though a clause uses
forum. Dorsey v. Northern L{f'e Ins. Co., 2004 \VL
the term "shall," which is generally mandatory, the
2496214, at *3 (E.D.La.2004). In examining forum
clause need not necessarily be classified as mandatory.
selection clauses, courts must examine the language
Caldas & Sons, Inc., 17 F.3d at 127.Even when venue
of the clause and determine whether or not the forum
is specified and "shall" is used, the language of the
selection clause evidences an intent of the parties' to
clause must be examined thoroughly to determine if
limit the scope of jurisdiction or venue to a particular
the parties intended for the specified forum to be
forum, or whether an ambiguity exists. {'ity of NeH'
exclusive.
Orleans v. J:!unicipal Admin. Sen .. Inc., 376 F.3d
501, 504 (5th Cir.2004) ("For a forum selection
*4 Nevertheless, the combination of specified venue
clause to be exclusive, it must go beyond establishing
and obligatory language is a powerful combination.
that a particular forum will have jurisdiction and
A review of forum selection cases in the Fifth
must clearly demonstrate the parties' intent to make
Circuit reveals that the Fifth Circuit courts appear to
that jurisdiction exclusive"). Where an agreement
be overwhelmingly in line with the Tenth Circuit's
contains clear, unequivocal and mandatory language
observation in K & v. Scientific, as the Fifth Circuit
showing that jurisdiction is appropriate only in a
and District Courts within the Circuit have consistently
designated forum, the clause is considered mandatory.
found that specified venue in conjunction with
Von Grqffenreid v. Craig, 246 F.Supp.2d 553, 560
obligatory language (such as the term "shall") in
(N.D.Tex.2003); Dorsey, 2004 WL 2496214. at *3.
a forum selection clause mandates venue wherever
On the contrary, permissive forum selection clauses
specified. See, e.g., Collin County. Tex. v. Siemens Bus.
authorize jurisdiction in the designated forum, but do
Serv., Inc .. 2007 WL 2908926, at *4 (5th Cir.2007)
not prohibit litigation elsewhere. Von (}rqffenreid, 246
("Here, it is undisputed that the venue clause at
F.Supp.2d at 560.Whenever a forum selection clause
issue [, which states venue 'shall lie exclusively
contains an ambiguity, the clause must be construed
in Collin County, Texas,'] is mandatory"); Kevlin
against the drafter. Keaty v. Freeport Indonesia. Inc.,
.S'ervs., Inc. v. Lexington State Bank, 46 F.3d 13.
503 F.2d 955, 957 (5th Cir.l974) (per curiam).
l4-15 (5th Cir.l995) (finding mandatory a forum
selection clause stating: "The legal venue of this
The distinction between specifying jurisdiction and
contract and any disputes arising from it shall be
venue in forum selection clauses is often important.
settled in Dallas County, Texas"); In re fireman's
While analyzing a forum selection clause is extremely
Fund Ins. Co., 588 F.2d 93, 93-···-94 (5th Cir.1979)

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(finding clause stating that "any suit or action for venue to which they may be entitled by virtue of
the enforcement of any of the obligations under this domicile or otherwise").
agreement, the venue of such suit or action shall be
laid in the County ofEssex and State ofNew Jersey" is *5 IMT's argument is unavailing, as it ignores Fifth
mandatory); Dorsr..~v. 2004 WL 2496214. at *4("[T]he Circuit and District Court cases where the "venue
forum selection clause provides that 'venue shall be shall" language is found to be mandatory without
laid in King County, Washington.'The Court finds further language indicating exclusivity. See, e.g.,
that the forum selection clause is unambiguous with Kevlin Servs., Inc., 46 F.3d at 14···-15; In re Fireman~s
respect to exclusivity and it is, therefore, mandatory."); Fund Ins. Co., 588 F.2d at 93-94; Dorsey. 2004 'VL
First Nat'/ of N. Am., LLC v. Pem:v. 2002 WL 2496214. *4; Greenville Elec. Uti!. S)'S., 2001 WL
449582 (N.D.Tex.2002) (holding that forum selection 804521, * 1-2; Taylor, 474 F.Supp. At 146-48. While
clause providing that "all claims shall be litigated only it is true that parties must do more than just name
in Collin County, Texas" was a mandatory clause a venue, and also that generally mandatory terms
requiring venue in state court in Collin County); such as "shall" do not necessarily make a forum
Greenville Elec. Uti/. .S):s. v. N. Pac. Group, Inc., selection clause mandatory, there is no reason to
200 l \VL 804521 (N.D.Tex.200l) (finding that clause think the parties in the present circumstance meant
providing that "venue for any litigation arising from to allow for other venues. By stating "[v]enue over
this contract shall lie in Greenville, Hunt County, any dispute arising out of this Agreement shall lie in
Texas" mandatory); Taylor v. Titan Mid1-Pest Const. the state or federal courts sitting in Los Angeles or
Corp., 474 F.Supp. 145, 146, 148 (N.D.Tex.l979) Orange County, CA," the parties left no ambiguity
(transferring action and enforcing forum selection as to their intent to resolve all disputes arising out
clause providing that "if any controversy or claim of the agreement in the specified California courts.
arises out of or relates to this Subcontract or any Interpreting the clause to include the federal court in
alleged breach thereof jurisdiction and venue shall be the Eastern District of Texas would be a strained and
in the appropriate Court ... sitting within the County in unsupported interpretation. See b?ftnite Tech., 200 l
which the principal offices of Contractor are located"). \VL 527357, at *2. Accordingly, the Court finds the
parties' forum selection clause to be mandatory rather
In their brief, IMT argues that the "venue ... than permissive.
shall lie" language is not exclusive. Citing multiple
cases as support, IMT argues that further limiting
language such as "venue shall only lie" or "venue B. "Arising Out Of'
shall lie exclusively in" is necessary to truly The second major issue before the court is whether
or not the present dispute arises out of the settlement
remove ambiguity from the phrase. 5 See, e.g., .Art,ry;fl
agreement such that the forum selection clause
Equities LLC v. Paolino, 211 F. App'x 317,
mandates litigation in California. IMT argues its patent
318 (5th Cir.2006) (finding as mandatory forum
infringement claims in the present case do not arise out
selection clause stating: "Borrower hereby consents
of the California proceeding's settlement agreement,
to the exclusive jurisdiction of the courts sitting in
and therefore, the present action is not governed by
Kendall County, Texas") (emphasis added); lvlaley v.
the forum selection clause. Roland counters by arguing
Design Benejits Plan, b1C:., 125 F.Supp.2d 836, 838
that IMT's ability to bring its infringement suit against
(E.D.Tex.2000) (finding as mandatory forum selection
Roland based on the ,997 patent depends entirely
clause stating: "Venue for any action, suit or other
on the interpretation of the settlement agreement,
proceeding, including non-contract disputes, shall be
and therefore the present dispute arises out of the
exclusively in Winnebago County, Illinois") (emphasis
settlement agreement. With limited guidance from the
added); Dixon v. 1~S'E International, Inc., 330 F.3d
Fifth Circuit on this matter, the parties have turned to
396, 397 (5th Cir.2003) (finding as mandatory forum
selection clause stating: "The Courts of Texas, U.S.A., other Circuits' analyses. 6
shall have jurisdiction over all controversies with
respect to the execution, interpretation or performance IMT bases its position on a Second Circuit copyright
of this Agreement, and the parties waive any other case decided this year. In Phillips v. Audio Active Ltd,

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Interactive Music Technology, LLC v. Roland Corp. U.S., Not Reported in F.Supp.2d .•.

494 F.3d 378 (2d Cir.2007), the forum selection clause whether "any dispute" arises out of the agreement.
before the court stated that "any legal proceedings that There is no doubt that a dispute exists regarding
may arise out of [the agreement] are to be brought interpretation of the parties' agreement. According to
in England."The Phillips court examined the phrase the parties' settlement agreement, IMT cannot bring
"arise out of," which the court found means "to suit against Roland based on infringement of the ' 997
originate from a specified source," and determined the patent except in limited circumstances. Roland argues
copyright infringement claims brought by the plaintiff IMT's infringement action, and more specifically the
did not "arise out of' the pertinent agreement. Id at allegedly infringing product IMT asserts, is within
386-389.The Phillips court found that the plaintiffs the scope of the parties' settlement agreement. IMT
claims arose out of the Copyright Act instead of claims the product-atissue did not exist at the time of
the agreement, thereby rendering the forum selection the prior agreement, and the terms of the settlement
clause inapplicable to the plaintiffs ability to bring agreement therefore do not cover the products at
infringement allegations in New York instead of issue. If Roland is correct that the agreement does
England. IMT contends the Phillips analysis should in fact cover the products at issue, then IMT will
govern the present issues, and that under Phillips, be barred from continuing with this proceeding.
its rights as a patent holder do not arise out of However, should the terms of the agreement not cover
the settlement agreement, and therefore the forum the product-at-issue, then IMT may have the right
selection clause should not bar it from bringing the to continue infringement litigation against Roland
present action in the Eastern District of Texas. on the ,997 patent, but only so long as the action
falls within the limited circumstances provided for
*6 Roland turns to the Seventh Circuit for its position. in the settlement agreement. 7 Though the rights IMT
In Omron Healthcare, Inc. v. Afac/aren Exports Ltcl. is seeking to vindicate arise from patent law, the
28 F.3d 600, 603 (7th Cir.l994), the Seventh Circuit contractual relationship governs the circumstances
was faced with a forum selection clause stating: under which IMT may sue Roland, and therefore
"The parties hereto agree that all disputes arising IMT's ability to bring suit implicates the agreement.
out of this Agreement which cannot be resolved Kessmann & Assocs., Inc. v. Barton-AschmanAssocs.,
amicably between the parties shall be referred to the Inc .. 10 F.Supp.2d 682, 688 (S.D.Tex.l997) ("Claims
High Court of Justice in England which will have that arise out of the contractual relationship and
exclusive jurisdiction to determine such disputes."/d implicate the agreement are subject to the forum
at 601-02. The Omron court determined that "all selection clause"). The issue cannot be resolved
disputes the resolution of which arguably depend on without interpreting the prior agreement. Therefore,
the construction of the agreement 'arise out of that under the Omron approach, because the resolution of
agreement for purposes" of a forum selection clause. this issue depends on interpretation of the agreement,
Id Roland contends the dispute before the Court is the dispute "arises out of' the agreement.
whether the products accused of infringing are covered
by the California proceeding's settlement agreement, *7 The Court recognizes that Omron is not
and such a dispute arises of the settlement agreement. binding authority. However, the Omron analysis
leads to the more logical conclusion in the present
The Court finds the Seventh Circuit's analysis and
circumstances. 8 By following the Second Circuit's
conclusion more applicable to the present situation.
approach in Phillips to its conclusion in the present
As part of the settlement agreement of the California
case, the forum selection clause is rendered virtually
proceeding, IMT and Roland freely bargained for the
meaningless, as a plaintiff would always be able to
inclusion of the forum selection clause. According to
characterize a claim as arising out of patent law, and
that clause, "venue over any dispute arising out of this
thereby effectively sidestep the agreement. Allowing
Agreement shall lie in the state or federal courts sitting
this approach under the present circumstances would
in Los Angeles or Orange County, California."In
ignore the freely bargained-for exchange of two
examining the plain language of the clause, the key
sophisticated entities. IMT seeks to characterize the
question to determine when the clause is triggered is
bargained-for forum selection clause as applying only
not whether the claims arise out of the agreement, but
when the cause of action arises out of the agreement

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Interactive Music Technology, LLC v. Roland Corp. U.S., Not Reported in F.Supp.2d ...

itself, such as a breach of the settlement agreement, federal question, and therefore the federal courts will
and not when the cause of action springs from another be the appropriate venue. The proper procedure for
body oflaw (such as patent law) outside the agreement. enforcing the clause is therefore through § 1404(a), and
Roland, however, is asserting that IMT has breached the Court will therefore analyze the motion entirely
the settlement agreement by filing suit on products under § 1404(a).
covered under the terms of the settlement agreement.
Thus, in fact, the parties do have a dispute arising out *8 Under § 1404(a), a district court must weigh a
of the settlement agreement. number of factors. The presence of a forum selection
clause is "a significant factor that figures centrally into
The U.S. Supreme Court has noted a strong preference district court's calculus. Stel·mrt Org., Inc. v. Ricoh
for enforcing valid forum selection clauses. See A1'S Corp.. 487 U.S. 22, 29, 108 S.Ct. 2239, 101 L.Ed.2d
Bremen, 407 U.S. at 1O.Neither party has challenged 22 (1988); Brock v. BasA:in-·Robbins USA Co., 113
the validity of the clause, only its applicability. F.Supp.2d 1078~ 1084 (E.D.Tex.2000). Although the
The Court has reviewed the parties' assertions and forum selection clause is a significant factor in the
arguments over the settlement agreement's terms, transfer analysis, on its own it is not sufficient to justify
and found a genuine dispute exists regarding the transfer. Canvas Records, Inc.. 2007 WL 1239243, at
applicability of the settlement agreement's covenant *5."The forum selection clause, which represents the
not to sue to the present litigation. Accordingly, the parties' agreement as to the most proper forum, should
Court fmds there to be a dispute that "arises out of' the receive neither dispositive consideration .. . nor no
settlement agreement, and the forum selection clause consideration, but rather the consideration for which
must be given full effect. Congress provided in § l404(a)."Stewart Org., Inc.,
487 U.S. at 31.

C. Enforcing the Clause
Where the designated venue in a forum selection II. Motion to Transfer Venue
clause is another federal court, the majority of District Section 1404(a) provides that "[f]or the convenience
Courts in the Fifth Circuit have interpreted Supreme of parties and witnesses, in the interest of justice,
Court and Fifth Circuit precedent to mean the proper a district court may transfer any civil action to any
way to enforce the clause is through a venue transfer other district or division where it might have been
pursuant to 28 U.S.C. § 1404(a), and not dismissal brought." 10 See28 U.S.C. § 1404(a). The goals of§
for improper venue pursuant to Rule l2{b)(3) and l404(a) are to prevent waste of time, energy, and
28 U.S.C. § l406(a). 9 See Southeastern Consulting money, and also to protect litigants, witnesses, and
Group, Inc. v. 1Hatimus, Inc .. 387 F.Supp.2d 681,683- the public against unnecessary inconvenience and
84 (S.D.Miss.2005); Speed v. Omega Protein, Inc .. expense. Vau Dusen v. Barrack, 376 U.S. 612, 616,
246 F.Supp.2d 668, 671 (S.D.Tex.2003); Ellington 84 S.Ct. 805, ll L.Ed.2d 945 (1964). Ultimately it
Credit Fund, Ltd. v. Select Portfblio Serv., lnc., is within a district court's sound discretion to transfer
2007 \\'1., 3256210, at *4 (\V.D.Tex.2007); Wali\fart venue pursuant to 28 U.S.C. § 1404(a), but the court
Stores, Inc. v. Oore, Inc .. 2007 \VL 2769835, at must exercise its discretion in light of the particular
*2 (N.D.Miss.2007); Canvas Records. Inc. v. Koch circumstances of the case. Hanby v. Shell Oil Co.,
Entm't Distrib., LLC, 2007 WL 1239243, at *5 144 F.Supp.2d 673,676 (E.D.Tex.200l); i'\tfohamedv.
(S.D.Tex.2007); Gutermuth lnv., Inc. v. Coo/brands Afazda Cmp., 90 F.Supp.2d 757, 768 (E.D.Tex.2000).
Smoothies, 2006 \VL 2933886. at *3 (W.D.Tex.2006);
Dorsey v. Northern Life lns. Co., 2004 WL 2496214, When deciding whether to transfer venue, a district
at *9 (E.D.La.2004). court balances two categories of interests: (1) the
convenience of the litigants (or private interest
Defendants moved to dismiss the case pursuant to Rule factors), and (2) the public interests in the fair and
12(b)(3 ), or alternatively pursuant to § 1404(a) or § efficient administration of justice. In re Volkswagen
1406(a). Although the forum selection clause provides ofAmerica. inc .. 506 F.3d 376, 384 (5th Cir.2007);
for the state or federal courts, patent infringement is a Hanby, 144 F.Supp.2d at 676.The private interest

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factors weighed by the court include: (1) the plaintiffs agreed on a forum, the parties themselves presumably
choice of forum, (2) the relative ease of access to already accounted for a number of the factors in
sources of proof, (3) the availability of compulsory bargaining for the terms of the agreement and settling
process to secure the attendance of witnesses, (4) the on the Central District of California as the best
cost of attendance for willing witnesses, and (5) all place to continue litigation when required. If ease of
other practical problems that make trial of a case access to sources of proof, availability of compulsory
easy, expeditious and inexpensive. In re Volkswagen process to secure the attendance of witnesses, cost of
q(America, Iuc .. 506 F.3d at 380.The public interest attendance for willing witnesses, and the familiarity
factors include: "(1) the administrative difficulties of the forum with the law that will govern the case
flowing from court congestion, (2) the local interest were more convenient for the parties elsewhere, the
in having localized interests decided at home, (3) parties could have agreed to that at the time. Of
the familiarity of the forum with the law that will course, the parties could also have agreed not to
govern the case, and (4) the avoidance of unnecessary specify a venue for continued litigation. Also, a change
problems of conflict of laws or in the application of in circumstances could certainly have rendered the
foreign law."/d parties' forum selection determination less convenient
now than it was at the time of settlement, but that
None of the factors are dispositive on their own. One is not the case here. Nothing has happened since the
of the factors, the plaintiffs choice of forum, is entitled California proceeding that makes the Eastern District
to a certain level of deference, and "this deference of Texas a more appropriate venue.
establishes the burden that a moving party must meet
in seeking a § 1404(a) transfer."/d A party seeking Only the deference given to IMT's choice of forum
transfer 'must show good cause,' which according to weighs against transfer. Factors such as ease of
the Fifth Circuit means "that a moving party must access to sources of proof, availability of compulsory
demonstrate that a transfer is '[f]or the convenience of process to secure attendance, the cost of attendance for
parties and witnesses, in the interest ofjustice.' " Id A willing witnesses, administrative difficulties flowing
transfer should be ordered "when the transferee forum from court congestion, the local interest in deciding
is clearly more convenient," but a plaintiffs choice of the dispute at home, and the avoidance of conflict
forum should not be disturbed "when the transferee of law problems all either play neutral or weigh
forum is no more convenient than the chosen forum." slightly in favor of transfer. More importantly, certain
/d factors weigh significantly in favor of transfer, such
as the familiarity of the forum with the governing
*9 Because of the presence of the forum selection law. Though Judge Walter never held a Markman
clause between IMT and Roland, but not IMT and hearing or construed the terms in the patent, he
the other Defendants, two separate analyses under § nonetheless has already invested judicial time and
1404(a) are required. resources into this case. In his order dismissing the
case, Judge Walter noted that the Central District
of California "retain[ed] full jurisdiction over this
A. Roland's Motion to Transfer action."While IMT claims that phrase was included
While all of the factors are always pertinent in any § solely because the settlement agreement was not
1404(a) analysis, the disposition ofRoland's motion to fmalized, the issues before the Court today concern
transfer ultimately amounts to two major competing interpretation of the forum selection clause, and are
components: the deference afforded to IMT's choice in essence a continuation of the finalization of the
of forum versus the weight of the mandatory forum previous case's settlement agreement. Furthermore,
selection clause bargained-for by Roland and IMT. while both the Eastern District of Texas and the
The presence of the forum selection clause looms Central District of California maintain heavy patent
large in the§ 1404(a) transfer analysis, and "provides dockets (and therefore equivalent familiarity with
some indication that the convenience of the parties patent law), the interpretation of the parties' settlement
would presumably be better served by transfer."Elliott agreement, which is governed under California law,
v. Carnival Cruise Lines, 213 F.Supp.2d 555, 561 will ultimately determine whether or not IMT will
(S.D. Tex.2002). Given that the parties previously

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Interactive Music Technology, LLC v. Roland Corp. U.S., Not Reported in F.Supp.2d •..

be barred from proceeding with the present patent problems, both public factors, have been presented to
infringement action. Not only will the Central District the Court. Also, the allegedly infringing products are
of California judges be better versed in applying sold in both districts, so both California and Texas have
California law, Judge Walter also will have specific an interest in deciding the issues at home. Both districts
familiarity with the intent of the parties' in their also maintain heavy patent dockets, neutralizing the
settlement agreement. 11 familiarity of the forum factor with the governing law.

*10 When viewed as a whole, the forum selection Once again, the only factor weighing against transfer
clause and familiarity of the forum with the law that is IMT's choice of forum. Nonetheless, that choice
will govern the case outweigh IMT's choice of forum, of forum is given deference, and another forum must
which is the only factor lending any significant weight be "clearly more convenient" to disturb that choice.
against transfer. The effect of the forum selection A court should consider the choice of forum, but the
clause operates to mandate litigation between Roland plaintiffs forum choice by itself is not conclusive or
and IMT in the Central District of California. In light determinative. In re Horseshoe Entm't, 337 F.3d 429,
of the Supreme Court's strong preference for enforcing 434 (5th Cir.2003). While a number of the factors
valid forum selection clauses, and considering all of are neutral, one factor weighs heavily in favor of
the appropriate factors and the effect of the forum transfer: judicial economy. It is well established that
selection clause, the Court finds that the interests of the public interest factors in a § 1404( a) analysis
justice and the convenience of the parties would be encompass the interest of justice.Zo/tar Satellite Sys..
better served in the Central District of California. Inc. v. LG Elec. LHobile Commc'ns, 402 F.Supp.2d 731,
The proper enforcement by this Court is to transfer 735 (E.D.Tex.2005)."Consideration of the interest of
the case to the appropriate venue pursuant to § justice, which includes judicial economy, 'may be
l404(a) rather than dismiss Roland based on the determinative to a particular transfer motion, even if
forum selection clause. See Stewart Org., Inc., 487 the convenience of the parties and the witnesses may
U.S. at 29-30.Accordingly, the Court recommends call for a difference result."'Jd (quoting Regents of
Roland's motion to transfer pursuant to § 1404(a) be the Univ. ql Cal. v. Eli Lilly & Co., 119 F.3d 1559,
GRANTED, and its motion to dismiss pursuant to Rule 1565 (Fed.Cir.1997)). In cases that involve a highly
12(b)(3) be DENIED. technical subject matter, such as patent litigation,
judicial economy may favor transfer to a court that is
already familiar with the issues involved in the case.Jd
B. Yamaha and Open Labs' Motions to Transfer
The analysis of the traditional § 1404(a) factors *11 While Yamaha and Open Labs were not
for Defendants Yamaha and Open Labs' motions defendants in IMT's previous litigation on the
to transfer is much the same as the analysis for patents at issue against Roland, Judge Walter
Roland's motion (without the presence of the forum nonetheless already has some familiarity with the
selection clause). The majority of the factors will patents at issue. Where the judicial economy factor
play neutral. The relative ease of access to sources weighs heaviest, however, is in avoiding confusion
of proof is neutral because the vast majority of over litigating the same patent simultaneously in
the documents in the case will likely be exchanged separate venues. Because the Court has already
electronically, making the physical location of the recommended transferring IMT's litigation against
documents of lesser consequence. See .Symbol Techs., Roland to California, the Central District of California
Inc. v. Afetrologic Instruments, Inc., 450 F.Supp.2d will have to preside over the Markman hearing and
676, 678 (E.D. Tex.2006). The inventors are scattered issue claim constructions on the ,997 patent. If only
across the country, and will have to travel great Roland were transferred, both the Central District of
distances regardless of whether the litigation is in California and the Eastern District of Texas would then
California or Texas. While a number of the witnesses be faced with the untenable prospect of infringement
are in the Central Time Zone, a number of others are actions involving the same plaintiff litigating on the
in California or would find it easier to travel there same patent in two separate venues. Such a situation
from Japan. No conflict of law or court congestion would be inefficient in conserving judicial efficiency,

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to 28 U.S.C. § 1404(a) (Doc. No. 38) should
and bears potential for confusion on appeal, as it would
GRANTED pursuant to 28 U.S.C. § l404(a). Roland's
lead to competing claim constructions on the same
motion to dismiss should be DENIED.
terms in the same patent. A single judge is better
positioned to resolve the matter efficiently and in its
Within ten (10) days after receipt of the magistrate
entirety. Preserving efficiency and avoiding potential
judge's report, any party may serve and file written
confusion serves the interests and convenience of
objections to the fmdings and recommendations
the parties and the Court. Therefore, as it relates to
contained in the report. A party's failure to file
Yamaha and Open Labs, this factor weighs heavily in
written objections to the findings, conclusions and
favor of transfer. The Court recommends Yamaha and
recommendations contained in this Report within ten
Open Labs motions to transfer be GRANTED.
days after being served with a copy shall bar that
party from de novo review by the district judge of
those findings, conclusions and recommendations and,
CONCLUSION except on grounds of plain error, from appellate review
ofunobjected-to factual findings and legal conclusions
With Roland and IMT continuing litigation in the
accepted and adopted by the district court. Douglass
Central District of California on the ,997 patent,
v. United States Auto. Ass'n, 79 F.3d 1415, 1430 (5th
and the factors weighing in favor of transfer for
Cir.l996) (en bane).
all three Defendants, it is in the interests of justice
and for the convenience of the parties that all
So ORDERED and SIGNED this 7th day of
matters involving these parties be pursued in the
January, 2008.
Central District of California. Accordingly, the Court
therefore RECOMMENDS that Defendant Roland's
motion to transfer (Doc. No. 19); Defendant Yamaha All Citations
Corporation of America's Motion to Transfer Pursuant
to 28 U.S.C. § 1404(a) (Doc. No. 25); and Defendant Not Reported in F.Supp.2d, 2008 WL 245142
Open Labs, Inc.'s Motion to Transfer Venue Pursuant

Footnotes
1 In the California proceeding, IMT also asserted infringement of U.S. Patent No.6, 160,213 (hereinafter "the
'2l3 patent"), but only the ,997 patent has been asserted against Roland in the present proceeding. The
,213 patent is being asserted against the other Defendants in this case.
2 Roland describes the extent of the California litigation as follows: "disclosures were exchanged, a protective
order was entered and then amended, documents were requested and produced, interrogatories were
propounded and answered, third party discover was taken, etc."Def.'s Mot. Dismiss 2 (Doc. No. 19).
3 Austin, Texas is located in the U.S. District Court for the Western District of Texas.
4 This principal is illustrated well in the court's analysis in a recent case from the Western District of Texas.
See Paolino v. Argyll Equities. L.L.C., 2005 WL 2147931, at *4 n. 3 (W.D.Tex.2005). The Paolino court
cited a bevy of cases from federal courts across the country which validate the Tenth Circuit's observation
in K & v. Scientific that when venue is specified in a forum selection clause with mandatory language, the
clause is deemed mandatory. See, e.g., Phillips v. Audio Active Ltd., 494 F.3d 378, 386--87 (2d Cir.2007)
(recognizing that in the Second Circuit, obligatory venue language suffices to give mandatory force to a forum
selection clause); Excel/, Inc. v. Sterling Boiler & Mech., 106 F.3d 318 (10th Cir.1997) (construing forum
selection clause stating that "U]urisdiction shall be in the State of Colorado, and venue shall lie in the County
of El Paso, Colorado" as mandatory); Milk 'n' Mores Inc. v. Beaver!, 963 F.2d 1342, 1346 (10th Cir.1992)
(construing forum selection clause stating that "venue shall be proper under this agreement in Johnson
County, Kansas" as a mandatory); Docksider, Ltd. v. Sea Tech. 875 F.2d 762, 764 (9th Cir.1989) (holding
I

that a clause providing that "Licensee hereby agrees and consents to the jurisdiction of the courts of the State
of Virginia. Venue of any action brought hereunder shall be deemed to be in Gloucester County, Virginia"
was mandatory and exclusive); Sompo Japan Ins., Inc. v. Alarm Detection Sys., Inc., 2003 WL 21877615
(N.D.III.2003) (holding that forum selection clause providing that "venue shall be proper in Kane County,

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Illinois should any portion of this contract have to be legally enforced" was a mandatory forum selection
clause); Relm Wireless Cotp. v. C.P. Allstar Corp., 265 F.Supp.2d 523 (E.D.Pa.2003) (granting motion to
dismiss based on forum selection clause providing that "[t]his Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania with venue in Chester County"); Navickas
v. Aircenter, Inc .. 2003 WL 21212747 (E.D.Tenn.2003) (construing clause stating that the "laws of the State
of Tennessee shall govern this contract and transaction, and the parties further agree that venue for any
matter relating to this contract shall be in Marion County, Tennessee" was unambiguous and mandatory);
Infinite Tech. v. Rockwell E/ec. Commerce Corp., 2001 WL 527357 (N.D.III.2001) (noting that interpreting a
forum selection clause designating the "courts of DuPage County" to include a federal court located in Cook
County would be a strained interpretation); N. Am. Air Force v. Rose, 2001 WL 1155078 (N.D.Cal.2001)
(holding that forum selection clause stating that "[v]enue for any disputes between the parties will be in
Newton County, Mississippi" clearly intended to limit venue to the state court in Newton County); Double A
Home Care, Inc. v. Epsilon Sys., Inc., 15 F.Supp.2d 1114, 1116 (D. Kan.1998) (finding that a clause providing
that any "action shall be venued in the County of Ramsey, State of Minnesota" was mandatory and "clearly
require[d] venue in Minnesota state court").
On the contrary, where jurisdiction is the sole focus of the forum selection clause, there is often an
ambiguity unless very clear language evidencing an intent for sole jurisdiction in a particular forum is
included.See, e.g., City of New Orleans, 376 F.3d at 504 (finding clause that states "[the parties] hereby
consent and yield to the jurisdiction of the State Civil Courts of the Parish of New Orleans" was ambiguous,
and therefore permissive); Southridge Ethanol, Inc. v. South La. Ethanol L.L.C., 2007 WL 2375758, at *7-
8 (N.D.Tex.2007) (finding that clause stating "the parties hereby attorn to the jurisdiction of the Courts of
competent jurisdiction of the State of Louisiana in any proceeding hereunder'' to be permissive since it
does not vest exclusive jurisdiction in the courts of Louisiana); Von Graffenreid, 246 F.Supp.2d at 560-61
(finding clause stating "that the district court of Dallas County, Texas, or ... the United States District Court
for the Northern District of Texas, Dallas Division, shall have jurisdiction to hear and determine any claims
or disputes ... pertaining to this Agreement" was permissive since it only specified that certain courts will
always have jurisdiction, but evidenced no intent to exclude other jurisdictions).
The Fifth Circuit and District Courts within the Fifth Circuit also seem to adhere to this principal, as
discussed in the main text of the opinion.
5 IMT's most persuasive support for its position comes from a case in the United States District Court for the
District of Columbia. See Byrd v. Admiral Moving & Storage, Inc., 355 F.Supp.2d 234, 238-39 (D.D.C.2005)
(holding that a forum selection clause providing "venue shall lie" is permissive and ambiguous since it did not
say venue "shall ONLY lie" in the referenced district). The precedential value of a single District of Columbia
case is outweighed, however, by the plethora of contrary authority cited herein from the Fifth Circuit and
District Courts within the Fifth Circuit. These cases show that the Byrd court's analysis is not the preferred
interpretation for clauses such as the one at issue.
6 The most pertinent analysis on this issue comes from the Seventh Circuit and the Second Circuit. Both
the Seventh Circuit and Second Circuit have each rejected, either explicitly or implicitly, the other court's
approach to this issue.
7 IMT covenanted not to sue Roland "for infringement of any claim of the ,997 patent... based upon any
products made, used or sold by Roland in the United states, or imported by Roland in the United States, as
of the effective date of this Agreement."lser Decl. ~ 7. The parties "intend[ed] that th[e] covenant [not to sue]
shall apply to the Current Products as well as any new models or new products to the extent that said new
models or new products do not incorporate capabilities or features relating to any claim of the ,997 patent...
beyond those capabilities and features contained in the Current Products."lser Decl. ~ 7.
8 It is worth noting that the Omron court was dealing with a clause more similar in structure and style to the
present case than Phillips. In Omron, the clause used the phrase "disputes arising out of this agreement,"
the same phrase used in the present forum selection clause. Meanwhile, the clause in Phillips used "any
legal proceedings that may arise out of [the agreement]."
9 The District Courts rely on the Supreme Court's discussion in Stewart Org., Inc. v. Ricoh Corp., 487 U.S.
22, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988), and the Fifth Circuit's analysis of the Stewart opinion in lnt'l
Software v. Amp/icon, 77 F.3d 112, 113-14 (5th Cir.1996).

0
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Interactive Music Technology, LLC v. Roland Corp. U.S., Not Reported in F.Supp.2d ..•

10 The first question a court must address when ruling on a motion for change of venue under 28 U.S.C. § 1404
is whether the suit could have been filed originally in the destination venue. Defendants Roland, Yamaha
and Open Labs seek to transfer this case to the U.S. District Court for the Central District of California, and
there is no question the case could have been filed in the Central District of California.
11 The Court is cognizant of the fact that Judge Walter may not be assigned this case upon transfer. However,
that determination is for the Central District of California.

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Skold v. Galderma Laboratories, L.P., --- F.Supp.3d ---- (2015)
2015 WL 1740032

2015 WL 1740032 Motion granted in part and denied in part.
Only the Westlaw citation is currently available.
United States District Court,
E.D. Pennsylvania.
West Headnotes (37)
Thomas SKÖLD, Plaintiff,
v.
[1] Alternative Dispute Resolution
GALDERMA LABORATORIES, L.P.; Galderma
Compulsory mediation; mediation as
Laboratories, Inc.; and Galderma S.A., Defendants.
condition precedent
Civil Action No. 14–5280. Alternative dispute resolution clause in
| Signed April 17, 2015. cooperation, development, and licensing
agreement between inventor of skin care
Synopsis technology and corporation did not require
Background: Inventor of skin care technology brought inventor to refer dispute to mediation before
action against corporation, as successor-in-interest to bringing suit against corporation's successor-
cooperation, development, and licensing agreement, as in-interest for trademark infringement, false
well as related partnership and purported common parent advertising, unfair competition, breach of
of both corporation and partnership, alleging Lanham contract, and unjust enrichment under federal
Act claims for trademark infringement, false advertising, and Pennsylvania law, where clause contained
and unfair competition and Pennsylvania-law claims two clauses, one of which was mandatory,
for unfair competition, breach of contract, and unjust stating that parties “shall” refer matter to senior
enrichment. Defendants moved to dismiss or to stay pending executives to attempt to negotiate resolution,
administrative proceeding. and other of which was permissive, stating
that parties “may” refer matter to nonbinding
mediation.
Holdings: The District Court, Wendy Beetlestone, J., held Cases that cite this headnote
that:

[1] alternative dispute resolution clause in agreement did not [2] Alternative Dispute Resolution
require inventor to refer dispute to mediation; Compulsory mediation; mediation as
condition precedent
[2] corporation waived any rights under agreement to have its Alternative dispute resolution clause in
senior executives negotiate end to dispute; cooperation, development, and licensing
agreement between inventor of skin care
[3] breach of contract claim against corporation was timely; technology and corporation did not bar inventor's
federal and Pennsylvania-law claims against
[4] parent was not liable for any breach of agreement; related partnership and purported common
parent of both corporation and partnership
[5] inventor sufficiently pled unjust enrichment claims for trademark infringement, false advertising,
against parent and partnership ; unfair competition, breach of contract, and
unjust enrichment, where partnership and parent
[6] “gist of the action doctrine” barred certain unfair were not parties to agreement and no relevant
competition claims against corporation; and case or statute permitted non-parties to force
signatory party to engage in negotiations
[7] forum selection clause in agreement applied to claims pursuant to permissive mediation clause as
against parent. condition precedent to filing suit.

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Under the so-called “Third Circuit Rule,” if a
Cases that cite this headnote limitations bar is not apparent on the face of the
complaint, then it may not afford the basis for a
[3] Alternative Dispute Resolution dismissal for failure to state a claim. Fed.Rules
Right to enforcement and defenses Civ.Proc.Rule 12(b)(6), 28 U.S.C.A.
Successor-in-interest with respect to Cases that cite this headnote
cooperation, development, and licensing
agreement with inventor of skin care technology
waived any rights it may have had under that [7] Federal Civil Procedure
agreement to seek to have its senior executives Matters considered in general
negotiate end to dispute in which inventor When determining whether a document is
alleged federal and Pennsylvania-law claims integral to or explicitly relied upon in the
for trademark infringement, false advertising, complaint, such that it may be considered on a
unfair competition, breach of contract, and motion to dismiss for failure to state a claim,
unjust enrichment, even though inventor failed what is critical is whether the claims in the
to bring dispute to senior executives to try complaint are based on an extrinsic document
to resolve dispute as he was required to do and not merely whether the extrinsic document
under agreement's alternative dispute resolution was explicitly cited. Fed.Rules Civ.Proc.Rule
clause, by participating in four-year litigation 12(b)(6), 28 U.S.C.A.
in cancellation action before Trademark Trial
and Appeal Board (TTAB), including successful Cases that cite this headnote
motion for summary judgment on inventor's
abandonment contention. [8] Limitation of Actions
Contracts; warranties
Cases that cite this headnote
Pennsylvania's four-year statute of limitations
for skin care technology inventor's breach
[4] Federal Courts of contract claim against successor-in-interest
Limitations and Laches to cooperation, development, and licensing
Absent a borrowing statute, a federal court agreement, as well as related partnership and
exercising supplemental jurisdiction applies the purported common parent of both corporation
forum state's statute of limitations. and partnership, began to run when inventor
became aware of alleged breach, which
1 Cases that cite this headnote was when partnership issued press release
introducing United States products bearing
[5] Federal Civil Procedure inventor's trademark but not involving inventor's
Limitations, laches and prematurity technology. Fed.Rules Civ.Proc.Rule 12(b)(6),
28 U.S.C.A.
So-called “Third Circuit Rule,” permits a
limitations defense to be raised by a motion to Cases that cite this headnote
dismiss for failure to state a claim only if the time
alleged in the statement of a claim shows that the
cause of action has not been brought within the [9] Federal Civil Procedure
statute of limitations. Fed.Rules Civ.Proc.Rule Matters considered in general
12(b)(6), 28 U.S.C.A. Court could rely on partnership's press
release in considering motion to dismiss
Cases that cite this headnote for failure to state claim by partnership,
related corporation, as successor-in-interest
[6] Federal Civil Procedure to cooperation, development, and licensing
Limitations, laches and prematurity agreement with inventor, and purported common

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parent of partnership and corporation on insufficient under Twombly–Iqbal pleading
inventor's breach of contract claim, even though standard to hold corporation liable on
press release was not attached to complaint or Pennsylvania-law breach of contract claim.
to any of parties' briefs, where it was clear
that this claim was based on press release, Cases that cite this headnote
which introduced products bearing inventor's
trademark, which was first time that defendants [13] Pleading
had used trademark in connection with United Disjunctive and alternative allegations
States product that did not involve inventor's skin
Only if there is a question as to the validity of
care technology. Fed.Rules Civ.Proc.Rule 12(b)
the contract in question can a plaintiff proceed
(6), 28 U.S.C.A.
on both breach of contract and unjust enrichment
Cases that cite this headnote theories under Pennsylvania law.

Cases that cite this headnote
[10] Federal Civil Procedure
Matters considered in general
[14] Implied and Constructive Contracts
Skin care technology inventor's breach of Unjust enrichment
contract claim against successor-in-interest
Under Pennsylvania law, “unjust enrichment”
to cooperation, development, and licensing
is essentially an equitable doctrine under which
agreement, as well as related partnership and
the law implies a contract which requires the
purported common parent of both corporation
defendant to pay to the plaintiff the value of the
and partnership was not based on third-party
benefit conferred.
document, and thus court would not consider this
document on defendants' motion to dismiss for Cases that cite this headnote
failure to state claim. Fed.Rules Civ.Proc.Rule
12(b)(6), 28 U.S.C.A.
[15] Implied and Constructive Contracts
Cases that cite this headnote Unjust enrichment
To state a claim for unjust enrichment under
Pennsylvania law, a plaintiff must allege: (1)
[11] Federal Civil Procedure
benefits conferred on one party by another; (2)
Briefs in general
appreciation of such benefits by the recipient;
Federal Civil Procedure
and (3) acceptance and retention of such benefits
Waiver, abandonment, or default
under such circumstances that it would be
Where an issue of fact or law is raised in inequitable or unjust for the defendant to retain
an opening brief but it is uncontested in the the benefit without payment of value.
opposition brief, the issue is considered waived
or abandoned by the non-movant in regard to the Cases that cite this headnote
uncontested issue.
[16] Implied and Constructive Contracts
Cases that cite this headnote
Unjust enrichment
Skin care technology inventor alleged
[12] Corporations and Business Organizations
that he conferred benefits on partnership
Contracts
related to successor-in-interest to cooperation,
Even if non-conclusory, skin care technology development, and licensing agreement with
inventor's single allegation that corporation inventor and purported common parent of both
was ultimate owner of successor-in-interest partnership and successor-in-interest, neither of
with respect to cooperation, development, which were party to agreement, based on their
and licensing agreement with inventor was use of inventor's trademark in marketing and

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selling products and related goodwill and that on finding that defendants breached agreement
defendants had failed to return trademark to by not reverting trademark to inventor when
him in accordance with agreement or to make corporation voluntarily terminated it.
payment, as required to plead Pennsylvania-
law unjust enrichment claims against these Cases that cite this headnote
defendants.
[20] Action
Cases that cite this headnote
Nature of Action
Antitrust and Trade Regulation
[17] Action Representations, assertions, and
Nature of Action descriptions in general
Under Pennsylvania law, the “gist of the action Under Pennsylvania law, “gist of the
doctrine” bars plaintiffs from recovering under action doctrine” did not bar skin care
tort theories for failure to perform a contract. technology inventor's federal and state-law
unfair competition claims against corporation,
1 Cases that cite this headnote
as successor-in-interest to cooperation,
development, and licensing agreement, as well
[18] Action as related partnership and purported common
Nature of Action parent of both corporation and partnership,
Under Pennsylvania law, the “gist of the action insofar as inventor's claims were based on
doctrine” bars tort claims (1) arising solely defendants' actions and communications after
from a contract between the parties; (2) where they chose not to revert trademark to him,
the duties allegedly breached were created and as required by agreement, since this alleged
grounded in the contract itself; (3) where the deception by defendants breached broader
liability stems from a contract; or (4) where societal duty to inventor not to mislead him,
the tort claim essentially duplicates a breach of which did not relate to any provision of
contract claim or the success of which is wholly agreement.
dependent on the terms of a contract.
Cases that cite this headnote
1 Cases that cite this headnote
[21] Action
[19] Action Nature of Action
Nature of Action Antitrust and Trade Regulation
Antitrust and Trade Regulation Passing Off or Palming Off
Passing Off or Palming Off Under Pennsylvania law, the gist of the action of
Under Pennsylvania law, “gist of the action an unfair competition claim lies in the deception
doctrine” barred skin care technology inventor's practiced in passing off the goods of one for
federal and state-law unfair competition claims that of another, and the underlying principle
against corporation, as successor-in-interest of the law of unfair competition is to prevent
to cooperation, development, and licensing substitution by deception.
agreement, as well as related partnership and
Cases that cite this headnote
purported common parent of both corporation
and partnership, insofar as inventor's claims
were based upon defendants' failure to revert [22] Fraud
trademark to him, in violation of agreement, Effect of existence of remedy by action on
or upon defendants' continued marketing and contract
selling of products bearing trademark, since Under Pennsylvania law, where a purported
success on these grounds was wholly dependent misrepresentation extends beyond a failure to

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adhere to any provision of the contract, the claim Contacts with United States as a whole;
sounds primarily in tort and may be maintained nationwide jurisdiction
concurrently with a breach of contract action. Federal long-arm statute applies in a narrow band
of cases in which the United States serves as the
Cases that cite this headnote
relevant forum for a minimum contacts analysis.
Fed.Rules Civ.Proc.Rule 4(k)(2), 28 U.S.C.A.
[23] Federal Courts
Contacts with United States as a whole; Cases that cite this headnote
nationwide jurisdiction
Federal long-arm statute sanctions personal [27] Constitutional Law
jurisdiction over foreign defendants for claims Non-residents in general
arising under federal law when the defendant has For a court to constitutionally exercise personal
sufficient contacts with the nation as a whole jurisdiction over a foreign defendant under
to justify the imposition of United States law, the federal long-arm statute: (1) there must
but is without sufficient contacts to satisfy the be a claim arising under federal law; (2) the
due process concerns of the long-arm statute of defendant must be beyond the jurisdictional
any particular state. U.S.C.A. Const.Amend. 5; reach of any state court of general jurisdiction;
Fed.Rules Civ.Proc.Rule 4(k)(2), 28 U.S.C.A. and (3) the defendant must have sufficient
contacts with the United States as a whole so
Cases that cite this headnote
that the court's exercise of personal jurisdiction
over the defendant comports with the due
[24] Federal Courts process requirements of the Constitution or
Related contacts and activities; specific other federal law. U.S.C.A. Const.Amend. 5;
jurisdiction Fed.Rules Civ.Proc.Rule 4(k)(2), 28 U.S.C.A.
Under the federal long-arm statute, a court may
Cases that cite this headnote
exercise specific personal jurisdiction over a
defendant where the defendant has purposefully
directed his activities at residents of the forum [28] Federal Courts
and the litigation results from alleged injuries Related or affiliated entities; parent and
that arise out of or related to those activities. subsidiary
Fed.Rules Civ.Proc.Rule 4(k)(2), 28 U.S.C.A. Federal Courts
Particular Entities, Contexts, and Causes of
Cases that cite this headnote
Action
Even assuming that purported parent of
[25] Federal Courts both partnership and related corporation
Unrelated contacts and activities; general that was successor-in-interest to cooperation,
jurisdiction development, and licensing agreement with
Under the federal long-arm statute, the exercise inventor owned and operated single research
by a court of general personal jurisdiction is and development facility in United States, this
appropriate where the defendant's contacts with was insufficient to render parent essentially at
the forum are so continuous and systematic as to home in U.S., as required for district court
render it essentially at home in the forum state. to exercise personal jurisdiction over parent
Fed.Rules Civ.Proc.Rule 4(k)(2), 28 U.S.C.A. under federal long-arm statute in inventor's
federal and Pennsylvania-law action alleging
Cases that cite this headnote trademark infringement, false advertising, unfair
competition, breach of contract, and unjust
[26] Federal Courts enrichment. Fed.Rules Civ.Proc.Rule 4(k)(2), 28
U.S.C.A.

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whether the nonsignatory received a direct
Cases that cite this headnote benefit from the agreement.

Cases that cite this headnote
[29] Federal Courts
Contacts with United States as a whole;
nationwide jurisdiction [33] Contracts
Even a defendant's engagement in a substantial, Legal remedies and proceedings
continuous, and systematic course of business Nonsignatory third parties that should have
is alone insufficient to render it at home foreseen governance by a forum selection clause
in a forum, as required to satisfy more in a contract to which they are closely related
stringent “essentially at home” standard may be bound to it if it is fair and reasonable to
for determining the applicability of general do so.
jurisdiction under the federal long-arm statute.
Fed.Rules Civ.Proc.Rule 4(k)(2), 28 U.S.C.A. Cases that cite this headnote

Cases that cite this headnote
[34] Contracts
Legal remedies and proceedings
[30] Federal Courts Forum selection clause in cooperation,
Waiver, estoppel, and consent development, and licensing agreement between
Personal jurisdiction is a waivable right, and corporation and inventor of skin care technology
litigants can give express or implied consent to was binding upon corporation's purported parent
the personal jurisdiction of the court through a as non-signatory third party, in inventor's
variety of legal arrangements, including forum federal and Pennsylvania-law action alleging
selection clauses in contracts executed by the trademark infringement, false advertising, unfair
parties. competition, breach of contract, and unjust
enrichment, where parent gained benefit from
Cases that cite this headnote use of inventor's trademark pursuant to
agreement to market and sell products, parent
[31] Contracts had registered trademark in other jurisdictions
Legal remedies and proceedings and sued to prevent other entities from using
mark, and parent could have reasonably foreseen
Nonsignatory third parties who are closely
governance by clause.
related to a contractual relationship are bound
by the forum selection clauses contained in the Cases that cite this headnote
agreements underlying that relationship.

Cases that cite this headnote [35] Contracts
Legal remedies and proceedings
[32] Contracts Forum selection clauses are treated as ordinary
Legal remedies and proceedings contract provisions and are subject to the
ordinary rules of contract interpretation.
In determining whether a nonsignatory third
party is “closely related to a contractual Cases that cite this headnote
relationship,” such that it may be bound by
the forum selection clauses contained in the
agreements underlying that relationship, the [36] Contracts
court must consider several factors, including Existence of ambiguity
the nonsignatory's ownership of the signatory, To be “unambiguous,” a contract clause must be
the relationship between the two parties, and reasonably capable of only one construction.

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Motion to Stay Pending the Outcome of the Administrative
Cases that cite this headnote Proceeding, the Plaintiff's Response in Opposition thereto,
and Galderma S.A.'s Reply. 1 The Court held oral argument
[37] Contracts on all pending motions on March 19, 2015.
Legal remedies and proceedings
Forum selection clause in cooperation, For the reasons that follow, the motion to stay shall be denied
development, and licensing agreement between as moot, the motions to dismiss for failure to state a claim
corporation and inventor of skin care shall be granted in part, and the motion to dismiss for lack of
technology applied to inventor's claims personal jurisdiction shall be denied.
against corporation's purported parent, alleging
federal and Pennsylvania-law claims for
II. FACTUAL HISTORY AND PROCEDURAL
trademark infringement, false advertising,
BACKGROUND
unfair competition, breach of contract, and
According to the facts alleged in the Complaint, Plaintiff
unjust enrichment, where inventor's claims
Thomas Sköld is a citizen of Sweden. Compl. ¶ 4.
against parent implicated agreement's terms
Defendant Galderma S.A. (“S.A.”) is a Swiss corporation
with respect to inventor's trademark and
with its principal place of business in Switzerland, while
would require consideration of agreement and
Defendant Galderma Laboratories, Inc. (“Inc.”) is a Delaware
parties' respective rights pursuant to agreement
corporation with its principal place of business in Texas
that represented only manifestation of any
and Defendant Galderma Laboratories, L.P. (“L.P.”) is a
relationship between inventor and parent or
Texas limited partnership with its principal place of business
corporation.
in Texas. Id. ¶¶ 5–7. All three Defendant entities are
Cases that cite this headnote “involved in the research, development, marketing, and sale
of pharmaceutical and therapeutic skin care products.”Id.
Sköld alleges that S.A. is the ultimate owner of both Inc. and
L.P. Id. ¶ 8.
Attorneys and Law Firms
In Summer 2001, Sköld began developing the technology
Christopher J. Michie, Bruce W. Clark, Clark Michie LLP, that would eventually become known as “Restoraderm” and
Princeton, NJ, Michael D. Lipuma, Philadelphia, PA, for set out to find entities interested in licensing the technology
Plaintiff. and developing the resulting product to be marketed and
distributed for mass consumption. Id. ¶ 11. In September
Jeffrey M. Becker,Normand
Lisa , Haynes & Boone LLP, 2001, Sköld met with Collagenex Pharmaceuticals, Inc.
Dallas, TX, Joseph Lawlor, Richard D. Rochford, Haynes & (“Collagenex”) of Newtown, Pennsylvania, and presented it
Boone LLP, New York, NY, Frederick A. Tecce, Panitch, formulations of his Restoraderm technology, using the phrase
Schwarze, Belisario And Nadel, LLP, Philadelphia, PA, for “Restoraderm technology” both in his oral presentation
Defendants. and written materials. Id. ¶ 12. Sköld used the term
“Restoraderm” in similar meetings he had with other
pharmaceutical companies throughout the remainder of
OPINION 2001. Id. ¶¶ 14–18. He first manufactured a Restoraderm
product “in its current form in about October 2001,” and
WENDY BEETLESTONE, District Judge. delivered samples of a material with the “Restoraderm”
label to Collagenex in November and December 2001
I. INTRODUCTION
and January 2002. Id. ¶¶ 19–21. Sköld and Collagenex
*1 Before the Court are Defendants Galderma Laboratories,
executed a Letter of Intent in December 2001 and signed
L.P. and Galderma Laboratories, Inc.'s Motion to Dismiss and
a Cooperation, Development, and Licensing Agreement on
Motion to Stay Pending the Outcome of the Administrative
February 11, 2002 (the “2002 Agreement”).Id. ¶¶ 22–23.
Proceeding, Plaintiff Thomas Sköld's Response in Opposition
Under the 2002 Agreement, Sköld continued developing
thereto, and Galderma L.P. and Galderma Inc.'s Reply, as
the Restoraderm technology, while Collagenex developed
well as Defendant Galderma S.A.'s Motion to Dismiss and

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and maintained the Restoraderm intellectual property rights, and three counts under Pennsylvania state law—unfair
including registering and protecting the “Restoraderm” competition, breach of contract, and unjust enrichment. Id.
trademark, a process Collagenex began in 2002. Id. ¶¶ 24–26. ¶¶ 48–80. Sköld previously initiated a proceeding before
the U.S. Patent and Trademark Office seeking to cancel the
*2 In August 2004, Sköld and Collagenex signed a Defendants' registration of the “Restoraderm” trademark, id.
Consulting Agreement under which Sköld would provide ¶ 37, but that proceeding has been stayed by the Trademark
“technical consulting and development services with respect Trial and Appeal Board (“TTAB”) pending the outcome of
to Restoraderm Technology in such manner as shall be this litigation. See infra Section IV.A.
requested by the Company from time to time,” defining
“Restoraderm Technology” as the “topical drug delivery L.P. and Inc. filed a motion to dismiss on December 1, 2014.
technology developed by Sköld.”Id. ¶ 28. On August 19, They contend as follows. First, the breach of contract and
2004, Sköld and Collagenex restructured the 2002 Agreement unjust enrichment claims are barred by Pennsylvania's four-
into an Asset Purchase and Product Development Agreement year statute of limitations because the claims began to accrue
(the “2004 Agreement”), which “formalized Sköld's control prior to September 15, 2010. Second, the breach of contract
of the Restoraderm development.”Id. ¶¶ 27, 29. In the course claim should also be dismissed for failing to comply with the
of negotiating this agreement, Collagenex “confirmed” that agreement's dispute resolution and mediation clause. Third,
the Restoraderm trademark was included in the assets the unjust enrichment claim should be dismissed because
contemplated in the agreement. Id. ¶ 30. the complained-of conduct is governed by contract, which
precludes Sköld from availing himself of quasi-contract
Inc. acquired Collagenex in March 2008 and terminated theories of recovery. And finally, the unfair competition claim
the 2004 Agreement with Sköld on November 27, 2009. is precluded by the gist of the action doctrine because he
Id. ¶¶ 33–34. Section 8.5(b) of the 2004 Agreement impermissibly attempts to recast a breach of contract claim as
provides that should Collagenex terminate the Agreement, a tort claim. See L.P./Inc. Mot. to Dismiss at 8–9.
the assets, including the Restoraderm intellectual property,
and additional related records shall be transferred to Sköld. *3 On December 22, 2014, Sköld filed his response in
Id. ¶ 35 & Ex. A at 19. Sköld alleges that the “parties' opposition. He argues that he filed the Complaint within
contractual intent was that the Restoraderm trademark would the four-year limitations period because he was unaware the
be returned to Sköld if the 2004 Agreement were cancelled contract was breached until September 14, 2010, when L.P.
by Collagenex (or its successors-in-interest),” but that the issued the press release announcing the Restoraderm product.
Defendants have yet to return the Restoraderm trademark to In the alternative, Sköld contends he is entitled to equitable
Sköld in accordance with this provision. Id. ¶¶ 36–37. tolling of the statute of limitations. Furthermore, he argues
that the unjust enrichment claim is not precluded against all
After terminating the 2004 Agreement, Sköld alleges parties by the contract and the gist of the action doctrine does
the Defendants “gave mixed messages” regarding their not bar his unfair competition claim. See Pl.'s L.P./Inc. Opp'n
intentions for future use of the Restoraderm trademark at 10–13. In reply, L.P. and Inc. argue that Sköld knew about
and Restoraderm technology. Id. ¶ 38. On September 14, the Defendants' use of Restoraderm no later than August
2010, L.P. issued a Press Release announcing the launch of 16, 2010, when he initiated the TTAB proceeding, attaching
“Cetaphil® Restoraderm® products” in the United States, a May 26, 2010 press release “demonstrating Defendant's
which, according to the Complaint, “made it clear that widespread public use of the RESTORADERM mark for its
the Defendants intended to use the mark ‘Restoraderm’ in products.”L.P./Inc. Reply at 2. Based on that press release,
connection with a product to be sold by them in the United L.P. and Inc. contend that Sköld “transparent[ly] attempt[s]
States.”Id. ¶¶ 39–40. Sköld alleges that this press release to avoid dismissal on statute of limitations grounds.”Id. They
“was the first time that the Defendants had used the term also argue that Sköld is not entitled to equitable tolling and
‘Restoraderm’ in connection with a U.S. product that did not reaffirm their arguments on the other grounds. See id. at 4–8.
involve Sköld's Restoraderm technology.”Id. ¶ 43.
S.A. filed its own motion to dismiss on January 15, 2015. See
Sköld filed an action in this Court on September 15, 2014, S.A. Mot. to Dismiss; see also supra note 1. In opposition to
alleging three counts under the Lanham Act—trademark S.A.'s jurisdictional argument, Sköld argued that jurisdiction
infringement, false advertising, and unfair competition— is proper under the federal long-arm statute, Federal Rule of

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Civil Procedure 4(k)(2), because S.A. has sufficient contacts dispute in the cancellation action before the TTAB. See Pl.'s
with the United States such that the exercise of jurisdiction L.P./Inc. Opp'n at 14–15.
comports with due process. See Pl.'s S.A. Opp'n at 9–10.
Furthermore, Sköld alleges that the forum selection clause in *4 [1] The dispute resolution clause in the 2004 Agreement
the 2004 Agreement operates to subject S.A. to jurisdiction contains two clauses, one of which is mandatory (the parties
in this Court. See id.In Reply, S.A. argues that: (1) Rule shall refer the matter to senior executives to attempt to
4(k)(2) does not apply; (2) the forum selection clause does negotiate a resolution) and the other which is permissive (the
not apply to S.A. as a non-signatory third party to the 2004 parties may refer the matter to nonbinding mediation). Given
Agreement; and (3) the forum selection clause does not apply the voluntary nature of the latter, this Court agrees with Sköld
to the Sköld's claims against it. See S.A. Reply at 2–9. that he was not required to refer this dispute to mediation
before bringing suit here against Inc.

III. DISCUSSION [2] L.P. and S.A., who are not parties to the 2004
Agreement, also contend that the dispute resolution clause
A. Motions to Stay
requires their dismissal from this action. In essence, they
The Court first addresses the Defendants' motions to stay this
urge this Court to accept the contention that a nonparty
action pending a decision of the TTAB in the cancellation
to an agreement should be permitted to force a signatory
proceeding. In his Opposition to S.A.'s motion to dismiss and
party to engage in negotiations pursuant to a permissive
motion to stay, Sköld brought to the Court's attention that the
mediation clause in that agreement as a condition precedent
TTAB proceeding has been stayed pending the outcome of
to filing suit but cite no relevant case or statute in support
this litigation. Pl.'s S.A. Opp'n at 11 (citing Michie Decl. ¶ 13
of this contention. See United States v. Benish, 5 F.3d
& Ex. J). In its Reply, S.A., on behalf of all three Defendants,
20, 26 (3d Cir.1993) (rejecting a party's claim where the
recognized this action by the TTAB and withdrew the motions
party “provid[ed] no legal support for his argument or any
to stay. S.A. Reply at 1 n. 1. Accordingly, the Defendants'
motions to stay are moot. persuasive reason” for the court to find in his favor). 2 The
Court sees no persuasive reason to dismiss Sköld's entire
Complaint based on this unsupported argument. Accordingly,
B. Alternative Dispute Resolution Clause the motion to dismiss the Complaint against L.P. and S.A. on
The Defendants contend that the Complaint should be this ground shall be denied.
dismissed in its entirety for failure to comply with the 2004
Agreement's dispute resolution and mediation clause. L.P./ [3] Regarding Inc.: although Sköld did fail to bring in a
Inc. Mot. to Dismiss at 12–13. The clause provides that senior-level executive to try to resolve the dispute—as he was
“[a]ny dispute, controversy or claim arising out of or relating required to do under the dispute resolution provision—Inc.'s
to this Agreement, or the breach, termination, or invalidity participation in the TTAB proceedings waived any rights it
thereof shall first be referred by the parties to their senior- may have had to seek to have the parties' executives negotiate
level executives for attempted resolution through good-faith an end to the dispute. See, e.g., LBL Skysystems (USA),
negotiations.”Compl. Ex. A § 9.1 (emphasis added). Should Inc. v. APG–Am., Inc., No. 02–5379, 2005 WL 2140240,
negotiations fail, thirty days after making a written request at *30 (E.D.Pa. Aug. 31, 2005) (holding that a “party that
to initiate those negotiations, “either Party may, by written engages in discovery and files pretrial motions waives a
notice to the other, require that the Dispute be referred to non- contract's alternative dispute resolution provision”); Smith v.
binding mediation administered by the American Arbitration IMG Worldwide, Inc., 360 F.Supp.2d 681, 687 (E.D.Pa.2005)
Association.”Id. (emphasis added). The Defendants assert (finding that a party's engaging in motion practice and
that Sköld did not refer a dispute to a senior-level executive providing “substantial discovery” constituted waiver of
for negotiations and failed to make a written request that the contractual alternative dispute resolution provision).
dispute be referred to nonbinding mediation. L.P./Inc. Mot.
to Dismiss at 12–13. Sköld responds that the language of the Viewing the four years' worth of docket entries in the TTAB
mediation clause is permissive (“either Party may... require”) action, the Court considers that Inc. did not file a motion
and also argues that, in any event, Inc. has waived its right to to stay the TTAB proceedings pending executive-level
invoke the clause because it participated in litigation over the negotiations and instead filed, inter alia, motions to dismiss,
a protective order, multiple summary judgment motions (one

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of which was partially granted in its favor), and a final exercising supplemental jurisdiction applies the forum state's
brief in preparation for trial. See, e.g., Sköld v. Galderma statute of limitations. Layser v. Morrison, 935 F.Supp. 562,
Labs., Inc., Cancellation No. 92052897, 2012 WL 5902083 570 (E.D.Pa.1995). Pennsylvania's statute of limitations to
(T.T.A.B. Nov. 8, 2012) (granting Inc.'s motion for partial file contract actions is four years. 42 Pa. Cons.Stat. § 5525.
summary judgment on Sköld's abandonment claim).See also In the Complaint and his Opposition, Sköld asserts that the
generally Registrant's Trial Brief, Sköld v. Galderma Labs., breach of contract claim accrued on Sunday, September 14,
Inc., Cancellation No. 92052897 (T.T.A.B. Aug. 13, 2014), 2010, when L.P. issued the press release announcing the
Docket No. 81. This four-year history of litigation in the launch of “Cetaphil® Restoraderm® Products” in the United
cancellation action—from filing nearly through trial—is, on States. See Compl. ¶ 39; Pl.'s L.P./Inc. Opp'n at 7. Because the
its face, inconsistent with the notion that Inc. was willing Complaint was filed four years later, on Monday, September
to engage in the good-faith executive-level negotiations 15, 2014 (September 14, 2014, was a Sunday), he argues the
required by the dispute resolution provision. claim is timely. See1 Pa. Cons.Stat. § 1908 (“Whenever the
last day of such period shall fall on a Saturday or Sunday ...
*5 Moreover, the Court can look to the TTAB's grant of such day shall be omitted from the computation.”).
partial summary judgment in favor of Inc. and dismissing
Sköld's abandonment claim as a concrete example of an The Defendants argue that the claim for breach of contract
instance where Inc.'s conduct inconsistent with the dispute began to accrue as early as November 27, 2009, when
resolution clause caused prejudice to Sköld, not to mention Inc. terminated the 2004 Agreement with Sköld and did
the expenditure of time, cost, and resources attendant to not immediately revert the Restoraderm intellectual property
maintaining a multi-year trademark cancellation action. The to Sköld, as he alleges they were required to do. L.P./
Defendants have undisputedly accepted the judicial process Inc. Mot. to Dismiss at 6. They further argue that Sköld's
and have demonstrated that fact by: (1) Inc.'s failure to commencing of the TTAB proceeding on August 16, 2010,
raise the issue of good-faith negotiations promptly before necessarily evinces his knowledge on that date that the
the TTAB; (2) Inc.'s engaging in discovery in the TTAB Defendants had breached the contract by not reverting the
action; (3) Inc.'s filing of several pretrial motions in the TTAB Restoraderm trademark to Sköld as provided for in the
action, none of which raise the issue of negotiation; and (4) contract. Id. They point to an attachment to Sköld's petition
the Defendants' decision to wait until the case was ready to in the TTAB proceeding: a May 26, 2010, article titled
proceed to trial before the TTAB and until a Complaint was “Cetaphil RestoraDERM for extra dry skin and Eczema,”
filed in this Court before asserting Sköld's failure to negotiate which stated that Cetaphil, an allegedly well-known Inc.
as grounds for a motion to dismiss. See St. Clair Area Sch. brand, was planning to introduce a new line of skin care
Dist. Bd. of Educ. v. E.I. Assocs., 733 A.2d 677, 682 n. 6 products called “RestoraDERM” in August 2010. L.P./Inc.
(Pa.Commw.Ct.1999) (“The key to determining whether [an Reply at 2 (quoting Rochford Decl. Ex. B at Ex. 8). Given
alternative dispute resolution procedure] has been waived is Sköld's concession that the Defendants' September 14, 2010,
whether the party, by virtue of its conduct, has accepted the press release put him on notice of the breach of contract claim,
judicial process.”). Inc. cannot now attempt to stand on the they contend that the similarly worded May 26, 2010, article
alternative dispute resolution clause as a reason for dismissal. should have also put him on notice. Id. at 2–3. If they are
Its right to invoke the clause has been waived. correct, the cause of action for breach of contract accrued no
later than August 16, 2010, when Sköld filed his petition in
Accordingly, the motions to dismiss on this ground shall be the TTAB proceeding attaching the article, and this lawsuit is
denied. 3 untimely because it was filed over four years and three months
later. Id.

C. Breach of Contract *6 [5] [6] Whether they are correct is determined
by reference to the so-called “Third Circuit Rule,” which
“permit[s] a limitations defense to be raised by a motion under
1. Timeliness of the Claim
Rule 12(b)(6)‘only if the time alleged in the statement of a
[4] The parties dispute whether Sköld's breach of contract claim shows that the cause of action has not been brought
claim in Count Five of the Complaint is barred by the statute within the statute of limitations.’”Schmidt v. Skolas, 770 F.3d
of limitations. Absent a borrowing statute, a federal court 241, 249 (3d Cir.2014) (quoting Robinson v. Johnson, 313

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F.3d 128, 135 (3d Cir.2002)). Under this rule “[i]f the bar is stage. They are not integral to the complaint—the complaint
not apparent on the face of the complaint, then it may not was not ‘based’ on” this third-party document, but rather
afford the basis for a dismissal of the complaint under Rule on the September 14, 2010, press release published by the
12(b)(6).”Id.(quoting Robinson, 313 F.3d at 135) (internal Defendants.Schmidt, 770 F.3d at 249–50. The Court will not
quotation marks omitted). consider this document. 5

[7] “To decide a motion to dismiss, courts generally consider *7 Thus, taking the well-pleaded allegations in the
only the allegations contained in the complaint, exhibits Complaint as true, and drawing all reasonable inferences
attached to the complaint and matters of public record.”Id. in Sköld's favor therefrom, the Court will not dismiss the
(quoting Pension Benefit Guar. Corp. v. White Consol. contract claims on statute of limitations grounds, at least at
Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.1993)) (internal this stage of the proceedings. Accordingly, the motions to
quotation marks omitted). An exception to this rule, however, dismiss the breach of contract claim in Count Five on this
is that “a ‘document integral to or explicitly relied upon in
ground shall be denied. 6
the complaint’ may be considered ‘without converting the
motion [to dismiss] into one for summary judgment.’”In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d
Cir.1997) (emphasis added) (alteration in original) (citation 2. Whether S.A. is a Proper Defendant
and internal quotation marks omitted). In the context of a
motion decided pursuant to the Third Circuit Rule, “what is [11] S.A. contends that the breach of contract claim should
critical is whether the claims in the complaint are ‘based’ on be dismissed against it because Sköld does not allege that it
an extrinsic document and not merely whether the extrinsic was a party to the 2004 Agreement. S.A. Mot. to Dismiss
document was explicitly cited.”Schmidt, 770 F.3d at 249. at 11; S.A. Reply at 2–3. 7 Sköld does not provide any
counterargument in his opposition brief. “Where an issue of
[8] [9] Here, the bar is not apparent on the face of the fact or law is raised in an opening brief but it is uncontested
Complaint. Accepting all facts alleged in the Complaint as in the opposition brief, the issue is considered waived or
true, see Fowler v. UPMC Shadyside, 578 F.3d 203, 210– abandoned by the non-movant in regard to the uncontested
11 (3d Cir.2009), Sköld was not aware of the Defendants' issue.”Markert v. PNC Fin. Servs. Grp., Inc., 828 F.Supp.2d
breach until September 14, 2010, when L.P. issued the press 765, 773 (E.D.Pa.2011); see also Young v. St. Luke's Hosp.,
release introducing the products bearing the Restoraderm No. 09–3460, 2010 WL 1348468, at *6 (E.D.Pa. Mar. 30,
4
trademark. Sköld alleges in the Complaint that the press 2010) (“Parties who fail to adequately brief their opposition
release “was the first time that the Defendants had used the to motions do so at the risk of having those motions granted
term ‘Restoraderm’ in connection with a U.S. product that did as uncontested.”).
not involve Sköld's Restoraderm technology.”Compl. ¶ 42.
Although this press release was not attached to the Complaint [12] Even so, the only allegations in the Complaint
or to any of the parties' briefs, it is clear that the breach of concerning S.A.'s relationship with Inc., the successor-in-
contract claim is “based” on this extrinsic document, and the interest to the signatory party are so sparse as to warrant
Court may thus rely on it. Schmidt, 770 F.3d at 249. a dismissal of the contract claim against S.A. Paragraph
8 provides, “Upon information and belief, Galderma S.A.
[10] The Defendants urge this Court to consider a document is the ultimate owner of Galderma Laboratories, Inc. and
attached to Sköld's petition initiating the proceeding before Galderma Laboratories, L.P.” Compl. ¶ 8. And paragraph
the TTAB: a May 26, 2010, document L.P. and Inc. describe 9 states simply, that “[e]ach defendant acted in concert
as a “release,” comparing it directly to the September 14, and active participation with each other in committing the
2010, press release Sköld alleges forms the basis for the wrongful acts alleged herein.”Id. ¶ 9. Notwithstanding the
breach of contract action. See L.P./Inc. Reply at 3. They argue fact that paragraph 9 is conclusory, and, without more, is
that this document, titled “Cetaphil RestoraDERM for extra not entitled to any credence under Twombly and Iqbal, the
dry skin and Eczema,” contains all the information Sköld single allegation in paragraph 8 that S.A. is the ultimate
needed to ascertain his injury and thus the claim for breach owner of Inc. is insufficient to hold S.A. liable for a breach
of contract is untimely. Id.“While this may be true, these of contract. See Ashcroft v. Iqbal, 556 U.S. 662, 678–79,
materials may not be considered at the motion to dismiss 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (“Rule 8 ... does

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not unlock the doors of discovery for a plaintiff armed with (Pa.Super.Ct.1999) (quoting Styer v. Hugo, 422 Pa.Super.
nothing more than conclusions.”); Bistrian v. Levi, 696 F.3d 262, 619 A.2d 347 (1993), aff'd,535 Pa. 610, 637 A.2d 276
352, 365 (3d Cir.2012) (stating that a court must “peel away (1994); Schenck v. K.E. David, Ltd., 446 Pa.Super. 94, 666
those allegations that are no more than conclusions and thus A.2d 327 (1995)). To state a claim for unjust enrichment, a
not entitled to the assumption of truth” (citation and internal plaintiff must allege:
quotation marks omitted)). There are simply insufficient
“facts to raise a reasonable expectation that discovery will [1] benefits conferred on one party
reveal evidence of the necessary element[s].”Bell Atl. Corp. by another; [2] appreciation of such
v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d benefits by the recipient; and [3]
929 (2007). Because Sköld has not addressed S.A.'s argument acceptance and retention of such
that it is not a party to the contract and because the Complaint benefits under such circumstances that
does not contain sufficient allegations to survive Twombly it would be inequitable [or unjust] for
and Iqbal scrutiny, the breach of contract claim in Count Five defendant to retain the benefit without
shall be dismissed as to S.A. payment of value.

Premier Payments, 848 F.Supp.2d at 527 (quoting Allegheny
D. Unjust Enrichment Gen. Hosp. v. Philip Morris, Inc., 228 F.3d 429, 447 (3d
*8 [13] The Defendants argue that Sköld fails to state Cir.2000)); accord Torchia ex rel. Torchia v. Torchia, 346
a claim for unjust enrichment. They contend the claim Pa.Super. 229, 499 A.2d 581, 582 (1985) (“To sustain a claim
should be dismissed because it is precluded by the 2004 of unjust enrichment, a claimant must show that the party
Agreement. This Court agrees that the existence of the 2004 against whom recovery is sought either wrongfully secured or
Agreement precludes Sköld from proceeding on an unjust passively received a benefit that it would be unconscionable
enrichment claim against Inc., the successor-in-interest to for her to retain.”).
the original Collagenex contract. See Hershey Foods Corp.
v. Ralph Chapek, Inc., 828 F.2d 989, 999 (3d Cir.1987) [16] Sköld's allegations support a prima facie case for unjust
(stating that a claim for unjust enrichment is unavailable enrichment. As to the first element, he alleges that he has
“when the relationship between the parties is founded on a conferred benefits on the Defendants as a result of their
written agreement or express contract”) (citation and internal use of the Restoraderm trademark in marketing and selling
quotation marks omitted). Sköld has not questioned the products and the related goodwill. Compl. ¶¶ 39–41, 79. As
validity of the 2004 Agreement, and Inc. does not dispute to the third element, he alleges that the Defendants have
its validity. Only if there were a “question as to the validity “registered the term Restoraderm as a trademark in the United
of the contract in question” could Sköld proceed on both States and other jurisdictions” and “have failed to return
theories in the alternative against Inc. Premier Payments the Restoraderm trademark to Sköld in accordance with the
Online, Inc. v. Payment Sys. Worldwide, 848 F.Supp.2d 513, 2004 Agreement.”Id. ¶ 37. It can also be inferred that this
527 (E.D.Pa.2012) (citation and internal quotation marks element is satisfied because it would be inequitable or unjust
omitted). There being no such question, the motion to dismiss for the Defendants to retain the benefit of the Restoraderm
the unjust enrichment claim against Inc. shall be granted. trademark (which allegedly should have been returned to
Sköld upon termination of the Agreement) without payment
[14] [15] The same is not so for S.A. or L.P. S.A. argued of value. As to the second element, although Sköld has not
throughout its briefing that it is not a party to the contract explicitly pled that the Defendants appreciated such benefits,
and that this Court should dismiss the breach of contract such appreciation is plausible given the Defendants' acts of
claims against it based on that fact, and the Court agreed. See marketing (and deriving profits from) products containing the
supra subsection IV.C.2. However, because the relationship Restoraderm trademark. This same reasoning applies to L.P.,
between Sköld and S.A. is not governed by an express as well, which is also not a party to the 2004 Agreement.
written agreement, S.A. cannot rely on the existence of the
2004 Agreement to shield it from Sköld's unjust enrichment *9 Based on the allegations in the Complaint, Sköld has
claim. “ ‘Unjust enrichment’ is essentially an equitable plausibly stated a claim for unjust enrichment against S.A.
doctrine,” under which “the law implies a contract which and L.P. Accordingly, the motion to dismiss the unjust
requires the defendant to pay to the plaintiff the value of the enrichment claim for failure to state a claim against S.A. and
benefit conferred.”Mitchell v. Moore, 729 A.2d 1200, 1203 L.P. shall be denied. 8

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ordinarily have been obligated to do
but for the existence of the contract—
E. Unfair Competition then the claim is to be viewed as one
[17] The Defendants contend that Sköld's unfair competition for breach of contract. If, however, the
claim should be dismissed because of the gist of the action facts establish that the claim involves
doctrine, which bars plaintiffs from recovering under tort the defendant's violation of a broader
theories for failure to perform a contract. See L.P./Inc. Mot. social duty owed to all individuals,
to Dismiss at 8; see also Jones v. ABN Amro Mortg. Grp., which is imposed by the law of torts
Inc., 606 F.3d 119, 123 (3d Cir.2010). 9 More specifically, and, hence, exists regardless of the
they argue that Sköld “attempts to recast a breach of contract contract, then it must be regarded as a
claim as an unfair competition tort claim.”L.P./Inc. Mot. to tort.
Dismiss at 8.
Id. at 68 (citations omitted).
[18] The doctrine “forecloses a party's pursuit of a tort
action for the mere breach of contractual duties ‘without any [19] Under Bruno, cases where tort actions are permitted
separate or independent event giving rise to the tort.’”Brown to arise in the context of a contractual relationship are cases
& Brown, Inc. v. Cola, 745 F.Supp.2d 588, 619 (E.D.Pa.2010) in which the defendant's alleged acts are “not founded on
(quoting Smith v. Lincoln Benefit Co., No. 081324, 2009 WL the breach of any of the specific executory promises which
789900, at *20 (W.D.Pa. Mar. 23, 2009), aff'd,395 Fed.Appx. comprise the contract.”106 A.3d at 70. To the extent that
821 (3d Cir.2010)). It bars tort claims: Sköld bases his claim upon the Defendants' failure to revert
the Restoraderm trademark to him, in violation of Section
(1) arising solely from a contract 8.5(b)(iii) of the 2004 Agreement (providing that Defendants
between the parties; (2) where the “shall transfer to Sköld the Purchased Assets” upon their
duties allegedly breached were created voluntary termination of the Agreement), or even upon the
and grounded in the contract itself; Defendants' continuing to market and sell products bearing
(3) where the liability stems from the Restoraderm trademark, the claim is barred by the gist
a contract; or (4) where the tort of the action doctrine. The success on these grounds of
claim essentially duplicates a breach of Sköld's unfair competition claim, which has been traditionally
contract claim or the success of which defined under Pennsylvania law as the “ ‘passing off’ a rival's
is wholly dependent on the terms of a goods as one's own, creating confusion between one's own
contract. goods and the goods of one's rival,”Giordano v. Claudio,
714 F.Supp.2d 508, 521 (E.D.Pa.2010), would be wholly
eToll, Inc. v. Elias/Savion Advertising, Inc., 811 A.2d 10, 19 dependent on this Court finding that the Defendants breached
(Pa.Super.Ct.2002) (citations omitted). The mere existence of the 2004 Agreement by not reverting the Restoraderm
a contractual relationship between the parties, however, does trademark to Sköld when Inc. voluntarily terminated it in
not preclude one party from bringing a tort claim against the 2009. The claim would not “lie from the breach of duties
other. See Bohler–Uddeholm Am., Inc. v. Ellwood Grp., Inc., imposed as a matter of social policy,” but rather from “the
247 F.3d 79, 104 (3d Cir.2001). breach of duties imposed by mutual consensus.”Bohler–
Uddeholm, 247 F.3d at 103–04 (quoting Redev. Auth. v. Int'l
In its first foray into an analysis of the gist of the action Ins. Co., 454 Pa.Super. 374, 685 A.2d 581, 590 (1996) (en
doctrine—after a long history of predictive federal court and banc)) (internal quotation marks omitted); see also eToll, 811
lower state court litigation on the same 10 —the Pennsylvania A.2d at 19 (stating that the doctrine bars tort claims where the
Supreme Court, in Bruno v. Erie Insurance Co., 106 A.3d 48 “success of [the tort claim] is wholly dependent on the terms
(Pa.2014), summarized the doctrine's contours as follows: of a contract”).

If the facts of a particular claim *10 [20] [21] [22] However, to the extent that Sköld
establish that the duty breached is one bases his unfair competition claim on the Defendants' actions
created by the parties by the terms of and communications after they chose not to revert the
their contract—i.e., a specific promise Restoraderm trademark, the Court finds that these allegations
to do something that a party would not plausibly state an unfair competition claim that is not barred

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by the gist of the action doctrine. The Court recognizes the clause, because, it argues, the breach of contract claim is
existence of some broader social duties at play in the law time-barred 11 and because it cannot be bound by the forum
of unfair competition. The “gist of the action” of an unfair selection clause in a contract to which it is not a party or a
competition claim “lies in the deception practiced in ‘passing successor-in-interest to a party. Id. at 2–4. The Court will first
off’ the goods of one for that of another,” and moreover, address the jurisdictional arguments involving the Lanham
“the ‘underlying principle of law of unfair competition is to Act claims, followed by the arguments involving the forum
prevent substitution by deception.’”Pa. State Univ. v. Univ. selection clause.
Orthopedics, Ltd., 706 A.2d 863, 870–71 (Pa.Super.Ct.1998)
(quoting Winthrop Chem. Co. v. Weinberg, 60 F.2d 461,
463 (3d Cir.1932)). Sköld alleges in the Complaint that,
after termination, the Defendants gave “mixed messages 1. Rule 4(k)(2)
concerning their intentions concerning their future use of
*11 [23] [24] [25] The Due Process Clause of the
the Restoraderm trademark and the Restoraderm technology
Fourteenth Amendment to the Constitution permits personal
developed by Sköld,” but that the September 14, 2010,
jurisdiction so long as the nonresident defendant has certain
press release announcing the launch of the “Cetaphil®
minimum contacts with the forum such that maintenance of
Restoraderm® products” gives rise to the inference that
the suit does not offend “ ‘traditional notions of fair play and
the Defendants all along intended to use the Restoraderm
substantial justice.’”Int'l Shoe Co. v. Washington, 326 U.S.
trademark on products they planned to sell. Compl. ¶¶ 38–
310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken
40. Sköld has alleged that this deception on the part of
v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278
the Defendants breaches a broader societal duty they had
(1940)).Federal Rule of Civil Procedure 4(k)(2), colloquially
to Sköld not to mislead him, which does not relate to any
termed the “federal long-arm statute,” “sanctions personal
provision of the contract. See Pl.'s Supp. Br. at 3. The Court
jurisdiction over foreign defendants for claims arising under
agrees. “[W]here the purported misrepresentation extends
federal law when the defendant has sufficient contacts with
beyond a failure to adhere to any provision of the contract,
the nation as a whole to justify the imposition of U.S. law,
[a] claim sounds primarily in tort and may be maintained
but is without sufficient contacts to satisfy the due process
concurrently with [a] breach of contract action.”Brown &
concerns of the long-arm statute of any particular state.”Toys
Brown, 745 F.Supp.2d at 624. Although Sköld will likely
“R” Us, Inc. v. Step Two, S.A., 318 F.3d 446, 455 n. 7 (3d
need to substantiate his claim further to survive summary
Cir.2003). Under this paradigm, a court may exercise specific
judgment on this ground, the Court finds that he has alleged
personal jurisdiction over a defendant where the defendant
sufficient facts to allow his unfair competition claim to
has “purposefully directed his activities at residents of the
survive a motion to dismiss; it is not barred by the gist of the
forum and the litigation results from alleged injuries that
action doctrine.
‘arise out of or related to’ those activities.”Burger King Corp.
v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d
Accordingly, the motion to dismiss the unfair competition
528 (1985). The exercise by a court of general personal
claim shall be denied.
jurisdiction is appropriate where the defendant's contacts with
the forum “are so ‘continuous and systematic’ as to render
F. Personal Jurisdiction Over Galderma S.A. [it] essentially at home in the forum State.”Daimler AG v.
Sköld contends that this Court may exercise personal Bauman, –––U.S. ––––, 134 S.Ct. 746, 761, 187 L.Ed.2d 624
jurisdiction over S.A. on the Lanham Act Claims pursuant to (2014). For the purposes of a Rule 4(k)(2) general jurisdiction
the federal long-arm statute, Federal Rule of Civil Procedure analysis, however, the relevant “forum State” is the United
4(k)(2). Pl.'s S.A. Opp'n at 9–10. Furthermore, he contends States as a whole, rather than any individual state. See BP
that the forum selection clause in the 2004 Agreement Chems. Ltd. v. Formosa Chem. & Fibre Corp., 229 F.3d 254
subjects S.A. to jurisdiction in this Court. Id. at 6–8. S.A. (3d Cir.2000).
counters that it is not subject to jurisdiction under Rule 4(k)(2)
because it does not have sufficient contacts with the United [26] [27] [28] The Rule applies “in a narrow band of
States as a whole to satisfy that Rule's requirements and cases in which the United States serves as the relevant forum
because Sköld fails to properly allege Lanham Act claims for a minimum contacts analysis.”Glencore Grain Rotterdam
against it. S.A. Reply at 4–9. S.A. rejects Sköld's claim that B.V. v. Shivnath Rai Harnarain Co., 284 F.3d 1114, 1126 (9th
this Court has jurisdiction over S.A. under the forum selection

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Cir.2002). This Court can exercise jurisdiction pursuant to “unadorned ‘continuous and systematic’ contacts standard
this rule only where: for determining general jurisdiction is no longer viable” in
this District in light of the U.S. Supreme Court's decisions
(A) the defendant is not subject to jurisdiction in any state's in Goodyear Dunlop Tires Operations, S.A. v. Brown, –––
courts of general jurisdiction; and U.S. ––––, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011), and
Daimler AG v. Bauman, ––– U.S. ––––, 134 S.Ct. 746, 187
(B) exercising jurisdiction is consistent with the United
L.Ed.2d 624 (2014), and held that those cases' more stringent
States Constitution and laws.
“essentially at home” standard is the operative standard for
Fed.R.Civ.P. 4(k)(2). In other words, for a Court to determining the applicability of general jurisdiction.Farber,
constitutionally exercise personal jurisdiction over a foreign ––– F.Supp.3d at ––––, 2015 WL 518254, at *9. “[T]he
defendant under the Rule: (1) there must be a claim arising inquiry ... is whether corporation's ‘affiliations with the state
under federal law; (2) the defendant must be beyond the are so “continuous and systematic” as to render [it] essentially
jurisdictional reach of any state court of general jurisdiction; at home in the forum State.’”Daimler, 134 S.Ct. at 754
and (3) the defendant must have sufficient contacts with (quoting Goodyear, 131 S.Ct. at 2851). Because the language
the United States as a whole so that the court's exercise of of the Rule 4(k)(2) jurisdictional analysis previously has
personal jurisdiction over the defendant comports with the tracked the language of the due process jurisdictional analysis
due process requirements of the Constitution or other federal under International Shoe and its progeny, see BP Chemicals,
law. Saudi v. Acomarit Maritimes Servs., S.A., 114 Fed.Appx. 229 F.3d at 259, this Court will update accordingly the
449, 455 (3d Cir.2004). Although S.A. concedes that it is Rule 4(k)(2) analysis to incorporate the Goodyear/Daimler
beyond the jurisdictional reach of any state court of general standard. Cf., e.g., Archangel Diamond Corp. Liquidating
jurisdiction, seeS.A. Reply at 5 n. 2, it contends that neither Trust v. OAO Lukoil, ––– F.Supp.3d ––––, –––– – ––––, 2014
of the other two prongs are met. First, it argues that Sköld's WL 7232341, at *13–16 (D.Colo. Dec. 18, 2014); Toumazou
Complaint does not state a Lanham Act claim against it and v. Turkish Republic of N. Cyprus, ––– F.Supp.3d ––––, ––––,
hence it should be dismissed. Id. at 5. Second, it argues that 2014 WL 5034621, at *6 (D.D.C. Oct. 9, 2014); Best Odds
it does not have sufficient contacts with the United States as Corp. v. iBus Media Ltd., No. 13–2008, 2014 WL 2527145,
a whole such that the exercise of jurisdiction comports with at *5 (D.Nev. June 4, 2014).
due process. Id. This Court agrees with the second point and,
thus, it declines to address S.A.'s argument regarding whether [29] Goodyear and Daimler“make clear that even a
Sköld has alleged claims “arising under federal law.” company's ‘engage [ment] in a substantial, continuous and
systematic course of business' is alone insufficient to render
*12 S.A. argues that Sköld has not alleged that S.A. has it at home in a forum.”Farber, ––– F.Supp.3d at ––––,
sufficient minimum contacts with the United States as a 2015 WL 518254, at *10 (quoting Sonera Holding B.V.
whole to satisfy the Rule 4(k)(2) test. Sköld counters that v. Çukurova Holding A.S., 750 F.3d 221, 226 (2d Cir.)
the standard to be followed in analyzing satisfaction of the (per curiam), cert. denied, ––– U.S. ––––, 134 S.Ct. 2888,
third prong “is similar to that of personal jurisdiction for a 189 L.Ed.2d 837 (2014)). Thus, a nonresident trucking
particular state: ‘general jurisdiction is available when the company that completed 4600 deliveries in Pennsylvania,
defendant's contacts unrelated to the litigation are continuous earned approximately 3% of its revenue from Pennsylvania
and systematic,’ ” and proffers that S.A.'s website states that deliveries, employed drivers who traveled hundreds of
S.A. maintains a Research and Development facility in the thousands of miles per year in Pennsylvania, purchased tens
United States, claiming that the existence of this facility is of thousands of gallons of gas per year in Pennsylvania,
sufficient to satisfy this prong. Pl.'s S.A. Opp'n at 10 (quoting and made payments of over $1.7 million to Pennsylvania-
BP Chemicals, 229 F.3d at 262 (3d Cir.2000)) (internal based carriers over the course of several years could not be
quotation marks omitted); see also Michie Decl. ¶ 8, Ex. E. subjected to general personal jurisdiction in Pennsylvania. Id.
at –––– – ––––, at *9–11. “Mere deliveries in Pennsylvania,
To the extent Sköld invokes the standard governing the even occurring at regular intervals, are insufficient to justify
exercise of general personal jurisdiction over a nonresident Pennsylvania's assertion of general jurisdiction over [a
corporate defendant, this Court very recently explained in nonresident corporate defendant] in causes of action unrelated
Farber v. Tennant Truck Lines, Inc., –––F.Supp.3d ––––, to those deliveries.”Id. at ––––, at *11 (citing Helicopteros
––––, 2015 WL 518254 (E.D.Pa. Feb. 9, 2015), that the

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Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 418, 104 the exclusive jurisdiction of the state
S.Ct. 1868, 80 L.Ed.2d 404 (1984)). and federal courts located in the
Commonwealth of Pennsylvania, and
*13 Here, even assuming arguendo that S.A. does own any courts of appeal therefrom, and
and operate a single research and development facility in the waives any objection on the grounds of
United States, as Sköld contends (and S.A. denies, seeS.A. lack of jurisdiction (including, without
Reply at 8), that fact is insufficient to render S.A. “essentially limitation, venue) to the exercise of
at home” in the United States. See BP Chemicals, 229 F.3d such jurisdiction over it by any such
at 258–59 (declining to find sufficient contacts where the courts.
defendant Taiwanese corporation exported its products to
the United States, held an ownership interest in a Delaware Compl. Ex. A § 9.10. The Court must make two inquiries
corporation, required its personnel to travel to the United in determining the clause's applicability to its jurisdictional
States for training); Toumazou, ––– F.Supp.3d at ––––, 2014 analysis here: first, whether the forum selection clause binds
WL 5034621, at *6 (declining to find sufficient contacts S.A. as a non-signatory third party, and, second, whether the
where the plaintiff alleged that the defendant maintained claims Sköld alleges against S.A. arise out of the agreement
a “West coast” and “NY” representative, participated in a and are thus governed by its terms.
conference in the “Southern United States,” and attempted
to intervene in an Indiana litigation); Best Odds Corp., 2014
WL 2527145, at *5 (declining to find sufficient contacts, a. Whether the clause binds S.A.
even in light of the defendant's media kit, in which it self-
described its “significant U.S. presence”); Chavez v. Dole [31] [32] [33] Nonsignatory third parties who
Food Co., 947 F.Supp.2d 438, 443 (D.Del.2013) (finding that are “closely related” to a contractual relationship are
a company's “ownership of a facility in Delaware, movement bound by the forum selection clauses contained in the
of its products through Delaware, and sale of its products agreements underlying that relationship. See, e.g., AAMCO
in Delaware” did not render the company “at home” in Transmissions, Inc. v. Romano, 42 F.Supp.3d 700, 708
Delaware). This Court concludes that it cannot exercise (E.D.Pa.2014). In determining whether a nonsignatory is
personal jurisdiction over S.A. under Rule 4(k)(2). closely related, the Court must consider several factors,
including the nonsignatory's ownership of the signatory,
the relationship between the two parties, and whether the
nonsignatory received a direct benefit from the agreement.
2. Forum Selection Clause
Carlyle Inv. Mgmt. LLC v. Moonmouth Co. SA, 779 F.3d
[30] Personal jurisdiction is, however, a waivable right, 214, 219 (3d Cir.2015). Further, third parties “that should
and litigants can give “express or implied consent to the have foreseen governance by the clause may also be bound
personal jurisdiction of the court” through a “variety of legal to it.”First Fin. Mgmt. Grp., Inc. v. Univ. Painters of Balt.,
arrangements,” including forum selection clauses in contracts Inc., No. 11–5821, 2012 WL 1150131, at *3 (E.D.Pa. Apr.
executed by the parties. Ins. Corp. of Ir., Ltd. v. Compagnie 5, 2012).
des Bauxites de Guinee, 456 U.S. 694, 703, 102 S.Ct. 2099,
72 L.Ed.2d 492 (1982) (quoting Nat'l Equip. Rental, Ltd. v. *14 The Court may apply the forum selection clause to a
Szukhent, 375 U.S. 311, 316, 84 S.Ct. 411, 11 L.Ed.2d 354 nonsignatory if the totality of the circumstances makes it fair
(1964)) (internal quotation marks omitted). and reasonable to bind the nonsignatory to the clause because
it is foreseeable to the nonsignatory that it would become
And this is Sköld's final potential avenue for this Court to have involved in the contract dispute. Lefkowitz v. McGraw–Hill
personal jurisdiction over S.A.: the forum selection clause Cos., No. 13–1661, 2013 WL 3061549, at *3 (E.D.Pa. June
found in section 9.10 of the 2004 Agreement. The section 9, 2013);also
see Magi XXI, Inc. v. Stato della Citta del
reads, in relevant part: Vaticano, 714 F.3d 714, 722 (2d Cir.2013) (recognizing that
using “[a] literal approach to interpreting forum selection
Each Party hereby submits itself for clauses” could undermine their purpose); Adams v. Raintree
the purpose of this Agreement and Vacation Exch., 702 F.3d 436, 441 (7th Cir.2012) (reasoning
any controversy arising hereunder to that “[w]ere it not for judicial willingness in appropriate

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circumstances to enforce forum selection clauses against of the passage that undermines its position: the court in
[nonparties], such clauses often could easily be evaded”). Mushroom Transportation stated that forum selection clauses
are enforceable only against nonsignatories “that are closely
[34] Sköld alleges that S.A. is the owner of Inc., the related to the contractual relationship or that should
successor-in-interest to Collagenex (the original signatory). have foreseen governance by the clause.”247 B.R. at 398
Compl. ¶ 8. He also alleges that S.A. has received a direct (emphasis added) (citation and internal quotation marks
benefit from the agreement: according to the Complaint, omitted). The Court has already found that S.A. is closely
S.A. has “taken the fruits of the Sköld–Collagenex contract related to the contractual relationship between Sköld and Inc.
—the trademark and related goodwill associated with the Furthermore, as the Court's discussion above makes plain,
Restoraderm® name—and used those assets in the marketing S.A. should have foreseen governance by the clause based
and sale of its Cetaphil® products.”Pl.'s S.A. Opp'n at 8. See on its relationship to the signatory parties and to the dispute
Synthes, Inc. v. Emerge Med., Inc., 887 F.Supp.2d 598, 607 at issue. S.A. was closely related to the Agreement through
(E.D.Pa.2012) (recognizing that a forum selection clause also the ownership of its subsidiary Inc., it derived a direct benefit
applies to a nonsignatory third party where the third party's from the Agreement, and it was closely related to the dispute
conduct is closely related to the contractual relationship or through its actions involving the Restoraderm trademark pre-
the contractual dispute and where the third party enjoys and post-termination of the Agreement. Thus, the “totality of
financial benefit from the contract). He further alleges that the circumstances makes it fair and reasonable” to bind the
S.A. has “registered the Restoraderm® name as a trademark nonsignatory party to the forum selection clause. Lefkowitz,
in multiple jurisdictions and has sued to prevent other entities 2013 WL 3061549, at *3. The Court therefore finds the 2004
using the domain name Restoraderm.com.” Pl.'s S.A. Opp'n Agreement's forum selection clause binds S.A. as a non-
at 8. signatory third party.

It is certainly plausible from the totality of the circumstances *15 This is only the first part of the analysis, however; the
alleged that S.A. was closely related to the contractual Court yet may be unable to enforce the forum selection clause
relationship between Sköld and Inc. As a nonsignatory, and exercise jurisdiction over S.A. if the claims Sköld alleges
it gained a benefit from the use of a trademark do not “arise under” the 2004 Agreement.
that was transferred to its subsidiary (as successor-in-
interest) via a contract between the plaintiff and the
subsidiary's predecessor-in-interest. Given its engagement in
b. Whether the clause applies
the marketing and sale of the Cetaphil/Restoraderm product,
to Sköld's claims against S.A.
it also should reasonably have foreseen becoming involved
in the relevant dispute over the Defendants' alleged refusal [35] [36] Forum selection clauses are treated as ordinary
to revert the trademark back to Sköld after Inc. terminated contract provisions and are subject to the ordinary rules of
the 2004 Agreement and after S.A. continued to register and contract interpretation. See M/S Bremen v. Zapata Off–Shore
use the very trademark at issue in marketing and selling Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972).
its products. Thus, the Court finds it eminently fair and First, a court must determine whether the clause states the
reasonable that the forum selection clause binds S.A. as a parties' intentions unambiguously. “To be ‘unambiguous,’
nonsignatory party. a contract clause must be reasonably capable of only one
construction.”Otto v. Erie Ins. Exch., 11 F.Supp.3d 482, 483
S.A. argues that the law requires the non-signatory foresee (E.D.Pa.2014). The only reasonable construction of the clause
“being sued on the contract itself.” S.A. Reply at 4 (emphasis in the 2004 Agreement (“Each Party hereby submits itself for
in original). In support of this argument, it includes a the purpose of this Agreement and any controversy arising
truncated quote from Burtch v. Security Pacific Bank Oregon hereunder to the exclusive jurisdiction of the state and federal
(In re Mushroom Transportation Co.), to the effect that courts located in the Commonwealth of Pennsylvania ....”)
to demonstrate the “foreseeability [ ] required to enforce is that any dispute between the parties arising under the
such a clause against a nonparty to an agreement” a Agreement must be litigated in Pennsylvania. This clause on
plaintiff must establish that the nonsignatory “should have its face is unambiguous. See Health Robotics, LLC v. Bennett,
foreseen governance by the clause.” 247 B.R. 395, 398 No. 09–0627, 2009 WL 1708067, at *3 (E.D.Pa. June 16,
(E.D.Pa.2000) (emphasis in original). S.A. omits the portion 2009). Having so found, this Court must now determine

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whether Sköld's claims “arise out of the Agreement” and are In Omron Healthcare, Inc. v. Maclaren Exports Ltd., 28 F.3d
thus covered by the terms of the forum selection clause. Id.; 600 (7th Cir.1994), the Seventh Circuit expressed its broad
see also Terra Int'l, Inc. v. Miss. Chem. Corp., 119 F.3d 688, view on the applicability of forum selection clauses to claims,
692 (8th Cir.1997) (stating that before a court can consider holding that “all disputes the resolution of which arguably
enforcing a forum selection clause, “it must first decide depend on the construction of an agreement ‘arise out of’
whether the clause applies to the type of claims asserted in that agreement” for purposes of enforcing such clauses. Id.
the lawsuit”). 12 at 603. In Laserdynamics, Inc. v. Acer America Corp., 209
F.R.D. 388 (S.D.Tex.2002), the Southern District of Texas
The Third Circuit's decision in Crescent International v. held that important to the forum selection clause analysis was
Avatar Communities, Inc., 857 F.2d 943 (3d Cir.1988) a determination of the “spirit” of the underlying agreement,
(per curiam), is instructive on this question. The issue in as well as the subject matter comprising the agreement's
Crescent involved interpretation of a forum selection clause “nucleus.” Id. at 391. And finally, the Southern District of
in an agreement between Crescent, a Pennsylvania-based New York, in finding that a plaintiff's action “clear[ly]” arose
corporation, and Avatar, a Florida-based corporation, under pursuant to the contract and enforcing a forum selection
which Crescent sold real estate owned by Avatar in return clause, looked to the fact that the plaintiff's “entire business
for commissions. The agreement chose Florida law and relation with the defendant ... stemmed from the contract,”
provided that “any litigation upon any of [its] terms ... shall and, as a result “[a]ny determination with respect to plaintiff's
be maintained” in a state or federal court in Miami, Florida. claims will require consideration of the contract and of the
Id. at 944. Crescent, however, filed an action in the Eastern parties' respective rights pursuant to the contract.”YWCA v.
District of Pennsylvania alleging breach of contract and HMC Entm't, Inc., No. 91–7943, 1992 WL 279361, at *4
several related, albeit noncontractual, claims. Avatar moved (S.D.N.Y. Sept. 25, 1992).
to dismiss, arguing that the forum selection clause applied to
noncontractual as well as contractual claims and, as such, the [37] Taking into account the above analysis, the Court
action was in the wrong forum. The district court agreed and finds that the forum selection clause in the 2004 Agreement
dismissed the suit. applies to Sköld's claims against S.A. Those claims arise
out of the 2004 Agreement and implicate its terms. See
Crescent argued on appeal that the forum selection clause Crescent, 857 F.2d at 945. In fact, Sköld's “entire business
was narrowly drafted and could not apply to noncontractual relation” with the Galderma entities with respect to the
claims. The Third Circuit, however, determined that the Restoraderm trademark stems from the 2004 Agreement.
pleading of alternate noncontractual theories does not alone YWCA, 1992 WL 279361, at *4. Thus, determination of
allow a party to avoid enforcement of a forum selection Sköld's claims implicate the contract's terms and will require
clause “if the claims asserted arise out of the contractual consideration of the contract and the parties' respective rights
relation and implicate the contract's terms.”Id. at 945. The pursuant to the contract. See id.The 2004 Agreement is not
court held that the district court correctly construed the “merely one of the final manifestations” of the “ongoing
forum selection clause, concluding that “[a]lthough only business relationships between the parties”—a situation in
one of Crescent's claims is based on a breach of contract which forum selection clauses have been held inapplicable to
theory, all of them involve allegations arising out of the noncontractual claims.Gen. Envtl. Sci. Corp. v. Horsfall, 753
agreement implicating its terms.”Id.; see also Coastal Steel F.Supp. 664, 667–68 (N.D.Ohio 1990). Quite the contrary,
Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 203 the 2004 Agreement was the final manifestation of the
(3d Cir.1983) (“[W]here the relationship between the parties relationship between Sköld and Collagenex and the only
is contractual, the pleading of alternative non-contractual manifestation of a relationship between Sköld and any
theories of liability should not prevent enforcement of such a Galderma entity.
bargain.”), overruled on other grounds by Lauro Lines s.r.l.
v. Chasser, 490 U.S. 495, 109 S.Ct. 1976, 104 L.Ed.2d 548 The “nucleus” of the 2004 Agreement is the transfer
(1989). of the Restoraderm trademark, and the “spirit of the ...
agreement contemplate[d] the rights and duties of the parties”
*16 Several decisions involving similarly worded forum concerning the Restoraderm trademark. Laserdynamics, 209
selection clauses in similar factual scenarios from courts in F.R.D. at 389. Accordingly, if any of the rights or obligations
other jurisdictions are also helpful in resolving this question. in the 2004 Agreement were “threatened or impaired by

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an act of the parties or their privities, that act gives rise Reply [ECF No. 33]; Defendant Galderma S.A.'s Motion
to a dispute under the agreement.”Id. Sköld's allegations to Dismiss and Motion to Stay Pending the Outcome of
that the acts of the Defendants, in declining to revert the the Administrative Proceeding [ECF No. 36], the Plaintiff's
Response in Opposition thereto [ECF No. 38], and Galderma
Restoraderm intellectual property to him upon termination
S.A.'s Reply [ECF No. 46]; the parties' supplemental briefing
of the 2004 Agreement and continuing to market and sell
on the Plaintiff's unfair competition claim [ECF Nos. 54 &
products bearing the Restoraderm mark, are the nucleus of his
55]; and oral argument on March 19, 2015, and for the reasons
claims that his rights under the 2004 Agreement have been
provided in the Court's revised opinion of April 17, 2015
impaired. S.A. should be expected to answer to those claims.
[ECF No. 56], IT IS ORDERED that:
*17 At bottom, because “all disputes the resolution of which (1) Defendant Galderma S.A.'s motion to dismiss the
arguably depend on the construction of an agreement ‘arise breach of contract claim in Count Five is GRANTED;
out of’ that agreement” for purposes of enforcing a forum Count Five of the Complaint shall be DISMISSED
selection clause, Omron, 28 F.3d at 603, the Court holds WITH PREJUDICE as to Defendant Galderma S.A.;
that S.A. cannot avoid enforcement of the forum selection
clause because the non-contractual claims asserted “arise (2) Defendants' Galderma Laboratories, Inc.'s motion to
out of the contractual relation and implicate the contract's dismiss the unjust enrichment claim in Count Six is
terms.”Crescent, 857 F.2d at 945. When the substance of the GRANTED; Count Six of the Complaint shall be
plaintiff's claims, stripped of their labels, fall within the scope DISMISSED WITH PREJUDICE as to Defendant
of the forum selection clause, the opposing party cannot avoid Galderma Laboratories, Inc.;
it. The dispute between Sköld and S.A. arises out of the 2004
Agreement such that the forum selection clause is applicable (3) Defendants' motions to dismiss the unfair competition
against S.A. on all claims Sköld has alleged. claim in Court Four are GRANTED IN PART; to the
extent the Plaintiff bases his unfair competition claim on
The exercise of personal jurisdiction over S.A. is the Defendants' alleged failure to revert the trademark
to him based on the terms of the parties' agreement, the
proper. 13 The motion to dismiss for lack of personal
claim is DISMISSED WITH PREJUDICE as to all
jurisdiction shall be denied.
Defendants on those grounds; the motions to dismiss this
claim are otherwise DENIED;
An appropriate Order follows.
(4) Defendants' motions to dismiss for failure to state a
claim are otherwise DENIED;
Dated: March 20, 2015.
(5) Defendants' motions to stay are DENIED AS MOOT;
REVISED ORDER and

AND NOW, this 17th day of April, 2015, upon consideration (6) Defendant Galderma S.A.'s motion to dismiss for lack
of Defendants Galderma Laboratories, L.P. and Galderma of personal jurisdiction is DENIED.
Laboratories, Inc.'s Motion to Dismiss and Motion to Stay
Pending the Outcome of the Administrative Proceeding [ECF
All Citations
No. 22], Plaintiff Thomas Sköld's Response in Opposition
thereto [ECF No. 29], and Galderma L.P. and Galderma Inc.'s --- F.Supp.3d ----, 2015 WL 1740032

Footnotes
1 Galderma S.A. was served after Galderma Laboratories, L.P. and Galderma Laboratories, Inc. had filed their motion to
dismiss. Galderma S.A. then filed its own motion to dismiss, incorporating the arguments contained in L.P. and Inc.'s
motion to dismiss Sköld's state-law claims and also arguing separately that this Court cannot exercise either general
or specific personal jurisdiction over it. See S.A. Mot. to Dismiss at 11. Hereinafter, any reference in this Opinion to
an argument made by “the Defendants” collectively will be used in the context of an argument asserted by Galderma

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Laboratories, L.P. and Galderma Laboratories, Inc. in their Motion to Dismiss that was later incorporated by Galderma
S.A. in its Motion to Dismiss.
2 Both cases the Defendants cite ostensibly in support of their argument are inapposite, as both involved parties to an
agreement forcing other parties to that agreement to engage in the binding arbitration to which they assented at the time
of contracting. See Seus v. John Nuveen & Co., 146 F.3d 175, 177 (3d Cir.1998) (“I agree to arbitrate any dispute, claim
or controversy that may arise between me and my firm ....”), overruled on other grounds byGreen Tree Fin. Corp.-Ala.
v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000); Halide Grp., Inc. v. Hyosung Corp., No. 10–2392,
2010 WL 4456928, at *2 (E.D.Pa. Nov. 8, 2010) (stating that the relevant agreement provided any dispute or claim that
could not be settled by mandatory “best efforts” negotiation “shall be finally resolved by arbitration in the defendant's
country” (emphasis added)).
3 As an alternative to dismissal, the Defendants request that the Court stay this action and order that Sköld take the steps
outlined in the dispute resolution clause before proceeding here. L.P./Inc. Mot. to Dismiss at 13 n. 5. In support of this
argument, they cite Mendez v. Puerto Rican International Cos., 553 F.3d 709 (3d Cir.2009), in which the Third Circuit
affirmed the district court's grant of a stay pending arbitration. While it is true that Section 3 of the Arbitration Act permits
a district court to stay “any suit ... brought in any of the courts of the United States upon any issue referable to arbitration,”
9 U.S.C. § 3 (2012) (emphasis added), and while it is true that this section is drafted broadly enough “to permit the
stay of litigation between nonarbitrating parties as long as that lawsuit is based on issues referable to arbitration under”
an agreement governed by the Arbitration Act, Contracting Nw., Inc. v. City of Fredericksburg, 713 F.2d 382, 387 (8th
Cir.1983), the Defendants have not provided any support for the argument that these principles apply to nonparties
seeking stays pending the outcome of good-faith negotiations.
“The power to stay proceedings,” and, as a corollary, the power to decline to stay proceedings, “is incidental to the
power inherent in every court to control the disposition of the causes on its docket with economy of time and effort
for itself, for counsel, and for litigants.”Landis v. N. Am. Co., 299 U.S. 248, 57 S.Ct. 163, 81 L.Ed. 153 (1936). The
2004 Agreement was allegedly breached in 2010, and Sköld has already been involved in four years of litigation
with one Defendant in the TTAB action since then (which, as stated above, has already been stayed). Moreover, all
parties in the present action have been involved in this litigation for over half a year. If the parties have been unable
to reach some common ground through all that time, the Court finds it unlikely that imposing a stay to force good-
faith negotiations and perhaps a separate mediation will be anything but a waste of the parties' (and the Court's)
time, energy, and resources. For these reasons, the Court will not stay this action to impose the 2004 Agreement's
alternative dispute resolution clause.
4 The Court finds no merit in the Defendants' argument that the breach accrued on the day Inc. terminated the 2004
Agreement. Section 8.2 of the Agreement expressly provided that Collagenex could terminate at any time after March 31,
2007. See Compl. Ex. A. Construing all reasonable inferences in the Plaintiff's favor, the Agreement was unclear by what
date Inc. was required to transfer assets to Sköld after electing to terminate the Agreement. Any arguments to the contrary
involve fact-specific issues of contract interpretation not appropriate for determination at this stage of the proceedings.
5 The Defendants also urged the Court at oral argument to consider the fact of the Plaintiff's filing of the TTAB petition
as evidence that he was aware the contract was breached prior to September 14, 2010. While the Complaint mentions
that there was a TTAB proceeding pending at the time of filing, see Compl. ¶ 37, the date of filing is not included and
thus the Court need not consider it in ruling on whether to grant a motion to dismiss the breach of contract claim on
timeliness grounds, which, again, is only permissible “[i]f the bar is ... apparent on the face of the complaint.”Schmidt,
770 F.3d at 249.
6 As the Court has denied the Defendants' motion to dismiss on timeliness on the face of the Complaint, it declines to
address Sköld's equitable tolling argument.
7 S.A. argues (but only in passing) in its Reply that L.P. likewise is not a party to the contract and should likewise not be
called to defend against the breach claims. S.A. Reply at 2. This is not an argument that was raised by L.P. in its briefing,
however, and the Court thus declines to address such an argument now. See Carpenter v. Vaughn, 888 F.Supp. 635,
648 (M.D.Pa.1994) (“A litigant who fails to press a point by supporting it with pertinent authority or by showing why it is
a good point despite a lack of authority ... forfeits the point.”).
8 The Defendants also argue that the unjust enrichment claim is untimely because the Complaint was filed beyond the
four-year statute of limitations. L.P./Inc. Mot. to Dismiss at 6–8. Sköld repeats the arguments he raised in the breach of
contract context. Pl.'s L.P./Inc. Opp'n at 10–12. The Court finds, for the purposes of this motion to dismiss, that the unjust
enrichment claim similarly is not barred by the statute of limitations.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 20
Giant Eagle's Letter Brief Page 68
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Skold v. Galderma Laboratories, L.P., --- F.Supp.3d ---- (2015)
2015 WL 1740032

9 At the Preliminary Pretrial Conference held on March 17, 2015, the Court ordered the parties to submit supplemental
briefing on Sköld's unfair competition claim in light of the Pennsylvania Supreme Court's recent decision in Bruno. See
ECF No. 48. That briefing having been provided, the Court will now rule on this claim.
10 See, e.g., Williams v. Hilton Group PLC, 93 Fed.Appx. 384, 385 (3d Cir.2004); Vives v. Rodriguez, 849 F.Supp.2d 507,
516 (E.D.Pa.2012); PPG Indus., Inc. v. Generon IGS, Inc., 760 F.Supp.2d 520, 527 n. 1 (W.D.Pa.2011); Sunburst Paper,
LLC v. Keating Fibre Int'l, No. 06–3957, 2006 WL 3097771, at *2 n. 2 (E.D.Pa. Oct. 30, 2006); Caudill Seed & Warehouse
Co. v. Prophet 21, Inc., 123 F.Supp.2d 826, 833–34 (E.D.Pa.2000).
11 The Court has already addressed the merits of the statute of limitations argument and denied the Defendants' motion to
dismiss on that ground. See supra subsection IV.C.1. It will not reiterate the discussion here.
12 At the outset, the Court recognizes the restrictive “arising under” language present in the 2004 Agreement's forum
selection clause. Several courts have held that the term “relating to” in a clause casts a wider net than the term “arising
out of” or “arising under,” and thus drawing analogies to other cases “is useful only to the extent those other cases
address contact language that is the same or substantially similar.”John Wyeth & Bro. Ltd. v. CIGNA Int'l Corp., 119 F.3d
1070, 1075 (3d Cir.1997) (Alito, J.); see also id. at 1074–75 (interpreting the term “arising in relation to” to mean that
the dispute has some “logical or causal connection to the contract”); Vt. Pure Holdings Ltd. v. Descartes Sys. Grp., Inc.,
140 F.Supp.2d 331, 335 (D.Vt.2001) (“[T]he term ‘relating to’ has a much broader meaning than ‘arising out of.’ ”). As
a result, the analogous cases cited by the Court in this Section all involve forum selection clauses containing “arising
out of” language.
13 In its Reply brief and at oral argument, S.A. advanced the argument that “even if the 2004 Agreement's forum selection
clause were somehow to apply to Galderma S.A., Sköld ignores that he still needs to meet the constitutional minimum
contacts test....” S.A. Reply at 4. This argument is meritless. The forum selection clause is one of the “variety of legal
arrangements” through which parties impliedly consent to the personal jurisdiction of a particular court. See Insurance
Corp. of Ireland, 456 U.S. at 703, 102 S.Ct. 2099. Mandating that a plaintiff meet the constitutional minimum contacts test
for personal jurisdiction as a prerequisite to enforcement of a forum selection clause would utterly defeat the purpose of
forum selection clauses. Indeed, “Pennsylvania law provides that were a party has consented to personal jurisdiction via
a contractual provision, the minimum contacts due process analysis usually employed to analyze jurisdiction on a Rule
12(b)(2) motion to dismiss is not appropriate.”Synthes, 887 F.Supp.2d at 606 n. 4 (internal punctuation omitted).

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 21
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Leibovitz v. Sequoia Real Estate Holdings, L.P., --- S.W.3d ---- {2015)

[4] injunction was properly granted against limited
partnership created by investor to purchase and hold
2015 WL 3451675
investment; and
Only the Westlaw citation is currently available.
Court of Appeals of Texas,
[5] award of attorney fees in favor of business was
Dallas.
proper.
Jeffrey Leibovitz and Sequoia
Frankford Springs 23, L.P ., Appellants
Affirmed.
v.
Sequoia Real Estate Holdings, L.P ., Appellee

No. 05-14-00125-CV \Vest Headnotes (38)
Opinion Filed May 29, 2015

Synopsis Ill Contracts
Background: Following parties' settlement of ~ Reliance on representation

underlying lawsuits stemming from investment Reliance by the party asserting fraud is
offering concerning apartment complex, business that element of breach of contract defenses
created investment offering sued investor, who had of fraudulent inducement, fraudulent
invested tax-deferred money in complex as tenant in concealment, and fraud by nondisclosure.
common pursuant to business's investment offering,
for breach of contract and seeking injunction barring 1 Cases that cite this headnote
investor from filing complaint against investor with
Financial Industry Regulatory Authority (FINRA) and (2) Contracts
the Securities and Exchange Commission (SEC) and Fraud and Misrepresentation
from communicating with other investors regarding
In general, contract is subject to avoidance
complaint. Investor filed affirmative defenses to
on ground of fraudulent inducement;
business's claims. The 116th Judicial District Court,
however, in some situations, parties can
Dallas County, Tonya Parker, J., granted injunction,
agree in contract to waive right to assert
granted business summary judgment on investor's
fraud as a defense to breach of the contract
affirmative defenses, and awarded business damages
by expressly disclaiming reliance.
and attorney fees. Investor appealed.
I Cases that cite this headnote

Holdings: The Court of Appeals, Myers, J., held that: [3] Contracts
Fraud and Misrepresentation
[ 1] investor waived reliance in settlement agreement,
Factors most relevant to whether there
precluding affirmative defense of fraud;
was a waiver of reliance precluding
affirmative defense of fraud to breach
[2] enforcement of confidentiality provision of
of contract claim are whether: (1)
settlement agreement would not have made investor
terms of contract were negotiated, rather
guilty of misprision of felony;
than boilerplate, and during negotiations
parties specifically discussed issue which
[3] as a matter of apparent first impression, investor's
has become topic of subsequent dispute;
statement in agreement that he signed agreement
(2) complaining party was represented by
without any duress was enforceable, precluding
counsel; (3) parties dealt with each other
economic duress defense.
in an arm's length transaction; (4) parties
were knowledgeable in business matters;

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and (5) release and non-reliance language common pursuant to investment offering,
was clear. was represented by counsel during
settlement negotiations of prior actions
2 Cases that cite this headnote arising out of investment offering, as
factor weighing in favor of determination
[41 Compromise ami Settlement that waiver-of-reliance provision of
Fraud or duress settlement agreement precluded investor's
affirmative defense of fraud to subsequent
Fact that an agreement is a once
breach of contract claim asserted
and for all settlement constitutes factor
by business that created investment
for rejecting fraud-based affirmative
opportunity, stemming from investor's
defenses to breach of contract claims.
statement that he would file complaints
Cases that cite this headnote against business if investor was not
reimbursed by business for alleged
losses he suffered through investment;
[5] Compromise and Settlement
even if investor signed agreement
Fraud or duress
without consulting attorney, agreement
Investor and business that created stated that investor had opportunity to
investment offering specifically discussed review agreement with independent legal
issue that became topic of subsequent counsel, and attorney had access to
dispute in business's breach of contract attorneys at time agreement was signed.
action against investor during parties'
prior settlement negotiations pertaining Cases that cite this headnote
to underlying actions arising out of
investment offering, as factor used
[7] Compromise and Settlement
to determine whether investor waived
Fraud or duress
reliance, as element of fraud, in settlement
Settlement agreement pertaining to
agreement, thereby precluding investor's
parties' prior actions involving investment
affirmative defense of fraud to breach of
offering concerning apartment complex
contract claim; parties disclaimed reliance
was an arm's-length transaction,
with respect to all decisions being made
as factor weighing in favor of
during settlement negotiations, including
determination that waiver-of-reliance
decisions that parties released one another
provision of agreement precluded
from any and all presently existing
investor's affirmative defense of fraud
claims relating to dispute, investment
to subsequent breach of contract claim
offering, or any other matter, and even
asserted by business that created
if it were required that parties had
investment opportunity; there were
to have discussed facts of subsequent
attorneys on all sides at time of agreement,
lawsuit, facts discussed by parties during
and there were negotiations leading to
negotiation of settlement agreement were
agreement.
closely related to facts alleged in breach
of contract suit. Cases that cite this headnote

l Cases that cite this headnote
(8) Compromise and Settlement
Fraud or duress
[6] Compromise and Settlement
Fraud or duress Parties to settlement agreement pertaining
to prior actions involving investment
Investor, who invested tax-deferred
offering concerning apartment complex
money in apartment complex as tenant in

Government VVorks. 2
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Leibovitz v. Sequoia Real Estate Holdings, L.P., --- S.W.3d ---- (2015)

were knowledgeable in business matters,
as factor weighing in favor of 1 Cases that cite this headnote
determination that waiver-of-reliance
provision of agreement precluded [1 0] Compromise and Settlement
investor's affirmative defense of fraud P Fraud or duress
to subsequent breach of contract claim
Release
asserted by business that created
Fraud and l'vlisrepresentation
investment opportunity; agreement stated
Parties' settlement agreement pertaining
parties were sophisticated, in order to
to prior actions involving investment
invest in offering, investor was required
offering concerning apartment complex
to be an accredited investor, and prior
was once and for all settlement, as factor
to investing in offering, investor was
weighing in favor of rejecting fraud-based
required to state in writing that he
affirmative defenses asserted by investor
had such knowledge and experience in
to breach of contract claims filed by
financial and business matters that he was
business that created investment offering;
capable of evaluating merits and risks of
agreement stated that it was intended to
investment and had ability to protect his
extinguish, without limitation, any and all
own interests concerning investment. 17
claims that parties did not know or suspect
C.F.R. § 230.2l5(e), (f), (h).
to exist at time agreement was executed,
Cases that cite this headnote that it was express intention of parties that
releases would be construed as broadly as
possible, and that parties did not intend to
191 Compromise and Settlement
except any entity or claim from releases,
Fraud or duress
except breaches of agreement.
Release
.Fraud and Misrepresentation Cases that cite this headnote
Language of release and disclaimer
of reliance contained in parties (11] Compromise and Settlement
settlement agreement pertaining to prior ~ Construction of Agreement
actions involving investment offering
Obstructing Justice
concerning apartment complex was
Misprision of a Felony
clear, as factor weighing in favor
Enforcement of confidentiality provision
of determination that disclaimer-of-
of settlement agreement between investor
reliance provision of agreement precluded
in apartment complex and business that
investor's affirmative defense of fraud
created investment offering concerning
to subsequent breach of contract claim
complex, pertaining to underlying
asserted by business that created
lawsuits stemming from investment
investment opportunity; parties did not
offering, would not have prevented
rely on any representation by any other
investor from reporting business's
party when they gave up any rights they
felonious actives, such that enforcement
might have had regarding complaint about
of confidentiality provision would not
another party that existed on effective
have made investor guilty of misprision
date of agreement, regardless of whether
of felony; to extent confidentiality
complaining party knew of complaint's
provision prohibited party from reporting
existence, and concerning any matter
another party's illegal activities, those
whatsoever, from beginning of time to
prohibitions were nullified by statement
present.
that agreement did not prohibit party from

3
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Leibovitz v. Sequoia Real Estate Holdings, L.P., --- S.W.3d ---- (2015)

disclosing information as required by law. no legal right to do; (2) some illegal
18 U.S.C.A. § 4. exaction or some fraud or deception; and
(3) restraint is imminent and such as
Cases that cite this headnote to destroy free agency without present
means of protection.
[12) Obstructing Justice
Cases that cite this headnote
Misprision of a Felony
Misprision of felony has four elements:
(1) felony was committed; (2) accused (17] Contracts
had knowledge of felony; (3) accused Questions for jury
failed to notify authorities; and (4) Whether the conduct or acts of party
accused took an affirmative step to accused constitute economic duress, as
conceal crime. 18 U.S.C.A. § 4. defense to contract enforcement, is a
question of law, but whether duress
Cases that cite this headnote exists in a particular situation is a
question of fact dependent upon the
[13) Contracts circumstances surrounding the situation,
Effect ofillegality including mental effect on party claiming
duress.
Contract to do a thing which cannot be
performed without violation of law is Cases that cite this headnote
void.

Cases that cite this headnote [18] Compromise and Settlement
~ Fraud or duress

[14] Contracts Investor's statement in prior settlement
Effect of Illegality agreement with business that created
investment offering that investor signed
When illegality does not appear on the
agreement voluntarily and without
face of the contract, it will not be held
any duress or undue influence
illegal and thus void unless facts showing
was enforceable, precluding investor's
its illegality are before the court.
economic duress defense to enforceability
Cases that cite this headnote of agreement in subsequent action
brought by business for breach of
settlement agreement; agreement was
[15] Contracts
negotiated at arm's length by sophisticated
~Duress
parties that were represented by counsel
Economic duress is defense to or had opportunity and means to obtain
enforcement of contract. representation, disclaimer of duress was
clear, and parties intended for agreement
Cases that cite this headnote
to create end to all disputes between them.

(16] Contracts Cases that cite this headnote
Duress
Contracts [19] Injunction
Threats in general Grounds in general: multiple factors
Elements of economic duress, as defense To be entitled to permanent injunction,
to enforce contract, are: (1) threat to plaintiff must plead and prove: (1)
do something that threatening party has wrongful act; (2) imminent harm; (3)

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Leibovitz v. Sequoia Real Estate Holdings, LP., --- S.W.3d ---- (2015)

irreparable injury; and (4) no adequate support finding, the evidence is legally
remedy at law. sufficient.

Cac;es that cite this headnote Cases that cite this headnote

[20) Appeal nnd Error [24) Evidence
Injunction Sufficiency to suppmt verdict or
Appeal and Enor finding
Refusing injunction When evidence offered to prove vital fact
Court of Appeals reviews trial court's is so weak as to do no more than create
grant or refusal of permanent injunction mere surmise or suspicion of its existence,
to determine whether it clearly abused its evidence is no more than a scintilla and,
discretion. in legal effect, is no evidence.

Cases that cite this headnote Cases that cite this headnote

[21) Appeal and Error (25) Evidence
Abuse of discretion Sufficiency to suppmt verdict or
tin ding
Under abuse of discretion standard, legal
and factual sufficiency of evidence are If evidence furnishes reasonable basis
not independent grounds for reversal, but for differing conclusions by reasonable
sufficiency of the evidence is a relevant minds as to existence of a vital fact, then
factor in determining whether trial court there is legally sufficient evidence, more
had sufficient evidence to exercise its than a scintilla, to support the fact.
discretion.
Cases that cite this headnote
Cases that cite this headnote
[26] Appeal and Error
(22] Appeal nnd Err·or Extent of Review
Verdict Appeal and Error
Appeal and Error Clear or palpable weight or
Extent of Review preponderance
When reviewing the legal sufficiency When reviewing factual sufficiency of
of the evidence to support finding, evidence, Court of Appeals examines all
Court of Appeals considers all the evidence and sets aside finding only if it
evidence, crediting evidence in support is so contrary to evidence as to be clearly
of verdict if reasonable jurors could, and wrong and unjust.
disregarding evidence contrary to verdict
Cases that cite this headnote
unless reasonable jurors could not.

Cases that cite this headnote [27] Injunction
Breaches in general
[23) Appeal and E1·ror Limited partnership created by investor
Sufficiency of Evidence in Support to purchase and hold investment
When reviewing the legal sufficiency of in apartment complex performed or
the evidence to support finding, if there threatened to perform wrongful act
is more than a scintilla of evidence to against business that created investment

5
Giant Eagle's Letter Brief Page 74

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Leibovitz v. Sequoia Real Estate Holdings, L.P., --- S.W.3d ---- (2015)

offering, as required for business to in business's subsequent suit for
be entitled to permanent injunction breach of parties' prior settlement
against partnership in business's action agreement pertaining to underlying
for breach of parties' prior settlement actions stemming from investment
agreement pertaining to underlying offering; threat would have caused
actions stemming from investment business injury that was either not able
offering; investor was manager of to be compensated by damages or was
corporation that was limited partnership's not able to be measured by any certain
general partner, and investor performed monetary standard.
or threatened to perform wrongful act
against business. Cases that cite this headnote

Cases that cite this headnote
[301 Injunction
Irreparable injury
(28] Injunction Injury is "irreparable injury," as required
Breaches in general for party to be entitled to injunction,
Inclusion of limited partnership created if injured party cannot be compensated
by investor to purchase and hold in damages or if damages cannot
investment in apartment complex in be measured by any certain monetary
injunction granted in suit filed against standard.
investor by business that created
investment offering for breach of parties' Cases that cite this headnote
prior settlement agreement pertaining
to underlying actions stemming from [31] Injunction
investment offering did not render Adequacy of remedy at law
injunction overly broad, despite
Existing legal remedy is adequate, such
contention that limited partnership was
that party would not be entitled to
not in active concert or participation
permanent injunction, if it is as complete,
with investor; investor was manager of
practical, and efficient to the ends of
limited partnership's general partner, and
justice and its prompt administration as is
investor's actions in breach of agreement
equitable relief.
were not made solely on his own behalf.
Tex. R. Civ. P. 683. Cases that cite this headnote

Cases that cite this headnote
(32] Injunction
~ Breaches in general
(29) Injunction
There was legally and factually sufficient
Breaches in general
evidence to support trial court's finding,
Investor's threat to send copies of
in granting injunction against investor and
complaint regarding investment offering
limited partnership created to purchase
created by business to other investors
and hold investment in action filed by
involved in business's investment
business that created investment offerings
offerings would have, if carried
for breach of parties' prior settlement
out, constituted irreparable injury, as
agreement pertaining to prior actions
required for business to be entitled to
stemming from investment offering, that
permanent injunction against investor
business had no adequate remedy at law;
and limited partnership created by
testimony that it would take significant
investor to purchase and hold investment
time to repair damage from investor

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Leibovitz v. Sequoia Real Estate Holdings, L.P .• --- S.W.3d ---- (2015)

carrying out threat to send complaint Valid jury instruction assists jury,
regarding investment to other investors, accurately states the law, and finds
in breach of agreement, showed that support in pleadings and evidence.
enjoining limited partnership and investor
from contacting other investors before Cases that cite this headnote
investor carried out threat was a more
efficient remedy than any award of (35] Appeal and Error
damages. ~ Conduct of trial or hearing in general

Cases that cite this headnote Court of Appeals does not disturb trial
court's decision on which instructions to
submit to jury absent abuse of discretion.
[33] Constitutional Law
Injunctions and restraining orders Cases that cite this headnote
Injunction
Breaches in general (361 Damages
Granting request for injunction by Mode of estimating damages in
business that created investment offerings general
against investor and limited partnership "Benefit-of-the-bargain standard" for
created by investor to purchase and measuring damages is the difference in
hold investment was not illegal prior value given and value received.
restraint on speech in business's action
against investor for breach of parties' Cases that cite this headnote
prior settlement agreement pertaining
to underlying actions stemming from
1371 Appeal and Error
investment offering, even though investor
Instructions
was enjoined from sending additional
Investor waived argument for review
complaint against business related to
that evidence ..... was insufficient to
investment to other investors; investor
support damages question instructing
agreed not to engage in certain actions,
jury to measure damages in favor of
including disparagement of other parties,
business that created investment offering
in settlement agreement, investor agreed
under benefit-of-the-bargain standard in
that violation of that provision of
business's action against investor for
agreement was enforceable through
breach of settlement agreement pertaining
injunctive relief, and injunction was
to underlying actions stemming from
narrowly tailored and did nothing more
investment offering, since investor did not
than enforce restraint on speech investor
object to jury instruction on such ground
agreed to in settlement agreement. Tex.
in trial court. Tex. R. Civ. P. 274.
Const. art. 1, § 8.
Cases that cite this headnote
Cases that cite this headnote

[38] Costs
(34) Trial
Prevailing party
Sufficiency as to Subject-Matter
Award of attorney fees in favor of
Trial
business that created investment offering
Matters of law
was proper in action against investor
Trial for breach of parties prior settlement
Application of Instructions to Ca..c;e
agreement pertaining to underlying
actions stemming from investment

7
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Leibovitz v. Sequoia Real Estate Holdings, l.P.J --- S.W.3d ---- (2015)

offering; settlement agreement provided the taxes due from that sale by investing the
for attorney fees, requiring that proceeds in another investment. Holdings, which
substantially non-prevailing party bear was operated by Donald Behunin, created real-estate
any fees and expenses incurred by investment offerings, including Sequoia Frankford
substantially prevailing party, and Springs, an investment offering concerning an
business was clearly and substantially apartment complex in Dallas. 2 In the Private
prevailing party. Placement Memorandum (essentially a prospectus) for
the Sequoia Frankford Springs investment, Holdings
Cases that cite this headnote
offered qualified investors 3 the opportunity to
purchase tenancies in common in the complex and
promised a 6.5 percent annual return. Leibovitz
invested the tax-deferred money in Frankford Springs
On Appeal from the 116th Judicial District Court,
as a tenant in common with twenty-seven other
Dallas County, Texas, Trial Court Cause No. DC-11-
tenant-in-common investors. As required by the
14357-F, Tonya Parker, Judge
Private Placement Memorandum, Leibovitz created
Attorneys and Law Firms the limited partnership SFS 23 to purchase and hold
the investment.
Charles R. Nichols, Garland, TX, for appellants.
*2 The structure of the investment and what
Edward Jason Dennis, Samuel Hardy IV, Dallas, TX,
happened to the money is complex involving many
for appellees.
entities including the name "Sequoia," and the
structure is not entirely clear from the record.
Before Justices Myers, Evans, and O'Neill 1
However, it appears the Frankford Springs apartment
complex was purchased in 2006 by Sequoia Frankford
Springs, L.P. The twenty-eight tenant-in-common
investors, through Sequoia Frankford Springs, L.P.,
OPINION
paid cash (Leibovitz testified he invested cash
Opinion by Justice Myers of $378, 781.50), executed a nonrecourse note for
$21,400,000, and granted the lender a deed of trust to
*1 Jeffrey Leibovitz and Sequoia Frankford secure the note. According to the Private Placement
Springs 23, L.P. (SFS 23) appeal the trial court's Memorandum, the money and debt provided by
judgment enjoining them from breaching a settlement the investors was to be used to purchase the
agreement, awarding Sequoia Real Estate Holdings, property, create certain reserves, and pay expenses
L.P. damages of $2,500 against Leibovitz for breach described in the Private Placement Memorandum.
of the settlement agreement, and awarding Holdings The investors signed a master lease agreement with
attorney's fees of $200,000 against both appellants. Sequoia Frankford Springs LeaseCo, LP (LeaseCo)
Appellants bring thirteen issues on appeal contending as Master Tenant, which was to pay rent to the
the trial court erred by granting Holdings' motion investors of $789,653 per year, which would provide
for summary judgment on appellants' affirmative a return of over 6.5 percent to the investors
defenses, imposing an injunction on appellants, on their cash investment. LeaseCo would manage
awarding Holdings damages, and awarding Holdings the property through its contractor, Sequoia Real
attorney's fees against SFS 23. We affirm the trial Estate Management, L.P ., and sublease the units to
court's judgment. the individuals who would actually reside in the
apartments and pay rent. LeaseCo would pay Real
Estate Management four percent of the gross revenues
earned by the apartment complex. Behunin was
BACKGROUND
the president of Holdings; the president, secretary,
In 2006, Leibovitz sold investment property in treasurer, and sole manager of LeaseCo's general
California. The law permitted Leibovitz to defer

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partner; and the chief executive and chief financial interest, escrow deposit, and fees. To pay this amount,
officer of Sequoia Real Estate Management. Holdings made a "cash call" to the investors to pay
their pro-rata share of the amount. Sequoia Frankford
The investors in Frankford Springs received only 4.64 Springs, L.P, deeded the property to the investors. In
percent return on investment instead of the promised the "Settlement and Mutual Release Agreement" (the
6.5 percent. In 2009, LeaseCo missed some note Agreement), the parties agreed to dismiss the two
payments to the lender. On February 10, 2010, the pending lawsuits against one another. The Agreement
lender notified LeaseCo that the note was in default. provided for the distribution ofthe funds from the cash
On June 4, 2010, the lender notified LeaseCo that call. The Agreement also terminated the Master Lease
the loan was accelerated and the property posted with LeaseCo and provided that a new management
for foreclosure. When the investors learned Behunin group, unaffiliated with Behunin and the Sequoia
and LeaseCo had stopped paying the note and that entities, would manage the property under a new asset
the property was facing foreclosure, some of them, management agreement. 4 The Agreement contained
including Leibovitz, questioned Behunin and the a "Confidentiality and Non-Disparagement" provision
Sequoia entities' management ofthe project, including in which the parties agreed not to disclose the terms
why the money generated by the property was not and conditions of the Agreement "to any individual or
used to pay the note. Behunin sued Leibovitz and other entity." The provision stated that the parties "further
investors for libel and business disparagement. agree not to make any derogatory, disparaging and/
or untruthful statements about any other party to
Another group of investors, not including Leibovitz, any person or entity." The Agreement stated that
sued Behunin and the Sequoia entities operating violation of this provision would be a breach of
Frankford Springs. In this lawsuit, the investors the Agreement and would entitle the non-breaching
alleged that Behunin and the Sequoia entities party to immediate injunctive relief against further
committed fraud by failing to provide necessary violations of the provision. Leibovitz signed the
information in the Private Placement Memorandum, Agreement as manager of SFS 23's general partner and
misrepresented the expected return on investment at signed on his own behalf agreeing that he was bound
6.5 percent when the appraisal ofthe property showed by the terms and conditions of the Agreement.
only a 4.64 percent return was possible and that
the property would lose money, and misrepresented *3 After signing the Agreement, Leibovitz learned
the condition of the property as being satisfactory that some ofthe money from the initial cash investment
when the property required $508,000 of capital was being used in ways he believed were not disclosed
improvements in the first three and one-half years in the Private Placement Memorandum. Holdings,
of operation. The investors also alleged Behunin and managed by Behunin, was the sponsor of four other
the Sequoia entities breached the agreement with the tenancy-in-common investment offerings in the Dallas
investors to make the payments on the note by failing area, which operated similarly with a "LeaseCo"
to make three of those payments and then further entity as the master tenant managing the property and
breached the agreement by failing to forward the paying rent to the investors. Leftover funds from the
lender's notice of default to the investors. The investors initial investment of each offering were pooled in
alleged Behunin and the Sequoia entities converted Holdings. Holdings would then lend that money to
about $128,000 of the property's funds. master tenants, including Frankford Springs LeaseCo,
that needed funds to pay rent to the investors. Only one
For almost a year, negotiations continued with the of the properties, not Frankford Springs, was able to
lender and amongst the parties to the two lawsuits. pay its rent to the investors solely from the operations
Effective March 31, 2011, the bank agreed to reinstate of the property. Thus, many investors were paid the
the loan, and the parties to the lawsuits and all the rent from their own investment funds and with the
investors and business entities involved in Frankford investment funds from other properties instead of from
Springs entered into a settlement agreement. Before the funds the properties actually earned by leasing
reinstating the loan, however, the lender required the
to residents. 5 In this case, LeaseCo did not inform
payment of about $1,256,400 in past due principal,
appellants and the other investors that the property was

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Leibovitz v. Sequoia Real Estate Holdings, L.P., --- S.W.3d ---- (2015)

not generating sufficient income to pay the rent to them
and that the rent was being paid by LeaseCo borrowing
RELEASE PROVISIONS
money from Holdings.
IN THE AGREEMENT

On November 8, 2011, Leibovitz sent an e-mail to the The parties' Settlement and Mutual Release Agreement
brokers that sold him the investment stating that, unless stated that the parties, which included appellants,
the brokers paid Leibovitz for the losses he suffered Holdings, and Behunin,
through the investment, he would file complaints with
the Financial Industry Regulatory Authority (FINRA) hereby fully and finally mutually release one
and the Securities and Exchange Commission (SEC) another of and from any and all presently existing
and send copies of the complaints to all the investors claims, demands, promises, causes of action, and/or
in Holdings' other investment offerings. Holdings then similar rights of any type of whatever kind or nature
filed the current suit seeking an injunction barring ("Claim "), whether known or unknown, relating to
Leibovitz from filing the complaint with FINRA and and/or arising in any way out of the Dispute, the
the SEC and from communicating with investors in Property and/or any other matter whatsoever from
the other investment offerings. 6 The trial court issued the beginning of time to the present.
a temporary restraining order. At the hearing on the
*4 In further exchange for the covenants and
temporary injunction, Leibovitz testified that unless he
consideration set forth herein, the Parties agree that
was enjoined from doing so, he would file a complaint
they will not bring or assert in any manner, either
with FINRA and would send a copy ofthe complaint to
directly or indirectly, any Claims, professional
the investors in Holdings' other investment offerings.
grievances, professional liability claims, allegations
of misconduct, litigation, arbitration and/or any
Leibovitz asserted numerous affirmative defenses
other form of adversary proceeding relating to and/
to Holdings' claims. Holdings moved for summary
or arising in any way out of any presently existing
judgment on the defenses. The trial court granted
claim relating to the Dispute, the Property and/or
summary judgment on most of the defenses. Holdings'
any other matter whatsoever from the beginning of
claim of breach of contract was tried before a jury,
time to the present, whether same is presently known
which found Leibovitz liable and found Holdings
or unknown.
suffered damages of $2,500.
For the purpose ofimplementing a full and complete
The trial court's judgment awarded Holdings damages release and discharge of each other, the Parties
of $2,500 against Leibovitz and attorney's fees expressly acknowledge that this Agreement is
of $200,000 against both appellants. The court intended to include in its effect, without limitation,
also imposed a permanent injunction on appellants, any and all claims that the Parties do not know or
prohibiting them from (a) disclosing the existence suspect to exist in their favor at the time of execution
or terms of the Agreement to anyone not a party to hereof, and that this Agreement contemplates the
the Agreement; (b) communicating with any of the extinguishment of those claims.
investors in Holdings' other investment offerings that
appellants had threatened to contact; and (c) bringing
or asserting any claims relating to the "dispute" as
It is the express intention of the Parties to this
defined in the Agreement. The trial court stated in the
Agreement that these mutual releases and associated
order that the permanent injunction did not prohibit
definitions be construed as broadly as possible
appellants from reporting a crime to law-enforcement
to effectuate the Parties' desire for absolute and
authorities or from providing testimony in response to
complete peace going forward in relation to all
an inquiry from any regulatory authority as long as
dealings between them whatsoever. The Parties do
appellants did not initiate the inquiry.
not intend to except any entity or claim of any
kind from these releases, except breaches of this
Appellants now appeal from this judgment.
Agreement.

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Leibovitz v. Sequoia Real Estate Holdings, l.P.J --- S.W.3d ---- (2015)

fraud by nondisclosure. Appellants alleged Holdings
The Agreement defined "the Dispute" as "any and committed fraud leading to the Agreement by failing
all issues and matters that have been discussed and to inform appellants that the funds they and the other
debated relating to, among other things, including investors in the property invested were placed in an
without limitation, the Property, the Master Lease integrated fund with investment monies from other
Agreement, the TIC [Tenants in Common] Agreement Holdings investment projects and not used solely
and/or the PPM [Private Placement Memorandum]." for Frankford Springs. Appellants alleged Holdings
commingled the funds of numerous real estate projects
and used those funds as needed for all the real
SUMMARY JUDGMENT estate projects. Appellants alleged these facts were
required to be disclosed in the Private Placement
In their first five issues, appellants contend the trial Memorandum but were not disclosed. Appellants also
court erred by granting Holdings' motion for summary alleged Holdings failed to disclose a due-diligence
judgment on their affirmative defenses. The standard report stating that the Frankford Springs real estate
for reviewing a traditional summary judgment is project would never perform as represented.
well established. SeeNi.:wn v. A1r. Prop. Mgmt. Co.,
690 S. W.2d 546. 548-49 (Tex.l985); ,'lk.·1fee, Inc. *5 [1] Holdings moved for summary judgment on
v. Agilysys, bu:., 316 S.W.3d 820. 825 (Tex.App ...-· the fraud defenses, asserting appellants disclaimed
Dallas 2010, no pet.). The movant has the burden of in the Agreement the element of reliance necessary
showing that no genuine issue of material fact exists for appellants' affirmative defenses based on fraud.
and that it is entitled to judgment as a matter of Reliance by the party asserting fraud is an element
law. TEX. R. ClV. P. l66a(c). In deciding whether a of the defenses of fraudulent inducement, fraudulent
disputed material fact issue exists precluding summary concealment, and fraud by nondisclosure. In re Int'l
judgment, evidence favorable to the nonmovant will be Pr(?fit Assocs.. Inc., 274 S.W.3d 672, 678 ('I'ex.2009)
taken as true. Nixon. 690 S. \V .2d at 549; 1n re Estate of (false representation "was intended to be and was
Beny, 280 S.W.3d 478, 480 (Tex.App.-Dallas 2009, relied upon by the injured party" as element of
no pet.). Every reasonable inference must be indulged fraudulent inducement); Wise v. SR Dall., LLC, 436
in favor of the nonmovant and any doubts resolved in S.W.Jd 402,409 (Tex.App.·-Dallas 2014. no pet.)("the
its favor. City of Keller v. Wilson, 168 S. W .3d 802, listener relies on the nondisclosure resulting in injury"
824 (Tex.2005 ). We review a summary judgment de is element of fraud by nondisclosure); Mitchell Energy
novo to determine whether a party's right to prevail is Corp. v. Bartlett, 958 S.\V.2d 430, 439 (Tex.App.·-··
established as a matter oflaw. Dickey v. Club Cmp., 12 Fort \Vorth 1997, pet. denied) ("plaintiffs reasonable
S.Vv.3d 172, 175 (Tex.App.-Dallas 2000. pet. denied). reliance on the deception" is element of fraudulent
When a trial court's order granting summary judgment concealment).
does not specify the grounds relied upon, the reviewing
court must affirm the summary judgment if any of [2] [3] [4] In general, a contract is subject to
the summary judgment grounds are meritorious. Fi\1 avoidance on the ground of fraudulent inducement.
Props. Operating Co. v. City ofAustin, 21 S.\V.3d However, in some situations, the parties can agree
868, 872 (Tex.2000); Furmanite Worldwide, Inc. v. in the contract to waive the right to assert fraud
NextCorp.. Ltd, 339 S.\V.3d 326, 331 (Tex.App.- as a defense to breach of the contract by expressly
Dallas 20 ll, no pet.). disclaiming reliance. SeeForest Oil Corp. v. J\!cA/len,
268 S.W .3d 51, 58 (Tex.2008); Schlumbet~qer Tech.
Coq;. v. Swanson, 959 S.\V.2d 171, 179 (Tex.1997).
The factors most relevant to whether there was a
Fraud
waiver of reliance precluding an affirmative defense of
In the first three issues, appellants contend the fraud are whether:
trial court erred by granting Holdings' motion for
1. the terms of the contract were negotiated, rather
summary judgment on appellants' affirmative defenses
than boilerplate, and during negotiations the parties
of fraudulent inducement, fraudulent concealment, and

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Leibovitz v. Sequoia Real Estate Holdings, L.P., --- S.W.3d ---- (2015)

specifically discussed the issue which has become
the topic of the subsequent dispute; J. Review and Understanding ofAgreement

2. the complaining party was represented by a. The Parties ... acknowledge and agree that
counsel; they have carefully read this Agreement and have
asked any questions needed to understand the
3. the parties dealt with each other in an arm's length terms, consequences and binding effect of this
transaction; Agreement.

4. the parties were knowledgeable in business b. Each Owner acknowledges and agrees that the
matters; and Attorneys have not made and will not make any
representations, warranties and/or covenants with
5. the release and non-reliance language was clear. respect to any federal, state or local income tax
consequences to the Owners ....
Forest Oil Corp., 268 S.W.3d at 60. The court also
added a sixth factor, stating the fact that an agreement *6 c. The Parties ... acknowledge and agree
is a "once and for all" settlement constitutes an that they are sophisticated and that they
additional factor for rejecting fraud-based claims. Id had an opportunity to review this Agreement
at 58. with independent legal counsel, accountants,
CPAs, advisors and/or other professionals or
Concerning the fifth factor, the supreme court stated representatives of their own choosing.
the factor with reference to clarity of the release
language, but throughout the opinion, the court d. The Parties ... further understand that this
examined the clarity of the non-reliance language as Agreement is the full, final and complete
well. For example, "[a]n all-embracing disclaimer of agreement between the Parties, even if the final
any and all representations ... shows the parties' clear tax consequences and/or monetary distributions
intent." ld at 58; see a/soid at 59 ("the release ... are different from what was original[ly]
mak[es] clear that at the time of the agreement, the anticipated by the Owners.
parties disclaimed reliance"). In rejecting the argument
that the breadth of the clear non-reliance language e. The Parties ... represent and warrant that
should be viewed as limited to the more narrow release they have been fully informed and have full
language, the court reasoned that the parties' agreement knowledge of all of the terms, provisions,
"makes clear the parties intended an exhaustive waiver conditions, and effects of this Agreement, and
unconfined to claims specifically released." ld at 59. they are fully satisfied with the terms and effects
Therefore, we understand that the subject of the fifth of this Agreement.
factor is the clarity of both the language effecting the
f. The Parties ... warrant and represent that they
release and the language disclaiming reliance.
have full standing and capacity to enter into this
Agreement, that they execute this Agreement of
Whether a contract's disclaimer-of-reliance provision
their own free will and accord for the purposes
negates an assertion of fraud as a defense is a question
and the consideration set forth herein.
oflaw reviewed de novo. ld at 55 & n. 9.
g. The Parties .. . warrant and represent that no
The Agreement provided, promise or inducement has been offered or made,
except as herein set forth, and that this Agreement
D. Jointly Drafted; Savings Clause
is executed voluntarily and without reliance upon
any statement or representation by any party,
The Parties 7 ••• agree that this Agreement was
lawyer or third party.
jointly drafted and shall not be construed against any
party .... (Footnote and emphasis added.)

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Leibovitz v. Sequoia Real Estate Holdings, L.P., --- S.W.3d ---- (2015)

subsequent fraudulent inducement claim. We disagree.
Under Forest Oil Corp., "the topic of the subsequent
Negotiation of the Terms of the Contract
dispute" is the specific contract term being asserted
that Are the Subject of the Current Dispute
against the party claiming fraud. 8 This interpretation
[51 The first factor set forth in Fore:.u Oil Corp. goes along with the rest of the factor that "the terms of
for determining whether a disclaimer of reliance is the contract were negotiated, rather than boilerplate."
enforceable is whether "the terms of the contract Forest Oil C01p.. 268 S.\V.3d at 60. The terms of the
were negotiated, rather than boilerplate, and during contract and the factual basis of the subsequent fraud
negotiations the parties specifically discussed the issue claim are such different concepts that we believe the
which has become the topic ofthe subsequent dispute." supreme court would have made them different factors.
Forest Oil Corp., 268 S.\V.3d at 60. In this case, Also, in Forest Oil Corp., the court's analysis of the
the Agreement states that it was "jointly drafted" by enforceability of the contract concerned the terms of
the parties, which indicates its terms were negotiated. the contract Forest Oil was seeking to enforce, an
Also, Leibovitz states in his affidavit of August 9, arbitration provision and a disclaimer of reliance, not
20 12, that there were negotiations leading to the the allegations in the subsequent lawsuit.
Agreement: "With regards to claims by Plaintiff in
their MSJ facts that I was never represented by the In Forest Oil Cmp.. the disclaimer of reliance stated
law firm of Walters [Bali do] and Crain in the review the parties were not "relying upon any statement
and negotiation of the subject settlement agreement or any representation of any agent of the parties
in the lawsuit styled Tamera Franklin et al. v. David being released." /d. at 54 n. 4. The parties released
Freeman et al., Cause No. 10-10364, 193rd Judicial all claims "in any manner relating to" certain oil
District, Dallas County, Texas [sic]." The "subject and gas leases. lei at 53. The parties also agreed
settlement agreement" of the Franklin v. Freeman to arbitrate all claims for environmental damage
lawsuit is the Agreement, so appellants have conceded and personal injuries "relating to" the leases. When
the Agreement was negotiated. This is evident from McAllen sued Forest Oil for environmental damage,
the provision of the Agreement that the parties would Forest Oil invoked the arbitration clause. ld at 54.
dismiss with prejudice their claims in the "Franklin- McAllen argued the arbitration provision was induced
Behunin-SREM Lawsuit," which was defined as by fraud and was therefore unenforceable because
meaning "Case No. DC-10-10364-L." The cause a lawyer for Forest Oil told him there was no
numbers ofthe lawsuits mentioned in the affidavit and environmental contamination on the property. ld at
in the Agreement are the same. Therefore, "the subject 55. McAllen argued that the disclaimer of reliance
settlement agreement," the "negotiation" of which applied only to the released claims and not to the
Leibovitz states he was not represented by "Walters arbitration provision. ld. at 58·--59. The supreme
[Balido] and Crain," was the Agreement at issue in court disagreed and stated, "the parties disclaimed
this appeal. Accordingly, appellants have conceded the reliance with respect to all decisions being made
Agreement was negotiated. during negotiations, including the decision to resolve
future disputes regarding environmental and personal-
*7 Appellants also argue that the parties did not injury claims via arbitration." Id at 59. The court's
specifically discuss the issues that became the topics decision was not based on any similarity between the
of this dispute, namely, ( 1) Behunin's combining the topics of discussion during negotiations and the factual
funds of multiple investment projects and using the allegations of McAllen's fraudulent inducement claim.
funds from Frankford Springs to pay the shortfalls
of other investments managed by Behunin and Likewise, in this case, "the parties disclaimed reliance
his entities, and (2) Holdings' failure to include with respect to all decisions being made during
the due diligence report showing the unprofitable negotiations,"id. including the decisions that the
nature of Frankford Springs in the Private Placement parties released one another "from any and all
Memorandum. Under appellants' interpretation, then, presently existing claims ... , whether known or
"the issue which has become the topic of the unknown, relating to and/or arising in any way
subsequent dispute" is the factual basis of the out of the Dispute, the Property, and/or any other

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Leibovitz v. Sequoia Real Estate Holdings, L.P., --- S.W.3d ---- (2015)

matter whatsoever from the beginning of time to the which the Agreement defined as including Leibovitz
present." Appellants do not assert on appeal that the and SFS 23. 9 The Agreement also states appellants
parties failed to discuss this release provision in their "had an opportunity to review this Agreement with
negotiations. independent legal counsel." In an e-mail, Leibovitz
referred to "my attorney" addressing Leibovitz's
However, even if it were required that the parties concerns about the defamation lawsuit, which was
had to have discussed the facts of the subsequent one of the disputes leading to the Agreement. In
lawsuit, the facts discussed by the parties during his affidavit, Leibovitz stated that Walters Balido &
negotiation of the Agreement were closely related to Crain were not representing him on the settlement
the facts alleged in this lawsuit. The Agreement settled agreement. However, that testimony is not evidence
the two pending lawsuits, which involved the issues that he did not have counsel to advise him about the
of what happened to the money generated by the Agreement.
property and appellee's failure to disclose information
in the Private Placement Memorandum showing that Leibovitz also testified in his deposition that he did
the investment could not meet the promised rate not have counsel to advise him on the Agreement and
of return and would be unprofitable. These lawsuits that Eastman did not represent him or SFS 23. Even
were dismissed by the Agreement. Appellants' claims if Leibovitz signed the Agreement without consulting
of fraud in this case-the failure to disclose in the an attorney, the Agreement states, and Leibovitz does
Private Placement Memorandum the integration of the not dispute, that he "had an opportunity to review this
investment funds for Frankford Springs with those of Agreement with independent legal counsel." The fact
other investment projects and the failure to disclose that Leibovitz had the opportunity to consult a lawyer
the due diligence report showing the unprofitability (as stated in the Agreement) and the evidence that he
of the investment-involve those same issues of what had access to attorneys (as shown by his representation
happened to the money in the investment and the by an attorney in the defamation lawsuit and the
failure to disclose necessary information in the Private Agreement's statement that there was an attorney
Placement Memorandum. See Tex. Std. Oil & Gas, L. P. for the Owners) support enforcement of the waiver-
l'. Frankel Offihore Energy, Inc .. 394 S.\V.3d 753,
of-reliance provision. SeeRAS Grp., Inc. v. Rent-A-
772 (Tex.App.-lfouston [14th Dist.] 2012, no pet.) Center E., Inc., 335 S.W.3d 630, 640 (Tex.App.-·-·
("However, the Forest Oil court did not opine that Dallas 10 I0. no pet.)(fact that parties had lawyers they
the parties must have discussed the exact grounds that regularly used and had the opportunity to consult with
form the basis of the subsequent dispute, in order to them supported enforcement of disclaimer-of-reliance
satisfy this factor."); cfF'orest Oil CoqJ., 168 S.W.3d clause even though parties testified they could not
at 58 (parties' negotiations discussed environmental remember if they submitted the agreement to their
matters and treatment of surface issues, which touched lawyers). Leibovitz's personal decision not to protect
on the subject of the fraud, the burying of highly toxic, his interests by having counsel advise him on the
mercury-contaminated material on the property). Agreement should not bar enforcement of the waiver-
of-reliance provision.
*8 We conclude appellants have not shown the trial
court erred by determining "the parties specifically
discussed the issue which has become the topic of the
subsequent dispute." Arm's-Length Transaction

(7) The record also shows the Agreement was an
arm's-length transaction. At the time ofthe Agreement,
Representation by Counsel Leibovitz and other investors were in litigation against
Holdings, and the record shows there were attorneys
[6] Concerning whether appellants were represented on all sides. Leibovitz admitted in his affidavit that
by counsel before signing the Agreement, a provision there were "negotiations" leading to the Agreement.
of the Agreement (not quoted above) states that We conclude this evidence established the Agreement
Joel M. Eastman was the attorney for the "Owners," was an arm's-length transaction.

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and concerning any "matter whatsoever, from the
beginning oftime to the present."

Knowledgeable in Business Matters

[8] The next factor is whether the parties were "Once and for All" Settlement
knowledgeable in business matters. The Agreement
states the parties "are sophisticated." In order to invest [10] The Agreement is clear that the settlement was
in the project, Leibovitz and his wife must have had intended to be a "once and for all" settlement. The
combined incomes of more than $300,000 per year Agreement stated,
for the preceding two years and prospects of the
same for the following year or assets of more than For the purpose of implementing a full and complete
$1 million. See supra note 3. Leibovitz states in his release and discharge of each other, the Parties
affidavit that he is not a lawyer, real estate broker, expressly acknowledge that this Agreement is
or securities investment professional, but these facts intended to include in its effect, without limitation,
do not show he was not "sophisticated." Moreover, any and all claims that the Parties do not know or
the Private Placement Memorandum required that suspect to exist in their favor at the time of execution
all investors state in writing that they "have such hereof, and that this Agreement contemplates the
knowledge and experience in financial and business extinguishment of those claims.
matters that [they] are capable of evaluating the merits
and risks of an investment in an Interest and have the
ability to protect [their] own interests in connection It is the express intention of the Parties to this
with such investment." By entering into the investment Agreement that these mutual releases and associated
with these requirements, Leibovitz conceded he was definitions be construed as broadly as possible
knowledgeable in business matters. to effectuate the Parties' desire for absolute and
complete peace going forward in relation to all
dealings between them whatsoever. The Parties do
Clarity of the Release and not intend to except any entity or claim of any
Disclaimer-of-Reliance Language kind from these releases, except breaches of this
Agreement.
*9 [9] The language of the release and non-reliance
clauses is clear. In addition to the parties releasing The Agreement could not be clearer that the parties
one another from "any and all presently existing intended the Agreement to be a "once and for all"
claims, demands, promises, causes of action, and/ settlement of all claims related to the investment. As
or similar rights of any type of whatever kind or the supreme court stated in Forest Oil Corp.. the fact
nature ("Claim"), whether known or unknown, relating that an agreement is a "once and for all" settlement is
to and/or arising in any way out of the Dispute, an additional factor for rejection of fraud-based claims.
the Property and/or any other matter whatsoever SeeForest Oil Corp., 268 S.\V.3d at 58.
from the beginning of time to the present," those
who signed the Agreement acknowledged that they
did so "voluntarily and without reliance upon any Special Relationship
statement or representation by any party, lawyer
or third party." (Emphasis added.) In other words, Appellants contend the trial court erred by granting
the parties did not rely on any representation by Holdings' motion for summary judgment on appellants'
any other party when they gave up any rights they affirmative defenses of fraudulent concealment and
may have had regarding a complaint about another fraudulent inducement because there was a special
party that existed on March 31, 2011, the effective relationship between Holdings and appellants resulting
date of the Agreement, regardless of whether the in a fiduciary duty to disclose material facts and
complaining party knew of the complaint's existence, information related to the investment. Regardless of
the factual basis for the assertion of fraud, appellants

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Leibovitz v. Sequoia Real Estate Holdings, l.P .• --- S.W.3d ---- (2015)

would have to prove reliance, which they disclaimed. United States, shall be fined
Appellants do not cite any authority concluding that a under this title or imprisoned
disclaimer of reliance is not enforceable by a fiduciary not more than three years, or
against a party to whom the duty was owed. SeeTex. both.
Std Oil & Gas, L P. v. Frankel C?tlshore Energy, Inc.,
394 S.vV.3d 753, 774-76 (Tex.App.-Houston [14th 18 U.S.C. § 4. Misprision of felony has four elements:
Dist.] 2012, no pet.)(supreme court has not expressly (1) a felony was committed; (2) the accused had
held that fiduciary relationship bars disclaimer of knowledge of the felony; (3) the accused failed
reliance). to notify authorities; and (4) the accused took an
affirmative step to conceal the crime. United States v.
Davila, 698 F.2d 715,717 (5th Cir.l983).

Conclusion [13] [14] "A contract to do a thing which cannot
be performed without a violation of the law is void."
After considering all six factors under Forest
Leu•is v. Davis. 145 Tex. 468, 199 S.W.2d 146, 148-
Oil Corp.. we conclude the Agreement's provision
49 (1947) (quoting Tex. Emp'rs'lns. Ass'n v. Tabor,
that appellants disclaimed the element of reliance
283 S.W. 779, 780 (Tex.Com.App.1926, judgm't
necessary to bring a fraudulent concealment,
adopted)). When the illegality does not appear on the
fraudulent inducement, or fraud by nondisclosure
face of the contract, it will not be held illegal and thus
affirmative defense is enforceable against appellants as
void unless the facts showing its illegality are before
a matter of law. We overrule appellants' first, second,
the court. ld at 149.
and third issues.

The confidentiality provision in the Agreement stated:

Misprision of Felony L. Confidentiality and Non-Disparagement

[11] In their fourth issue, appellants contend the As mutual consideration for entering into this
trial court erred by granting Holdings' motion Agreement, the Parties, the Released Group, and
for summary judgment on appellants' affirmative each of their resp~ctive attorneys agree and
defense of misprision of felony. Appellants assert the acknowledge that the fact ofthis Agreement and the
enforcement of the confidentiality provision of the terms and conditions of this Agreement, including
Agreement would prevent appellants from reporting the amount of consideration paid in connection with
Holdings' and Behunin's felonious activities, which the resolution of the Dispute are confidential and
would make appellants guilty of the federal offense shall not be disclosed to any individual or entity.
All Parties, members of the Released Group, and
of misprision of felony. 10 Appellants argue that
their attorneys agree that the response to any inquiry
because the Agreement cannot be performed without
by anyone about the status or disposition of the
the commission of a crime, the Agreement violated
lawsuits or any Claims related to the Dispute or
public policy and is void.
the Property shall be limited to the following: "The
case was resolved by the agreement of the parties."
*10 [12] Title 18, section 4 of the United States
Notwithstanding the above, any party may disclose
Code provides:
such information to the extent reasonably necessary
Whoever, having knowledge of for the purpose of tax or securities law compliance
the actual commission of a and/or other legitimate business purposes and/or
felony cognizable by a court of responding to any other regulatory proceedings or
the United States, conceals and inquiry or as otherwise required by any law or
does not as soon as possible governmental rule or regulation or court order.
make known the same to some
The Parties and each member of the Released
judge or other person in civil
Group further agree not to make any derogatory,
or military authority under the

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Leibovitz v. Sequoia Real Estate Holdings, L.P., --- S.W.3d ---- (2015)

disparaging and/or untruthful statements about any legal right to do; (2) some illegal exaction or some
other party to any person or entity (although this fraud or deception; and (3) the restraint is imminent
restriction shall not be construed to limit any and such as to destroy free agency without present
party's truthful testimony). The Parties and each means of protection. Simpson v. it!Bank Dall., N.A.,
member of the Released Group, as well as their 724 S.W.2d 102, 109 (Tex.App.--Dallas 1987, writ
respective attorneys, acknowledge and agree that refd n.r.e.). Whether the conduct or acts of the party
these confidentiality provisions are material terms accused constitute duress is a question of law, but
of this Agreement and substantial inducements to whether duress exists in a particular situation is a
the settlement of this matter. The Parties and each question of fact dependent upon the circumstances
member ofthe Released Group further acknowledge surrounding the situation, including the mental effect
and agree that any violation of this paragraph on the party claiming duress. Schuhardt Consulting
shall be a breach of this Agreement entitling Profit Sharing Plan v. Double Knobs Mountain Ranch,
the non-breaching party, in addition to any other Inc., No. 04-13-00529-CV,- S.\V.3d --~ - - ,
rights or remedies afforded at law or in equity, 2014 \VL 7185081, at *15 (Tex.App.-San Antonio
to immediate injunctive relief against any further Dec. 17,2014. no pet. h.); i\1atthews v. 1\1atthews, 725
violations thereof. S.W.2d 275.278 (Tex.App.--Houston [lst Dist.] 1986,
writ refd n.r.e.).
*11 (Emphasis added.) To the extent parts of this
provision may prohibit a party from reporting another Holdings moved for summary judgment on several
party's illegal activities to an "authority under the grounds, including that there was no economic duress
United States," those prohibitions are nullified by as a matter of law because appellants expressly
the statement that the Agreement does not prohibit a disclaimed any duress. The Agreement stated,
party from disclosing information as required by law.
Under this provision, the Agreement would not prevent I. No Duress or Undue Influence ...
appellants from reporting felonious activities, if any,
to the appropriate authorities. Therefore, as a matter of The Parties and the Released Group acknowledge
law, the Agreement may be enforced without any party and agree that they enter into this Agreement
being guilty of misprision of felony. voluntarily and without any duress or undue
influence.
We overrule appellants' fourth issue.
[18) The parties presented almost no argument and
cited no cases concerning whether economic duress
can be disclaimed in a contract. Likewise, we have
Economic Duress found no authority on the subject. However, just as the
element of reliance may be expressly waived in certain
In their fifth issue, appellants contend the trial court
cases where it is clear that adequate due-process
erred by granting summary judgment on appellants'
protections exist, so also should the parties be allowed
affirmative defense of economic duress. Appellants
to include a term that the parties were not under duress
alleged they signed the Agreement because Behunin
when they signed it. As the supreme court stated in
and Holdings had withheld payment of the mortgage
Schlumberger, "Parties should be able to bargain for
and threatened to let the property go into foreclosure
and execute a release barring all further dispute."
unless all the parties to the Agreement signed it. 11 Schlumherger. 959 S.\V.2d at 179. The supreme court
Appellants assert "[t]here was a scintilla of evidence stated "[t]his principle necessarily contemplates that
creating a material issue of fact." 12 parties may disclaim reliance on representations." 1d
If parties may disclaim reliance in a case that meets
[15] [16] [17] Economic duress is a defense to all the factors set forth in Schlumberger and Forest
enforcement of a contract. King v. Bishop, 879 S. \V .2d Oil Cmp., then we fail to see why the right of the
222, 224 (Tex.App.··-Tlouston [14th Dist.] 1994, no parties "to bargain for and execute a release barring
writ). The elements of the defense are: (1) a threat all further dispute" should not permit the parties
to do something that the threatening party has no to disclaim economic duress. Where an arms-length

VVestlavvNe:d 20i 5 Thornson 17
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Leibovitz v. Sequoia Real Estate Holdings, L.P., --- S.W.3d ---- (2015)

contract is negotiated, the parties are sophisticated, prove (1) a wrongful act; (2) imminent harm; (3)
they are represented by counsel or had the opportunity irreparable injury; and (4) no adequate remedy at
and means to obtain representation, the disclaimer law. Henning v. One West Bank I~:S'B, 405 S.W .3d
of duress is clear, and the parties intended for the 950, 970 (Tex.App.-Dallas 2013, no pet.). We review
contract to create an end to all disputes between the trial court's grant or refusal of a permanent
them, we conclude that parties may disclaim economic injunction to determine whether it clearly abused its
duress. As discussed above, the Agreement meets all discretion. Priest v. Tex. Animal Health Comm'n,
ofthese factors. Accordingly, we conclude as a matter 780 S. \V.2d 874. 875 (Tex.App.--··Dallas 1989, no
of law that appellants' statement that they signed the writ). The trial court abuses its discretion when it
Agreement "voluntarily and without any duress or acts arbitrarily and unreasonably, without reference to
undue influence" is enforceable. guiding rules or principles, or misapplies the law to the
established facts ofthe case. Triantaphyllis v. Gamble,
*12 We overrule appellants' fifth issue. 93 S.W.3d 398. 402 (Tex.App.-Houston [14th Dist.]
2002, pet. denied). A trial court's clear failure to
analyze and apply the law correctly constitutes an
abuse of discretion. See Webb v. Glenbrook Owners
INJUNCTION
Ass'n, h1c., 298 S.W.3d 374. 380 (Tex.App.--·Dallas
In the sixth through ninth issues, appellants contend 2009, no pet.). Under an abuse of discretion standard,
the trial court erred by granting Holdings' request for the legal and factual sufficiency of the evidence are not
a permanent injunction against SFS 23. Appellants independent grounds for reversal, but the sufficiency
do not challenge the applicability of the injunction to of the evidence is a relevant factor in determining
Leibovitz. whether the trial court had sufficient evidence to
exercise its discretion. Beaumont Bank N.A. t'. Buller,
The trial court's order imposing the injunction states 806 S.\V.2d 223.226 (Tex.1991).
appellants would breach the Agreement by (1) filing
new claims; (2) contacting Holdings' investors and (22] [231 [24] 125] When reviewing the legal
making known to them the derogatory allegations sufficiency of the evidence, we consider all the
of such claims; and (3) making the terms of the evidence, crediting evidence in support of the verdict
Agreement public. The court observed that both if reasonable jurors could, and disregarding evidence
appellants expressly consented in the Agreement to contrary to the verdict unless reasonable jurors could
injunctive relief to prevent further violations of the not. City qf Keller v. Wilson. 168 S.W.3d 802. 823,
Agreement. The court ordered that appellants (a) not 827 (Tex.2005); Aforris v. I'Vells Fargo Bank, N.A.,
disclose the existence or terms of the Agreement 334 S.W.3d 838, 842 (Tex.App.·-Dallas 2011, no
to anyone not a party to the Agreement; (b) not pet.). If there is more than a scintilla of evidence to
communicate with Holdings' 160 other investors; and support the finding, the evidence is legally sufficient.
(c) not bring any claims, grievances, or other litigation Formosa Plastics C01p. USA v. Presidio Eng'rs &
relating to or arising out of any claim relating to the Contractors, Inc.. 960 S.W.2d 41, 48 (TexJ 998).
Dispute as defined in the Agreement, the property, When the evidence offered to prove a vital fact is so
Holdings, or any other matter. The order stated it weak as to do no more than create a mere surmise or
did not prohibit appellants from providing testimony suspicion of its existence, the evidence is no more than
requested by any state or federal regulatory authority, a scintilla and, in legal effect, is no evidence. Kindred
and it did not prohibit appellants from reporting a v. Cow'Chem, Inc.. 650 S. W.2d 61, 63 (Tex.l983). If
crime to law enforcement officials. the evidence furnishes a reasonable basis for differing
conclusions by reasonable minds as to the existence of
[19] [20] [21] Appellants contend the trial court a vital fact, then there is legally sufficient evidence,
should not have granted the injunction against SFS more than a scintilla, to support the fact. I d.
23 because Holdings failed to prove the elements
required to obtain an injunction. To be entitled to *13 [26] When reviewing the factual sufficiency of
a permanent injunction, a plaintiff must plead and the evidence, we examine all the evidence and set aside

8
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Leibovitz v. Sequoia Real Estate Holdings, LP., --- S.W.3d ---- (2015)

a fmding only if it is so contrary to the evidence as to broad. Rule of civil procedure 683 provides that
be clearly wrong and unjust. 1\faritime Overseas Corp. injunctions are "binding only upon the parties to the
v. Ellis, 971 S.W.2d 402, 407 (Tex.l998); Cameron action, their officers, agents, servants, employees, and
v. Cameron, 158 S.\V.3d 680, 683 (Tex.App.-Dallas attorneys, and upon those persons in active concert or
2005, pet. denied). In conducting our review of both participation with them who receive actual notice of
the legal and factual sufficiency ofthe evidence, we are the order by personal service or otherwise." TEX.R.
mindful that the fact finder was the sole judge of the CIV. P. 683. Appellants contend SFS 23 does not fall
credibility of the witnesses and the weight to be given into these categories because it was not "in active
their testimony. City ~~Keller, 168 S.\V.3d at 819; concert or participation" with Leibovitz. We disagree.
Hinkle v. Hinkle, 223 S.\V.3d 773, 782 (Tex.App.-- Leibovitz was the manager ofSFS 23's general partner.
Dallas 2007, no pet.). We may not substitute our The evidence did not show that Leibovitz's actions in
judgment for the fact finder's, even if we would breach ofthe Agreement were made solely on his own
reach a different answer on the evidence. SeeAfaritime behalf and not on behalf of SFS 23. The trial court
0Perseas Corp., 971 S.W.2d at 407; Hinkle. 223 could conclude from the evidence that SFS 23 was "in
S. \V .3d at 782. active concert or participation with" Leibovitz.

Wrongful Act Imminent Harm and Irreparable Injury

[27] Appellants argue there was no evidence SFS 23 *14 [29] [30] Appellants also argue there was no
performed or threatened to perform a wrongful act. evidence of imminent harm or irreparable injury. An
They argue that Holdings had to show an act or threat injury is irreparable if the injured party cannot be
by SFS 23 separate or independent of any threat or compensated in damages or if the damages cannot be
act by Leibovitz. We disagree. Limited partnerships, measured by any certain monetary standard. Butnaru
such as SFS 23, act only through their general partners, v. Ford lvlotor Co .. 84 S.W.3d I 98, 204 (Tex..2002).
and Leibovitz was the manager of the corpration As part of the Agreement, appellants promised not
that was SFS 23's general partner. SeeTEX. BUS. to make derogatory or disparaging statements about
ORGS.CODE ANN. §§ 153.102, .152(a)(l) (West any other party to the Agreement to any person or
2012); Nw. Otolaryngology Assocs. v. iHobilease. entity. In an e-mail sent to the brokers who enrolled
Inc .. 786 S.\V.2d 399. 404 (Tex.App.-Texarkana Leibovitz in the Sequoia Frankford Springs investment
1990, writ denied) ("A limited partnership acts only offering, Leibovitz threatened to file a complaint about
through its general partner."). Appellants do not the investment with FINRA and to send that complaint
contest that Leibovitz performed or threatened to to the 160 investors in the other Sequoia investment
perform a wrongful act, and Leibovitz admitted offerings. At the hearing on whether to impose a
at trial that he breached the Agreement. Behunin temporary injunction, Leibovitz testified that unless
testified that Leibovitz threatened to communicate he were enjoined, he would file the complaint with
with the investors in other Sequoia offerings about FINRA and send a copy of it to every investor in the
the problems in the Sequoia Frankford Springs other Sequoia investment offerings. Behunin testified
offering. 13 Leibovitz was the manager of SFS 23's that Leibovitz's threatened actions, if carried out,
general partner. The trial court could have concluded would "significantly" damage Holdings' reputation
Leibovitz breached the Agreement in his role as and require "significant time and money" to repair.
manager of SFS 23's general partner as well as on his The trial court could construe this evidence as showing
own behalf. an imminent threat to disparage and make derogatory
remarks about Behunin, Sequoia Frankford Springs,
and Holdings to persons who were not parties to the
Agreement.
Breadth of the Injunction
"[A]ssigning a dollar amount to such intangibles as
[28) Appellants also contend the inclusion of SFS
a company's loss of clientele, goodwill, marketing
23 in the injunction made the injunction overly

9
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Leibovitz v. Sequoia Real Estate Holdings, l.P., --- S.W.3d ---- (2015)

techniques, and office stability, among others, is not 625. The Supreme Court held that such a restraint
easy." Frequent Flyer Depot, Inc. v. Am. Airlines, on future speech was unconstitutional even though
Inc., :281 S.\V.3d 215. 228 (Tex.App.·-··Fort Wmth it was preceded by defamatory material. Jd. at 722-
2009, pet. denied). The trial court could determine 23, 51 S.Ct. 625. In Keefe, a group of picketers
from Behunin's testimony that Leibovitz's threat to and pamphleteers was enjoined from protesting a real
send copies of a FINRA claim to the investors in the estate developer's business practices, Keefe. 402 U.S.
other Sequoia investments, if carried out, would cause at 417, 91 S.Ct. 1575, and the Court held this restraint
Holdings injury that either cannot be compensated by on free expression unconstitutional, id at 419-··20, 91
damages or that cannot be measured by any certain S.Ct. 1575. Neither case is applicable to the case before
monetary standard. us. In this case, appellants agreed not to engage in
certain actions, including disparagement of the other
We conclude there was legally and factually sufficient parties, and appellants agreed that violation of that
evidence of imminent harm and irreparable injury. provision could be enforced through injunctive relief.
Near and Keefe did not involve such agreements,
which is an important distinction between those cases
and the facts before us. If appellants' theory of the
No Adequate Remedy at Law
law were correct, then any agreement not to disclose
[31] [32] Appellants also assert Holdings failed information would be unenforceable, which is clearly
to prove it lacked an adequate remedy at law. An not correct. SeeTmn James ofDall., lnc. v. Cobb, 109
existing legal remedy is adequate if it is as complete, S.\V.3d 877, 888 (Tex.App.-Da1las 2003, no pet.) ("A
practical, and efficient to the ends of justice and its non-disclosure agreement may be enforceable even
prompt administration as is equitable relief. Brazos if a covenant not to compete is not."); Zep I\4jg.
River Conservation & Reclamation Dist. v. Allen, 141 Co. v. llarthcock, 824 S.\V.2d 654, 663 (Tex.App.-
Tex. 208, 171 S.\V.2d 842, 846 (1943); Hilb, Rogal Dallas 1992, no writ) ("nondisclosure covenants are
& Hamilton Co. of Tex. v. Wur=man. 861 S.W.2d not against public policy").
30, 32 (Tex.App.---Dallas 1993, no writ). Behunin's
testimony that it would take "significant time" to *15 Appellants also cite atticle l, section 8 of the
repair the damage from appellants carrying out the Texas Constitution, which provides,
threat to send the FINRA complaint to the investors
Every person shall be at liberty
in the other Sequoia investments shows that enjoining
to speak, write or publish his
appellants from contacting the other investors before
opinions on any subject, being
he carried out the threat was a more efficient remedy
responsible for the abuse of that
than any award of damages after appellants had sent
privilege; and no law shall ever
the complaint to the other investors. We conclude
be passed curtailing the liberty
there was legally and factually sufficient evidence that
of speech or of the press.
Holdings lacked an adequate remedy at law.
TEX. CONST. art. I, § 8. However, appellants do not
cite any case where the enjoined party had agreed in
Prior Restraint on Speech a written contract to a restriction on his speech and
agreed that the restriction could be enforced through
[33) Appellants also contend the injunction is an injunctive relief.
illegal prior restraint on speech. Appellants cite two
cases, Near v. A1innesota ex ref. Olson 283 U.S. In this case, the prior restraint on appellants' speech
697. 51 S.Ct. 625, 75 L.Ed. 1357 (1930), and was the Agreement. The injunction was narrowly
Organi:=ation for a Better Austin v. Keefe, 402 U.S. tailored and did nothing more than enforce the restraint
415, 91 S.Ct. 1575, 29 L.Ed.2d 1 (1971). In Near, a on speech appellants agreed to in the Agreement. We
permanent injunction barred a newspaper from ever conclude appellants have not shown the injunction
publishing again because of its history of publishing constituted an illegal prior restraint.
defamatory articles. Near, 283 U.S. at 706, 51 S.Ct.

20
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Leibovitz v. Sequoia Real Estate Holdings, L.P., --- S.W.3d ---- (2015)

The sole jury question in this case was:
We overrule appellants' sixth through ninth issues.
What sum of money, if any, if paid now in cash,
would fairly and reasonably compensate Sequoia
JURY CHARGE Real Estate Holdings, L.P. ("Sequoia") for its
damages, if any, that resulted from the failure of
[34] [35] In their tenth issue, appellants contend the any of the following to comply with the Settlement
trial court erred by submitting a damages question Agreement?
instructing the jury to measure Holdings' damages
under the benefit-of-the-bargain standard. The rules of Consider the following elements of damages, if any,
civil procedure require the trial court to "submit such and none other.
instructions and definitions as shall be proper to enable
The difference, if any, between the value
the jury to render a verdict." TEX.R. CIV. P. 277. A
Sequoia gave in connection with the Settlement
valid instruction assists the jury, accurately states the
Agreement on March 31, 2011 and the value
law, and finds support in the pleadings and evidence.
Sequoia received from the Settlement Agreement
Thotav. Young, 366 S.W.3d 678,687 (Tex.2012). The
at the time of the breach.
trial court has considerable discretion when framing a
jury charge. We do not disturb the trial court's decision
Do not add any amount for interest on damages, if
on which instructions to submit to the jury absent an any.
abuse of discretion. Columbia Rio Grande Healthcare.
L.P. v. Hawley. 284 S.\V.3d 851, 856 (Tex.2009). A Answer separately in dollars and cents for damages,
trial court abuses its discretion by failing to follow if any, for those named below:
guiding rules and principles. I d.

a. Jeffrey Leibovitz: $2,500.00
b. Sequoia Frankford Springs 23, LP: -0-
Leibovitz stated he would "give Mr. Behunin back his
(Jury's answers in italics.) $2,800." Leibovitz then said, "I believe $2,800 is fair."
For damages, Behunin testified to the interest in the The jury awarded Holdings $2,500 against Leibovitz.
investment and potential earnings he and the Sequoia
entities gave up as part of the Agreement. Behunin *16 [36] [37] The jury question asked the jurors
personally gave up about $300,000 of his limited to measure Holdings' damages under the benefit-of-
partnership interest to the other limited partners, and the-bargain standard, which is the difference in the
about $2,800 ofthat interest wentto SFS 23, which was value given and the value received. Baylor Univ.
owned and controlled by Leibovitz. Additionally, the v. Somzichsen, 221 S.\V.3d 632, 636 {Tex.2007).
Sequoia entities, by giving up the management of the Appellants contend that in a suit for breach of a
property, gave up the right to receive about $819,000 settlement agreement, the jury should be asked to
in management fees they probably would have earned determine the amount of consequential damages the
and the right to six percent of the price for the plaintiff suffered, that is, the natural, probable, and
eventual sale ofthe property, which Behunin estimated foreseeable consequence of the defendant's breach
would probably have been at least $2.1 million. The of the settlement agreement, including the attorney's
Sequoia entities also gave up control of the escrows fees the plaintiff incurred in defending the settlement
and reserves, worth about $274,000. According to agreement. Appellants cite two cases in support
Behunin, he and the Sequoia entities he controlled gave of their argument: 11Videner v. Arco Oil & Gas
up about $3.5 million for the settlement. Leibovitz Co.. 717 F.Supp. 1211 (N.D.Tex.l989), and Ganske
conceded that he breached the agreement. When asked v. WRS Group. Inc.. No. l0--··06·····00050--CV, 2007
what he thought the amount of damages he should pay \VL 1147357 (Tex.App.-Waco Apr. 18, 2007, no
as a consequence of his breaches of the Agreement, pet.)(mem.op). 14 Those cases conclude that in a suit

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Leibovitz v. Sequoia Real Estate Holdings, L.P., --- S.W.3d ---- (2015)

involving breach and enforcement of a settlement In the eleventh issue, appellants contend Holdings
agreement that sought to bring an end to litigation or is not entitled to attorney's fees against SFS 23
prevent future litigation, the attorney's fees incurred because Holdings did not establish the elements
by the non-breaching party in enforcing the settlement for a permanent injunction against SFS 23. This
agreement are damages for the breach because they are issue depends upon our sustaining appellants' sixth
a foreseeable consequence of the breach. See Widener, through ninth issues. However, because we overruled
717 F. Supp. at 1217 ("Because the purpose of entering those issues and concluded Holdings established the
into a release is to avoid litigation, the damages a elements for a permanent injunction against SFS 23,
releaser suffers when the release is breached are its we overrule appellants' eleventh issue.
costs and attorneys' fees incurred in defending against
the wrongfully brought action."); Ganske. 2007 WL In the twelfth and thirteenth issues, appellants contend
114 73 57, at *3 ("In an action for breach of contract, the trial court erred by awarding attorney's fees
actual damages may be recovered when the loss is against SFS 23 "because the permanent injunction
the 'natural, probable, and foreseeable consequence against [SFS 23] must be reversed,""the jury failed
of defendant's conduct.' The prior attorney's fees are to find damages [against SFS 23]," and Holdings
such consequences of the breach."(quoting J\1(;'ad v. "failed to plead and prove SFS 23 was jointly and
Johnson 01p., Inc., 615 S.\V.2d 685,687 (Tex.198l ))). severally liable." We have overruled appellants' issues
Those cases did not hold that benefit of the bargain challenging the enforceability of the injunction. The
cannot be an appropriate measure of damages for arguments about the jury failing to find damages
breach of a settlement agreement. Appellants cite no against SFS 23 concern appellants' argument that
cases concluding that Holdings' damages could not be Holdings is not entitled to attorney's fees under section
measured by the benefit of the bargain. 38.00 l of the Texas Civil Practice and Remedies
Code. SeeTEX. CIV. PRAC. & REM.CODE ANN.
Appellants also contend the trial court erred by § 38.001(8) (West 2015). However, we need not
submitting the jury question based on the benefit-of- consider those arguments because the Agreement
the-bargain measure because there was no evidence of provided for attorney's fees.
that measure of damages. Appellants did not object to
the jury charge on that ground. Accordingly, they have *17 [381 The Agreement contained a paragraph
waived any error on that ground. SeeTEX.R. CIV. P. describing the procedures for any future litigation
274 ("Any complaint as to a question, definition, or related to the Agreement. It stated that any
instruction, on account of any defect, omission, or fault dispute, claim, or controversy concerning breach or
in pleading, is waived unless specifically included in enforcement of the Agreement would be resolved
the objections."). through arbitration in Dallas. The paragraph described
the method for selecting the panel of arbitrators and
We conclude appellants have not shown the trial court then described the method of allocating costs and
abused its discretion. We overrule appellants' tenth attorney's fees incurred in the litigation:
issue.
The substantially non-
prevailing party (as determined
by the arbitration panel after
ATTORNEY'S FEES determining the relative success
of the parties, including the
In their eleventh, twelfth, and thirteenth issues,
successful assertion of any
appellants contend the trial court abused its discretion
defense) shall bear any fees
by awarding Holdings its attorney's fees against SFS
and expenses of the arbitrators,
23. In Texas, attorney's fees are not recoverable from
other tribunal fees and
an opposing party unless authorized by statute or
expenses, reasonable attorneys'
contract. Tucker v. Tfwmas, 419 S. W .3d 292, 295
fees of both parties, any costs
(Tex.20 13).
of producing witnesses and
any other reasonable costs or

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Leibovitz v. Sequoia Real Estate Holdings, L.P., --- S.W.3d ---- (2015)

Holdings obtained a permanent injunction against both
expenses incurred by him or the
substantially prevailing party. Leibovitz and SFS 23 to enforce the provisions of the
Agreement prohibiting appellants from filing claims
Because neither side demanded arbitration, the parties against and disparaging other parties to the Agreement,
waived their right to have the dispute determined including contacting the investors in other Sequoia
by an arbitration panel, and the parties elected to investments and making derogatory allegations about
proceed in traditional litigation before a trial court Holdings. We conclude appellants have not shown the
and jury. Regardless of whether the adjudicator was trial court erred by awarding Holdings its attorney's
an arbitration panel or a trial court, it appears the fees against SFS 23. We overrule appellants' twelfth
intent of the parties as expressed in the Agreement and thirteenth issues.
was that the "substantially non-prevailing party" pay
the substantially prevailing party's attorney's fees.
SeeCoker v. Coker. 650 S.W.2d 391, 393 (Tex.l983)
CONCLUSION
("In construing a written contract, the primary concern
of the court is to ascertain the true intentions of the We affirm the trial court's judgment.
parties as expressed in the instrument.").

In this case, Holdings was clearly the substantially All Citations
prevailing party against both appellants. Although
--- S.W.3d ----, 2015 WL 3451675
Holdings did not recover any damages from SFS
23 and only minimal damages from Leibovitz,

Footnotes
1 The Han. Michael J. O'Neill, Justice, Court of Appeals, Fifth District of Texas at Dallas, Retired, sitting by
assignment.
2 All of the investment offerings created or overseen by Behunin and mentioned in the record included the
word "Sequoia" in the name. Thus, the investment offering concerning the Frankford Springs apartment
complex was called "Sequoia Frankford Springs." Likewise, all of the entities involved in the ownership or
management of the investments also included the word "Sequoia" in their names.
3 The Private Placement Memorandum required that each investor "have such knowledge and experience
in financial and business matters that you are capable of evaluating the merits and risks of an investment
in an Interest and have the ability to protect your own interests in connection with such investment." Each
investor also had to qualify as an "accredited investor" under the Securities Act of 1933 by being (1) "a
natural person who had had individual income in excess of $200,000 in each of the two most recent years,
or joint income with your spouse in excess of $300,000 in each of these years, and have a reasonable
expectation of reaching the same income level in the current year;" (2) "a natural person and your individual
net worth, or joint net worth with your spouse, exceeds $1,000,000 at the time you purchase the Interests;"
or (3) "an entity ... in which each equity owner is an accredited investor." See17 C.F.R. § 230.215(e), (f), (h)
(codification of rule 501 of Regulation D defining "accredited investor'').
4 Besides managing the investment offering, Behunin was also a tenant in common in the investment. As part
of the settlement, Behunin transferred about twenty-five percent of his investment (valued by Behunin at
about $282,000) to the other investors. This transfer increased Leibovitz's percentage of ownership from
3.118 percent to 3.197 percent.
5 Behunin revealed how remaining investment funds were pooled in Holdings. Behunin's statements were
part of his testimony in bankruptcy court in 2011 concerning the bankruptcy of another Sequoia tenancy-
in-common investment.
6 Behunin testified that he and the Sequoia entities he controlled assigned their claims against appellants to
Holdings.
7 The agreement defined "Owners" as meaning all the limited partnerships that owned an interest in the
property, including SFS 23, and the partnerships' general partners, including Leibovitz and his wife. "Parties"
was defined as including the Owners, "Sequoia" (which was defined as including specific Sequoia entities,

Government VVorks. 23
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Leibovitz v. Sequoia Real Estate Holdings, L.P., --- S.W.3d ---- (2015)

including Holdings, and their owners, officers, directors, employees, etc.), and Behunin. Thus, appellants
were both "Owners" and "Parties" as defined in the agreement.
8 Part of the difficulty of interpreting the meaning of the language arises from the fact that the supreme court
set forth the factors in Forest Oil Corp. but did not expressly apply them.
9 The Agreement also stated that Eastman was not the attorney for Behunin and his limited partnership that
was one of the tenants in common in the investment.
10 Appellants assert Holdings committed the offenses of misapplication of fiduciary property over $200,000,
TEX. PENAL CODE ANN.§ 32.45(c)(7) (West Supp.2014), exploitation of an elderly individual, id. § 32.53,
and violations of the Texas Securities Act, TEX. REV. CIV. STAT. ANN .. art. 581-29 (West Supp.2014).
11 This case involves a claim of economic duress concerning the subject matter of the Agreement. The alleged
threat in this case does not involve a threat of physical harm or criminal wrongdoing. Whether actual, physical
duress, such as a threat of physical harm to a person, could ever be disclaimed in a contract is not before
us, and we make no determination of that issue. Likewise, we make no determination of whether a threat
of harm to economic interests with no relation to the Agreement could be disclaimed or whether a threat of
criminal wrongdoing to the economic interest that is the subject of the contract could be disclaimed.
12 We presume appellants mean there was more than a scintilla of evidence. A mere scintilla of evidence does
not create a material fact issue and, in legal effect, is no evidence. SeeKindred v. Con/Chem, Inc., 650
S.W.2d 61, 63 (Tex.1983).
13 Appellants argue that their threatened derogatory statements or disparagement of Holdings to investors
in other Sequoia investments was not a proper ground for the injunction because Holdings withdrew that
claim for breach of contract. We disagree. At the conclusion of the first day of the jury trial, the attorney
for Holdings stated that Holdings was not seeking to prove breach of contract beyond those grounds for
breach of contract on which the trial court had granted summary judgment for Holdings. Those grounds for
breach of contract on which the trial court granted summary judgment included "anticipatory repudiation"
and "disparagement." These grounds appear to include appellants' threat to send a copy of a FINRA claim
to the investors in other Sequoia investments. Therefore, appellants' argument that this ground was a not
proper ground for the injunction because Holdings waived it lacks merit.
14 Appellants also cited a third case, Guffey v. Clark, No. 05-93-00849-CV, 1997 WL 142750 (Tex.App.-
Dallas Mar. 31, 1997, writ denied) (not designated for publication). Because Guffey was decided before
January 1, 2003, and was designated "do not publish" under the rules of appellate procedure in effect at that
time, it has no precedential value. SeeTEX.R.APP. P. 47.7(b). However, like Widener and Ganske, it also
does not conclude that benefit of the bargain cannot be an appropriate measure of damages for breach of
a settlement agreement. Guffey, 1997 WL 142750 at "'3-4.

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Tab I
 CAUSE NO. DC-15-03853

DICKSON PERRY, derivatively on § IN THE DISTRICT COURT
behalf of EXCENTUS CORPORATION, §
§
Plaintiff, §
§
vs. §
§ DALLAS COUNTY, TEXAS
EXCENTUS CORPORATION, §
BRANDON LOGSDON, JIM MILLS, §
GIANT EAGLE, INC., DAVID §
SHAPIRA, DANIEL SHAPIRA, AUTO- §
GAS SYSTEMS, INC., RANDY §
NICHOLSON, and §
ALLIANCE DATA SYSTEMS, INC., §
§
Defendants, § 68TH JUDICIAL DISTRICT

MOTION TO STRIKE PLAINTIFF DICKSON PERRY’S SUPPLEMENTAL BRIEF IN
OPPOSITION TO GIANT EAGLE’S MOTION TO DISMISS

Defendant Giant Eagle, Inc. (“Giant Eagle”) moves to strike Plaintiff Dickson Perry’s

Supplemental Brief in Opposition to Giant Eagle’s Motion to Dismiss (“Supplemental Brief”).

On August 24, 2015, after the scheduled start time of the hearing on Giant Eagle’s Motion to

Dismiss, Perry electronically filed a Supplemental Brief. Counsel for Mr. Perry referred to this

Supplemental Brief, and the eleven previously-undisclosed cases cited therein, throughout his

argument. Every argument that Perry made in his Supplemental Brief was available to him, and

could have been raised, prior to the briefing deadline of August 19, 2015.1

This Supplemental Brief was filed contrary to Local Rule 2.09, which provides that

“[e]xcept in case of emergency, briefs, responses and replies relating to a motion (other than for

summary judgment) set for hearing must be served and filed with the Clerk of the Court no

1
The Supplemental Brief improperly relies on other Defendants’ Responses to Perry’s Requests for Admission in an
attempt to – again – argue that litigation against Giant Eagle in Pittsburgh would be inconvenient. Like every other
argument made in the Supplemental Brief, Perry could have made arguments about these Responses in a timely
Response brief, as they were served on August 14th and 17th, respectively. Moreover, one of these response exhibits
is not legible. See Supp. Br. Ex. 2.

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later than three working days before the scheduled hearing.” Dallas County Local Rule 2.09

(emphasis added). Perry did not serve and file this brief at least three days before the hearing.

Counsel did not even provide Giant Eagle with a courtesy copy before or during the hearing.

Only after the hearing, at Defendants’ insistence, did counsel for Perry actually provide a copy.

For the above reasons, this Court should not consider Perry’s untimely Supplemental

Brief. However, in the event the Court does consider it, the Court should also be aware of

several flaws in Perry’s arguments. First, Perry cites In re Lisa Laser USA, Inc., 310 S.W.3d

880, 883 (Tex. 2010) in an attempt to portray the Texas Supreme Court as applying a “but for”

test when interpreting “arising out of.” That is not what Lisa Laser stands for; rather, the Court

there actually granted mandamus relief from the trial court’s failure to enforce a forum selection

clause and stated that “forum-selection clauses should be given full effect, and subjecting a party

to trial in a forum other than the contractually chosen one amounts to clear harassment ...

injecting inefficiency by enabling forum-shopping, wasting judicial resources, delaying

adjudication on the merits, and skewing settlement dynamics....” Id. (quotations omitted).

Second, the Supplemental Brief also misrepresents Judge Boyle’s opinion in the First

Texas Case by portraying Judge Boyle as relying on a single case from the Northern District of

Illinois. That is not accurate. Judge Boyle relied on Aerus LLC v. Pro Team, Inc., No. CIV.A. 3-

04-CV-1985M, 2005 WL 1131093, at *1 (N.D. Tex. May 9, 2005), a Texas federal case directly

on point.2 The Texas Supreme Court has expressly stated that it “look[s] to federal law for

guidance in analyzing forum-selection clauses.” In re Int’l Profit Associates, Inc., 274 S.W.3d

672, 677 (Tex. 2009). Moreover, Judge Boyle’s analysis (in addition to being preclusive under

collateral estoppel) is completely in accord with many other courts. See, e.g., Wellogix, Inc. v.

2
Aerus, and other cases not previously provided to the Court, are attached as Exhibit A.

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SAP Am., Inc., 58 F. Supp. 3d 766, 779 (S.D. Tex. 2014) (finding that where resolution of a

plaintiff’s claims “arguably depends” on construction of an agreement containing a forum

selection clause, “[t]hose claims would therefore also fall within the scope of the forum-selection

clause.”); Interactive Music Tech., LLC v. Roland Corp. U.S., No. CIV.A. 6:07-CV-282, 2008

WL 245142, at *6 (E.D. Tex. Jan. 29, 2008) (“because the resolution of this issue depends on

interpretation of the agreement, the dispute ‘arises out of’ the agreement.”); Laserdynamics Inc.

v. Acer Am. Corp., 209 F.R.D. 388, 391 (S.D. Tex. 2002) (finding that where the “spirit of the …

agreement contemplates the rights and duties of the parties[,] … [i]f any right or obligation in the

… agreement is threatened or impaired by an act of the parties or their privities, that act gives

rise to a dispute under the agreement.”); Skold v. Galderma Labs., L.P., No. CIV.A. 14-5280,

2015 WL 1740032, at *16 (E.D. Pa. Apr. 17, 2015) (forum selection clause applies where

contract forms the “entire business relation” between the parties and “determination of

[planitiff’s] claims implicate the contract’s terms and will require consideration of the contract

and the parties’ respective rights pursuant to the contract.”).

Third, Perry’s continued complaints about litigation in Pittsburgh being inconvenient are

not relevant. The Texas Supreme Court has held that multi-forum litigation resulting from the

enforcement of a forum selection clause does not constitute the type of “unusual and special

circumstance” that would allow a court to ignore a forum selection clause. See In re Int’l Profit

Associates, Inc., 274 S.W.3d 672, 680 (Tex. 2009) (“[A]ssuming plaintiff’s argument that if the

clauses are enforced, it will have to pursue two suits—one against IPA in Illinois and one against

Salinas in Texas—is correct, that is not the type of unusual and special circumstances that show

litigating in the contracted-for forum will be so gravely difficult and inconvenient [Plaintiff] will

be deprived of its day in court. Litigation over contractual business obligations frequently

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involves more parties than the two principals to the contract. If all it takes to avoid a forum-

selection clause is to join as defendants local residents who are not parties to the agreement, then

forum-selection clauses will be of little value.”); See also In re ADM Investor Servs., Inc., 304

S.W.3d 371, 375 (Tex. 2010) (“The mere existence of another defendant does not compel joint

litigation, even if the claims arise out of the same nucleus of facts.”).

For the above reasons, the Court should strike Perry’s untimely Supplemental Brief and

grant Giant Eagle’s Motion to Dismiss.

Respectfully Submitted,

/s/ Orrin Harrison III
Orrin L. Harrison III
Bar No. 09130700
oharrison@ghetrial.com
GRUBER HURST ELROD JOHANSEN
HAIL SHANK, LLP
1445 Ross Avenue, Suite 2500
Dallas, TX 75202
Telephone: 214-855-6828
Fax: 214-855-6808

-and-

Bernard Marcus
marcus@marcus-shapira.com
Scott Livingston
livingston@marcus-shapira.com
Jonathan Marcus
jmarcus@marcus-shapira.com
MARCUS & SHAPIRA LLP
301 Grant Street, 35th Floor
One Oxford Centre
Pittsburgh, Pennsylvania 15219-6401
Telephone: 412-338-5200
Fax: 412-391-8758

Attorneys for Giant Eagle, Inc., David
Shapira, and Daniel Shapira

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 CERTIFICATE OF SERVICE

The undersigned certifies that a copy of the foregoing instrument was served upon the
attorneys of record in the above cause via electronic filing and E-mail, in accordance with Rule
21a, Texas Rules of Civil Procedure, on August 25, 2015.

/s/ Orrin L. Harrison III
Orrin L. Harrison III

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 Exhibit A

Giant Eagle's Motion to Strike Page 6

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Aerus LLC v. Pro Team, Inc., Not Reported in F.Supp.2d (2005)
2005 WL 1131093

Unauthorized Trademark Reproduction; (4) Infringement of
Common Law Trade Dress Rights; and (5) Common Law
2005 WL 1131093
Unfair Competition. On October 4, 2004, Defendant filed
Only the Westlaw citation is currently available.
its Answer, generally denying Plaintiff's allegations and
United States District Court,
asserting that venue is improper in the Northern District of
N.D. Texas, Dallas Division.
Texas. On December 3, 2004, Defendant filed the subject
AERUS LLC, Plaintiff, motion.
v.
PRO TEAM, INC., Defendant.
II. Analysis
Pursuant to 28 U.S.C. § 1406(a), Defendant moves to dismiss
No. Civ.A. 304CV1985M. | May 9, 2005.
this case, or to transfer it to the Southern District of California,
Attorneys and Law Firms arguing the parties contractually agreed that the forum for
their disputes would be San Diego, California.
John A Dondrea, Douglas Alan Sorensen, Kelly J Kubasta,
Dallas, TX, for Plaintiff. This Court must determine whether an enforceable forum
selection clause exists, and if so, what deference should be
Anthony J Dain, Victor M Felix, San Diego, CA, for
given to it. Federal law governs the determination of whether
Defendant.
an enforceable forum selection clause exists.Haynsworth v.
The Corp., 121 F.3d 956, 962 (5th Cir.1997). In this case,
the Court must first determine which agreement (and which
MEMORANDUM OPINION AND ORDER corresponding forum selection clause) governs: the 2001
Agreement or the 2003 Agreement. The Court will interpret
LYNN, J.
these Agreements in accordance with Texas law to decide
*1 Before the Court is Defendant's Motion to Dismiss, or which controls. See In re Dengel, 340 F.3d 300, 313 (5th
in the Alternative, to Transfer for Improper Venue, filed on Cir.2003) (quoting F.D.I.C. v. Firemen's Ins. Co. of Newark,
December 3, 2004. Having considered the motion, response, N.J., 109 F.3d 1084, 1087 (5th Cir.1997)) (“We look to state
reply and the applicable law, the Court GRANTS in part and law for rules governing contract interpretation.”).
DENIES in part Defendant's Motion to Dismiss, or in the
Alternative, to Transfer for Improper Venue.
A. The Applicable Forum Selection Clause
When construing a written contract, it is the court's primary
I. Background concern “to ascertain the true intent of the parties as expressed
Plaintiff Aerus LLC, formerly doing business as Electrolux, is in the instrument.”Nat'l Union Fire Ins. Co. of Pittsburgh,
a limited liability company with its principal place of business Pa. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.1995);
in Texas. Plaintiff manufactures and distributes cleaning see also J .M. Davidson, Inc. v. Webster, 128 S.W.3d 223,
equipment. Defendant ProTeam, Inc. is a corporation with 229 (Tex.2003). To the extent possible, provisions should
its main corporate office in Idaho. Defendant develops be interpreted in a way that gives the entire agreement
and markets floor care products for the janitorial and effect and “harmonizes potential conflicts between differing
sanitation industry. On July 1, 2001, the parties entered provisions.”New Concept Constr. Co. v. Kirbyville Consol.
into a Marketing Agreement (“2001 Agreement”), which Indep. Sch. Dist., 119 S.W.3d 468, 470 (Tex.App.-Beaumont
provided that Defendant would purchase, sell, market, 2003, pet. denied). Parties to a contract are presumed to intend
and distribute Plaintiff's commercial floor care products. that each provision has meaning, and a clause will not be
The 2001 Agreement also addressed use of Plaintiff's struck unless an irreconcilable conflict exists. Id. at 469.
trademark and intellectual property. On May 12, 2003,
the parties entered into the Termination, Transition, and *2 Ambiguity is a question of law for the court to decide.
Release Agreement (“2003 Agreement”), terminating the CBI Indus., Inc., 907 S.W.2d at 520. In determining whether
2001 Agreement. On September 10, 2004, Plaintiff filed a contractual provision is ambiguous, the court reviews the
suit against the Defendant, alleging the following claims: wording in light of surrounding circumstances “in order
(1) Patent Infringement; (2) Breach of Contract; (3) to ascertain the meaning that would be attached to the

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Aerus LLC v. Pro Team, Inc., Not Reported in F.Supp.2d (2005)
2005 WL 1131093

wording ‘by a reasonably intelligent person acquainted with
all operative usages and knowing all the circumstances prior The parenthetical at the end of Section 2.1 is not present in
to and contemporaneous with the making of the [contract], Section 5.13.
other than oral statements by the parties of what they intended
to mean.” ’ Watkins v. Petro-Search, Inc., 689 F.2d 537, By virtue of Section 5.7 of the 2001 Agreement (“survival
538 (5th Cir.1982) (quoting Sun Oil Co. v. Madeley, 626 clause”), “Sections 4.4, 5.6, and 6 through 20 will survive
S.W.2d 726, 731 (Tex.1981)). If the contract's wording has any termination or expiration of this Agreement.”One of the
a definite or certain legal meaning, it is not ambiguous. CBI surviving sections is Section 10, which states, “In the event
Indus., Inc., 907 S.W.2d at 520. Even if an instrument is [Aerus, LLC] asserts a breach or default by ProTeam under
unambiguous, a trial court may admit extrinsic evidence, the terms of this Agreement, the jurisdiction, venue, and
such as “parol testimony of the facts and circumstances applicable law shall be the State of Texas, United States....”
surrounding or pertaining to the making of the agreement, Plaintiff argues that the forum selection clause in the 2001
in order that the court may apply the language used in the Agreement is in conflict with the 2003 Agreement. Section
instrument to the facts and circumstances then existing for 5.9 of the 2003 Agreement states:
the purpose of ascertaining the true intention of the parties.”
*3 In the event either Party asserts
Templeton v. Dreiss, 961 S.W.2d 645, 657 n. 12 (Tex.App.-
a breach or default by the other
San Antonio 1998, pet. denied). If the language of the contract
under the terms of this Agreement,
is subject to two or more reasonable interpretations in light
the jurisdiction, venue, and applicable
of surrounding circumstances and after applying rules of
law shall be [the] City of San Diego,
contract construction, it is ambiguous, and the Court will
California, United States of America,
resolve its meaning. See Watkins, 689 F.2d at 538; Webster,
and this Agreement shall be deemed
128 S.W.3d at 229; CBI Indus., Inc., 907 S.W.2d at 520.
to have been signed at such location
to the extent necessary for such
Plaintiff argues that the 2001 and 2003 Agreements'
jurisdiction and venue to apply.
provisions relating to venue and jurisdiction are “ambiguous
at best,” and that the forum selection clause therefore is not
mandatory. Two provisions in the 2003 Agreement require The terms of the 2001 Agreement that allegedly survive
examination. Section 2.1 of the 2003 Agreement states, termination would render the 2003 Agreement illogical and
inconsistent. For example, the dispute resolution and the
With the sole exception of this forum selection clauses in the 2001 and 2003 Agreements are
Agreement, the Parties acknowledge very similar, but they provide for completely different fora
and agree that any and all written or and applicable law. If these provisions in the 2001 Agreement
oral agreements between the Parties were intended to survive termination, then they would render
related to products or services are conflicting provisions in the 2003 Agreement unenforceable.
hereby terminated and are of no further Certain of these provisions, which the 2001 Agreement says
force or effect (except those provisions survive are nonsensical in light of the 2003 Agreement.
thereof that, by their terms, survive For example, the 2001 Agreement, Section 20, states, “This
termination ). Agreement, including Schedules attached hereto, contains the
entire agreement between the parties as of the date concerning
(emphasis added). Section 5.13 states, the subject matter hereof and supercedes [sic] any and all
prior agreements.”Similar wording also exists in the 2003
This Agreement, including all Exhibits
Agreement. Both provisions could not logically coexist.
attached hereto, contains the entire
agreement between the Parties as of
Defendant argues that merger occurred, and therefore, no
the date concerning the subject matter
inconsistency exists. “Merger refers to the absorption of one
hereof and supercedes [sic] any and
contract into another subsequent contract and is largely a
all prior agreements, oral or written,
matter of intention of the parties.”Fish v. Tandy Corp., 948
between the Parties concerning the
S.W.2d 886, 898 (Tex.App.-Fort Worth 1997, writ denied);
subject matter hereof....
see also Superior Laminate & Supply, Inc. v. Formica Corp.,
93 S.W.3d 445, 449 (Tex.App.-Houston [14th Dist.] 2002,

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Aerus LLC v. Pro Team, Inc., Not Reported in F.Supp.2d (2005)
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pet. denied). In order for one contract to be merged into (N.D.Tex. Mar.21, 2002). A party that consents to jurisdiction
another, the parties must be the same in both contracts, in one forum does not automatically waive its rights to have an
the last contract must address the same subject matter, and action heard in another. City of New Orleans v. Mun. Admin.
merger must have been intended by the parties. Smith v. Servs., 376 F.3d 501, 504 (5th Cir.2004). According to the
Smith, 794 S.W.2d 823, 828 (Tex.App.-Dallas 1990, writ Fifth Circuit, “for a forum selection clause to be exclusive, it
withdrawn).“[A] subsequent integration will not supersede or must go beyond establishing that a particular forum will have
invalidate a written agreement relating to the same subject jurisdiction and must clearly demonstrate the parties' intent to
matter if the agreement is such that [it] might naturally be make that jurisdiction exclusive.”Id. at 504.The court noted,
made as a separate agreement.”Fish, 948 S.W.2d at 899. “It is important to distinguish between jurisdiction and venue
“However, if the parties to one contract execute another when interpreting such clauses. Although it is not necessary
whose terms are so inconsistent with the first that they both for such a clause to use the word ‘venue’ or ‘forum,’ it must do
cannot stand, the first agreement is conclusively presumed more than establish that one forum will have jurisdiction.”Id.
to have been superseded by the second.”Smith, 794 S.W.2d A permissive forum selection clause authorizes jurisdiction in
at 828;see also Willeke v. Bailey, 144 Tex. 157, 160, 189 a particular forum, but does not prohibit litigation elsewhere.
S.W.2d 477, 479 (1945); Fish, 948 S.W.2d at 899; Leon Peavy, 2002 WL 449582, at *1.
Ltd. v. Albuquerque Commons P'ship, 862 S.W.2d 693, 700
(Tex.App.-El Paso 1993, no writ); Montgomery Elevator Co. A forum selection clause is not necessarily classified as
v. Tarrant County, 604 S.W.2d 363, 367 (Tex.App.-Fort mandatory or exclusive simply because it contains the
Worth 1980, no writ).“An integration clause is in essence the word “shall.” Caldas & Sons, Inc. v. Willingham, 17 F.3d
merger doctrine memorialized.”Smith, 794 S.W.2d at 828. 123, 127 (5th Cir.1994) (analyzing Hunt Wesson Foods,
Inc. v. Supreme Oil Co., 817 F.2d 75 (9th Cir.1987)). In
The 2003 Agreement includes an integration clause in Section Hunt, the court explained that, “although the word ‘shall’
5.13, which states, “[t]his Agreement ... contains the entire is a mandatory term, here it mandates nothing more than
agreement between the Parties as of the date concerning the that the Orange County courts have jurisdiction.”Id. at
subject matter hereof and supercedes [sic] any and all prior 128 (reviewing a forum selection clause that stated, “the
agreement, oral or written, between the Parties as of the date laws of the State of California shall govern the validity,
concerning the subject matter hereof ...” The parties explicitly construction, [and] interpretation ... of this contract. The
set forth their intent that the 2003 Agreement constituted courts of California, County of Orange, shall have jurisdiction
the entire agreement, and that it superseded any and all over the parties in any action at law relating to the subject
prior agreements. Any language that survived termination matter or the interpretation of this contract.”).“[W]here venue
merged into the 2003 Agreement, and to the extent it is is specified [in a forum selection clause] with mandatory
inconsistent, the 2003 Agreement controls. Thus, the Court or obligatory language, the clause will be enforced; where
finds that the 2003 Agreement is unambiguous, and its forum only jurisdiction is specified [in a forum selection clause],
selection clause controls the Court's examination of where the clause will generally not be enforced unless there is some
venue properly lies for this suit. further language indicating the parties' intent to make venue
exclusive.”K & V Scientific Co. v. Bayerische Motoren Werke
Aktiengesellschaft, 314 F.3d 494, 499 (10th Cir.2002); see
B. Mandatory Versus Permissive Forum Selection also Docksider, 875 F.2d at 764 (“The prevailing rule is clear
Language from these and other cases that where venue is specified with
*4 Having determined that the 2003 Agreement controls, mandatory language[,] the clause will be enforced”).
the Court must determine whether the forum selection clause
in the 2003 Agreement is mandatory (sometimes called *5 The Plaintiff argues that because in the 2003 Agreement
“exclusive”) or permissive. “Where the agreement contains the forum selection clause (Section 5.9) and the dispute
clear language showing that jurisdiction is appropriate only in resolution clause (Section 5.3) provide for two different fora,
a designated forum, the clause is mandatory.”Von Graffenreid the forum selection clause is not mandatory, and trademark
v. Craig, 246 F.Supp.2d 553, 560 (N.D.Tex.2003) (citing and confidentiality disputes between the parties can be
Excell, Inc. v. Sterling Boiler & Mech., Inc., 106 F.3d 318, brought in any court with jurisdiction. The Court disagrees
321 (10th Cir.1997)); Docksider, Ltd. v. Sea Tech., Ltd., 875 with Plaintiff's argument.
F.2d 762, 763-64 (9th Cir.1989); First Nat'l of N. Am., LLC
v. Peavy, No. 3-02-CV-0033-R, 2002 WL 449582, at *1

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In Personal Security & Safety Systems, Inc. v. Motorola Inc., 377 (5th Cir.2002) (citing RESTATEMENT (SECOND) OF
297 F.3d 388 (5th Cir.2002), the Fifth Circuit distinguished CONTRACTS § 203(c)). Thus, even if the dispute resolution
between arbitration clauses and forum selection clauses. and forum selection clauses provide for different fora, the
In Motorola, the Plaintiff argued that the forum selection forum selection clause applies to claims of breach or default.
clause's specific forum precluded only lawsuits in other
than the designated forum, not arbitration elsewhere. Id. at *6 Plaintiff argues that the conflicting venue language
395.The court explained that the forum selection clause must of the forum selection clause and the dispute resolution
be interpreted in the context of the entire agreement. Id. The clause renders the forum selection clause permissive. Courts
forum selection clause in Motorola was interpreted to mean have held forum selection provisions permissive when
cases should be litigated in Texas, only when they were not the language does not prescribe venue nor provide for
subject to arbitration. Id. at 396.The forum selection clause exclusivity. See Mun. Admin. Servs., Inc., 376 F.3d at
governed “any suit or proceeding,” while the arbitration 504-05 (“The undersigned Contractor does further hereby
clause governed “all disputes or all claims,” evidencing the consent and yield to the jurisdiction of the State Civil Courts
parties' desire to apply the forum selection clause only when of the Parish of Orleans ...”); Caldas & Sons, Inc., 17
the dispute was not subject to arbitration. Id. The court further F.3d at 127-28 (“The laws of the Courts of Zurich are
noted that this was consistent with cases that hold “a forum applicable.”); Keaty v. Freeport Indonesia, Inc., 503 F.3d
selection clause cannot nullify an arbitration clause unless the 955, 956 (5th Cir.1974) (“This agreement shall be construed
forum selection clause specifically precludes arbitration.”Id. and enforceable according to the law of the State of New
at n. 11 (citing In re Winter Park Constr., Inc., 30 S.W.3d 576, York and the parties submit to the jurisdiction of the courts
578 (Tex.App.-Texarkana 2000, no pet.)). In Winter Park, of New York.”); K & v. Scientific Co., 314 F.3d at 496,
the court held the forum selection clause did not supersede 500 (“Jurisdiction for all and any disputes arising out of or
the arbitration clause, explaining that the forum selection in connection with this agreement is Munich. All and any
clause simply provided where venue would exist and the law disputes arising out of or in connection with this agreement
that governed in lawsuits. Id. at 578.“A contractual choice are subject to the laws of the Federal Republic of Germany.”);
of law provision will not supersede or obviate an arbitration Watson v. John K. Burch Co., No. 3:02-CV-2555-D, 2003
provision unless the choice of law provision specifically WL 21145755, at *3 (N.D.Tex. May 14, 2003) (“All lawsuits
excludes arbitration.”Id. will be handled in the State of Michigan.”); Von Graffenreid,
246 F.Supp.2d at 557, 561 (“Borrower and each other Loan
In this case, the dispute resolution provision and the Party hereby consents and agrees that the district court of
forum selection clause apply to different types of disputes. Dallas County, Texas, or, at Agent's option, the United
According to Section 5.3 of the 2003 Agreement, “Any States District Court for the Northern District of Texas,
disputes arising under Section 3.7 [Trademarks; Branding] or Dallas Division, shall have jurisdiction to hear and determine
5.4 [Confidentiality] hereof may be introduced into and heard any claims or disputes between Borrower and/or any other
by any court having jurisdiction, without any requirement Loan Party and Agent and/or Guarantors pertaining to this
to comply with the procedures described above in this Agreement or to any matter arising out of or related to this
Section 5.3.”Section 5.9 provides, “In the event either Party Agreement.”); Blue Cross & Blue Shield of Tex., Inc. v.
asserts a breach or default by the other under the terms Dimark Mktg., Inc., No. 3:97-CV-1257-D, 1997 WL 405169,
of this Agreement, the jurisdiction, venue, and applicable at *1 (N.D.Tex. July 15, 1997) (“each party ‘agrees to’
law shall be [the] City of San Diego, California, United the jurisdiction of the courts of ‘the Commonwealth of
States of America ...” As in Motorola, the forum selection Pennsylvania and the Eastern District of the Courts of the
clause in issue here specifically addresses suits for breach United States.” ’).
or default of the 2003 Agreement. The dispute resolution
provision governs “disputes,” which encompasses an array On the other hand, courts have held that forum selection
of other conflicts. Therefore, the more general language of clauses are mandatory and enforceable when they provide for
the dispute resolution clause is not in conflict with the more exclusivity as to where a case can be brought. See Kevlin
specific language of the forum selection clause. “It is a Servs., Inc. v. Lexington State Bank, 46 F.3d 13, 14-15
fundamental axiom of contract interpretation that specific (5th Cir.1995) (emphasis added) (“This contract shall be
provisions control general provisions.”Baton Rouge Oil & interpreted and construed in accordance with the laws of the
Chem. Workers Union v. ExxonMobil Corp., 289 F.3d 373, State of Texas. The legal venue of this contract and any

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disputes arising from it shall be settled in Dallas County, not ambiguous regarding its exclusivity, and was therefore
Texas.”); Docksider Ltd., 875 F.2d at 763-64 (emphasis mandatory. Dorsey, 2004 WL 2496214, at *4.
added) (“This agreement shall be deemed to be a contract
made under the laws of the State of Virginia, United States The forum selection clause in this case is similar to the
of America, and for all purposes shall be interpreted in its clauses in Dorsey and Docksider.The 2003 Agreement
entirety in accordance with the laws of said State. Licensee forum selection clause states, “the jurisdiction, venue,
hereby agrees and consents to the jurisdiction of the courts of and applicable law shall be [the] City of San Diego,
the State of Virginia. Venue of any action brought hereunder California, United States of America ...” This clause
shall be deemed to be in Gloucester County, Virginia.”); addresses jurisdiction and venue, fixing such in the City of
Klinghoffer v. Mama Fu's Noodle House, Inc., No. 3-04- San Diego, California. While the clause does not expressly
CV-1695-L, 2004 WL 2583632, at *1, *3 (N.D.Tex. Nov.12, use the language “exclusively” or “only,” the Court construes
2004) (emphasis added) (“Each party agrees that any legal it, in context, to be so limited. The specific venue requirement
action or proceeding against the other party that arises out makes this forum selection clause mandatory and pursuant to
of or is related to this Agreement may only be brought in it, a lawsuit must be brought in state or federal court in San
the courts of the State of Georgia or of the United States of Diego, California.
America for the Northern District of Georgia and by entering
into this Agreement each party accepts and consents to the
jurisdiction of the aforesaid courts.”); Dorsey v. N. Life Ins. C. Applicability of Forum Selection Clause to Claims
Co., No. 04-0342, 2004 WL 2496214, at *1, *4 (E.D.La. The Court must next determine whether the forum selection
Nov.5, 2004) (emphasis added) (citing Docksider, Ltd., 875 clause applies to the claims asserted in this case. Soil Bldg.
F.2d at 763) (“This Agreement is governed by the laws of Sys. v. CMI Terex Corp., No. 3:04-CV-0210-G, 2004 WL
the State of Washington. In the event of a lawsuit arising out 1283966, at *4 (N.D.Tex. June 9, 2004); Woolf v. Mary Kay,
of this Agreement, the Executive General Agent agrees that Inc., 176 F.Supp.2d 642, 647 (N.D.Tex.2001). The court must
venue shall be laid in King County, Washington.”); Marengo examine the language of the contract to determine which
Films, Inc. v. Koch Int'l LLC, No. 3:03-CV-0369-P, 2003 WL causes of action are governed by the forum selection clause.
21435728, at *1, *5 (N.D. Tex. June 16, 2003) (emphasis Marinechance Shipping, Ltd. v. Sebastian, 143 F.3d 216,
added) (“This agreement shall be governed exclusively by 222 (5th Cir.1998); Soil Bldg. Sys., 2004 WL 1283966, at
the laws of the State of New York applicable to contracts *5. “If the substance of [the plaintiff's] claims, stripped of
made and to be performed entirely in such State. The parties their labels, does not fall within the scope of the [forum
agree to the exclusive jurisdiction of the Southern District selection] clause [ ], the clause[ ] cannot apply.”Soil Bldg.
Court of New York, New York.”); Bonded Inspections, Inc. v. Sys., 2004 WL 1283966, at *4 (quoting Roby v. The Corp.
Northrop Grumman Corp., No. 3:98-CV-0214-D, 1998 WL of Lloyd's, 996 F.2d 1353, 1361 (2d Cir.1993)) (alteration in
185518, at *1-*2 (N.D.Tex. Apr.10, 1998) (emphasis added) original).“Claims that arise out of the contractual relationship
(“Exclusive jurisdiction and venue shall lie in the State of and implicate the agreement are subject to the forum selection
New York, County of Nassau, including the United States clause.”Kessmann & Assoc., Inc. v. Barton-Aschman Assoc.,
Federal Courts therein.”). Inc., 10 F.Supp.2d 682, 688 (S.D.Tex.1997); see also Tex.
Source Group, Inc. v. CCH, Inc., 967 F.Supp. 234, 238
*7 In Docksider, the Ninth Circuit distinguished its earlier (S.D.Tex.1997); Hoffman v. Burroughs Corp., 571 F.Supp.
decision in Hunt (in which the court held the forum selection 545, 547 (N.D.Tex.1982). In other words,
clause was permissive) by explaining that the forum selection
the precise issue before this Court
clause at issue specifically prescribed venue. Docksider,
is whether the facts and claims
Ltd., 875 F.2d at 763. The Ninth Circuit explained that
alleged in the ... complaint have a
the clause required enforcement because the parties not
direct or indirect connection, link or
only consented to jurisdiction in Virginia, but agreed to
association with, or relation to (1) the
mandatory venue in Virginia. Id.“This mandatory language
contractual relationship evidenced by
makes clear that venue, the place of suit, lies exclusively
the ... Agreement; (2) an interpretation
in the designated county.”Id. In Dorsey, the court held the
of the ... Agreement; (3) the facts that
explicit venue language in the forum selection clause was
would support a breach of contract
action based on the ... Agreement;

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or (4) the subject matter of the ... LEXIS 4074, at *37. Therefore, the forum selection clause is
Agreement. In arriving at its decision, applicable to this claim.
the Court, taking the allegations in
the ... complaint as true and resolving
factual conflicts in the documentary 2. Counts II & III-Breach of Contract & Unauthorized
submissions in favor of the plaintiff, Trademark Reproduction in Violation of the Lanham
looks to whether a connection, link, Act
association with or relation to the ... Because the Plaintiff asserts the same argument for both of
Agreement, exists by reason of an these claims, the Court considers them together. Plaintiff
established or discoverable relation. argues the forum selection clause does not apply to the
breach of contract claim because the breach asserted involves
*8 Smith v. Lucent Techs., Inc., No. 02-0481, 2004 U.S. use of licensed marks and confidentiality. Plaintiff further
Dist. LEXIS 4074, at *37 (E.D.La., Mar. 16, 2004). If such a states that such subject matter is expressly allowed to “be
connection is found between the claims at issue and the 2003 introduced into and heard by any court having jurisdiction,”
Agreement, the forum selection clause applies. pursuant to Section 5.3 of the 2003 Agreement. In addition,
Plaintiff asserts that the breach related to Plaintiff's licensed
The Plaintiff argues the forum selection clause does not apply marks falls under Section 7 [Intellectual Property] of the
to any of its claims. It is asserting the following claims: (1) 2001 Agreement, and that Texas is the proper venue and
Count I-Patent Infringement; (2) Count II-Breach of Contract; jurisdiction to bring such a claim under Section 10 [Forum
(3) Count III-Unauthorized Trademark Reproduction in Selection] of the 2001 Agreement, and both Sections survive
Violation of the Lanham Act; (4) Count IV-Infringement of termination according to the Survival Clause, Section 5.7
Common Law Trade Dress Rights; and (5) Count V-Common of the 2001 Agreement. Plaintiff makes a similar argument
Law Unfair Competition. The relevant language at issue from regarding the Lanham Act claim.
the 2003 Agreement forum selection clause is, “In the event
either Party asserts a breach or default by the other under *9 The forum selection clause specifically addresses breach
the terms of this Agreement, the jurisdiction, venue, and or default under the 2003 Agreement. The breach of contract
applicable law shall be [the] City of San Diego, California ...” and Lanham Act claims fall within the purview of the
2003 Agreement's forum selection clause because the 2003
Agreement must be interpreted to determine whether the
1. Count I-Patent Infringement Defendant violated such rights of the Plaintiff, or whether it
Plaintiff argues that resolution of the Patent Infringement was acting in accordance with the Agreement. In addition,
claim does not depend on interpretation of either the 2001 the 2003 Agreement is the controlling agreement as explained
Agreement or the 2003 Agreement. Plaintiff explains that above. Thus, the forum selection clause is applicable with
because the contracts do not explicitly address patents regard to both claims.
or patent infringement, the forum selection clause is
inapplicable to such a claim. Defendant argues that the 2003
Agreement authorized it to manufacture and sell Plaintiff's 3. Count IV-Infringement of Common Law Trade Dress
products embodying inventions in the patent at issue, without Rights
a time limit to market and sell such products. Thus, one of Plaintiff argues that because trade dress rights are another
the Defendant's defenses to the patent infringement claim is form of trademark rights, and trademark claims can
based on the 2003 Agreement. “If enforcement of a provision be brought in any jurisdiction pursuant to Section 3.7
in the [Agreement] is ... a defense to a claim, that claim [Trademarks; Branding] of the 2003 Agreement, the forum
involves a right or remedy under the contract and should selection clause does not apply. As explained above regarding
fall within the scope of the forum selection clause.”Penn, the Lanham Act claim, interpretation of the 2003 Agreement
L.L.C. v. New Edge Network, Inc., No. 03 C 5496, 2003 U.S. is necessary to determine whether the Defendant violated the
Dist. LEXIS 17664, at *7 (N.D.Ill. Oct. 1, 2003). Thus, the Plaintiff's trademark rights. Therefore, the forum selection
Court finds that the allegations in this claim have a “direct or clause applies to this claim.
indirect connection, link or association with, or relation to”
the 2003 Agreement. See Lucent Techs., Inc.,2004 U.S. Dist.
4. Count V-Common Law Unfair Competition

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Plaintiff argues that Defendant “unfairly competed unfairness of the chosen law will
by infringing [Plaintiff's] common law trade dress deprive the plaintiff of a remedy; or
rights.”Plaintiff further states that this claim falls under (4) enforcement of the forum selection
Section 3.7 [Trademarks; Branding] of the 2003 Agreement, clause would contravene a strong
and can be brought in “any court having jurisdiction,” since public policy of the forum state.
the forum selection clause does not apply. To determine
whether Defendant violated Plaintiff's trade dress rights, Haynsworth, 121 F.3d at 963. However, the party seeking to
interpretation of the contract is necessary. If no violation avoid enforcement of the forum selection clause bears a heavy
occurred, then no unfair competition occurred. Because burden of proof.Id.“Where the contract contains a valid forum
interpretation of the contract is necessary to determine if such selection clause, dismissal rather than transfer is appropriate
claim can stand, the forum selection clause applies to this if the case is filed in the wrong district.”Von Graffenreid,
claim. 246 F.Supp.2d at 562 (citing Amplicon, 77 F.3d at 115). The
Fifth Circuit has upheld dismissal as an appropriate means
of enforcement of a forum selection clause. Amplicon, Inc.,
D. Deference 77 F.3d at 114. The Plaintiff does not specifically address
The Court must next determine the amount of deference whether the forum selection clause is unreasonable. Rather,
to be given to the forum selection clause. The amount of the Plaintiff only sets forth reasons why the case should not
deference a court should give to a forum selection clause is be transferred pursuant to the “interest of justice” balancing
determined by whether the Defendant has requested dismissal of 28 U.S.C. § 1404(a).
for improper venue under 28 U.S.C. § 1406(a) or requested
transfer under § 1404(a).See Int'l Software Sys., Inc. v. A transfer for improper venue falls under § 1406(a).Jackson
Amplicon, Inc., 77 F.3d 112, 115-16 (5th Cir.1996); Pugh v. v. W. Telemarketing Corp. Outbound, 245 F.3d 518, 523
Arrow Elecs., Inc., 304 F.Supp.2d 890, 893 (N.D.Tex.2003); (5th Cir.2001); Soil Bldg. Sys., 2004 WL 1283966, at *6.
Von Graffenreid, 246 F.Supp.2d at 561; Beauticontrol, Inc. The court has broad discretion in determining whether to
v. Burditt, No. 3:01-CV-0744-M, 2001 WL 1149360, at dismiss or transfer a case in the interest of justice under 28
*2 (N.D.Tex. Sept.26, 2001). In this case, the Defendant U.S.C. § 1406(a).Soil Bldg. Sys., 2004 WL 1283966, at *6.
has moved to dismiss, or in the alternative, to transfer for “[I]n considering a defendant's motion to transfer, courts in
improper venue pursuant to § 1406(a).28 U.S.C. § 1406(a) this circuit should use an ‘interest of justice’ balancing test
states, “The district court of a district in which is filed a case based on § 1404 and § 1406 in which the forum selection
laying venue in the wrong division or district shall dismiss, clause is only one consideration among many, whereas with
or if it be in the interest of justice, transfer such case to any a motion to dismiss, a court should presume that the clause
district or division in which it could have been brought.” is valid unless a defendant proves fraud or overreaching in
relation to the clause itself.”Beauticontrol, Inc., 2001 WL
Where a party seeks dismissal under § 1406(a), the forum 1149360, at *5. The court should look at convenience of the
selection clause is “prima facie valid and should be enforced forum given the parties' expressed preference in the forum
unless enforcement is shown by the resisting party to selection clause, the fairness of transferring the case in light
be unreasonable under the circumstances.”M/S Bremen v. of the forum selection clause, and the relative bargaining
Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 power of the parties. Id. at *6 The court should also weigh
L.Ed.2d 513 (1972). Enforcement may be “unreasonable” the convenience of the witnesses and “those public-interest
when: factors of systemic integrity and fairness that, in addition to
private concerns, come under the heading of ‘the interest of
*10 (1) the incorporation of the justice.” ’ Id. (quoting Stewart Org., Inc. v. Ricoh Corp.,
forum selection clause into the 487 U.S. 22, 30, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988)). In
agreement was the product of fraud most cases, the movant bears the burden of proving transfer
or overreaching; (2) the party seeking is appropriate. Watson, 2003 WL 21145744, at *4. However,
to escape enforcement will for all “the presence of a valid and enforceable forum selection
practical purposes be deprived of his clause shifts the burden of persuasion to the nonmovant who
day in court because of the grave is attempting to avoid enforcement.” Id.
inconvenience or unfairness of the
selected forum; (3) the fundamental

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Defendant argues that the parties' expressed preference in
the 2003 Agreement was San Diego, California. Defendant In analyzing the interest of justice factors, the Court agrees
avers Plaintiff has the burden of persuading the Court why with the Defendant. In the 2003 Agreement, both parties
the forum selection clause should not be enforced. It explains contractually agreed to choose San Diego, California, as the
that Plaintiff is “a sophisticated business entity that has been forum. Plaintiff's concerns should have been raised at the time
of drafting the forum selection provision, not after the fact.
in business for nearly 80 years, has over 500 franchise-
owned centers throughout the United States and Canada, Both parties were represented by attorneys, and there is no
evidence of any unequal bargaining power. It is not unfair or
and has sold products or services to nearly 50 million
households and businesses.”In addition, the 2003 Agreement unreasonable to enforce a forum selection provision to which
both parties contractually agreed to be bound.
was executed in San Diego, California, and California law
is applicable in interpretation of the contract. Defendant also
This Court will enforce the contract's forum selection clause.
argues both parties were represented by counsel in drafting
this agreement. Therefore, Defendant asserts the case should Because the forum selection clause mandates the case be filed
in San Diego, California, venue in this Court is “wrong.”
be transferred to San Diego, California.
However, as transfer is an appropriate means under § 1406
*11 Using the interest of justice analysis, and considering to enforce the forum selection clause when a case is filed in
the wrong district, this Court transfers the case to the United
the convenience of the parties, and witnesses the Plaintiff
States District Court for Southern District of California,
suggests the Northern District of Texas is the appropriate
venue. Plaintiff's headquarters are in Dallas, Texas, and located in San Diego, California. See28 U.S.C. § 1406(a)
(2005).
Plaintiff's representatives would have to travel over 1,000
miles to San Diego, California. Plaintiff also argues its
“officers and key employees are located in Dallas, Texas,”
III. Conclusion
“most, if not all” documents related to Plaintiff's claims are For the reasons stated above, the Defendant's Motion to
located in Dallas, no relevant documents or witnesses are Dismiss is DENIED and Defendant's Motion to Transfer
located in San Diego, it would significantly burden resources Venue is GRANTED.
of the company to travel to San Diego for court appearances,
and Plaintiff would have to retain local counsel in California. SO ORDERED.
Additionally, Plaintiff argues whether venue is in San Diego
or Dallas, Defendant will still have to travel over 1,000 miles.
Defendant will have to retain local counsel in either city, All Citations
Defendant does not have a sales representative in either city,
and Defendant has a comparable number of warranty centers Not Reported in F.Supp.2d, 2005 WL 1131093
in both cities. Thus, Plaintiff asserts there is no reason to
override its choice of forum in Dallas.

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Wellogix, Inc. v. SAP America, Inc., 58 F.Supp.3d 766 (2014)

pursuant to a forum-selection clause pointing to
a state or foreign forum.
58 F.Supp.3d 766
United States District Court, Cases that cite this headnote
S.D. Texas,
Houston Division.
[2] Federal Courts
WELLOGIX, INC., Plaintiff, Forum Non Conveniens
v. Federal Courts
SAP AMERICA, INC., et al., Defendants. Discretion in general
The doctrine of forum non conveniens enables
Civil Action No. H–14–
a district court, at its discretion, to decline
741. | Signed Nov. 10, 2014.
to exercise jurisdiction if the moving party
Synopsis establishes that the convenience of the parties
Background: Competitor of software production company and the court and the interests of justice indicate
sought declaration of noninfringement of company's patents. that the case should be tried in another forum.
Production company counterclaimed under state law for
Cases that cite this headnote
misappropriation of trade secrets obtained during course
of work performed pursuant to cooperation agreement.
Following severance of counterclaims, competitor moved for [3] Federal Courts
summary judgment. Forum Non Conveniens
Federal Courts
Convenience of parties and witnesses;
Holdings: The District Court, Sim Lake, J., held that: location of evidence
The ultimate inquiry in a forum non conveniens
[1] competitor did not waive forum selection clause in analysis is where trial will best serve the
agreement; convenience of the parties and the ends of justice.

Cases that cite this headnote
[2] misappropriation claims were within scope of forum
selection clause;
[4] Contracts
[3] forum selection clause was enforceable; Legal remedies and proceedings
For purposes of forum non conveniens
[4] dismissal for forum non conveniens was merited; and analysis, because a valid forum-selection clause
represents the parties' agreement as to the most
[5] Germany was adequate and available forum. proper forum and the overarching consideration
is whether dismissal would promote the interest
of justice, a valid forum-selection clause should
Motion granted.
be given controlling weight in all but the most
exceptional cases.

West Headnotes (34) Cases that cite this headnote

[5] Contracts
[1] Federal Courts
Legal remedies and proceedings
Forum non conveniens
Competitor that allegedly misappropriated trade
A federal court applies the federal law of forum
secrets from a software production company
non conveniens in deciding a motion to dismiss
during course of cooperation agreement did not

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waive right to enforce forum selection clause necessary to a final judgment, and (4) reviewed
by filing declaratory action in Texas, where under the same standard as the present issue.
there was no indication that competitor intended
to waive that right, and competitor did not Cases that cite this headnote
substantially invoke judicial process in Texas to
production company's detriment. [10] Contracts
Legal remedies and proceedings
Cases that cite this headnote
Software production company's state law
misappropriation of trade secret claims were
[6] Federal Courts within the scope of forum selection clause
Agreement as to place of bringing suit; contained in cooperation agreement with
forum selection clauses competitor; dispute arose out of agreement, since
The enforceability of a forum-selection clause its resolution arguably depended on construction
in federal court is governed by federal law, of confidentiality language in the agreement.
regardless of the basis for federal jurisdiction.
Cases that cite this headnote
Cases that cite this headnote

[11] Contracts
[7] Contracts Legal remedies and proceedings
Legal remedies and proceedings To determine whether a claim falls within the
Before a court can consider enforcing a forum- scope of a forum-selection clause, a court looks
selection clause, it must first determine whether to the language of the contract.
the clause applies to the type of claims asserted
in the lawsuit. Cases that cite this headnote

Cases that cite this headnote
[12] Contracts
Legal remedies and proceedings
[8] Judgment As with the potential waiver of a forum-selection
Essentials of Adjudication clause, a threshold issue in determining whether
Once a court has decided an issue of fact or a claim falls within the scope of that clause is
law necessary to its judgment in a case, the what law to apply.
doctrine of collateral estoppel precludes parties
from relitigating that issue in a subsequent case Cases that cite this headnote
involving a party to the first.
[13] Contracts
Cases that cite this headnote
Legal remedies and proceedings
The scope of a forum-selection clause is not
[9] Judgment limited solely to claims for breach of the contract
Identity of Issues, in General that contains it.
Judgment
Matters actually litigated and determined Cases that cite this headnote

Judgment
Essentials of Adjudication [14] Contracts
Collateral estoppel applies when a previously Legal remedies and proceedings
litigated issue of law or fact was: (1) identical In a forum-selection clause, the term “arising”
to the present issue, (2) actually litigated, (3) is generally interpreted as indicating a causal
connection; thus, clauses that extend only to

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disputes “arising out of” a contract are construed must clearly demonstrate the parties' intent to
narrowly, while clauses extending to disputes make that jurisdiction exclusive; therefore, to be
that “relate to” or “are connected with” the enforceable, a forum-selection clause must be
contract are construed broadly. mandatory, not just permissive.

Cases that cite this headnote Cases that cite this headnote

[15] Contracts [19] Contracts
Legal remedies and proceedings Agreement as to place of bringing suit;
In determining whether a claim falls within the forum selection clauses
scope of a forum selection clause, the phrase Forum selection clause in cooperation agreement
“arising in connection with” has been found to between two software production company and
reach every dispute between the parties having competitor was enforceable absent showing that
a significant relationship to the contract and all it was unreasonable or exceptional.
disputes having their origin or genesis in the
contract; such a clause encompasses not only Cases that cite this headnote
contract claims, but also statutory and common
law trade secrets claims in connection with the [20] Contracts
agreement. Agreement as to place of bringing suit;
forum selection clauses
Cases that cite this headnote
To show that a forum-selection clause is
unreasonable, the resisting party must prove: (1)
[16] Contracts the incorporation of the forum-selection clause
Legal remedies and proceedings into the agreement was the product of fraud or
All disputes the resolution of which arguably overreaching; (2) the party seeking to escape
depend on the construction of the agreement enforcement will for all practical purposes be
arise out of that agreement for purposes of a deprived of his day in court because of the
forum-selection clause. grave inconvenience or unfairness of the selected
forum; (3) the fundamental unfairness of the
Cases that cite this headnote chosen law will deprive the plaintiff of a remedy;
or (4) enforcement of the forum selection clause
[17] Contracts would contravene a strong public policy of the
Legal remedies and proceedings forum state.
Federal Courts Cases that cite this headnote
Waiver, estoppel, and consent
For purposes of a forum selection clause's
[21] Contracts
exclusivity, a party's consent to jurisdiction in
Legal remedies and proceedings
one forum does not necessarily waive its right to
have an action heard in another. Forum-selection clauses must be given
controlling weight in all but the most exceptional
Cases that cite this headnote cases, because in all but the most unusual cases
the interest of justice is served by holding parties
to their bargain.
[18] Contracts
Legal remedies and proceedings Cases that cite this headnote
For a forum selection clause to be exclusive,
it must go beyond establishing that a
[22] Federal Courts
particular forum will have jurisdiction and
Denial, dismissal, or transfer

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Wellogix, Inc. v. SAP America, Inc., 58 F.Supp.3d 766 (2014)

Dismissal of software production company's misappropriation of trade secrets claims against
state law misappropriation of trade secret claims a competitor with which it had entered
against competitor with which it had entered into a cooperation agreement; absent good
into a cooperation agreement for forum non faith showing to the contrary, court would
conveniens was merited, where forum selection assume that competitor would consent to
clause in agreement provided for Germany as jurisdiction provided in forum selection clause of
the appropriate jurisdiction, private factors of the cooperation agreement.
forum non conveniens analysis were irrelevant,
public factors were insufficient to overcome the Cases that cite this headnote
parties' agreement, and the case was not so
unusual as to overcome forum selection clause. [26] Federal Courts
Availability and adequacy
Cases that cite this headnote
For purposes of forum non conveniens analysis,
an alternative forum is available when the
[23] Contracts entire case and all parties can come within the
Agreement as to place of bringing suit; jurisdiction of that forum.
forum selection clauses
Federal Courts Cases that cite this headnote
Forum non conveniens
A forum-selection clause that points to a [27] Federal Courts
nonfederal forum must be evaluated under the Availability and adequacy
doctrine of forum non conveniens, including a Federal Courts
balancing-of-interests analysis. Amenability to process

Cases that cite this headnote For purposes of forum non conveniens analysis,
a defendant's submission to the jurisdiction
of a foreign forum sufficiently satisfies the
[24] Federal Courts availability requirement.
Public and private interests; balancing
interests Cases that cite this headnote
Federal Courts
Availability and adequacy [28] Federal Courts
The traditional forum non conveniens analysis Amenability to process
comprises a two-step inquiry: first, the court To dismiss a case for forum non conveniens
must establish the existence of an alternative a court must establish that the defendants are
forum in which the case may be brought that amenable to process in the alternative forum.
is both available and adequate; second, if an
alternative forum is both available and adequate, Cases that cite this headnote
the district court must then weigh various private
and public interest factors to determine whether [29] Federal Courts
dismissal is warranted. Availability and adequacy
Cases that cite this headnote For purposes of forum non conveniens analysis,
an alternative forum is adequate when the parties
will not be deprived of all remedies or treated
[25] Federal Courts
unfairly, even though they might not enjoy
Availability and adequacy
the same benefits as they might receive in an
For purposes of forum non conveniens American court.
analysis, Germany was adequate and available
forum for software production company's

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Cases that cite this headnote Cases that cite this headnote

[30] Federal Courts [34] Federal Courts
Presumptions and burden of proof Presumptions and burden of proof
A party moving to dismiss for forum non For purposes of a forum non conveniens
conveniens may rely on a presumption that the analysis, the party resisting enforcement of a
foreign forum is adequate. forum selection clause has the burden of showing
that public-interest factors overwhelmingly
Cases that cite this headnote disfavor dismissal.

Cases that cite this headnote
[31] Federal Courts
Presumptions and burden of proof
Under a forum non conveniens analysis, the
substantive law of the foreign forum is presumed
Attorneys and Law Firms
to be adequate unless the plaintiff makes some
showing to the contrary, or unless conditions *769 Richard N. Laminack, Buffy Kay Martines, Thomas
in the foreign forum made known to the court, Wayne Pirtle, Laminack Pirtle et al., Thomas C. Wright,
plainly demonstrate that the plaintiff is highly Wright & Close LLP, Houston, TX, D. Scott Hemingway,
unlikely to obtain basic justice there. Eugenia Simmons Hansen, Hemingway Hansen LLP, Dallas,
TX, for Plaintiff.
Cases that cite this headnote
Joseph T. Jakubek, John D. Vandenberg, Stephen J. Joncus,
[32] Federal Courts Klarquist Sparkman, LLP, Portland, OR, How–Ying Albert
Parties' choice of forum; forum-shopping Liou, Joseph Beauchamp, Scott W. Cowan, Jones Day,
Michael Paul Graham, Attorney at Law, Maria Wyckoff
Federal Courts
Boyce, Amy Pharr Hefley, Baker Botts LLP, Edward Michael
Public and private interests; balancing
Cottrell, First Court of Appeals, Houston, TX, Tharan
interests
Gregory Lanier, Jones Day, Palo Alto, CA, for Defendants.
Because a forum selection clause represents the
parties' agreement as to the most proper forum,
the plaintiff's choice of forum merits no weight,
MEMORANDUM OPINION AND ORDER
and a court must deem the private-interest factors
to weigh entirely in favor of the preselected SIM LAKE, District Judge.
forum under forum non conveniens analysis;
thus a court may only consider arguments about Plaintiff Wellogix, Inc. (“Wellogix”) brought this trade
public-interest factors. secrets action against SAP AG and SAP America, Inc.
(collectively “SAP” or “Defendants”). Pending before the
Cases that cite this headnote court is Defendants SAP America, Inc.'s and SAP AG's
Motion for Summary Judgment (“Motion for Summary
[33] Federal Courts Judgment”) (Docket Entry No. 8). For the reasons stated
Parties' choice of forum; forum-shopping below, Defendants' Motion for Summary Judgment will be
granted, and this case will be dismissed.
Because public interest factors in a forum
non conveniens analysis will rarely defeat a
transfer motion, the practical result is that
forum-selection clauses should control except in I. Background
unusual cases.
A. Business Relationship

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Wellogix develops software for the electronic procurement and Accenture, fraud by SAP, negligent misrepresentation
1 by SAP, tortious interference with contract and *771
of goods and services by oil and gas operators. This is
commonly referred to as electronic “Purchase *770 to prospective business relationships by SAP, Accenture, and

Pay” (“P2P”) in the industry. 2 Traditionally, oil and gas BP, and theft of trade secrets by SAP, Accenture, and BP. 14
companies planned drilling projects using paper records to Judge Keith B. Ellison presided over the case.

track and pay costs. 3 Around 1998, Wellogix developed
Wellogix's claims against BP were arbitrated before Judge
software that allowed oil companies to schedule and pay for
Ellison, who found that BP breached its confidentiality
complex services electronically. 4 According to Wellogix, it agreement with Wellogix by making Wellogix's confidential
was the only firm offering such software from 2000 to 2005. 5 information accessible to Accenture and SAP. 15 Wellogix's
Wellogix did not offer a standalone solution, however, but
suit against Accenture proceeded to trial. 16 The jury found
implemented its technology through a series of pilot projects
for Wellogix, awarding $26.2 million in compensatory
with partner firms. 6
damages and $68.2 million in punitive damages. 17

SAP, a potential partner, had an existing software solution
Relevant to the present case, Wellogix's trade secrets claims
providing electronic P2P functionality for the oil and gas
against the SAP defendants were dismissed pursuant to a
industry, but it lacked the complex services functionality
forum-selection clause in the NetWeaver Agreement. 18 In
offered by Wellogix. 7 To facilitate integration of third-
a December 8, 2008, Memorandum and Order (the “2008
party software with its existing solution, SAP developed
Order”), Judge Ellison held that the clause, which specified
“middleware” software called “NetWeaver.” 8 On March Frankfurt, Germany, as “[t]he place of jurisdiction for all
15, 2005, Wellogix and SAP entered into the Powered by disputes arising between the parties out of or in connection
SAP NetWeaver Cooperation Agreement (the “NetWeaver with [the NetWeaver Agreement],” was mandatory and
Agreement”), which “permitted Wellogix, on a nonexclusive
enforceable, 19 and that all of Wellogix's claims against
basis, to integrate its software with SAP's software through
SAP AG and SAP America would have to be decided in
NetWeaver.” 9
Germany. 20

In May of 2005, SAP and Wellogix pitched their integrated
software to the consulting firm Accenture, which was C. Patent Declaratory Judgment Action
working on behalf of BP to identify a global software On April 15, 2010, SAP America filed a Complaint for
provider for BP's operations. 10 “Without notifying Wellogix, Declaratory Relief against Wellogix, Inc. and Wellogix
Accenture and SAP began developing the complex services Technology Licensing LLC (the “Declaratory Judgment
component of the global software for BP. As they developed Action”), which was assigned to the undersigned judge. 21
the component, Accenture and SAP apparently accessed SAP sought a declaration of noninfringement and invalidity
Wellogix technology ... that had been uploaded to [a
of five Wellogix patents. 22 In July of 2010, SAP filed inter
11
confidential] portal.” Wellogix alleges that “SAP used partes requests for reexamination of Wellogix's patents with
these misappropriated trade secrets for its own substantial
the United States Patent Office (“PTO”). 23 SAP then moved
financial benefit, profiting handsomely from technology it
to stay the Declaratory Judgment Action pending the outcome
did not develop but which it fully incorporated into its own
of the PTO reexamination. 24 Wellogix counterclaimed in
products.” 12
the Declaratory Judgment Action for infringement of the
same patents. 25 On January 4, 2011, the court stayed the
B. Trade Secrets Litigation and the 2008 Order Declaratory Judgment Action, pending reexamination. 26
In May of 2008, Wellogix sued Accenture, BP, and SAP in
Texas state court, and the case was removed to the Southern At a hearing on March 14, 2014, counsel for all parties
13
District of Texas, Galveston Division. Wellogix asserted agreed that the patent review process could take an additional
multiple causes of action, including breach of a partnership six to *772 eighteen months to complete. 27 In order to
agreement by SAP, breach of fiduciary duty by SAP allow Wellogix to file an amended answer and counterclaims

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alleging theft of trade secrets, the court lifted the stay Cas. Co., 330 U.S. 518, 67 S.Ct. 828, 834, 91 L.Ed. 1067
and directed Wellogix to file its amended answer and a (1947). Because a valid forum-select ion clause “represents
motion to sever the trade secrets counterclaims into a new the parties' agreement as to the most proper forum” and
case. 28 On March 19, 2014, Wellogix filed its amended the overarching consideration is whether dismissal would
answer and counterclaims for patent infringement and theft promote the “interest of justice,” a valid forum-selection
clause should be given controlling weight “in all but the most
of trade secrets. 29 Wellogix moved to sever its trade secrets
exceptional cases.” Atlantic Marine, 134 S.Ct. at 581 (internal
counterclaims, the motion was granted, and on March 21,
quotation marks and citations omitted).
2014, the counterclaims were docketed as Civil Case No.
H–14–741. 30 SAP then moved for summary judgment on
Wellogix's trade secrets claims. 31 B. SAP has not waived its right to enforce the forum-
selection clause.
[5] As an initial matter, Wellogix argues that SAP has
waived its rights under the forum-selection clause by filing
II. Analysis the Declaratory Judgment Action in the Southern District of
Wellogix's counterclaims against SAP America, Inc. and SAP Texas. 34 SAP argues that it has not. 35 The parties have cited
AG allege misappropriation of trade secrets under Texas a smattering of cases from various federal jurisdictions, but
common law and theft of trade secrets in violation of the they have ignored a key threshold issue: What law governs a
Texas Penal Code, which is made actionable under the Texas finding of waiver in this context?
Theft Liability Act (“TTLA”). The common law claim is
nearly identical to the claim that was dismissed by Judge Wellogix relies on Supreme Court precedent for the “well-
32 established law that a party waives all of its potential
Ellison in 2008. The TTLA claim stems from the same
objections to a venue with respect to any counterclaims filed
33
incident. Defendants have moved for summary judgment by a defendant when it chooses to bring suit in a forum where
on the grounds that Wellogix's claims are barred by claim
it could not otherwise be sued.” 36 See Gen. Elec. Co. v.
preclusion and issue preclusion, or, alternatively, that they
Marvel Rare Metals, 287 U.S. 430, 53 S.Ct. 202, 204, 77
should be dismissed for forum non conveniens pursuant to
L.Ed. 408 (1932). That case held that patent-specific venue
the forum-selection clause in the NetWeaver Agreement.
provisions of the Judicial Code did not apply to counterclaims
Because the court is persuaded that Wellogix's counterclaims
and, therefore, that a plaintiff who sues on a patent in a district
should be dismissed pursuant to the forum-selection clause
in which he would not otherwise be subject to venue consents
and that the relevant portions of Judge Ellison's 2008 Order
to that venue for other issues of the case, “including those
are issue preclusive, only these grounds are addressed in
pertaining to a counterclaim praying that he be restrained
detail.
from infringing a patent of the defendant.” Id. SAP does not
contest the propriety of this court hearing Wellogix's patent
A. Legal Standard counterclaims in the Declaratory Judgment Action.
[1] [2] [3] [4] A federal court applies the federal law
of forum non conveniens in deciding a motion to dismiss While Wellogix contends that “[c]ourts have applied this
pursuant to a forum-selection clause pointing to a state or rule to hold that parties have waived forum selection clauses
foreign forum. Atlantic Marine Const. Co. v. U.S. Dist. Court by initiating litigation,” 37 it has identified only one case
for the W. Dist. of Tex., ––– U.S. ––––, 134 S.Ct. 568, in eighty years that did so, Jalin Realty Capital Advisors,
580, 187 L.Ed.2d 487 (2013). The doctrine of forum non LLC v. A Better Wireless, NISP, LLC, No. 11–165 (JRT/
conveniens enables a district court, at its discretion, to decline LIB), 2012 WL 838439, at *3 (D.Minn. Mar. 12, 2012). 38
to exercise jurisdiction “if the moving party establishes that Nevertheless, many federal courts have held, as a general
the convenience of the parties and the court and the interests matter, that a contracting party can waive a forum-selection
of justice indicate that the case should be tried in another clause, thereby relieving the other party of any obligation to
forum.” Karim v. Finch Shipping Co., 265 F.3d 258, 268 file suit in the originally specified forum. See, e.g., Innovative
(5th Cir.2001). Indeed, “the ultimate inquiry is where trial Display Techs. LLC v. Microsoft Corp., No. 2–13–783,
will best serve the convenience *773 of the parties and 2014 WL 2757541, at *5 (W.D.Tex. June 17, 2014). SAP
the ends of justice.” Koster v. (American) Lumbermens Mut. responds that “Wellogix entirely ignores the touchstone of the

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waiver inquiry: that a party cannot waive its forum-selection
clause right[ ] unless that party possessed an actual intent When addressing waiver of a forum-selection clause,
39 however, the Fifth Circuit applied Texas law and concluded
to relinquish that right.” Although there is some support
*774 for this proposition, the correct source of the governing that waiver requires an intent to relinquish a known
rule remains unclear. right. 40 See GP Plastics Corp. v. Interboro Packaging
Corp., 108 Fed.Appx. 832, 836 (5th Cir.2004) (per curium)
[6] The enforceability of a forum-selection clause in federal (unpublished) (citing Two Thirty Nine Joint Venture v. Joe, 60
court is governed by federal law, regardless of the basis S.W.3d 896, 904 (Tex.App.-Dallas 2001)), rev'd, 145 S.W.3d
for federal jurisdiction. Haynsworth v. The Corporation, 121 150 (Tex.2004). 41
F.3d 956, 962 (5th Cir.1997); see also Jumara v. State Farm
Ins. Co., 55 F.3d 873, 877 (3d Cir.1995) (“Because questions *775 Authorities cited by Wellogix also rely on state law to
of venue and the enforcement of forum-selection clauses determine what constitutes waiver. See Unity Creations, Inc.
are essentially procedural, rather than substantive, in nature, v. Trafcon Indus., 137 F.Supp.2d 108, 111 (E.D.N.Y.2001)
federal law applies in diversity cases irrespective of Erie.”) (“In New York, when a party disregards a forum selection
(internal quotation marks and citations omitted). While there clause and sues on a contract in an unauthorized forum, it
is still considerable confusion as to what body of law applies waives the forum selection clause on the claims it pursues.”);
to the interpretation of a forum-selection clause, there is some Dart Mech. Corp. v. Johnson Controls, Inc., No. 13–CV–
consensus that the court should apply the law that governs the 2941(JS) (WDW), 2013 WL 5937424, at *2 (E.D.N.Y. Nov.
rest of the contract. See Martinez v. Bloomberg LP, 740 F.3d 4, 2013) (citing cases that applied New York law).
211, 222–23 (2d Cir.2014) (reviewing cases from several
circuits). If federal law governs, the court has found no controlling
cases on point and would therefore defer to the intent
Like interpreting a forum-selection clause, determining requirement articulated in GP Plastics and other cases in
waiver of a forum-selection clause is arguably a matter of
this district. 42 If the law applicable to the contract governs,
substantive contract law to be governed by the law applicable
this case presents two additional complications: First, the
to the rest of the contract. Cf. CK DFW Partners Ltd.
NetWeaver Agreement specifies that it is to be governed
v. City Kitchens, Inc., No. 3–6–1598, 2007 WL 2381259,
at *2 n. 8 (N.D.Tex. Aug. 17, 2007) (“Although federal and construed in accordance with German law. 43 However,
law governs the enforceability of an otherwise valid forum Wellogix has neither invoked the choice-of-law clause nor
selection clause, threshold questions concerning whether a shown how SAP waived its rights under German law. Not
forum selection clause is triggered or is somehow nullified having been formally invited, the court declines to venture
under the other terms of the contract is a question governed further down this road. Cf. Int. Admins., Inc. v. Life Ins. Co.
by the applicable state law.”); Martinez, 740 F.3d at 221 (“In of N.A., 753 F.2d 1373, 1376 n. 4 (7th Cir.1985) (“Although
construing a forum selection clause, a court may confront we are not certain that Illinois law would apply to every
a wide range of contract law issues.... Erie warns against issue, were the question properly argued, we are certain that
an approach that would force federal courts to generate it is not the job of the trial judge to do the parties' work
a sprawling ‘federal general common law’ of contracts to for them.”). Second, the Texas Supreme Court has adopted a
govern such questions whenever they arise in the context of specific test to determine whether a party has waived a forum-
forum selection clauses.”). selection clause, and it differs from the waiver test cited in GP
Plastics. See In re ADM Investor Servs., Inc., 304 S.W.3d 371,
In the arbitration context, the Fifth Circuit holds that waiver 374 (Tex.2010) (“A party waives a forum-selection clause by
is to be addressed as a matter of federal law. See, e.g., Miller substantially invoking the judicial process to the other party's
Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494, 497 n. detriment or prejudice.”). The parties have not addressed
4 (5th Cir.1986) (“The issue of arbitrability under the United these issues; they simply disagree as to whether GP Plastics is
States Arbitration Act is a matter of federal substantive law. distinguishable. Ultimately, the court concludes that SAP has
We thus dismiss out of hand FWDC's citation of 60 Tex. not waived its rights under either the GP Plastics approach or
Jur.2d 199 for the proposition[ ] that waiver is a question of the In re ADM approach.
fact based largely on intent.”) (internal quotation marks and
citations omitted).

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GP Plastics holds that waiver of a forum-selection clause
requires an intent to relinquish rights under the contract. 108 1. Wellogix's trade secrets claims are within the scope of
Fed.Appx. at 836–37. There is no evidence that SAP intended the forum-selection clause.
to waive its rights under the forum-selection clause in this [7] Before a court can consider enforcing a forum-selection
case. In fact, SAP's complaint in the Declaratory Judgment clause, it must first determine whether the clause applies to
Action demonstrates an intent not to relinquish the relief *777 the type of claims asserted in the lawsuit. Braspetro Oil
granted by Judge Ellison in 2008: Servs. Co. v. Modec (USA), Inc., 240 Fed.Appx. 612, 616 (5th
Cir.2007). SAP argues that Judge Ellison decided this issue in
2008 and that his order has preclusive effect. Wellogix argues
that the issue was not actually litigated before Judge Ellison.
*776 SPECIFIC RELIEF NOT REQUESTED
[8] [9] Once a court has decided an issue of fact or
SAP does not request any additional relief with respect to
law necessary to its judgment in a case, the doctrine of
the claims adjudicated in [Judge Ellison's December 2008
collateral estoppel precludes parties from relitigating that
Memorandum and Order] beyond that which has already
issue in a subsequent case involving a party to the first. Allen
been granted to SAP, all such claims being separate and
v. McCurry, 449 U.S. 90, 101 S.Ct. 411, 414, 66 L.Ed.2d
distinct from the non-infringement and invalidity of the
308 (1980). “In this circuit, collateral estoppel applies when
Wellogix Patents. 44 a previously litigated issue of law or fact was [1] identical to
The court therefore concludes that SAP did not intentionally the present issue, [2] actually litigated, [3] necessary to a final
relinquish its rights under the forum-selection clause. judgment, and [4] reviewed under the same standard as the
present issue.” Duffy & McGovern Accommodation Servs. v.
In re ADM holds that a party waives a forum-selection clause QCI Marine Offshore, Inc., 448 F.3d 825, 829 (5th Cir.2006).
by substantially invoking the judicial process to the other
party's detriment or prejudice, but that there is a strong Here, the parties appear not to have “actually litigated”
presumption against such waiver. 45 304 S.W.3d at 374. the scope of the forum-selection clause before Judge
Wellogix has not shown how it suffered any detriment or Ellison. Although Wellogix arguably conceded that its trade
prejudice with respect to its trade secrets claims as a result secrets claims arose out of the NetWeaver Agreement, 50
46
of SAP's Declaratory Judgment Action in this forum. The concessions and stipulations do not necessarily have issue-
court therefore concludes that SAP has not waived its rights preclusive effect. See Martin v. Trend Personnel Servs., No.
under the In re ADM approach. 47 3:13–CV–3953–L, 2014 WL 2894440, at *4 (N.D.Tex. June
26, 2014); 18A Fed. Prac. & Proc. Juris. § 4443 (2d ed.). Even
if resolution of the issue was logically necessary to Judge
C. The forum-selection clause is mandatory and Ellison's decision, the scope of the clause was neither briefed
enforceable with respect to Wellogix's trade secrets by the parties nor fully addressed in Judge Ellison's Order.
claims. Although it is a close question, because the court reaches the
SAP argues that Judge Ellison's 2008 Order dismissing same conclusion as Judge Ellison there is no reason to decide
Wellogix's trade secrets claims precludes Wellogix from the preclusive effect of the Order on this issue.
challenging the enforcement of the forum-selection clause in
this action. 48 Wellogix does not contest the preclusive effect [10] [11] [12] To determine whether a claim falls within
of Judge Ellison's order, except to argue that the trade secrets the scope of a forum-selection clause, a court looks to the
claims are outside the scope of the forum-selection clause and language of the contract. Braspetro, 240 Fed.Appx. at 616
(citing Marinechance Shipping, Ltd. v. Sebastian, 143 F.3d
that this issue was not litigated before Judge Ellison. 49 The
216, 222 (5th Cir.1998)). As with the potential waiver of a
court concludes that Judge Ellison's 2008 Order is entitled to
forum-selection clause, a threshold issue here is what law
full preclusive effect as to the enforceability of the forum-
to apply. The Fifth Circuit has applied federal law in this
selection clause. Because the scope of the clause was not fully
context, drawing on maritime and diversity cases in this and
litigated before Judge Ellison, however, the court will address
other circuits. See, e.g., id. Despite the choice-of-law clause
that issue.
in the NetWeaver Agreement, the parties also rely on federal
law. This court will do the same. See Phillips v. Audio Active

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Ltd., 494 F.3d 378, 386 (2d Cir.2007) (“We will assume from to any party without agreement by
the parties' briefing that they do not rely on any distinctive the receiving party to keep them
features of [the contractually selected] law and apply general secret. The SAP Parties, through
contract law principles and federal precedent to discern the their confidential and fiduciary
meaning and scope of the forum clause.”). relationships with Wellogix, acquired
access to Wellogix's trade secrets.
The forum-selection clause in the NetWeaver Agreement By acknowledging and agreeing that
states: Wellogix had valuable trade secrets,
the SAP Parties owed a duty not
The Agreement shall be governed and to use or disclose these trade
construed in accordance with the laws secrets without Wellogix's permission.
of the Federal Republic of Germany. The SAP Parties, without permission
The UNICITRAL purchase law shall or legal authority from Wellogix,
not apply. The place of jurisdiction misappropriated this highly valuable
for all disputes arising between the technology in order to obtain and
parties out of or in connection with this perform under various agreements
Agreement *778 shall be Frankfurt, with its other business partners and
Germany. 51 customers. As a direct result of
this misappropriation of trade secrets,
[13] [14] [15] “The scope of a forum-select ion clause Wellogix has been damaged and the
is not limited solely to claims for breach of the contract SAP Parties have profited. 53
that contains it.” MaxEn Capital, LLC v. Sutherland, No.
H–08–3590, 2009 WL 936895, at *6 (S.D.Tex. Apr. 3, *779 [16] Case law cited by Wellogix supports this
2009). In a forum-selection clause, “[t]he term ‘arising’ conclusion as well, In arguing that SAP's patent claims
is generally interpreted as indicating a causal connection.” against Wellogix also fall within the scope of the forum-
Braspetro, 240 Fed.Appx. at 616. Clauses that extend only to selection clause, an issue the court need not reach, Wellogix
disputes “arising out of” a contract are construed narrowly, relies primarily on Omron Healthcare, Inc. v. Maclaren
while clauses extending to disputes that “relate to” or Exports Ltd., 28 F.3d 600 (7th Cir.1994). In Omron, the
“are connected with” the contract are construed broadly. Seventh Circuit recognized that a test of but-for causation
Blueskygreenland Envtl. Solutions, LLC v. Rentar Envtl. would be overly broad, and it held that “all disputes the
Solutions, Inc., No. H–11–1745, 2011 WL 6372842, at resolution of which arguably depend on the construction of
*4 (S.D.Tex. Dec. 20, 2011). Thus, the phrase “arising in the agreement ‘arise out of’ that agreement” for purposes of
connection with” has been found to reach “every dispute a forum-selection clause. Id. at 603. The phrase “arise out of”
between the parties having a significant relationship to the is narrower than the language in the NetWeaver Agreement.
contract and all disputes having their origin or genesis in the Nevertheless, since the NetWeaver Agreement governs the
contract.” Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 721
confidentiality of Wellogix's trade secrets, 54 the resolution
(9th Cir.1999). Such a clause encompasses not only contract
of Wellogix's claims “arguably depends” on construction of
claims, but also statutory and common law trade secrets
the NetWeaver Agreement. Those claims would therefore
claims “in connection with” the agreement. Id. at 724–25. 52 also fall within the scope of the forum-selection clause under
the Omron test.
Beginning with the first substantive paragraph of Wellogix's
trade secrets counterclaim, it is clear that this is “a dispute[ ]
arising between the parties out of or in connection with [the 2. The clause is mandatory, and it applies to both
NetWeaver Agreement]”: defendants.
[17] [18] “A party's consent to jurisdiction in one forum
Wellogix took reasonable steps to keep does not necessarily waive its right to have an action heard
its technology and other confidential in another.” City of New Orleans v. Mun. Admin. Servs., Inc.,
information as trade secrets and would 376 F.3d 501, 504 (5th Cir.2004). “For a forum selection
not have disclosed its trade secrets clause to be exclusive, it must go beyond establishing that

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a particular forum will have jurisdiction and must clearly Judge Ellison applied the Bremen standard, and he held that
demonstrate the parties' intent to make that jurisdiction the forum-selection clause was enforceable. 60 To the extent
exclusive.” Id. Therefore, to be enforceable, a forum- that the Bremen standard is still applicable and dispositive,
selection clause must be mandatory, not just permissive. the court gives Judge Ellison's ruling full preclusive effect.
Caldas & Sons, Inc. v. Willingham, 17 F.3d 123, 127–28 (5th Furthermore, since Wellogix has made no showing that this
Cir.1994). Judge Ellison determined that the forum-selection is an “exceptional” or “most unusual” case, the clause is also
clause in the NetWeaver Agreement is mandatory. 55 Judge enforceable under Atlantic Marine.
Ellison also determined that the forum-selection clause
applies to claims against both SAP AG, which was a signatory
D. Wellogix's claims should be dismissed for forum non
to the Agreement, and SAP America, which was not. 56 The
conveniens.
parties do not dispute the preclusive effect of these findings.
[22] [23] Following Atlantic Marine, a forum-selection
clause that points to a nonfederal forum must be evaluated
3. The clause is enforceable. under the doctrine of forum non conveniens, including a
[19] [20] Prior to the Supreme Court's decision in Atlantic balancing-of-interests analysis. Atlantic Marine, 134 S.Ct.
Marine, courts in this and other circuits enforced forum- at 581–83. Because Judge Ellison's 2008 Order ruled on a
selection clauses under the standard articulated in M/S 12(b)(3) motion and did not apply a forum non conveniens
Bremen v. Zapata Off–Shore Co., 407 U.S. 1, 92 S.Ct. analysis, 61 the court must now do so.
1907, 32 L.Ed.2d 513 (1972). Under the Bremen standard,
forum-selection clauses are prima facie valid and will be [24] Under a traditional forum non conveniens analysis,
enforced unless the resisting party proves that enforcement the court conducts a two-step inquiry. First, the court must
is unreasonable. Id. at 1913. 57 A resisting party can show establish the existence of an alternative forum in which the
unreasonableness by establishing a number of relevant case may be brought. Piper Aircraft Co. v. Reyno, 454 U.S.
235, 102 S.Ct. 252, 265 n. 22, 70 L.Ed.2d 419 (1981). Such a
factors, 58 However, *780 that party bears a “heavy burden
forum must be both available and adequate. *781 In re Air
of proof.” Bremen, 92 S.Ct. at 1917.
Crash Disaster Near New Orleans, La., 821 F.2d 1147, 1165
(5th Cir.1987), vacated on other grounds sub nom. Pan Am.
[21] After Atlantic Marine, forum-selection clauses must
World Airways, Inc. v. Lopez, 490 U.S. 1032, 109 S.Ct. 1928,
be “given controlling weight in all but the most exceptional
104 L.Ed.2d 400 (1989), reinstated except as to damages by
cases,” 134 S.Ct. at 579 (internal quotation marks and citation
In re Air Crash Disaster Near New Orleans, La., 883 F.2d 17
omitted), because in “all but the most unusual cases ... the
(5th Cir.1989). “If an alternative forum is both available and
‘interest of justice’ is served by holding parties to their
adequate, the district court must then weigh various private
bargain,” id. at 583. 59 and public interest factors to determine whether dismissal is
warranted.” Saqui v. Pride Cent. Am., LLC, 595 F.3d 206, 211
As the Second Circuit has observed, Atlantic Marine “did (5th Cir.2010).
not address the extent to which the ‘interest of justice’
test ... resembles the test developed under Bremen.” Martinez,
740 F.3d at 219. Although there is still some uncertainty 1. Availability
as to whether the Bremen factors remain relevant, courts [25] [26] [27] “An alternative forum is available when
continue to apply them. See, e.g., id. at 228; Emrit v. the entire case and all parties can come within the jurisdiction
Watts, Guerra, L.L.P., No. SA–13–CV–00473–XR, 2014 WL of that forum.” Id. (internal quotation marks and citation
3970172, at *2 (W.D.Tex. Aug. 13, 2014) (“Assuming, for omitted). “A defendant's submission to the jurisdiction
the sake of argument, that these factors all remain relevant of a foreign forum sufficiently satisfies the availability
post-Atlantic Marine ....”); 1–Stop Fin. Serv. Centers of requirement.” City of New Orleans Employees' Ret. Sys. ex
Am., LLC v. Astonish Results, LLC, No. A–13–CA–961– rel. BP P.L.C. v. Hayward, 508 Fed.Appx. 293, 296 (5th
SS, 2014 WL 279669, at *6–*7 (W.D.Tex. Jan. 23, 2014) Cir.2013); see also Saqui, 595 F.3d at 210 (“Fifth Circuit
(applying balancing-of-interest factors but also addressing law has consistently held that when a defendant submits to
unreasonableness argument under Bremen standard). the jurisdiction of an alternate forum, that renders the forum
available for purposes of FNC analysis.”).

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DTEX, LLC v. BBVA Bancomer, S.A., 508 F.3d 785, 796 (5th
[28] To dismiss a case for forum non conveniens a court Cir.2007) (internal quotation marks and citation omitted).
must establish that the defendants are amenable to process in Because Wellogix has made no showing to the contrary,
the alternative forum. In re BP Shareholder Derivative Litig., the court presumes that Germany is an adequate alternative
No. 10–MD–2185, 2011 WL 4345209, at *6 (S.D.Tex. Sept. forum. Furthermore, the parties expressly agreed to both a
German forum and the application of German law. The court
15, 2011) aff'd sub nom. City of New Orleans Employees'
Ret. Sys. ex rel. BP P.L.C. v. Hayward, 508 Fed.Appx. 293 sees no injustice in holding the parties to their bargain.
(5th Cir.2013). Neither party has addressed the availability of
Germany as a forum or the Defendants' amenability to process
3. Balancing of Interests
there. Courts in this circuit sometimes condition dismissal for
[32] [33] Atlantic Marine modified the typical forum non
forum non conveniens on defendants stipulating that they will
conveniens analysis for cases involving a forum-selection
submit to the jurisdiction of the foreign court. See, e.g., id.
clause. Because such a clause “represents the parties'
However, this practice pre-dates Atlantic Marine, and it is not
agreement as to the most proper forum,” the plaintiff's choice
clear that such conditions are required in a case involving a
of forum “merits no weight,” and a court “must deem the
forum-selection clause.
private-interest factors to weigh entirely in favor of the
preselected forum.” Atlantic Marine, 134 S.Ct. at 581–82.
In light of the mandatory forum-selection clause providing for
Thus a court may only consider arguments about public-
jurisdiction in Frankfurt, Germany, and Defendants' argument
interest factors. 62 Id. at 582. “Because those factors will
that the clause applies to claims against both SAP AG and
rarely defeat a transfer motion, the practical result is that
SAP America, the court is satisfied that Defendants have
forum-selection clauses should control except in unusual
consented to the jurisdiction of the German courts. The court
cases.” Id. at 583. “[S]uch cases will not be common.” Id.
is not inclined to delay the resolution of this matter by
imposing conditions on dismissal. However, should Wellogix
[34] SAP points to a number of public-interest factors
have a good-faith argument that SAP AG or SAP America is
not amenable to process in Germany, the court may reconsider favoring dismissal. 63 However, under Atlantic Marine, the
and condition dismissal on an appropriate stipulation. Barring party resisting enforcement has the burden of showing that
a good-faith showing to the contrary, the Court finds that public-interest factors “overwhelmingly disfavor” dismissal.
German courts provide an available alternative forum in Id. Because Wellogix has made no showing that public-
which to proceed with this case. interest factors disfavor dismissal, it has not met its burden
under Atlantic Marine. This is not an “unusual case,” and the
forum-selection clause should control.
2. Adequacy
[29] [30] [31] An alternative forum is adequate “when
the parties will not be deprived of all remedies or treated
III. Conclusions and Order
unfairly, even though they might not enjoy the same benefits
as they might receive in an American court.” In re Air Crash For the reasons stated above, Defendants SAP America,
Disaster, 821 F.2d at 1165 (citing Piper, 102 S.Ct. at 265; Inc.'s and SAP AG's Motion for Summary Judgment is
Syndicate 420 at Lloyd's London v. Early Am. Ins. Co., 796 GRANTED. However, this court may reassert jurisdiction
F.2d 821, 829 (5th Cir.1986)). Although neither party has upon timely notification if the courts of Germany refuse
addressed the adequacy of Germany as a forum, a party to accept jurisdiction for reasons other than Wellogix's
moving to dismiss for forum non conveniens “may rely on refusal to pursue an action or to comply with the procedural
a presumption that the foreign forum is adequate.” Indusoft, requirements of German courts. The court retains jurisdiction
Inc. v. Taccolini, 560 Fed.Appx. 245, 249 (5th Cir.2014). to supervise the terms of this dismissal.
“The substantiative law of the foreign forum is presumed
to be adequate unless the plaintiff makes some showing
to the contrary, or unless conditions in the foreign forum All Citations
*782 made known to the court, plainly demonstrate that
the plaintiff is highly unlikely to obtain basic justice there.” 58 F.Supp.3d 766

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Footnotes
1 Wellogix's Opposition to SAP America, Inc.'s and SAP AG's Motion for Summary Judgment (“Opposition to Motion
for Summary Judgment”), Case No. H–14–741, Docket Entry No. 15, pp. 8–9. Page citations are to the pagination
imprinted by the federal court's electronic filing system at the top and right of the document. For a succinct summary of
the background of this dispute see Facts and Proceedings, Wellogix v. Accenture, L.L.P., 716 F.3d 867, 872–73 (5th
Cir.2013).
2 Plaintiff's First Amended Complaint, Case No. G–8–119, Docket Entry No. 53, p. 3.
3 Opposition to Motion for Summary Judgment, Case No. H–14–741, Docket Entry No. 15, p. 7.
4 Id.
5 Wellogix, 716 F.3d at 873.
6 Id.
7 Plaintiff's First Amended Complaint, Case No. G–8–119, Docket Entry No. 53, pp. 5–6.
8 Complaint for Declaratory Relief, Case No. H–10–1224, Docket Entry No. 1, pp. 3–4.
9 Id.
10 Wellogix, 716 F.3d at 873.
11 Id.
12 Opposition to Motion for Summary Judgment, Case No. H–14–741, Docket Entry No. 15, p. 9.
13 See Notice of Removal, Case No. G–8–119, Docket Entry No. 1.
14 See Plaintiff's First Amended Complaint, Case No. G–8–119, Docket Entry No. 53, pp. 11–30.
15 Wellogix, 716 F.3d at 874.
16 Id.
17 Id. Ultimately, Wellogix accepted a remittitur of the punitive damages to $18.2 million, the amount it sought at trial. Id.
18 See Memorandum and Order, Case No. G–8–119, Docket Entry No. 54.
19 Id. at 5–16.
20 Id. at 16.
21 Complaint for Declaratory Relief, Case No. H–10–1224, Docket Entry No. 1.
22 Id. at 8–14. SAP later filed another declaratory judgment action, Case No. H–11–2840, which added a sixth Wellogix
patent. It was consolidated into the pending Declaratory Judgment Action. See Order, Case No. H–10–1224, Docket
Entry No. 72.
23 Notice of Filing of Requests for Reexamination, Case No. H–10–1224, Docket Entry No. 21.
24 SAP America, Inc.'s Motion to Stay Pending Reexamination, Case No. H–10–1224, Docket Entry No. 30.
25 Defendants Wellogix, Inc. and Wellogix Technology Licensing's Amended Answer and Counterclaims, Case No. H–10–
1224, Docket Entry No. 38, pp. 9–43.
26 Order, Case No. H–10–1224, Docket Entry No. 63.
27 See Transcript of Proceedings, Case No. H–10–1224, Docket Entry No. 112, pp. 4–5.
28 Id. at 5–8.
29 Defendants Wellogix, Inc. and Wellogix Technology Licensing's Amended Answer and Amended Counterclaims, Case
No. H–10–1224, Docket Entry No. 104; see also Case No. H–14–741, Docket Entry No. 1.
30 Counter–Plaintiff Wellogix, Inc.'s Motion for Severence, Case No. H–10–1224, Docket Entry No. 105; Order on Wellogix,
Inc.'s Motion for Severance, Case No. H–10–1224, Docket Entry No. 106; Defendants Wellogix, Inc. and Wellogix
Technology Licensing's Amended Answer and Amended Counterclaims, Case No. H–14–741, Docket Entry No. 1.
31 Motion for Summary Judgment, Case No. H–14–741, Docket Entry No. 8.
32 Compare Defendants Wellogix, Inc. and Wellogix Technology Licensing's Amended Answer and Amended
Counterclaims, Case No. H–14–741, Docket Entry No. 1, pp. 45–46 ¶¶ 242–249, with Plaintiff's First Amended Complaint,
Case No. G–8–119, Docket Entry No. 53, pp. 23–24 ¶¶ 102–106.
33 See Defendants Wellogix, Inc. and Wellogix Technology Licensing's Amended Answer and Amended Counterclaims,
Case No. H–14–741, Docket Entry No. 1, p. 46 ¶¶ 247–249.
34 Opposition to Motion for Summary Judgment, Case No. H–14–741, Docket Entry No. 15, pp. 19–29.

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35 Motion for Summary Judgment, Case No. H–14–741, Docket Entry No. 8, pp. 27–31; Defendants SAP America, Inc.'s
and SAP AG's Reply Brief in Support of Their Motion for Summary Judgment, Case No. H–14–741, Docket Entry No.
16, pp. 4–10.
36 Opposition to Motion for Summary Judgment, Case No. H–14–741, Docket Entry No. 15, p. 20.
37 Id. at 21.
38 The other cases Wellogix cites are either inapposite, see id. at 20–21, or apply New York state law, see id. at 21–22.
39 Defendants SAP America, Inc.'s and SAP AG's Reply Brief in Support of their Motion for Summary Judgment, Case No.
H–14–741, Docket Entry No. 16, p. 8 (internal quotation marks and citation omitted).
40 The court did not specify whether or why state or federal law should control the issue.
41 The Dallas Court of Appeals in Two Thirty Nine Joint Venture recited the elements of waiver, but it was in the context of
waiving a conflict of interest, not a waiver of contractual rights or a forum-selection clause. 60 S.W.3d at 911. But see
Johnson v. Structured Asset Servs., LLC, 148 S.W.3d 711, 722 (Tex.App.-Dallas 2004, no pet.) (“In order to establish
a waiver of rights under a contract, there must be proof of an intent to relinquish a known right.”); In re EPIC Holdings,
Inc., 985 S.W.2d 41, 57 (Tex.1998) (“Waiver is an affirmative defense.... Waiver occurs when a party either intentionally
relinquishes a known right or engages in intentional conduct inconsistent with claiming that right.”).
42 Other courts in this district have required intent to waive a forum-select ion clause, though the source of the governing
rule remains unclear. See Texas Cmty. Bank, N.A. v. Dunn, No. H–9–3514, 2010 WL 3220652, at *2 n. 1 (S.D.Tex. Aug.
13, 2010) (finding defendant's waiver argument “unpersuasive” because plaintiff “did not ‘intentionally relinquish’ its rights
under the forum-selection clause.”) (no citation in original); Bancroft Life & Cas. ICC, Ltd. v. Davnic Ventures, L.P., No.
H–12–2015, 2013 WL 1222112, at *2 (S.D.Tex. Mar. 25, 2013) (“ ‘For waiver to occur, there must be an existing right,
knowledge of its existence, and either an actual intention to relinquish that right or conduct so inconsistent with the intent
to enforce the right as to induce a reasonable belief that it has been relinquished.’ ”) (quoting N. Am. Specialty Ins. Co.
v. Debis Fin. Servs., Inc., 513 F.3d 466, 470 (5th Cir.2007) (citing Steptore v. Masco Const. Co., 643 So.2d 1213, 1215
(La.1994))). The Seventh Circuit has also held that waiver of a forum-selection clause requires “voluntary or intentional
relinquishment of a known right.” Haber v. Biomet, Inc., 578 F.3d 553, 558 (7th Cir.2009). For authority, the court quoted
a Seventh Circuit ERISA case, Vershaw v. Nw. Nat. Life Ins. Co., 979 F.2d 557, 560 (7th Cir.1992), which in turn quoted
a Fifth Circuit ERISA case, Pitts v. Am. Sec. Life Ins. Co., 931 F.2d 351, 357 (5th Cir.1991).
43 Powered by SAP NetWeaver Cooperation Agreement, Exhibit A to Motion for Summary Judgment, Docket Entry No.
8–2, p. 13 ¶ 15.2.
44 Complaint for Declaratory Relief, Case No. H–10–1224, Docket Entry No. 1, p. 14.
45 The Fifth Circuit applies a similar test under federal law in the arbitration context: “Although waiver of arbitration is a
disfavored finding, ‘[w]aiver will be found when the party seeking arbitration substantially invokes the judicial process to
the detriment or prejudice of the other party.’ ” Nicholas v. KBR, Inc., 565 F.3d 904, 907 (5th Cir.2009) (citation omitted).
“Prejudice in the context of arbitration waiver refers to delay, expense, and damage to a party's legal position.” Id. at 910.
46 As Wellogix has stated, “the theft of trade secret claims stand completely independent of the patent claims.” Wellogix, Inc.
and Wellogix Technology Licensing, L.L.C.'s Renewed Motion to Lift Stay and Request for Entry of Scheduling Order,
Case No. H–10–1224, Docket Entry No. 98, p. 3 ¶ 6. Judge Ellison was of the same opinion when, in 2010, he denied
Wellogix's motion to consolidate the patent action with the then-pending trade secrets claims against Accenture. See
Memorandum and Order, Case No. G–8–119, Docket Entry No. 203, pp. 3–5.
47 Because Wellogix has failed to establish that SAP waived any rights under the forum-selection clause, and neither party
seeks to enforce the clause in the Declaratory Judgment Action, the court need not address whether the patent claims
fall within the scope of the forum-selection clause.
48 Motion for Summary Judgment, Case No. H–14–741, Docket Entry No. 8, pp. 19–24.
49 See Opposition to Motion for Summary Judgment, Case No. H–14–741, Docket Entry No. 15, pp. 24–25.
50 See Wellogix, Inc.'s Response in Opposition to SAP America, Inc., SAP A.G. and Manfred Heil's Motion to Dismiss for
Improper Venue, Case No. G–8–119, Docket Entry No. 22, p. 7 (“Plaintiff has pled that SAP A.G. has misappropriated
confidential information and misappropriated trade secrets. These claims arise under both the Content Certification
Agreement (Pennsylvania clause) as well as the [NetWeaver] Agreement (Germany clause).”)
51 Powered by SAP NetWeaver Cooperation Agreement, Exhibit A to Motion for Summary Judgment, Case No. H–14–741,
Docket Entry No. 8–2, p. 13 ¶ 15.2.
52 While some of these cases deal with arbitration clauses, the scope given to the phrase should not differ for purposes
of a forum-selection clause. Omron Healthcare, Inc. v. Maclaren Exports Ltd., 28 F.3d 600, 603 (7th Cir.1994); see also
Opposition to Motion for Summary Judgment, Case No. H–14–741, Docket Entry No. 15, p. 23 n. 4 (“Cases involving

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arbitration clauses are broadly applicable to disputes about forum-selection clauses, because an agreement to arbitrate
before a specific tribunal is considered by courts to be nothing more than a ‘specialized kind of forum-selection clause.’
” (quoting Scherk v. Alberto–Culver Co., 417 U.S. 506, 94 S.Ct. 2449, 2457, 41 L.Ed.2d 270 (1974))).
53 Defendants Wellogix, Inc. and Wellogix Technology Licensing's Amended Answer and Amended Counterclaims, Case
No. H–14–741, Docket Entry No. 1, p. 45 ¶ 243; see also Plaintiff's First Amended Complaint, Case No. G–8–119, Docket
Entry No. 53, p. 6 ¶ 25 (“As part of this agreement, after its execution on or about March 22, 2005 through March 24,
2005, several SAP/SAP A.G. employees went to Wellogix's offices for a three-day workshop wherein Wellogix disclosed
highly confidential information and trade secrets.” (emphasis added)).
54 Powered by SAP NetWeaver Cooperation Agreement, Exhibit A to Motion for Summary Judgment, Case No. H–14–741,
Docket Entry No. 8–2, p. 10 ¶¶ 12.1–12.2; see also Plaintiff's First Amended Complaint, Case No. G–8–119, Docket
Entry No. 53, p. 6 ¶ 24 (“SAP/SAP A.G. is required under the NetWeaver Partner Agreement to strictly maintain the
confidential information and trade secrets of Wellogix.”)
55 Memorandum and Order, Case No. G–8–119, Docket Entry No. 54, pp. 5–9.
56 Id. at 14–16.
57 Although Bremen was an admiralty case, this and other circuits have applied it in diversity and federal question cases as
well. Haynsworth v. The Corporation, 121 F.3d 956, 962 & n. 10 (5th Cir.1997).
58 To show that a forum-selection clause is unreasonable, the resisting party must prove: “(1) the incorporation of the forum-
selection clause into the agreement was the product of fraud or overreaching; (2) the party seeking to escape enforcement
‘will for all practical purposes be deprived of his day in court’ because of the grave inconvenience or unfairness of the
selected forum; (3) the fundamental unfairness of the chosen law will deprive the plaintiff of a remedy; or (4) enforcement
of the forum selection clause would contravene a strong public policy of the forum state.” Id. at 963 (citing Carnival Cruise
Lines, Inc. v. Shute, 499 U.S. 585, 111 S.Ct. 1522, 1528, 113 L.Ed.2d 622 (1991); Bremen, 92 S.Ct. at 1914–15, 1916,
1917).
59 The Court in Atlantic Marine established this standard for motions to transfer under § 1404(a), which permits a transfer “in
the interest of justice.” However, the court stated that “Section 1404(a) is merely a codification of forum non conveniens
for the subset of cases in which the transferee forum is within the federal court system.” Atlantic Marine, 134 S.Ct. at
580. The Court made clear that “the same standards should apply to motions to dismiss for forum non conveniens in
cases involving valid forum-selection clauses pointing to state or federal forums.” Id. at 583 n. 8; see also Emrit v. Watts,
Guerra, L.L.P., No. SA–13–473, 2014 WL 3970172, at *1 n. 5 (W.D.Tex. Aug. 13, 2014) (“[T]here is no doubt that Atlantic
Marine controls the outcome of this case.”).
60 See Memorandum and Order, Case No. G–8–119, Docket Entry No. 54, pp. 6 n. 2, 9–14.
61 See id. at 4–5.
62 “Public-interest factors may include ‘the administrative difficulties flowing from court congestion; the local interest in having
localized controversies decided at home; [and] the interest in having the trial of a diversity case in a forum that is at home
with the law.’ ” Atlantic Marine, 134 S.Ct. at 581 n. 6 (2013) (quoting Piper, 102 S.Ct. at 258 n. 6).
63 See Motion for Summary Judgment, Case No. H–14–741, Docket Entry No. 8, pp. 26–27.

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In re Lisa Laser USA, Inc., 310 S.W.3d 880 (2010)
53 Tex. Sup. Ct. J. 624

[3] Mandamus
310 S.W.3d 880 Modification or vacation of judgment or
Supreme Court of Texas. order
In re LISA LASER USA, INC. and Mandamus
Lisa Laser Products, oHG, Relators. Change of venue and transfer of causes
An appellate remedy is inadequate, so as to
No. 09–0557. | April 16, 2010. warrant mandamus relief, when a trial court
improperly refuses to enforce a forum-selection
Synopsis
clause, because allowing the trial to go forward
Background: Medical-device distributor brought breach-of-
will vitiate and render illusory the subject matter
contract action against manufacturer. The 98th District Court,
of an appeal, i.e., trial in the proper forum.
Travis County, Rhonda G. Hurley, J., denied manufacturer's
motion to dismiss for improper forum on basis of contractual 15 Cases that cite this headnote
forum-selection clause. Manufacturer filed petition for
mandamus relief. The Court of Appeals denied the petition.
[4] Contracts
Manufacturer filed petition for mandamus relief in the
Agreement as to place of bringing suit;
Supreme Court.
forum selection clauses
In general, forum-selection clauses should be
given full effect, and subjecting a party to
[Holding:] The Supreme Court held that distributor's claims trial in a forum other than the contractually
were required to be litigated in California. chosen one amounts to clear harassment,
injecting inefficiency by enabling forum-
shopping, wasting judicial resources, delaying
Petition conditionally granted.
adjudication on the merits, and skewing
settlement dynamics.

West Headnotes (7) 7 Cases that cite this headnote

[1] Mandamus [5] Contracts
Remedy by Appeal or Writ of Error Legal remedies and proceedings

Mandamus Distributor's claims against medical-device
Matters of discretion manufacturer, alleging that manufacturer failed
to inform distributor of new products and failed
Mandamus relief is available when a trial court
to offer distributor a right of first refusal to
clearly abuses its discretion and relief on appeal
distribute new products, arose out of distribution
after a final judgment is inadequate.
agreement between the parties, rather than
4 Cases that cite this headnote general obligations imposed by law, and thus,
pursuant to agreement's forum-selection clause,
claims were required to be litigated in California.
[2] Mandamus
Change of venue and transfer of causes 8 Cases that cite this headnote
A trial court abuses its discretion, so as to warrant
mandamus relief, when it fails to properly [6] Contracts
interpret or apply a forum-selection clause. Legal remedies and proceedings

21 Cases that cite this headnote Contract between medical-device manufacturer
and distributor included both document titled
“Distribution Agreement” and document titled

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In re Lisa Laser USA, Inc., 310 S.W.3d 880 (2010)
53 Tex. Sup. Ct. J. 624

“Standard Terms and Conditions,” and thus specifically referenced only one of the two defendants sued.
forum-selection clause contained in terms We hold that the trial court abused its discretion in failing to
and conditions applied to dispute arising out enforce the clause, and we conditionally grant the petition.
of manufacturer's alleged breach of terms
contained in distribution agreement, since Relator Lisa Laser Products, oHG 1 (“Lisa Germany”) is
neither document alone contained enough terms a German partnership that manufactures lasers for use
to be a separate contract; terms and conditions in various medical fields. Lisa Laser USA, Inc., (“Lisa
document did not mention what product was the USA”) is the registered assumed named of a California
subject of the agreement between the parties, corporation affiliated with Lisa Germany (collectively, “Lisa
and distribution agreement, while setting out the Laser”). Lisa Germany manufactures medical lasers, and Lisa
rough outline of the parties' obligations, was also USA is the distributor of those products within the United
incomplete. States. In 2005, Lisa USA signed a distribution agreement
with Real Party in Interest HealthTronics, Inc., a Georgia
1 Cases that cite this headnote
corporation headquartered in Austin, Texas. In 2007, *882
the agreement was superseded by an Amended and Restated
[7] Contracts Distribution Agreement (the Distribution Agreement or
Legal remedies and proceedings Agreement) that included Lisa USA and HealthTronics, the
Forum-selection clause contained in distribution original contracting parties, and added Lisa Germany as a
agreement between medical-device distributor, party. The President of Lisa USA, the CEO of Lisa Germany,
German manufacturer, and California and the Senior Vice–President for Medical Products of
corporation affiliated with manufacturer, HealthTronics signed it.
applied to distributor's claims against German
manufacturer as well as claims against California The Distribution Agreement gave HealthTronics exclusive
corporation, and thus claims were required to U.S. distribution rights for particular Lisa Laser medical
be litigated in California; German manufacturer devices. It also provided HealthTronics with rights of
was a signatory to agreement and forum- first refusal to distribute new, related products that Lisa
selection clause applied to “any dispute” arising Laser may produce, on condition that HealthTronics fulfill
from agreement. yearly purchase quotas and comply with other requirements.
The Distribution Agreement also contained eight separately
8 Cases that cite this headnote attached Exhibits, labeled A through H. Exhibit F is Lisa
Laser's “Standard Terms and Conditions.” Its preamble states:

The following standard terms and
Attorneys and Law Firms conditions of sale apply to sales
by Seller [Lisa Laser USA, Inc.] to
*881 Derek Lawrence Davis, Byrd Davis Furman, L.L.P., HealthTronics, Inc. ... pursuant to
Austin, for Relators. the Distribution Agreement between
the parties, a copy of which is
George Breck Harrison, Joshua Abraham Romero, Jackson attached hereto and incorporated
Walker L.L.P., Austin, for Real Parties in Interest. herein by this reference, except
as specifically modified in the
Opinion
Distribution Agreement.
PER CURIAM.
Exhibit F also includes the following forum-selection clause,
In this mandamus petition we are asked to review a trial in Paragraph 16:
court's refusal to enforce a forum-selection clause designating
APPLICABLE LAW; JURISDICTION AND VENUE
a California forum for any lawsuits “arising out of” a
distribution agreement. The clause was in an exhibit to This agreement will be governed by the laws of the
the agreement, signed by all the parties, but the exhibit State of California. The California state [or federal] courts

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53 Tex. Sup. Ct. J. 624

of Alameda County, California ... will have exclusive mandamus. 2009 WL 2217745. Following the denial, Lisa
jurisdiction and venue over any dispute arising out of this Laser petitioned this Court for relief.
agreement, and [HealthTronics] hereby consents to the
jurisdiction of such courts. [1] [2] [3] [4] Mandamus relief is available when a
trial court clearly abuses its discretion and relief on appeal
Exhibit F is mentioned in the body of the Distribution after a final judgment is inadequate. In re Prudential Ins.
Agreement in Section 4, titled “Terms of Purchase of Co. of Am., 148 S.W.3d 124, 135–36 (Tex.2004). 2 A trial
Products By Customer.” Relevant here, under the subhead court abuses its discretion when it fails to properly interpret or
“Terms of Purchase Orders” in Section 4, Exhibit F is apply a forum-selection clause. In re Laibe Corp., 307 S.W.3d
incorporated: 314 (Tex.2010). Further, an appellate remedy is inadequate
when a trial court improperly refuses to enforce a forum-
To the extent consistent with the
selection clause because allowing the trial to go forward
terms set forth in this Agreement,
will “vitiate and render illusory the subject matter of an
Lisa Laser USA['s] standard terms
appeal”—i.e., trial in the proper forum. In re AIU Ins. Co.,
and conditions, set forth as Exhibit
148 S.W.3d 109, 115 (Tex.2004) (quoting Jack B. Anglin
F hereto, shall be applicable
Co. v. Tipps, 842 S.W.2d 266, 272 (Tex.1992)); accord In
to the shipment of any Product
re Laibe Corp., 307 S.W.3d at 316. Accordingly, we have
to [HealthTronics]. [HealthTronics]'s
repeatedly held that mandamus relief is available to enforce
purchase orders submitted to Lisa
an unambiguous forum-selection clause in a contract. See,
Laser USA from time to time with
e.g., id.; In re AIU Ins. Co., 148 S.W.3d at 115–19; In re
respect to Products to be purchased
AutoNation, Inc., 228 S.W.3d at 665; In re Int'l Profit Assocs.
hereunder shall be governed by the
I, 274 S.W.3d at 674; In re Int'l Profit Assocs. II, 286 S.W.3d
terms of this Agreement, and nothing
at 922; In re ADM Investor Servs., Inc., 304 S.W.3d 371
contained in any such purchase order
(Tex.2010). In general, forum-selection clauses should be
shall in any way modify such terms of
given full effect, and subjecting a party to trial in a forum
purchase or add any additional terms
other than the contractually chosen one amounts to “ ‘clear
or conditions.
harassment’ ... injecting inefficiency by enabling forum-
shopping, wasting judicial resources, delaying adjudication
In September 2008, Lisa Laser notified HealthTronics that it on the merits, and skewing settlement dynamics....” In re
was in default for failing to use its best efforts to market and AutoNation, 228 S.W.3d at 667–68 (quoting In re AIU Ins.
sell the products to which it had exclusivity. HealthTronics
Co., 148 S.W.3d at 117). 3
alleged that it was abiding by the minimum purchase
requirements during the contract period, but that Lisa Laser
*884 [5] In this case, HealthTronics argues that the forum-
had refused to provide information about new products, failed
selection clause does not apply to the Texas lawsuit. First, it
to offer a right of first refusal to distribute new products,
argues that because the clause was contained only in Exhibit
and began to directly market new products in the United
F, it applies only to claims specifically related to “sales by
States. HealthTronics then filed suit in district court in Travis
Seller ... to HealthTronics,” and not to any other claims based
County, Texas against both Lisa USA and Lisa Germany
on the parties' relationships (such as breach of contract for
for breach of contract and tortious interference with contract
failure to provide rights of first refusal or tortiously interfering
(related to confidentiality and non-solicitation agreements
with HealthTronics's contracts with its employees). Second,
between HealthTronics and its former employees) and sought
HealthTronics argues that the 2007 modification of the
monetary damages and injunctive relief.
limiting language in the preamble indicates the parties' intent
to limit the forum-selection clause only to disputes over
In the trial court, Lisa Laser filed a motion to dismiss for
sales transactions. Because all of HealthTronics's claims are
improper forum on the basis of the forum-selection clause
directed at protecting its rights for the marketing and sale of
in Exhibit F. The trial court denied the motion. *883 Lisa
the new lasers “to third parties” and protecting its confidential
Laser then sought mandamus relief and an emergency stay at
information, HealthTronics contends the claims in the Texas
the court of appeals. After originally granting the requested
lawsuit are outside the scope of the clause and the Court
stay, the court of appeals denied the petition for writ of
should enforce the language of the Agreement as written

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In re Lisa Laser USA, Inc., 310 S.W.3d 880 (2010)
53 Tex. Sup. Ct. J. 624

and bargained for. Finally, HealthTronics argues because [6] HealthTronics's textual argument—that the forum-
the plain language of the preamble to Exhibit F indicates selection clause applies only to sales “By Seller to
that the exhibit applies only to sales by “Seller” [Lisa HealthTronics” and that Section 4 of the Distribution
USA] to HealthTronics, the forum-selection clause does not Agreement incorporates the standard terms and conditions
apply to its claims against Lisa Germany, a signatory to the as “applicable to the shipment of any Product to the
Distribution Agreement but an entity that was specifically Distributor”—is unavailing. The Distribution Agreement and
omitted from the terms in Exhibit F. the Standard Terms and Conditions in Exhibit F are not
separate, or even separable, agreements. Exhibit F does
In this case, HealthTronics does not argue that the forum- not contain price or quantity terms. Cf. TEX. BUS. &
selection clause is unenforceable, but that it only applies COM.CODE § 2.201 (setting basic terms for enforceable
to part of the contract—sales transactions between it and contracts for the sale of goods with a value over $500);
Lisa USA. In examining whether claims brought by the Miller v. Vaughn & Taylor Const. Co., 345 S.W.2d 852,
plaintiff were within the scope of the clauses, this Court held 853 (Tex.Civ.App.-Fort Worth 1961, writ ref'd n.r.e.) (“A
that a reviewing court should engage in a “common-sense contract is not sufficiently certain to be enforced if it fails
examination of the claims and the forum-selection clause to to specify the quantity of the goods to be sold.”). Nor
determine if the clause covers the claims.” Int'l Profit Assocs. does it mention any particular product to be distributed.
I, 274 S.W.3d at 677 (citing Ginter ex rel. Ballard v. Belcher, It is nothing more than the standard terms of purchase
Prendergast & Laporte, 536 F.3d 439, 444 (5th Cir.2008)); that would normally accompany any commercial purchase
In re Laibe Corp., 307 S.W.3d at 316. In International order. Likewise, the Distribution Agreement, while setting
Profit Associates I, the Court borrowed from its arbitration out the rough outline of the parties' obligations, is also
jurisprudence to determine whether a forum-selection clause incomplete. It requires and incorporates the additional terms
included in contracts to provide business consulting services from the exhibits to fully elucidate the parties' agreement. The
would apply to a tort suit. 274 S.W.3d at 674. In that case, exhibits are consecutively paginated following the body of
the plaintiff the consulting company and its employee for the Distribution Agreement. The Distribution Agreement and
negligently providing services, fraud, and breach of duty of the Exhibits were intended to be one document. And even if
good faith after the consulting company's employee allegedly the exhibits have some independent significance, as this Court
embezzled large sums of money from the client. The Court recognized in In re Laibe, “[a] contract can consist of more
held that “whether claims seek a direct benefit from a contract than one document [and d]ocuments pertaining to the same
turns on the substance of the claim, not artful pleading.... transaction may be read together.” In re Laibe Corp., 307
[A] claim is brought in contract if liability arises from the S.W.3d at 317. This is a prime example of a single transaction
contract, while a claim is brought in tort if liability is derived governed by a document with multiple subparts, referencing
from other general obligations imposed by law.” Id. at 677 each other, and substantially incomplete without each other,
(citing In re Weekley Homes, L.P., 180 S.W.3d 127, 131–32 but together comprising the Agreement.
(Tex.2005)). Using that rationale, the Court held that the tort
claims arose from the contractual relationship of the parties. Because neither document could be considered “this
Id. Agreement” by itself, the common sense approach is to
read the two documents as multiple documents describing a
Although In re International Profit Associates I discussed a singular transaction, with the forum-selection clause applying
tort/contract dichotomy, rather than the scope of contractual to all claims arising out of the Distribution Agreement.
coverage, its reasoning applies in this case. HealthTronics Int'l Profit Assocs. I, 274 S.W.3d at 677; see also In re
alleges that Lisa Laser failed to inform it of new products Laibe, 307 S.W.3d 314; Neal v. Hardee's Food Sys., Inc.,
and failed to offer it a right of first refusal to distribute new 918 F.2d 34 (5th Cir.1990). Further, the forum-selection
products in the United States. Lisa Laser's obligation, if any, clause itself describes a scope broader that the mere sales
to do so only arises from the Distribution Agreement, in transactions between Lisa USA and HealthTronics. It states
which Lisa Laser agreed to *885 sell and HealthTronics to that California shall be the forum “over any dispute arising
buy urological lasers pursuant to certain terms. Those terms out of this agreement,” not merely any dispute arising out of
are set out both in the body of the Distribution Agreement as any particular sale.
well as in the Exhibits.

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In re Lisa Laser USA, Inc., 310 S.W.3d 880 (2010)
53 Tex. Sup. Ct. J. 624

HealthTronics cites to two Texas court of appeals cases HealthTronics to distribute new products, failed to provide
in support of its position that the forum-selection clause HealthTronics information about new products, allowed other
should not apply to its claims—Apollo Property Partners, distributors to sell products for which HealthTronics was
LLC v. Diamond Houston I, L.P., No. 14–07–00528–CV, supposed to be the exclusive distributor, and wrongfully
2008 WL 3017549, 2008 Tex.App. LEXIS 5884 (Tex.App.- terminated the contract. See In re Int'l Profit Assocs. I, 274
Houston [14th Dist.] Aug. 5, 2008, no pet.) and IKON Office S.W.3d at 678. Accordingly, the trial court erred in refusing
Solutions, Inc. v. Eifert, 2 S.W.3d 688 (Tex.App.-Houston to enforce the clause in the Texas lawsuit.
[14th Dist.] 1999, no pet.). Both are distinguishable. Apollo
Property Partners is inapposite because the forum-selection [7] Next, HealthTronics contends that even if the forum-
clause at issue did not clearly mandate an Illinois forum; selection clause applies to its claims against Lisa USA, it
rather, it merely prevented either party from raising venue does not apply to claims against Lisa Germany, because the
or personal jurisdiction arguments if an action were filed plain language of the preamble makes Exhibit F applicable
in Illinois. 2008 WL 3017549 *2–3. IKON Office Solutions only to “sales by Seller [Lisa USA] to HealthTronics, Inc. ...
is distinguishable because the portion of the sale agreement pursuant to the Distribution Agreement.” As discussed above,
containing *886 the arbitration clause (an employment Exhibit F is the default terms and conditions to the sales and
agreement) was an independent, integrated agreement, and distribution contract between Lisa Laser and HealthTronics.
because the arbitration provision did not broadly require Because no sales actually occur between Lisa Germany and
arbitration of all disputes between the parties. “[T]he narrow HealthTronics, it is not surprising that Lisa Germany is not
arbitration clause in this case cover[ed] only disputes related mentioned in Exhibit F.
to the termination of employment.” IKON Office Solutions,
2 S.W.3d at 696 (emphasis added). Because the fraudulent HealthTronics's claims against Lisa Germany are for breaches
inducement claims at issue in the case were not related to the of the right of first refusal and exclusivity clauses in the
termination of the individual's employment, the dispute was Distribution Agreement. Lisa Germany was a signatory to the
outside the scope of the arbitration clause. Distribution Agreement, which incorporated Exhibit F, and
HealthTronics seeks to enforce obligations of the contract in
HealthTronics also argues that a change from the original this lawsuit. A plaintiff “cannot both have his contract and
2005 distribution agreement evidences the parties' intent defeat it too.” In re Weekley Homes, L.P., 180 S.W.3d 127,
for the forum-selection clause to apply only to sales 135 (Tex.2005). In other words, HealthTronics cannot claim
transaction disputes between HealthTronics and Lisa USA. that Lisa Germany has obligations to HealthTronics under
The preamble to Exhibit F in the 2005 distribution agreement the Distribution Agreement and simultaneously claim that the
stated that the standard terms and conditions “apply except forum-selection clause does not apply to those claims. See
as specifically modified in the Distribution Agreement also Grigson v. Creative Artists Agency, L.L.C., 210 F.3d
between the parties....” The preamble in the amended, 2007 524, 528 (5th Cir.2000) (holding, in the context of an *887
Distribution Agreement, which is effective for this dispute, arbitration agreement, that “a signatory to that agreement
states that the terms apply “to sales by [Lisa USA] to cannot, ... ‘have it both ways': it cannot, on the one hand, seek
HealthTronics, Inc. pursuant to the Distribution Agreement to hold the non-signatory liable pursuant to duties imposed by
between the parties.” This amendment does not limit the the agreement, which contains an arbitration provision, but,
forum-selection clause (which continues to state that the on the other hand, deny arbitration's applicability because the
clause applies to “any disputes” between the parties) but defendant is a non-signatory”).
merely describes the “standard terms and conditions.” This
amendment is reasonable, considering that Lisa Germany was Accordingly, reading the forum-selection clause in Exhibit
not a party to the 2005 agreement, but is a party to the 2007 F in context of the whole Agreement, considering that Lisa
Distribution Agreement, and the amendment was necessary Germany was a signatory to the Distribution Agreement, that
to identify the buyer and the seller. the forum-selection clause applies to “any dispute arising out
of this agreement,” and that HealthTronics seeks to hold Lisa
HealthTronics's claims arise out of the Agreement rather than Germany responsible for obligations under the Distribution
other general obligations imposed by law. That is, but for the Agreement, we conclude that all disputes arising out of the
Agreement, HealthTronics would have no basis to complain Distribution Agreement against either or both defendants are
that Lisa Germany failed to offer the right of first refusal to to be litigated in Alameda County, California.

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In re Lisa Laser USA, Inc., 310 S.W.3d 880 (2010)
53 Tex. Sup. Ct. J. 624

and direct the trial court to vacate its order and grant Lisa
The forum-selection clause at issue in this case governs Laser's motion to dismiss. We are confident the trial court will
the forum for the dispute between HealthTronics and Lisa comply, and the writ will issue only if it fails to do so.
Laser, and the trial court abused its discretion in failing to
dismiss the case based on the clause. For these reasons, and
All Citations
without hearing oral argument, TEX.R.APP. P. 52.8(c), we
conditionally grant Lisa Laser's petition for writ of mandamus 310 S.W.3d 880, 53 Tex. Sup. Ct. J. 624

Footnotes
1 oHG is short for “offene Handelsgesellschaft” which literally translates to “open trading company.” LANGENSCHEIDT'S
GERMAN–ENGLISH, ENGLISH–GERMAN DICTIONARY 112, 165 (E. Klatt & G. Golze eds., 1962); MODERN
DICTIONARY OF INTERNATIONAL LEGAL TERMS 27 (Little, Brown & Co. 1993) (1992). It is the German equivalent
of a general partnership. E.g., Norbert Meister & Gunner Schuster, Classifying Foreign Entities Investing in Germany,
2 INT'L TAX REV., July/Aug. 1991, at 42, 42.
2 Before this Court for the first time on appeal, Lisa Laser argues that California law applies to determine whether the
forum-selection clause is applicable and whether mandamus relief is available to correct the trial court's error, as the
parties chose California law in the Distribution Agreement. This Court has applied Texas law in the mandamus cases
in which the parties seek to enforce a forum-selection clause, even if the contract also contains a choice-of-law clause
selecting the application of another state's substantive law. See, e.g., In re AIU Ins. Co., 148 S.W.3d 109, 111 (Tex.2004)
(applying Texas law in a mandamus action enforce a forum-selection clause in a contract that also included a choice-
of-law provision designating New York law); In re Automated Collection Techs., Inc., 156 S.W.3d 557, 558 (Tex.2004)
(same, Pennsylvania law); In re AutoNation, Inc., 228 S.W.3d 663, 665 (Tex.2007) (same, Florida law); In re Lyon Fin.
Servs., 257 S.W.3d 228, 230–31 (Tex.2008) (same, Pennsylvania law); In re Int'l Profit Assocs., Inc. (“Int'l Profit Assocs.
I”), 274 S.W.3d 672, 674 (Tex.2009) (same, Illinois law); In re Int'l Profit Assocs., Inc. (“Int'l Profit Assocs. II”), 286
S.W.3d 921, 922 (Tex.2009) (same, Illinois law). Further, the determination of whether mandamus relief is available is a
matter of procedure. The law of the forum state applies to procedural questions. Arkoma Basin Exploration Co. v. FMF
Assocs. 1990–A, Ltd., 249 S.W.3d 380, 387 & n. 17 (Tex.2008). Accordingly, we apply Texas law in determining whether
mandamus relief is available in this case.
3 Notwithstanding Lisa Laser's invocation of California law, the parties do not allege that there are any material differences
between California and Texas law when it comes to interpretation and enforcement of forum-selection clauses. In
California, as in Texas, (a) the denial of a motion to dismiss or to stay pursuant to a valid forum-selection clause may
be the basis for mandamus relief; (b) a mandatory forum-selection clause is to be enforced unless it is unreasonable;
and (c) the plaintiff must shoulder a “heavy burden” to prove unreasonableness, and mere inconvenience and additional
expense is insufficient. See, e.g., Net2Phone, Inc. v. Superior Court, 109 Cal.App.4th 583, 135 Cal.Rptr.2d 149, 154
(2003); Olinick v. BMG Entm't, 138 Cal.App.4th 1286, 42 Cal.Rptr.3d 268, 273 (2006); Smith, Valentino & Smith, Inc. v.
Superior Court, 17 Cal.3d 491, 131 Cal.Rptr. 374, 551 P.2d 1206, 1208–09 (1976).

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

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Laserdynamics Inc. v. Acer America Corp., 209 F.R.D. 388 (2002)

of validity by establishing that the clause is
unreasonable-namely, that the clause is the
209 F.R.D. 388
synthesis of fraud or coercion.
United States District Court,
S.D. Texas, 2 Cases that cite this headnote
Houston Division.

LASERDYNAMICS INC., Plaintiff, [3] Contracts
v. Legal Remedies and Proceedings
ACER AMERICA CORP., and Acer Communications Forum selection clause in software licensing
& Multimedia America Inc. Defendants. agreement which provided “any dispute arising
Acer America Corp. and Benq Inc. out of this Agreement” would subject to
Acer Communications & Multimedia exclusive jurisdiction of California state and
America Inc. Third–Party Plaintiffs, federal courts was applicable to third-party
claim of licensee seeking indemnity pursuant
Cyberlink Corp., Intervideo, Inc., and
to the agreement for any liability flowing
Mediamatics, Inc., Third–Party Defendants.
from underlying patent infringement suit against
No. CIV.A.H–01–1745. | Aug. 15, 2002. licensee, notwithstanding licensee's claim that
clause covered only specific licensing or
Patentee brought suit for infringement of patent on DVD payment issues.
software. Defendant impled third-party defendant, seeking
indemnity pursuant to a licensing agreement. On third-party 5 Cases that cite this headnote
defendant's motion to dismiss for improper venue, or to
transfer venue, the District Court, Hoyt, J., held that: (1) [4] Contracts
forum selection clause in software licensing agreement which Agreement as to Place of Bringing Suit;
provided “any dispute arising out of this Agreement” would Forum Selection Clauses
subject to exclusive jurisdiction of California state and federal
Forum selection clause in software licensing
courts was applicable to third-party claim, and (2) clause was
contract was not unreasonable, where it was
not unreasonable.
entered into by sophisticated global business
entities, incorporated and licensed to transact
Motion to dismiss granted.
business all over the world, and record
established that the agreement was entered into
freely and without coercion.
West Headnotes (4)
2 Cases that cite this headnote

[1] Contracts
Agreement as to Place of Bringing Suit;
Forum Selection Clauses Attorneys and Law Firms
Forum selection clauses carry a presumption of
validity. *388 Timothy N Trop, Trop Pruner et al, Houston, TX, for
plaintiff.
2 Cases that cite this headnote
*389 Scott F Partridge, Baker & Botts, Paul R Morico,
Baker Botts, LLP, Houston, TX, Warren J Krauss, Sedgwick
[2] Contracts Detert et al, James Yuanxin Li, Sedgwick Detert et al, San
Agreement as to Place of Bringing Suit; Francisco, CA, for defendants.
Forum Selection Clauses
Opponents of a motion to enforce a forum
selection clause may rebut the presumption

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Laserdynamics Inc. v. Acer America Corp., 209 F.R.D. 388 (2002)

of California. Mediamatics bulwarks this position by citing
various United States Supreme Court and lower court
MEMORANDUM AND ORDER authority for the proposition that forum selection clauses are
presumptively valid. In light of the Supreme Court and lower
HOYT, District Judge. court authority treating forum selection clause enforcement
issues, Mediamatics opines that the forum selection clause
I. INTRODUCTION is neither unreasonable nor overreaching, it does not violate
This case concerns the scope of forum selection clauses and public policy, and does not deprive Acer of its day in court.
their relationship to Third–Party Practice promulgated under Further, Mediamatics notes that the parties are sophisticated
Rule 14 of the FEDERAL RULES OF CIVIL PROCEDURE. international business entities that freely entered into the
Before the Court is the third-party defendant Mediamatics agreement.
Inc.'s (“Mediamatics”) motion to dismiss pursuant to 12(b)
(3), or transfer venue pursuant to § 1404. The Court has As to the manner of disposition, Mediamatics opines that the
reviewed the papers on file and concludes that Mediamatics's Court is empowered to dismiss Acer's claim under 12(b)(3).
motion to dismiss should be GRANTED. In the alternative, Mediamatics argues that the Court should
transfer the third-party claim to the appropriate federal court
II. FACTUAL HISTORY in California, pursuant to 28 U.S.C. § 1404(a). 1
In May of 1998, Acer America Corporation and Benq
Inc., (“Acer”) and Mediamatics entered into a licensing
B. Acer's Contentions
agreement concerning DVD software. Pursuant to the
Acer argues that the parties' forum selection clause does
agreement, Mediamatics licensed its DVD software to Acer,
not apply to its Rule 14 action here. Acer interprets the
and promised to indemnify Acer for any patent infringement
“disputes arising out of this agreement” language of *390
liability flowing from Acer's use of the DVD software.
the forum selection clause to embrace only specific licensing
The Acer–Mediamatics agreement also contains a forum
or payment issues between the parties. Acer asserts that there
selection clause that mandates all disputes “arising under [the]
is no dispute with Mediamatics as to any licensing or payment
Agreement” be litigated in the state and federal courts of
issues between the two parties. Instead, Acer maintains that
California. In the cardinal action, the plaintiff, Laserdynamics
its impleader is the natural consequence from the underlying
Inc., is suing Acer, alleging patent infringement of its
patent case concerning Mediamatics's DVD software. From
DVD software, listed as Patent No. 6,215,743. As a result,
this, Acer concludes that the Laserdynamics lawsuit has
Acer impled Mediamatics in this action, seeking indemnity
nothing to do with the Acer–Mediamatics agreement. Acer
from any liability flowing from its underlying case against
goes on to note that Mediamatics has a “general obligation
Laserdynamics concerning the DVD software. Mediamatics
moves this Court to dismiss Acer's indemnity claim against under the law” and the Uniform Commercial Code 2 to
it, arguing that the parties contracted to litigate all matters indemnify it in this case.
arising from their contract in another forum.
Second, Acer contends that the Court should employ its
discretion to retain jurisdiction over Acer's third-party claim.
III. CONTENTIONS OF THE PARTIES Even assuming the forum selection cause applies, Acer
opines, the forum selection clause is only one factor in the
A. Mediamatics's Contentions
Court's consideration to transfer or dismiss this action. Acer
Mediamatics contends that the Court should enforce the
maintains that when the Court examines collateral issues
forum selection clause and dismiss the Acer's third-party
such as witness convenience and other factors of fundamental
action pursuant to 12(b)(3), because the agreement's forum
fairness, judicial economy principles should persuade the
selection clause controls Acer's indemnity claim against
Court to deny Mediamatics's motion to dismiss. In reaching
Mediamatics. Mediamatics maintains that Acer's indemnity
this result, Acer opines that the Court would avoid the
claim “arises out of the agreement,” because the contract
apparent injustice of unduly burdening Acer to litigate the
itself must be interpreted to resolve the question presented.
infringement liability issue from both sides-that is, defending
Therefore, the forum selection clause mandates that suits
against liability issue in this Court, while conversely
between the parties be litigated under the laws and courts
attempting to establish that same infringement liability issue

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Laserdynamics Inc. v. Acer America Corp., 209 F.R.D. 388 (2002)

to buttress its indemnity claim against Mediamatics in of a motion to enforce a forum selection clause may
California. rebut the presumption by establishing that the clause is
unreasonable-namely, that the clause is the synthesis of fraud
Lastly, Acer contends that the Court's retention of the or coercion. *391 Bremen, 407 U.S. at 12–13, 92 S.Ct.
indemnity claim is essential to preserve Acer's right to 1907. Unreasonableness in this context may be established if
indemnity under the contract. Because of complexity of the the motion-opponent proves either that the provision is the
case, and the potentially expensive cost of defending and product of fraud or overreaching. Thus enforcement of the
litigating this action, Acer asserts that the Court should provision would violate a stout public policy, or “enforcement
not dismiss or transfer the case, because doing so would of the clause would deprive the plaintiff of his day in court.”
constitute an undue burden upon Acer. Bremen, 407 U.S. at 12–13, 92 S.Ct. 1907; Scherk v. Alberto–
Culver Co., 417 U.S. 506, 519 n. 14, 94 S.Ct. 2449, 41
L.Ed.2d 270 (1974); MacPhail v. Oceaneering Int'l Inc., 170
IV. STANDARD OF REVIEW F.Supp.2d 718, 726 (S.D.Tex.2001).

Motions to Dismiss Pursuant to Rule 12(b)(3)
[3] In the instant case, Acer argues that the forum selection
FEDERAL RULE oF CIVIL PROCEDURE 12(b)(3) permits
clause does not apply to its indemnity action against
a defendant to move to dismiss an action on the basis of
Mediamatics. In addition, Acer advances the position that the
improper venue. Frietsch v. Refco, Inc., 56 F.3d 825, 830 (7th
Court should narrowly construe the forum selection clause to
Cir.1995) Richards v. Lloyd's of London, 135 F.3d 1289, 1292
cover only specific licensing or payment issues. The Court
(9th Cir.1998); Lipcon v. Underwriters at LLoyd's, London,
disagrees with Acer's interpretation of the forum selection
148 F.3d 1285, 1290 (11th Cir.1998); Psarros v. Avior
clause. The relevant language of the forum selection clause
Shipping, Inc., 192 F.Supp.2d 751, 752–53 (S.D.Tex.2002).
provides: “Any dispute arising out of this Agreement shall be
The majority of the courts conform to the standard that
subject to the exclusive jurisdiction of the state and federal
once a defendant has raised the improper venue issue by
courts of California, and the parties hereby consent to the
motion, the burden of sustaining venue rests with the plaintiff.
jurisdiction of such courts.”
McCaskey v. Continental Airlines Inc., 133 F.Supp.2d 514,
523 (S.D.Tex.2001); Bigham v. Envirocare of Utah, Inc., 123
[4] The word “arising” connotes and denotes an origin
F.Supp.2d 1046, 1048 (S.D.Tex.2000). In the absence of an
or genesis of a thing. It follows that the parties intended
evidentiary hearing on the matter, courts will allow a plaintiff
that those disputes that arise under the Acer–Mediamatics
to carry the burden by establishing facts, taken as true, that
agreement be litigated in the manner proscribed by the
establish venue. McCaskey, 133 F.Supp.2d at 523; Bigham,
forum selection clause. The Acer–Mediamatics agreement
123 F.Supp.2d at 1048; Wilson v. Belin, 20 F.3d 644, 648
has “patent licensing” as its nucleus. In other words, the spirit
(5th Cir.1994). The Court will accept uncontroverted facts
of the Acer–Mediamatics agreement contemplates the rights
contained in the Plaintiff's pleadings as true, and resolve
and duties of the parties concerning the DVD software. If
any conflicts in the parties' documents and affidavits in the
any right or obligation in the Acer–Mediamatics agreement
Plaintiff's favor. McCaskey, 133 F.Supp.2d at 523. While
is threatened or impaired by an act of the parties or their
a defendant need not affirmatively disprove all bases for a
privities, that act gives rise to a dispute under the agreement. 3
plaintiff's choice of venue, courts will provide the plaintiff the
See Marinechance Shipping, Ltd. v. Sebastian, 143 F.3d
benefit of the doubt in ascertaining the controlling facts. Id.
216, 222–23 (5th Cir.1998). Moreover, Acer's arguments
concerning systemic fairness do not carry its heavy burden
V. ANALYSIS to rebut the presumption of the forum selection clause's
[1] [2] Federal law controls the Court's examination enforceability. See M/S Bremen v. Zapata Off–Shore Co.,
concerning the enforceability of a forum selection clause. 407 U.S. 1, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). This
Haynsworth v. The Corp., 121 F.3d 956, 962 (5th Cir.1997). contract was entered into by sophisticated global business
The United States Supreme Court has held that forum entities, incorporated and licensed to transact business all
selection clauses carry a presumption of validity. M/S Bremen over the world. The record establishes that the Acer–
v. Zapata Off–Shore Co., 407 U.S. 1, 15, 92 S.Ct. 1907, Mediamatics agreement was entered into freely and without
32 L.Ed.2d 513 (1972); see also Mitsui & Co. (USA), coercion. Fairness, in this action, mandates enforcement of
Inc. v. MIRA M/V, 111 F.3d 33 (5th Cir.1997). Opponents the Acer–Mediamatics agreement.

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Laserdynamics Inc. v. Acer America Corp., 209 F.R.D. 388 (2002)

Acer has not met its “heavy burden” to rebut the presumption After weighing the validity of Acer's contentions, the Court
that the forum selection clause is reasonable. This contract finds no compelling justification to avoid enforcement of
is not the product of fraud or overreaching. The Court finds Acer's forum selection clause. To do otherwise would
that enforcing the forum selection clause in this matter neither contravene the spirit of contract law. This Court has long
frustrates a stout public policy, nor deprives Acer of its day adhered to the legal maxim, pacta sunt servanda: Agreements
in court. Acer notes that our policy of “systemic integrity of the parties must be observed. This resolution also furthers
and fairness” warrants the Court's retention of Acer's third- a co-existing judicial policy goal that every party should be
party claim. The Court disagrees with Acer's use of that duly afforded the opportunity to address his disputes and
policy premise. Acer's third party claim is for indemnity. The independent grievances in a just manner. See F ED. R. CIV.
indemnity claim is one that requires a condition precedent P. 1. Therefore, the Court finds that the forum selection clause
of the Acer–Mediamatics agreement applies and should be
before the right is truly implicated: an adjudicative finding
of liability upon the benefactor of the indemnity clause. See enforced.

BLACK'S LAW DICTIONARY 772 (7th ed.1999). 4 Acer is
free to litigate the indemnity issue once this matter is resolved VI. CONCLUSION
or re-file its claim in California upon the final judgment of In light of the discussion above, and pursuant to the discretion
Mediamatics's motion. Although Rule 14 permits defendants allotted this Court by Rule 14 of the FEDERAL RULES OF
to implead parties that may be primarily or secondarily liable CIVIL PROCEDURE, the Court GRANTS the Third–Party
on the plaintiff's claim, the same Rule enables our federal Defendant's motion to dismiss Acer's third-party indemnity
courts with the necessary 5 discretion to avoid the potential claim against Mediamatics WITHOUT PREJUDICE.
pitfalls of complex multi-party litigation. *392 FED. R.
CIV. P. 14; see also Dery v. Wyer, 265 F.2d 804 (2nd It is so ORDERED.
Cir.1959); Florida East Coast Railway Co. v. United States,
519 F.2d 1184 (5th Cir.1975). Hence, the Court exercises its
All Citations
discretionary authority to dismiss Acer's third-party action,
pursuant to Rule 12(b)(3) of the FEDERAL RULES OF 209 F.R.D. 388
CIVIL PROCEDURE.

Footnotes
1 Rule 12(b)(3) and 28 U.S.C. § 1404(a) have been employed by courts to enforce forum selection clauses. See
International Software Sys. v. Amplicon, Inc., 77 F.3d 112, 113 (5th Cir.1996); Lafargue v. Union Pacific Railroad, 154
F.Supp.2d 1001 (S.D.Tex.2001). The Fifth Circuit has not squarely addressed the procedural method to dismiss cases
on the basis on enforcing a forum selection clause; however, in Mitsui & Co. (USA), Inc. v. MIRA M/V, 111 F.3d 33 (5th
Cir.1997), the Court affirmed the District Court's decision to dismiss a lawsuit that employed 12(b)(3) as its basis. Based
on the rationale articulated below, the Court need not consider Mediamatics's alternative motion to transfer venue.
2 In its reply to this premise, Mediamatics points out that the relative U.C.C. provision applies in absence of an agreement
to indemnify. See CAL. COM. CODE § 2312(3) (West 2001).
3 It must be noted that Acer cannot “have its cake and eat it too”-by arguing the inapplicability of the forum selection clause
in its reply to Mediamatics's motion to dismiss while using the same clause as its basis for the lawsuit in its Third–Party
Complaint.
4 BLACK'S defines indemnity as “[a] duty to make good any loss, damage, or liability incurred by another.”
5 Nor does this Court opine that Acer would suffer an undue financial burden by litigating this matter in its contract's forum
subsequent to, or concurrently with, the instant case. If Acer is found liable in the underlying lawsuit, its indemnity right
becomes a matter of contract interpretation by the California courts.

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

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53 Tex. Sup. Ct. J. 363

2 Cases that cite this headnote
304 S.W.3d 371
Supreme Court of Texas.
[2] Mandamus
In re ADM INVESTOR SERVICES, INC., Relator. Remedy by Appeal or Writ of Error
Mandamus
No. 08–0570. | Feb. 19, 2010.
Nature of acts to be commanded
Synopsis Mandamus will issue if the relator establishes a
Background: Futures commission merchant filed petition clear abuse of discretion for which there is no
for writ of mandamus, seeking relief from order of the adequate remedy by appeal.
354th District Court, Rains County, Richard A. Beacom,
Jr., J., denying its motion to dismiss on basis of mandatory Cases that cite this headnote
forum selection clause investor's action for fraud, breach of
fiduciary duty, and negligence. The Court of Appeals, James [3] Contracts
T. Worthen, C.J., 257 S.W.3d 817, denied petition. Merchant Legal remedies and proceedings
appealed. Party waives a forum-selection clause by
substantially invoking the judicial process to the
other party's detriment or prejudice; there is a
Holdings: The Supreme Court, Green, J., held that: strong presumption against such waiver.

10 Cases that cite this headnote
[1] merchant did not waive enforcement of forum selection
clause;
[4] Contracts
[2] merchant's broker did not waive forum selection clause on Legal remedies and proceedings
merchant's behalf; and Merely participating in litigation does not
categorically mean the party has invoked the
[3] trial court abused it discretion by refusing to enforce judicial process so as to waive enforcement of
forum-selection clause. forum selection clause.

4 Cases that cite this headnote
Petition conditionally granted with directions.

Willett, J., concurred and filed opinion. [5] Contracts
Legal remedies and proceedings
Waiver of forum selection clause can be implied
from a party's unequivocal conduct, but not by
West Headnotes (15)
inaction.

6 Cases that cite this headnote
[1] Contracts
Legal remedies and proceedings
Futures commission merchant did not waive [6] Contracts
enforcement of forum selection clause in Legal remedies and proceedings
agreement with investor by simultaneously filing Futures commission merchant's approximately
answer to complaint and motion to transfer venue three-month delay in requesting a hearing on
with motion to dismiss; merchant fell far short of motion to dismiss was not waiver of forum
invoking judicial process to investor's detriment selection clause in agreement with investor;
or prejudice. despite delay, merchant did nothing unequivocal
to waive enforcement.

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53 Tex. Sup. Ct. J. 363

merchant in investor's action against merchant
1 Cases that cite this headnote for fraud, breach of fiduciary duty, and
negligence; investor failed to meet her heavy
[7] Brokers burden to establish that enforcing the forum-
Contracts in general selection clause would be unreasonable, unjust,
or seriously inconvenient.
Futures commission merchant's broker did not
waive on merchant's behalf forum selection 11 Cases that cite this headnote
clause in investor's action against merchant
and broker for fraud, breach of fiduciary duty,
and negligence; nothing in record suggested [11] Contracts
either that scope of any agency relationship Agreement as to place of bringing suit;
between merchant and broker encompassed forum selection clauses
actual authority to waive forum-selection clause Trial court abuses its discretion in refusing
during litigation, or that merchant communicated to enforce a forum-selection clause unless
to investor that broker would have such the party opposing enforcement of the clause
authority. can clearly show that: (1) enforcement would
be unreasonable or unjust, (2) the clause is
Cases that cite this headnote invalid for reasons of fraud or overreaching, (3)
enforcement would contravene a strong public
[8] Principal and Agent policy of the forum where the suit was brought,
Implied Agency or (4) the selected forum would be seriously
inconvenient for trial.
Principal and Agent
Implied and Apparent Authority 16 Cases that cite this headnote
An agent's authority to act on behalf of a
principal depends on some communication by
[12] Contracts
the principal either to the agent, actual or express
Agreement as to place of bringing suit;
authority, or to the third party, apparent or
forum selection clauses
implied authority.
Contracts
3 Cases that cite this headnote Presumptions and burden of proof
Burden of proof is heavy for the party
[9] Principal and Agent challenging enforcement of forum selection
Contracts in General clause; when inconvenience in litigating in the
chosen forum is foreseeable at the time of
Because an agent's authority is presumed to be
contracting, the challenger must show that trial in
co-extensive with the business entrusted to his
the contractual forum will be so gravely difficult
care, it includes only those contracts and acts
and inconvenient that he will for all practical
incidental to the management of the particular
purposes be deprived of his day in court.
business with which he is entrusted.
13 Cases that cite this headnote
Cases that cite this headnote

[13] Action
[10] Contracts
Claims Arising Out of Same Transaction or
Agreement as to place of bringing suit;
Transactions Connected with Same Subject of
forum selection clauses
Action
Trial court abused its discretion by refusing
Action
to enforce forum-selection clause in agreement
Joint or Common Liability of Defendants
between investor and futures commission

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53 Tex. Sup. Ct. J. 363

Mere existence of another defendant does not we conditionally grant the relator's petition *373 for writ of
compel joint litigation, even if the claims arise mandamus and order the trial court to dismiss the case as to
out of the same nucleus of facts. the relator.

Cases that cite this headnote

I
[14] Contracts
Agreement as to place of bringing suit; Jetta Prescott executed an agreement in 2001 with ADM
forum selection clauses Investor Services, Inc., allowing ADM to trade commodities
Conclusory statements that investor's health on Prescott's behalf. Texas Trading Company Incorporated
concerns would preclude her from litigating acted as a broker and guarantor in the transaction. When
case in two different states were insufficient Prescott's account balance reached a deficit greater than
to establish inconvenience sufficient to avoid $50,000.00, ADM was authorized to close her account
enforcement of forum-selection clause. and collect the deficit from Texas Trading. In early 2004,
Prescott's balance reached a deficit of $57,844.29. ADM
1 Cases that cite this headnote closed her account and collected the deficit from Texas
Trading's CEO, Charles Dawson. Dawson filed suit in his
individual capacity in Hopkins County against Prescott and
[15] Contracts
obtained a judgment against her.
Agreement as to place of bringing suit;
forum selection clauses
Prescott then sued both Texas Trading and ADM in Rains
Bright-line test for avoiding enforcement of
County, alleging several legal theories including fraud,
forum-selection clauses has not been established.
breach of fiduciary duty, and negligence. Texas Trading
6 Cases that cite this headnote simultaneously filed an answer and a motion to transfer venue
to Hopkins County. ADM responded to the suit by filing an
answer, a motion to dismiss, and, alternatively, a motion to
transfer venue to Hopkins County. ADM's motion to dismiss
relied on the choice-of-law and forum-selection clause in its
Attorneys and Law Firms
agreement with Prescott, which reads:
*372 J. Brad McCampbell, Curtis Alexander McCampbell
All actions or proceedings arising
& Morris PC, Emory, TX, for relator.
directly, indirectly or otherwise in
Michael Jason Forni, Law Office of Mike Forni, Thomas L. connection with, out of, related to,
Kapioltas, Kapioltas & Forni, PLLC, Dallas, TX, for real or from this Agreement or any
party in interest. transaction covered hereby shall be
governed by the law of Illinois and
John W. Alexander, Alexander & Boswell, Winnsboro, TX, may, at the discretion and election of
for Texas Trading Company Incorporated. [ADM], be litigated in courts whose
situs in [sic] within Illinois.
Opinion

Justice GREEN delivered the opinion of the Court. A hearing was set for Texas Trading's motion to transfer
venue. ADM acknowledged the setting for this hearing in a
In this case, we consider whether the trial court abused its letter to Prescott's counsel, but then elected not to appear so
discretion by denying a motion to dismiss premised on a as to avoid potentially waiving its motion to dismiss. Instead,
forum-selection clause. We conclude that it did. The real approximately three months after filing its answer and motion
party in interest did not overcome the presumption against to dismiss, ADM requested a separate hearing on its motion
the relator's waiving its right to enforce the forum-selection to dismiss. After the hearing on Texas Trading's motion to
clause, or satisfy her burden to demonstrate that enforcing transfer venue, the trial court granted that motion. The trial
the clause would be unreasonable and unjust. Accordingly, court later conducted a hearing on ADM's motion to dismiss,

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which it denied. The trial court explained its reasoning in a not categorically mean the party has invoked the judicial
letter, stating that although the forum-selection clause would process so as to waive enforcement. Automated, 156 S.W.3d
be enforceable if ADM were the lone defendant, “[i]t seems at 559–60. Waiver can be implied from a party's unequivocal
unreasonable to the Court for Plaintiff to have to pursue the conduct, but not by inaction. See Perry Homes, 258 S.W.3d
same cause of action against two defendants in two different at 593.
states.” Nothing in the record before us indicates whether
the trial court ruled on ADM's motion to transfer venue to [6] We disagree with the court of appeals that ADM
Hopkins County, where Prescott's claims remain pending waived enforcement. Simultaneously filing an answer and
against Texas Trading. The court of appeals denied ADM's motion to transfer venue with a motion to dismiss falls short
petition for writ of mandamus on the alternative ground that of substantially invoking the judicial process to Prescott's
ADM waived enforcement. 257 S.W.3d 817, 822 (Tex.App.- detriment or prejudice. Indeed, in both AIU and Automated,
Tyler 2008). the defendants participated in the litigation process much
more substantially. See AIU, 148 S.W.3d at 121 (defendant
filed answer and request for jury before filing its motion
to dismiss); Automated, 156 S.W.3d at 558–60 (defendant
II
filed answer with counterclaims and served substantial
[1] Prescott primarily argues to us that ADM waived discovery requests before filing its motion to dismiss). ADM's
enforcement by failing to request a hearing sooner or appear approximately three-month delay in requesting a hearing also
at the hearing on Texas Trading's motion to transfer venue, does not compel us to find waiver. We do not consider
which prevented the trial court from being able to determine the length of any delay separate from the totality of the
the proper forum for the entire case to be heard. Prescott circumstances. See Perry Homes, 258 S.W.3d at 595–97.
also argues that Dawson, as ADM's agent, waived the forum- Here, despite the gap between filing and requesting a hearing,
selection clause by his earlier lawsuit against Prescott, and ADM did nothing “unequivocal” to waive enforcement. See
that Texas Trading, as ADM's agent, waived the clause by id. at 593. Moreover, we have considered comparable delays
moving to transfer venue. In the alternative, Prescott argues before without finding waiver. See AIU, 148 S.W.3d at 121
that it would be unreasonable or unjust to enforce the forum- (five-month delay); Automated, 156 S.W.3d at 558 (four-
selection clause. month delay).

[2] Mandamus will issue if the relator establishes a clear [7] [8] [9] We also reject any agency theory that holds
abuse of discretion for *374 which there is no adequate ADM as waiving enforcement because of the actions taken by
remedy by appeal. In re Prudential Ins. Co. of Am., 148 Texas Trading, an initial co-defendant, or its CEO, Dawson.
S.W.3d 124, 135–36 (Tex.2004). We have consistently “An agent's authority to act on behalf of a principal depends
granted petitions for writ of mandamus to enforce forum- on some communication by the principal either to the agent
selection clauses because a trial court that improperly refuses (actual or express authority) or to the third party (apparent
to enforce such a clause has clearly abused its discretion. See or implied authority).” Gaines v. Kelly, 235 S.W.3d 179,
In re AIU Ins. Co., 148 S.W.3d 109, 114–15 (Tex.2004). 182 (Tex.2007). “Because an agent's authority is presumed
to be co-extensive with the business entrusted to his care,
[3] [4] [5] A party waives a forum-selection clause by it includes only those contracts and acts incidental to the
substantially invoking the judicial process to the other party's management of the particular business with which he is
detriment or prejudice. In re Automated Collection Techs., entrusted.” Id. at 185. Nothing in the record suggests that
Inc., 156 S.W.3d 557, 559 (Tex.2004) (per curiam); see also the scope of any agency relationship between ADM and
AIU, 148 S.W.3d at 121. There is a strong presumption Texas Trading, its broker, encompasses the actual authority to
against such waiver. See Perry Homes v. Cull, 258 S.W.3d waive the forum-selection clause during litigation. Likewise,
580, 590 (Tex.2008) (observing strong presumption against nothing suggests that ADM communicated to Prescott that
waiver of arbitration clause); Automated, 156 S.W.3d at 559 Texas Trading would have such authority.
(stating that waiver in arbitration clause context is analogous
to forum-selection clauses). In Perry Homes, we adopted [10] [11] [12] Prescott has also failed to establish an
a test considering the totality of the circumstances. 258 exception under which the trial court's refusal to enforce the
S.W.3d at 596. But merely participating in litigation does forum-selection *375 clause would be permissible. A trial

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court abuses its discretion in refusing to enforce a forum- Texas Trading's motion to transfer venue to Hopkins County.
selection clause unless the party opposing enforcement of Prescott swore that she was nearing the age of 80, suffered
the clause can clearly show that (1) enforcement would be chronic health problems including fibromyalgia and heart
unreasonable or unjust, (2) the clause is invalid for reasons of problems, often had difficulty walking, and had been
fraud or overreaching, (3) enforcement would contravene a hospitalized several times in recent months. Prescott believed
strong public policy of the forum where the suit was brought, that her “case will be severely prejudiced if transferred to
or (4) the selected forum would be seriously inconvenient Hopkins County.” Although we are sympathetic to Prescott's
for trial. In re Lyon Fin. Servs., Inc., 257 S.W.3d 228, 231– health concerns, the record does not establish that requiring
32 (Tex.2008) (per curiam). The burden of proof is heavy her to pursue her claims against ADM in Illinois, the forum
for the party challenging enforcement. AIU, 148 S.W.3d at to which she agreed in 2001, would be unreasonable or
113. When inconvenience in litigating in the chosen forum unjust. Further, even assuming that health concerns could
is foreseeable at the time of contracting, the challenger render a selected forum sufficiently inconvenient to preclude
must “show that trial in the contractual forum will be so enforcement of a forum-selection clause, we believe that
gravely difficult and inconvenient that he will for all practical Prescott's conclusory statements are insufficient to establish
purposes be deprived of his day in court.” Id. (quoting M/S such inconvenience. Cf. Lyon, 257 S.W.3d at 234 (“If merely
Bremen v. Zapata Off–Shore Co., 407 U.S. 1, 18, 92 S.Ct. stating that *376 financial and logistical difficulties will
1907, 32 L.Ed.2d 513 (1972)); see also Lyon, 257 S.W.3d at preclude litigation in another state suffices to avoid a forum-
234 (“By entering into an agreement with a forum-selection selection clause, the clauses are practically useless.”). 1
clause, the parties effectively represent to each other that the
agreed forum is not so inconvenient that enforcing the clause [15] By allowing for exceptions when enforcement of
will deprive either party of its day in court, whether for cost forum-selection clauses would be unreasonable or unjust,
or other reasons.”). or seriously inconvenient, we, as the Supreme Court in
M/S Bremen, have recognized that there may be extreme
[13] Prescott failed to meet her heavy burden to circumstances that courts cannot presently anticipate or
establish that enforcing the forum-selection clause will foresee; but we have not established a bright-line test for
be unreasonable or unjust, or seriously inconvenient. The avoiding enforcement of forum-selection clauses. See M/S
mere existence of another defendant does not compel joint Bremen, 407 U.S. at 17, 92 S.Ct. 1907 (speculating that
litigation, even if the claims arise out of the same nucleus exceptional circumstances could exist such as a forum-
of facts. See In re Int'l Profit Assocs., Inc., 274 S.W.3d selection clause in a contract of adhesion, or a controversy
672, 680 (Tex.2009) (per curiam) (“If all it takes to avoid a
that the parties could never have had in mind). 2 We have
forum-selection clause is to join as defendants local residents
consistently refused to close the door to the possibility that
who are not parties to the agreement, then forum-selection
exceptional circumstances could exist, even as we have
clauses will be of little value.”). Indeed, as the case reaches
chosen not to confront them in particular cases. See, e.g.,
us, the trial court already separated the case, isolating ADM
Int'l Profit Assocs., 274 S.W.3d at 679–80; Lyon, 257 S.W.3d
as a defendant in Prescott's suit in Rains County. Still,
at 231–32; Michiana Easy Livin' Country, Inc. v. Holten,
our conclusion would not differ even if ADM and Texas
168 S.W.3d 777, 793 (Tex.2005). Here, though, we need not
Trading were co-defendants in a single forum. Nothing in
elaborate on these exceptions any further because the sparse
the record establishes that Prescott could not proceed in
record in this mandamus case does not demonstrate such
Illinois. Moreover, while a trial in Texas is undoubtedly more
exceptional circumstances.
convenient for a Texas resident, Prescott failed to prove that
a trial in Illinois would deprive her of her day in court. See
Lyon, 257 S.W.3d at 234. Prescott's circumstances here are
thus not sufficient to meet the heavy burden she has to avoid III
a forum-selection clause. See AIU, 148 S.W.3d at 113.
We conclude that Prescott did not overcome the presumption
[14] We observe that Prescott asserted in her brief to this against ADM's waiving its right to enforce the forum-
Court that her “health will prevent her from prosecuting selection clause by showing that ADM substantially invoked
her claims in two different states.” The record shows that the judicial process. We also conclude that Prescott failed
Prescott presented an affidavit to the trial court, opposing to satisfy her burden to demonstrate that enforcement of the
forum-selection clause would be unjust and unreasonable.

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Accordingly, we hold that the trial court abused its discretion Boiled down, a party opposing a forum-selection clause bears
in denying ADM's motion to dismiss. There is no adequate a “heavy burden” 2 of proving a heavy burden—that trial
remedy by appeal when a trial court refuses to enforce a in the chosen forum would be unjustly onerous. And if
forum-selection clause. In re Pirelli Tire, L.L.C., 247 S.W.3d the assertion is health-related, a health professional should
670, 679 (Tex.2007). For these reasons, without hearing oral do the asserting. In my view, first-party patient testimony
argument, TEX. R. APP. P. 52.8(c), we conditionally grant is insufficient (though perhaps not always necessary), and
ADM's petition for writ of mandamus and direct the trial court third-party provider testimony is necessary (though perhaps
to vacate its February 11, 2008 order and grant ADM's motion not always sufficient). Specifically, a competent medical
to dismiss. We are confident the trial court will comply, and provider should attest that the patient's condition makes travel
the writ will issue only if it fails to do so. to the agreed forum not merely inconvenient or impracticable,
but medically prohibited. This is the approach adopted in
a recent federal-court case involving an 81–year–old New
Justice WILLETT filed a concurring opinion. York resident who broke her hip on a cruise ship and argued
“inconvenience” to defeat transfer of her personal-injury
suit to Washington State under a forum-selection clause. 3
Justice WILLETT, concurring.
Both the plaintiff and her orthopedic surgeon described
I join the Court's result and write separately only to add
her condition, the surgeon testifying she could tolerate a
a brief word on the evidentiary burden borne by a party
plane flight, although it would be difficult and she would
asserting medical hardship to escape a forum-selection clause,
an issue of first impression in this Court. Also, while today's suffer discomfort. 4 The court held that while this plaintiff
case is a sub-par vehicle given its slim record, I believe failed to make the requisite showing—she proved only that
the Court should one day clarify something else in medical- travel would be unpleasant, not unfeasible—a plaintiff whose
hardship cases: the meaning of phrases like “seriously physical limitations bar travel can satisfy the heavy burden
inconvenient” and “unreasonable or unjust”—two of the of proof required to set aside a forum-selection clause on
bases for avoiding a forum-selection clause—and, relatedly, grounds of inconvenience. 5 If health concerns are ever held
whether physical ailments can qualify as *377 “special to preclude enforcement, this type of proof, at minimum,
and unusual circumstances” sufficient to defeat enforcement. seems necessary.
Actions to enforce forum-selection clauses arrive at the Court
via mandamus, and it seems unfair to conclude a lower court
clearly abused its discretion by acting without reference to 2. In a forum-selection clause case involving a medically
guiding principles if the principles they must reference supply infirm party, what do “seriously inconvenient” and
scant guidance. “unreasonable or unjust” mean?

A litigant may defeat enforcement of a forum-selection clause
1. What sort of health-related evidence would suffice to by showing one of four things:
escape a forum-selection clause?
(1) enforcement would be unreasonable or unjust,
I agree that Jetta Prescott's affidavit detailing her myriad
*378 (2) the clause is invalid for reasons of fraud or
health woes is, standing alone, insufficient to avoid the
overreaching,
contracted-for forum. The lesson of In re Lyon, as the Court
notes, is that the mere assertion of “financial and logistical (3) enforcement would contravene a strong public policy
difficulties” is not enough to negate a forum-selection clause, of the forum where the suit was brought, or
lest such clauses become “practically useless.” 1 Ease of
evasion is certainly no less a concern when the claimed (4) the selected forum would be seriously inconvenient for
hardship is physical rather than financial. So I agree that a trial. 6
party asserting medical infirmities must offer more than her
own testimony. Today's case focuses on grounds (1) and (4) above, and while
I understand that the slender record makes this case a less-
I would go a step further, however, and make clear for than-ideal vehicle for extended analysis, I believe we should
the bench and bar what sort of evidence would suffice.

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of severe medical ailments constitute “special and unusual
one day explain more fully how these rather opaque phrases
apply to assertions of medical hardship. circumstances” in certain cases?

Most Texas cases avoid fleshing out the term “seriously The Court never mentions this “special and unusual
inconvenient”; the only discernible “definition” seems to circumstances” basis for negating a forum-selection clause,
but that is immaterial here. Mrs. Prescott's only evidence
emerge from piecing together examples of what various
of post-contract medical problems is her lone affidavit,
courts have held not to be seriously inconvenient. 7 Many
which even if wholly persuasive, is wholly insufficient.
cases recite the general standard from M/S Bremen v. Zapata
Accordingly, we need not consider the affidavit's substance
Off–Shore Co., 8 essentially that “a forum clause ... may (or lack thereof) and whether Mrs. Prescott's ailments qualify
[ ] be ‘unreasonable’ and unenforceable if the chosen as “special and unusual circumstances.”
forum is seriously inconvenient for the trial of the action,”
and conclude the party's proof fell short. 9 None of the In sum, this Court has never addressed, nor has any Texas
cases, however, are medical-hardship cases; today's case appellate court, whether medical concerns can negate a
is the first, meaning Texas courts have no guidance for forum-selection clause. Given the ubiquity of such clauses
discerning the confusing, but apparently consequential, line in everyday contracts, both commercial and consumer, I
between “inconvenient” (clause enforced) and “seriously hope a future case with a more-developed record gives
inconvenient” (clause evaded) ... *379 not to mention what us an opportunity to clarify how the various bases for
separately qualifies as “unreasonable or unjust” in the context avoiding enforcement apply when a party asserts serious
of someone asserting health maladies that arose after the medical hardship. This seems only fair. Actions to enforce
clause was adopted. forum-selection clauses reach us via mandamus, 13 a remedy
“controlled largely by equitable principles,” 14 and we must
Cases involving medical hardship strike me as somewhat
determine if the court below clearly abused its discretion
unique. Financial or logistical burdens may be easily
in denying enforcement. It seems inequitable to fault lower
anticipated; not so with many medical burdens. 10 The Court courts for acting without reference to guiding principles if
notes that when a forum's inconvenience is foreseeable at there are few on-point principles to be referenced.
the time of contracting, the party opposing enforcement
must “show that trial in the contractual forum will be so I understand why the Court declines to use today's imperfect
gravely difficult and inconvenient that he will for all practical case to dive deeper and provide greater specificity for forum-
purposes be deprived of his day in court.” 11 True, but in selection cases involving medical hardship, *380 but I hope
conducting that analysis we must also confront what we a future case will give us occasion to say more.
confirmed just last year: a party asserting inconvenience
can avoid enforcement by proving that “special and unusual
All Citations
circumstances developed after the contracts were executed”
such that litigation in the chosen forum would work a 304 S.W.3d 371, 53 Tex. Sup. Ct. J. 363
deprivation of its day in court. 12 So can exacting evidence

Footnotes
1 In considering the circumstances of this case, we offer no opinion as to whether, in a different case, health concerns
might be sufficient grounds to preclude enforcement of a forum-selection clause, or what sort of proof of such health
concerns would be required.
2 The Supreme Court clarified in Carnival Cruise Lines, Inc. v. Shute that its use of “serious inconvenience of the contractual
forum” in M/S Bremen was in the context of a hypothetical agreement between two Americans to resolve a local dispute
in a remote alien forum, not an agreement to resolve the dispute in another state. 499 U.S. 585, 594, 111 S.Ct. 1522,
113 L.Ed.2d 622 (1991).
1 In re Lyon Fin. Servs., Inc., 257 S.W.3d 228, 234 (Tex.2008) (per curiam).
2 In re AIU Ins. Co., 148 S.W.3d 109, 113 (Tex.2004).

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3 See Caputo v. Holland Am. Line, Inc., No. 08–CV–4584, 2009 WL 2258326 (E.D.N.Y. July 29, 2009) (stating an 81–
year–old plaintiff whose recent hip surgery made her unable to walk alone or sit for extended periods could have made
the requisite showing if she had shown she was physically unable to fly to the selected forum).
4 Id. at *1–2.
5 Id. at *4.
6 Lyon, 257 S.W.3d at 231–32. Despite the disjunctive “or,” which signals textual separateness, we seemed to intermingle
grounds (1) and (4) in In re Lyon, asking “whether Pennsylvania is such an inconvenient forum that enforcing the forum-
selection clause would produce an unjust result.” Id. at 233.
7 See, e.g., In re Int'l Profit Assocs., Inc., 274 S.W.3d 672, 679, 680 (Tex.2009) (per curiam) (holding that even though
plaintiff may have to pursue two suits, one in Illinois and one in Texas, that is not the type of unusual and special
circumstances that shows litigating in the contracted-for forum would be so gravely difficult and inconvenient that plaintiff
would be deprived of its day in court; also, Illinois is not a remote alien forum for purposes of forum-selection agreements);
Lyon, 257 S.W.3d at 233–34 (clause was not so inconvenient to the lessee that enforcing it would produce an unjust
result, even though lessee claimed it lacked the financial or logistical ability to pursue its claims in Pennsylvania); AIU,
148 S.W.3d at 112–13 (rejecting argument that many if not most potential witnesses regarding coverage issues were
in Texas and therefore trial in New York would be seriously inconvenient); First ATM, Inc. v. Onedoz, Inc., No. 03–
08–00286–CV, 2009 WL 349164, at *3 (Tex.App.-Austin Feb. 13, 2009, no pet.) (mem. op.) (holding that unsupported
pleadings regarding a party's financial condition and its expected costs of litigation in Texas did not show that litigating
in Texas would be so inconvenient that party would be deprived of its day in court); Bailey v. Sorenson Labs., Inc., 217
B.R. 523, 527 (Bankr.E.D.Tex.1997) (finding that mere fact that debtor had experienced financial difficulties resulting
in bankruptcy was not sufficient to preclude enforcement of a forum-selection clause on the theory that it had become
seriously inconvenient).
8 407 U.S. 1, 16, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) (the Supreme Court also noted: “the serious inconvenience of the
contractual forum to one or both of the parties might carry greater weight in determining the reasonableness of the forum
clause,” id. at 17, 92 S.Ct. 1907). The Court later clarified in Carnival Cruise Lines, Inc. v. Shute that the inconvenience
discussion in The Bremen was in the context of a hypothetical agreement between two Americans to resolve a local
dispute in a remote alien forum, not an agreement to resolve the dispute in another of the United States. 499 U.S. 585,
594, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991). See Lyon, 257 S.W.3d at 234.
9 See, e.g., AIU, 148 S.W.3d at 112–13; Deep Water Slender Wells, Ltd. v. Shell Int'l Exploration & Prod., Inc., 234 S.W.3d
679, 692–93 (Tex.App.-Houston [14th Dist.] 2007, pet. denied); In re Talent Tree Crystal, No. 01–05–00686–CV, 2006
WL 305015, at *4 (Tex.App.-Houston [1st Dist.] Feb. 9, 2006, no pet.) (mem. op.); Phoenix Network Techs. (Europe) Ltd.
v. Neon Sys., Inc., 177 S.W.3d 605, 621 (Tex.App.-Houston [1st Dist.] 2005, no pet.).
10 Parties ought not bear an expectation of prognostication when it comes to their health, required to foretell whether future
maladies might make a potential out-of-state trial too onerous. Infirmities are inevitable, but that doesn't make them
foreseeable such that healthy parties who execute a forum-selection clause must consider whether health woes years or
decades down the road might pose a travel problem. Cross-country travel may be undemanding for a healthy 60–year–
old who signs a forum-selection clause but inconceivable for an ailing almost–80–year–old who contests one.
11 304 S.W.3d at 375 (citing AIU, 148 S.W.3d at 113 (quoting The Bremen, 407 U.S. at 18, 92 S.Ct. 1907)).
12 Int'l Profit Assocs., 274 S.W.3d at 680 (emphasis added). See also Lyon, 257 S.W.3d at 234 (noting no “proof of special
and unusual circumstances” and “no evidence that ... conditions changed from the time the agreements were executed”).
13 See Lyon, 257 S.W.3d at 231 (“There is no adequate remedy by appeal when a trial court refuses to enforce a forum-
selection clause, and such clauses can be enforced via mandamus.”).
14 Int'l Profit Assocs., 274 S.W.3d at 676.

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 8
Giant Eagle's Motion to Strike Page 47
R508
Tab J
R509
Tab K
 FILED
DALLAS COUNTY
10/6/2015 3:51:38 PM
FELICIA PITRE
DISTRICT CLERK

CAUSE NO. DC-15-03853

DICKSON PERRY, derivatively on § IN THE DISTRICT COURT
behalf of EXCENTUS CORPORATION, §
§
Plaintiff, §
§
vs. §
§
EXCENTUS CORPORATION, § DALLAS COUNTY, TEXAS
BRANDON LOGSDON, JIM MILLS, §
GIANT EAGLE, INC., DAVID §
SHAPIRA, DANIEL SHAPIRA, AUTO- §
GAS SYSTEMS, INC., RANDY §
NICHOLSON, and §
ALLIANCE DATA SYSTEMS, INC., §
§
Defendants, § 68TH JUDICIAL DISTRICT

DEFENDANT GIANT EAGLE, INC.’S MOTION TO STAY ALL PROCEEDINGS,
ASIDE FROM OUTSTANDING MOTIONS, PENDING RESOLUTION OF ITS
FORTHCOMING PETITION FOR WRIT OF MANDAMUS

Defendant Giant Eagle, Inc. (“Giant Eagle”) files this Motion to Stay All Proceedings,

Aside From Outstanding Motions, Pending Resolution of Its Forthcoming Petition for Writ of

Mandamus (“Motion”) with the Court of Appeals for the Fifth District of Texas.1 Giant Eagle

requests a hearing on this Motion as soon as practicable. In support of this Motion, Giant Eagle

states as follows:

1. Giant Eagle respectfully requests a stay of all proceedings (aside from

outstanding motions) so that it may have the opportunity to file a petition for writ of mandamus

in the Court of Appeals for the Fifth District of Texas seeking relief from this Court’s denial of

1
The following motions are currently pending before this Court and are scheduled for hearing on November 2,
2015: Defendants David and Daniel Shapira’s Verified Special Appearance and Motion Objecting to Jurisdiction;
Defendants Motion to Abate and Plea to Jurisdiction; and Defendants Logsdon and Mills’s Motion to Dismiss.
Giant Eagle is not asking the Court to stay the hearing on these motions or otherwise delay determination thereof.
Rather, for the reasons explained herein, the present motion seeks to stay all proceedings after resolution of these
threshold issues, so as to preserve the status quo and protect Giant Eagle’s contractual rights.

DEFENDANT GIANT EAGLE, INC.’S MOTION TO STAY ALL PROCEEDINGS, ASIDE FROM OUTSTANDING
MOTIONS, PENDING RESOLUTION OF ITS FORTHCOMING PETITION FOR WRIT OF MANDAMUS PAGE 1
A0963864.1/266096.docx
R510
Giant Eagle’s Motion to Dismiss for Collateral Estoppel or, in the Alternative, Pursuant to the

Governing Forum Selection Clause (“Motion to Dismiss”).

2. On July 15, 2015, Giant Eagle filed its Motion to Dismiss, arguing that collateral

estoppel mandated application of the forum selection clause in the Excentus-Giant Eagle Stock

Purchase Agreements (“SP Agreements”) because of a prior decision by Judge Boyle of the U.S.

District Court for the Northern District of Texas. Excentus Corp. v. Giant Eagle, Inc., 3:11-cv-

03331, 2012 WL 2525594, at *8-11 (N.D. Tex. July 2, 2012). Giant Eagle’s position is that

venue for this action is only proper in Allegheny County, Pennsylvania. Giant Eagle also

argued, in the alternative, that even if collateral estoppel did not apply, the forum selection

clause in the SP Agreements nevertheless applied for the same reasons outlined in Judge

Boyle’s opinion; namely, that the dispute “arose out of” the SP Agreements because the court

would be required to determine the parties’ rights thereunder to resolve Perry’s claims.

3. At oral argument on August 24, 2015, this Court denied Giant Eagle’s motion to

dismiss with respect to the collateral estoppel argument.

4. By order dated and signed September 22, 2015, this Court denied Giant Eagle’s

motion to dismiss with respect to the forum selection clause. Giant Eagle did not receive notice

of this order until September 28, 2015 after Excentus’ counsel checked the Court’s docket.

5. Giant Eagle plans to file a petition for writ of mandamus in the Court of Appeals

for the Fifth District of Texas seeking review of, and relief from, this Court’s denial of Giant

Eagle’s Motion to Dismiss. A petition for writ of mandamus is the appropriate method for

seeking review of this Court’s order refusing to apply the forum selection clause in the SP

Agreements. See In re ADM Investor Servs., Inc., 304 S.W.3d 371, 374 (Tex. 2010) (citing In

re AIU Ins. Co., 148 S.W.3d 109, 114–15 (Tex. 2004)) (“We have consistently granted petitions

DEFENDANT GIANT EAGLE, INC.’S MOTION TO STAY ALL PROCEEDINGS, ASIDE FROM OUTSTANDING
MOTIONS, PENDING RESOLUTION OF ITS FORTHCOMING PETITION FOR WRIT OF MANDAMUS PAGE 2
A0963864.1/266096.docx

R511
for writ of mandamus to enforce forum-selection clauses because a trial court that improperly

refuses to enforce such a clause has clearly abused its discretion.”).

6. A stay of all proceedings in the District Court pending a ruling by the Court of

Appeals on Giant Eagle’s forthcoming petition for writ of mandamus is necessary to preserve

the status quo and protect Giant Eagle’s rights. See, e.g., Syrian-American Oil Corp. S.A. v.

Pecten Orient Co., No. 2007-67830, 2010 WL 7096628, at *1 (109th Jud. Dist.—Harris County,

May 13, 2010) (granting motion to stay all trial court proceedings pending all appeals by

petition for writ of mandamus of court’s orders denying motion to dismiss on venue grounds).

Granting this stay would not result in any prejudice to Perry.

7. The right Giant Eagle bargained for in the SP Agreements – i.e., litigation in the

agreed upon forum (Pennsylvania) – will be lost forever if Giant Eagle is forced to proceed with

discovery and further litigation in Texas while its petition for writ of mandamus is pending. See

In re Lisa Laser USA, Inc., 310 S.W.3d 880, 883 (Tex. 2010) (“an appellate remedy is

inadequate when a trial court improperly refuses to enforce a forum-selection clause because

allowing the trial to go forward will vitiate and render illusory the subject matter of an appeal—

i.e., trial in the proper forum.” (quotations and citations omitted)).

8. Further, in order to protect Giant Eagle’s rights, the court should stay the entire

proceeding, not just proceedings against Giant Eagle. If proceedings go forward without Giant

Eagle, and its petition is denied, Giant Eagle may miss the opportunity to protect its rights by

taking discovery, including by deposing Plaintiff Perry.

9. In addition, a stay is necessary to protect the rights of other Defendants,

particularly David and Daniel Shapira (together, the “Shapiras”). As noted in Giant Eagle’s

Motion to Dismiss, the forum selection clause also applies to the Shapiras. (See Motion to

DEFENDANT GIANT EAGLE, INC.’S MOTION TO STAY ALL PROCEEDINGS, ASIDE FROM OUTSTANDING
MOTIONS, PENDING RESOLUTION OF ITS FORTHCOMING PETITION FOR WRIT OF MANDAMUS PAGE 3
A0963864.1/266096.docx

R512
Dismiss at 1, n.1). The Shapiras did not join Giant Eagle’s Motion to Dismiss so as not to waive

their Special Appearance and Motion Objecting to Jurisdiction (scheduled for hearing on

November 2, 2015). If the Shapiras’ Special Appearance is denied, however, they will move to

dismiss because collateral estoppel mandates that this court apply the forum selection clause to

them as well. Like Giant Eagle, the Shapiras would lose the benefit of the forum selection

clause forever if they were required to participate in discovery and further proceedings before

the applicability of the forum selection clause is fully resolved in the court of appeals.

10. For the reasons set forth above, Giant Eagle respectfully requests that all

proceedings in this matter, other than those currently scheduled to be heard on November 2,

2015, be stayed pending the final resolution of Defendants’ Petition for Writ of Mandamus.

Respectfully Submitted,

/s/ Orrin L. Harrison III
Orrin L. Harrison III
Bar No. 09130700
oharrison@ghetrial.com
GRUBER HURST ELROD JOHANSEN HAIL SHANK, LLP
1445 Ross Avenue, Suite 2500
Dallas, TX 75202
Telephone: 214-855-6828
Fax: 214-855-6808
-and-
Bernard Marcus
marcus@marcus-shapira.com
Scott Livingston
livingston@marcus-shapira.com
Jonathan Marcus
jmarcus@marcus-shapira.com
MARCUS & SHAPIRA LLP
301 Grant Street, 35th Floor
One Oxford Centre
Pittsburgh, Pennsylvania 15219-6401
Telephone: 412-338-5200
Fax: 412-391-8758
Attorneys for Giant Eagle, Inc., David Shapira, and
Daniel Shapira

DEFENDANT GIANT EAGLE, INC.’S MOTION TO STAY ALL PROCEEDINGS, ASIDE FROM OUTSTANDING
MOTIONS, PENDING RESOLUTION OF ITS FORTHCOMING PETITION FOR WRIT OF MANDAMUS PAGE 4
A0963864.1/266096.docx

R513
 CERTIFICATE OF CONFERENCE

Counsel for movant and counsel for respondent have personally conducted a conference
at which there was a substantive discussion of every item presented to the Court in this motion
and despite best efforts the counsel have not been able to resolve those matters presented.

Certified to the Day of October 6, 2015.

/s/ Orrin L. Harrison III
Orrin L. Harrison III

CERTIFICATE OF SERVICE

The undersigned certifies that a copy of the foregoing instrument was served upon the
attorneys of record in the above cause via electronic filing and E-Mail, in accordance with Rule
21a, Texas Rules of Civil Procedure, on October 6, 2015.

/s/ Orrin L. Harrison III
Orrin L. Harrison III

DEFENDANT GIANT EAGLE, INC.’S MOTION TO STAY ALL PROCEEDINGS, ASIDE FROM OUTSTANDING
MOTIONS, PENDING RESOLUTION OF ITS FORTHCOMING PETITION FOR WRIT OF MANDAMUS PAGE 5
A0963864.1/266096.docx

R514
 CAUSE NO. DC-15-03853

DICKSON PERRY, derivatively on § IN THE DISTRICT COURT
behalf of EXCENTUS §
CORPORATION, §
§
Plaintiffs, §
§
vs. §
§ DALLAS COUNTY, TEXAS
BRANDON LOGSDON, JIM MILLS, §
GIANT EAGLE, INC., DAVID §
SHAPIRA, DANIEL SHAPIRA, §
AUTO-GAS SYSTEMS, INC., §
RANDY NICHOLSON, and §
ALLIANCE DATA SYSTEMS, INC., §
§ 68TH JUDICIAL DISTRICT
Defendants, §

ORDER

After considering Defendant Giant Eagle’s Motion to Stay All Proceedings, Aside from

Outstanding Motions, Pending Resolution of Its Forthcoming Petition for Writ of Mandamus, the

Court:

GRANTS Giant Eagle’s Motion to Stay.

SIGNED on this _____ day of ______________, 2015.

____________________________
PRESIDING JUDGE

266639.docx Page Solo

R515
Tab L
 FILED
DALLAS COUNTY
10/14/2015 7:39:58 PM
FELICIA PITRE
DISTRICT CLERK

CAUSE NO. DC-15-03853

DICKSON PERRY, derivatively on behalf § IN THE DISTRICT COURT
of EXCENTUS CORPORATION, §
§
Plaintiff, §
§
v. § OF DALLAS COUNTY, TEXAS
§
BRANDON LOGSDON, JIM MILLS, §
GIANT EAGLE, INC., DAVID SHAPIRA, §
DANIEL SHAPIRA, AUTO-GAS §
SYSTEMS, INC., RANDY NICHOLSON, §
AND ALLIANCE DATA SYSTEMS, INC., §
and EXCENTUS CORPORATION. §
§
Defendants. § 68TH JUDICIAL DISTRICT
______________________________________________________________________________

PLAINTIFF’S RESPONSE TO DEFENDANT GIANT EAGLE, INC.’S
MOTION TO STAY ALL PROCEEDINGS
______________________________________________________________________________

TO THE HONORABLE JUDGE:

Plaintiff Dickson Perry (“Mr. Perry” or “Perry”) responds to Defendant Giant Eagle, Inc.’s

(“Giant Eagle”), Motion to Stay the All Proceedings Pending Resolution of Its Forthcoming

Petition For Writ of Mandamus (the “Motion”) and respectfully shows the Court as follows:

I. INTRODUCTION

The Court should deny Giant Eagle’s Motion to Stay All Proceedings for four reasons.

First, Mr. Perry would be prejudiced if all proceedings were stayed for a single defendant.

This case involves multiple parties and multiple claims, most of whom would not be affected by

the mandamus relief sought by Giant Eagle. This case will require significant discovery, and Mr.

Perry must commence that discovery before memories begin to fade and important witnesses

resign, move, or otherwise become unavailable. Halting the progress of this case for a single

defendant when there are multiple claims and other parties involved would unnecessarily delay

______________________________________________________________________________
PLAINTIFF’S RESPONSE TO GIANT EAGLE’S MOTION TO STAY Page 1
R516
Mr. Perry’s right to a speedy trial. Giant Eagle fails to explain why all of the remaining claims

against the other defendants should be stayed. Tellingly, this Court recently entered an agreed

Scheduling Order in this case establishing a trial date of November 29, 2016, as well as numerous

pretrial deadlines. Giant Eagle agreed to those dates and yet seeks to circumvent that Scheduling

Order despite its prior agreement to them. Giant Eagle’s motion should be denied.

Second, Giant Eagle has not yet filed a petition for writ of mandamus and, therefore, its

Motion is premature and improper.

Third, mandamus relief is extraordinary and will lie only when there has been a clear

abuse of discretion. The undisputed facts here show that there was no abuse of discretion by this

Court. Courts are reluctant to grant a stay pending a mandamus decision when it is unlikely that

the movant will succeed on the merits — as is the case here.

Fourth, it is unnecessary and unwarranted to stay all proceedings or even the proceedings

as they relate to Giant Eagle. Giant Eagle cited no statute or precedent that requires a stay of all

the proceedings based upon the particular circumstances of this case. Further, mandamus relief is

similar in nature to an appeal from an interlocutory order which, absent specific circumstances

delineated by the Texas legislature, does not necessitate the staying of a case and certainly not the

staying of all proceedings. And even when an interlocutory appeal demands an automatic stay,

such a stay relates to the commencement of trial and typically does not apply to any other

proceedings for which the trial court retains jurisdiction. The same reasoning should be

applicable here. Accordingly, for all of the above reasons, the request for a stay should be denied.

______________________________________________________________________________
PLAINTIFF’S RESPONSE TO GIANT EAGLE’S MOTION TO STAY Page 2

R517
 II. RELEVANT BACKGROUND

Previously, Defendant Giant Eagle moved to dismiss Mr. Perry’s complaint on the basis of

collateral estoppel and, alternatively, pursuant to a forum-selection clause in the Stock Purchase

Agreements in which, approximately 10 years ago, Giant Eagle purchased certain shares of stock

in Excentus (the “SP Agreements”). As to collateral estoppel, this Court denied Giant Eagle’s

Motion at oral argument for numerous reasons, including that Mr. Perry’s claims in this lawsuit

have never actually been litigated (nor could they have been) because they arise out of the actions

of Excentus shareholders, directors, and officers during the summer of 2014 — over two years

after the issuance of the opinion Giant Eagle contends fully adjudicated the forum-selection clause

issue. As to the forum-selection clause, this Court sought further briefing regarding the applicable

language of the SP Agreements — specifically, the “arising out of” language. After receiving that

briefing, this Court denied Giant Eagle’s Motion to Dismiss. In doing so, the Court recognized

that “tangential” connections between the SP Agreements and the claims in this case or

agreements that “merely created the conditions that led to” the parties dealing with each other are

insufficient to bring the subject dispute within the forum-selection provision. The Court also

recognized that the designation of Dallas, Texas as the forum for disputes “arising out of or

related to” the Excentus/Giant Eagle settlement agreement directly contradicted Giant Eagle’s

contention that it negotiated and expected Pittsburgh to be the forum for all disputes involving the

parties and that, further, the settlement agreement’s broad forum-selection provision stands in

sharp contrast to the narrow provision Giant Eagle negotiated and agreed to in the SP

Agreements.

In short, after consideration, and in a proper exercise of its discretion, this Court rejected

both of Giant Eagle’s arguments. Giant Eagle now seeks a second bite of the apple and, in doing

______________________________________________________________________________
PLAINTIFF’S RESPONSE TO GIANT EAGLE’S MOTION TO STAY Page 3

R518
so, necessarily seeks to delay the adjudication of this case having previously agreed to the

pre-trial scheduling order governing this case. This Court should deny the Motion.

III. ARGUMENT

A. Giant Eagle Has Not and Cannot Demonstrate Compelling Circumstances for a Stay.

A motion to stay will necessarily delay this case. The Texas Supreme Court has

recognized that a stay “increases delay and expense and should not be done absent compelling

circumstances.” Coal. of Cities for Affordable Util. Rates v. Third Court of Appeals, 787 S.W.2d

946, 947 (Tex. 1990) (per curiam) (emphasis added). A motion to stay can also become a

strategic weapon used by an opponent to unnecessarily prevent discovery, increase expense, and

all around delay litigation.

As the Court is aware, this case involves several claims against several defendants.

Staying all proceedings gives Giant Eagle the power to delay not only claims against it but other

claims against at least six other Defendants that are unrelated and unaffected by any mandamus

request — all at Mr. Perry’s expense. Mr. Perry is entitled to commence discovery before

memories begin to fade and important witnesses resign, move, or otherwise become unavailable.1

Staying the case would cause Mr. Perry to be unduly prejudiced in accessing the necessary

witnesses and documents that are crucial to the support of all his claims, not just those against

Giant Eagle. What is more, even if the claims against Giant Eagle were to be finally tried in

Pennsylvania (an event Mr. Perry and the undersigned believes is unlikely), the discovery

developed in Texas would necessarily be used in that proceeding. This Court recently entered a

Scheduling Order in this case setting a trial date of November 29, 2016, as well as numerous

1
It is worth noting that, unfortunately, there are several witnesses whose health is a serious issue, including
two of the named Defendants, and further delay could result in their testimony not being taken in this case.
______________________________________________________________________________
PLAINTIFF’S RESPONSE TO GIANT EAGLE’S MOTION TO STAY Page 4

R519
pretrial deadlines. Exhibit A, Scheduling Order Entered By Court On September 21, 2015. By

requesting a stay of all proceedings, Giant Eagle is circumventing this agreed Scheduling Order.

Accordingly, the Court should deny the Motion.

B. Giant Eagle’s Motion Is Premature Because It Has Not Filed A Petition For Writ of
Mandamus And, In Any Event, The Motion Should Be Addressed By The Court of
Appeals.

Giant Eagle has not yet filed a petition for writ of mandamus. Thus, its Motion is

premature and improper, as it asks this Court to stay all proceedings because it contends it will, at

some unspecified time, file a petition for writ of mandamus. It cannot seek a stay before it has

filed a petition for writ of mandamus. See In re Khan, No. 13-12-00404-CV, 2012 WL 2360885,

at *1 (Tex. App. — Corpus Christi June 21, 2012, no pet.) (per curiam) (mem. op.) (denying the

motion to stay and mandamus petition because relator failed to meet the rigorous requirements

specified in Texas Rule of Appellate Procedure 52.3 and 52.7); see also Tex. R. App. P. 52.

Notably, in its Motion, Giant Eagle has not even alleged this Court abused its discretion or that it

has met the requirements for the relief sought on appeal.

In any event, in the rare instances where a stay is instituted pending mandamus, it is

generally the Court of Appeals — not the trial court — that effectuates the stay. D’Brien v.

Alderman, No. 2009-20328, 2011 WL 2790533 (151st Jud. Dist.—Harris County, Jan. 11, 2011)

(acknowledging that when a direct appeal is not allowed through the appellate procedures or

statutes, relief “may be sought by mandamus and a motion to stay in the court of appeals”); In re

Julian, No. 13-08-00363-CV, 2008 WL 2503280, at *1 (Tex. App.—Corpus Christi June 5, 2008,

no pet.) (per curiam) (granting a motion to stay only after having examined and fully considered

the motion); Archer Daniels Midland Co. v. Garcia, No. 01-96-01466-CV, 1996 WL 711266, at

*1 (Tex. App.—Houston [1st Dist.] Dec. 5, 1996, no writ) (making the initial determination as to

______________________________________________________________________________
PLAINTIFF’S RESPONSE TO GIANT EAGLE’S MOTION TO STAY Page 5

R520
whether to allow leave for relator to file a petition for writ of mandamus and whether to grant the

emergency motion to stay). Deferring to the Court of Appeals here is prudent because it is better

positioned to initially assess the merits of the mandamus petition and it avoids unnecessary delays

in the trial court proceedings, particularly in those circumstances when the mandamus relief will

be unlikely or has not been properly sought. See In re Khan, 2012 WL 2360885, at *1 (denying

the motion to stay and mandamus petition because relator failed to meet the rigorous requirements

specified in Texas Rule of Appellate Procedure 52.3 and 52.7).

Accordingly, even if this Court were inclined to grant a stay, it should nevertheless defer

to the Court of Appeals as to whether a stay is appropriate.

C. Giant Eagle’s Motion to Stay Should be Denied Because the Mandamus Relief
Sought is Extraordinary and Giant Eagle Has Not Shown That It Would Likely
Obtain Such Relief.

Crucial to a court’s discretion in ruling on a motion to stay is whether the movant has met

the requirements for a writ of mandamus. Sanchez v. Huntsville Indep. Sch. Dist., 844 S.W.2d

286, 291 (Tex. App.—Houston [1st Dist.] 1992, no writ) (upholding the trial court’s denial of the

motion to stay because the movant did not meet the requirements for obtaining injunctive relief);

Erwin v. Valley Hosp. Medical Center, No. A636641, 2011 WL 7737836 (D. Nev. Aug. 29, 2011)

(holding that the defendant was not entitled to a stay pending writ because it had not shown that it

will likely succeed on the merits in the writ petition). It is well-settled under Texas law that

“mandamus is an extraordinary remedy, available only in limited circumstances.” Walker v.

Packer, 827 S.W.2d 833, 839-40 (Tex. 1992) (emphasis added); see also Tex. R. App. P. 52.1.

Mandamus will only issue when necessary to correct a “clear abuse of discretion.” Walker, 827

S.W.2d at 839 (emphasis added). A clear abuse of discretion occurs when the trial court “reaches

a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law.” Id.

______________________________________________________________________________
PLAINTIFF’S RESPONSE TO GIANT EAGLE’S MOTION TO STAY Page 6

R521
A reviewing court will not issue a mandamus “to control the action of a lower court in a matter

involving discretion.” Cessna Aircraft Co. v. Kirk, 702 S.W.2d 321, 323 (Tex. App.—Eastland

1986, no writ) (internal citations omitted), nor will the court substitute its judgment for that of the

trial court with respect to factual issues, Packer, 827 S.W.2d at 839. “A mere error in judgment is

not an abuse of discretion.” In re Clark, 977 S.W.2d 152, 155 (Tex. App.—Houston [14th Dist.]

1998, no pet.) (internal citation omitted).

In terms of forum-selection clauses, a trial court abuses its discretion when the clause is

found to be unambiguous and the matter before the court falls within its scope. However, when a

contract is ambiguous, it is reasonably susceptible to two or more meanings and creates a fact

issue for regarding the parties’ intent. Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd.,

940 S.W.2d 587, 589 (Tex. 1996). “A trial court does not abuse its discretion if it bases its

decision on conflicting evidence and some evidence supports its decision.” In re Barber, 982

SW 2d 364, 366 (Tex. 1998) (emphasis added). Therefore, to support its request, Giant Eagle

must be able to show that there was only one permissible view of the evidence and the trial court

“could reasonably have reached only one decision.” Packer, 827 S.W.2d at 839. Importantly,

Texas courts construe “arise out of” (which was the language at issue in the SP Agreements) or

similar language narrowly and to exclude the particular claims at issue in this case. See, e.g.,

Busse v. Pac. Cattle Feeding Fund No. 1, Ltd., 896 S.W.2d 807, 812 (Tex. App.—Texarkana

1995, writ denied) (in forum selection case, construing “arising hereto” to exclude tort claims

where “[t]he rights, obligations, and cause of action do not arise from the contracts but from the

Deceptive Trade Practices Act, the Texas Securities Act, and the common law”); Major Help Ctr.,

Inc. v. Ivy, Crews & Elliott, P.C., 03-99-00285-CV, 2000 WL 298282, at *2 (Tex. App.—Austin

Mar. 23, 2000, no pet.) (in forum-selection case, construing “[a]ny action brought by either party

______________________________________________________________________________
PLAINTIFF’S RESPONSE TO GIANT EAGLE’S MOTION TO STAY Page 7

R522
under this agreement” to exclude tort claims that “do not rely on the terms of the Agreement as

the[ir] basis” and plaintiffs “do not attempt to enforce duties or obligations arising under the

Agreement”); Osornia v. AmeriMex Motor & Controls, Inc., 367 S.W.3d 707, 712 (Tex. App.—

Houston [14th Dist.] 2012, no pet.) (in arbitration case, construing “any and all claims arising out

of this Agreement” narrowly due to absence of “relating to” language); Associated Air Freight,

Inc. v. Meek, 01-00-00843-CV, 2001 WL 225516, at *2 (Tex. App.—Houston [1st Dist.] Mar. 8,

2001, no pet.) (in arbitration case, construing “a dispute hereunder” to exclude claims where

“allegations in this lawsuit touch only tangentially on the” agreements at issue).

Giant Eagle has failed to show it meets the requirements for mandamus relief and thus

should not be entitled to stay the proceedings of this case. See, e.g., In re Ruby Tequila's

Amarillo W., LLC, 07-11-00494-CV, 2012 WL 537812, *5 (Tex. App.—Amarillo Feb. 17, 2012,

no pet.) (finding underlying suit was not within the scope of forum-selection clause in certain

agreements and denying the petition for writ of mandamus). Specifically, the SP Agreements’

forum-selection clause brings within its scope only disputes “arising out of” the SP Agreements,

which Texas courts have interpreted to mean disputes that look to the subject agreement as the

source of the obligations allegedly breached. Indeed, the settlement agreement’s broad

forum-selection provision Giant Eagle negotiated and agreed to — encompassing all claims

“related to” the settlement agreement — stands in sharp contrast to the narrow provision Giant

Eagle negotiated and agreed to in the SP Agreements. Mr. Perry’s claims arise out of Defendants’

breaches of obligations imposed by Texas common and statutory law, not by the SP Agreements,

and his claims make no reference to any of the rights or obligations in the SP

Agreements. Further, at the very least, conflicting evidence exists given that the settlement

agreement entered into by Excentus and Giant Eagle designates Dallas, Texas as the forum for

______________________________________________________________________________
PLAINTIFF’S RESPONSE TO GIANT EAGLE’S MOTION TO STAY Page 8

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disputes related to that settlement agreement, which directly contradicts Giant Eagle’s contention

that it negotiated and expected Pittsburgh to be the forum for all disputes involving the parties.

See In re Sterling Chemicals, Inc., 261 S.W.3d 805, 811 (Tex. App.—Houston [14th Dist.] 2008,

no pet.) (finding that inconsistency among agreements created an ambiguity and, therefore, trial

court did not abuse its discretion by denying motions to dismiss based on a forum-selection

clause); In re Yahoo! Inc., 313 F. App’x. 722, 723 (5th Cir. 2009) (holding that mandamus relief

was not warranted and the district court did not abuse its discretion in determining that the forum

selection clause was ambiguous and the claims were not subject to the clause); Louisiana Ice

Cream Distributors, Inc. v. Carvel Corp., 821 F.2d 1031, 1033 (5th Cir. 1987) (holding that

mandamus review regarding the forum selection clause would have been inappropriate because

the clause was ambiguous and the trial court’s determination involved questions of fact).

Therefore, because Giant Eagle is unable to meet the heavy burden required to prove it is

entitled to mandamus relief and, at the very least, there is conflicting evidence making the denial

of the motion to dismiss a decision well within the discretion of this Court, this Court should deny

Giant Eagle’s Motion.

D. Staying the Entire Case is Unwarranted, Particularly When All of Mr. Perry’s
Claims Do Not Implicate the Stock Purchase Agreement’s Forum-Selection Clause.

It is unnecessary to stay the entire case or even the proceedings related to Giant Eagle.

Giant Eagle has cited no statute or precedent that requires a stay of all the proceedings based on

the particular circumstances of this case. Not every mandamus request requires the trial court to

stay its proceedings. See, e.g., Whittington v. Bayer Materialscience LLC, No. 22949, 2007 WL

5112566 (253rd Jud. Dist. — Chambers County, Aug. 27, 2007) (denying the motion to stay

______________________________________________________________________________
PLAINTIFF’S RESPONSE TO GIANT EAGLE’S MOTION TO STAY Page 9

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pending writ of mandamus). 2

Giant Eagle’s single citation to Syrian-American Oil Corp. S.A. v. Pecten Orient Co., No.

2007-67830, 2010 WL 7096628, at *1 (109th Jud. Dist.—Harris County, May 13, 2010), in

support of its Motion provides no reasoning or guidance for the Court’s consideration and is, at

best, distinguishable. For instance, while devoid of any analysis whatsoever, there is sno

indication in that case that the trial court was faced with a situation involving multiple claims

against multiple defendants, the potential for testimony to become unavailable, the lack of a

petition for writ of mandamus, and the absence of any indication of even the potential for an

abuse of discretion—factors that would undoubtedly impact the motion to stay analysis here and

weigh in favor of its denial. Again, none of the pending claims against Excentus, Brandon

Logsdon, Jim Mills, Auto-Gas Systems, Inc., Randy Nicholson, and Alliance Data Systems, Inc.

will be affected by Giant Eagle’s proposed mandamus request as those claims are not subject to

the SP Agreements. It is unnecessary to prolong the entire case when only three of the nine

parties may potentially be affected. Sheinfeld, Maley & Kay, P.C. v. Bellush, 61 S.W.3d 437, 439

(Tex. App.—San Antonio 2001, no pet.) (holding that “[t]he trial court retains jurisdiction over

the case and may go forward with all other proceedings except the commencement of trial”).

Mandamus relief is similar in nature to an appeal from an interlocutory order which,

absent specific circumstances delineated by the Texas legislature, does not necessitate the staying

of a case and certainly not the staying of all proceedings. And even when an interlocutory appeal

demands an automatic stay, such stay generally only relates to the commencement of trial and

typically does hinder the trial court’s jurisdiction on pretrial proceedings. See Tex. Civ. Prac. &

Rem. Code Ann. § 51.014(b). The same reasoning should apply here.

2
Indeed, if every mandamus request required a stay of all proceedings it would encourage defendants to
request mandamus at any opportunity — even if they believed such requests to be wholly without merit — in an
effort to unnecessarily prolong and stay cases.
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PLAINTIFF’S RESPONSE TO GIANT EAGLE’S MOTION TO STAY Page 10

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 Therefore, this Court should deny Giant Eagle’s Motion. Alternatively, even if this Court

determines that the circumstances warrant a stay, this Court should only stay the case as to the

commencement of trial with respect to Giant Eagle and should continue with all other

proceedings against the defendants.

IV. CONCLUSION AND PRAYER

For the foregoing reasons, Plaintiff respectfully requests that the Court deny Giant Eagle’s

Motion to Stay All Proceedings. Alternatively, if the Court determines a stay is warranted, the

stay should only be to the commencement of trial against Giant Eagle and the Court should

continue all other proceedings against the defendants.

Date: October 14, 2015 Respectfully submitted,

/s/Michael P. Lynn
Michael P. Lynn, P.C. (mlynn@lynnllp.com)
State Bar No. 12738500
Andrés Correa (acorrea@lynnllp.com)
State Bar No. 24076330
Andrew S. Hansbrough (ahansbrough@lynnllp.com)
State Bar No. 24094700
LYNN TILLOTSON PINKER & COX, LLP
2100 Ross Avenue, Suite 2700
Dallas, Texas 75201
214-981-3800 Telephone
214-981-3839 Facsimile

ATTORNEYS FOR PLAINTIFF
DICKSON PERRY

______________________________________________________________________________
PLAINTIFF’S RESPONSE TO GIANT EAGLE’S MOTION TO STAY Page 11

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 CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true and correct copy of the above and foregoing
document has been served as shown below on counsel of record on October 14, 2015:

Via Email Via Email
Orrin L. Harrison III Lisa S. Gallerano
(oharrison@ghjhlaw.com) (lgallerano@akingump.com)
GRUBER HURST ELROD JOHANSEN HAIL Patrick O’Brien (pobrien@akingump.com)
SHANK, LLP AKIN GUMP
1445 Ross Avenue, Suite 2500 1700 Pacific Avenue, Suite 4100
Dallas, TX 75202 Dallas, TX 75201-4624
Attorneys for Defendants Attorneys for Defendant
Giant Eagle, Inc., David Shapira, and Alliance Data Systems, Inc.
Daniel Shapira
Via Email
Via Email Ken Carroll (kcarroll@ccsb.com)
Bernard Marcus (marcus@marcus- Byran Erman (berman@ccsb.com)
shapira.com) Sara Romine (sromine@ccsb.com)
Scott Livingston (livingston@marcus- CARRINGTON, COLEMAN, SLOMAN &
shapira.com) BLUMENTHAL, L.L.P.
Jonathan Marcus (jmarcus@marcus- 901 Main Street, Suite 5500
shapira.com) Dallas, TX 75202-3767
MARCUS & SHAPIRA LLP Attorneys for Defendants
301 Grant Street, 35th Floor Brandon Logsdon and Jim Mills
One Oxford Centre
Pittsburgh, PA 15219-6401
Attorneys for Defendants
Giant Eagle, Inc., David Shapira, and
Daniel Shapira

Via Email
Robert B. Wagstaff (rwagstaff@mcmahonlawtx.com)
MCMAHON SUROVIK SUTTLE
P.O. Box 3679
Abilene, TX 79604
Attorney for Defendants
Randy Nicholson and Auto-Glass Systems, Inc.

/s/ Andres Correa
Andres Correa

4852-7445-3545, v. 1

______________________________________________________________________________
PLAINTIFF’S RESPONSE TO GIANT EAGLE’S MOTION TO STAY Page 12

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EXHIBIT A

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R530
R531
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R533
Tab M
 CAUSE NO. DC-15-03853

DICKSON PERRY, derivatively on behalf
§ IN THE DISTRICT COURT
ofEXCENTUS CORPORATION, §
§
Plaintiff, §
§
v. § OF DALLAS COUNTY, TEXAS
§
BRANDON LOGSDON, llM MILLS, §
GIANT EAGLE, INC., DAVID SHAPIRA, §
DANIEL SHAPIRA, AUTO-GAS §
SYSTEMS, INC., RANDY NICHOLSON, §
AND ALLIANCE DATA SYSTEMS, INC., §
and EXCENTUS CORPORATION. §
§
Defendants. § 68TH JUDICIAL DISTRICT

ORDER

Before the Court is Defendant Giant Eagle, Inc.'s Motion to Stay All Proceedings, Aside

from Outstanding Motions, Pending Resolution of Its Forthcoming Petition for Writ of

Mandamus ("the Motion"). On October 19, 2015 the parties appeared through their counsel.

Having considered the parties' briefing, the arguments of counsel, and all of the evidence

properly before it, the Court hereby DENIES the Motion.

IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Defendant's

Motion is DENIED. 1·

SIGNEDthis_li_day of _ _J_c-=··(j):..._f__.Y/'-------'2015.

HON. MARTIN HOFFMAN, PRESIDING JUDGE

ORDER Page 1

R534
Tab N
 FILED
DALLAS COUNTY
9/18/2015 10:56:34 AM
FELICIA PITRE
DISTRICT CLERK

CAUSE NO. DC-15-03853

DICKSON PERRY, derivatively on behalf
§ IN THE DISTRICT COURT
of EXCENTUS CORPORATION, §
§
Plaintiff, §
§
v. § OF DALLAS COUNTY, TEXAS
§
BRANDON LOGSDON, JIM MILLS, §
GIANT EAGLE, INC., DAVID SHAPIRA, §
DANIEL SHAPIRA, AUTO-GAS §
SYSTEMS, INC., RANDY NICHOLSON, §
AND ALLIANCE DATA SYSTEMS, INC., §
and EXCENTUS CORPORATION. §
§
Defendants. § 68TH JUDICIAL DISTRICT

RESPONSE TO PLAINTIFF’S [PROPOSED] LEVEL THREE SCHEDULING ORDER

Defendants Giant Eagle, Inc. (“Giant Eagle”), David Shapira, and Daniel Shapira

(collectively, “Giant Eagle and the Shapiras”), through undersigned counsel, respectfully submit

this Response to Plaintiff’s [Proposed] Level Three Scheduling Order (the “Proposed Order”) as

follows:1

Giant Eagle and the Shapiras have no objection to many aspects of Plaintiff’s Proposed

Order, except (1) the schedule should commence only at the appropriate time, after a series of

preliminary matters have been decided; and (2) given the several preliminary matters either

pending or not yet scheduled for argument, the large number of Defendants, and the nature of the

claims, the trial in this action should be scheduled for no sooner than April 2017 to allow

sufficient time for discovery and summary judgment briefing.

1
Giant Eagle and the Shapiras submit this Response subject to, reserving, and without prejudice to Giant
Eagle’s Motion to Dismiss for Collateral Estoppel or, in the Alternative, Pursuant to the Governing
Forum Selection Clause and Defendants David Shapira’s and Daniel Shapira’s Verified Special
Appearance and Motion Objecting to Jurisdiction.
A0954766.3
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 Defendants David and Daniel Shapira’s Special Appearance (the “Shapira Special

Appearance”) hearing should not proceed until the Court rules on Giant Eagle’s Motion to

Dismiss for Collateral Estoppel or, in the Alternative, Pursuant to the Governing Forum

Selection Clause, as that ruling may eliminate the need for the Shapira Special Appearance. A

hearing on Defendants’ Motion to Abate is similarly premature, as it is not yet clear which

Defendants will be in the case. A short delay to address remaining preliminary matters will not

prejudice the Plaintiff Dickson Perry (“Mr. Perry”). Mr. Perry has been engaged since August in

substantial discovery in his employment arbitration proceeding against Excentus Corporation,

covering issues that largely overlap with the issues in this action. The arbitration hearing is

currently scheduled for November 2015.

Defendants Giant Eagle and the Shapiras respectfully request that the Court refrain from

entering a scheduling order while the aforementioned preliminary matters are pending.

Alternatively, Giant Eagle and the Shapiras request that the Court set only the trial date for no

sooner than April 2017 pending resolution of these preliminary matters.

A0954766.3
RESPONSE TO PLAINTIFF’S [PROPOSED] LEVEL THREE SCHEDULING ORDER Page 2
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Dated: September 18, 2015 Respectfully submitted,

/s/ Orrin L. Harrison III
Orrin L. Harrison III
Texas Bar No. 09130700
oharrison@ghetrial.com
Hayley Ellison
Texas Bar No. 24074175
hellison@ghetrial.com
GRUBER HURST ELROD
JOHANSEN HAIL SHANK, LLP
1445 Ross Avenue, Suite 2500
Dallas, TX 75202
Telephone: 214-855-6828
Fax: 214-855-6808

-and-

Bernard Marcus
marcus@marcus-shapira.com
Scott Livingston
livingston@marcus-shapira.com
Jonathan Marcus
jmarcus@marcus-shapira.com
MARCUS & SHAPIRA LLP
301 Grant Street, 35th Floor
One Oxford Centre
Pittsburgh, Pennsylvania 15219-6401
Telephone: 412-338-5200
Fax: 412-391-8758

Attorneys for Giant Eagle, Inc., David
Shapira, and Daniel Shapira

A0954766.3
RESPONSE TO PLAINTIFF’S [PROPOSED] LEVEL THREE SCHEDULING ORDER Page 3
4833-3615-0537

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 CERTIFICATE OF SERVICE

The undersigned certifies that a copy of the foregoing instrument was served upon the

attorneys of record in the above in accordance with the Texas Rules of Civil Procedure, on this

the 18th of September, 2015.

/s/ Hayley Ellison
Hayley Ellison

CERTIFICATE OF CONFERENCE

I, the undersigned attorney, hereby certify to the Court that counsel for Giant Eagle and

the Shapiras has conferred with counsel for all Defendants regarding the issues presented by this

Response, and counsel for all Defendants have indicated they agree to the relief requested in this

Response.

/s/ Hayley Ellison
Hayley Ellison

A0954766.3
RESPONSE TO PLAINTIFF’S [PROPOSED] LEVEL THREE SCHEDULING ORDER Page 4
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