FOURTH DIVISION
ELLINGTON, P. J.,
MCFADDEN and MERCIER, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
October 19, 2016
In the Court of Appeals of Georgia
A16A0813. EQUITY TRUST COMPANY v. JONES.
MCFADDEN, Judge.
This appeal is from the denial of a motion to dismiss for improper venue.
Because the trial court’s dismissal rests on an erroneous legal theory, we vacate the
order and remand the case for further proceedings.
Ronald G. Jones, II filed a complaint against Eddie L. Long, New Birth
Missionary Baptist Church, Inc., Ehpren Taylor, Jr., City Capital Corporation, Robert
Batt, and Equity Trust Company, alleging that he had been fraudulently induced into
moving $60,000 into sham investments. Equity Trust Company moved to dismiss the
complaint for improper venue on the basis of forum selection clauses in two contracts
between it and Jones. A custodial account agreement provided that “[a]ny suit filed
against [Equity] shall only be instituted in the county courts of Lorain County, Ohio
where [Equity] maintains its principal office and you agree to submit to such
jurisdiction both in connection with any such suit you may file and in connection with
any suit which we may file against you.” Similarly, a direction of investment form
provided that “[a]ny suit filed against [Equity] arising out of or in connection with its
role as custodian of the undersigned’s Retirement Account shall only be instituted in
the courts of Lorain County, Ohio; and the undersigned agrees to submit to such
jurisdiction.”
The trial court denied the motion to dismiss, reasoning that Jones had alleged
sufficient facts in the complaint from which a jury could find that defendants Long
and New Birth had a confidential relationship with Jones, that Long and New Birth
unduly influenced Jones to sign the contracts, and that such undue influence was
“sufficient to overcome the presumption that the forum selection clause[s] should be
enforced[.]” The trial court issued a certificate of immediate review, and this appeal
followed.
Georgia courts have
adopted the United States Supreme Court’s ruling in The Bremen v.
Zapata Off-Shore Co., 407 U.S. 1 (92 SCt 1907, 32 LE2d 513) (1972),
that forum selection clauses are prima facie valid and should be enforced
unless the opposing party shows that enforcement would be
unreasonable under the circumstances. To invalidate such a clause, the
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opposing party must show that trial in the chosen forum will be so
inconvenient that he will, for all practical purposes, be deprived of his
day in court. A freely negotiated agreement should be upheld absent a
compelling reason such as fraud, undue influence, or overweening
bargaining power.
Houseboat Store v. Chris-Craft Corp., 302 Ga. App. 795, 797 (1) (b) (692 SE2d 61)
(2010) (citations and punctuation omitted). See also Iero v. Mohawk Finishing
Products, 243 Ga. App. 670, 670-671 (534 SE2d 136) (2000).
Equity asserts that there is no evidence that the forum selection clauses were
included in the contract as the result of fraud or undue influence on its part, and thus
the clauses should be enforced. The parties have not cited any Georgia law on this
particular issue and we have found none, but federal courts have addressed the issue.
While we are not bound by federal case law, we find their reasoning on this issue
persuasive and apply it to the instant case. See Wegman v. Wegman, ___ Ga. App.
___ (1) (Case No. A16A0771, decided September 21, 2016) (where no Georgia law
on point, applying persuasive federal authority to resolve trial court ruling on motion
to dismiss under doctrine of forum non conveniens). See also Tolson v. Sistrunk, 332
Ga. App. 324, 331 (1) n. 3 (772 SE2d 416) (2015) (decisions of federal courts are not
binding authority on this court, but their reasoning may be persuasive).
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The United States Supreme Court has explained that a “forum-selection clause
in a contract is not enforceable if the inclusion of that clause in the contract was the
product of fraud or coercion. [Cit.]” Scherk v. Alberto-Culver Co., 417 U. S. 506, 519
n. 14 (94 SCt. 2449, 41 LE2d 270) (1974) (emphasis in original). “A forum selection
clause is viewed as a separate contract that is severable from the agreement in which
it is contained.” Rucker v. Oasis Legal Finance, 632 F3d 1231, 1238 (IV) (11th Cir.
2011) (citations omitted). “A forum-selection clause is understood not merely as a
contract provision, but as a distinct contract . . . – that is, an agreement between the
parties to settle disputes in a particular forum – that is separate from the obligations
the parties owe to each other under the remainder of the contract.” Marra v.
Papandreou, 216 F3d 1119, 1123 (II) (A) (D.C. Cir. 2000) (citation and footnote
omitted). Thus, “[i]n order for a forum selection clause to be invalidated on the basis
of . . . fraud or overreaching, a plaintiff must specifically allege that the clause was
included in the contract at issue because of [such] fraud [or overreaching].” Rucker,
supra at 1236 (IV) (citation omitted). “Unless there is a showing that the alleged fraud
or misrepresentation induced the party opposing a forum selection clause to agree to
inclusion of that clause in a contract, a general claim of fraud or misrepresentation as
to the entire contract does not affect the validity of the forum selection clause.”
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Preferred Capital v. Assocs. in Urology, 453 F3d 718, 722 (III) (2) (6th Cir. 2006)
(citations, punctuation and emphasis omitted). “By requiring the plaintiff specifically
to allege that the choice clause itself was included in the contract due to fraud in order
to succeed in a claim that the choice clause is unenforceable, courts may ensure that
more general claims of fraud will be litigated in the chosen forum, in accordance with
the contractual expectations of the parties.” Lipcon v. Underwriters at Lloyd’s,
London, 148 F3d 1285, 1296 (III) (A) (11th Cir. 1998) (emphasis in original).
Here, the trial court made no findings as to whether Jones had sufficiently
alleged or shown that Equity’s fraud or overreaching had induced him into agreeing
to inclusion of the forum selection clauses in the contracts. Rather, the trial court
premised its denial of the motion to dismiss solely on findings that Jones’ general
allegations of fraud and undue influence by Long and New Birth were sufficient to
invalidate the forum selection clauses included in the contracts between Jones and
Equity. Such “mere allegation[s] of fraud in the complaint should not determine the
enforceability of a forum selection clause.” Picken v. Minuteman Press Intl., 854
FSupp. 909, 911 (II) (N. D. Ga. 1993) (enforcing forum selection clause where the
alleged fraud attacked only the underlying transaction as having been deceitful, but
did not attack the language of the contract itself). Thus, the trial court’s order was
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based on a flawed legal theory that failed to determine the critical issue of whether
the forum selection clauses were included in the contracts due to fraud or
overreaching. Compare Brinson v. Martin, 220 Ga. App. 638, 640 (1) (b) (469 SE2d
537) (1996) (upholding dismissal of complaint for improper venue where “nothing
in the record indicat[ed] that [employer] obtained [employee’s] assent to the forum
selection clause [in employment contract] by fraud or overreaching”). “Where it is
apparent that a trial court’s judgment rests on an erroneous legal theory, an appellate
court cannot affirm[, and instead may] vacate the trial court’s order . . . and remand
the case for [further] proceedings[.]” Nelson v. Powell, 293 Ga. App. 227, 228 (666
SE2d 598) (2008) (citations and punctuation omitted).
In so doing, we remind the trial court that improper venue is a matter in
abatement. See OCGA § 9-11-12 (b) (3); Hight v. Blankenship, 199 Ga. App. 744,
745 (406 SE2d 241) (1991). See generally Department of Transp. v. Dupree, 256 Ga.
App. 668, 671 (1) (570 SE2d 1) (2002) (matter in abatement is not an adjudication
on the merits). “Generally, when a motion to dismiss involves a factual issue as to a
question of abatement, that is, lack of jurisdiction, improper venue, insufficiency of
process, insufficiency of service of process or failure to join a party, the trial court is
authorized under OCGA § 9-11-12 (d) to hear and determine these defenses before
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trial without a jury on application of any party.” Marietta Props. v. City of Marietta,
319 Ga. App. 184, 186 (1) (732 SE2d 102) (2012) (citation omitted; emphasis
supplied). See also Parris v. Douthit, 287 Ga. 119 (694 SE2d 655) (2010) (“Under
OCGA § 9-11-12 (d), the trial court may hear and determine a defense in abatement
such as improper venue prior to trial without submitting it to a jury, or may defer such
hearing and determination until trial. [Cits]”). In considering a matter in abatement
such as a motion to dismiss for improper venue under OCGA § 9-11-12 (b) (3),
a trial court is not confined to the allegations of the complaint, as the
court would be if considering a motion to dismiss for failure to state a
claim under OCGA § 9-11-12 (b) (6). [Rather, t]he trial court may hear
the matter on affidavits presented by the respective parties, and may
direct that the matter be heard wholly or partly on oral testimony or
depositions, OCGA § 9-11-43 (b), and has broad discretion in
conducting the preliminary hearing on the motion. Accordingly, [on a
motion to dismiss for improper venue,] the trial court may receive
evidence and make relevant factual findings to decide the threshold
issue of [venue].
James v. Dept. of Pub. Safety, 337 Ga. App. 864, 867 (2) (789 SE2d 236) (2016)
(citations and punctuation omitted). Indeed, “[a]ll parties may present evidence at an
OCGA § 9-11-12 (d) hearing, and . . . [t]he trial court cannot refuse to hear evidence
at the hearing, except to order the hearing and determination of the motion in
abatement be deferred until trial.” Dept. of Transp. v. Dupree, supra at 675 (1) (b)
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(citations omitted). But whether the venue determination is made before trial or
“deferred until trial, the determination remains one for the trial court, not the jury.”
James, supra at 868 (2) (citations omitted).
For the foregoing reasons, we hereby “vacate the trial court’s order [denying
the] motion to dismiss . . . and remand the case for consideration of the issues under
the proper legal standards.” Cleveland v. Katz, 311 Ga. App. 880, 884 (717 SE2d
500) (2011) (citations omitted), overruled in part on other grounds by Giles v. State
Farm Mut. Ins. Co., 330 Ga. App. 314 (765 SE2d 413) (2014). See also Classic
Commercial Svcs. v. Baldwin, 336 Ga. App. 183, 190 (3) (784 SE2d 44) (2016)
(vacating order on motion to dismiss and remanding case with direction).
Judgment vacated and case remanded with direction. Ellington, P. J., and
Mercier, J., concur.
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