In an opinion released on February 28, 2014, the Supreme Court of Texas explained how a mandatory venue clause, which appears in only one agreement in a series of related transactions, can nevertheless be enforced as to the entire transaction.
The Case:
In re Mark Fisher and Reece Bourdreaux, No. 14-12-0163-CV (Tex. – Feb. 28, 2014).
The Facts:
In this case, Nighthawk Oilfield Services, Ltd. (Nighthawk) acquired Richey Oilfield Construction, Inc. (ROCI) from Mike Richey, under several related agreements, including a Stock Purchase Agreement, a Goodwill Agreement, and a Promissory Note. Mark Fisher and Reece Boudreaux were limited partners of Nighthawk, along with Mr. Richey.
The Stock Purchase Agreement contained a provision which stated: “Any proceeding arising out of or relating to this Agreement may be brought in the courts of the State of Texas, Tarrant County, or if it has or can acquire jurisdiction, in the United States District Court for the Northern District of Texas, and each of the parties irrevocably submits to the non-exclusive jurisdiction of each such court in any such proceeding, waives any objection it may now or hereafter have to venue or to convenience of forum, agrees that all claims in respect of the proceeding may be heard and determined in any such court and agrees not to bring any proceeding arising out of or relating to this Agreement in any other Court.”
The parties had disputes and the contracts were not fulfilled. Richey then sued Fisher and Boudreaux in Wise County, where he resided. Fisher and Boudreaux sought to have the case moved to Tarrant County pursuant to the Stock Purchase Agreement.
The Court’s Analysis:
The Court looked to Texas Civil Practices and Remedies Code Section 15.020, which applies to a “major transaction,” and is defined as a transaction evidenced by a written agreement and which involves $1 million or more (as was the case here). Richey argued that section 15.020 and the forum selection clause in the Goodwill Agreement did not apply because: (1) his tort claims did not “arise from” the purchase of Richey Oil; (2) the only agreement that related to Richey’s claims was the Partnership Agreement, which had no forum or venue selection clause; and (3) the contractual forum selection clause was permissive, not mandatory.
The Supreme Court stated that section 15.020 did not require that an action “arise out of” a specific agreement. Rather, it applied to an action “arising from a major transaction,” if the party bringing the action agreed in writing that the action would be brought in a certain jurisdiction. Here, Richey signed the Goodwill Agreement specifying that claims arising out of or relating to it would be brought in Tarrant County, so the entire action had to be brought in Tarrant County.
What to Take Away:
When engaged in a major transaction that involves many transactions, you need to be aware of mandatory forum clauses. This can be the case even if appears in only one agreement in a series of related transactions.
