Vacate and Conditionally Grant and Opinion Filed September 17, 2018
S In The Court of Appeals Fifth District of Texas at Dallas No. 05-18-00166-CV
IN RE ROSEWOOD PRIVATE INVESTMENTS, INC., ROSEWOOD VISION CORPORATION, INSIGHT EQUITY A.P. X COMPANY, INSIGHT EQUITY VISION PARTNERS, L.P., AND INSIGHT EQUITY MANAGEMENT COMPANY, LLC, Relators
Original Proceeding from the 192nd Judicial District Court Dallas County, Texas Trial Court Cause No. DC-17-11870
MEMORANDUM OPINION Before Justices Lang, Myers, and Whitehill Opinion by Justice Whitehill We withdraw our August 28, 2018 opinion on our own motion. This is now the opinion of
the court.
This original proceeding concerns the enforceability of a forum–selection clause requiring
that claims arising out of or related to an underlying agreement be brought in a Delaware federal
court. Relators Rosewood Vision Corporation, Rosewood Private Investments, Inc., Insight
Equity, A.P.X Company, LLC, Insight Equity Vision Partners, LP, and Insight Equity
Management Company, LLC (Insight) complain of the trial court’s denial of their motion to
enforce the forum-selection clause and dismiss real party in interest’s Wind Point Partners VII-A,
L.P.’s (Wind Point) claims against relators. Having reviewed the petition, the real party’s
response, relators’ reply, and the mandamus record, we conclude relators are entitled to relief from the trial court’s refusal to enforce the forum-selection clause, because the clause is enforceable and
Wind Point did not establish that an exception to enforcement applies. Therefore, we conditionally
grant the writ.
I. BACKGROUND
In 2014, Wind Point bought Vision Ease from Insight and Rosewood Vision Corporation
for $180 million pursuant to a securities purchase agreement (SPA).1 The SPA, which is governed
by Delaware law, includes a forum-selection clause providing that the parties agree to the exclusive
jurisdiction of the Delaware federal courts “with respect to any claim or cause of action arising
under or relating to” the SPA. The SPA also includes a severability clause providing that if any
part of the SPA is deemed invalid, illegal, or unenforceable the SPA is to be enforced “in such
jurisdiction so as to best give effect to the intent of the parties.”
Notwithstanding the forum-selection clause, Wind Point sued Insight in a Dallas County
District court. The suit alleges claims in connection with the sale for fraud, breach of contract,
and violations of the Texas Securities Act.
Insight moved to dismiss the suit based on the forum-selection clause in the SPA. The trial
court denied the motion, and this original proceeding followed. On February 23, 2018, we granted
relators’ motion to stay all trial court proceedings pending resolution of this original proceeding.
II. ANALYSIS
A. Applicable Law
To be entitled to mandamus relief, a relator must show both that the trial court abused its
discretion and that relator has no adequate appellate remedy. In re Prudential Ins. Co., 148 S.W.3d
124, 135–36 (Tex. 2004) (orig. proceeding). Mandamus relief is available to enforce unambiguous
forum-selection agreements because there is no adequate remedy by appeal when a trial court
1 Wind Point sold Vision Ease in 2017, but received an assignment of claims and rights it contends are sufficient to maintain standing to sue.
–2– abuses its discretion by refusing to enforce a valid forum-selection clause that covers the dispute.
In re Int’l Profit Assocs., Inc., 274 S.W.3d 672, 675 (Tex. 2009) (orig. proceeding) (per curiam).
Forum-selection clauses provide parties with an opportunity to contractually preselect the
jurisdiction for dispute resolution. Pinto Tech. Ventures, L.P. v. Sheldon, 526 S.W.3d 428, 436
(Tex. 2017). Enforcing “valid forum-selection clauses, bargained for by the parties, protects their
legitimate expectations and furthers vital interests of the justice system,” such as sparing litigants
the time and expense of pretrial motions to determine the proper forum for disputes. Stewart Org.,
Inc. v. Ricoh Corp., 487 U.S. 22, 33(1988) (Kennedy, J., concurring).
Furthermore, failing to give effect to contractual forum-selection clauses and forcing a
party to litigate 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 . . . .” In re AutoNation, Inc., 228
S.W.3d 663, 667–68 (Tex. 2007) (orig. proceeding). Both Texas and federal courts recognize that
public policy strongly favors enforcing forum selection clauses. Rouse v. Tex. Cap. Bank, N.A.,
394 S.W.3d 1, 8 (Tex. App.—Dallas 2011, no pet.).
A trial court abuses its discretion if it refuses to enforce a forum-selection clause unless the
party opposing enforcement clearly shows that: (i) the clause is invalid because of fraud or
overreaching (ii) enforcement would be unreasonable or unjust; (iii) enforcement would
contravene a strong public policy of the forum where the suit was brought; or (iv) the selected
forum would be seriously inconvenient for trial. See In re Lyon Fin. Servs., Inc., 257 S.W.3d 228,
231–32 (Tex. 2008) (orig. proceeding) (per curiam). Thus, a party attempting to show that such a
clause should not be enforced bears a heavy burden. Id.
–3– B. Does the forum selection clause apply to the underlying proceeding?
1. Applicable Standards
Before we may enforce a forum-selection clause, we must determine whether the clause
applies to the claims asserted in the lawsuit. Deep Water Slender Wells, Ltd. v. Shell Exploration
& Prod., Inc., 234 S.W.3d 679, 687–88 (Tex. App.—Houston [14th Dist.] 2007, pet. denied).
The clause at issue here provides:
Consent to Jurisdiction. EACH OF THE PARTIES HERETO AGREES TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL COURTS LOCATED WITHIN THE STATE OF DELAWARE WITH RESPECT TO ANY CLAIM OR CAUSE OF ACTION ARISING UNDER OR RELATING TO THIS AGREEMENT . . . .
Wind Point argues that the underlying proceeding does not fall within the above clause,
because the clause governs only claims that can be brought in federal court and the claims here
cannot be brought in federal court. We reject Wind Point’s argument.
When construing a forum selection clause, courts use a common-sense approach by
examining the clause to determine if it covers the claims. See In re Int’l Profit Assocs., Inc., 274
S.W.3d 672, 677–78 (Tex. 2009) (per curiam). Because forum-selection clauses are contractual,
we apply contract interpretation principles. RSR Corp. v. Siegmund, 309 S.W.3d 686, 700 (Tex.
App.—Dallas 2010, no pet.). Thus, our primary goal is to give effect to the written expression of
the parties’ agreement. Sw. Intelecom, Inc. v. Hotel Networks Corp., 997 S.W.2d 322, 324 (Tex.
App.—Dallas 1999 pet. denied). We give terms their plain, ordinary, and generally accepted
meaning unless the contract shows otherwise. CNOOC Se. Asia Ltd. v. Paladin Res. (SUNDA)
Ltd., 222 S.W.3d 889, 895 (Tex. App.—Dallas 2007, pet. denied).
The starting point is the clause’s language. Pinto Tech. Venture, L.P. v. Sheldon, 526
S.W.3d 428, 437 (Tex. 2017). The clause at issue here covers “any claim or cause of action arising
out of or relating to [the SPA].” Additionally, the clause unambiguously encompasses claims
–4– “relating to” the SPA. See Diamond Offshore (Bermuda), Ltd. v. Haaksman, 355 S.W.3d 842, 848
(Tex. App.—Houston [14th Dis.] 2011, pet. denied).
The words “arising out of” and “relating to” have broad significance. Id. Indeed, such
broad language typically is deemed to encompass any claim that has some possible relationship
with the agreement. See RSR Corp., 309 S.W.3d at 701. Furthermore, when all of the claims arise
out of the parties’ contractual relations and implicate the contract’s terms, the forum-selection
clause will encompass all of the causes of action relating to the agreement. Young v. Valt.X
Holdings, Inc., 336 S.W.3d 258, 263 (Tex. App.—Austin 2010, pet. dism’d).
Moreover, the clause here specifies that the Delaware federal courts have “exclusive”
jurisdiction. Therefore, the forum-selection clause is mandatory. Deep Water Slender Wells, 234
S.W.3d at 687. Mandatory forum-selection clauses are presumptively enforceable. In re Int’l
Profits, 274 S.W.3d at 675.
2. Application
Wind Point’s petition asserts claims for fraud, Texas Securities Act violations, and breach
of contract. Specifically, Wind Point’s fraud claim alleges “fraud in the preparation and
presentation of financial statements upon which the purchase price of the SPA was calculated,”
and by “materially misrepresenting the amount of Vision Ease’s working capital.” Likewise, Wind
Point’s Texas Securities Act claim relates to the purchase of securities “pursuant to the SPA.”
And the breach of contract claim alleges breaches of the SPA. Thus, the SPA’s plain language,
read with Wind Point’s petition, establishes that Wind Point’s claims both arise out of and relate
to the SPA.
However, citing Troy Corp. v. Schoon, No. CA1959-VCL, 2007 WL 949441, at *3 (Del.
Ch. March 26, 2007) (not designated for publication),Wind Point insists that the clause’s reference
to federal courts means that the clause applies only when federal jurisdiction can be invoked. Wind
–5– Point further argues that because of this federal court limitation, the trial court was required to
interpret the clause to determine how Delaware law would construe it if there was no federal forum
available.
Conversely, Insight argues that Schoon is distinguishable because the clause at issue there
identified a federal forum “unless such court is unavailable,” whereas this clause includes no such
qualifying language. But that is not the only reason that Schoon is distinguishable from this case.
In Schoon, a Delaware corporation sued two other Delaware corporations and a Delaware
limited partnership on various claims, including breach of contract and breach of fiduciary duty.
That is, indisputably, there was incomplete diversity because there were Delaware corporate
citizens on both sides of the case. And there was no federal question involved in that case.
The defendants moved to dismiss based on a forum selection clause in one of the parties’
agreements. That clause provided for exclusive jurisdiction over any dispute “with respect to, in
connection with or arising out of the agreement” in a court for the Southern District of New York,
“unless such court is unavailable.”
In denying the motion to dismiss, the court noted that while “questions of federal subject
matter jurisdiction are, in most circumstances, the specific province of the federal court charged
with entertaining a given claim,” the parties in that case could not argue “with any modicum of
seriousness” that federal subject matter jurisdiction existed over any aspect of that suit. The court
therefore concluded that “it is indisputably clear that a federal tribunal could not adjudicate this
action” and thus “the federal court . . . is most assuredly ‘unavailable.’” Id.
The court further reasoned that by including the unavailability language the parties
contemplated, but chose not to address, what would happen if the United States District Court for
the Southern District of New York was unavailable. Id. at 4. Thus, the court held that the parties
intended for the forum-selection clause to not apply if the federal court was unavailable. Id.
–6– The present situation is different because the unavailability of a federal court has not been
conclusively established, and the SPA provides a remedy even if a Delaware federal court would
lack jurisdiction.
First we examine the arguments concerning whether complete diversity would exist in
Delaware. In so doing, we conclude that this record does not present a case where federal
jurisdiction undeniably cannot be invoked. In the court below, Wind Point argued that diversity
was the only potential basis for jurisdiction, and the parties are not diverse because it is a Delaware
citizen.2 The diversity question here, however, is more complicated and nuanced than it was in
Schoon.
Diversity jurisdiction exists under 28 U.S.C. §1332 when there is a civil action between
citizens of two different states and at least $75,000 in controversy. Lincoln Prop. Co. v. Roche,
546 U.S. 81, 89 (2005). For complete diversity to exist, no plaintiff may be a citizen of the same
state as any defendant. See Zambelli v. Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 419 (3d Cir.
2010). The diversity analysis here involves the citizenship of a trust.
The method for determining a trust’s citizenship is “long unsettled and the subject of much
debate.” Raymond Loubier Irrevocable Trust v. Loubier, 858 F.3d 719, 725 (2d Cir. 2017). And
the circuits have been split on how to apply these principles. Compare, Ind. Gas Co. v. Home Ins.
Co., 141 F.3d 314, 318 (7th Cir. 1998) (for diversity purposes, underwriting syndicate was citizen
of all jurisdictions in which “names” were citizens), with GBForefront, L.P. v. Forefront Mgmt.
Grp., LLC, 888 F.3d 29, 32 (3d Cir. 2018) (diversity determination required remand to determine
whether trusts that comprised purchaser were traditional or business trusts).
In Americold Realty Trust v. Conagra Foods, Inc., __ U.S.__, 136 S. Ct. 1012, 1016 (2016),
the supreme court held that, for diversity purposes, a real estate investment trust (REIT) organized
2 Wind Point did not assert any federal question claims.
–7– under Maryland law for the benefit of its shareholders takes its citizenship from all of its
shareholders. In so concluding, the court distinguished between (i) traditional trusts establishing
only fiduciary relationships and having no legal identity distinct from their trustees and (ii) the
variety of unincorporated artificial entities to which states have applied the “trust” label, but that
have little in common with traditional trusts. The REIT was one of the latter entities. Id.
But when acknowledging that not all trusts were like the REIT before it, the court stated,
“[f]or a traditional trust . . . there is no need to determine its membership, as would be true if the
trust, as an entity were sued.” Id. As many federal courts have observed, the meaning of the
foregoing language is difficult to ascertain, and “seems open to several interpretations.”
Zoroastrian Ctr. & Darb-E-Mehr of Metro D.C. v. Rustam Guiv Found. of N.Y., 822 F.3d 739,
749 (4th Cir. 2016); Wang by and through Wong v. New Mighty U.S. Trust, 843 F.2d 487, 493
(D.C. Cir. 2016). Thus, the issue is far from settled among the federal circuits.
According to Wind Point, at least one of its limited partners is a pension trust that has
beneficiaries or participants who are Delaware citizens. Alternatively, Wind Point claims that at
least one of the other limited partners is a trust with a trustee that is a Delaware corporation and
thus, regardless of whether the citizenship of the trustee or the citizenship of the trust beneficiaries
is used in the diversity calculus, the outcome remains the same. This argument, however,
oversimplifies and ignores the struggle with the Americold holding that persists in the federal
circuits. Moreover, even if we were inclined to undertake such an analysis, Wind Point does not
specifically identify the types of trusts to which our analysis would apply. It also does not identify
the individuals’ domicile, or trace citizenship through the layers of partners and members for each
–8– unincorporated entity.3 Thus, the record does not clearly establish the absence of federal diversity
jurisdiction.4
Second, even if a federal court were to determine that diversity is lacking, the SPA provides
a remedy. Specifically, the SPA contains this severability clause:
Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Agreement is held to be invalid, illegal, or unenforceable in any respect and under any applicable Law in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision or any other jurisdiction, and, for purposes of such jurisdiction, such provision or portion thereof shall be struck from the remainder of this Agreement, which shall remain in full force and effect. This Agreement shall be reformed, construed and enforced in such jurisdiction so as to best give effect to the intent of the Parties under this Agreement.
(emphasis added). Thus, if a federal forum were not viable, the severability clause could be used
to strike the word “federal” from the forum selection provision, thereby allowing the parties to
proceed in a Delaware state court so as to effectuate the parties’ intent. See S. Intelcom, 997
S.W.2d at 324. The severability clause, including its reference to a “portion” of a provision,
indicates that, unlike Schoon, the parties here provided a remedy that would require their disputes
to be resolved by Delaware state courts should the federal system be unavailable.
Finally, unlike Schoon, nothing in the plain language of the forum-selection clause at issue
here requires us to determine whether the federal court is amenable to jurisdiction or otherwise
“available.”5 Thus, our declining to do so is not contrary to the parties’ objective intent expressed
in the SPA.
3 A natural person is deemed a citizen of the state where he is domiciled. Swiger v. Allegheny Energy, Inc., 540 F.3d 179, 182 (3d Cir. 2008). A partnership as an unincorporated entity takes on the citizenship of each of its partners. Zambelli, 592 F.3d at 419. Thus, to determine the citizenship of an unincorporated entity, citizenship “must be traced through however many layers of partners or members there may be.” Id. at 420. 4 The parties dispute the admissibility of the evidence Wind Point offered to establish its citizenship facts. Specifically, Wind Point submitted the affidavits of Ron Lieberman, one of the limited partners, and of Robert Hunkeler, Vice-president of Investments at International Paper Company in charge of the International Paper Company pension trust (the pension trust is a Wind Point limited partner). Insight filed numerous objections to the affidavits, but the trial court did not rule. Insight then sent a letter to the court requesting a ruling, but the trial court still did not rule. Wind Point filed a motion for leave to supplement the affidavits, but the trial court did not conduct a hearing or rule on this motion. But even if we were to assume the evidence was properly admitted, the record does not conclusively demonstrate the absence of federal diversity jurisdiction. 5 In addition, diversity jurisdiction is based on the citizenship of the parties at the time a federal suit is filed. See Grupo Dataflux v. Atlas Global Grp.,L.P., 541 U.S. 567, 570–71 (2004). Here, no such suit has been filed.
–9– Therefore, we conclude that the federal court is best situated to determine its own
jurisdiction. Indeed, courts in other jurisdictions have concluded that the federal jurisdiction issue
can and should only be decided by the federal court. See e.g., Lewis v. Townsend, 108 So.3d 184,
187–88 (La. Ct. App. 2012); McIntosh Cty. Bank v. St. Regis Mohawk Tribe, No. 182-63-03, 2004
WL 1878201, at *3 (N.Y. Sup. Ct. Aug. 18, 2004) (2004 NY Slip Op. 50920(u)); Aqua Sun Mgmt.,
Inc. v. Divi Time Ltd., 797 So.2d 24, 24–25 (Fla. Dist. Ct. App. 2001). These decisions are
consistent with Texas’s well-established policy that forum-selection clauses are prima facie valid
and will be enforced absent a strong showing that the clause should be set aside. See In re AIU
Ins., Co., 148 S.W.3d 109, 113–114 (Tex. 2004) (orig. proceeding).
Having concluded that the clause is enforceable, we turn to whether Wind Point clearly
established that one of the enforcement exceptions applies.
C. Did Wind Point establish that an enforcement exception applies?
Wind Point argues only one exception to enforcement—that enforcement would be unjust
and unreasonable. See Lyon Financial, 257 S.W.3d at 231–32. According to Wind Point, it
demonstrated that it could not bring its claims in federal court, and there is no other forum
We have concluded, however, that the record does not establish that Wind Point cannot
bring its claims in federal court. Moreover, even if a federal court ultimately determines that there
is no diversity jurisdiction upon which the suit can proceed in federal court, the severability clause
provides a mechanism for allowing the parties to proceed in a Delaware state court.
Thus, on this record, we conclude that Wind Point has not met its “heavy burden” to clearly
establish that enforcement of the forum-selection clause would be unjust or unreasonable.
–10– D. Is Insight entitled to mandamus relief?
We have concluded that the forum-selection clause is valid and the trial court abused its
discretion by refusing to enforce it. See Int’l Profit, 274 S.W.3d at 675. “Subjecting a party to
trial in a forum other than that agreed upon and requiring an appeal to vindicate the rights granted
in a forum-selection clause is clear harassment. There is no benefit to either the individual case or
the judicial system as a whole.” In re AIU, 148 S.W.3d at 117. Thus, there is no adequate remedy
by appeal. In re JP Morgan Chase Bank, N.A., No. 05-17-01174-CV, 2018 WL 1312470, at *2
(Tex. App,—Dallas Mar. 14, 2018, orig. proceeding) (mem. op.).
III. CONCLUSION
We conclude the trial court abused its discretion by refusing to enforce the forum-selection
clause and denying relators’ motion to dismiss. We vacate our February 23, 2018 stay,
conditionally grant relators’ petition for writ of mandamus, and direct the trial court to issue a
written order, within fifteen (15) days of the date of this opinion, vacating its December 20, 2017
order denying relators’ motion to dismiss, and dismissing the claims of the real parties in interest.
We are confident the trial court will comply, and the writ will issue only if it fails to do so.
/Bill Whitehill/ BILL WHITEHILL JUSTICE 180166F.P05
–11–