K2m3, LLC and Cocoon Data, Llc v. Cocoon Data Holdings Pty Ltd Acn 127 993 300 and Cocoon Data Pty Ltd Acn 127 993 284

Court of Appeals of Texas·Decided June 28, 2012·No. 13-11-00194-CV·Published

Opinion

NUMBER 13-11-00194-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS CORPUS CHRISTI – EDINBURG K2M3, LLC AND COCOON DATA, LLC , Appellants,

v.

COCOON DATA HOLDING PTY. LTD. ACN 127 993 300 AND COCOON DATA PTY LTD ACN 127 993 284, Appellees.

On appeal from the 152nd District Court of Harris County, Texas.

MEMORANDUM OPINION

Before Justices Rodriguez, Garza and Benavides Memorandum Opinion by Justice Garza

This is an appeal from the trial court’s dismissal of a lawsuit filed by appellants, K2M3, LLC (“K2M3”) and Cocoon Data, LLC (“Cocoon US”), on grounds of forum non conveniens. By three issues, appellants contend that the trial court erred in: (1) failing

to issue findings of fact and conclusions of law; (2) dismissing the suit because there was no evidence that an adequate alternative forum existed; and (3) dismissing the suit because there is insufficient evidence that balancing the parties’ interests favors dismissal. We affirm.

I. BACKGROUND1

Appellees, Cocoon Data Holdings Pty. Ltd. ACN 127 993 300 and Cocoon Data Pty. Ltd. ACN 127 993 284 (collectively, “Cocoon Australia”) are Australian corporations with principal offices in Australia. K2M3 and Cocoon US are both Colorado limited liability companies. On August 5, 2009, K2M3 and Cocoon Australia entered into a Joint Development Agreement (“the Agreement”) for the purpose of exploiting and selling, in North America, proprietary software encryption technology owned by Cocoon Australia. To facilitate the parties’ business relationship, the Agreement established Military Resources Limited (“MR”), a new British Virgin Islands corporation, owned equally by K2M3 and Cocoon Australia. Under the Agreement, Cocoon Australia agreed to fund MR and granted it the exclusive license to sell the encryption technology in North America. K2M3 agreed to market the technology through MR and guaranteed specified sales revenues.

By February 2010, various disputes had developed between the parties. For example, Cocoon Australia claimed that K2M3 failed to provide an accounting for the funds paid by Cocoon Australia. It also claimed that, without authority or Cocoon Australia’s consent, Mathew Tinley, K2M3’s manager, had unilaterally “substituted” a new company—Cocoon US—for MR in the Agreement. K2M3 claimed that Cocoon

1 This case is before this Court on transfer from the Fourteenth Court of Appeals in Houston pursuant to an order issued by the Supreme Court of Texas. See TEX. GOV’T CODE ANN. § 73.001 (West 2005).

Australia failed to make required payments under the Agreement.

On May 17, 2010, Cocoon Australia sued K2M3 for breach of the Agreement in Australia. On September 21, 2010, K2M3 made a general appearance before the Australian court. On November 10, 2010, K2M3 filed a “defence,” in which it asserted affirmative defenses and a counterclaim that Cocoon Australia had breached the Agreement.2 K2M3 asserted that the Agreement was governed by Texas law, but did not challenge the Australian court’s jurisdiction.

On September 23, 2010—two days after its appearance in the Australian court—

K2M3 and Cocoon US filed suit in Harris County, asserting that Cocoon Australia had breached the Agreement. K2M3 and Cocoon US’s petition also requested a temporary restraining order and injunctive relief enjoining Cocoon Australia from attempting to license the encryption technology to any other North American company.

On September 28, 2010, the Australian court issued a restraining order enjoining K2M3 from seeking a temporary restraining order in the Harris County lawsuit until October 14, 2010. On October 14, 2010, the Australian court issued a second order prohibiting K2M3 from seeking a restraining order in the Harris County suit. Despite these orders, K2M3 and Cocoon US filed an amended petition on October 21, 2010 in

the Harris County suit, in which they requested a hearing on their application for a 2 K2M3’s “defence” responds to Cocoon Australia’s allegations and asserts counterclaims. For example, the “defence” asserted:

In answer to paragraph 6(a), the Defendant denies that the Plaintiff made the payments as described and says that the Plaintiffs is [sic] in breach of clause 8.1 of the Agreement which provided that the Plaintiffs were to make payments totaling US$1million by 30 October 2010.

Particulars

The Plaintiffs only paid US$167,000 and therefore owe US$833,000.

temporary injunction. The trial court held the temporary injunction hearing on November 12, 2010; counsel for appellants and Cocoon Australia appeared. K2M3 presented the testimony of Tinley. Both sides introduced exhibits.

On cross-examination, Tinley admitted that Cocoon Australia had sued K2M3 first in Australian court and that K2M3 had answered, but that K2M3 had not challenged the Australian court’s jurisdiction. The Australian court’s September 28 and October 14 restraining orders were introduced into evidence. On November 22, 2010, the trial court denied appellants’ request for a temporary injunction.

On November 19, 2010, Cocoon Australia filed a motion to dismiss the Harris County suit for forum non conveniens. Cocoon Australia argued, among other things, that: (1) an alternate forum existed in Australia, a lawsuit litigating the same issue (breach of the Agreement) was pending in the Australian court, and K2M3 had appeared and asserted a claim for breach of the Agreement in that suit; (2) none of the parties were Texas residents and allowing duplicate litigation would result in unnecessary costs; (3) duplicate litigation could result in conflicting rulings; and (4) appellants had filed the Harris County suit “in brazen disregard” of the Australian court’s orders. Appellants filed a response to Cocoon Australia’s motion to dismiss in which they argued that: (1) they were required to bring their claims in Texas pursuant to a forum selection clause in the Agreement3; (2) any additional costs and risks to Cocoon

3 The disputed clause in the Agreement states:

5.3 Governing Law

This Agreement is governed by and shall be construed in accordance with the laws of Texas, United States of America, and each party unconditionally and irrevocably submits to the exclusive jurisdiction of federal and state courts of Texas, United States of America. This Agreement is governed by and shall be construed in accordance with the laws of Texas and each party unconditionally and irrevocably submits to the exclusive

Australia as a result of the Harris County suit were “bargained for” when the parties signed the Agreement; and (3) the Harris County suit is not a “duplicate lawsuit” because appellants sought enforcement of the Agreement, whereas Cocoon Australia’s Australia lawsuit sought termination of the Agreement.4 On December 10, 2010, the trial court held a hearing on Cocoon Australia’s forum non conveniens motion. At the hearing, the trial court judge stated that he was “concerned about these claims being filed in two forums and parallel proceedings going on.” He stated he was “not going to preside over a trial if there is a trial that has already taken place in Australia, and [was] sure the Justice down in Australia doesn’t wish to preside over a trial where a trial’s already taken place here in Texas.” The trial court observed that, contrary to appellants’ arguments, he was “not viewing [clause 5.3 in the Agreement] as a mandatory-forum selection clause.” The court questioned the parties about the status of the Australian suit. Cocoon Australia’s counsel stated that there was a pending hearing regarding appellants’ repeated violations of the Australian court’s restraining orders. The trial court repeatedly questioned appellants’ counsel regarding the parties’ relationship to Texas. Appellants’ counsel responded that the contract “was performable” in Texas and the parties had agreed Texas was an appropriate forum. On

jurisdiction of federal and state courts of:

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K2m3, LLC and Cocoon Data, Llc v. Cocoon Data Holdings Pty Ltd Acn 127 993 300 and Cocoon Data Pty Ltd Acn 127 993 284, (Tex. Ct. App. 2012).

K2m3, LLC and Cocoon Data, Llc v. Cocoon Data Holdings Pty Ltd Acn 127 993 300 and Cocoon Data Pty Ltd Acn 127 993 284 (K2m3, LLC and Cocoon Data, Llc v. Cocoon Data Holdings Pty Ltd Acn 127 993 300 and Cocoon Data Pty Ltd Acn 127 993 284) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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