Court says forum clause in contract trumps logistical, financial difficulties

Steve Korris Jun. 25, 2008, 7:00am

Texas Supreme Court

AUSTIN - Hector Hernandez signed equipment leases stating he would file any lawsuit about them in Pennsylvania, and the Texas Supreme Court has held him to that.

The court ordered Hidalgo County District Judge Jaime Palacios to dismiss a suit that Hernandez's business, McAllen North Imaging, filed against Lyon Financial Services.

All nine justices agreed June 20 that McAllen North Imaging must sue in Pennsylvania, home to Lyon predecessor DVI Financial Services.

Hernandez claimed he couldn't afford to litigate far from home, but that didn't impress the justices.

"If merely stating that financial and logistical difficulties will preclude litigation in another state suffices to avoid a forum selection clause, the clauses are practically useless," the justices wrote in an unsigned opinion.

"Financial difficulties on behalf of one party or the other are typically part of the reason litigation begins," they wrote.

In 2002 Hernandez and DVI Financial Services agreed that he would select magnetic resonance imaging equipment and submit purchase schedules to DVI for approval.

If DVI approved, it would order the equipment, pay for it and send it to him.

He and seven others guaranteed McAllen North Imaging's obligations.

A forum clause in the agreement provided that state and federal courts in Pennsylvania would have jurisdiction over all matters arising from it, though it afforded DVI the option of suing him where he resided.

Three times he submitted schedules and DVI or Lyon approved them.

In 2006 McAllen North Imaging and Lyon restructured the agreement in a new contract that not only repeated the forum clause but expressed it in capital letters.

It stated that "there are no agreements, understandings, warranties or representations among the parties with respect to these matters except as set forth herein."

McAllen North Imaging sued Lyon in Hidalgo County, claiming that under the third schedule Lyon charged for equipment it hadn't financed.

McAllen North Imaging alleged usury and unjust enrichment.
Lyon moved to dismiss, relying on the forum clause.

Hernandez answered that Lyon fraudulently induced him to sign the contract. He claimed the clause overreached and enforcement would create an unjust result.

He swore in an affidavit that he signed the contract on Lyon's representation that the clause applied to the first schedule and not the third.

He swore he couldn't afford legal advice and he lacked legal training. He swore Lyon presented the contract on a "take it or leave it" basis.

Judge Palacios denied the motion to dismiss, and the 13th District Court of Appeals in Corpus Christi affirmed him.

Lyon petitioned the Supreme Court for mandamus relief, and the justices granted it.

"A party who signs an agreement is presumed to know its contents," they wrote.

They found no evidence of misrepresentation, fraud, overreaching or trickery in Hernandez's affidavit.

They wrote that "a bargain is not negated because one party may have been in a more advantageous bargaining position."

They wrote, "Rather, we consider whether a contract results in unfair surprise or oppression."

Paul Wilson represented Lyon. Larry Moreno represented McAllen North Imaging.

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