Appeals Court: Party challenging forum-selection clause has burden of proof

David Yates Jan. 5, 2010, 6:14am


Frustrated with only receiving "fancy charts," a local security company sued a pack of out-of-town financial consultants last March in hopes of recovering the $100,000 it paid them to reshape the company's business paradigm.

However, on Dec. 31 justices seated on the Texas Ninth District Court of Appeals conditionally granted the defendants' writ of mandamus, dismissing the case.

Court papers show that on Oct. 30, 2008, Guardian Force Security Services hired Illinois-based International Profit Associates to help increase profitability.

"IPA promised (Guardian Force) ... better profit and loss reports and overhead adjustments," court papers say. "After the plaintiff ended up paying $100,000, the plaintiff realized that no (substantial services) were being provided, instead defendants were merely producing fancy charts."

Guardian Force filed a deceptive trade practices suit against IPA, International Tax Advisors Inc. (ITA), Bob Vander Veen, Marie O'Donnell, Bill Conboy, Donald Garner and Michael Moses on March 4 in Jefferson County District Court.

In response, the defendants filed a motion to dismiss, asserting Guardian Force entered into a contract containing a clause that the venue for any legal action would be the Nineteenth Judicial District of Lake County, Ill.

Jefferson County Judge Bob Wortham, 58th District Court, denied the motion to dismiss, leading the defendants to file an appeal on Nov. 5.

"In this mandamus proceeding, relators contend the trial court abused its discretion by refusing to enforce a contractual forum-selection clause," the appellate court's memorandum opinion states. "We conditionally grant the writ of mandamus."

During the hearing to dismiss, Guardian had opposed dismissal on the grounds that the forum-selection clause "was never signed" by the company and that the clause is void under Texas law, court papers say.

Subsequently, Judge Wortham placed the burden of proof on IPA to show that Guardian was aware of the clause. When no sufficient evidence was produced, he denied the motion.

However the appeals court ruled that Wortham abused his discretion by placing the burden of proof on IPA.

"In conclusion, the party challenging a forum-selection clause has the burden of proving the clause is invalid, and the party seeking to enforce the forum-selection clause is not obligated to prove that it specifically showed the clause to the opposing party as a condition of enforcement," the opinion states.

The writ will issue only if Wortham fails to reverse his ruling.

Guardian Force is represented by Beaumont attorney John Morgan.

IPA is represented in part by attorney Ken Nunley of Nunley Jolley Cluck Aelvoet LLP in Boerne.

Case No. A183-429
Appeals case No. 09-09-00505-CV

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