Texas SC enforces forum selection clause in contract case

By Steve Korris | Jan 15, 2009

AUSTIN – Hidalgo County District Judge Noe Gonzalez kept jurisdiction of a lawsuit that belonged in Illinois, the Supreme Court of Texas ruled on Jan. 9.

All nine justices agreed that Gonzalez should have enforced a forum clause in contracts between International Profit Associates and McAllen Tropicpak Inc.

The contracts specified that Illinois law would apply to any dispute and litigation would proceed at Lake County courthouse in Waukegan, Ill.

The justices reversed the 13th District appeals court in Corpus Christi, which had ruled that Gonzalez could keep the case.
McAllen Tropicpak hired International Profit Associates for consulting services in 2004.

The businesses executed three contracts that covered general services, financial assessment and tax services.

International Profit Associates recommended that Tropicpak hire David Salinas to increase sales.

"Tropicpak hired Salinas, who allegedly embezzled large sums of money from the company," the justices wrote in an unsigned opinion.

Tropicpak sued Salinas and International Profit Associates in Hidalgo County, claiming negligence, fraud, misrepresentation, and breach of good faith and fair dealing.

International Profit Associates moved to dismiss for transfer to Illinois.

Gonzalez held a hearing in 2006, and another in 2007. She denied the motion on May 29, 2007, but called it a motion to compel and dated the order May 29, 2006.

International Profit Associates sought corrections, and Gonzalez signed a corrected order on Oct. 23, 2007.

"IPA obtained a copy of the corrected order by fax in December 2007," the Court wrote.

International Profit Associates sought a writ of mandamus, but the 13th District denied relief.

At the Supreme Court, Tropicpak claimed the clauses didn't apply because employment recommendations went beyond the scope of the contract.

Tropicpak argued that International Profit Associates delayed the assertion of its rights.

It attacked the Illinois clauses as ambiguous and fraudulent.

It claimed that public interest and the interests of its witnesses favored a Texas forum and argued that enforcement of the clauses would deprive it of its day in court.

Tropicpak argued that it shouldn't have to pursue two suits, one against International Profit Associates in Illinois and one against Salinas in Texas.

The justices disagreed on all counts.

They held that "it was the errors and delays of the trial court and Tropicpak that hindered IPA's ability to initiate mandamus proceedings."

They wrote, "The forum selection clauses in this case are not susceptible to more than one reasonable interpretation."

They wrote that the contracts did not limit the extent or form of consulting services.

"The recommendation to hire a new employee to bolster Tropicpak's sales was a proposal that IPA made as an integral part of its consulting services," they wrote.

"IPA offered to do business on a particular basis as set out in the two page contracts, and Tropicpak accepted the offer," they wrote.

"It is presumed that Tropicpak understood and agreed to the contents of its contracts," they wrote.

They prescribed separate suits for International Profit Associates and Salinas.

"If all it takes to avoid a forum selection clause is to join as defendants local residents who are not parties to the agreement, then forum selection clauses will be of little value," they wrote.

Ken Nunley, Chad Upham and Kelly Putney Rogers represented International Profit Associates.

Raymond Thomas, Rebecca Vela and Tracy Altman Spillman represented Tropicpak.

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