BEAUMONT (Legal Newsline) – Financial groups have filed a petition for a writ of mandamus to compel the trial court to enforce a contractual forum-selection clause.
Relators Varilease Finance Inc., VFI-SPV VIII, Corp., Republic Bank Inc., VFI-SPV IX, Corp., VFI KR SPE I LLC, and Somerset Capital Group LTD filed an appeal Aug. 12 in the Beaumont Division of the Eastern Division of Texas to obtain a writ of mandamus to order the court to carry out the contractual forum-selection clause in their agreement with Energy Alloys, LLC. The petition was granted a conditional mandamus relief.
According to the petition, the plaintiffs sought to dismiss the case filed by Energy Alloys in Montgomery County, Texas on the basis of the forum-selection clause agreed upon by both parties. The defendants alleged the contract between them and the petitioners required the case to be heard in Oakland County, Michigan, and not elsewhere. However, the Montgomery County trial court signed an order to deny the plaintiffs' motion to dismiss.
The denial of their motion to dismiss pushed the plaintiffs to file for a writ of mandamus. In order for their petition to be granted, the defendants must prove the Montgomery County trial court clearly abused its discretion. In addition, the plaintiffs must demonstrate they have no other adequate remedy but to appeal.
To support their claim, the plaintiffs noted the pertinent portion of their contract with Energy Alloys, stating “the parties hereto agree that in the event . . . Any controversies arise between the parties relating to this master agreement or any documents relating thereto, such controversies shall be tried by a judge alone before the federal or state courts in Oakland County, Michigan.”
The plaintiffs stressed that the forum-selection clause in their contract was mandatory, which means that the venue is fixed. Hence, no other trial court may decide the case other than those in Oakland County.
In response to this point, Energy Alloys noted the clause merely stated that “Michigan was one place that forum and venue could lie, and that the parties agreed to a bench trial.” Hence, the points raised by the plaintiffs to dismiss the case are invalid.
Energy Alloys insisted that the forum-selection clause was permissive in that it identifies a specific venue for the trial, but does not prohibit the parties to take litigation somewhere else.
The Court of Appeals disagreed.
In its memorandum regarding the case, the appellate court pointed out the rules of construing a contract. In their decision, they explained that the contract between the parties should be construed in its plain language. That is, it should be understood in the same way a layman would interpret it.
A contract only needs further interpretation if there are ambiguities in the language that may have various interpretations, the court said.
The Court of Appeals pointed out the use of the word “shall” in the contract between the parties. In construing the plain language of the clause and taking into consideration the generally accepted use of the word, they regarded the contents of the agreement as “mandatory.”
In the decision the appellate court noted that Energy Alloys failed to meet its burden of proving the invalidity of the forum-selection clause. Moreover, the Montgomery County trial court was declared to have abused its discretion when they denied the motion to dismiss of the plaintiffs.