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finding the plain meaning of "under" to be "subject to the bidding or authority of"
Summary of this case from Buc-ee's, Ltd. v. Bucks, Inc.Opinion
No. 05-08-01395-CV
Opinion Filed December 31, 2008.
Original Proceeding from the 401st Judicial District Court, Collin County, Texas, Trial Court Cause No. 401-00568-2008.
Before Justices Whittington, FitzGerald, and Lang-Miers.
MEMORANDUM OPINION
Real party in interest, McAfee, Inc., sued relator, the law firm of Wilmer Cutler Pickering Hale and Dorr LLP, on several theories of liability including fraud. Relator moved to dismiss on several grounds, including a contractual forum-selection clause and lack of ripeness. The trial court signed an order dismissing every claim except for fraud. Relator seeks mandamus relief, asking us to direct the trial court to dismiss the fraud claim as well. We deny relator's petition for writ of mandamus.
I. Background
In 2002, McAfee's former chief financial officer, Prabhat Goyal, became the subject of a federal investigation for securities fraud. Goyal retained relator in connection with that matter. The investigation led to the filing of a twenty-count federal indictment against Goyal in 2004 in the Northern District of California. Goyal continued to retain relator to defend him in that matter. He was eventually convicted of at least some counts in that case.
Goyal had an indemnity agreement with McAfee, pursuant to which McAfee was obliged to indemnify and defend Goyal against actions brought against him by reason of his status as an agent of McAfee. In that agreement, McAfee promised to advance Goyal's defense costs, and Goyal promised to repay those costs if it were ultimately determined that Goyal was not entitled to be indemnified. Accordingly, McAfee paid Goyal's legal bills incurred in connection with the securities-fraud investigation and prosecution for several years. Goyal's legal fees and expenses from the start of the federal investigation through Goyal's conviction were approximately $12 million.
In April 2008, McAfee sued relator in Texas state court, alleging that relator billed McAfee for roughly $6.8 million of "unjustifiable legal fees and expenses." McAfee asserted equitable subrogation, negligence, breach of fiduciary duty, and fraud as its legal theories of recovery, and it also sought declaratory relief. Relator removed the case to federal court. While in federal court, McAfee amended its pleadings to add the theories of assumpsit, theft, and gross negligence. The federal judge later remanded the case on the ground that it was not ripe under federal law. The judge declined to speculate whether McAfee's claims were ripe under Texas state law.
After remand, relator filed a motion to dismiss in state court. Relator raised three grounds for dismissal: (1) lack of ripeness, (2) a forum-selection clause in the indemnity agreement between Goyal and McAfee, and (3) the absence of Goyal, an indispensable party, from the lawsuit. After a hearing, the judge signed an order denying the motion to dismiss as to McAfee's fraud claim but granting it as to all other claims asserted by McAfee. Relator seeks a writ of mandamus compelling the trial judge to dismiss McAfee's fraud claim as well. In its petition for writ of mandamus, relator argues only the forum-selection clause and the lack of ripeness as grounds for relief. Our inquiry is whether relator has demonstrated that the trial court clearly abused its discretion and that relator has no adequate remedy by appeal. In re McAllen Med. Ctr., Inc., No. 05-0892, 2008 WL 4051053, at *1 (Tex. Aug. 29, 2008).
II. Forum-Selection Clause
In the first of its two issues, relator argues that the trial court should have dismissed McAfee's fraud claim because of the forum-selection clause found in the indemnity agreement between McAfee and Goyal. We reject relator's argument for the following reasons.
A.
Standing to enforce the forum-selection clause
We first consider whether relator, which was not a party to the indemnity agreement between McAfee and Goyal, is entitled to enforce the forum-selection clause found therein. Ordinarily, a non-party cannot enforce a contract unless it enjoys third-party beneficiary status. See, e.g., S. Tex. Water Auth. v. Lomas, 223 S.W.3d 304, 306 (Tex. 2007) ("A third party may only enforce a contract when the contracting parties themselves intend to secure some benefit for the third party and entered into the contract directly for the third party's benefit."). Relator does not directly contend that it is a third-party beneficiary of the indemnity agreement (although, as discussed below, it does rely on an alleged admission by McAfee that relator was a third-party beneficiary in connection with a different theory). Rather, relator relies on this Court's holding that a "transaction participant" can enforce a forum-selection clause even if the participant was not actually a party to the contract. Accelerated Christian Educ., Inc. v. Oracle Corp., 925 S.W.2d 66, 75 (Tex.App.-Dallas 1996, no writ). In its reply brief, relator also asserts the theory of equitable estoppel. Under this theory, a non-signatory defendant can invoke a forum-selection clause if the signatory plaintiff "has sued signatory and non-signatory defendants based on substantially interdependent and concerted misconduct by all defendants." Phoenix Network Techs. (Europe) Ltd. v. Neon Sys., Inc., 177 S.W.3d 605, 622 (Tex.App.-Houston [1st Dist.] 2005, no pet.) (analogizing to the law governing arbitration agreements); accord Deep Water Slender Wells, Ltd. v. Shell Int'l Exploration Prod., Inc., 234 S.W.3d 679, 694 (Tex.App.-Houston [14th Dist.] 2007, pet. denied).
1.
Transaction participant
Relator does not fit the definition of "transaction participant" that we adopted in Accelerated Christian Education. In that case, we defined transaction participant as "an employee of one of the contracting parties who is individually named by another contracting party in a suit arising out of the contract containing the forum selection clause." 925 S.W.2d at 75. From the context, it is plain that the employee relationship must have existed at the time of the transaction containing the forum-selection clause. See id. ("To hold otherwise would allow a nonsignatory employee, who was a transaction participant, to defeat his company's agreed-to forum by refusing to be bound by the employer's contract."). And in a subsequent unpublished but persuasive opinion, we closely analyzed the question of whether the nonsignatory was an employee of the signatory at the time of the transaction. Robbins Myers, Inc. v. J.M. Huber Corp., No. 05-01-00139-CV, 2002 WL 418206, at *3 n. 5 (Tex.App.-Dallas March 19, 2002, no pet.) (not designated for publication). Relator points to no evidence that it was an employee of Goyal at the time the indemnity agreement was executed, or that it had any involvement in the indemnity agreement transaction at all. Indeed, relator acknowledges in its reply brief that it is not Goyal's employee.
Relator presents two arguments in support of its position that it is a transaction participant. First, relator argues that McAfee admitted that relator is, after all, a third-party beneficiary of the indemnity agreement. We have reviewed the pleading cited by relator in support of this argument, and we do not agree that McAfee admitted relator's third-party beneficiary status. At one time McAfee pleaded for declaratory relief that it "has fulfilled and discharged any and all liabilities to [relator] as a third party beneficiary to the agreement by paying past fees, and to declare that [McAfee] is not obligated to pay any outstanding fees or expenses or fees for future work to [relator]." (Emphasis added). As we read this pleading, McAfee did not concede relator's third-party beneficiary status, but only sought a declaration that McAfee had discharged its liabilities to relator as a third-party beneficiary if any such liabilities existed.
Second, relator argues that it is a "transaction participant" because McAfee made all of the payments at issue because of the indemnity agreement. This argument fails because it does not address the requirement that a "transaction participant" must have been an employee of a signatory at the time of the transaction containing the forum-selection clause. According to relator's own recitation of the facts, some six years passed between the execution of the indemnity agreement and Goyal's need to retain relator as counsel. Thus, relator fails to show that it was an employee of McAfee or Goyal when the indemnity agreement was executed or that relator participated in that transaction in any way. Its participation in the invoice-and-payment transactions with McAfee years later is irrelevant.
2.
Equitable estoppel
This leaves relator's equitable-estoppel theory of standing to enforce the forum-selection clause. Under this theory, relator had to demonstrate that McAfee "has sued signatory and non-signatory defendants based on substantially interdependent and concerted misconduct by all defendants." See Phoenix Network, 177 S.W.3d at 622. Relator is the only defendant, so plainly McAfee has not sued both signatory and nonsignatory defendants. Moreover, McAfee does not allege interdependent and concerted misconduct by relator and signatory Goyal. The only misconduct at issue is the alleged fraud by relator. Relator argues that equitable estoppel is supported by McAfee's allegations that it required Goyal to review and approve relator's invoices before forwarding them to McAfee for payment. But McAfee alleges no wrongdoing by Goyal in connection with relator's invoices, much less that Goyal was a participant in relator's alleged fraud. Accordingly, relator has not shown that the facts of this case compel application of the equitable-estoppel theory of standing.
3.
Conclusion
Relator has not shown that it has standing to enforce the forum-selection clause.
B.
Interpretation of the forum-selection clause
Even if relator had standing to enforce the forum-selection clause, we would still overrule its first issue because the forum-selection clause does not cover McAfee's fraud claim. Paragraph 19 of the indemnity agreement provides as follows:
Consent to Jurisdiction. [McAfee] and [Goyal] each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in the state courts of the State of Delaware.
This provision has two parts: a consent to Delaware jurisdiction for any action that "arises out of or relates to" the indemnity agreement, and a mandatory forum-selection provision for any action "instituted under" the indemnity agreement. Courts have recognized that clauses in which parties merely "consent" or "submit" to the jurisdiction of a particular forum are permissive rather than mandatory, and a mere consent-to-jurisdiction clause will not justify dismissing a suit that is filed in a different forum. E.g., Dunne v. Libbra, 330 F.3d 1062, 1063 (8th Cir. 2003); Keaty v. Freeport Indonesia, Inc., 503 F.2d 955, 956-57 (5th Cir. 1974); see also Sw. Intelecom, Inc. v. Hotel Networks Corp., 997 S.W.2d 322, 323-26 (Tex.App.-Austin 1999, pet. denied) (clause whereby parties "stipulate to jurisdiction [in] Minnesota, as if this Agreement were executed in Minnesota" was not a mandatory forum-selection clause); Weisser v. PNC Bank, N.A., 967 So. 2d 327, 330 (Fla.Dist.Ct.App. 2007) (distinguishing mandatory forum-selection clauses from permissive clauses that "constitute nothing more than a consent to jurisdiction and venue in the named forum and do not exclude jurisdiction or venue in any other forum").
In construing the clause, we strive to ascertain the intent of the parties by giving the language its ordinary meaning. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005). When parties use different language in different parts of a contract, we may ordinarily assume that they intended different things. Cf. City of Dallas v. Heard, 252 S.W.3d 98, 111 (Tex.App.-Dallas 2008, pet. denied) ("We assume the legislature used different language in each subsection for a reason."). In this case, the consent-to-jurisdiction clause has a scope that is different from the mandatory forum-selection clause. The consent-to-jurisdiction clause is very broad, encompassing all actions that arise out of or relate to the agreement. The phrase "relates to," in particular, is recognized as a very broad term. See, e.g., Kirby Highland Lakes Surgery Ctr., L.L.P. v. Kirby, 183 S.W.3d 891 (Tex.App.-Austin 2006, no pet.) (arbitration clause); Whitten v. Vehicle Removal Corp., 56 S.W.3d 293, 308 (Tex.App.-Dallas 2001, pet. denied) (statutory preemption provision).
The mandatory forum-selection clause, by contrast, applies only to actions "instituted under" the indemnity agreement. The use of different words indicates that the scope of the forum-selection clause is different from the scope of the consent-to-jurisdiction clause. The phrase "instituted under" connotes a scope narrower than the expansive phrase "arises out of or relates to." The plain meaning of "instituted" in this context is "initiated" or "set up," and the plain meaning of "under" is "in accordance with" or "subject to the bidding or authority of." Webster's Third New International Dictionary of the English Language Unabridged 1171, 2487 (1981). We agree with McAfee that an action is "instituted under" the indemnity agreement only if the claimant is relying on the terms and authority of the agreement as the basis for the rights sued upon. In other words, the forum-selection clause of section 19 applies only if the claimant is suing on rights that are created by the indemnity agreement itself. McAfee's fraud claim against relator does not depend on the authority or terms of the agreement. Rather, McAfee alleges that relator defrauded McAfee with repeated misrepresentations "contained in [relator's] billings, related correspondence and communication together with [its] reputation as a top law firm." Relator's legal duty not to defraud McAfee in the manner alleged, if any, is created by the common law, not the indemnity agreement.
Relator urges that the "instituted under" requirement is satisfied because McAfee paid Goyal's legal expenses "under" the indemnification agreement. The forum-selection clause, however, applies only if McAfee's action is "instituted under" the indemnity agreement. Although the indemnity agreement may explain why McAfee was paying relator's invoices at all, the fact remains that McAfee is not suing relator based on any rights created by or spelled out in the indemnity agreement itself. McAfee's fraud claim is "instituted under" the common law, not the indemnity agreement. We decline to expand the meaning of the language contained in the agreement. See Lewis v. Foxworth, 170 S.W.3d 900, 903 (Tex.App.-Dallas 2005, no pet.) ("We may neither rewrite the contract nor add to its language.").
C.
Conclusion
We overrule relator's first issue.
III. Ripeness
In its second issue, relator argues that McAfee's fraud claim is not yet ripe, which deprives the trial court of subject-matter jurisdiction over that claim. Relator's theory is that the indemnity agreement gives McAfee the right to recoup all of its payments from Goyal if it is ultimately determined that Goyal is not entitled to indemnification under the agreement. This determination, relator contends, cannot be made until Goyal's criminal case, including appeal, has run its course. Thus, relator concludes, McAfee's injury remains totally speculative until Goyal's criminal case is concluded and his right to indemnification determined. See Perry v. Del Rio, 66 S.W.3d 239, 249 (Tex. 2001) ("The central concern [in a ripeness inquiry] is whether the case involves uncertain or contingent future events that may not occur as anticipated, or indeed may not occur at all.").
We reject relator's argument. It may be true that McAfee's right of recoupment against Goyal, based on the terms of the indemnity agreement, is not yet ripe. But McAfee's right not to be defrauded by relator is separate and independent of any contractual rights it may enjoy against Goyal. That is, McAfee's right to recover against relator for fraud does not depend on a preliminary determination that Goyal has no right to indemnification. Whether Goyal prevails or not, neither he nor relator enjoys the right to defraud McAfee under any scenario.
In sum, McAfee's rights against relator are concrete and do not depend on contingent or hypothetical facts, or on events that may not come to pass. Accordingly, McAfee's fraud claim against relator is ripe.
We overrule relator's second issue.
IV. Conclusion
Relator has not shown that the trial court clearly abused its discretion by denying relator's motion to dismiss as to McAfee's fraud claim. We deny the petition for writ of mandamus.
The author of this opinion would also deny relief on the ground that the certification at the end of relator's petition for writ of mandamus does not substantially comply with the requirements of Texas Rule of Appellate Procedure 52.3(j), as amended effective September 1, 2008. See In re Butler, No. 05-08-01443-CV, 2008 WL 4952842 (Tex.App.-Dallas Nov. 21, 2008, orig. proceeding). The rule requires the person filing a petition for writ of mandamus to certify that he or she has read the petition and concluded that "every factual statement in the petition is supported by competent evidence included in the appendix or record." The certificate at the end of relator's petition contains only an averment that "the Petition truly and correctly recites the factual allegations set forth in the pleadings and the evidence in the record." But in light of the foregoing analysis, it is unnecessary to address this issue.