Opinion
No. 05-17-01174-CV
03-14-2018
IN RE JP MORGAN CHASE BANK, N.A. AND KELLY ADAMS, Relators
Original Proceeding from the 95th Judicial District Court Dallas County, Texas
Trial Court Cause No. DC-17-01509
MEMORANDUM OPINION
Before Justices Lang, Brown, and Stoddart
Opinion by Justice Lang
In this original proceeding, relators JP Morgan Chase Bank, N.A. and Kelly Adams complain of the trial court's denial of relators' motion to enforce a forum-selection clause and to dismiss real parties in interest's claims against relators. After reviewing the petition, the real parties' response, relators' reply, and the mandamus record, we conclude relators are entitled to relief from the trial court's refusal to enforce the forum-selection clause. Therefore, we conditionally grant the writ.
I. Factual and Procedural Context
Real parties in interest Mary Frances Wagley, James Wagley, Anne Wagley, and Mary Copp (collectively "the Wagleys"), are beneficiaries of the Mary Penney Wagley Irrevocable Trust. The Trust was established pursuant to a Trust Agreement dated December 28, 1934. The beneficiaries are James C. "J.C." Penney's daughter, Mary Frances, and her descendants. The Trust Agreement was executed in New York and includes the following forum-selection clause:
Eleventh: The validity and effect of the provisions of this Agreement shall be determined by the laws of the State of New York, and the Trustee shall not be required to account in any court other than one of the courts of that state.(emphasis added).
Several years ago, the Wagleys became concerned about the performance of the Trust. After meeting and communicating with JP Morgan for several years regarding their concerns, the Wagleys eventually requested JP Morgan to resign as trustee. In January 2017, JP Morgan filed a petition in New York seeking to withdraw as trustee. A few weeks later, the Wagleys sued relators in Texas for allegedly breaching fiduciary duties owed to them under the Trust Agreement.
The Wagleys' original and first amended petitions also asserted a claim for an accounting, but they deleted that claim in their second amended petition.
According to the Wagleys, JP Morgan mismanaged the Trust's funds and invested the funds in high risk investments and investments for JP Morgan's benefit rather than for the benefit of the Trust and its beneficiaries. Relators contend the forum-selection clause requires the Wagleys' lawsuit to be brought in New York because it prohibits the Trustee from being "required to account in" courts of any state other than New York. Relators maintain that "required to account in" means they may not be sued in or otherwise required to explain alleged wrongdoing regarding the Trust or its administration in any state other than New York.
The Wagleys, on the other hand, argue the second part of the forum-selection clause relates solely to requests for an accounting because it states that New York courts are the only courts in which the Trustee can "be required to account." The Wagleys also maintain that New York is an inconvenient forum for them and that public policy favors remaining in Texas because section 115.002(c) of the Texas Property Code mandates the Wagleys' lawsuit be maintained in Texas.
Section 115.002(c) of the Texas Property Code provides that if there are one or more corporate trustees, proceedings by or against a trustee must be brought in the county where the trust is administered or where the trustee maintains its principal office. TEX. PROP. CODE ANN. § 115.002(c) (West Supp. 2017).
II. Applicable Law
Forum-selection clauses provide parties with an opportunity to contractually preselect the jurisdiction for dispute resolution. Pinto Tech. Ventures, L.P. v. Sheldon, 526 S.W.3d 428, 436 (Tex. 2017). Mandamus relief is available to enforce forum-selection agreements because there is no adequate remedy by appeal when a trial court abuses its discretion by refusing to enforce a valid forum-selection clause that covers the dispute. In re Int'l Profit Assocs., Inc., 274 S.W.3d 672, 675 (Tex. 2009) (orig. proceeding) (per curiam).
Forum-selection clauses are generally enforceable and presumptively valid. Pinto Tech., 526 S.W.3d at 436; Int'l Profit Assocs., 274 S.W.3d at 675. Failing to give effect to contractual forum-selection clauses and forcing a party to litigate in a forum other than the contractually chosen one amounts to " 'clear harassment' ... injecting inefficiency by enabling forum-shopping, wasting judicial resources, delaying adjudication on the merits, and skewing settlement dynamics...." In re Lisa Laser USA, Inc., 310 S.W.3d 880, 883 (Tex. 2010) (orig. proceeding) (quoting In re AutoNation, Inc., 228 S.W.3d 663, 667-68 (Tex. 2007) (orig. proceeding)). A party attempting to show that such a clause should not be enforced bears a heavy burden. In re Lyon Fin. Servs., Inc., 257 S.W.3d 228, 232 (Tex. 2008) (orig. proceeding) (per curiam) (citing In re AIU Ins. Co., 148 S.W.3d 109, 113 (Tex. 2004) (original proceeding)); In re ADM Inv'r Servs., Inc., 304 S.W.3d 371, 375 (Tex. 2010) (original proceeding).
A trial court abuses its discretion by refusing to enforce a forum-selection clause unless the party opposing enforcement meets its heavy burden of showing that (1) enforcement would be unreasonable or unjust, (2) the clause is invalid for reasons of fraud or overreaching, (3) enforcement would contravene a strong public policy of the forum where the suit was brought, or (4) the selected forum would be seriously inconvenient for trial. In re ADM Inv'r., 304 S.W.3d at 375. To meet this burden, the party opposing enforcement must present evidence that one of the exceptions applies. See, e.g., In re Automated Collection Techs., Inc., 156 S.W.3d 557, 559 (Tex. 2004) (orig. proceeding).
III. Application of Law to Facts
We begin our analysis by considering the meaning of the complained-of forum-selection clause. The parties agreed that the validity and effect of the provisions of the Trust would be determined by New York law and that the Trustee would not be "required to account" in any court other than a New York court. The Wagleys maintain the language of the forum-selection clause applies only to a cause of action for an accounting and, thus, does not apply to their breach of fiduciary duty claims. The starting point of our inquiry is the language of the clause itself. Pinto Tech., 526 S.W.3d at 437. When interpreting such phrases, we give words and phrases their ordinary and generally accepted meaning, reading them in context and in light of the rules of grammar and common usage. See Nassar v. Liberty Mut. Fire Ins. Co., 508 S.W.3d 254, 258 (Tex. 2017). The forum selection clause specifies that the "validity and effect of the provisions of this Agreement shall be determined by the laws of the State of New York." Although both parties cite cases from New York and Texas, no party has suggested that the contract would be interpreted differently under the laws of New York and Texas. Accordingly, like the parties have done, we will analyze the forum selection clause in accordance with well-established principles of contract interpretation under Texas law. Cf. In re Lisa Laser USA, Inc., 310 S.W.3d 880, 884-86 (Tex. 2010) (per curiam) (relying on well-established principles of contract interpretation under Texas law to determine whether forum-selection clause applied to dispute, despite choice-of-law provision specifying California law); In re Advance PCS Health L.P., 172 S .W.3d 603, 606 (Tex. 2005) (per curiam) (holding that in the absence of conflicting laws, "there can be no harm in applying Texas law").
We have considered the numerous definitions and usages of the word "account" cited by both parties. In doing so, we have been mindful of the era in which the forum-selection clause was written, and that "account" is used as a verb, rather than a noun. The forum-selection clause used the term "account" as the verb, "to account," ("the Trustee shall not be required to account in any court other than one of the courts of that state"). This term encompasses more than actions for an accounting. Black's Law Dictionary defines the verb "account for" as either "1. To furnish a good reason or convincing explanation for; to explain the cause of[;] 2. To render a reckoning of (funds held, esp. in trust)[;] or 3. To answer for (conduct)." Account for, BLACK'S LAW DICTIONARY (10th ed. 2014). The verb form of "account" is similarly defined in Merriam-Webster's Collegiate dictionary as "to furnish a justifying analysis or explanation." Account, MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY (10th ed. 2014). These definitions of "to account" are not limited to "furnish[ing] good reason or [a] convincing explanation" specifically in actions for an accounting. With those considerations in mind, we conclude "required to account in" is used as a broad, unrestricted phrase and means relators may not be sued or otherwise required to explain alleged wrongdoing regarding the Trust or its administration in any state other than New York.
We also find support for our conclusion that "account" is used broadly in other portions of the Trust document. For example, section 5 of the Trust reads: "[t]he Trustee shall not be liable or accountable to any person interested hereunder for the making of any payment or payments to any beneficiary . . . ." (emphasis added). In other words, under the terms of the Trust, the Trustee is not "accountable," that is not required or expected to justify or answer for his or her actions or decisions about payments made to any beneficiary.
In contrast, other sections of the Trust use narrow, restrictive language as to the responsibility or liability of the Trustee. For example, section two provides the Trustee "shall not be responsible or liable in any way for any loss or depreciation by reason of the sale, purchase, and/or retention of any property so sold, purchased and/or held . . . ."
We agree with relators that the above language demonstrates that the trust agreement was crafted carefully. Accordingly, the language of the forum selection clause could have easily been written narrowly to include only causes of action for an accounting. It was not.
Finally, we have considered the four New York cases cited by real parties to support their conclusion that New York law interprets a phrase "to account" to mean requiring someone to provide an accounting. Those cases are not persuasive in determining the scope of the forum-selection clause in this case. Each of the cases relied on by real parties involved judicial or statutory actions for an accounting, not, as here, the interpretation of a forum-selection clause. See In re Ebbets' Estate, 149 Misc. 260, 263-64, 267 N.Y.S. 268, 273 (N.Y. Sur. Ct. 1933); Williams v. Purdy, 6 Paige Ch. 166, 168-69 (N.Y. Ch. 1836); In re Osborn, 278 N.Y.S. 309, 310 (N.Y. App. Div. 1935); In re Merllo's Estate, 152 Misc. 435, 436, 273 N.Y.S. 708, 711 (N.Y. Sur. Ct. 1934). Similarly, section 2205 of the Surrogate's Court Procedure Act, also cited by the real parties, addresses who may petition for a compulsory accounting from a fiduciary in New York. N.Y. SURR. CT. PROC. ACT § 2205 (McKinney 2002).
On the other hand, other cases use the phrase "to account" more broadly to refer to any action in which an individual is to be held accountable for some action. See, e.g., Application of Chase Nat'l Bank of City of New York (Stillwell), 102 N.Y.S.2d 124, 127 (N.Y. Sup. Ct. 1950) (holding that the New York courts had exclusive jurisdiction over a trust's administration because the trust indenture stated that the " '[t]rustee shall not be required to account in any court other than one of the courts of [New York]' "); Noblitt v. Barker, 97 S.W.2d 1010, 1014 (Tex. Civ. App.—San Antonio 1936, writ ref'd) ("We are not unmindful of the seriousness of the questions raised by plaintiff in error on the propositions that all parties to such a transaction as this record reveals, wherein a person has been overreached, oversold, and defrauded, should be held to account for any participation in the scheme.") (emphasis added); N.Y. & Queens Elec. Light & Power Co. v. Long Island Mach. & Marine Const. Co., 108 N.Y.S. 176, 178 (N.Y. App. Div. 1908) ("I do not see why the defendant should be held to this inaccurate registration, and why, also, he should be held to account for the inaccurate readings of the plaintiff continued by its own admission for nearly three years.") (emphasis added). Thus, we conclude the scope of the forum-selection clause includes the Wagleys' claims for breach of fiduciary duty and is not limited to only claims for an accounting.
Having determined the underlying claims are subject to the forum-selection clause, we turn to whether the Wagleys established an exception to the general rule of enforceability. With respect to their argument that the mandatory venue statute in section 115.002(c) of the Texas Property Code shows strong public policy to keep the action in Texas, that statute applies to cases properly brought in Texas and does not supersede a contractual forum-selection clause. See, e.g., In re AutoNation, 228 S.W.3d at 669 ("even where Texas statutory provisions specify the application of Texas law, these provisions are irrelevant to the enforceability of a forum-selection clause where no statute requires suit to be brought or maintained in Texas") (quoting In re AIU, 148 S.W.3d at 114). Although a venue-selection clause contrary to section 115.002 would be unenforceable, the same is not true of a forum-selection clause like the one at issue here. See, e.g., Liu v. Cici Enters., LP, No. 14-05-00827-CV, 2007 WL 43816, at *2 (Tex. App.—Houston [14th Dist.] Jan. 9, 2007, no pet.) (mem. op.) ("The distinction between a forum-selection clause and a venue-selection clause is critical. Under Texas law, forum-selection clauses are enforceable unless shown to be unreasonable, and may be enforced through a motion to dismiss. In contrast, venue selection cannot be the subject of private contract unless otherwise provided by statute.") (internal citations omitted). Although the Wagleys contend that proceeding in New York would be unreasonable and seriously inconvenient, they failed to present any evidence to support those contentions. Absent evidence supporting the trial court's decision to refuse to enforce a forum-selection clause, refusal to do so is an abuse of discretion. See Automated Collection Techs., 156 S.W.3d at 559 (trial court abused its discretion in failing to enforce a forum-selection clause where plaintiff submitted no evidence showing enforcement would be unreasonable or unjust).
IV. Conclusion
Having determined the Wagleys failed to meet their burden of proof to establish one of the four exceptions to avoid enforcement of the forum-selection clause, we conclude the trial court abused its discretion by refusing to enforce the forum-selection clause and denying relators' motion to dismiss. We conditionally grant relators' petition for writ of mandamus and direct the trial court to issue a written order, within fifteen days of the date of this opinion, vacating its September 14, 2017 order denying relators' motion to dismiss, granting relators' motion to dismiss, and dismissing the claims of the real parties in interest. We are confident the trial court will comply, and the writ will issue only if it fails to do so.
/Douglas S. Lang/
DOUGLAS S. LANG
JUSTICE 171174F.P05