Case Title: Tuxedo International Inc. v. Rosenberg

Citation: 127 Nev. Adv. Op. No. 2

Docket Number: 52861

State: nevada

Court: Nevada Supreme Court

Date: 2011-02-10T00:00:00Z

Document:
me

 

427 Nev., Advance Opinion 2.
IN THE SUPREME COURT OF THE STATE OF NEVADA

INCORPORATED, A FOREIGN
CORPORATION,
Appellant, |

vs.
MICHAEL ROSENBERG, AN FILED
INDIVIDUAL; AND LIMA UNO, A

FOREIGN CORPORATION, FEB 1972011
Respondents,

‘TUXEDO INTERNATIONAL | No. 52861

 

Appeal from a district court final judgment. ighth Judicial
District Court, Clark County; Valorie Vega, Judge.
Reversed and remanded,

Alan J. Buttell & Associates and Alan J. Buttell, Las Vegas,
for Appellant.

Dubowsky Law Office, Chtd., and Peter Dubowsky, Las Vegas,
for Respondents.

 

BEFORE DOUGLAS, C.J., PICKERING and HARDESTY, JJ.
OPINION
By the Court, HARDESTY, J

In this appeal, we address the proper analysis to determine
whether a forum selection clau:

 

applies to the tort claims pleaded by a

plaintiff when the dispute is arguably related to a contract containing an

W- 04388

 
applicable forum selection clause. We conclude that the best approach for
resolving this issue is one that focuses first on the intent of the parties
regarding a forum selection clause’s applicability to contract-related tort
claims. If that examination does not resolve the question, however, the
district court must determine whether resolution of the tort-based claims
[pleaded by the plaintiff relates to the interpretation of the contract. And if
that analysis does not resolve the question, the district court must
determine whether the plaintiff's contract-related tort claims involve the
[same operative facts as a parallel breach of contract claim. As the district,
court dismissed this case without the benefit of our guidance on this issue,
we reverse the district court’s judgment and remand this matter to the
district court for reexamination under the standard adopted today.
BACKGROUND

In April 2008, appellant Tuxedo International Incorporated
filed a complaint in district court against respondents Michael Rosenberg
land Lima Uno (hereinafter Rosenberg) seeking damages for two causes of
laction—‘theft-conversion by fraud” and unjust enrichment—arising out of
fan allegedly failed investment involving casinos in the South American
country of Peru.

‘The following facts are alleged in Tuxedo’s complaint and are

sot forth here to provide context for this appeal.! During the spring of

*This case was dismissed shortly after the complaint was filed and,
as a result, the district court did not make any factual findings. Because
[t]his court is not a fact-finding tribunal,” Zugel v, Miller, 99 Nev. 100,
1101, 659 P.2d 296, 297 (1983), we set forth the allegations enumerated in
{the complaint for informational purposes.

 

 
12005, Tuxedo had “numerous meetings” with Michael Rosenberg and/or
fhis associates in Las Vegas, Los Angeles, and Peru regarding a possible
investment project involving technology facilitating horse book and sports
book betting in Peru. During these meetings, Rosenberg and his
associates purportedly represented that he owned, “directly or indirectly,”
approximately “400 slot machine casinos’ in Peru. It is alleged that
Rosenberg knew these representations were false at the time they were
made to Tuxedo, Tuxedo claims that its decision to pursue this venture
was largely influenced by Rosenberg's claim of ownership of the casinos
land that it would not have participated in this venture if it had known
|that Rosenbere’s ownership claims were false.

As a result of these meetings, a series of agreements were
subsequently signed. First, a memorandum of understanding was signed
lon June 25, 2005, the purpose of which was to “set forth the main
[guidelines of the business to be developed by [Tuxedo and Rosenberg]
prior to entering into good faith negotiations towards the execution of a
definitive long term agreement.” The memorandum of understanding
contained a clause stating that

[tJhis document and the Agreement will be
governed by the laws of Peru. Any arising dispute
will be submitted to arbitration in Peru by an
arbitration tribunal to be set according to what
the Parties may agree and lacking such
agreement, pursuant to the General Law of
Arbitration of Peru in force at the time the dispute

(Thereafter, on December 15, 2005, Tuxedo and Rosenberg signed a more

 

lextensive agreement, which specifically “incorporated” the memorandum

 

 
or

 

lof understanding. The December 15 agreement included a clause entitled
“Choice of law and forum,” stating that “[t]his agreement shall be
construed, interpreted and enforced according to the laws of Peru, The
parties hereto hereby consent to jurisdiction in Lima, Peru.” Directly
below this “Choice of law and forum” provision was a separate clause,
entitled “Entire Agreement,” stating that “[t]his instrument super{s}edes
[any prior agreements between the parties hereto, and sets forth the entire
agreement between the parties hereto with respect to the subject matter
hereof.”

Under this December 15 agreement, Tuxedo would provide
technology, equipment, and funding to make horse book and sports book
betting available at selected casinos. The agreement called for Tuxedo to
provide start-up costs of $25,000 to $30,000 and initial working capital of
'$5,000 per location, $125,000 in build-out payments for the first five
casinos, and approximately $7,300 per month in ongoing operating
lexpenses. According to Tuxedo, it paid over $400,000 in build-out costs,
'$90,000 in working capital, and $160,000 in operating expenses for
locations that never opened.

Finally, the parties’ briefs also reference a third agreement, a
[June 12, 2006, “tripartite addendum to agreement of simuleasting and
tote services.”* This is an agreement between Tuxedo, Rosenberg, and a
third entity, DGS Systems Corp., a Panamanian corporation, regarding

2While Tuxedo is the only party to this agreement that has signed
{the copy contained in the record on appeal, Rosenberg has not challenged
the document's authenticity or disputed having signed it

 
ithe transmission of video feeds of horse and dog races. The tripartite

 

[tJhis Addendum shall be construed and governed

in accordance with the laws of the Country of

Peru. Each party hereby consents to personal

jurisdiction in the Country of Peru and

acknowledges that venue is proper in any court in

the Country of Peru and agrees that any action

related to this Addendum must be brought in a

court in the Country of Peru and waives any

objection that may exist, now or in the future, with

respect to jurisdiction, governing law and venue as

set out in this paragraph.
This document also contained a clause entitled “Entire Agreement,”
stating that “[this Addendum constitutes the entire agreement between
the parties hereto relating to the subject matter hereof. It does not,
however, alter the Definitive Agreement between [Rosenberg] and
Tuxedo.”

Approximately one month after the complaint was filed,

 

Rosenberg brought a motion to dismiss, arguing, among other things, that
{the complaint should be dismissed based on the “Choice of law and forum”
Jclause in the December 15 agreement because the parties had already
agreed that Peru is the proper forum for this dispute. After further filings
Janda hearing on Rosenberg’s motion, the district court found that the
forum selection clauses were “valid and enforceable” and entered an order

dismii

 

ing the complaint. This appeal followed.

'The district court also granted respondents’ alternative request to

[dismiss the complaint on personal jurisdiction grounds. Although we do

not consider Tuxedo's argument that it should have been granted limited
continued on next page .

 

 
DISCUSSION
On appeal, Tuxedo argues that the district court erred in

lenforcing the forum selection clause to preclude its complaint for tort
claims. More specifically, Tuxedo contends that contractual forum
selection clauses do not encompass claims for fraud, that its complaint
makes clear that the causes of action are based in tort connected to
Rosenberg’s alleged series of fraudulent activities that led Tuxedo to sign
ia sham contract, and that the contract here should be considered, at best,
levidence of the conspiracy to defraud Tuxedo rather than constituting any
liegitimate bargained-for agreement. Rosenberg, however, contends that
[precedent from other jurisdictions provides compelling authority to uphold

continued
[discovery to establish jurisdiction over Rosenberg, as that argument is not
properly before us, see Arnold v. Kip, 123 Nev. 410, 416-17, 168 P.Sd 1050,
11054 (2007) (explaining that arguments set forth for the first time in a
Jmotion for reconsideration are only reviewable if the distriet court
Jaddresses those arguments on the merits in an order entered before the
Inotice of appeal is filed), we nonetheless reverse the district court's
jalternative dismissal for lack of personal jurisdiction. Specifically, we
conclude that, under our decision in Firouzabadi v. District Court, 110
Nev. 1848, 1355, 885 P.2d 616, 621 (1994) (determining that a prima facie
case of specific personal jurisdiction had been shown for an out-of-state
[defendant who traveled to Nevada to attend a trade show), Tuxedo made a
prima facie showing of specific personal jurisdiction over Rosenberg with
its allegations that meaningful meetings and negotiations regarding the
Peruvian casino investment project took place in Las Vegas, so as to
preclude dismissal at this early stage of the proceedings. See Fritz
Hansen A/S v. Dist. Ct., 116 Nev. 650, 655, 6 P.3d 982, 985 (2000) (noting
that after a plaintiff makes, when challenged, a pretrial prima facie
showing of jurisdiction, the issue can be raised again at a pretrial
Jevidentiary hearing or at trial itself).

 

 
7

ithe dismissal of this complaint based on the forum selection clause, as
forum selection clauses will become meaningless if parties are simply
allowed to circumvent them by alleging fraud in the inducement of the
contract rather than asserting contract-based claims,

This court has not addressed whether tort-based causes of
faction that, at a minimum, are tangentially related to a contract are
subject to an otherwise enforceable forum selection clause included in the
contract. Other courts considering this question have struggled to fashion
lgenerally applicable rules. On the one hand, forum selection clauses
should not be rendered meaningless by allowing parties to disingenuously
back out of their contractual obligations through attempts at artful
pleading. See, e.g, Lambert v, Kvsar, 983 F.2d 1110 (1st Cir. 1993)
(rejecting arguments that tort-based claims related to a contract are not
subject to a contractual forum selection clause on this basis). On the other
fhand, some flexibility should also be made available for legitimate cases
when a forum selection clause is contained in an agreement that never
would have been entered into absent a party’s fraudulent conduct. See
Frazier-Parrott Commodities, 806 F.2d 848, 851-

 

Farmland Industries

 

 

52 (Sth Cir. 1986) (setting forth this proposition in explaining that, when a
fiduciary relationship is created by a fraudulent contract, the individual
defrauded should not be held to the contract's forum selection clause),
abrogated on other grounds by Lauro Lines $.R.L. v. Chasser, 490 U.S.
495 (1989). Striking the proper balance between these competing

Jconcerns, however, is a difficult and delicate endeavor.

 

 
Numerous other courts have addressed this issue and our
review of these decisions reveals a variety of methods used to determine
whether tort-based claims related to a contract are subject to its
jcontractual forum selection clause. We therefore begin our analysis of this,
issue by providing an overview of the different approaches taken by other
jurisdictions. We then discuss our concerns with these approaches before
setting forth the analysis to be applied by Nevada courts considering this
issue.

Extrajurisdiction:
selection clauses to tort-based claims

Based on our review of the approaches taken by other courts
in determining whether tort-based claims related to a contract are subject
to a forum selection clause, it appears that the majority of the decisions

fall, generally, into three categories. Some courts have adopted a bright:

 

line approach that takes the position that the inclusion of allegations in a
complaint of fraud in the inducement or the like does not warrant ignoring

jan otherwise enforceable forum selection clause. In other jurisdictions,

 

more rule-based approach has been adopted, which, in some cases,

 

Jappears to be more receptive to a conclusion that such tort-based claims
Jare not subject to a contractual forum selection clause if certain
requirements are met. Finally, other courts have adopted an approach
{that focuses on the intent of the parties and the text of a particular forum
selection clause to resolve the issue. While we concede that none of the
courts adopt these categories and, at times, the analyses blur somewhat

between the categories, we nonetheless find this framework helpful to

analyze and understand the different methodologies used for this issue.

 

 
‘The bright-line approach
In certain jurisdictions, questions regarding the applicability
lof forum selection clauses to contract-based tort claims are resolved using
a bright-line approach that flatly rejects the possibility that pleading tort-
based claims alleging fraud in the inducement of an agreement or the like
/can result in a forum selection clause not being applied to such claims. A
good example of this approach is provided by the United States Court of
|Appeals for the Seventh Circuit's decision in American Patriot Insurance
Agency v. Mutual Risk Management, 364 F.3d 884 (7th Cir. 2004). In this
decision, the Seventh Cireuit rejected an attempt to avoid a forum
selection clause, reasoning that

a dispute over a contract does not cease to be such
merely because instead of charging breach of
contract the plaintiff charges a fraudulent breach,
or fraudulent inducement, or fraudulent
performance. The reason is not that contract
remedies always supersede fraud remedies in a
case that arises out of a contract .... It is that
the existence of multiple remedies for wrongs
arising out of a contractual relationship does not
obliterate the contractual setting, does not make
the dispute any less one arising under or out of or
concerning the contract, and does not point to a
better forum for adjudicating the parties’ dispute
than the one they had selected to resolve their
contractual disputes.

Id. at 889 (citations omitted); see also Dexter Axle Co. v. Baan USA, Inc.
1833 N.E.2d 43, 49-51 (Ind. Ct. App. 2005) (adopting, in its entirety, the
bright-line approach set forth in American Patriot Insurance). Another
example of this approach is found in Cheney v. IPD Analytics, LLC, 583 F.
Supp. 2d 108, 117-18 (D.D.C. 2008), in which a federal district court

 

 

 
om

 

laddressed the enforceability of an employment agreement's forum
selection clause against an employee, when the employee argued that he
was induced to leave his former employment with a law firm by a
fraudulent promise of equity in his new employer, thereby rendering his
lexecution of the employment contract with the new employer a product of
fraud. The federal district court rejected this argument as “plainly
insufficient to invalidate the forum selection clause” and further explained
[that such allegations of fraud and overreaching must be specific to the
{forum selection clause itself, rather than the entire contract, in order to
invalidate the forum selection clause.* Id, at 118.

“This distinction is in reference to a footnote in the United States
[Supreme Court's decision Scherk v. Alberto-Culver Co,, 417 U.S. 506, 519
n.14 (1974). ‘This footnote clarified that. a prior decision, The Bremen v.
Zapata Off-Shore Co, 407 U.S. 1 (1972), did not hold that a forum
selection clause is unenforceable any time the allegation is made that the
lunderlying transaction was a product of fraud, but rather that the
inclusion of the forum selection clause in the contract must be the product,
lof the fraud. Scherk, 417 U.S. at 619 n.14. Relatedly, this court, in Sentry
[Systems, Inc. v. Guy, 98 Nev. 507, 654 P.2d 1008 (1982), addressed a case
where a party argued that the inclusion in his complaint of a claim for
fraud in the inducement regarding a franchise agreement removed the
controversy from the field of the Federal Arbitration Act. This court
disagreed, citing a United States Supreme Court decision, Prima Paint v.
Flood & Conklin, 388 U.S. 395 (1967), for the conclusion that “a general
claim of fraud in the inducement of a contract is arbitrable but a specific
claim of fraud in the inducement of the arbitration clause itself is for the
courts to decide.” Sentry, 98 Nev. at 509, 654 P.2d at 1009, We are not
convinced, however, that this Scherk footnote represents good policy for
Nevada regarding general forum selection clauses, as we do not believe, in
reality, a party is likely to be defrauded only in the inclusion of a forum
selection clause but not defrauded by the contract as a whole. See, e.g,
Hoffman _v. Minuteman Press Intern., Inc. 747 F. Supp. 652, 657 n.3
(W.D. Mo. 1990) (expressing skepticism at the Scherk footnote’s division

continued on next page

 

10

 
‘The rule-based approach

A second approach to reviewing tort claims potentially subject
to a contractual forum selection clause, which we refer to here as the rule-
[based approach, is arguably more receptive to permitting avoidance of a
forum selection clause through a party's pleadings. This approach sets
forth various guidelines for determining whether a forum selection clause
‘contained in an agreement applies to tort-based claims such as fraud in
‘the inducement that are related to the contract. And unlike the bright-
line approach, courts applying this methodology have at least recognized
{the possibility that, in certain circumstances, such tort-based claims may
not be subject to a forum selection clause contained in the contract.
Within this approach there appear to be three different rules applied by
various courts, which we address, in turn, below.

‘The First Cireuit rule

In Lambert v. Kysar, 983 F.2d 1110, 1121-22 (Ist Cir. 1993),
ithe First Circuit Court of Appeals addressed an argument that a forum
selection clause should not apply to certain tort claims because the
plaintiff was alleging tortious conduct relating to the formation of the
contract rather than regarding performance of the contract. ‘The First,
[Circuit rejected this distinction by commenting that “w]e cannot accept
the invitation to reward attempts to evade enforcement of forum selection

Jagreements through artful pleading of tort claims in the context of a

continued
between fraud in the inducement of a forum selection clause and fraud in
the inducement of the contract as a whole).

 

 
oo

contract dispute.” Id. at 1121 (internal quotations omitted). ‘The court
then continued by noting that the United States Supreme Court had
recognized in Scherk v. Alberto-Culver Co,, 417 U.S. 506, 519 n.14 (1974),
that allegations of fraud and overreaching must be specific to the forum
selection clause itself rather than the entire contract in order to invalidate
the forum selection clause. Lambert, 983 F.2d at 1121.

Although this pronouncement appears more in line with the
bright-line approach set forth above, this did not conclude the Lambert
court's analysis. Instead, the Lambert court went on to hold that
“contract-related tort claims involving the same operative facts as a
parallel claim for breach of contract should be heard in the forum selected
by the contracting parties.” Id, at 1121-22. This same-operative-facts test

requires a determination

 

to whether a plaintiff's cause of action directly
concerns the formation or enforcement of the contract containing the
forum selection clause, id, at 1122, or, in the opinion of the Kighth Circuit
Court of Appeals, whether the parties could have brought a parallel
breach of contract claim and yet did not. See ‘Terra Intern, Inc. v.
Mississippi Chemical Corp,, 119 F.34 688, 695 (Sth Cir. 1997) (restating
the Lambert test). Thus, this approach arguably breaks with those courts
that broadly conclude that tort-based claims are always subject to

contractual forum selection clauses by announcing a rule that, at least in

 

theory, could allow allegations of tort-based causes of action related to a
contract to avoid being subject to a forum selection clause. See also
Forrest_v. Verizon Communications, Inc, 805 A.2d 1007, 1014-15 (D.C.
2002) (adopting the First Circuit rule that noncontract claims involving
the same operative facts as a parallel contract claim fall within the scope

of a forum selection clause in the contract); Lawler v. Schumacher Filters

12

 

 
America, Inc,, 832 F. Supp. 1044, 1052 (E.D. Va. 1993) (implementing the
Lambert “same operative facts” rule).

‘The Ninth Circuit rule

While similarly choosing to adopt a rule-based analysis of this
forum selection clause applicability question, the Ninth Circuit Court of
Appeals has stated its rule somewhat differently, In Manetti-Farrow, Ine.
v. Gucci America, Inc, 858 F.2d 509, 513-14 (9th Cir, 1988), the court
addressed the contention that a forum selection clause did not apply to

 

certain tort-based claims, ‘The court explained that a forum selection
clause can equally apply to tort or contractual causes of action and that
the primary analysis is “whether resolution of the claims relates to
interpretation of the contract.” Id, at 514. In addressing the claims before
it, the Ninth Circuit determined that the tort claims at issue could not “be
adjudicated without analyzing whether the parties were in compliance
with the contract,” and that therefore they fell within the scope of the
forum selection clause. Id,; see also Moon v, CSA-Credit. Solutions of
America, 696 S.E.2d 486, 487 (Ga. Ct. App. 2010) (independently adopting
a largely identical rule providing that “[rJegardless of the duty sought to
be enforced in a particular cause of action, if the duty arises from the
contract, the forum selection clause [in the contract] governs the action”
(quoting Hugel_v. Corporation of Lloyd's, 999 F.2d 206, 209 (7th Cir.
1993))).

The Third Cireuit rule

Finally, the Third Circuit Court of Appeals has adopted a
third version of this rule-based approach. In Coastal Steel v. Tilghman
Wheelabrator Ltd., 709 F.2d 190, 203 (8d Cir. 1983), abrogated on other

13.

 
grounds by Lauro Lines S.R.L. v. Chaser, 490 U.S. 495 (1989), the Third
[Circuit explained that to permit a pleading to avoid being subject to a
forum selection clause “ignores the reality that the . . . contract is the basic
source of any duty,” and that “[iJf forum selection clauses are to be
enforced as a matter of publie policy, that same public policy requires that
they not be defeated by artful pleading of claims...” Id. The court
[therefore set forth the rule that “where the relationship between the
parties is contractual, the pleading of alternative non-contractual theories

 

of liability should not prevent enforcement of such a bargain.” Id,; see also
Banco Popular de Puerto Rico v, Airborne Group PLC, 882 F. Supp. 1212,
1217 (D.P.R. 1995) (relying on Coastal Steel in determining that a forum
selection clause was enforceable against a plaintiff's tort claims).

‘The intent-of-the-parties approach
A third approach to addressing whether a fraud-in-the-

inducement tort claim or the like can avoid a forum selection clause is to
deduce the intent of the parties regarding the clause's applicability to such
claims, as demonstrated by the text of the forum selection clause and the
facts of the case. A Utah federal district court decision, Berrett v. Life
Insurance Co. of the Southwest, 623 F. Supp. 946, 948-49 (D. Utah 1985),

 

provides a useful illustration of the operation of this approach. In Berrett,

 

fan individual and his insurance agency contracted with a life insurance
company for authorization to write insurance policies on behalf of the
insurance company. Id. at 947. The agreement contained a forum
selection clause that provided as follows: “{s}itus. This agreement is made
and performable in Dallas, Dallas County, Texas. ‘The parties agree that

Jany action at law or in equity hereunder shall be brought in Dallas

 

 
om

 

(County, Texas.” Id. Aftor the business relationship soured, the individual
land his agency brought an action asserting both breach of contract and
tort-based claims against the insurance company. Id, at 947-48.

In resolving a motion to dismiss the action brought by the
jinsurance company, the federal district court addressed, among other
things, the applicability of the forum selection clause contained in the
agreement to the tort-based claims brought by the plaintiffs. Id. at 948-
49. The Berrett court concluded that the key factor in determining
whether the tort claims were subject to the forum selection clause was
the intention of the parties reflected in the wording of particular clauses
and the facts of each case.” Id. In reaching this conclusion, the court also
noted that “compelling factual considerations may dictate that claims
Jotherwise governable by forum selection clauses be retained for
disposition” by the court in which the claims were originally filed. Id. at
949.

Applying its approach to the case before it, the Berrett court
{found noteworthy the fact that the plaintiffs’ complaint alleged tortious
Jacts by the defendants causing damage to the plaintiffs’ business and
‘reputation that, in the court's view, were “unrelated to the interpretation
lof the agency agreement,” Id. Specifically, the Berrett plaintiffs asserted

 

that the insurance company independently contacted a large number of
‘the plaintiffs’ clients to encourage those clients not to renew their policies
through the plaintiffs and informed those policyholders, as well as the
Utah Division of Insurance, that the plaintiffs were engaged in fraudulent
business practices. Id. The Berrett court determined that, in entering
into the agency agreement, it was “highly unlikely” that the parties

15

 
coe Be

 

intended such tort claims to be subject to the forum selection clause. Id.
The Berrett court further grounded its decision in an analysis of the text
lof the parties’ forum selection clause. Id, While acknowledging that the
|agency agreement's forum selection clause applied to “any action at law or
jin equity hereunder,” the court nonetheless concluded that such tort-based
[claims did not “arise ‘hereunder” the agreement. Id. at 947, 949. As a
result, the Berrett court held that the parties’ forum selection clause was
‘not applicable to the plaintiffs’ tort-based claims. Id, at 949.

How Nevada courts should address the applicability of forum selection
‘clauses in relation to tort claims

Having reviewed the various analyses used by other courts to

jaddress the applicability of contractual forum selection clauses to tort-

 

‘based claims related to the contract, we now turn to how Nevada courts

should address this issue. We begin our analysis by noting that we do not

 

{find any of the established methodologies set forth above to be, in and of

themselves, wholly satisfactory. The most appropriate analysis of this

 

issue should be one that focuses on the terms of the parties’ actual

 

Jagreements, furthering the parties’ freedom to contract on this point while
jalso being responsive enough to avoid substantial injustice when
necessary, ‘The ideal analysis should also provide consistency and
predictability for the parties.

While the bright-line approach has some merit in its simplicity
jand the clarity it provides, we conclude that this approach is too inflexible
and that its application may, in certain cases, lead to substantial injustice.
Indeed, in some cases, the application of such a rigid default position,
which fails to particularize its analysis to the actual text of a disputed
forum selection clause, may contravene the contractual intent of the

16

 
os

parties’ agreements. For the same reasons, we find the Third Circuit's
whether-the-parties-relationship-is-contractual test, which is effectively
the brightline approach presented in rule form, to be equally
unsatisfactory.

Turning to the remaining rule-based approaches, we are not
persuaded that the First Circuit's same-operative-facts rule, in and of
itself, provides the best approach, as it fails to sufficiently take into
laccount the intention of the parties as demonstrated by the text of an
Jagreement. Instead, we conclude that this rule provides ultimate utility
Jwhen applied as a secondary factor when the intentions of the parties
Jeannot be discerned. Such a configuration allows consideration of the
intent of the parties to be at the forefront, while making use of the rule's
Jguidance when the parties’ intent cannot be gleaned from their
contractual language. In our view, the Ninth Circuit's whether-resolution-
of-the-claims-relates-to-the-interpretation-of-the-contract rule comes the
closest to approximately the ideal analysis of the rule-based approaches as
jit focuses, if only tangentially, on the actual language of the parties’
Jagreements. ‘To the extent that the rule emphasizes compliance with the
contract as the essential question, like the First Circuit rule, we similarly
view this emphasis as more properly considered as a secondary factor to be
jused only if the intent of the parties is unavailing, rather than as the
[whole test, because the issue of whether the tort claims involve questions
of compliance with the contract should not be the primary concern,

Finally, we turn to the intent-of-the-parties approach as set
forth in Berrett, 623 F. Supp. at 948-49. We conclude that this approach

represents the best of these various methodologies because it places a

7

 

 
determination of the parties’ intent, as established through a thorough
examination of the text of the subject forum selection clause, at the
forefront of its analysis. Such an approach recognizes the parties’ freedom
to contract on the applicability of the clause to potential tort claims and is,
sufficiently accommodating to the individual facts of a case so as to avoid
substantial injustice.

Because the intent of the parties must be discerned through a
review of the language of the subject forum selection clause, an application
lof this approach requires the district court to conduct a thorough and
[detailed review of the language of that provision. Id. Our de novo review
lof the district court's contractual interpretation of the agreements
discussed by the parties in this case, see Whitemaine v. Aniskovich, 124
Nev. 302, 308, 183 P.3d 137, 141 (2008) (setting forth this court's

 

standards for reviewing the district court’s interpretation of contractual
terms), reveals two problematic issues that would likely have been
apparent had the district court conducted the thorough textual review
[required by the intent-of-the-parties approach.

‘The parties’ forum selection clause arguments, both on appeal
‘and before the district court, focus primarily on the language contained in
the “Choice of law and forum” clause of the December 15, 2005,
fagreement, which provides that “[tJhis agreement shall be construed,
interpreted and enforced according to the laws of Peru. The parties hereto
hhereby consent to jurisdiction in Lima, Peru.” Rosenberg, however, also

points to language contained in two additional agreements as further

levidence of the parties’ intent to have this dispute resolved in Peru. First,

 

 
there is the June 25, 2005, memorandum of understanding, which
contains a clause stating that

[t]his document and the Agreement will be
governed by the laws of Peru. Any arising dispute
will be submitted to arbitration in Peru by an
arbitration tribunal to be set according to what
the Parties may agree and lacking such
agreement, pursuant to the General Law of
Arbitration of Peru in force at the time the dispute

And second, there is the June 12, 2006, “tripartite addendum to

 

jagreement of simulcasting and tote services,” which contains a clause

entitled “Governing Law and Jurisdiction,” which provides that

[this Addendum shall be construed and governed

in accordance with the laws of the Country of

Peru. Each party hereby consents to personal

jurisdiction in the Country of Pera and

acknowledges that venue is proper in any court in

the Country of Peru and agrees that any action

related to this Addendum must be brought in a

court in the Country of Peru and waives any

objection that may exist, now or in the future, with

respect to jurisdiction, governing law and venue as

set out in this paragraph.
While the parties seem to treat these various clauses as forum selection
clauses all approximately achieving the same ends, our de novo review of
the language of these agreements, Whitemaine, 124 Nev. at 308, 183 P.3d
lat 141, suggests to us that these clauses may contain distinct and separate
meanings.

As an initial matter, the language in the June 2005
memorandum of understanding suggests this clause may be more properly

[construed as an arbitration clause than as a forum selection clause, and

 

 
thus, if this clause were deemed controlling, it would be subject to an
entirely different type of analysis than the forum selection clause analysis
set forth in this opinion. See, e.g, Gonski v. Dist. Ct., 126 Nev. __, _.
| P.8d __, __ (Adv. Op. No. 51, December 30, 2010) (discussing
jenforceability of arbitration clauses). Turning to the December 2005
agreement's clause, the relevant language could be read as memorializing
the agreement on only two relevant matters: that the parties consent to a
[choice of the laws of Peru and the parties consent to jurisdiction in Peru.
It can be argued, however, that there is no requirement contained in this,
clause that Peru is the exclusive forum for jurisdiction over any dispute
[between the parties. See, e.g., Hunt Wesson Foods, Inc. v. Supreme Oil
Co,, 817 F.2d 75, 76-77 (9th Cir, 1987) (distinguishing between exclusive
Jand nonexclusive forum selection clauses). If it is determined that the
parties did not intend for the clause to act as an exclusive forum selection
clause, then arguably, there is no contractual bar to Tuxedo bringing its
tort claims in the Nevada district court.

Finally, with regard to the June 2006 tripartite addendum,
Jour de novo review of the language reveals that it is the provision that
most closely resembles a traditional exclusive forum selection clause. This
addendum, however, adds a new entity that does not appear to have been
la party to the memorandum of understanding or December 15
agreements, and the addendum specifically states that it does not “alter
the Definitive Agreement between [Rosenberg] and Tuxedo.” Further, the
language of the clause itself may specifically limit its application to “any

Jaction related to this Addendum.” Thus, there appears strong textual

support that this clause cannot be construed as the controlling clause in

 

 
 

ans

this litigation. Indeed, given that all three clauses may have significant
and distinct meanings and implications, the question of which clause
controls here would also appear to be a crucial and necessary part of a
thorough review of the language of these provisions.

‘The foregoing discussion highlights the importance of a
thorough textual review to any analysis of whether a contractual forum
selection clause applies to tort-based claims related to the contract
Indeed, we believe that this discussion aptly demonstrates why the intent-
of-the-parties approach, which requires such a detailed analysis of the
language of the forum selection clause, represents the best of the

established methodologies for resolving this issue. Nonetheless, we

 

recognize that, like the other approaches, the intent-of-the-parties
analysis is also not without its own flaws. As highlighted in Terra
International, Inc, v. Mississippi Chemical Corp,, 119 F.3d 688 (8th Cir.
1997), there may be instances when the intent of the parties cannot be
determined even after a thorough review of the applicable contracts. In
Terra, the Eighth Circuit Court of Appeals applied the Berrett rule in
reviewing whether tort claims were subject to a forum selection clause
and, after carefully reviewing the meaning of the terms used in that
clause, concluded that it was unable to ascertain whether the parties
intended the tort claims brought by the plaintiff to be subject to the
clause. Id. at 692-95. In order to resolve the stalemate, the Terra court
applied the First Circuit's “same operative facts” rule-based test to resolve
this issue. Id. at 695.

In light of the concerns noted above, and the practical insight
generated from a review of the facts of this case, we conclude that a
modified version of Terra’s hybrid approach that combines a careful review

21

 

 
of the text with possible consideration of the Ninth and First Circuit rules
‘as secondary factors is best suited for addressing whether tort-based
claims related to a contract are subject to a forum selection clause
contained in that agreement. In applying the hybrid test we adopt here
today to resolve this issue, the district court must first focus on “the
intention of the parties reflected in the wording of particular clauses and
the facts of [the] case,” Berrett, 623 F. Supp. at 948-49, to determine
whether related tort claims were meant to be included within the clause’s
control. Therefore, the initial review must involve a careful and thorough
study of the particular clause itself, See Terra, 119 F.3d 688; Berrett, 623
F. Supp. 946. The clause’s context within a series of preexisting or
superseding agreements and other particular facts of the case may also be
relevant in this initial review. Berrett, 623 F. Supp. at 948-49.

If the issue can be resolved based on this examination, then
the district court's analysis is concluded. If, however, as in Terra, the
intent of the parties cannot be discerned from the language of the
Jagreement, then the district court should apply the Ninth and First
[Circuit rules, in that order, to resolve the issue. As a result, if the issue

Jcannot be resolved through the Berrett textual analysis, the next step to is

 

{to determine whether resolution of the tort-based claims pleaded by the
plaintiff relates to the interpretation of the contract, and if they are, then
ithe claims are within the scope of the forum selection clause. Cf, Manetti-
Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 514 (9th Cir. 1988). If,
{for some reason, the application of this rule still does not resolve the issue,
the district court should determine whether the contract-related tort

claims involve the same operative facts as a parallel breach of contract

claim—that is, whether the plaintiff's cause of action directly concerns the

 

 
nee

 

formation or enforcement of the contract containing the forum selection
clause, cf, Lambert v. Kysar, 983 F.2d 1110, 1121-22 (1st Cir. 1993), or
[whether the plaintiff could have brought a parallel breach of contract,
claim and yet did not, See Terra, 119 F.3d at 695 (rephrasing the Lambert
rule). If these tests are satisfied, then the forum selection clause would be
applicable to the tort claims. Lambert, 983 F.2d at 1121-22. Thus, the
/Ninth and First Circuit rules should be implemented as relevant factors in
ithe rendering of a final determination of whether tort claims should be
subject to a forum selection clause when the parties’ intentions on this
issue are not otherwise discernible. Finally, we note that, in applying this,
analysis, the plaintiff has the burden of demonstrating that tort-based
claims related to a contract are not subject to a forum selection cause
contained in the agreement. Cf. Tandy Computer Leasing v. Terina’s
Pizza, 105 Nev. 841, 844, 784 P.2d 7, 8 (1989) (requiring the party seeking
to set aside a forum selection clause to demonstrate a “strong showing”
that such relief is warranted).

Because this court had never addressed whether tort-based
claims related to a contract were subject to an otherwise enforceable forum
selection clause contained in the agreement, the parties and district court
did not have the benefit of the test adopted in this opinion in addressing
this issue in the underlying case. Accordingly, we conclude that a remand
is warranted for the district court to further examine its dismissal in light
lof this opinion, and we therefore reverse the district court's dismissal of
this case based on the applicability of the forum selection clause for that
purpose. See, e.g., Vredenburg v. Sedgwick CMS, 124 Nev. 553, 563, 188
/P.3d 1084, 1092 (2008) (remanding for reexamination under a standard

jadopted in that opinion). We note that, prior to implementing this test on

23

 
on

 

lremand to determine whether Tuxedo's tort-based claims are subject to
lany forum selection clause, the district court will necessarily need to
Jdetermine which of the three purported forum selection clauses discussed
lby the parties is the controlling clause and, once that determination is
made, address the relevant issues identified by this court through its de
Inovo review of the district court’s contractual interpretation.® Whitemaine
lv. Aniskovich, 124 Nev. 302, 308, 183 P.3d 137, 141 (2008).

Ae et, J.

Hardesty

We concur:

U4 Yaa ca.
Douglas

Pickering

We note that our brief discussion of the issues revealed through our
ide novo review of particular texts at issue in this appeal should not be
construed as instructions to the district court on how to rule on these
various issues,

In addition, this opinion should not be construed as affecting
lexisting Nevada law that presupposes the existence of a contract for a
party seeking rescission based on fraud in the inducement. See Awada v.
‘Shuffle Master, Inc, 123 Nev. 613, 622, 173 P.3d 707, 713 (2007)
(explaining requirements for seeking rescission of a contract because of
{fraud in the inducement); J,A. Jones Constr, v, Lehrer McGovern Bovis,
120 Nev. 277, 290-91, 89 P.3d 1009, 1018 (2004) (stating the elements for
{fraud in the inducement).

 

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