### IN THE COURT OF APPEALS OF TENNESSEE AT KNOXVILLE May 2000 Session

SIGNAL CAPITAL CORPORATION, ET AL 

### . v. SIGNAL ONE, LLC, ET AL


### .

Appeal from the Chancery Court for Hamilton County No. 99-0899 W. Frank Brown, III, Chancellor

FILED SEPTEMBER 7, 2000

No. E2000-00140-COA-R3-CV

This appeal questions whether a forum selection clause is valid and enf orceable ag ainst the Plaintiff s, Larry Well s and S ignal Capit al Cor porat ion. P ursua nt to the fo rum se lecti on cla use, S ignal One LLC andNationsBanc Cap

ital Corporation f

iled a motion to

dismiss forimproper venue. The Trial Court granted the moti

on to dismiss by

finding the foru

m selection clause

was valid. We affi

rm.

Tenn. R. App. P. 3 Appe al as of Right; Judgme

nt of the Chancery Co

urt Affirmed and Remanded

H OUSTON M. G ODDARD , P.J., delivered the o pinion of the court

, in which C HARLES D. S USANO , J R

. and D. M ICHAEL S WINEY , JJ. joined.

John W. Murrey, III

and Hugh J. Moore, Jr., Chattanooga, Tennessee, for the appellants, Signal Capital Corporatio

n and Larry

Wells

Roger W. Dickson and C. Cre ws Townse

nd, Chatt anooga, Tenne ssee, and Cory

Hohnbaum, Charlotte, North Carolina, for the appellees, Signal One, LLC and NationsBanc Capital Corpor ation

OPINION

Larry Wel ls and Signa l Capi tal Co rpora tion filed a comp laint again st Si gnal O ne LLC and NationsBanc Capital Corporation alleging that two agreements, the First Amendment to the Acquisition Agreement and the First Amendment to the Employment Agree ment, were induced by fraud and duress. The Plaintiffs sought rescission of the amendments and reinstate ment of the original Acquisition and Employment agreements. Signal One and Na tionsBanc filed a motion to dismiss for improper venue because the original Acquisition Agreement contained a forum selection clause requiring all disputes arising from the agreement to be resolved in Charlotte, North Carolina. The Trial Court found the forum selection clause valid and dismissed the complaint without prejudice.-2-

On appeal, the Plaintiffs raise the following issues, which we restate:

I. Whether the trial court erred in dismissing a cause of action for rescission of an employment c

ontract based up

on a forum select

ion clause contai

ned in a separate and independent a

cquisition agre

ement. II. Whether the trial court erred in dismissing a cause of action for enforcement of the provision of a limited liability company agree ment based upon a forum selection clause

contained in a sep

arate and indep

endent acquisitio

n agreement. III. Whether the trial court erred in not applying North Carolina law and public policy opposing forum se

lection clauses. IV. Whether the trial court erred by finding none of the exceptions to enforce ment of the forum selection clause applied.

We affirm the Tria

l Court.

FACTS Larry Wells, a Tennessee resident, wa s the founder and sole shareholder of Signal Capital Corporation. Mr. Wells formed and managed Signal Capital beginning in 1992. Signal Capital’s business

consisted of acqu

iring, construc

ting, developing

, owning and lea

sing wireless communication towe

rs. Signal Capita

l is a Tennessee c

orporation with its

offices locate

d in Chattanooga.

On July 8, 1998, Mr. Wells and NationsBanc Capital Corporation, a Texas corporation, entered into three agreements, an Acquisition Agreement, an Employ ment Agreement and a Limited Liability Company Agreement. The Limited Liability Company Agreement created Signal One LLC, a Delaware limited liability company with its offices located in Chattanooga. The Acquisition Ag

reement transfe

rred Signal Capi

tal’s operating

assets to Signal O

ne LLC in exchange for $1,000,000 in cash and 46,320 Voting Common Units of Signal One LL C. The amount of $4,000,000 was placed in escrow to be released at a later time. NationsBanc rec eived 53,680 Nonvoting Common Units of Signal One LLC. In the Employ ment Agreement, Mr. Wells agreed to serve as S ignal One’s C hief Execu tive Office r until J une 30, 200 1, in exch ange for an annual sa

lary of $250

,000 with benefits

. Each of the three original agreements contained a clause re garding either the forum selected or the governing law for any disputes. The Limited Liability Company Agreement provided that the governing law would be the law of the State of Delaware and that disputes may be brought in the courts of the State of North Carolina or the United States District Court for the Western District of North Carolina. The Employment Agreement stated the gove rning law was the law of North Carolina, but there was no forum selection provision. The Acquisition Agreement contained a governing law section and the forum selec tion clause which is relied upon by the Defendants. The governing law unde r the Acquisition Agreement was the law of the State of North Carolina. The forum selection clause in the Acquisition Agreement provided the following:-3-

Except to the extent a claim is subject to arbitration as provided in Section 11.3(b) hereof, any and all actions arising under or in respe ct of this Agreement (but excluding any Third Party Action) shall be litiga ted exclusively in the federal or state courts in the City of Charlotte, State of North Carolina. . . .By e xecution and delivery of

this Agreement,

each Party

to this Agreemen

t irrevocably

submits to the personal jurisdiction of such courts for itself, himself, or herself and in respect of its, his or her property with respect to such action with respect to any actions arising under or in respect of this Agreement (including Third Party Actions). Each party to this Agreement agree s that venue would be proper in any of such courts, and hereby waives any objection that any such court is an improper or inconvenient forum for the resolution of any such action.

On September 1, 1998, the Acquisition Agreement and Employment Agree ment were amended. The First Amendment to the Acquisition Agreement reduced the number of Voting Common Units received by Signal Capital from 46,320 to 21,930.8 units. The First Amendment to the Employment Agreement changed Mr. Wells’ responsibilities as Signal One’ s Chief Executive Officer, but his salary and benefits remained the same. Neither amendment contained a clause regarding any cha nges to the governing law or forum selected.

THE AGREEMENTS The Plaintiffs’ first two issues question whether the three agreements are separate and distinct or one transaction. In interpreting a contract, a court must ascerta in and give effect to the parties’ intentions. See Bob Pearsall Motors, Inc. v. Regal Chrysler -Plymouth, Inc. , 521 S.W.2d 578, 580 (Tenn. 1975). In this ca se, the parties e

ntered into more th

an one contract

. “The terms of separate contracts forming integral parts of a single transa ction may be considered together.” The Realty Shop, Inc. v. RR Westminster Holding, Inc. , 7 S.W.3d 581, 599 (Tenn. Ct. App. 1999) (cit ing McCall v. Towne Square, Inc. , 503 S.W.2d 180, 182-83 (Tenn. 1973); Stovall v. Dattel , 619 S.W.2d 125, 127 (Tenn. Ct. App. 1981)). The Trial Court found the three original agreements constituted one transaction and applied the forum selection clause to all the Plaintiffs’ claims.

The Plaintiffs argue that the three agreements are separate and independent documents. In support of their argument, Plaintiffs cite the governing law and pe rmissive forum selection provisions in the Emp

loyment Ag

reement and L

imited Liability

Company Ag

reement. These provisions do not conflict with the mandatory forum selection clause in the Acquisition Agreement, but the Plaintiffs argue that these provisions prove the documents are separate a nd independent. We disagree.

The parties signed the Limited Liability Company Agreement, Acquisition Agreement and Employment Agreement on the same day . The Acquisition Agreement incorporates both the Employment Agreement and Limited L iability Company Agreement as par t of the parties’ entire agreement. Furthermore, the Acquisition Agreement conditioned the obligations of the pa rties-4-

upon their entering into the Limited Liability Company Agreement and the Employment Agreement. The Acquisition Agreement, which transferred assets to Signal One LLC, and the Employment Agreement, which employ ed Mr. Wells as CEO of Signal One LLC, would be meaningless without the Limited Liability Company Agreement, which created Signal One LL C. We find the three agreements are interrelated and must be read toge ther as one transaction. Accordingly

, the Trial Court co

rrectly fo und that the forum s

election clause

, if valid, applied

to all the Plaintiffs’ claims.

FORUM SELECTI ON CLAUSE The Plaintiffs’ last two issues involve the enforceability of the forum selection clause. They argue that the forum selection clause violates North Car olina public policy. In the alternative, they argue that the forum selection clause is unenforceable under Tennessee law because four exceptions apply.

The Plaintiffs cite

North Carolina Ge

neral Statutes Sec

tion 22B-3 in suppor

t of their argument that the forum selection clause in this case violates North Carolina public policy. The Acquisition Agreement’s governing law section states that the law of North Carolina applies. North Carolina General Statutes Section 22B-3 provides that “any provision in a contrac t entered into in North Carolin

a that requires th

e prosecution of a

ny action or

the arbitration of

any dispute that arises from the contract to be instituted or heard in another state is against public policy a nd is void and unenforceable.” N.C. Gen. Stat. § 22B-3 (1999). However, this statute would not apply to the f

orum selection cla

use in this case be

cause the contra

ct was not “enter

ed into in North Carolina.”

Forum selection clauses are generally e nforced in Tennessee. In Dyersburg Machine Works, Inc. v. Rentenbach Engineering Company , 650 S.W.2d 378 (Tenn. 1983), the Tennessee Supreme Court provided the following exceptions to the enforceability of a forum selection clause: “(1) the plaintiff cannot secure effective relief in the other state, for r easons other than delay in bringing the action; (2) or the other state would be a substantially less convenient place for the trial of the action than this state; (3) or the agreement as to the place of the action was obtained by

misrepresentati

on, duress, abuse

of economic powe

r, or other uncon

scionable means; (4) or it would for some other reason be unfair or unreasonable to enforce the ag reement.” Dyersburg , 650 S.W.2d at 380. The Court further sta

ted: “We conclude

that the courts of

this state should give consideration to the above mentioned factors and any other s which bear upon the fundamental fairness of enforcing such a forum selection clause, and should enforc e such a clause unless the party opposing enforcement demonstrates that it would be unfa ir and inequitable to do so.” Dyersburg , 650 S.W.2d at 380.

In reviewing the exceptions to the enforceability of forum selection clauses, the Trial Court found North Carolina has jurisdiction to hear this action, North Carolina is a convenient place for this action, the agreement as to the place of the action was not obtained by fraud or duress and there was no other reason that would be unfair or inequitable to enforce the clause

.-5-

The first exceptio

n involves the ques

tion of whether a

party can s

ecure effect

ive relief in the other state. F

irst, the Plaintiffs

assert they

will not receive e

ffective relie

f because their claims would have to be split between a North Carolina court and Tennessee court. However, the claims would only have to be split if we found the agreements were se parate and independent. By finding

the three agre

ements were one

transaction, all t

he Plaintiffs’ cla

ims would remain together in one court.

Second, the Plaintif

fs argue that th

ey can re ceive no relief

in North Carolina b

ecause North Carolina does not have a reasonable relationship to the parties and their agreements. According to the

Plaintiffs, North Ca

rolina would not ha

ve subject matter

jurisdiction over t

his dispute without having a reasonable relationship. We find both Tennessee and North Carolina have a reasonable relationship to this contract dispute.

Tennessee Code Annotated Section 47-1-105(1) provides: “Except as provided hereafter in this section, when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties.” Tenn. Code Ann. § 47-1-105(1) (1999). The parties chose to litigate

any disputes

in the courts of Cha

rlotte, North Caro

lina. NationsBan

c conducts business in Charlott

e and maintains an

office there. A

ll correspondenc

e arising from th

e parties’ bus ine ss r ela tio nsh ip w as t o be sen t to the Nat ion sBan c off ice in C harl ott e. M ost imp ort ant ly, Mr. Binkowski, one

of the individuals r

epresenting Na

tionsBanc, work

s and resides in No

rth Carolina. Mr. Bin

kowski signed all

the agreemen

ts as a Vice Presid

ent of NationsBa

nc and he is a material witness to the circumstances surrounding the contract negotiations. North Carolina has a reasonable relationship to this dispute and can provide relief to the Plaintiffs.

The second exception relates to the convenience of having a trial in the other state as compared to Tennessee. The other state must be a substantially less convenient place for the trial than Tennessee. The convenience is evaluated from the perspective of all the parties, not just the Plaintiffs. The Plaintiffs argue that many witnesses and all the business records of Signa l Capital and Signal One LLC are located in Chattanooga , Tennessee. However, the NationsBanc’s representative

s involved in this ac

tion are located

in Texas and North Ca

rolina. All correspondence regarding the business activities between the parties wa s sent to North Carolina. Therefore, business records are located in North Carolina as well as Tennessee. The record contains no inform

ation regardin

g the differen

ce in Plaintiffs’ e

xpenses for litiga

ting in Tennessee compared to litigating in North Carolina. The Plaintiffs only arg ue that they may have to take “expensive depositions.” There is no proof that these “expensive depositions” would not have occurred if the litigation was in Tennessee. The Plaintiffs have not shown a substantial inconvenience to all the parties.

The third exception

is whether “the a

greement as to the place of the action was obtained by misrepre

sentation, duress , abuse of econom ic power, or othe

r unconscionable

means” (emphasis added) . The Plaintiffs al lege they were fraudule

ntly induced

into signing the F

irst Amendment to the Acquisition Agreement. The First Amendment to the Acquisition Agreement-6-

did not change the effect of the forum selection clause in the original Acquisition Agre ement. Therefore, the Plaintiffs have not alleged the original Acquisition Agreement conta ining the forum selection clause was obtained by fraud or duress. The third exception does not apply

. The fourth except

ion encompasses a

ny other re

ason that is unfair

or unreasonable

to enforce the agreement. We find no other reasons not to enforce the forum selec tion clause.

For the for egoi ng re aso ns t he j udgm ent of t he C han cery C ourt is affir med and the cause remanded for the collection of

costs bel ow. Costs of appeal are adjudged against Signal Capital Corporation, L

arry Wells a

nd their sureties.

_________________________________________

HOUSTON M. GODDARD, PRESIDING JUDGE