Opinion ID: 2834006
Heading Depth: 2
Heading Rank: 2

Heading: The Parties’ Freely Negotiated Contract Should be Respected

Text: Our decisions in AIU and Automated Collection Technologies regarding the propriety of mandamus relief in forum-selection cases comport with the principle that parties generally have the freedom to negotiate agreements as they see fit. [19] Hatfield did not demonstrate fraud, overreaching, or undue hardship that would provide an exception to the rule that forum-selection clauses are generally honored. Instead, relying on our decision in DeSantis , which involved only a choice-of-law provision and not a forum-selection clause, Hatfield insists we must disregard the forum-selection clause because the pending case concerns a covenant not to compete. In DeSantis , a Florida corporation filed suit in Texas against one of its Texas employees for violation of a non-compete agreement. The agreement included a choice-of-law provision specifying that Florida law would govern disputes under the agreement. We held that Texas law should govern the dispute despite the choice-of-law provision. [20] We reasoned that Texas law should control because, among other reasons, “the law governing enforcement of noncompetition agreements is fundamental policy in Texas” and “to apply the law of another state to determine the enforceability of such an agreement in the circumstances of a case like this would be contrary to that policy.” [21] We therefore held that enforceability of the non-compete agreement “must be judged by Texas law, not Florida law.” [22] Our decision today in no way questions the reasoning of DeSantis , but we decline Hatfield’s invitation to superimpose the DeSantis choice-of-law analysis onto the law governing forum-selection clauses. [23] While DeSantis and the instant case both concern Texas citizens working in Texas for a Florida-based company, there are critical distinctions. DeSantis , decided before the now-applicable version of the Covenants Not to Compete Act [24] and our recent decision in Sheshunoff construing the Act, [25] did not concern a mandatory forum-selection clause or first-filed litigation in the parties’ chosen jurisdiction. DeSantis concerned how Texas courts should construe employment contracts of Texas employees. We observed that “Texas has a materially greater interest than Florida in deciding whether the noncompetition agreement in this case should be enforced.” [26] But we have never declared that fundamental Texas policy requires that every employment dispute with a Texas resident must be litigated in Texas. We recognized in AIU that 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.” [27] Along similar lines, even if DeSantis requires Texas courts to apply Texas law to certain employment disputes, it does not require suit to be brought in Texas when a forum-selection clause mandates venue elsewhere. No Texas precedent compels us to enjoin a party from asking a Florida court to honor the parties’ express agreement to litigate a non- compete agreement in Florida, the employer’s headquarters and principal place of business. Under Automated Collection Technologies and AIU , our controlling precedents on forum-selection clauses, the parties’ bargained-for agreement merits judicial respect. This dispute should be heard in the first-filed Florida action, as the parties explicitly contracted. [28] Finally, we note that today’s decision according deference to the first-filed Florida action, besides honoring the parties’ contractual commitment, also honors principles of interstate comity. Our federal system benefits from a measure of state-to-state comity, which, while not a constitutional obligation, is “a principle of mutual convenience whereby one state or jurisdiction will give effect to the laws and judicial decisions of another.” [29] When a matter is first filed in another state, the general rule is that Texas courts stay the later-filed proceeding pending adjudication of the first suit. [30] Although the mere pendency of a previously filed action in one state does not, in itself, mandate abatement or dismissal in another state, deference seems particularly appropriate here. AutoNation’s first-filed Florida action is not an attempt to litigate a purely Texas matter in a forum that has no relation to the parties or their agreement. Florida has an interest in this dispute, as described in two published interlocutory appellate decisions in the related Florida suit. [31] Here, comity is not pitted against fundamental Texas policy, [32] which does not require that every non-compete case involving a Texas resident be litigated in our courts, as explained above. Accordingly, and without offending DeSantis , we will not presume to tell the forty-nine other states that they cannot hear a non- compete case involving a Texas resident-employee and decide what law applies, particularly where the parties voluntarily agree to litigate enforceability disputes there and not here. Our holding today rests squarely on the parties’ contractual commitment, but it carries the concomitant benefit of extending comity to the Florida courts.