Opinion ID: 1667169
Heading Depth: 1
Heading Rank: 6

Heading: Interrelated litigation Old South

Text: ¶ 45. HICO/Hood's concern with interrelated litigation which involves parties not subject to the contract relates primarily to Old South. Thus, we first address whether Old South is subject to the forum selection clause. ¶ 46. In Lu, a California appeals court was faced with similar facts. A non-signatory defendant was alleged to have participated in tortious conduct and was involved with the corporate business structure in the franchising dry-cleaning establishment. That court held: `A range of transaction participants, parties, and non-parties, should benefit from and be subject to forum selection clauses.' [citations omitted]. ( Manetti-Farrow, Inc. v. Gucci America, Inc. (9th Cir.1988) 858 F.2d 509, 514, fn. 5). Here, the alleged conduct of Dryclean Franchise and Dryclean U.S.A. is closely related to the contractual relationship. They are alleged to have participated in the fraudulent representations which induce plaintiffs to enter into the Agreement. Indeed, plaintiffs go so far as to allege alter ego of Dryclean California, which did sign the Agreement containing the forum selection clause. Under these circumstances, the fact that Dryclean Franchise and Dryclean U.S.A. did not sign the Agreement does not render the forum selection clause unenforceable. (See TAAG Linhas Aereas de Angola v. Transamerica, Inc., (9th Cir.1990) 915 F.2d 1351, 1354, Manetti-Farrow, Inc. v. Gucci America, Inc., supra., 858 F.2d at 514 fn. 5; Coastal Steel v. Tilghman Wheelabrator Ltd. (3d Cir.1983) 709 F.2d 190, 203). To hold otherwise would be to permit a plaintiff to sidestep a valid [forum selection clause] simply by naming a closely related party who did not sign the clause as a defendant. Lu, 14 Cal.Rptr.2d at 908 ¶ 47. A Texas appellate court relied on Lu in affirming a motion to dismiss, where the contract specified California as both the choice of law and the forum. In doing so, the court held that the plaintiff waived its right to assert its own inconvenience by agreeing to the valid forum selection clause. Accelerated Christian Education, Inc. v. Oracle Corp., 925 S.W.2d 66, 71 (Tex.App.1996). In Accelerated, the court also found that [i]n federal court, forum selection clauses have been applied to non-signatories to a contract who are `transaction participants.' Id. (citing Brock v. Entre Computer Ctrs., Inc., 740 F.Supp. 428, 431 (E.D.Tex.1990); Clinton v. Janger, 583 F.Supp. 284, 290 (N.D.Ill.1984)). In doing so, the Accelerated court held: We agree with the federal court that a valid forum selection clause governs all transaction participants, regardless of whether the participants were actual signatories to the contract. By transaction participant, we mean 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. 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. This cannot be. We conclude the trial court may apply a valid forum selection clause to all transaction participants. [footnote omitted] To conclude otherwise would enable a party to bypass a valid forum selection clause by naming in its petition a closely-related party who was not a party to the contract. See Lu, 14 Cal.Rptr.2d at 908. The trial court properly dismissed Accelerated's claims against Brady. Accelerated, 925 S.W.2d at 75. The same standard should apply in the underlying case. ¶ 48. Delaney and Old South attempt to distance themselves from the Representative Agreement, and establish independent liability under their Producer's Contract with St. Paul. In their cross-claim, Delaney and Old South claim they were independent contractors for HICO. Hood, however, claims that Gerald Delaney was an employee of HICO from the beginning, and remained an employee until Delaney resigned his position with HICO and began representing Zurich, in competition with Titan. ¶ 49. More importantly, Delaney was a corporate officer of HICO. Old South was formed after Delaney became involved with HICO. He and his partners in Old South acquiesced in Delaney's involvement at HICO. The record shows that both Delaney and Old South profited greatly from the existence of the Representative Agreement. Old South tells us that Hood and HICO became the sole and exclusive marketing arm for Titan in Mississippi.... Delaney testified and clearly believed that HICO was Titan's exclusive marketing representative. ¶ 50. While operating with HICO, whether independent contractor or employee, Delaney and Old South enjoyed the benefits of the Representative Agreement, including HICO's relationship with the Association of Supervisors, and the political connections provided by Hood. ¶ 51. Old South's primary dispute in this litigation involves the ownership of expirations of certain policies. Furthermore, in its cross complaint, Old South's primary allegation against St. Paul was that its agent, Hood, committed wrongful acts, and that the wrongful acts were imputed to St. Paul. Whether St. Paul and/or Hood had a right to approach the various policyholders and solicit renewals requires interpretation and application of the terms of both the Representative Agreement and the Titan/Old South Producers Agreement. Having enjoyed the benefits provided by the Representative Agreement, Old South will not now be allowed to disavow its terms, including the forum selection clause. The extent and quality of Delaney's involvement in HICO, together with his involvement in the operation of HICO under the Representative Agreement, renders both Delaney and Old South transaction participants in the Representative Agreement. See discussion of transaction participants, supra. See also Lu, 14 Cal.Rptr.2d at 908. ¶ 52. Accordingly, both Delaney and Old South are bound by the forum selection clause of the Representative Agreement. That said, HICO's concern that this matter involves interrelated litigation with other parties not subject to the contract or jurisdiction of Bexar County, Texas, is unfounded. Additionally, HICO/Hood would not be subject to multiple litigation and Bexar County, Texas is the appropriate forum for this litigation.