Court Opinion

ID: 4193635
Source: CourtListenerOpinion
Date Created: 2017-08-07 07:18:22.596203+00
Date Added: 2024-06-11T14:39:40.386739
License: Public Domain

CONDITIONALLY GRANT; and Opinion Filed August 4, 2017.

                                         S    In The
                                Court of Appeals
                         Fifth District of Texas at Dallas
                                      No. 05-16-01443-CV

 IN RE BRUNO KÜBLER, IN HIS CAPACITY AS INSOLVENCY ADMINISTRATOR
            OF THIELERT AIRCRAFT ENGINES GMBH, Relator

                 Original Proceeding from the 191st Judicial District Court
                                   Dallas County, Texas
                            Trial Court Cause No. DC-14-09151

                             MEMORANDUM OPINION
                           Before Justices Myers, Evans, and Schenck
                                  Opinion by Justice Schenck
       In this original proceeding, relator complains of the trial court’s denial of relator’s motion

to dismiss the intervenor’s claims for lack of subject matter jurisdiction and, alternatively, the

trial court’s refusal to enforce a forum selection clause and refusal to dismiss based on forum non

conveniens. After reviewing the petition, the real parties’ responses, relator’s reply, and the

mandamus record, we conclude relator is entitled to relief from the trial court’s refusal to enforce

the forum selection clause. We conditionally grant the writ.

                                           Background

       Relator Bruno Kübler is the German, insolvency administrator of Thielert Aircraft, a

German company that manufactures and supplies replacement aircraft engine parts. Superior Air

Parts, Inc., a former customer to whom Thielert Aircraft manufactured and supplied engine parts,

sued Thielert Aircraft in Dallas. Superior’s lawsuit is based on a dispute over the ownership and

possession of drawings and technical sheets allegedly given to Thielert Aircraft by Superior and
models and drawings created by Thielert Aircraft that relate to or contain information regarding

Superior (“the Property”).

       After Thielert Aircraft was placed in an insolvency proceeding in Germany, Kübler

negotiated the sale of Thielert Aircraft’s assets to another German company, Technify Motors,

GmbH. The sale was memorialized in the Business Purchase and Transfer Agreement (“the

transfer agreement”) and was executed in January 2013. The transfer agreement provides for

jurisdiction of any disputes related to the agreement as the corporate seat of Thielert Aircraft,

which is Lichtenstein, Germany. Kübler and Technify disagree on whether Germany is the

exclusive place of jurisdiction.

       Before the sale to Technify closed, Superior demanded Kübler return the Property.

Kübler and Technify addressed Superior’s demand in a “Closing Protocol to the Business

Purchase and Transfer Agreement” (“the closing protocol”) that carved out the Property from the

asset purchase. The closing protocol set forth the agreement between Kübler and Technify to

exclude the Property from the assets transferred to Technify, noted that Kübler and Technify

could not reach an agreement on the value of the Property, and provided remedies for Technify

should the final decision of the Texas courts prohibit Kübler from transferring the Property to

Technify.   The closing protocol provides that Technify “shall have and retain any and all

potential rights and claims, in particular claims for damages within the meaning of §§ 249 et seq.

German Civil Code,” that Technify might have against Kübler because the Property cannot be

transferred to Technify.     Kübler and Technify agreed to cap damages for such a claim at

€3,500,000.00. The closing protocol also notes that Kübler would not transfer the Property to

Technify “until it has been legally finally and unappealable [sic] decided or agreed on, if and to

what extent [Kübler] shall be entitled to transfer” the Property to Technify.

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       Technify intervened in the underlying lawsuit between Kübler and Superior. Technify

asserted a claim for declaratory judgment as to “the respective rights” of Superior, Kübler, and

Technify in the Property and asserted a claim for “contract damages,” alleging that Kübler and

Technify had agreed that “in the event of a legal determination that Kübler must transfer the

Property” to Superior, then Technify “will have a claim for damages against Kübler.” Kübler

filed a motion to dismiss and plea to the jurisdiction seeking dismissal of Technify’s intervention

and claims, which the trial court denied.

       In this original proceeding, Kübler contends dismissal was required because (1)

Technify’s contract damages claim is not ripe because no judicial determination has been made

as to Superior’s right to the Property, (2) the transfer agreement’s forum selection clause

required Technify to file suit in Germany, and (3) Dallas is an inconvenient forum for a contract

dispute between two German companies that is governed by German law.

                                     Forum Selection Clause

       Forum-selection clauses provide parties with an opportunity to contractually preselect the

jurisdiction for dispute resolution. Pinto Tech. Ventures, L.P. v. Sheldon, No. 16-0007, 2017 WL
2200357, at *5 (Tex. May 19, 2017) (citing In re AIU Ins. Co., 148 S.W.3d 109, 111 (Tex. 2004)

(orig. proceeding)). 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. In re Laibe

Corp., 307 S.W.3d 314, 316 (Tex. 2010) (orig. proceeding) (per curiam); In re 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

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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 at

113); In re Laibe Corp., 307 S.W.3d at 316; In re ADM Inv’r Servs., Inc., 304 S.W.3d 371, 375

(Tex. 2010) (original proceeding). A trial court abuses its discretion in 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. Servs., Inc., 304 S.W.3d at 375; M/S Bremen v. Zapata Off–Shore Co., 407 U.S.
1, 15–17 (1972). Technify did not meet that heavy burden here.

                                            Analysis

       The transfer agreement includes the following forum selection clause:

       This Agreement is subject to the laws of the Federal Republic of Germany. To
       the extent legally permitted, exclusive place of jurisdiction is the seat of the
       Insolvency Debtor.

It was Technify’s burden to establish one of the four exceptions to the general rule that forum

selection clauses are mandatory and enforceable. To meet that burden, Technify argued below

that (1) the clause is invalid and unenforceable because Kübler is not a proper party to the clause

under German law, (2) the clause does not apply to all claims asserted by Technify, (3)

enforcement of the clause would be unreasonable or unjust, and (4) Germany would be a

seriously inconvenient forum for trial. Technify failed to meet its burden of proof.

                                               –4–
       Technify first argues that the clause is not mandatory and is unenforceable because it

conditions the exclusive place of jurisdiction only “to the extent legally permitted” and German

law does not permit an insolvency administrator like Kübler to be a party to a forum selection

clause. Technify and Kübler each presented expert testimony on German law. The experts

agreed that the German Federal Supreme Court had not yet decided whether an insolvency

administrator is permitted to be a party to a forum selection clause under German law. But the

experts disagreed regarding how the court would decide the issue if it was presented to the court.

Whether the German courts would enforce the clause is irrelevant, however, because Texas law

does not require Kübler to prove that German courts would recognize the validity of the clause or

allow Kübler to enforce the clause. See Deep Water Slender Wells, Ltd. v. Shell Intern. Expl. &

Prod., Inc., 234 S.W.3d 679, 695 (Tex. App.—Houston [14th Dist.] 2007, pet. denied) (citing

Phoenix Network Techs. (Europe) Ltd. v. Neon Sys., Inc., 177 S.W.3d 605, 618 (Tex. App.—

Houston [1st Dist.] 2005, no pet.) (holding that under federal analysis adopted by Texas Supreme

Court, party invoking forum-selection clause need not show that forum selected recognizes the

validity of forum-selection clauses). We are aware of recent federal case law proposing a more

nuanced approach to this “lex fori” rule that would allow consideration of some aspects of the

chosen foreign law as part of the analysis of the forum selection clause. Yavuz v. 61 MM, Ltd.,

465 F.3d 418, 421, 430–31 (10th Cir. 2006). But even under that line of authority, foreign law

would govern only the issue of construction of the clause’s reach, not its fundamental

enforceability. E.g., Phillips v. Audio Active Ltd., 494 F.3d 378, 385 (2d Cir. 2007); Lanier v.

Syncreon Holdings, Ltd., No. 11-14780, 2012 WL 3475680, at *5, 6 (E.D. Mich. Aug. 14, 2012);

Diesel Props S.r.L. v. Greystone Bus. Credit II LLC, No. 07 Civ. 9580(HB), 2008 WL 4833001,

*6–7 (S.D.N.Y. Nov. 6, 2008). Texas law deems forum-selection clauses prima facie valid and

will be enforced unless the opponent makes a strong showing that the forum-selection clause

                                               –5–
should be set aside. In re AIU Ins. Co., 148 S.W.3d at 113–14; In re Automated Collection

Techs., Inc., 156 S.W.3d 557, 559 (Tex. 2004) (orig. proceeding) (per curiam).

       Moreover, Technify’s arguments misconstrue the clause’s language.             Courts have

construed similar provisions to be mandatory provisions conferring exclusive jurisdiction in the

specified forum. See, e.g. Weber v. PACT XPP Techs., AG, 811 F.3d 758, 773 (5th Cir. 2016)

(under German law, clause stating “[t]o the extent permitted by law, jurisdiction, venue, courts,

and place of performance shall be at the corporate seat of [German corporation]” confers

exclusive and mandatory jurisdiction in the specified forum); May v. Ticketmaster Entm’t, LLC,

No. 3:10-CV00760, 2010 WL 4024257, at *2, 3 (M.D. Tenn. Oct. 13, 2010) (forum selection

clause stating that the parties “submit to the exclusive jurisdiction of the Delaware Chancery

Court to the fullest extent permitted by Applicable Law and, to the extent not so permitted, in

any court sitting in the State of Delaware” specifies Delaware state court as the exclusive forum);

In re Facebook, Inc., IPO Sec. & Derivative Litig., 922 F. Supp. 2d 445, 461 (S.D.N.Y. 2013),

aff’d sub nom. In re Facebook, Inc., Initial Pub. Offering Derivative Litig., 797 F.3d 148 (2d Cir.

2015) (forum selection clause stating “the Court of Chancery of the State of Delaware shall, to

the fullest extent permitted by law, be the sole and exclusive forum” is mandatory, not

permissive).

       The phrase “to the extent legally permitted” does not make the provision permissive and

does not imply a requirement that the parties prove that they have authority to enter into the

forum selection clause.    Rather, the proper focus is on the statement of exclusivity and

determination of whether the applicable law would permit exclusive jurisdiction in the chosen

forum. For example, in May, the record did not establish that applicable law would not permit

exclusive jurisdiction in the Delaware Court of Chancery or that the suit could not have been

filed in that court. May, 2010 WL 4024257 at *2, 3. The court, therefore, held that the clause

                                               –6–
mandated exclusive jurisdiction in the Delaware state courts. Id. at * 3, n. 15; see also In re

Facebook, 922 F. Supp. 2d at 461 (focusing on use of the term “exclusive” rather than modifying

phrase “to the fullest extent permitted by law”). The same analysis applies here. The plain

language of the forum selection clause provides for exclusive jurisdiction in Thielert Aircraft’s

corporate seat, which is in Lichtenstein, Germany. The record does not establish that German

law prohibits enforcement of forum selection clauses. The forum selection clause, thus, confers

mandatory and exclusive jurisdiction in Lichtenstein, Germany.

       Technify next argues that its declaratory judgment claim and Superior’s declaratory

judgment claims against Technify are outside the scope of the clause. This argument disregards

that Superior brought claims against Technify only in response to Technify’s intervention.

Superior’s declaratory judgment claims against Technify state that Superior seeks a declaration

that Superior has a superior right to the Property over Technify. But Superior’s request for that

declaration arose only because Technify intervened and sought to have all questions regarding

the Property resolved in Texas. If the intervention is dismissed, then Superior’s claims would

become moot. As for Technify’s declaratory judgment claim, that claim seeks the same relief

whether asserted against Kübler or Superior – a declaration that Technify has ownership rights in

the Property by virtue of the transfer agreement. The transfer agreement included the forum

selection clause, meaning claims between Kübler and Technify regarding the transfer agreement

should be heard in Germany per that clause.           Moreover, the dispute between Kübler and

Technify should have no bearing on the suit between Superior and Kübler because Technify is

not a party to the Superior/Kübler agreement, Technify has no rights under that agreement, and

the claims raise separate and distinct liability and damages issues. To be sure, Technify’s claims

all arise from the transfer agreement and, therefore, are subject to its forum selection clause.

                                                –7–
           Next, Technify argues that enforcing the clause would be unreasonable or unjust because

doing so would require Superior’s claims against Kübler to be tried in a separate forum from

Technify’s claims against Kübler. Technify describes this as “an intertwined dispute” among

three parties all claiming an interest in the Property. But that misconstrues the nature of these

disputes. Superior and Kübler dispute who owns the Property, whereas Technify and Kübler

dispute the damages incurred by Technify, if any, as a result of Kübler’s failure to transfer the

Property to Technify in accordance with the transfer agreement. Technify’s only interest in the

Property is derivative of Kübler’s ownership of the Property. Technify has no independent right

to seek relief from Superior and no contract with Superior. If the Texas court decides the

Superior-Kübler dispute adversely to Kübler, Technify may then assert claims against Kübler in

Germany pursuant to the transfer agreement and the closing protocol. Technify and Kübler

specifically recognized this dichotomy of claims and proceedings in the closing protocol. “The

mere existence of another party does not compel joint litigation, even if the claims arise out of

the same nucleus of facts.” In re ADM Inv’r Servs., Inc., 304 S.W.3d at 375; In re Int’l Profit

Assocs., Inc., 274 S.W.3d at 680 (“If all it takes to avoid a forum-selection clause is to join as

defendants local residents who are not parties to the agreement, then forum-selection clauses will

be of little value.”). It is not unreasonable or unjust to require Technify to honor the bargain it

made with knowledge of the Texas litigation regarding the Property. See In re ADM Inv’r Servs.,

Inc., 304 S.W.3d at 375. 1

           Finally, Technify argues that Germany would be a seriously inconvenient forum for trial

because of the Texas lawsuit.                       When inconvenience in litigating in the chosen forum is

foreseeable at the time of contracting, the challenger must “show that trial in the contractual

     1
        Identical arguments over efficiency and resulting piecemeal litigation have been made and rejected as a basis for resisting enforcement of
arbitration agreements. Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 (1983).

                                                                      –8–
forum will be so gravely difficult and inconvenient that he will for all practical purposes be

deprived of his day in court.” In re AIU, 148 S.W.3d at 113 (quoting M/S Bremen v. Zapata Off–

Shore Co., 407 U.S. at 18); see also Lyon, 257 S.W.3d at 234 (“By entering into an agreement

with a forum-selection clause, the parties effectively represent to each other that the agreed

forum is not so inconvenient that enforcing the clause will deprive either party of its day in court,

whether for cost or other reasons.”). Here, Thielert Aircraft and Technify are sophisticated

businesses that negotiated and knowingly entered into the transfer agreement and included the

forum selection clause. By doing so, they effectively represented that Germany is not a seriously

inconvenient forum.

       Further, the record establishes that Technify will not be deprived of its day in court by

enforcing the forum selection clause. Technify has filed an action against Kübler in Germany

relating to Technify’s dispute with Kübler over the Property and Technify’s rights to the

Property under the transfer agreement. Technify bargained with Kübler for German courts

applying German law to determine Technify’s and Kübler’s rights under the transfer agreement

and rights related to the transfer of assets. By agreeing to the terms of the closing protocol,

Technify acknowledged the Superior claims and agreed to have its own rights to the Property

and damages, if any, decided separately from Superior’s lawsuit against Kübler. The closing

protocol does not remove or amend the forum selection clause. Under the plain terms of section

7(2) of the closing protocol, the forum selection clause, therefore, remained “unaffected and

applicable.” Technify has no contractual relationship with Superior. Technify’s only interest in

Superior’s dispute with Kübler is how the resolution of that dispute impacts Technify’s rights

under the transfer agreement. Technify agreed to have those rights determined exclusively in

Germany. Technify’s circumstances here are not sufficient to meet the heavy burden it has to

                                                –9–
avoid a forum-selection clause. See In re ADM Inv’r Servs., 304 S.W.3d at 375; see also AIU,
148 S.W.3d at 113.

                                           Conclusion

       Technify failed to meet its burden of proof to establish one of the four exceptions to

avoid enforcement of the forum selection clause. The trial court, therefore, abused its discretion

by refusing to enforce the forum selection clause and denying Kübler’s motion to dismiss.

Because we find for Kübler as to the enforceability of the forum selection clause, we need not

address Kübler’s remaining issues. We, therefore, conditionally grant relator’s petition for writ

of mandamus and direct the trial court to issue written orders within fifteen days of the date of

this opinion vacating the December 2, 2016 order denying relator’s motion to dismiss

intervenor’s claims and motion to strike intervenor’s claims, granting relator’s motion to dismiss

Technify’s claims, and dismissing Technify’s claims.

                                                   /David J. Schenck/
                                                   DAVID J. SCHENCK
                                                   JUSTICE

161443F.P05

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