Court Opinion

ID: 2766510
Source: CourtListenerOpinion
Date Created: 2015-01-05 08:23:45.483321+00
Date Added: 2024-06-11T11:26:22.004585
License: Public Domain

AFFIRM; and Opinion Filed December 31, 2014.

                                         S   In The
                                Court of Appeals
                         Fifth District of Texas at Dallas
                                      No. 05-14-00341-CV

                       FOREX CAPITAL MARKETS, LLC, Appellant
                                       V.
                           KELLY M. CRAWFORD, Appellee

                      On Appeal from the 429th Judicial District Court
                                   Collin County, Texas
                          Trial Court Cause No. 429-00075-2014

                             MEMORANDUM OPINION
                        Before Justices O’Neill, Lang-Miers, and Brown
                                  Opinion by Justice O’Neill
       In this consolidated interlocutory appeal and petition for writ of mandamus, appellant

Forex Capital Markets, LLC (FXCM) complains of the trial court’s order denying its motion to

dismiss for improper venue or, in the alternative, motion to compel arbitration. In re Lisa Laser

USA, Inc., 310 S.W.3d 880, 883 (Tex. 2010) (mandamus relief is available to enforce an

unambiguous forum-selection clause); TEX. CIV. PRAC. & REM. CODE ANN. §§ 51.016,

171.098(a)(1) (West 2011) (authorizing interlocutory appeals from denial of motion to compel

arbitration). In both proceedings, FXCM asserts the trial court erred in not enforcing provisions

of a contract entered into between it and a limited partnership against the federal equity receiver

of that partnership. For the following reasons, we affirm the trial court’s order and deny the

petition for writ of mandamus.
          Kevin G. White induced investors to contribute millions of dollars in funds to invest in

Revelation Forex Fund, LP (Revelation) to engage in foreign currency exchange (“Forex”)

trading. To conduct that trading, Revelation opened a “Forex” account with FXCM. When it did

so, Revelation agreed to provisions in a “Client Agreement,” which included a forum selection

clause consenting to jurisdiction and exclusive venue in New York and an agreement to arbitrate.

White subsequently misappropriated over $1 million in partnership funds. The investors also

suffered significant losses from Revelation’s trading activities.

          The Security and Exchange Commission (SEC) and the Commodity Futures Trading

Commission (CFTC) instituted civil enforcement actions in federal court against White,

Revelation, and other entities White controlled alleging White defrauded Revelation’s investors. 1

The federal court appointed appellee Kelly M. Crawford as receiver over the “estates and assets”

of White, Revelation, and related entities. The federal court gave Crawford broad powers,

including all powers, authority and rights that the officers, directors and partners had possessed,

as well as all powers and authority of a receiver at equity. The federal court also directed

Crawford to investigate the business affairs of the entities and, after obtaining leave of court, to

file such actions as he deemed appropriate.

          Crawford subsequently determined that Revelation’s investors had claims against FXCM

for its participation and complicity in White’s scheme. The investors unconditionally assigned

their claims against FXCM to Crawford and agreed that any recovery would be included in the

“Receivership Estate.” The federal court then expressly authorized Crawford to file suit against

FXCM on the assigned claims.

   1
       White pleaded guilty to committing wire fraud in connection with the fraudulent scheme.

                                                                    –2–
           Crawford then filed this suit, in his own name, but as the assignee of the investors’

claims. 2 FXCM filed a motion to dismiss for improper venue or, in the alternative, motion to

compel arbitration.               It relied on the forum selection clause and arbitration agreement in

Revelation’s Client Agreement. The trial court denied FXCM’s motions.

           According to FXCM, the trial court erred in doing so because, as Revelation’s receiver,

Crawford is bound by its agreements regarding venue and arbitration. Crawford, on the other

hand, responds Revelation’s agreements are inapplicable because he has sued only on claims that

the investors assigned to him for injuries they suffered as a result of FXCM’s conduct.

           It is well settled that when a claim is assigned, the assignee “steps into the shoes of the

assignor and is considered under the law to have suffered the same injury as the assignors and

have the same ability to pursue the claims.” Sw. Bell Tel. Co. v. Mktg. on Hold Inc., 308 S.W.3d
909, 916 (Tex. 2010). An assignee may thus assert those rights that the assignor could assert,

including bringing suit. Flagstar Bank, FSB v. Walker, 05-13-00724-CV, 2014 WL 6065713

(Tex. App.—Dallas Nov. 14, 2014, no pet. h.); Cadle Co. v. Estate of Weaver, 897 S.W.2d 814,

818 (Tex. App.—Dallas 1994, writ denied); see also Jackson v. Thweatt, 883 S.W.2d 171, 174

(Tex. 1994). An assignee’s rights are also subject to defenses existing at the time of the

assignment that would have been available against the assignor had there been no assignment.

See Irrigation Ass’n v. First Nat’l Bank of Frisco, 773 S.W.2d 346, 348 (Tex. App.—Dallas

1989, writ denied).

           Absent an agreement to the contrary, a plaintiff generally has the right to have their

claims resolved by litigation and to choose the venue in which to file suit. See In re Fisher, 433
S.W.3d 523, 533 (Tex. 2014) (plaintiff is generally afforded the right to choose venue when suit

     2
        Throughout, we use the phrase “investors’” claims to reference claims asserting the legal rights of the investors, not to identify the party
with title or ownership of the claims.

                                                                       –3–
is filed); Freis v. Canales, 877 S.W.2d 283, 284 (Tex. 1994) (party who has not agreed to

arbitration has a right to have disputes resolved by litigation). A party seeking to enforce a

forum selection clause or an arbitration agreement must first show the existence of the agreement

and that the claims fall within the scope of that agreement. See In re D. Wilson Constr. Co., 196
S.W.3d 774, 781 (Tex.2006) (orig. proceeding); Seven Hills Commercial, LLC v. Mirabal

Custom Homes, Inc., 442 S.W.3d 706, 715 (Tex. App.—Dallas 2014, pet. filed); Young v. Valt.X

Holdings, Inc., 336 S.W.3d 258, 262 (Tex. App. —Austin 2010, pet. dism’d ).

           This initial burden includes showing the contract applies to the parties involved in the

dispute. See VSR Fin. Servs., Inc. v. McLendon, 409 S.W.3d 817, 827 (Tex. App.— Dallas 2013,

no pet.). A party may meet this burden by showing the party signed the contract or is otherwise

bound to the contract under principals of contract law and agency. See In re Kellogg, Brown &

Root Inc., 166 S.W.3d 732, 738 (Tex. 2005); CNOOC SE Asia Ltd. v. Paladin Resources

(SUNDA) Ltd., 222 S.W.3d 889, 894-95 (Tex. App.—Dallas 2007, pet. denied); Mohamed v.

Auto Nation USA Corp., 89 S.W.3d 830, 835-36 (Tex. App.—Houston [1st Dist.] 2002, no pet.).

           Here, Crawford filed suit against FXCM on claims the investors’ unconditionally

assigned to him. FXCM does not challenge the validity of the assignments. As a consequence,

Crawford stands in the investors shoes. But to support its motion, FXCM did not show the

investors agreed to either venue in New York or to arbitration. Nor did FXCM show the

investors were otherwise bound under any theory of agency or contract law. 3 Instead, it asserts

Crawford was bound by Revelation’s agreements because the investors’ claims are now

“property of the receivership estate” and Crawford, as receiver, “represents” the “estate” and is
           3
              In its reply brief, FXCM asserts for the first time the investors were bound by the provisions in the Client Agreement. It relies on
two agreements it asserts shows the investors authorized Revelation to execute the Client Agreement. But because FXCM raised this issue for
the first time in its reply brief, we cannot consider it as grounds for reversal. Cebcor Serv. Corp. v. Landscape Design & Const., Inc., 270
S.W.3d 328, 334 (Tex. App.—Dallas 2008, no pet.) (party may not raise an issue for the first time in reply brief). Moreover, the only agreements
FXCM directs us to are copies of a limited partnership agreement and a subscription agreement Revelation attached to its “Public Offering
Memorandum.” Neither agreement is signed by any investor. Further, FXCM has cited us to no authority and has provided no legal analysis
showing these agreements are sufficient to bind the investors to the provisions in the Client Agreement. Huey v. Huey, 200 S.W.3d 851, 854
(Tex. App.—Dallas 2006, no pet.) (failure to cite applicable authority or provide substantive analysis waives an issue on appeal).

                                                                      –4–
thus bound by any agreements of the “estate.” Of course, the “estate” did not execute the

agreement FXCM relies on, only Revelation did. 4 Nevertheless, FXCM asserts Crawford is

bound by the agreement because of the limitations on a receiver’s standing to bring claims to

benefit investors.

           As a general rule, a receiver may sue only for claims of the entities in receivership, and

may not assert claims for injuries directly suffered by the investors. See Liberte Capital Grp.,

LLC v. Capwill, 248 F. App'x 650, 655 (6th Cir. 2007); Scholes v. Schroeder, 744 F. Supp. 1419,

1421 (N.D.Ill.1990); see also Cotton v. Republic Nat’l Bank of Dallas, 395 S.W.2d 930, 941

(Tex. Civ. App.—Dallas 1965, writ ref’d n.r.e.); Janvey v. Democratic Senatorial Campaign

Comm., Inc., 712 F.3d 185, 190 (5th Cir. 2013); Javitch v. First Union Secs., Inc. 315 F.3d 619,

625 (6th Cir. 2003); Jones v. Wells Fargo Bank, N.A., 666 F.3d 955, 966 (5th. Cir. 2012). These

third-party claims are personal to the investor, and they alone may bring them. See Cotton, 395
S.W.2d at 941.

           When a receiver sues for the entity’s claims, the receiver generally stands in the shoes of

that entity, possessing no greater rights than the entity had and subject to any agreements the

entity entered. 5 Javitch, 315 F.3d at 625; cf. Hays & Co. v. Merrill Lynch, Pierce, Fenner &

Smith, Inc., 885 F.2d 1149, 1153-54 (3d Cir.1989) (when bankruptcy trustee asserts claims

derivative of debtor’s rights, he is subject to debtor’s agreement to arbitrate). A receiver is

     4
      Crawford agrees that any recovery he might obtain on the claims would become property of the estate, but he does not concede the claims
themselves are receivership property. That issue is not pertinent to our resolution of this appeal.
      We also note that a receiver is an officer of the court, not a representative of the parties. See Sec. Trust Co. of Austin v. Lipscomb County,
142 Tex. 572, 584, 180 S.W.2d 151, 158 (1944). “He is a disinterested party, the representative and protector of the interests of all persons,
including creditors, shareholders and others, in the property in receivership.” Id. (citing Clark on Receivers, 2d Ed., Vol. 1, pp. 33-37, ss 34-38,
p. 43, s 45; 45 Am.Jur. pp. 106-111, ss 126-130.)
     5
        Even so, when a receiver brings claims of a receivership entity, he does not necessarily stand in the entity’s shoes for all purposes.
F.D.I.C. v. O'Melveny & Myers, 61 F.3d 17, 19 (9th Cir. 1995) (while receiver generally occupies the same position as the entity he represents,
certain defenses based on the entity’s unclean hands or inequitable conduct do not generally apply against the entity’s receiver); see also Scholes,
56 F.3d at 753–55 (the defense of in pari delicto does not apply to receiver even if it would apply to entity); Jones, 666 F.3d at 966.

                                                                       –5–
therefore bound to a receivership entity’s agreement to arbitrate if the entity would have been

subject to that agreement. 6 See Javitch, 315 F.3d at 627.

          Here, however, Crawford is not asserting standing based on his capacity as receiver, but

on the investors’ unconditional assignments. Cf. Oakes v. Lake, 290 U.S. 59, 62-63 (1933)

(holding limitations generally applicable to a foreign receiver’s authority to bring claims outside

his jurisdiction do not apply when receiver brings claims based on assignments). FXCM does

not challenge the validity of the assignments or indeed contest that Crawford had standing to

bring the claims. Vt. Agency of Nat. Resources & U.S. ex rel. Stevens, 529 U.S. 765, 773 (2000)

(“an assignee of a claim has standing to assert the injury in fact suffered by the assignor”); see

also in re Bogdan, 414 F.3d 507, 512 (4th Cir. 2005) (unconditional assignments gave

bankruptcy trustee standing to prosecute creditors’ claims). Indeed, if Crawford lacked standing,

FXCM’s remedy would not be enforcement of Revelation’s contract against him, but dismissal

of the claims for want of jurisdiction. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61

(1992).

          Finally, we cannot agree with FXCM to the extent it suggest that the capacity in which

Crawford brought the assigned claims dictates the rights and remedies applicable to those claims.

Instead, under well-settled principals that govern assignments, Crawford acquired all the rights

the investors’ had, including the right to bring this suit in Texas state court.

   6
       However, the receiver is not necessarily bound to such agreements when brining claims of other parties. See Javitch, 315 F.3d at 627 n. 7.

                                                                     –6–
       Therefore, we affirm the trial court’s order denying FXCM’s motion to compel

arbitration and deny its petition for writ of mandamus.

                                                     /Michael J. O'Neill/
                                                     MICHAEL J. O'NEILL
                                                     JUSTICE

140341F.P05

                                               –7–
                                        S
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                      JUDGMENT

FOREX CAPITAL MARKETS, LLC,                         On Appeal from the 429th Judicial District
Appellant                                           Court, Collin County, Texas
                                                    Trial Court Cause No. 429-00075-2014.
No. 05-14-00341-CV         V.                       Opinion delivered by Justice O'Neill.
                                                    Justices Lang-Miers and Brown
KELLY M. CRAWFORD, Appellee                         participating.

       In accordance with this Court’s opinion of this date, we AFFIRM the trial court’s order
denying appellant Forex Capital Markets, LLC motion to compel arbitration.

       We ORDER appellee KELLY M. CRAWFORD recover his costs of this appeal from
appellant FOREX CAPITAL MARKETS, LLC.

Judgment entered this 31st day of December, 2014.

                                              –8–