Court Opinion

ID: 4638684
Source: CourtListenerOpinion
Date Created: 2020-12-02 01:00:24.222396+00
Date Added: 2024-06-11T07:58:50.667345
License: Public Domain

Case: 20-20184     Document: 00515656881         Page: 1     Date Filed: 12/01/2020

              United States Court of Appeals
                   for the Fifth Circuit                           United States Court of Appeals
                                                                            Fifth Circuit

                                                                          FILED
                                                                  December 1, 2020
                                  No. 20-20184
                                                                     Lyle W. Cayce
                                                                          Clerk

   Pierce Partners, GP,

                                                             Plaintiff—Appellee,

                                       versus

   Marcus Morton,

                                                         Defendant—Appellant.

                  Appeal from the United States District Court
                      for the Southern District of Texas
                            USDC No. 4:19-CV-335

   Before Haynes, Willett, and Ho, Circuit Judges.
   Per Curiam:*
          Pierce Partners, GP and D’Arbonne Bend, LLC (DBL) signed a
   promissory note under which Pierce Partners agreed to loan DBL $1 million
   to finance the theatrical release of a movie. Marcus Morton, DBL’s managing
   member, signed both the note and a Continuing Personal Guaranty of DBL’s
   indebtedness. Both the promissory note and guaranty had choice-of-law and

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-20184       Document: 00515656881          Page: 2   Date Filed: 12/01/2020

                                     No. 20-20184

   forum-selection clauses, stating, respectively, that Texas law applied to the
   contracts, and disputes arising under the contracts would be adjudicated in
   Texas.
            The movie had disappointing box office results, and DBL defaulted on
   its loan, which triggered Morton’s obligation to pay under the guaranty.
   Pierce Partners demanded Morton’s performance, but Morton has yet to
   make a payment. Per the guaranty’s forum-selection clause, Pierce Partners
   filed this lawsuit in the Southern District of Texas. Pierce Partners moved for
   summary judgment, and the district court granted the motion.
            In between the filing and service of the complaint in this case, DBL
   filed a declaratory-judgment suit in California state court. D’arbonne Bend
   LLC v. Pierce Partners III, LLC, No. 4:20-CV-589, 2020 WL 6484642 at *1
   (S.D. Tex. Nov. 4, 2020) (recounting the California case’s procedural
   history). Pierce Partners removed the case to federal court, and the case was
   transferred to the Southern District of Texas. Id. The district court in that
   case also granted Pierce Partner’s motion for summary judgment.
            We review the district court’s grant of summary judgment in this case
   de novo. Willis v. Cleco Corp., 749 F.3d 314, 317 (5th Cir. 2014). “Summary
   judgment should be granted when the moving party shows that there is no
   genuine dispute as to any material fact and the movant is entitled to judgment
   as a matter of law.” Id. (internal quotation marks omitted).
            On appeal, Morton only contests whether the note’s interest rate is
   usurious. He argues that California law, not Texas law, applies because the
   note does not have a choice-of-law provision, and California has a greater
   interest in this case. Morton’s arguments fail.
            First, the note does contain a choice-of-law clause: “[T]he provisions
   of this Note shall be governed by the laws of the State of Texas.” See also
   D’arbonne Bend LLC, 2020 at *2 (“Both the loan agreement and the guaranty

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Case: 20-20184        Document: 00515656881           Page: 3    Date Filed: 12/01/2020

                                       No. 20-20184

   at issue here provide in multiple clauses that Texas law will govern any
   disputes.”).
             Morton must show then that the choice-of-law provision is
   unenforceable. “To render a choice-of-law provision unenforceable, a party
   must satisfy the standards in Section 187(2) of the Restatement (Second) of
   Conflict of Laws, which provides that” the choice-of-law provision governs
   unless:
             (a) the chosen state has no substantial relationship to the
             parties or the transaction and there is no other reasonable basis
             for the parties’ choice, or
             (b) application of the law of the chosen state would be contrary
             to a fundamental policy of a state which has a materially greater
             interest than the chosen state in the determination of the
             particular issue and which, under the rule of § 188, would be
             the state of the applicable law in the absence of an effective
             choice of law by the parties.
   Cardoni v. Prosperity Bank, 805 F.3d 573, 581 (5th Cir. 2015) (applying
   Texas law).
             Subsection (a) does not help Morton because Pierce Partners is a
   Texas corporation. Thus, “[t]he parties had a reasonable basis for agreeing
   that Texas law would apply given that [Piece Partners] is headquartered in
   the state.” Id. As to subsection (b), Morton only argues that California’s
   maximum interest rate is 10% whereas Texas’s is 28%. So according to Mor-
   ton, California has a “fundamental policy” against usury. Morton also adds
   that the production of the movie occurred in California, and thus California
   has a “materially greater interest” in this dispute than Texas does. But these
   are all legal arguments, not factual disputes.
             Morton is a citizen of Louisiana, as is DBL. Pierce Partners is a citizen
   of Texas. And although the movie was produced in California, the loan was

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Case: 20-20184      Document: 00515656881          Page: 4   Date Filed: 12/01/2020

                                    No. 20-20184

   to pay for the movie’s theatrical release, not its production. In short, there
   are no relevant fact disputes, much less genuine disputes as to any material
   fact.
           Plus, as the district court noted, “Morton provides the Court with no
   authority suggesting that it is a fundamental policy of California to apply its
   usury law to a commercial loan provided by a Texas bank to a Louisiana cor-
   poration and guaranteed by a Louisiana citizen.” Just because Texas’s usury
   law is not as protective as California’s does not mean that “enforcing the
   parties’ bargain on this issue” offends California public policy. Cardoni, 805
   F.3d at 580.
           Finally, Morton argues that California law would apply in the absence
   of a choice-of-law provision because Morton brought a declaratory judgment
   action in California state court. But after that case was removed and trans-
   ferred, the district court applied Texas law in accordance with the contract’s
   forum-selection clause. D’arbonne Bend LLC, 2020 WL at *2 (explaining that
   while typically the law of the transferor court applies, an exception arises
   when the transfer is made to enforce a forum-selection clause).
           For the reasons stated, we AFFIRM.

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