FORUM SELECTION CLAUSES IN TEXAS

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FORUM SELECTION CLAU
SES IN TEXAS

David Coale, Lindsay Barton, Dustin Benham
, & Casey Kaplan

K&L Gates LLP

1717 Main Street, Suite 2800
, Dallas, Texas

75201

214
-
939
-
5500
,
david.coale@klgates.com


November 19, 2008

This paper discusses recent Texas state la
w regarding forum selection clauses, and notes
potential areas where future litigation may develop about those cases.

I.

RECENT TEXAS SUPREME COURT CASES

Recent Texas Supreme Court cases address important aspects of litigating the
enforcement of forum selecti
on clauses, including (1)

the

appropriate test to apply; (2)

the
appropriate form of relief; and (3)

the applicability of the waiver doctrine.

Following United
States Supreme Court precedent, in 2004 the Texas Supreme Court ruled that common law
enforceme
nt of a forum selection clause is

mandatory unless the party opposing enforcement

clearly show[s] that enforcement would be unreasonable and unjust, or that the clause [is]
invalid for such reasons as fraud or overreaching.
’“


In re Automated Collection
Techs., Inc.
, 156
S.W.3d 557, 559 (Tex. 2004);
see also In re AIU Ins. Co.
, 148 S.W.3d 109, 112 (Tex. 2004)
(citing
M/S Bremen v. Zapata Off
-
Shore, Co.
, 407 U.S. 1 (1972),
superseded in part by statute,

28 U.S.C. 1404(a),
as recognized by Stewart Org., Inc
. v. Ricoh Corp.
, 487 U.S. 22, 29 (1988)).

Additionally, parties no longer have to wait for appeal when a trial court fails to enforce a forum
selection clause in a valid contract, but may instead seek mandamus relief.

In re Automated
, 156
S.W.3d at 559;

In Re AIU Ins.
, 148 S.W.3d at 115
-
18.

Finally, these cases emphasize the
difficulty a party will have in attempting to establish that the opposing party waived the right to
enforce the forum selection clause.

See

In re Lyon Financial Services, Inc.
, 257

S.W.3d 228,

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233
-
34 (Tex. 2008);

Michiana Easy Livin


Country v. Holten
, 168 S.W.3d

777, 793 (Tex. 2005)
In re Automated
, 156 S.W.3d at 559
-
60;
In Re AIU
, 148 S.W.3d at 120
-
21.

A.

In re Lyon Financial Services, Inc.
, 257 S.W.3d 228 (Tex. 2008)

In
Lyon Financi
al
, McAllen North Imaging, Inc. (“MNI”) entered into a Master Lease
Agreement with Lyon Financial Services, Inc (“Lyon”). The Agreement contained a
Pennsylvania forum selection clause from Lyon. 257 S.W.3d at 230. The parties entred into a
Restructuring
Agreement that also included a forum selection clause.
Id.

Indeed, the forum
selection clause in the Restructuring Agreement was set out in all capital letters.
Id.

Despite the
forum selection clause, MNI sued Lyon in Hidalgo County, Texas, alleging that

Lyon had not
funded one of the machine purchases under the Master Lease Agreement and asserting claims for
usury and unjust enrichment.
Id.

at 231. MNI also sought declaratory judgment invalidating the
venue and jurisdictional requirements of the agreeme
nts as unconscionable.
Id.

Lyon filed its
Motion to Dismiss based on the forum selection clause, and MNI responded that the forum
selection clause was “induced by fraudulent representations, it was invalid for overreaching, and
that dismissal of its suit
would create an unjust result.”
Id.

The trial court overruled Lyon’s
Motion to Dismiss, the Court of Appeals denied mandamus relief, and Lyon then petitioned the
Texas Supreme Court for a writ of mandamus directing the trial court to dismiss MNI’s case.

T
he Texas Supreme Court held that the forum selection clause was enforceable. The
Court evaluated its decision based on the four part test established in
In re AIU Ins. Co.
, first set
out in the United States Supreme Court Case of
M/S Bremen
.
1

The Court s
tated that “[U]nless



1
In
M/S Bremen
, the United States Supreme Court affirmed application of a forum selection claus
e that chose the
London Court of Justice as its forum. In discussing the role that inconvenience played in deciding whether to
enforce a forum selection clause, the Court noted that the proponent of enforcing a clause should not “bear a heavy
burden” beca
use litigation in the foreign forum was foreseeable at the time of contracting.
See

407 U.S. at 17
-
18;
see also Carnival Cruise Lines, Inc. v. Shute
, 499 U.S. 585, 593
-
94 (1991) (using the Bremen analysis to enforce a
domestic forum selection clause),
sup
erseded by statute on other grounds
, 46 U.S.C. App. § 183(c). Texas courts
followed suit in
In re Automated Collection and In re AIU Insurance
.


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the party opposing enforcement of the clause can clearly show 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[,]” a trial court abuses its
discretion by refusing to enforce the forum selection clause.
Id.

at 231
-
32.

The Court found first that Lyon had not
fraudulently induced MNI to agree to the forum
selection clause.
Id.

at 232. The Court found that MNI had not met its “heavy burden” of proof
that required Lyon to show the forum selection clause, itself, was the product of fraud or
coercion.
Id.

Additio
nally, the Court found that Lyon did not engage in overreaching or that the
forum selection clause should be invalidated for unfairness.
Id.
at 233
-
34. MNI’s position was
that its president was unable to obtain legal advice, that the president had no forma
l business
school training and that he was unaware of the forum selection clause when he signed the
agreement.
Id.

at 233. The Court stated, however, that MNI had a duty and responsibility to
protect itself.
Id.

Furthermore, the Court held the forum sele
ction clause was not so one
-
sided as
to be unconscionable.
Id.

The Court found that it was not and that MNI had presented no
evidence of overreaching in connection with the contract.
Id.


Additionally, the Court found that the forum selection clause did
not force MNI to litigate
in such an inconvenient forum as to produce an unjust result.
Id.

The Court, relying on its
decision in
In re AIU
, held that by entering into a forum selection clause, “the parties effectively
represent to each other that the agr
eed forum is not so inconvenient that enforcing the clause will
deprive either party of its day in court, whether for cost or other reasons.”
Id.

at 234. Finally, the
Court held that MNI did not produce evidence that enforcing the forum selection clause w
ould
subvert Texas’ public policy with regards to a claim for usury, even though Pennsylvania did not

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recognize such a claim.
Id.

at 235. The Court found that the mere existence of Texas statutory
law in one area did not prove that Texas public policy wou
ld be offended and negate a forum
selection clause.
Id.
at 234. The Court found further that MNI made no showing that even if the
case were tried in Pennsylvania that the court there would not apply Texas law.
Id.

As the Court
found no evidence to “overc
ome the presumption” that the forum selection clause is valid, the
Court conditionally granted the writ of mandamus and directed the trial court to vacate its order
denying Lyon’s motion to dismiss MNI’s suit.
Id.
at 235.

B.

In re AIU Ins. Co.
, 148 S.W.3d 109

(Tex. 2004).

In
AIU
, the Louis Dreyfus Corporation purchased a pollution liability policy containing a

New York forum selection clause from AIU Insurance Company (

AIU

).
2


148 S.W.3d at
110
-
11.

Several months later, a Dreyfus subsidiary with its princip
al place of business in Texas
merged with American Exploration Company, a company that had a contamination suit pending
in Hidalgo County prior to the issuance of the policy.


Id
. at 111.


The newly merged Dreyfus
-
American Exploration (

Dreyfus

) claimed l
iability coverage under the AIU policy.

Id.


AIU
disputed coverage and Dreyfus sued AIU for various claims, including declaratory judgment
about coverage.


Id
.


AIU filed a motion to dismiss based on the forum selection clause.

Id
.


The
trial court denie
d AIU

s motion to dismiss, the court of appeals denied mandamus relief, and
AIU then petitioned the Texas Supreme Court for a writ of mandamus.

Id
.

The Texas Supreme Court held that the forum selection clause was enforceable.

Prior
Texas case law enforce
d forum selection clauses if the parties contractually consented to a
foreign jurisdiction and if the other state would recognize the validity of the provision.

Holeman
v. Nat

l Bus. Inst., Inc.
, 94 S.W.3d 91, 97 (Tex. App.

Houston [14th Dist.] 2002, pet.

denied).




2
At the time of the policy, AIU was a New York Corporation with its principal place of business in New York.
A
dditionally, the Louis Dreyfus Corporation listed its address as New York. 148 S.W.3d at 111.


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However, in this case, the Texas Supreme Court adopted the United States Supreme Court

s test
in
M/S Bremen

that absent a clear showing by the opposing party that enforcement would be

unreasonable and unjust, or that the clause was invalid for
reason of fraud or overreaching,


the
forum selection clause should be enforced.
3


AIU, 148 S.W.3d. at 112
-
13. A clause would fall
within the above exceptions if enforcement would contravene a public policy of the forum in

which the suit was brought or whe
n the contractually
-
chosen forum would be seriously
inconvenient.


Id.

The Court found that it was foreseeable that Dreyfus would be required to litigate in New
York under the forum selection clause and Dreyfus did not show that litigating in New York
woul
d deprive it of its day in court.


Id
. at
113.


Additionally, the court found that the forum
selection clause was fundamentally fair because there was no evidence that the New York was
chosen as the forum to discourage litigation or because of fraud or ove
rreaching.


Id
. at 114.


Dreyfus claimed that the clause should not be enforced because Texas had a strong public
interest in receiving the insurance proceeds.


Id
. at 112.


In response, the Court found it

highly
offensive


to suggest that the benefits to

the local community should be considered when
determining whether to enforce a forum selection clause.


Id
. As a result, the trial court held that
trial court abused its discretion in determining that the forum selection clause at issue was not
enforceabl
e.

Id
. at 114
-
15.

In an unprecedented move,
4

the Texas Supreme Court conditionally granted AIU

s
petition for mandamus relief.

I
d
. at 120 (four justices dissented on the ground that mandamus
relief was inappropriate).


Comparing arbitration agreements to

forum selection clauses, the



3
See also

Tom Stillwell & Audrey Cumming,
Forum Selection Clauses: Another Facet of the Freedom of Contract
Phenomenon
, Advocate 39 (2007).

4
The Texas Supreme Co
urt had previously declined mandamus relief for forum selection clause disputes.
Id
. at 118
-
19.


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majority specified instances where mandamus was granted for arbitration dispute agreements.

Id
. at 115
-
16.

The Court further stated that it is

clear harassment


to subject a party to a forum

other than the one agreed upon a
nd then require an appeal for vindication.

Id
. at 117.


Additionally, to hold trials in forums other than what was contractually agreed upon would be a

meaningless waste of judicial resources.

5


Id
. at 118.

Accordingly, the Court found that AIU
did not

have an adequate remedy by appeal and the granting of mandamus relief was
appropriate.
6


Id
. at 120.

Finally, the court rejected Dreyfus

s argument that AIU waived enforcement of the clause
by failing to raise the issue sooner.
Id
. at 120
-
21.

AIU never a
sserted the forum selection clause
when Dreyfus asserted its claims against AIU in demand letters a year before filing suit, and AIU
waited until five months after the suit was filed before moving to dismiss.

Id
. at 121.

Additionally, AIU requested a jur
y trial, paid the jury fee, filed a general denial and failed to file
a special appearance to dispute jurisdiction.
Id
.

However, again comparing forum selection
clauses to arbitration clauses, the Court stated that similar delays by a party in an arbitrat
ion
context did not result in the waiver of the arbitration clause.

Id
.


Thus, finding no reason to apply
a different rule to forum selection clauses, the court found that AIU did not waive the forum
selection clauses.

Id
.

C.

In re Automated Collection Tech
nologies, Inc.
, 156 S.W.3d 557 (Tex. 2004).

Just three months after
AIU
, the Texas Supreme Court issued a per curiam opinion on
another forum selection clause dispute.

In
In re Automated Collection Technologies, Inc.
,



5
The Texas Supreme Court treated a United States Supreme Court case on this issue as informative only.
Id
. at 120
(discussing
Lauro Lines S.R.L. v. Chasser
, 4
90 U.S. 495, 501 (1989), which stated that the failure to enforce a forum
selection clause may be adequately vindicated by appeal after judgment).

6
The Beaumont Court of Appeals recently confirmed that the legislature did not grant jurisdiction to hear
int
erlocutory appeals based on a trial court’s failure to enforce a forum selection clause.
Prosperous Maritime Corp.
v. Farwah
, 189 S.W.3d 389, 394 (Tex. App.

Beaumont 2006, no pet.). Thus, mandamus is the proper vehicle for
such a challenge.


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Professional Systems Corporation (

PS
C

), a Pennsylvania corporation, sued Automated

Collection Technologies, Inc. (

Automated

), a Texas corporation, for breach of a contract that
contained a forum selection clause designating Pennsylvania as the forum.

156 S.W.3d 557, 558
(Tex. 2004).

Ign
oring the forum selection clause, PSC sued Automated in Dallas, Texas,
Automated

s principal place of business.

Id
.


Four months later, Automated filed a motion to
dismiss based on the forum selection clause.

Id
. at 558
-
59.

PSC argued that enforcement o
f the
clause was permissive and further that Automated waived enforcement of the provision.


Id
. at
559.

The trial court denied the motion without stating its reasons, but the docket sheet noted

waiver found.



Id
.

The court of appeals denied Automated

s petition for writ of mandamus and
Automated sought mandamus relief from the Texas Supreme Court.


Id
.

In determining that the forum selection clause should be enforced, the Court cited to the
rule in
A
I
U

enforcement of a forum selection clause is mandato
ry absent clear proof by the
opposing party

that enforcement would be unreasonable and unjust, or that the clause [is]
invalid for such reasons as fraud or overreaching.



Id
. (citing
In re AIU Ins. Co.
, 148 S.W.3d at
112).


Because PSC submitted no evide
nce showing that enforcement would be unreasonable or
unjust and did not assert that the clause was otherwise invalid, the trial court was required to
enforce the forum selection clause.


See id
. (noting that neither party introduced evidence at the
trial
court hearing,).

Additionally, the Court again granted mandamus relief for failure to enforce a forum
selection clause.

Id
.

Unlike
AIU
, the Court in
Automated

did not undertake an analysis of
whether Automated had an adequate remedy through appeal of the

final judgment.

Id
.


Rather,
the Court simply stated that because the trial court failed to enforce the forum selection clause,

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mandamus relief was warranted.

Id
.


The Court confirmed that a failure to enforce a valid forum
selection clause is an abuse
of discretion for which there is no adequate remedy by appeal.


Id
.

Finally, the Court reaffirmed the difficulty of establishing that the proponent of a forum
selection clause waived the right to enforce that clause.


Id
. at 559
-
60.


Automated waited four
months after suit was filed before seeking dismissal based on the forum selection clause.


Id
. at
558
-
59.

In the meantime Automated answered, counterclaimed, and served discovery requests.


Id
.

The Court referred to its analysis in AIU and its comparison

to waiver in the arbitration
context.

Id
. at 559.

The Court rejected PSC

s argument that dismissal would

result only in
duplication of [significant] time and resources that are unnecessary


because such duplication
did not establish that PSC had been p
rejudiced by Automated

s four
-
month delay in seeking
dismissal.

Id
. at 559
-
60.

Further, PSC had no right to complain about the duplication of time
and resources, which resulted from PSC choosing to file suit in a forum other than the one to
which it cont
ractually agreed.


Id
. at 560.


Thus, the Court found that Automated did not waive
enforcement of the forum selection clause.

Id
.

D.

Michiana Easy Livin


Country v. Holten
, 168 S.W.3d 777 (Tex. 2005).

In
Michiana
, the Court addressed how a forum selection cl
ause affected the analysis of
personal jurisdiction.

There, James Holten, a Texas resident, purchased a recreational vehicle
(

RV

) from Michiana Easy Livin


Country, Inc., an outlet store that only did business in
Indiana.

Id
. at 781.

The contract betw
een the parties contained a clause designating Indiana as
the forum.

Id
. at 792.


Holten brought an action against Michiana in Texas alleging deceptive
practices and breach of contract, among others.


Id
. at 781.


Michiana made a special appearance,
asser
ting the forum selection clause as a separate ground for granting its special appearance, and
moved to dismiss on that basis.

Id
. at 792.

The trial court denied the special appearance and
motion to dismiss.

Id
. at 781.

Holten filed an interlocutory app
eal regarding the special

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appearance, and the court of appeals affirmed the trial court

s denial.


Id
.

Holten then filed a
petition to the Texas Supreme Court, which was granted, for review of its interlocutory appeal.

Id
.

Interestingly, Michiana did not

seek mandamus relief to enforce the forum selection clause,
instead only asserting that the forum selection clause provided additional proof that it did not
purposefully avail itself of Texas law.


Id
. at 792.

The Court determined that forum selection cla
uses must be considered when deciding
whether the defendant purposefully availed itself of a forum other than what it contractually
agreed to.

Id
. at 792
-
93.

Although a forum selection clause operates as consent to jurisdiction in
one forum, it does not
mean that the defendant would not satisfy the minimum contacts
requirement in another forum.

Id
. at 792 (citing
Carnival Cruise Lines
, 499 U.S. at 595).
However, a forum selection clause designating a foreign jurisdiction provides evidence that local
avai
lment was not intended.

Id
.

Ultimately the court held that the Michiana did not purposefully
avail itself of the benefits and protections of Texas law because its only contact with Texas was
Holten

s decision to place an order from Texas.

Id
. at 794.


T
hus, the claims against Michiana
were dismissed for want of jurisdiction.

Id
.

Before Holten

s claims were dismissed, he unsuccessfully asserted three arguments
against the consideration of the forum selection clause in determining personal jurisdiction.

Id
.
at 793.

First, Holten asserted that Michiana waived the clause because Michiana did not raise the
issue until shortly before the special appearance hearing and because, at the hearing, Michiana


agreed the clause was inapplicable.


Id
. at 793.

In
denying the waiver argument, the Court
noted three facts: (1) the alleged confession was unenforceable because there was no reporter

s
record at the hearing; (2) although two years passed before the special appearance was decided,

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very little activity had
occurred in the case; and (3) Holten presented no evidence to suggest he
was prejudiced from the delay.

Id
. at 793.

Thus, the Court found no waiver.


Id
.

Second, Holten claimed that the forum selection clause applied only to disagreements

regarding

inte
rpreting the terms of the contract,
’”
7

a phrase that appeared in the same paragraph
as the forum selection clause.


Id
.

However, the paragraph

s title,

Controlling Law and Place of
Suit


indicates that the paragraph addressed two different issues.

Id
.

Further, the forum
selection clause itself applies to

any dispute.



Id
. (emphasis added by court).


Accordingly, the
Court found that the forum selection clause applied to all disputes.

Id
.

Third, Holten argued that the trial court had the discretion to

refuse to enforce this clause.


Id
.

In response, the Court quoted the rule from Automated and MU, which makes enforcement
mandatory

absent a showing that

enforcement would be unreasonable and unjust, or that the
clause was invalid due to fraud or overr
eaching.



Id
.

Since Holten did not claim that the clause
was fraudulently induced or show that enforcement would be unreasonable or unjust, the court
found that he should be held to it.

Id
.

E.

In re Autonation, Inc.
, 50 Tex. Sup. Ct. J. 960, 2007 WL 18613
41 (June

29,
2007).

In
Autonation
, the court addressed the enforceability of a forum selection clause
contained in a non
-
compete agreement between an employer and employee.

Autonation, Inc., a
company that owns more than 250 automobile dealerships around
the county, employed Garrick
Hatfield as a manager of one of its dealerships.

Id
. * 1.

Autonation and Hatfield entered into an



7
The forum se
lection paragraph, as recited by the Court, reads as follows:

CONTROLLING LAW AND PLACE OF SUIT. The law of the State, in which I [Holten] sign this
contract, is the law which is to be used in
interpreting the terms of the contract
. You [Michiana] and I
a
gree that if any dispute between us is submitted to a court for resolution, such legal proceeding or suit
shall take place in the county in which you principle [sic] offices are located.

Id.

at 792 (emphasis added).


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agreement that included a one
-
year covenant not to compete.

Id
.

This agreement contained a
choice
-
of
-
law provision stating th
at the agreement would be construed in accordance with

Florida law.


Id
.

Additionally, the agreement contained a forum selection clause that provided
that all suits arising out of the agreement must be filed in Florida.


Id
.

Sometime after this agreement
was entered into, Hatfield left Autonation and began work
for a competitor.

Id
.

Autonation filed a suit for injunctive relief and damages against Hatfield in
Florida.

Id
.

Shortly thereafter, Hatfield and his new employer filed suit in Harris County, Te
xas
seeking a declaratory judgment that Texas law governed the non
-
compete.

Id
.


Hatfield also
filed an application to temporarily restrain and enjoin the first
-
filed Florida action.

Id
.
Autonation moved to dismiss or stay the Texas suit.

Id
. at *2.

Th
e trial court denied the motion
to dismiss or stay.

Id
.

The court of appeals denied Autonation

s petition for a writ of mandamus
and, accordingly, Autonation sought mandamus relief from the Texas Supreme Court.


Id
.

Reiterating its recent decisions, the
court held that forum selection clauses
“‘
should be
given full effect


and

should control absent a strong showing that they should be set aside



Id
.

at *3 (quoting
In re
AIU

Ins. Co.
, 148 S.W.3d 124, 135
-
36 (Tex. 2004)).

Id
.

Interestingly,
Hatfield did

not rely on fraud, overreaching, or undue hardship to avoid enforcement of the
forum selection clause but, rather, argued that because the forum selection clause is a part of a
non
-
compete agreement it is unenforceable.

Id
.

In support, Hatfield cited
De
Santis v.
Wackenhut Corp
., 793 S.W.2d 670 (Tex. 1990) for the proposition that non
-
compete agreements
with Texas employees are a matter of fundamental policy in Texas and, thus, Texas Courts
should apply Texas law to determine the enforceability of such an

agreement.

Id
.

The current
court

in no way questione[d] the reasoning of
DeSantis


but

decline[d]...to superimpose the

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DeSantis choice
-
of
-
law analysis onto the law governing forum selection clauses.

8


Id. at * 4.

And even though the Florida courts m
ight apply Florida law governing the enforceability of non
-
compete agreements, the court held that enforcement of the forum selection clause was
mandatory.

Id
.


Thus, the Court held that the trial court should have enforced the forum selection
clause and
conditionally granted the writ of mandamus.
9


Id
. at *5.

II.

RECENT TEXAS COURT OF APPEALS CASES

After AIU, Automated, and Michiana
, the Texas courts of appeals have decided several
forum selection cases.
10


These courts interpret the Texas Supreme Court cases
as replacing the
two
-
step test with the
Bremen

test.

Thus, the appellate courts treat as irrelevant the question
whether the forum contractually chosen by the parties would enforce the clause as irrelevant.

These cases also emphasize the difficulty an op
ponent will have trying to convince a court to not
enforce a forum selection clause based on public policy.

Moreover, the appellate courts indicate
that rarely would a clause fail to be enforced for vagueness or lack of conspicuousness.

The
courts also h
ave indicated that waiver, laches, and quasi
-
estoppel do not always bar enforcement
of forum selection clauses.


Finally, these clauses may be enforced, in appropriate situations,
under equitable principles even against non
-
signatories.




8
Justice O’Neill filed a concurring opin
ion on the basis that it was unclear whether enforcing the forum selection
clause would result in application of Florida law. Had Hatfield established that the Florida courts would apply
Florida law, O’Neill might have declined to enforce the forum select
ion clause.

9
The Court also held that, as a matter of comity, the first
-
filed Florida action deserved to be heard first.
Id
. at *4.
While recognizing that the pendency of a first
-
filed action in another state does not mandate dismissal or abatement
of th
e later action, the Court reasoned that it should pay some deference to the Florida courts under the
circumstances.

10
Two appellate cases in which the courts granted mandamus are worth a short mention. In
In re Sterling Chemicals
,
the court of appeals denie
d mandamus relief because the court found that the forum selection clause had a latent
ambiguity with regards to what agreements it applied to. 261 S.W.3d 805, 811 (Tex. App.

Houston [14th Dist.]
2008). This demonstrates the necessity of drafting clear fo
rum selection clauses to avoid similar problems.
Additionally, in
In re ADM Investor Services, Inc.
, the court of appeals held that the party seeking to dismiss the
case based on the forum selection clause had waived its right to enforce it because the pa
rty had not asserted its
motion to dismiss during the pendency of the other party’s motion to transfer venue. 257 S.W.3d 817, 821 (Tex.
App.

Tyler). This shows the importance of asserting a motion to dismiss early on in the proceedings to avoid a
court fi
nding waiver by substantially invoking the judicial process.


13

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A.

In re Boehme
, 256 S
.W.3d 878 (Tex. App.

Houston [14th Dist.] 2008, no pet.
history)

In
Boehme
, Houston Community Newspapers (“HCN”) sued George Boehme for breach
of a non
-
compete agreement after HCN purchased Boehme’s group of local newspapers. 256
S.W.3d at 880. After expe
dited discovery and a successful temporary injunction hearing by
HCN, Boehme moved to dismissed the law suit based on a New York forum selection clause.
Id.

at 880
-
81. The trial court denied Boehme’s motion to dismiss, and he sought mandamus relief
from t
he court of appeals.

The court of appeals held that HCN’s evidence was insufficient to support its contention
that enforcement of the forum selection clause would contravene public policy, that Boehme did
not substantially invoke the judicial process so as

to waive the forum selection clause, and that
mandamus relief was not precluded under the doctrines of laches or quasi estoppel.
Id.

at 884,
887
-
88. HCN first alleged that Boehme, by waiting until after he lost the temporary injunction
hearing to file hi
s motion to dismiss, engaged in improper forum shopping by testing the
respondent’s ruling on the temporary injunction and then seeking to re
-
litigate the same claims in
New York.
Id.

at 882. While the court of appeals did find that forum shopping is agai
nst public
policy, it did not find that Boehme engaged in such an act by waiting until after the temporary
injunction hearing to file his motion to dismiss.
Id.

at 883. The court of appeals stated clearly
that “Boehme did no more than participate in limit
ed discovery


at HCN’s insistence


and
defend against the temporary injunction that his opponent sought.”
Id.

This, the court of appeals
found, did not amount to abuse of the legal process and did not contravene Texas public policy.
Id.

at 883
-
84.

The c
ourt of appeals then evaluated HCN’s claims that Boehme waived his right to
enforce the forum selection clause by substantially invoking the judicial process in participating

14

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in the discovery and temporary injunction hearing.
Id.

at 884. Relying on the fa
ctors set out in
Perry Homes v. Cull
, the court of appeals found that Boehme did not substantially invoke the
judicial process so as to waive enforcement of the forum selection clause.
Id.

at 885. The court
of appeals noted that Boehme did not seek any af
firmative relief, the forum selection clause was
not raised by either party prior to Boehme’s motion to dismiss, and Boehme’s waited only 18
days to file the motion to dismiss.
Id.

The court of appeals found this to be insufficient evidence
to establish t
hat Boehme waived his right to enforce the forum selection clause.
Id.

at 886
-
87.
Finally, the court of appeals evaluated HCN’s claims that mandamus relief should be denied on
the basis of laches or quasi
-
estoppel.
Id.

at 887
-
88. With regards to the issu
e of laches, the court
of appeals found the evidence insufficient to establish that a period of less than 10 days between
Boehme’s motion to dismiss being denied and his seeking of mandamus relief was not an
unreasonable time.
Id.

at 888. The court of app
eals further found that Boehme did not enjoy a
benefit from HCN’s request for a temporary injunction where Boehme had to incur attorneys’
fees to defend himself and refused to apply the doctrine of quasi
-
estoppel.
Id.

The court of
appeals found HCN did no
t meet its burden and conditionally granted mandamus relief to
Boehme.
Id.

at 889.

B.

In re Tyco Electronics Power Systems, Inc.
, 2005 WL 237232 (Tex. App.

Dallas
2005, orig. proceeding).

In
Tyco
, Wayne Bowman sued his former employer Tyco Electronics Power S
ystems in
Texas for a declaratory judgment regarding the enforceability of a covenant not to compete
contained in a contract between them. 2005 WL 237232, at * 1.


Tyco answered and moved to
dismiss based on a forum selection clause contained in the contra
ct designating Pennsylvania as
the forum.


Id
.

After the trial court denied Tyco

s motion to dismiss, Tyco sought mandamus
relief.

Id
.


15

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The court of appeals held that the evidence presented by Bowman was insufficient to
establish that enforcement of the c
lause would be unreasonable or unjust, or that the clause was
invalid for reasons such as fraud or overreaching.


Id
. at *5.

In support of his response, Bowman
filled two affidavits.

Id
. at *4.

Bowman alleged that, as a Dallas resident, forcing him to l
itigate
would essentially deprive him of his day in court because of the prohibitive financial costs.

Id
.


Although Bowman admitted signing the non
-
compete agreement, he said that he felt

obligated


to do so and that he was informed that it was

rarely e
nforced.



Id
.

Additionally, Bowman
stated that he knew that Tyco

s parent company was headquartered in Pennsylvania, but that he
did not have contact with any Pennsylvania employees and never traveled to Pennsylvania on
business. Id. The court found that

the affidavits contained only conclusory statements about the
hardship of litigating in Pennsylvania.


Id
. at *5.

Further, the court found that testimony about
feeling

obligated


to sign an agreement is not proof of overreaching).


Id
.

Thus, the court
held
that enforcement of the forum selection clause was mandatory and conditionally granted the writ
of mandamus.

C.

In re Kyocera Wireless Corporation
, 162 S.W.3d 758 (Tex. App.

El Paso 2005,
orig. proceeding), mandamus denied (Mar.

3, 2005).

In 2005, the El

Paso Court of Appeals granted mandamus relief to resolve a forum
selection clause dispute.

In
Kyocera
, Coslight USA, Inc., a cell phone battery supplier, brought
suit for breach of contract against Hecmma, Inc., a battery back assembler in El Paso, Texas
,
alleging that Hecmma failed to pay amounts due under several purchase orders.

Id
. at 761.
Hecmma answered and filed a third party petition against Kyocera Wireless Corporation, a cell
phone manufacturer, claiming that Kyocera instructed Hecmma to stop u
sing and paying for
Coslight

s battery backs.


Id
. at 761
-
62.

In response, Kyocera filed a motion to dismiss based on
the forum selection clause contained in purchase orders between Kyocera and Hecmma, which


16

H:
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designated San Diego, California as the forum,
11

and because Kyocera was improperly joined.
Id
. at 762.

The trial court denied the motion to dismiss without specifying the reason.

Id
.


Kyocera then filed a petition seeking a writ of mandamus.

Id
.

The court first determined that Hecmma accepted the te
rms of the contract, including the
forum selection clause.

Hecmma argued that because it started work before it actually received
the purchase order, it did not accept the terms of the contract.


Id
. at 766.

However, because
Hecmma never objected to the
terms of the purchase orders, the court found that Hecmma
accepted the forum selection clause.

Id
. at 766
-
67 (relying on TE
X
. B
US
. & COM. CODE
ANN. § 2.201(b) (requiring party to object with to written contents of a contract within ten days
after it is re
ceived)). The court also determined that a forum selection clause does not have to be
conspicuous, unless the contract is for goods with consideration of $50,000 or less.

Id
. at 767
(relying on TE
X
. B
US
. & COM. CODE ANN. § 35.53(a)).

Since the contract a
mount in this
case was over $50,000, the forum selection clause was enforceable regardless of whether it was
conspicuous.

Id
.

Next, the court decided that neither inconvenience nor public policy provided a reason to
not enforce the forum selection clause.


Hecmma argued that because the witnesses, facilities,
and inventory were located in El Paso and Mexico, the clause should not be enforced.

Id
.

But
since California is not a

remote alien forum,


Hecmma failed to meet his

heavy burden to
prove that the

forum
-
selection clause should not be enforced on grounds of serious
inconvenience.



Id
.

Additionally, the court found that enforcement of the clause was not
contrary to Texas public policy on consumer safety.

Id
.


The court failed to find any evidence
that Texas consumers were more affected by safety than other consumers, and further, how




11
Kyocera has both a manufacturing plant and its principal place of business in San Diego. Hecmma is a Texas
corporation with its principal place of business in El Paso.
Id
. at 761.


17

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litigating in Texas would provide better protection to Texas consumer than if the case was
litigated in California.

Id
.

Finally, the court discussed the interplay bet
ween forum selection clauses and venue
statues. The court expressly disagreed with the contention that a venue statue will always trump a
forum selection clause.


Id
. at 768.

Hecmma contended that because Kyocera was an
indispensable third party defendant
, venue was proper under Section 15.062 of the Texas
Practice and Remedies Code.


Id
.

However, since Hecmma could provide no evidence that
Kyocera was liable for any of the claims in the original suit, Kyocera was improperly joined and
Section 15.062 did
not apply.


Id
. at 768
-
69.

Thus, the court ultimately held that the forum
selection clause was valid and enforceable, and therefore conditionally granted a writ of
mandamus.

Id
. at 769.

D.

Phoenix Network Technologies Ltd. v. Neon Systems, Inc.
, 177 S.W.3d
605 (Tex.
App.

Houston [1st Dist.] 2005, no pet.).

In
Phoenix
, a software distributor, Phoenix Network Technologies, Ltd. (

PNT

), sued
another distributor, Neon Systems, Inc., in Texas claiming tortious interference and breach of
contract.

177 S.W.3d at
609.

In the same suit, PNT also brought a breach of contract claim
against the software manufacturer, Computer Associates International, Inc. (

CAI

).

Id
.

Neon
and CAI moved to dismiss based on the contract

s forum selection clause.
12

Id
. at 610. The
con
tract at issue contained a forum selection clause designating the United Kingdom as the

forum.

The trial court granted the motions to dismiss and PNT appealed.


Id
.




12
The forum s
election clause at issue provided “The parties hereby agree that this Agreement and the provisions
hereof shall be construed in accordance with English law and the venue for resolution of any disputes arising out of
this Agreement shall be the United Kingd
om.”
Id
. at 610. Although the court refers to this clause as a forum
selection clause, it may actually be a venue selection clause, which will not necessarily be treated the same under
Texas law. After
M/S Bremen
, even though Texas courts began enforcin
g forum selection clauses, they still
continued to refuse to enforce venue stipulations.
See, e.g., Bristol
-
Myers Squibb Co. v. Goldson
, 957 S.W2d 671,
674 (Tex. App.

Fort Worth 1997, writ denied (holding that venue is fixed by law and cannot be contracte
d by
parties);
Barnette v. United Research Co.
, 823 S.W.2d 368, 369
-
70 (Tex. App.

Dallas 1991, writ denied) [sic]
(specifically stating that venue cases do not apply to forum selection cases).


18

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Before finding the clause valid and enforceable, the court made several findings in
respon
se to arguments asserted by PNT.

First, the court determined that the parties chose the
United Kingdom as the exclusive forum and that parol evidence of the parties


intentions is not
admissible when, such as here, the clause is unambiguous.


Id
. at 615.

Additionally, the court
determined that the defendants did not have to establish that the forum selected in the forum
selection clause would recognize the validity of such clauses.


See id
. at 618 (stating that such
clauses are prima facie valid).

Moreov
er, the court determined that parties could choose whether
to contract for a forum to receive only specific types of claims or all claims.


Id
. at 619.

Here,
the court stated that the clause required

all


claims to be litigated in the United Kingdom even

though the clause used the word

any.



Id
.

The court also determined that a clause is not void
for vagueness just because it selects a forum that contains multiple legal systems and
jurisdictions.

Id
. at 619
-
20 (stating that in terms of jurisdiction,

exclusive


does not mean

single

).

Finally, the court found that a public policy exception did not apply in this case. PNT
argued that because both CAI and Neon operated in Texas but sought to enforce a clause
selecting the United Kingdom as the forum, th
e policy behind forum selection clauses was not
satisfied.

Id
. at 620.

The court relied on
Automated
, where the Texas Supreme Court granted
enforcement of a forum selection clause even though the defendant was sued in the county of its
principal place of

business.

Id
. (citing
In re Automated Collection Techs., Inc.
, 156 S.W.3d at
558, 560).

Further, the court noted that the policy behind these clauses encourages freely
negotiated private agreements.


Id
. at 620
-
21.

Additionally, the court found that the

clause still bound defendants even though neither

one was an actual signatory to the contract.

Id
. at 620.

Evidence was presented that CAI was the

19

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successor to a company that did sign the original contract, and as successor, CAI was assigned
the rights
and obligations of the signatory to the contract.


Id
.

With respect to Neon, the court
relied on equitable estoppel principles, used in the arbitration context, to allow non
-
signatories
such as Neon to enforce the forum selection clause.

Id
. at 624.

Thu
s, the court
affirmed

the trial
court

s decision to dismiss the claims against CIA and Neon.
13


Id
.

E.

In re Talent Tree Crystal
, 2006 WL 305015 (Tex. App.

Houston [1st Dist.]
2006, no pet.)

Talent Tree Crystal, Inc., a franchisor of an employment staffing age
ncy, filed a petition
for writ of mandamus after the trial court denied its motion to dismiss an action brought by DRG,
Inc., its franchisee, based on a forum selection clause in the franchise agreement.

2006 WL
305015 at * 1.

The franchise agreement des
ignated the Southern District of Texas as the forum,
and in the event that that the Southern District did not have jurisdiction, all disputes were to be
brought in state courts in Houston.

Id
.

Rather than filing suit in the Southern District, DRG
brought

suit in a Houston state court.

Id
.

In granting mandamus, the court applied the
M/S Bremen

test. Id. at *2
-
4.

The court
noted that DRG did not content that fraud or overreaching invalidated the forum selection clause.


Id
. at *3.

Additionally, the court

found that enforcement of the clause would not be
unreasonable or unjust.


Id
.

Because Talent Tree had filed litigation in the Southern District of
Texas, dismissing the case filed in state court would avoid piecemeal litigation.

Id
.

Furthermore, DRG d
id not provide evidence that enforcing the forum selection clause would be

gravely difficult or inconvenient.

Id
. at *4.

Thus, since DRG did not meet its burden to defeat
the forum selection clause, the trial court had a mandatory duty to enforce the cla
use.

Id
. at *3.




13
But see,
Liu v. CICI Enters.
, No. 14
-
05
-
00827, 2007 WL 43817,
*2
-
3 (Tex. App.

Houston (14th Dist.) Jan. 9,
2007, no pet. h.) (holding that while a trial court may appropriately dismiss an action based on a forum selection
clause, venue selection clauses may only be enforced where specifically allowed by statute).


20

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The appellate court briefly addressed several other arguments relating to forum selection
clauses.

DRG argued that the clause was actually a venue provision, and in reliance on venue
principles, the trial court acquired dominant jurisdict
ion when DRG filed its petition in the trial
court.

Id
. at *3.

The appellate court found that since dominant jurisdiction only becomes a
question if venue is proper in two or more Texas counties, dominant jurisdiction was not an issue
in this case.

Id
.

Additionally, the court found that laches did not preclude Talent Tree from
seeking mandamus relief.


Id
. at *4.

DRG claimed that Talent Tree waited more than five
months after the motion to dismiss was denied before it sought mandamus.

Id
.

However, th
e
appellate court found that although the trial court may have denied several previous motions to
dismiss, Talent Tree sought mandamus based on the one denied seven days prior to seeking
mandamus.

Id
.

Consequently, the appellate court conditionally grant
ed the writ.

Id
.

F.

Deep Water Slender Wells, Ltd. V. Shell Int

l Exploration & Prod., Inc.
, 2007 WL
1745322 (Tex. App.

Houston [14th Dist.] 2007, no pet. h.)

Deep Water entered into an agreement with an entity related to Shell International and its
employee
s Jim Adam, Graham Brander, and Mark S. Leonard (

Shell Parties

) to develop
offshore drilling equipment.


2007 WL 1745322 at *1.

Deep Water sued the Shell Parties
alleging that, among other things, the Shell Parties converted trade secrets, disclosed con
fidential
information, and tortiously interfered with Deep Water

s relationships with third parties.


Id
. at
*2.

The Shell Parties filed a motion to dismiss based on a forum selection clause contained in
one of the relevant agreements that mandated exclus
ive jurisdiction in the Hague.


Id
. at *3.


The
agreement was signed by an entity related to Shell International but was not signed by any of the

defendants.

Id
. at * 1.

The trial court originally denied the motion but later it reconsidered and
dismissed

the suit.

Id
. at *3
-
4.


Deep Water appealed.


Id
. at *4.


21

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The Court of Appeals noted that when deciding whether to enforce a mandatory forum
selection clause, courts must

determine whether the claims in the case at hand fall within the
scope of the forum

selection clause...whether the court should enforce the clause...[and] whether
nonsignatories to the contract can enforce the forum selection clause.



Id
. at *5.

Accordingly,
the court determined that the claims Deep Water asserted were within the scope

of the clause and
that the clause should be enforced.
14


Id. at *5
-
11.

The court then addressed the issue of whether
a forum selection clause can be enforced by nonsignatories.

The court recognized that

[t]he First Court of Appeals has determined that th
e equitable
-
estoppel theories regarding nonsignatories to arbitration agreements also should be applied to
forum selection clauses that do not involve arbitration.



Id
. at *9.

Adopting this position, the
court held that

[
c]ourts should apply equitable e
stoppel when a signatory to the contract
containing the forum selection clause raises allegations of substantially interdependent and
concerted misconduct by both nonsignatories and one or more signatories to the contract.



Id
. at
*10.

The court went on
to find that Deep Water alleged that Shell International was the alter ego
of the signatory entity and, thus, was a signatory.


Id
.


Furthermore, Deep Water alleged that the
individual defendants engaged in substantially interdependent tortious conduct wit
h the signatory
to defraud Deep Water.

Thus, all of the defendants, including the non
-
signatories, could enforce
the clause.

Id
.

III.

POTENTIAL FUTURE ISSUES

The United States Supreme Court says the presumption of validity can be overcome and a
clause shown t
o be unreasonable: (1) if the selected forum is so

gravely difficult and
inconvenient that [the plaintiff] will for all practical purposes be deprived of its day in court

; (2)



14
De
ep Water also asserted that the Shell parties had to prove that the Hague recognized the validity of the forum
selection clause at issue in order to enforce the clause in Texas.
Id
. at *10. The court found that this argument had
no merit.
Id
.


22

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if the fundamental unfairness of the chosen law might deprive the plaintiff of

a remedy; or (3) if
the clause contravenes a strong public policy of the forum state.


M/S Bremen
, 407 U.S. at 12
-
18.
In the international context, there can be serious issues about the enforcement in the United
States of a judgment obtained abroad.
15


Sim
ilar issues can arise about the treatment in other
nations of an American judgment.
16


A Texas court has not yet squarely confronted this issue
under the new framework, but it has the potential for future litigation.

A related issue ties back to the two
-
ste
p test utilized by Texas courts prior to
AIU
, which
enforced forum selection clauses if the parties contractually consented to a foreign jurisdiction
and if the other state would recognize the validity of the provision
.

See Holeman v. Nat

l Bus.
Inst., In
c.
, 94 S.W.3d 91, 97 (Tex. App.

Houston [14th Dist.] 2002, pet. denied);
see also Tyco
,
2005 WL 237232, at *4 (stating that the two prong standard no longer applies).

Some foreign
jurisdictions, such as Israel, view forum selection clauses as presumptivel
y invalid.

Jason
Yackee,
Fifty Years Late to the Party?


A New International Convention for Non
-
arbitral Forum

Selection Agreements
, 23 INT

L LITIG. Q. 1, 1 (2006).

Other countries view forum selection
clauses as generally valid, but provide exceptions t
o enforcement for large, undefined categories
of cases or subject matter, making it difficult to determine whether the country would even
enforce the clause.


See id
. at 5 (noting the European approach to not enforce forum selection
clauses in both consume
r and employment contracts).

Public policy arguments can be made



15
For examp
le, in the United States, judgments obtained abroad are enforced by non
-
uniform state laws. See Linda J.
Silberman,
Enforcement and Recognition of Foreign County Judgments in the United States
, 739 PLUM. 351 (2006)
(discussing various recognition and enfor
cement principles applied by various United States jurisdictions);
see also
Hunt v. BP Exploration Co.
, 492 F. Supp. 885 (N.D. Tex. 1980) (applying Texas law to determine the preclusive
effect of an English judgment on relitigating the same or similar issu
es in Texas);
Hennessy v. Marshall
, 682 S.W.2d
340 (Tex. App.

Dallas 1984, no writ) (applying Texas law to determine enforcement of foreign judgment).

16
See, e.g.
, Wolfgang Wurmnest,
Recognition and Enforcement of U.S. Money Judgments in Germany
, 23 Berkley

J.
Int’l L. 175 (2005). The Hague Conference on Private International Law completed a draft of a new convention that
addresses the enforcement of international forum selection clauses and the resulting judgments. See Convention on
Choice of Court Agreem
ents, concluded June 30, 2005,
http://www.hcch.net/index_en.php?act=conventions.text&cid=98
.


23

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\
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about the perceived inequity of sending cases from Texas to a forum that would not send cases to
Texas.
17

IV.

CONCLUSION

The Texas Supreme Court

s holdings in
Lyon,
AIU, Automated
, and
Michiana

c
onfirm
that Texas now regards forum selection clauses as presumptively valid and enforceable.

In these
cases, the Court adopted the United States Supreme Court

s test in
M/S Bremen

that such clauses
should be enforced, unless the opposing party clearly sh
ows that enforcement would be

unreasonable and unjust, or that the clause was invalid for reasons such as fraud or
overreaching.



In re Automated Collection Techs., Inc.
, 156 S.W.3d 557, 559 (Tex. 2004);
see
also In re AIU Ins. Co.
, 148 S.W.3d 109, 112 (
Tex. 2004) (citing
M/S Bremen v. Zapata Off
-
Shore, Co.
, 407 U.S. 1 (1972).
18

Additionally, by providing mandamus relief
19

for failure to enforce forum selection

clauses and clarifying that such clauses cannot be easily waived, the Texas Supreme Court
opinion
s encourage lower courts to carefully analyze a case before deciding not to enforce a
clause. The court gave further support to this enforcement by holding multiple times that forum
selection clauses are analogous to arbitration clauses, which are highly f
avored.

See Automated
,
156 S.W.3d at 559 (analogizing regarding waiver);
AIU
, 148 S.W.3d at 115
-
16, 121 (analogizing
regarding waiver and mandamus).


Consequently, attorneys can be confident that if a dispute



17
In 2005, the American Law Institute voted to approve a model federal statute about the recognition of foreign
judgments, which in several places adopts the concep
t of “reciprocity.”
See, e.g.
, Recognition and Enforcement of
Foreign Judgments: Analysis and Proposed Federal Statute § 7(a) (“A foreign judgment shall not be recognized or
enforced in a court in the United States if the court fords that comparable judgm
ents of courts in the United States
would not be recognized or enforced in the courts of the state of origin.”).

18
In diversity cases, the Fifth Circuit uses federal law to determine whether to enforce forum selection clauses.
Haynsworth v. The Corp.
, 121
F.3d 956, 962 & n.11 (5th Cir. 1997). Thus, by adopting
M/S Bremen’s

test, Texas
not only aligned its law with federal law, but ensured more consistent results regardless of whether such a dispute
arose in Texas state or federal court.

19
By allowing mandam
us relief, Texas distinguishes itself from federal law.
See supra note

4.


24

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arises regarding a well
-
drafted forum selectio
n clause, meritorious arguments in favor of
enforcing the clause will be given full consideration without having to first go through a full trial
on the merits.