In re ADM Investor Services, Inc. (Published): Forum selection clause waived, at least according the the majority. Mandamus relief denied. The dissent would find no waiver, and would have granted mandamus. This is a hot topic in Austin, so either way, there’s a good chance that the Tyler court won’t have the last word.
Prescott signed an agreement with Texas Trading (an agent for ADM) for ADM to trade commodities for Prescott on the Chicago Board of Trade. Prescott’s account went 50 grand into the red. ADM got that out of the hide of Dawson, the owner of Texas Trading. Dawson then successfully sued Prescott for that amount.
Prescott then sued Texas Trading and ADM for being lousy traders. By virtue of the agreement that Prescott had signed, both Texas Trading and ADM could have asserted a forum selection clause that would have sent the matter to Illinois. But instead Texas Trading just asked that venue to be transferred from one Texas county Rains to another (Hopkins). ADM sat on its hands while Texas Trading got its venue transfer.
Generally speaking “[e]nforcement of forum selection clauses is mandatory unless the party opposing enforcement clearly shows that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching.” Of course, “unreasonable and unjust” could mean a lot of things. It’s a matter of sifting through prior cases to figure out what those terms really mean. In particular, arbitration cases, because the Texas Supreme Court has held that the standards for waiver of arbitration clauses are “analogous” to the standards for forum selection clauses. See this earlier post on an interesting arbitration decision by the Tyler court.
The majority all but accuses ADM of teaming up with Texas Trading to force Prescott into litigating in two forums. That’s dirty dealing that waives the forum selection clause.
The dissent basically says: “Like it or not, the law on forum selection lets ADM do exactly that.” The dissent doesn’t really take issue with the majority’s statement of the law, just its application to these facts. The dissent points to Supreme Court of Texas cases where parties let litigation roll along far longer than ADM did here without waiving the right to compel arbitration.
If memory serves, this is only the second Tyler case this year with a dissent. The first one is here.