frank-m-k-liu-and-edward-r-perry-jr-individually-and-on-behalf-of-iv ( 2007 )

Reversed and Remanded and Memorandum Opinion filed January 9, 2007

Reversed and Remanded and Memorandum Opinion filed January 9, 2007.

In The

Fourteenth Court of Appeals

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NO. 14-05-00827-CV

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FRANK M.K. LIU AND EDWARD R. PERRY, JR., INDIVIDUALLY AND ON BEHALF OF IV PIZZA, L.L.C., Appellant

V.

CICI ENTERPRISES, LP, SUCCESSOR BY CONVERSION TO CICI ENTERPRISES, INC., Appellee

On Appeal from the 125^th District Court

Harris County, Texas

Trial Court Cause No. 04-70816

M E M O R A N D U M    O P I N I O N

The trial court granted a motion to dismiss a Harris County suit based on a contractual provision stating that the parties Airrevocably submit themselves to the jurisdiction of the State Courts of Dallas County, Texas . . . [and] agree that venue for any proceeding relating to or arising out of this agreement shall be Dallas County, Texas . . . .@  Because the provision is not a mandatory forum selection clause requiring dismissal but is instead a venue selection clause, and because venue was not timely challenged in accordance with the governing procedural rules, we reverse and remand.

I.  Factual and Procedural History

The facts in this case are not in dispute.  Appellants Frank M.K. Liu and Edward R. Perry Jr. both reside in Harris County, Texas. Together with John McClure, appellants are shareholders in IV Pizza, L.L.C. ( APizza@).  In January 1999, Pizza entered into a franchise agreement with the predecessor in interest of appellee CiCi Enterprises, L.P.^[1] (ACiCi@) under which Pizza opened a franchise restaurant in Baton Rouge, Louisiana.  McClure managed the restaurant.  On December 14, 2004, Liu and Perry, individually and on behalf of Pizza, sued CiCi in Harris County, Texas for tortious interference with contract.  Specifically, they alleged that CiCi interfered with their relationship with McClure by granting him a separate franchise. 

On January 18, 2005, CiCi filed an answer Asubject to its Motion to Dismiss,@ but did not file the motion until January 31, 2005.  In its motion, CiCi argued that the franchise agreement contained an enforceable forum selection clause.  Appellants responded that the provision was instead a venue selection clause, and argued that CiCi waived enforcement because it failed to object to improper venue Aby written motion filed prior to or concurrently with any other plea, pleading or motion except a special appearance@ as required by Tex. R. Civ. P. 86(1).

The trial court granted CiCi=s motion to dismiss, and appellants filed a combined Motion for New Trial, Motion to Reform Judgment and Motion to Reconsider Judgment.  After the motion was overruled by operation of law, Liu and Perry brought this appeal.

II.  Issue Presented

In a single issue, appellants contend the trial court erred in granting CiCi=s motion to dismiss because the case does not fall within any mandatory exception to the venue statute and CiCi did not comply with the rules governing challenges to venue.

III.  Standard of Review

When the parties appeal the trial court=s grant of a motion to dismiss, the standard of review is determined by the issues presented in the motion.  Here, the case was dismissed on the grounds that suit was filed in Harris County in violation of a mandatory forum selection clause provided by contract.  We review the enforcement of a forum-selection clause for an abuse of discretion, and review the contractual interpretation of the clause de novo.  Clark v. Power Mktg. Direct, Inc., 192 S.W.3d 796, 798 (Tex. App.CHouston [1 Dist.] 2006, no pet.) (reviewing dismissal based on a contractual forum selection clause).  A clear failure by a trial court to analyze or apply the law correctly is an abuse of discretion.  McDaniel v. Yarbrough, 898 S.W.2d 251, 253 (Tex. 1995).

IV.  Analysis

Appellants argue that the contract provision at issue is not a forum selection clause but a venue selection clause; thus, by failing to comply with procedures governing challenges to venue, CiCi waived its argument that the lawsuit could not proceed in Harris County.  Appellants also contend the venue selection clause is unenforceable as a matter of law.

CiCi=s position, both in the trial court and in response to this appeal, rests on the bedrock assumption that the law treats forum and venue selection clauses alike.  Thus, CiCi argues that, because forum selection clauses are enforceable, venue selection clauses are also enforceable.  CiCi further reasons that, because the choice of an improper forum may be challenged through a motion to dismiss, the choice of an improper venue may likewise be challenged by a motion to dismiss. 

But, CiCi=s premise is without support.  Although the terms are not always used with precision, forum and venue are not synonymous.  Forum pertains to the jurisdiction, generally a nation or State, where suit may be brought.  See, e.g., Michiana Easy Livin= Country, Inc. v. Holten, 168 S.W.3d 777, 784 (Tex. 2005) (explaining that before a defendant is subject to specific jurisdiction in a particular state, the defendant must purposefully avail itself Aof the privilege of conducting activities within the forum State . . . .@) (emphasis added).  In contrast, venue concerns the geographic location within the forum where the case may be tried.  See, e.g., Boyle v. State, 820 S.W.2d 122, 139B40 (Tex. Crim. App. 1989) (en banc) (stating that venue Aconcerns the geographic location within the State where the case may be tried.@) (emphasis added), cert. denied, 503 U.S. 921, 112 S. Ct. 1297, 117 L. Ed. 2d 520 (1992), overruled on other grounds, Gordon v. State, 801 S.W.2d 899, 911 (Tex. Crim. App. 1990) (en banc); Gordon v. Jones, 196 S.W.3d 376, 383 (Tex. App.CHouston [1st Dist.] 2006, no pet.) (AVenue may and generally does refer to a particular county, but may also refer to a particular court.@) (internal citations omitted).^[2]

The distinction between a forum selection clause and a venue selection clause is critical.  Under Texas law, forum selection clauses are enforceable unless shown to be unreasonable, and may be enforced through a motion to dismiss.  See M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S. Ct. 1907, 1913, 32 L. Ed. 2d 513 (1972) (stating that forum selection clauses Aare prima facie valid and should be enforced unless enforcement is shown by the resisting party to be >unreasonable= under the circumstances@); Michiana Easy Livin= Country, Inc., 168 S.W.3d at 793 (emphasizing that  Aenforcement of a forum-selection clause is mandatory absent a showing that >enforcement would be unreasonable and unjust, or that the clause was invalid due to fraud or overreaching.=@) (quoting In re Automated Collection Techs., Inc., 156 S.W.3d 557, 559 (Tex. 2004)); Automated Collection Techs., Inc., 156 S.W.3d at 559B60 (granting petition for writ of mandamus and directing trial court to grant defendant=s motion to dismiss based on a contractual forum selection clause).  In contrast, venue selection cannot be the subject of private contract unless otherwise provided by statute.^[3] Fleming v. Ahumada, 193 S.W.3d 704, 712B13 (Tex. App.CCorpus Christi 2006, no pet.) (citing Fidelity Union Life Ins. Co. v. Evans, 477 S.W.2d 535, 537 (Tex. 1972)); Bristol-Myers Squibb Co. v. Goldston,  957 S.W.2d 671, 674 (Tex. App.CFort Worth 1997, pet. dism=d by agr.) (ABecause venue is fixed by law, any agreement or contract whereby the parties try to extend or restrict venue is void as against public policy.@).  Moreover, venue must be challenged by a motion to transfer venue filed before or concurrently with the defendant=s answer.  Tex. Civ. Prac. & Rem. Code Ann. ' 15.063 (Vernon 2002).  In the absence of a timely filed motion to transfer venue, the defendant=s objection to improper venue is waived.  Tex. R. Civ. P. 86(1); Wilson v. Tex. Parks & Wildlife Dept., 886 S.W.2d 259, 260 (Tex. 1994), overruled in part on other grounds, Golden Eagle Archery, Inc. v. Jackson, 24 S.W.3d 362, 372 (Tex. 2000).         Here, CiCi=s motion to dismiss was based on the following clause in the franchise agreement:

Jurisdiction and Venue: Governing Law.  Operator [Pizza] and the Controlling Principals hereby irrevocably submit themselves to the jurisdiction of the State Courts of Dallas County, Texas and the federal district court for the Northern District of Texas, Dallas Division. Operator and the Controlling Principals hereby waive all questions of personal jurisdiction for the purpose of carrying out this provision.  Operator and the Controlling Principals hereby agree that service of process may be made upon any of them in any proceeding relating to or arising out of this agreement or the relationship created by this agreement by any means allowed by Texas or Federal law.  Operator and the Controlling Principals further agree that venue for any proceeding relating to or arising out of this agreement shall be Dallas County, Texas . . . .

In the first two sentences of this provision, the parties effectively waive challenges to the jurisdiction of the state and federal courts of Dallas County, Texas.  Thus, CiCi waived the right to challenge the court=s exercise of general or specific jurisdiction in lawsuits filed in one of the enumerated courts.  Since the instant suit was not filed in Dallas County, this part of the contract provision is inapplicable.^[4]

The third sentence of the provision deals with service of process.  This, too, is not at issue in this case. 

This case instead turns on the quoted portion of the fourth sentence, in which CiCi and appellants agree Athat venue for any proceeding relating to or arising out of this agreement shall be Dallas County, Texas . . . .@  The quoted section is an unambiguous venue selection clause.  Thus, in order to assert its contention that venue is proper only in Dallas County, CiCi was required to file a written motion to transfer venue to Dallas County not later than the date on which it answered the lawsuit.  See Tex. R. Civ. P. 86.  Because CiCi failed to do so, it has waived objection to venue in Harris County. 

We therefore hold that the trial court abused its discretion in granting CiCi=s motion to dismiss, and we do not reach appellants= subsidiary argument that the venue selection clause at issue is unenforceable. 

V.  Conclusion

Because the trial court abused its discretion in granting CiCi=s motion to dismiss, we reverse the judgment of the trial court and remand for further proceedings consistent with this opinion.

/s/      Eva M. Guzman

Justice

Judgment rendered and Memorandum Opinion filed January 9, 2007.

Panel consists of Justices Anderson, Hudson, and Guzman.

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^[1]  CiCi was sued as the successor by conversion to CiCi Enterprises, Inc.

^[2]  We are not here presented with a contract specifying a venue in a foreign nation or state.  Such cases raise questions not presented here, such as whether the selection of a foreign venue necessarily implies the selection of a particular forum.  See generally, Phoenix Network Techs. (Europe) Ltd. v. Neon Sys., Inc., 177 S.W.3d 605 (Tex. App.CHouston [1st Dist.] 2005, no pet. h.).

^[3]  For example, a contract provision requiring mandatory venue in a particular county is enforceable if the case involves a Amajor transaction,@ defined, subject to certain exceptions inapplicable here, as Aa transaction evidenced by a written agreement under which a person pays or receives, or is obligated to pay or entitled to receive, consideration with an aggregate stated value equal to or greater than $1 million.@  See Tex. Civ. Prac. & Rem. Code Ann. ' 15.020(a) (Vernon 2002).  CiCi admits that the case at issue does not involve a major transaction.

^[4]  Moreover, because CiCi did not file a special appearance challenging jurisdiction in the instant case, CiCi has waived any challenge to the Harris County trial court=s exercise of jurisdiction, regardless of the terms of the contract.  See Tex. R. Civ. P. 120a.