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In re Bambu Franchising LLC

Court of Appeals of Texas, Fifth District, Dallas

September 12, 2017


         Original Proceeding from the 298th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-16-05683

          Before Justices Francis, Brown, and Whitehill.



         This original proceeding involves the enforceability of a contractual forum selection clause to claims asserted under the Texas Deceptive Trade Practices Act (DTPA). The clause states that all matters arising under the agreement shall be brought in San Jose, California. Relators complain that the trial court abused its discretion by refusing to enforce the clause and denying their motion to dismiss. The real party in interest maintains that the clause does not apply to the tort claims asserted below. We conditionally grant the writ.

         I. Background

         Relator Bambu Franchising LLC ("Bambu") is the franchisor of Vietnamese-style beverage and dessert restaurants. The real party in interest (Plaintiff below) Bamboo Dynasty, LLC ("Dynasty") obtained from Bambu the right to use the Bambu trademark and operating system (including recipes, training, and ingredient access) for a Bambu restaurant in Grand Prairie, Texas. The franchise relationship was consummated through three agreements. One of those agreements, the Business Agreement, includes the following forum selection clause:

Any lawsuit relating to any matter arising under this agreement shall be initiated in a State or Federal Court located in San Jose, California.

         The other agreements included similar clauses, but Bambu relies solely on the clause found in the Business Agreement here. Section 10.7 of the Business Agreement also designates California law as the law governing the agreement and construction of the rights of the parties under the agreement. Section 10.7 further provides that Dynasty "irrevocably consents to the jurisdiction, venue and to the service of process, pleadings, and notices in connection with any and all actions and processes in the State and Federal Courts located in the County of Santa Clara, California."[1]

         Dynasty sued Bambu below for DTPA violations, alleging Bambu failed to make certain required disclosures and failed to pay a $25, 000 bond required by the Texas Business Opportunity Act. Dynasty claims that Bambu sold it a "business opportunity" and represented that Dynasty would earn or likely earn a profit in excess of the purchase price. According to Dynasty, Bambu then failed to register the opportunity with the Texas Secretary of State and failed to establish a statutorily-required trust account or irrevocable letter of credit. Dynasty also argues that Bambu misrepresented to Dynasty that the transaction was a license of intellectual property and not a business opportunity. Bambu moved to dismiss based on the forum selection clause. Bambu argued that Dynasty's claims are subject to the forum selection clause because they arise under the Business Agreement. Bambu further contended that for Dynasty to prevail on its claims, Dynasty must prove that the agreements triggered the statutory disclosure requirement because the transaction involved the sale of a business opportunity. Bambu asserted Dynasty would have no claims against Bambu but for the agreements. The trial court denied the motion to dismiss and this original proceeding followed.

         II. Analysis

         A. Applicable Law

         Forum-selection clauses provide parties with an opportunity to contractually preselect the jurisdiction for dispute resolution. Pinto Tech. Ventures, L.P. v. Sheldon, No. 16-0007, 2017 WL 2200357, at *5 (Tex. May 19, 2017) (citing In re AIU Ins. Co., 148 S.W.3d 109, 111 (Tex. 2004) (orig. proceeding)). Mandamus relief is available to enforce forum-selection agreements because there is no adequate remedy by appeal when a trial court abuses its discretion by refusing to enforce a valid forum-selection clause that covers the dispute. In re Int'l Profit Assocs., Inc., 274 S.W.3d 672, 675 (Tex. 2009) (orig. proceeding) (per curiam).

         Forum-selection clauses are generally enforceable and presumptively valid. In re Laibe Corp., 307 S.W.3d 314, 316 (Tex. 2010) (orig. proceeding) (per curiam); In re Int'l Profit Assocs., 274 S.W.3d at 675. Failing to give effect to contractual forum-selection clauses and forcing a party to litigate in a forum other than the contractually chosen one amounts to " 'clear harassment' ... injecting inefficiency by enabling forum-shopping, wasting judicial resources, delaying adjudication on the merits, and skewing settlement dynamics...." In re Lisa Laser USA, Inc., 310 S.W.3d 880, 883 (Tex. 2010) (orig. proceeding) (quoting In re AutoNation, Inc., 228 S.W.3d 663, 667-68 (Tex. 2007) (orig. proceeding)).

         A party attempting to show that such a clause should not be enforced bears a heavy burden. In re ADM Inv'r Servs., Inc., 304 S.W.3d 371, 375 (Tex. 2010) (original proceeding); In re Lyon Fin. Servs., Inc., 257 S.W.3d 228, 232 (Tex. 2008) (orig. proceeding) (per curiam) (citing In re AIU Ins. Co., 148 S.W.3d at 113); In re Laibe Corp., 307 S.W.3d at 316. A trial court abuses its discretion in refusing to enforce a forum-selection clause unless the party opposing enforcement meets its heavy burden of showing 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 ...

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