FC Festivals, LLC v. Quality Event Flooring Systems, LLC

          Submitted on January 3, 2019

          On Appeal from the 136th District Court Jefferson County, Texas Trial Cause No. D-200,644

          Before Kreger, Horton, and Johnson, JJ.

          MEMORANDUM OPINION

          HOLLIS HORTON, JUSTICE.

         May a company charge a purchase to an account holder's corporate account when the individual who makes the purchase tells the company selling the goods that the goods are not being acquired for the account holder? And if the company charges the account holder for the purchase while knowing the account holder was not making the purchase, does the account holder's credit agreement apply to the transaction? If the account holder is also a nonresident of this State, may a forum selection clause in the account holder's credit agreement require the account holder to defend a lawsuit the seller filed against the account holder in the state designated in the clause?

         The trial court resolved these questions in a Texas company's favor and denied an Iowa company's special appearance. In its special appearance, the Iowa company claimed it never purchased the goods that were the subject of the Texas company's suit. And in the hearing, the Iowa company established that neither it nor an agent acting on its behalf acquired the goods for the Iowa company's account. Moreover, the Iowa company established the Texas company knew the individual who acquired the goods was not purchasing them for the Iowa company's account. Nevertheless, the trial court held the forum selection clause in a credit agreement the Iowa company signed allowed the court to exercise jurisdiction over the Iowa company and to resolve the Texas company's claim seeking to recover payment for the goods the Texas company delivered to the individual who signed contracts renting the goods the individual subsequently used.

         We conclude the forum selection clause does not apply because the Texas company knew the goods were not purchased on the Iowa company's account. And since the record contains no other basis justifying the trial court's ruling, we reverse the trial court's order denying the special appearance and dismiss the Iowa company from the suit.

         Background

         In September 2017, Quality Event Flooring Systems, LLC (Quality Flooring) sued Basis Live, LLC (Basis Live), FC Festivals, LLC (Festivals), Dave DeWaard, and Dave Arndt alleging they failed to pay the balance they owed Quality Flooring under two floor-rental contracts, dated April 2017. After Festivals learned of the suit, it filed a special appearance. In the special appearance, Festivals asserted that it never rented the floors for the concerts that were the subject of Quality Flooring's claims, did no business with Quality Flooring, and never signed any contracts with Quality Flooring that required it or Quality Flooring to perform any part of the contract in Texas.

         In September 2018, the trial court conducted a hearing on Festivals' special appearance. The evidence from the hearing shows that Quality Flooring sells and rents portable floors for concerts and special events. In late March or early April 2017, DeWaard, an Iowa resident, spoke to Ben Grennell, an employee of Quality Flooring, about the prospect of renting portable floors for two concerts, scheduled to occur in late April 2017 in Florida and Alabama. Over the next several days, Grennell, working from Quality Flooring's Texas office, and DeWaard, a resident of Iowa, exchanged a series of emails about the floors. The emails discuss the terms under which Quality Flooring would consider renting the floors.

         In the first of these emails, dated April 3, 2017, Grennell asked DeWaard to clarify two items the two of them had discussed by phone, (1) how many square feet of flooring would DeWaard need for the concerts, and (2) "what company name and address do you want me to put this contract under?" In response, DeWaard sent Grennell an email advising him that he needed "[a]bout 80 thousand total" for "Basis Live LLC[,] [B]ox 243[,] Forest [C]ity[,] IA[.]"

         In response to DeWaard's email, Grennell informed DeWaard what Quality Flooring would charge to rent, install, and remove the two floors. A week later, Grennell sent DeWaard an email informing him that Quality Flooring's chief operating officer had informed him that Quality Flooring would "have to do the contract for the flooring under [Festivals] because that is what your credit check is under. Sorry for all the paper work." Grennell's reference to a credit check relates to a March 2017 credit application that Festivals signed with Quality Mat Company of North Dakota, LLC (Quality North Dakota). The March 2017 credit agreement arose from discussions DeWaard had with Quality Flooring about Festivals' desire to rent floors for a concert in Iowa. In March 2017, Arndt, Festivals' manager, signed a credit application with Quality North Dakota contemplating that Festivals might need some wooden mats for a festival that it conducts in Iowa. On the credit application he signed for Festivals, Arndt listed DeWaard as one of the individuals who could order goods for Festivals on Festivals' account.

         On April 11, 2017, Grennell sent DeWaard an email advising DeWaard to "fill out the first page of the credit application regarding the Basis Live information [because] [o]ur CFO needs that for the credit application." The day after that, DeWaard sent Grennell an email advising Grennell to send Basis Live's credit application to him and to an individual named Melissa so they could "turn it around asap[.]"

         During the second week of April 2017, Grennell emailed DeWaard and advised he had just gotten out of a meeting with Quality Flooring's officers. Grennell's email states that Quality Flooring would provide the portable floors for the two concerts in Florida and Alabama after DeWaard sent Quality Flooring a $25,000 deposit and agreed to pay any remaining balance owed to Quality Flooring following the events. In the same email, Grennell told Dewaard the contracts for the two concerts "are not under the credit application you sent in for the wood mats[,]" which referred back to DeWaard's discussion with Grennell about the prospect that Festivals might rent wood mats for the festival in Iowa.

         Later that day, DeWaard signed two contracts to rent the floors for the Florida and Alabama concerts. DeWaard signed his name to the rental contracts to pay for the floors. On the line showing who the contracts were addressed to, Quality Flooring wrote: "Basis Live LLC/FC Festivals LLC[.]" After Quality Flooring forwarded the contracts to DeWaard, he signed them but did not strike Festivals' name from the address. And DeWaard did not represent whether he signed the contracts individually, for Basis Live, for Festivals, or for everyone whose name Quality Flooring put on the line showing the entities to whom Quality Flooring addressed the agreements.

         Excerpts from a deposition the parties obtained during discovery from DeWaard were also before the trial court before the court ruled on Festivals' special appearance. In his deposition, DeWaard testified he called Grennell after receiving the contracts and told him he could not sign the contracts "because FC Festivals has zero to do with [the two deals]." DeWaard also testified he spoke to two other individuals in Quality Flooring's chain of command about the fact that Festivals was not the entity renting the floors. DeWaard explained he sent Quality Flooring his personal check for $25,000 based on Quality Flooring's request for a down payment toward the cost of renting the floors. Quality Flooring does not dispute that it credited DeWaard's down payment against the damages it sought to recover in its suit. DeWaard also testified he never told anyone at Quality Flooring that Basis Live and Festivals were the same companies.

         Quality Flooring asked the trial court to consider three additional documents to decide whether DeWaard was acting as Festivals' actual or apparent agent when he rented the floors. The first consists of excerpts showing the discussion the court had with the parties during a scheduling hearing. The excerpts from the scheduling hearing reflect that Quality Flooring's attorney represented to the trial court that Quality Flooring could make Grennell available for a deposition because he still works for Quality Flooring but works from its Florida office. The evidence before the trial court, however, contains no evidence from Grennell (other than his emails) addressing whether DeWaard told him that Festivals was not involved in the contracts DeWaard signed to rent the floors.

         The second document is a copy of a March 2017 credit application signed by Arndt on Festivals' behalf. The credit application reflects that Festivals asked Quality North Dakota to set up an account authorizing Festivals to charge up to $50,000 on its account.^[1] Arndt listed DeWaard as an individual who Festivals authorized to charge goods purchased or rented by Festivals to Festivals' account.

         The last of the documents is an affidavit signed by Joe E. Penland, Sr., the president of Quality Mat Company. In his affidavit, Penland explains that Quality Mat Company is the parent company of Quality North Dakota. Penland also states Quality Flooring used Quality North Dakota's credit agreement form by mistake because the entities that are parties to transactions "know the other parties with whom they are doing business[.]" Penland's affidavit then states that Quality North Dakota has no interest in the March 2017 credit application signed by Festivals, but ...