Contractual forum-selection clauses are generally enforceable in Texas. A trial court that refuses to enforce such an agreement abuses its discretion absent clear evidence 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. Appeal is inadequate to remedy the erroneous denial of a motion to dismiss. But a forum selection clause may be waived by substantially invoking the judicial process to the other party's detriment or
On June 24, 2016, the Texas Supreme Court reaffirmed that Texas will enforce a forum selection clause, absent a showing that the clause has been waived or is otherwise unenforceable. In re Nationwide Mut. Ins., 2016 Tex. Lexis 579 (June 24, 2016).
An insurance agent sued Nationwide in Texas for fraud and breach of contract. The contract had a mandatory forum selection clause that required suit to be filed in Ohio. After participating in the suit for two years, Nationwide moved to dismiss based on the forum selection clause. The agent responded that Nationwide had waived the clause by substantially participating in the litigation for two years before asserting it. He also claimed that the delay was prejudicial because his contract claim, though viable in Texas, was barred under Ohio law. The agent's fraud claim, however, was not yet barred by limitations when Nationwide raised the issue.
Nationwide had participated in the litigation by serving answers and a counterclaim, filing special exceptions and two Rule 91a motions to dismiss specific claims, serving written discovery, and obtaining an agreed confidentiality and protective order.
Nationwide voluntarily waived its right to claim limitations as to the contract claim, but reserved the right to claim that limitations barred the fraud claim if the employee did not timely refile in Ohio.
The trial court denied the motion for two reasons. First, the agent's contract claim would be barred by limitations in Ohio. Second, he had expended two years and considerable costs litigating in Texas.
The court of appeals denied Nationwide's petition for mandamus. Meanwhile, during the interlocutory appeal, the limitations period for the fraud claim expired.
The Supreme Court granted relief, finding that, even assuming Nationwide's conduct substantially invoked the judicial process, there was no prejudice to the agent despite the two-year delay in invoking the clause.
The agent conceded that his time, effort and funds expended in the Texas litigation were not the type of detriment sufficient to avoid a forum selection clause. The Court agreed, stating that a party who "chose to initiate proceedings in a forum other than the one to which it contractually agreed . . . cannot complain about any duplication of time or effort that resulted from that choice." Moreover, said the Court, "delay is generally insufficient to establish waiver. . . ."
The Court explained that there was no prejudice as to the contract claim because Nationwide voluntarily waived the contractual limitations period. As to the fraud claim, the Court reasoned that the agent had a reasonable opportunity to preserve that claim in Ohio because Nationwide put him on notice prior to the expiration of Ohio's tort statute of limitations.
Accordingly, the Supreme Court conditionally granted the petition for writ of mandamus and directed the trial court to enforce the forum selection clause.
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