Cagle v. Mathers Family Trust
| Decision Date | 04 February 2013 |
| Docket Number | Supreme Court Case No. 11SC496 |
| Court | Colorado Supreme Court |
| Parties | Charles Reed CAGLE ; Joseph D. Kinlaw; Heartland Energy of Colorado, LLC; Steve Ziemke; Brandon Davis; John Schiffner; Joel Held; Martin Harper; HEI Resources, Inc., f/k/a Heartland Energy, Inc.; Heartland Energy Development Corp.; Reed Petroleum, LLC; D. Deerman Ltd.; and R & J Associates, Inc., Petitioners: v. MATHERS FAMILY TRUST, William H. Mathers, Myra M. Mathers, Thomas E. Carpenter Trust, Margaret M. Carpenter Trust, Robert Hall, and Gianpaolo Callioni, Respondents |
OPINION TEXT STARTS HERE
Certiorari to the Colorado Court of Appeals, Colorado Court of Appeals Case No. 10CA93
Judgment reversed
Attorneys for Petitioners Charles Reed Cagle; Heartland Energy of Colorado, LLC; HEI Resources, Inc.; Reed Petroleum, LLC; and R & J Associates, Inc.: Shoemaker Ghiselli + Schwartz LLC, Paul H. Schwartz, Andrew R. Shoemaker, Alice Warren–Gregory, Boulder, Colorado.
Attorneys for Petitioner Joel Held: Davis Graham & Stubbs LLP, Thomas P. JohnsonSaraP. Bellamy, Denver, Colorado.
Attorney for Petitioner Steve Ziemke: Hogan Lovells U.S. LLP, Jeffrey S. George, Colorado Springs, Colorado.
Attorneys for Petitioners Brandon Davis and Heartland Energy Development Corp.: The Tenenbaum Law Firm: A. Thomas Tenenbaum, George Kreye, Highlands Ranch, Colorado.
Attorney for Petitioners John Schiffner and D. Deerman Ltd.: Robinson Waters & O'Dorisio, P.C.: Otto K. Hilbert, II, Denver, Colorado.
Attorney for Petitioner Martin Harper: Ireland Stapleton Pryor & Pascoe, PC, Mark E. Haynes, Denver, Colorado.
Attorneys for Respondents: Pryor Johnson Carney Karr Nixon, P.C., Irving G. Johnson, John R. Paddock, Jr., Elizabeth C. Moran, Marta M. Jucha, Patrick A. Singer, Greenwood Village, Colorado.
Attorneys for Amicus Curiae The Colorado Securities Commissioner:John W. Suthers, Attorney General, Alexander C. Reinhardt, Assistant Solicitor General, Russell B. Klein, First Assistant Attorney General, Denver, Colorado.
Attorneys for Amicus Curiae North American Securities Administrators Association, Inc.: Lathrop & Gage LLP, Donald E. Lake, III, Thomas D. Leland, Denver, Colorado.
En Banc
¶ 1 In this appeal, we review a court of appeals decision reversing the trial court's grant of a motion to dismiss based on a forum selection clause in a sales contract. Mathers Family Trust v. Cagle,(2) P.3d % y(2) (Colo.App.2011).
¶ 2 The defendants, through cold calls, sold the plaintiffs shares in oil and gas joint ventures in Texas, Alabama, and Mississippi. The plaintiffs all signed agreements with clauses stating that the courts in Dallas County, Texas, “shall have exclusive jurisdiction” to hear any claims or disputes “arising from or relating to” the agreements. When the ventures lost money, the plaintiffs sued in Colorado, raising violations of the Colorado Securities Act (CSA) 1 as well as the Vermont, California, and Illinois securities acts and also various common-law claims. The defendants moved to dismiss all the claims, arguing that the forum selection clauses in the agreements required all lawsuits to be brought in Texas. The plaintiffs argued that the clauses were void because they were unenforceable on public policy grounds.
¶ 3 The trial court granted the defendants' motion to dismiss, ruling that the forum selection clauses did not violate Colorado public policy and were enforceable. In support of this ruling, the trial court concluded that the anti-waiver provision in the CSA, section 11–51–604(11), C.R.S. (2012), which prohibits waiving compliance with any other provision of the CSA, did not embody a public policy that prohibited a forum selection clause. The plaintiffs appealed, and, on appeal, the court of appeals reversed the trial court. The court of appeals held that the CSA anti-waiver provision voided the forum selection clauses because the anti-waiver provision mandates that a plaintiff seeking relief under the CSA be able to sue in Colorado.
¶ 4 Upon analysis, we construe the CSA and conclude that it does not express a strong public policy voiding forum selection clauses. Because the CSA requires coordination with the federal securities statutes, we find persuasive federal caselaw that analyzes the federal securities laws and that concludes that their anti-waiver provisions do not void a forum selection clause. We reason that the CSA anti-waiver provision differs from other anti-waiver provisions in Colorado statutes where we have determined the anti-waiver provision to bar suit in other jurisdictions. We hold that neither Colorado public policy nor the anti-waiver provision in the CSA voids a forum selection clause in this contract. Hence, we reverse and remand this case to the court of appeals with instructions to return it to the trial court for reinstatement of the trial court's grant of the defendants' motion to dismiss.
¶ 5 The plaintiffs, residents of Vermont, California, and Illinois, all bought shares in joint ventures from defendant HEI Resources, Inc. HEI was incorporated in Texas and based in Colorado. The individual defendants, except Joel Held, the lead securities law attorney for the joint ventures, all controlled some portion of HEI or of one of the other defendant companies, all of which had some connection to HEI. Employees of HEI cold-called the plaintiffs offering them interests in oil and gas ventures in Alabama, Mississippi, and Texas. Although all of the plaintiffs were sophisticated investors, two were over eighty. The defendants told the plaintiffs that they could expect high returns from their investments in the joint ventures. The defendants told one plaintiff that he could expect returns up to twenty times his initial investment. They falsely told some plaintiffs that the defendants' success rate in previous joint ventures was eighty to ninety percent, and that the defendants had been successful with the previous seven wells they drilled.
¶ 6 Each plaintiff invested in the joint ventures, and each plaintiff signed an Application Agreement and a Joint Venture Agreement. Both agreements contained a forum selection clause designating Dallas County, Texas, as the only forum for any lawsuit resulting from the agreement, and a choice of law clause stating that Texas law applied to any claims. The Application Agreement read:
Applicable Law. This Agreement will be construed according to the laws of the State of Texas, and is performable in the city of Dallas, Dallas County, Texas. The Courts located in the State of Texas, state or federal, shall have exclusive jurisdiction to hear and determine all claims, disputes, controversies and actions arising from or relating to this Application Agreement and any of its terms of provisions, or to any relationship between the parties hereto, and venue shall be solely in the courts located in Dallas County, Texas. The undersigned expressly consents and submits to the jurisdiction of said courts and to venue being in Dallas County, Texas.
The Joint Venture Agreement contains similar wording. Contrary to the defendants' sales pitches, the plaintiffs lost substantial amounts of money on the joint ventures. The plaintiffs' losses ranged from $445,097 to $1.1 million.
¶ 7 The plaintiffs then sued the defendants in Colorado, bringing claims under the CSA and the Vermont, Illinois, and California securities acts as well as claims for common-law fraud, concealment, breach of fiduciary duty, negligence, and misrepresentation,2 all under Colorado law, and civil theft under section 18–4–405, C.R.S (2012). The defendants filed a motion to dismiss claiming that the plaintiffs' Colorado lawsuit was in violation of the forum selection clauses in the Application Agreement and Joint Venture Agreement. The plaintiffs argued that the forum selection clauses were unreasonable, that they were fraudulently induced, and that they were inconsistent with the public policy purposes of the CSA and were therefore unenforceable.
¶ 8 The trial court granted the defendants' motion to dismiss pursuant to the forum selection clauses. It concluded that it did not have jurisdiction to hear the case because the forum selection clauses were enforceable and the parties had agreed that Texas courts had exclusive jurisdiction to hear any disputes arising from the contract. In support of this conclusion, the trial court found that the forum selection clauses were not unreasonable, the clauses were not fraudulently obtained, and the plaintiffs had failed to show that the forum selection clauses violated public policy. The trial court also construed the choice of law clauses in the two agreements and found the clauses enforceable.
¶ 9 On appeal, the court of appeals held that the forum selection clauses conflicted with the public policy expressed in the CSA and its anti-waiver provision and were therefore void. The court of appeals reversed the trial court's grant of the defendants' motion to dismiss. It did not address the enforceability of the choice of law clauses because its decision on the forum selection clauses resolved the case.
¶ 10 The defendants then petitioned this court to review the court of appeals' decision. We granted certiorari on the issue of whether Colorado public policy or the anti-waiver provision in the CSA voids the forum selection clauses. 3
¶ 11 Before analyzing the issue presented, we first give some background on forum selection clauses as well as the effect of a trial court's dismissal based on a forum selection clause. We then discuss the standard under which we review such a dismissal.
¶ 12 A forum selection clause is a contractual provision agreed to by private parties that constitutes the parties' agreement as to the place of the action where the parties will bring any litigation related to the contract. Restatement (Second) of Conflict of Laws § 80 (1971); 14D Charles...
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