Finley Res., Inc. v. Ep Energy E&P Co.

• Decision Date: 24 June 2019
• Docket Number: S-18-0235
• Citation: 443 P.3d 838
• Parties: FINLEY RESOURCES, INC., a Texas corporation, Appellant (Plaintiff), v. EP ENERGY E&P COMPANY, L.P., d/b/a EL Paso E&P Company, L.P., a Delaware limited partnership, Appellee (Defendant).
• Court: Wyoming Supreme Court

443 P.3d 838

FINLEY RESOURCES, INC., a Texas corporation, Appellant (Plaintiff),

v.EP ENERGY E&P COMPANY, L.P., d/b/a EL Paso E&P Company, L.P., a Delaware limited partnership, Appellee (Defendant).

S-18-0235

Supreme Court of Wyoming.

June 24, 2019

Representing Appellant: Scott P. Klosterman and Thomas F. Reese, Williams, Porter, Day & Neville, P.C., Casper, Wyoming. Argument by Mr. Klosterman.

Representing Appellee: Matthew L. Crockett and Jeffrey M. Lippa, Greenberg Traurig, LLP, Denver, Colorado. Argument by Mr. Lippa.

Before DAVIS, C.J., and FOX, KAUTZ, BOOMGAARDEN, and GRAY, JJ.

GRAY, Justice.

[¶1] Finley Resources, Inc. (Finley) appeals the district court’s dismissal of its Complaint against EP Energy E&P Company (EP Energy). The district court determined the forum-selection clause contained in the contract between the parties required Finley to file its suit in Texas. Finley contends the district court erred because its claims for quiet title, declaratory judgment, and adverse possession were not subject to the forum-selection clause. We affirm.

ISSUE

[¶2] Did the district court err when it decided the forum-selection clause required Finley’s lawsuit to be brought in Texas?

FACTS

[¶3] On December 28, 2007, Finley and EP Energy entered into a Purchase and Sale Agreement (Agreement) for the sale of oil and gas leases located in Converse and Niobrara Counties, Wyoming. Finley’s principal place of business is in Fort Worth, Texas, and EP Energy’s principal place of business is in Houston, Texas. Both entities conduct oil and gas activities in Wyoming. According to the First Amended Complaint, the Agreement required EP Energy to assign all of its interests under various leases to Finley, without limit to the depths and formations. EP Energy, however, failed to do so despite Finley’s "repeated requests and demands." The dispute crystalized on September 13, 2017, when EP Energy sent an e-mail to Finley stating EP Energy retained the deep rights in certain lands described in the leases assigned to Finley.

[¶4] Finley filed this lawsuit against EP Energy in the Wyoming District Court for the Eighth Judicial District. The First Amended Complaint set forth five claims for relief: (1) quiet title; (2) declaratory judgment; (3) breach of contract; (4) breach of the implied covenant of good faith and fair dealing; and (5) adverse possession. EP Energy filed a motion to dismiss seeking to enforce the choice-of-law and forum-selection clauses contained in the Agreement.

[¶5] Section 13.10 of the Agreement provides:

Governing Law; Jurisdiction; Waiver of Trial by Jury.

(a) This Agreement is governed by the Laws of the State of Texas, excluding any choice of law rules that may direct the application of the Laws of another jurisdiction.

(b) The Parties agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transaction contemplated hereby shall be brought in the United States District Court for the Southern District of Texas or any Texas state court sitting in Houston, so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Texas, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding ... has been brought in an inconvenient forum.

(First emphasis in original; later emphases added.)

[¶6] In its Motion to Dismiss, EP Energy argued Finley’s entire First Amended Complaint fell within the constraints of the forum-selection clause and must be dismissed. The district court applied Texas law and concluded, because the non-contract claims "certainly implicate the terms of the contract," the claims fell within the scope of the forum-selection clause. The district court granted EP Energy’s Motion to Dismiss.

STANDARD OF REVIEW

[¶7] We review the district court’s construction and interpretation of the forum-selection clause de novo. Larson v. Burton Constr., Inc. , 2018 WY 74, ¶ 16, 421 P.3d 538, 544 (Wyo. 2018) ("Contract interpretation presents questions of law which we review de novo."). A district court’s decision to decline jurisdiction based on a forum-selection clause freely entered into by the parties to a contract is discretionary. Venard v. Jackson Hole Paragliding, LLC , 2013 WY 8, ¶ 6, 292 P.3d 165, 168 (Wyo. 2013). A court abuses its discretion when it reasonably could not have concluded as it did. Id. "An abuse of discretion can exist if the wrong law has been applied, the correct law has been applied but incorrectly interpreted, or if the correct law has been improperly applied." Grove v. Pfister , 2005 WY 51, ¶ 6, 110 P.3d 275, 278 (Wyo. 2005).

DISCUSSION

[¶8] Finley asserts the district court abused its discretion when it dismissed Finley’s lawsuit because: (1) the declaratory judgment,¹ quiet title² and adverse possession³ claims (equitable causes of action) do not arise from the Agreement; and (2) even if the equitable causes of action arose from the Agreement, the Texas courts lack subject matter jurisdiction to consider the claims. Consequently, the claims are excluded from the application of the forum-selection clause. We address both arguments below.

Applicable Law

[¶9] The parties agree Texas law applies. The Agreement provides: "This Agreement is governed by the Laws of the State of Texas, excluding any choice of law rules that may direct the application of the Laws of another jurisdiction." (Emphasis omitted.) Wyoming courts will enforce choice-of-law provisions and apply foreign law when doing so is not "contrary to the law, public policy, or the general interests of Wyoming’s citizens." See Res. Tech. Corp. v. Fisher Sci. Co. , 924 P.2d 972, 975 (Wyo. 1996). We will apply Texas law.

Equitable Claims and the Agreement

[¶10] The parties agree Finley’s contractual claims fall within the forum-selection clause. However, Finley argues the forum-selection clause excludes its equitable causes of action because they arise independent of the Agreement. Instead, Finley contends its equitable claims arise from Finley’s open, notorious, exclusive, and continuous: (1) exercise of ownership over lands covered by the Lease and lands not included in the assignment; (2) operation of all oil and gas wells located on lands covered by the Lease as well as those located on lands not included in the assignment; and (3) receipt of all proceeds generated from these wells. According to Finley, EP Energy’s 2017 e-mail claiming ownership of the deep rights in the Kaye Teapot Sandstone Unit located on lands covered by the leases—an e-mail received nearly ten years after the Agreement was signed—was the impetus for this action.

[¶11] Under Texas law, a "forum-selection clause should be denied force only if the facts alleged in support of the claim stand alone, are completely independent of the contract, and the claim could be maintained without reference to the contract." Pinto Tech. Ventures, L.P. v. Sheldon , 526 S.W.3d 428, 440 (Tex. 2017), reh’g denied (Sept. 22, 2017) (quotations omitted); AutoNation USA Corp. v. Leroy , 105 S.W.3d 190, 195 (Tex. App. 2003). Whether a given claim falls "within the forum-selection clause’s scope depends on the parties’ intent ... and a ‘common-sense examination’ of the substantive factual allegations." Pinto , 526 S.W.3d at 437 (citing In re Int’l Profit Assocs., Inc. , 274 S.W.3d 672, 677 (Tex. 2009) ); see also JFP Servs., L.L.C. v. Torans , No. SA-17-CV-00210-FB, 2018 WL 3326841, at *6 (W.D. Tex. Apr. 30, 2018), report and recommendation adopted sub nom. JFP Servs., LLC v. Torans , No. SA-17-CA-210-FB, 2018 WL 4343439 (W.D. Tex. July 2, 2018) ; Braspetro Oil Servs. Co. v. Modec (USA), Inc. , 240 F. App'x 612, 616 (5th Cir. 2007) (The court "look[s] to the language of the parties’ contract[ ] to determine which causes of action are governed by the forum selection clause.") (citation omitted).

[¶12] Here, the forum-selection clause applies to "any suit ... based on any matter arising out of or in connection with, this Agreement or the transaction contemplated ." (Emphasis added.) Finley claims this language should be read narrowly because the Agreement’s later requirement of subject matter jurisdiction evidences the parties’ intent to restrict application of the clause. We disagree.

[¶13] In Pinto , the court examined a forum-selection clause that applied to "any dispute arising out of" the contract. Pinto , 526 S.W.3d at 433. The Pinto court held: "When a forum-selection clause encompasses all ‘disputes’ ‘arising out of’ the agreement, instead of ‘claims,’ its scope is necessarily broader than claims based solely on rights originating exclusively from the contract." Id. at 439 (citation omitted); see also In re Int’l Profit , 274 S.W.3d at 678 (fraud and negligent misrepresentation claims "arise from the contractual relationship between the parties, not from general obligations imposed by law"); In re Lisa Laser USA, Inc. , 310 S.W.3d 880, 886 (Tex. 2010) (forum-selection clause applies to all obligations that would not exist but for the agreement). "Clauses that extend only to disputes ‘arising out of’ a contract are construed narrowly, while clauses extending to disputes that ‘relate to’ or ‘are connected with’ the contract are construed broadly." Morgan-Rinehart v. Van de Perre , No. A-16-CA-01327-SS, 2017 WL 1383933, at *8 (W.D. Tex. Apr. 12, 2017) (quoting Wellogix, Inc. v. SAP Am., Inc ., 58 F. Supp. 3d 766, 778 (S.D. Tex. 2014) ). Here, because the...