In re Nationwide Ins. Co. of Am.

• Citation: 494 S.W.3d 708
• Decision Date: 24 June 2016
• Docket Number: No. 15–0328,15–0328
• Parties: In re Nationwide Insurance Company of America, et al., Relators
• Court: Supreme Court of Texas

494 S.W.3d 708

In re Nationwide Insurance Company of America, et al., Relators

No. 15–0328

Supreme Court of Texas.

Argued February 10, 2016

Opinion delivered: June 24, 2016

James Hatchitt, Randy Howry, Howry, Breen & Herman, L.L.P., Austin, for Real Party in Interest Brian Besch.

Ron K. Eudy, Austin, for Real Party in Interest Bradley Carducci.

Jeff D. Otto, Sean Michael Crowley, Wade Caven Crosnoe, Thomposon Coe Cousins & Irons, L.L.P., Austin, Quintin F. Lindsmith, Victoria A. Flinn, Bricker & Eckler, LLP, Columbus, OH, for Relators.

Justice Devine

delivered the opinion of the Court, in which Chief Justice Hecht, Justice Green, Justice Johnson, Justice Willett, Justice Lehrmann, and Justice Boyd joined.

In this original proceeding, we consider whether the trial court abused its discretion by denying a motion to dismiss premised on a contractual forum-selection clause. The clause designated Franklin County, Ohio, as the place to settle disputes arising from the agreement, but suit was instead filed in Texas. Because the party who initiated the Texas litigation failed to establish the mandatory forum-selection clause was waived or otherwise unenforceable, we conclude that the trial court abused its discretion by not enforcing it. Accordingly, we conditionally grant the petition for writ of mandamus and direct the trial court to enforce the parties' forum-selection clause.

I

Brian Besch formerly worked with Nationwide Insurance Company as an independent agent. After the relationship ended, he sued several Nationwide affiliates ¹ for breach of contract, fraud, and occupational disparagement. Besch's allegations centered on his contract with Nationwide—the Replacement Agency Executive Program Performance Agreement (the RAE Agreement)—which Besch claims Nationwide breached. The merits of that dispute, however, are not the issue in this original proceeding. The only issue here is whether Nationwide can enforce the RAE Agreement's forum-selection clause. Found in section 40 of the RAE Agreement, that clause identifies Franklin County, Ohio, as the proper forum for a dispute concerning the RAE Program:

40. Governing Law

It is hereby agreed by the parties that this Agreement shall be governed by the laws of the State of Ohio ... and that any action or proceeding arising from a dispute concerning the RAE Program shall be brought in Franklin County, Ohio.

Nationwide is an Ohio corporation, headquartered in Columbus, Franklin County, Ohio.

Notwithstanding section 40's designation of an Ohio forum, Besch filed the underlying lawsuit in Travis County, Texas. The suit was filed on December 26, 2012, and at its outset an attorney for Nationwide indicated that his client would seek to enforce the forum-selection clause. Nationwide, however, did not promptly move to dismiss the Texas proceeding. Instead, it waited until January 2015, making the motion only after changing counsel in the case. Nationwide's new attorney does not attempt to explain the two-year delay.

One of Besch's attorneys suggests, however, that a statement he made shortly after Nationwide answered the Texas suit may have been a factor. The deadline for that answer had been extended by agreement, and, during a conversation between attorneys shortly after the extended answer date, Nationwide's attorney stated he would be filing a motion to dismiss based on the agreement's mandatory forum-selection clause. Besch's attorney expressed his belief that Nationwide had waived the clause and consented to the Texas proceedings by obtaining the agreed extension to answer. Besch's attorney avers that after making this statement “there was a long pause on the other end of the phone,” and the attorney did not thereafter pursue the matter.

After Nationwide changed attorneys, however, its new counsel sought to enforce the forum-selection clause by moving to dismiss the Texas litigation. Besch responded that Nationwide had waived the clause by its substantial participation in the Texas litigation coupled with the delay in asserting its rights. Besch also maintained that Nationwide's participation and delay was prejudicial because his contract claim, although viable in Texas, was now barred under Ohio law.

Ohio law permits contracting parties to agree to a limitations period shorter than the statutory period generally applicable to contract claims, so long as the agreed period is reasonable. See OHIO REV. CODE § 2305.06

(establishing the limitations period); Sarmiento v. Grange Mut. Cas. Co., 106 Ohio St.3d 403, 835 N.E.2d 692, 696 (2005) (recognizing that parties may agree to shorter period). The parties' agreement provided for a limitations period of three years (which is shorter than Ohio's statutory period), and this period expired before Nationwide filed its motion to dismiss in Texas. Besch's contract claim was thus subject to limitations in Ohio if the three-year period was reasonable.

When Besch raised these circumstances as a reason to deny Nationwide's motion, Nationwide promptly agreed to waive enforcement of the contractual-limitations clause. The trial court, however, rejected the waiver as “untimely” and denied the motion to dismiss.

Nationwide thereafter petitioned the court of appeals for mandamus relief, but the court summarily denied its petition. See No. 03–15–00169–CV, 2015 WL 1545930 (Tex.App.–Austin Apr. 3, 2015)

(mem. op.). Nationwide now asks for mandamus relief in this Court.

II

To obtain relief by writ of mandamus, a relator must establish that an underlying order is void or a clear abuse of discretion and that no adequate appellate remedy exists. Walker v. Packer, 827 S.W.2d 833, 839–40 (Tex.1992)

(orig. proceeding). An abuse of discretion occurs when a trial court's ruling is arbitrary and unreasonable, made without regard for guiding legal principles or supporting evidence. Ford Motor Co. v. Garcia, 363 S.W.3d 573, 578 (Tex.2012). Similarly, a trial court abuses its discretion when it fails to analyze or apply the law correctly. In re Sw. Bell Tel. Co., 226 S.W.3d 400, 403 (Tex.2007). Nationwide submits that the trial court clearly abused its discretion by not dismissing the underlying suit because the forum-selection clause was mandatory and had not been waived.

Contractual forum-selection clauses are generally enforceable in Texas. See In re AIU Ins. Co ., 148 S.W.3d 109, 112 (Tex.2004)

. 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.” In re Lyon Fin. Servs., Inc., 257 S.W.3d 228, 231–32 (Tex.2008) (per curiam) (citing AIU Ins. Co., 148 S.W.3d at 112 ). Absent these circumstances, a trial court should enforce a mandatory forum-selection clause by granting a motion to dismiss, and we have repeatedly held that appeal is inadequate to remedy the erroneous denial of such a motion.² But like other contractual rights, a forum-selection clause may be waived, and it would ordinarily be “unreasonable or unjust” for a court to enforce a forum-selection clause after it has been waived. The question here is whether Nationwide's conduct in the Texas litigation waived the clause.

Generally, “waiver” consists of the intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right. See Jernigan v. Langley, 111 S.W.3d 153, 156 (Tex.2003)

(per curiam). In this instance, however, we have borrowed a different standard from the jurisprudence applicable to arbitration clauses, an analogous type of forum-selection clause. See

Automated Collection Techs., 156 S.W.3d at 559

(citing In re Bruce Terminix Co., 988 S.W.2d 702, 704 (Tex.1998)

). That test embodies aspects of estoppel and provides: “A party waives a forum-selection clause by substantially invoking the judicial process to the other party's detriment or prejudice.” ADM Inv'r Servs., 304 S.W.3d at 374. Substantial invocation and resulting prejudice must both occur to waive the right. Perry Homes v. Cull, 258 S.W.3d 580, 593 (Tex.2008) ; Automated Collection Techs., 156 S.W.3d at 559. Whether litigation conduct is “substantial” depends on context and is determined on a case-by-case basis from the totality of the circumstances. Perry Homes, 258 S.W.3d at 591–93.

The trial court concluded that Nationwide's conduct here was substantial. After reciting the details of Nationwide's participation in the Texas litigation and its delay in asserting its rights under the forum-selection clause, the court concluded that Besch could “suffer the ultimate prejudice” were the Texas litigation to be dismissed because Besch's contract claim was now barred in Ohio. The court accordingly denied the motion to dismiss, finding that Nationwide waived its right to enforce the forum-selection clause by substantially invoking the litigation process to Besch's prejudice.

III

Nationwide maintains that in the context of this case its conduct in the trial court was neither substantial nor prejudicial and that the trial court's denial of its motion to dismiss was thus an abuse of discretion. But to be sure, Nationwide was active in the Texas litigation. The record reflects that Nationwide showed more initiative in the case than Besch.

Nationwide served answers and a counterclaim, filed special exceptions and two Rule 91a motions to dismiss specific claims, served written discovery, and obtained an agreed confidentiality and protective order. But the parties' interaction with the trial court was minimal. Although the court sustained Nationwide's special exceptions and signed the agreed protective order, it made no dispositive rulings even though Nationwide moved to dismiss some of Besch's causes of action as baseless. The court never heard these motions because Besch elected to amend...