Jackson v. West Telemarketing Corp. Outbound

• Decision Date: 04 April 2001
• Docket Number: No. 99-11378,99-11378
• Citation: 245 F.3d 518
• Parties: (5th Cir. 2001) GLENN K. JACKSON; ELSIE JACKSON, Plaintiffs-Appellants, v. WEST TELEMARKETING CORPORATION OUTBOUND, A Delaware Corporation; DOES 1-10, inclusive; WEST TELEMARKETING CORPORATION, A Delaware Corporation; STEVEN GARZA; PROVIDENCE COMMERCIAL REAL ESTATE SERVICES, INC., Defendants-Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

Page 518

245 F.3d 518 (5th Cir. 2001)

GLENN K. JACKSON; ELSIE JACKSON, Plaintiffs-Appellants, v. WEST TELEMARKETING CORPORATION OUTBOUND, A Delaware Corporation; DOES 1-10, inclusive; WEST TELEMARKETING CORPORATION, A Delaware Corporation; STEVEN GARZA; PROVIDENCE COMMERCIAL REAL ESTATE SERVICES, INC., Defendants-Appellees.

No. 99-11378

UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT

April 4, 2001

[Copyrighted Material Omitted]

Appeal from the United States District Court for the Northern District of Texas

Before POLITZ, SMITH, and PARKER, Circuit Judges.

POLITZ, Circuit Judge:

Glenn and Elsie Jackson appeal an adverse summary judgment in their action alleging bid-rigging through fraud, conspiracy, and misappropriation. Concluding that the statute of limitations bars their tort claims and that they presented no genuine issues of material fact pertaining to the claim for fraud, we affirm.

BACKGROUND

The Jacksons, residents of California, desired to purchase office buildings in San Antonio, Texas, known as Woodway Phase I and Phase IV. Old Stone Federal Savings Bank foreclosed on the properties in 1992. The Resolution Trust Corporation, as receiver for Old Stone, owned a 69.23% interest therein. Broadway National Bank of San Antonio owned the remaining 30.77%, which it sold to the Jacksons for $680,000, subject to Old Stone's right of first refusal. After obtaining financing from Broadway, the Jacksons offered $1.5 million to Old Stone for its interest in Phase IV. This bid was increased to $1,592, 290 - 69.23% of the $2.3 million asking price. An Old Stone employee handled the sales process.

West Telemarketing Corporation, a Delaware corporation with its principal place of business in Nebraska, also expressed an interest in Phase IV, appointing an agent to assist in its purchase efforts. The Old Stone employee handling the sale informed West's agent that a $2.3 million dollar bid "would not be eliminated because of price." The very next day, after the Jacksons refused an offer by West to purchase the interest acquired from Broadway, West submitted a bid for $2.5 million, with brokerage fees to be paid by West.¹ The Old Stone employee recommended the offer to the RTC, Broadway, and Jackson. In accord with the Participation Agreement between Old Stone and Broadway, all parties consented and the sale was finalized on September 23, 1993.

Similar events transpired the following year when Old Stone sold Phase I. The RTC wrote to the parties asking them to submit their "best and final offers." On the morning of the deadline, West offered to purchase Phase I for $2.9 million. The Jacksons bid $3.1 million. West's agent called to inquire "how our offer looked," and the Old Stone employee responded by giving the agent "some range of numbers that the [other] offers fell within." West's agent sent a revised offer for $3.2 million. The RTC accepted West's bid and the parties entered into a purchase agreement on February 5, 1995.

In August of 1997, the Jacksons filed suit in California state court alleging various types of unfair competition, fraud and deceit, tortious interference with contract, misappropriation, and conversion. Appellees removed to federal court based on diversity jurisdiction and then successfully moved to transfer the case to Texas urging lack of personal jurisdiction, improper venue, or, in the alternative, for convenience of the parties. The appealed motion for summary judgment was then filed and was granted by the Magistrate Judge. This appeal followed.

ANALYSIS

We review de novo a trial court's grant of summary judgment.² The Jacksons challenge the court quo's use of the Texas choice of law rules and the subsequent application of Texas substantive law. Also challenged is the entry of summary judgment both with respect to the statute of limitations on the tort claims and the lack of evidence of fraud.

I. Applicable Law

A. Choice of Law Rules

The Jacksons first contend that the trial court erred in applying Texas' choice of law rules. In determining the appropriate substantive law, the court looked to the Texas choice of law rules because a federal court exercising diversity jurisdiction typically applies the choice of law rules of the forum state.³ The instant action is a bit more complex, however, because of the transfer from California, the "original" forum state. The Jacksons assert that the California district court transferred the matter under 28 U.S.C. 1404(a) and that such transfers do not change the state law applicable to a diversity case.⁴ West counters that the court issued the transfer under 1406(a) because venue was improper in California.⁵

The federal court in California ordered the transfer "because of the forum selection clause in the parties' agreement."⁶ We recognize that in Stewart Organization, Inc. v. Ricoh Corp.,⁷ the Supreme Court questioned "whether 1404(a) itself controls respondent's request to give effect to the parties' contractual choice of venue and transfer this case to a Manhattan court."⁸ Answering that inquiry in the affirmative, they stated that "Section 1404(a) is intended to place discretion in the district court to adjudicate motions for transfer according to an 'individualized, case-by-case consideration of convenience and fairness.'"⁹ On close review we conclude that the Stewart case does not control the present dispute for three reasons.

Initially, while the Jacksons urged application of California law to the Texas district court, they never disputed West's assertions that the Texas choice of law rules applied. Had they urged that California choice of law rules were applicable because the California court transferred under 1404(a), the Texas district court quite likely would have underscored the reasons for the transfer. Their assertion, for the first time advanced on appeal, that Stewart requires application of California law because of a claimed transfer under 1404(a) is not persuasive.

In addition, Stewart discusses the devices a trial court may employ to transfer an action when one party urges same based on a forum selection clause. The Court found that 1404(a) is an appropriate vehicle for such a transfer because it allows for an individualized assessment of fairness and convenience, with a forum selection clause being one factor for consideration. Stewart does not mandate that whenever a forum selection clause exists any transfer must fall under 1404(a).

Finally, although the transfer order referenced neither 1404(a) nor 1406(a), the record provides valuable insight into the statutory basis for transfer. West's motion requested dismissal or transfer under 1406(a), or, in the alternative, transfer under 1404(a) for the convenience of the parties. West's memorandum in support of a transfer under 1406(a) focuses exclusively on the forum selection clause, asserting that by designating Texas as the forum, venue in California was improper. In contrast, when requesting transfer under 1404(a), West presented a detailed analysis of the traditional factors evaluated when considering a transfer for convenience. Nothing in the record indicates that the court transferred the case for "convenience and fairness," which would implicate the reasoning and holding in Stewart. To the contrary, by stating only that the transfer was based on "the forum selection clause" the court obviously accepted West's contentions that venue in California was improper.¹⁰ As we held in Tel-Phonic Services, Inc. v. TBS Int'l, Inc.,¹¹ a transfer for improper venue comes under 1406(a).

Having determined that the California court transferred the case under 1406(a), we conclude that the Magistrate Judge correctly applied Texas choice of law principles. In Ellis v. Great Southwestern Corp.,¹² we addressed the choice of law principles applicable to transfers based on 1404(a) and 1406(a) and opined: "Accordingly, we conclude, as have the majority of authorities that have considered this question, that following a transfer under 1406(a), the transferee district court should apply its own state law rather than the state law of the transferor district court."¹³

B. Substantive Law

The Jacksons also challenge the application of Texas rather than California substantive law. We find no error in the trial court's analysis of Texas choice of law rules. Texas adheres to the most significant relationship test for both contract and tort cases.¹⁴ Although the number of contacts is relevant, the qualitative nature of the contacts controls.¹⁵ The real property at issue herein is in San Antonio, Texas. West's principal place of business is in Texas. The parties executed the contracts for sale in Texas and included a choice of law provision requiring application of Texas law. The only contact with California is that the Jacksons reside there. Virtually all of the relevant conduct occurred in Texas which undeniably bears the most significant relationship to the subject matter. There is no error in the Magistrate Judge's application of Texas law.

II. Statute of Limitations

The trial court found that the statute of limitations barred the tort claims, even if the discovery rule extended the time for the filing thereof. We find no error in the findings and the subsequent entry of summary judgment on this issue.

Under Texas law, claims for unfair competition, unfair trade practices, conversion, tortious interference with contract, misappropriation of trade secrets, and conspiracy must be brought within two years from the time the cause of action accrues.¹⁶ In general, a cause of action accrues and limitations begin running when a wrongful act causes a legal injury.¹⁷ The discovery rule, however, "defers accrual of certain causes of action until the plaintiff knew, or exercising reasonable diligence, should have known of the wrongful act causing injury."¹⁸ The discovery rule affords protection in only limited instances,¹⁹ applying in (1) cases of fraudulent concealment; and (2) when the nature...