Nelms v. Morgan Portable Bldg. Corp.

• Citation: 808 S.W.2d 314,305 Ark. 284
• Decision Date: 22 April 1991
• Docket Number: No. 90-61,90-61
• Parties: Roger NELMS, Appellant, v. MORGAN PORTABLE BUILDING CORPORATION, Appellee.
• Court: Supreme Court of Arkansas

Page 314

808 S.W.2d 314

305 Ark. 284

Roger NELMS, Appellant, v. MORGAN PORTABLE BUILDING CORPORATION, Appellee.

No. 90-61.

Supreme Court of Arkansas.

April 22, 1991.

[305 Ark. 285] Dick Jarboe, Walnut Ridge, for appellant.

[305 Ark. 286] W. Kirby Lockhart, Little Rock, for appellee.

A. GLENN VASSER, Special Justice.

This is a choice of forum case in which the appellant, Roger Nelms (Nelms), sought to have his employment contract with the appellee, Morgan Portable Building Corporation (Morgan), declared void and unenforceable under the Wingo Act, Ark.Code Ann. §§ 4-27-104 and -105 (1987), and as being contrary to the public policy of the State of Arkansas. Morgan filed a motion to dismiss on the basis of ARCP Rules 12(b)(1), (b)(2), (b)(3), and (b)(6), contending that Nelms had consented to the jurisdiction of a Texas court on all issues involving the employment contract and that an Arkansas court lacked jurisdiction to entertain such a proceeding.

Nelms was a resident of Lawrence County, Arkansas, where he served as plant manager of Morgan, a Texas corporation which manufactures and sells portable buildings in Arkansas and in other states. Nelms had been manager of the Walnut Ridge plant for two years and had formerly served as manager of Morgan's Mississippi plant. On June 13, 1986, Morgan prepared and presented to Nelms a contract entitled "Standard Employment/Non-competition Agreement". The contract was signed by Nelms and Morgan's President at Morgan's plant in College City, Arkansas. Then, the contract was delivered to Morgan's corporate office in Dallas and approved. At the time the contract was signed by Nelms and Morgan, Morgan was not authorized to do business in Arkansas, due to the revocation of its charter for nonpayment of franchise taxes. The contract, which is attached to Nelm's Petition for Declaratory Judgment, recited on Page 2 as follows: "WHEREAS, Morgan would not offer the employment relationship to employ without the specifically negotiated protective covenants herein stated...." The contract contained various protective covenants in Paragraph 9, which precluded Nelms from competing with Morgan by use of confidential information, trade secrets, and soliciting Morgan's customers and employees. These protective covenants would continue for five years after termination of employment, and the area covered by these covenants was within 200 miles of any of Morgan's plants. Of particular significance to this case are Paragraphs 16 and 20 of the contract, which read as follows:

16. Choice of Law. It is expressly agreed and stipulated that this contract shall be deemed to have been made and to be performable in Dallas, Dallas County, the State of Texas; and all questions concerning the validity, interpretation, or performance of any of its terms or provisions or of any rights or obligations of the parties hereto, shall be governed by and resolved in accordance with the laws of the State of Texas.

20. Attorneys' Fees, Venue, and Jurisdiction. In the event the Employee in any manner defaults or breaches the terms and conditions of this Agreement, or threatens to do same, or in the event it becomes necessary for Morgan to employ an attorney to enforce any provision of this Agreement, obtain injunctive relief, or collect damages on account of a breach or a threatened breach of this Agreement, Employee shall pay to Morgan After reviewing these facts, the Chancellor granted Morgan's Motion to Dismiss Nelms' Petition without prejudice, and Nelms was allowed to refile "in an appropriate forum." From this adverse ruling Nelms appeals. We concur with the Chancellor's decision.

such disbursements as Morgan may expend in such proceedings. Employee agrees that this Agreement is a contract performable wholly or partly within the State of Texas, and consents to the jurisdiction of the courts within the State of Texas in connection with any dispute or controversy arising out of this Agreement. In addition, Employee expressly waives any right he may have to be sued in the county of his residence and consents to venue in Dallas County, Texas in any proceeding arising out of this Agreement.

For reversal, Appellant asserts two theories for the proposition that the Lawrence County Chancery Court should exercise judicial jurisdiction over this case. Initially, he maintains that Appellee was a non-resident corporation, and unauthorized to do business at the time the contract was executed; and, therefore, the contract with its forum selection clause is unenforceable. Second, Appellant postulates that Appellee's Standard Employment/Non-competition Agreement violates public policy, thereby making the contract with its forum selection clause invalid.

A consideration of both of these points must be addressed in light of the well-established rule applicable to Motions to Dismiss Under Rule 12(b) of the Arkansas Rules of Civil Procedure (ARCP). Such Motions require opposing pleadings to be read in conjunction with ARCP Rule 8(a)(2), and under this Rule the facts and allegations set forth in the Complaint are treated as true. However, conclusions of law and statements of generalities are not admitted. Rabalaias v. Barnett, 284 Ark. 527, 683 S.W.2d 919 (1985). An application of this principle yields an admission of the terms of the Standard Employment/Non-competition Agreement executed by Appellant, an Arkansas resident, on June 13, 1986, with appellee, a Texas corporation, which was not qualified to do business in Arkansas. Under the clear admitted terms of Paragraph 16 of the Agreement, the contract is deemed to have been made and performable in Dallas County, Texas. Furthermore, it is admitted Appellant agreed that the contract was to be performed wholly or partly within the State of Texas and the Appellant consented to the jurisdiction of the Texas Court in connection with any dispute or controversy arising out of the agreement. Under this rule, Appellant admittedly waived any right to be sued in the county of his residence, and consented to Dallas County, Texas, as the proper venue for any proceeding arising out of this agreement.

Before this Court can resolve the Appellant's contentions that his employment contract is unenforceable under the Wingo Act, we must first determine whether an Arkansas Court should exercise jurisdiction over this case. This Court's consideration of the issue of whether an Arkansas Court should exercise judicial jurisdiction must commence with a review of the pertinent portion of Paragraph 20 of the Standard Employment/Non-competition Contract executed by Appellant and Appellee:

20. Attorneys Fees, Venue, and Jurisdiction.... Employee agrees that this Agreement is a contract performable wholly or partly within the State of Texas, and consents to the jurisdiction of the Courts within the State of Texas in connection with any dispute or controversy arising out of this agreement. In addition, employee expressly waives any right he may have to be sued in the County of his residence and consents to venue in Dallas County, Texas, in any proceeding arising out of this agreement.

Such choice of forum clauses in contracts have generally been held binding, unless it can be shown that the enforcement of the forum selection clause would be unreasonable and unfair. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). The modern trend among Courts is to respect the enforceability Traditionally, we have adhered to the view that an individual, such as Appellant, who subjects himself to the personal jurisdiction of a Court by express agreement shall be bound by that contract, if the agreement can be determined to be fair and reasonable. SD Leasing, Inc. v. Al Spain & Assoc., Inc., 277 Ark. 178, 640 S.W.2d 451 (1982). An inspection of the pleadings provides only a conclusory allegation that this is an unfair adhesion contract; however, Appellant's Petition is barren of any factual support for such a conclusion. A perusal of the undisputed terms of the agreement reveals that Appellant's employment rights, compensation and employment rules are equally balanced with Appellee's protective covenant rights and remedies; and in addition, the following language is most significant:

of contracts containing clauses limiting judicial jurisdiction, if there is nothing unfair or unreasonable about them. See Leflar, American Conflicts Law, 100 (1977); Central Contracting Co. v. C.E. Youngdahl & Co., 418 Pa. 122, 209 A.2d 810 (1965); and see Annot., "Validity of Contractual Provision Limiting Place or Court in Which Action May Be Brought", 56 ALR 2d 300 (1957).

....WHEREAS, Employee acknowledges that he has read and is fully familiar with the terms of this Agreement, that the same was specifically negotiated, and that the productive (sic) covenants agreed upon herein are reasonable as to duration and area and consideration of the nature of Morgan's business....

....I HAVE READ AND UNDERSTAND THIS AGREEMENT AND IN PARTICULAR THE NON-COMPETITION ASPECTS HEREOF, AND DO HEREBY EXECUTE THE SAME BEFORE THE WITNESSES WHO HAVE SIGNED HEREUNDER....

Without further evidence or factual support in the record, this Court is compelled to conclude that this contract with its choice of forum provision is fair and reasonable under the circumstances.

When confronted with a similar issue in the past, we have sustained a contract which contained a forum selection clause for Arkansas. In SD Leasing, Inc., v. Al Spain & Assoc., Inc., 277 Ark. 178, 640 S.W.2d 451 (1982), we concluded that a lease agreement containing a clause in which the parties expressly agreed to be subject to the jurisdiction of the Courts of the State of Arkansas should be enforced. In SD Leasing, supra, the lease agreement was executed by a Florida corporation and an Arkansas corporation, negotiations for the lease took place in Florida, and the equipment was located in Florida. Thus, since the choice of forum clause in...