Pinto Tech. Ventures, L.P. v. Sheldon

• Decision Date: 19 May 2017
• Docket Number: No. 16-0007.,16-0007.
• Citation: Pinto Tech. Ventures, L.P. v. Sheldon, 526 S.W.3d 428 (Tex. 2017)
• Parties: PINTO TECHNOLOGY VENTURES, L.P. ; Pinto TV Annex Fund, L.P.; PTV Sciences II, L.P. ; Rivervest Venture Fund I, L.P. ; Rivervest Venture Fund II, L.P. ; Rivervest Venture II (Ohio), L.P.; Bay City Capital Fund IV, L.P. ; Bay City Capital Fund IV Co-Investment Fund, L.P.; Chris Owens; Bill Burke ; Reese Terry ; and Craig Walker, Petitioners, v. Jeffery SHELDON and Andras Konya, M.D., Ph.D., Respondents
• Court: Texas Supreme Court

526 S.W.3d 428

PINTO TECHNOLOGY VENTURES, L.P. ; Pinto TV Annex Fund, L.P.; PTV Sciences II, L.P. ; Rivervest Venture Fund I, L.P. ; Rivervest Venture Fund II, L.P. ; Rivervest Venture II (Ohio), L.P.; Bay City Capital Fund IV, L.P. ; Bay City Capital Fund IV Co-Investment Fund, L.P.; Chris Owens; Bill Burke ; Reese Terry ; and Craig Walker, Petitioners,

v.Jeffery SHELDON and Andras Konya, M.D., Ph.D., Respondents

No. 16-0007.

Supreme Court of Texas.

Argued February 28, 2017

OPINION DELIVERED: May 19, 2017

Rehearing Overruled September 22, 2017

B. Russell Horton, R. James George Jr., George Brothers Kincaid & Horton LLP, Austin, Daniel David, Amy Pharr Hefley, David D. Sterling, J. Mark Little, Baker Botts, LLP, Houston, Thomas R. Phillips, Baker Botts L.L.P., Austin, for Petitioners.

Jeff Joyce, Huma Ali, Joyce + McFarland LLP, Houston, Craig T. Enoch, Melissa A. Lorber, Enoch Kever PLLC, Austin, for Respondents.

Justice Guzmandelivered the opinion of the Court.

Subject to public-policy constraints, forum-selection clauses are generally enforceable in Texas.¹Though enforceability is not the concern it once was,²courts are frequently confronted with disagreements about the specific claims encompassed and the extent to which nonsignatories may resist or enforce such clauses.In determining these matters, common principles of contract and agency law³ and the parties' chosen language are the fulcrum of our inquiry because forum-selection clauses are creatures of contract and we must give effect to the parties' intent as expressed in the four corners of the document.⁴

Here, certain minority shareholders filed suit alleging dilution of equity interests and the defendants responded, in part, by invoking a forum-selection clause designating Delaware as the proper forum for "any dispute arising out of" a shareholders agreement.The parties ask us to decide (1) which parties are bound to the forum-selection clause as signatories or nonsignatories to the shareholders agreement and (2) whether statutory and common-law tort claims that are factually predicated on the existence or terms of that agreement must be litigated in the contractually designated forum.The trial court granted the defendants' motion to dismiss, but a divided court of appeals reversed, holding the forum-selection clause does not control because the shareholders' extracontractual claims do not allege noncompliance or interference with any rights or obligations derived from the shareholders agreement.⁵

While "the party who brings a suit is master to decide what law he will rely on,"⁶ whether a forum-selection clause applies depends on the factual allegations undergirding the party's claims rather than the legal causes of action asserted.⁷Focusing on the factual allegations in this case rather than the legal theories the minority shareholders elected to pursue, we hold that the shareholders' statutory and common-law tort claims evidence a "dispute arising out of" the shareholders agreement because (1) the existence or terms of the agreement are operative facts in the litigation and (2)"but for" that agreement the shareholders would not be aggrieved.⁸Our holding today is faithful to the parties' chosen contractual language, avoids "slavish adherence to a contract/tort distinction,"⁹ and prevents litigants from avoiding a forum-selection clause with "artful pleading."¹⁰We further hold the shareholders are bound by the forum-selection clause as signatories to the shareholders agreement, except with respect to their claims against the nonsignatory defendants.We therefore reverse the court of appeals' judgment, render judgment dismissing the minority shareholders' claims in part, and remand the case to the trial court for further proceedings in part.

I.Factual and Procedural Background

Jeffery Sheldon and Andras Konya are shareholders in IDev Technologies, Inc.(IDEV), a developer and manufacturer of medical devices.Sheldon founded IDEV in 1999 and served as its Chief Executive Officer (CEO) until 2008.Konya, an IDEV consultant from 2002 to 2012, is the co-inventor of vascular-stent technology IDEV licensed in 2000.Both Sheldon and Konya initially acquired IDEV common stock through their business relationship with the company.Sheldon later added to his IDEV holdings by purchasing preferred stock.

IDEV engaged in multiple rounds of financing, causing Sheldon's and Konya's proportional ownership interests to change over time.In early 2010, shortly before the events giving rise to the present dispute, Sheldon and Konya allege they owned 5% and 2.4% of IDEV's total outstanding shares, respectively.Following a series of transactions in 2010, however, Sheldon and Konya allege their interests were substantially and wrongfully diluted to a fraction of 1% in a concerted effort by certain controlling parties to wipe out common stockholders after first converting preferred stock to common stock.Sheldon and Konya contend the 2010 transactions manipulated, diluted, and devalued their holdings, depriving them of a significant payout in connection with IDEV's impending acquisition by another company at a considerable sum.

Sheldon and Konya (collectively, the Shareholders) sued IDEV's venture-capital majority shareholders,¹¹ IDEV's CEO Chris Owens and Chief Financial Officer (CFO)Bill Burke, and IDEV directors Reese Terry and Craig Walker(collectively, the IDEV parties), alleging fraud, breach of fiduciary duty, minority-shareholder oppression, Texas Blue Sky Law violations, and conspiracy as to various parties.The IDEV parties moved to dismiss the claims based on a forum-selection clause in IDEV's 2010 Amended and Restated Shareholders Agreement (2010 Amended Shareholders Agreement), which plays a featured role in the allegations underlying the Shareholders' statutory and common-law tort claims.Sheldon and Konya contest the forum-selection clause's applicability to the dispute for a variety of reasons relating to the circumstances giving rise to the underlying dispute and amendment of the clause to change venue from Texas to Delaware.

A forum-selection clause has long been part of IDEV's shareholder agreements, as amended in 2002, 2004, 2006, 2008, and 2010.Both the 2002 and 2004 agreements included a forum-selection clause designating Harris County, Texas, as the forum for "any dispute arising out of" those agreements, but following an amendment in 2006, the shareholders agreement was revised to require litigation of disputes in Delaware:

[T]he Delaware state courts of Wilmington, Delaware (or, if there is exclusive federal jurisdiction, the United States District Court for the District of Delaware) shall have exclusive jurisdiction and venue over any dispute arising out of this Agreement, and the parties hereby consent to the jurisdiction of such courts.

The 2008 and 2010 agreements carried forward the Delaware forum-selection clause without alteration.

Sheldon signed all of the shareholder agreements, except the 2010 Amended Shareholders Agreement.Konya signed only the 2002 and 2004 shareholder agreements, but, notably, the 2004 agreement authorized written amendments with the assent of IDEV and a majority of the stockholders.Subsequent versions of the shareholders agreement also had provisions allowing for amendment on similar terms.

The stated purpose of each amended shareholders agreement was to "promote the best interests" of IDEV and the "mutual interests" of the company and its shareholders by "imposing certain requirements with respect to the voting and transferability of the shares of [the company's stock] owned by the Shareholders."To that end, under the shareholders agreement, as amended from time to time, the shareholders and IDEV have certain rights and obligations that govern the relationship between them.

Several of the amendments to the shareholders agreement coincided with financing required for IDEV's growth and solvency.Series A Financing in 2004 raised approximately $1.8 million; Series B in 2006 raised $24 million; and Series C in 2008 raised an additional $25 million.These transactions diluted the Shareholders' interests over time without any apparent dispute.However, dilution related to Series B-1 financing in 2010 and interconnected actions to amend the shareholders agreement precipitated Sheldon's and Konya's claims in the instant lawsuit.In addition to complaining about sundry actions permitted under the 2010 Amended Shareholders Agreement, the Shareholders allege:

• In 2010, the "Defendants set out to reduce [the Shareholders'] holdings ... to a modest fraction of 1% and to similarly dilute other existing shareholders" employing "the following steps to accomplish their goal," among others:

1."The venture capital defendants ... caused the board of directors to join with them to amend the Shareholder's Agreement, eliminating Sheldon['s] ... preemptive rights"; and

2."[The independent directors] Terry and Walker ... went along with the various steps—including the amendment of the Shareholder Agreement—in breach of their fiduciary duties."

• "The Defendants caused the Shareholder Agreement to be amended in hopes of avoiding Sheldon's (and others') preemptive rights in respect of his common and preferred stock holdings."

• "[T]he 2010 Shareholder Agreement amendment was procured by fraud and breaches of fiduciary duty."

• "Defendants failed to disclose material facts to Sheldon related to the 2010 Shareholder Agreement amendment and related transactions."

• "Defendants may claim no rights under the 2010 Shareholder Agreement amendment as it is unenforceable under [the Blue Sky Law]."

After considering the pleadings on file and the parties' arguments, the trial court granted the motion to dismiss in favor of a Delaware forum and dismissed the lawsuit with prejudice to refiling in Texas.

In a split decision, the court of appeals reversed, holding the forum-selection clause inapplicable to this dispute because an "arising out of"...