Cardoni et al v. Prosperity Bank, et al
Filing
48
OPINION AND ORDER by Judge Claire V Eagan ; remanding case (terminates case) ; denying 39 Motion to Strike; granting 14 Motion to Transfer Case to Other District (Re: 2 Notice of Removal ) (RGG, Chambers)
UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF OKLAHOMA
CHRIS CARDONI,
WESLEY WEBB,
TERRY BLAIN, and
BILLY SHAFFER,
Plaintiffs,
v.
PROSPERITY BANK,
ERIC DAVIS, and
ANTHONY DAVIS,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
Case No. 14-CV-0319-CVE-PJC
OPINION AND ORDER
Now before the Court are Defendant Prosperity Bank’s Motion to Transfer Venue (Dkt. #
14) and Defendant Prosperity Bank’s Motion to Strike Portions of the Affidavits of Plaintiffs (Dkt.
# 39). Defendant Prosperity Bank (Prosperity) asks the Court to transfer this case to the United
States District Court for the Southern District of Texas, because plaintiffs signed employment
agreements containing a mandatory forum selection designating Texas as the exclusive venue for
any dispute arising out of the employment agreements. Plaintiffs respond that the forum selection
clause is unenforceable because Prosperity and/or its agents fraudulently induced plaintiffs to sign
the employment agreements containing the forum selection clause. The Court set this matter for
evidentiary hearing on July 8, 2014, and the Court heard arguments as to the enforceability of the
forum selection clause.
I.
Plaintiffs Chris Cardoni, Wesley Webb, Terry Blain, and Billy Shaffer were employees of
F&M Bank (F&M) in Tulsa, Oklahoma. On August 23, 2013, Cardoni, Webb, Blain, and Shaffer
were instructed to attend a meeting scheduled for August 25, 2013, but the purpose of the meeting
was not disclosed. Dkt. # 33-1, at 2. They attended the meeting and each of the plaintiffs was
presented with an employment agreement offered by Prosperity. Id. Plaintiffs claim that they
received notice at the meeting of a proposed sale of F&M to Prosperity. Jeff Pickryl, then-President
of F&M, told everyone at the meeting that the proposed employment agreements were nonnegotiable and that Prosperity would not “change a single word” of the agreement. Id. Plaintiffs
were given until 5 p.m. on August 27, 2013 to accept or reject the employment agreements, and
Pickryl told the plaintiffs that the proposed sale of F&M to Prosperity was contingent on acceptance
of the proposed employment agreements by F&M’s employees. Id. However, only 35 employees
of F&M were offered employment agreements, and at least one of those 35 employees rejected the
proposed employment agreement. Dkt. # 35-1, at 2-3.
The proposed employment agreements offered to Cardoni, Webb, Blain, and Shaffer were
similar in all respects except for the salary and restricted common stock offered to each.1 The
1
Blain, Shaffer, Webb, and Cardoni were offered positions as senior vice presidents of
Prosperity and their base salaries ranged from $175,100 to $227,630. The base salary was
guaranteed for the entire employment period, and the employee would receive a lump sum
payment for any outstanding salary owed under the agreement if the employee was
terminated for a reason other than cause or disability. Dkt. # 14-1, at 10. Blain, Webb, and
Shaffer were offered 3,000 restricted shares of Prosperity common stock, and Cardoni was
offered 5,000 restricted shares of Prosperity common stock. Prosperity states that its
common stock was valued at $61.79 per share as of June 25, 2014. Dkt. # 36, at 2.
Defendants have submitted evidence that Shaffer demanded and received payment of
$96,273 before he would agree to sign the employment agreement, but plaintiffs’ counsel
disputed this allegation at the evidentiary hearing. Dkt. # 35-2, at 4. For the purpose of this
Opinion and Order, the Court will treat defendants’ allegation concerning Shaffer’s signing
bonus as disputed and it will not take it into account in ruling on Prosperity’s motion to
transfer venue.
2
employment period was three years and the employment period would begin upon completion of the
merger of F&M and Prosperity. Dkt. # 14-1, at 2.2 The employment agreements contain a choice
of law and a forum selection provision:
9.3 Governing Law. All questions concerning the validity, operation and
interpretation of this Agreement and the performance of the obligations imposed
upon the parties hereunder shall be governed by the laws of the State of Texas.
Exclusive venue of any dispute relating to this Agreement shall be, and is convenient
in, Texas. Employee agrees that he will not contest venue in Texas or the application
of Texas laws to any dispute relating to, connected with or arising under this
Agreement.
Id. at 11. The employment agreements describe “Confidential Information” to which a prospective
employee will have access, and this includes, but is not limited to:
information regarding past, current and prospective customers and investors and
business affiliates, employees, contractors, and the industry not generally known to
the public; strategies, methods, books, records, and documents; technical information
concerning products, equipment, services, and processes; procurement procedures,
pricing, and pricing techniques; including contact names, services provided, pricing,
type and amount of services used, financial data; pricing strategies and price curves;
positions; plans or strategies for expansion or acquisitions; budgets; research;
financial and sales data; trading methodologies and terms; communications
information; evaluations, opinions and interpretations of information and data;
marketing and merchandising techniques; electronic databases; models;
specifications; computer programs; contracts; organizational structure; personnel
information; payments or rates paid to consultants or other service providers; and
other such confidential or proprietary information. Employee acknowledges that the
Bank’s and Employer’s respective businesses are highly competitive, that this
Confidential Information constitutes a valuable, special and unique asset by each of
the Bank and Employer in its business, and that protection of such Confidential
Information against unauthorized disclosure and use is of critical importance to the
Bank and Employer.
Id. at 4-5. An employee of F&M would be given immediate access to the Confidential Information
upon execution of the agreement and, in order to protect the Confidential Information, the
2
Page citations are to the CM/ECF header and not to the page number of the employment
agreements.
3
employment agreements contain a non-competition agreement should the employee leave Prosperity
during the employment period.3 The employees agree not to directly or indirectly:
(a)
(b)
take any action to invest in, own, manage, operate, control, participate in, be
employed or engaged by or be connected in any manner with any partnership,
corporation or other business or entity engaging in a business similar to that
of the Bank or Employer anywhere within the Market Area. Notwithstanding
the foregoing, the Employee is permitted hereunder to own, directly or
indirectly, up to one percent (1%) of the issued and outstanding securities of
any publicly traded financial institution conducting business in the Market
Area;
(c)
3
compete or engage, anywhere in the geographic area comprised of the fifty
(50) mile radius surrounding each of (i) the banking centers of the Bank, (ii)
the banking centers of the Employer that were formerly banking officers [sic]
of the Bank or into which banking offices of the Bank were consolidated, and
(iii) any other Employer banking center from which the Employee has
worked (collectively, the “Market Area”), in a business similar to that of the
Bank or Employer, or compete or engage in that type of business which the
Bank or Employer has plans to engage in, or any business which the Bank or
Employer has engaged in during the preceding twelve (12) month period if
within the twenty-four (24) months before the termination of Employee’s
employment, Employee had access to information regarding the proposed
plans or the business in which the Bank or Employer engaged;
call on, service or solicit competing business from customers or prospective
customers of the Bank or Employer if, within the twelve (12) months before
the termination of Employee’s employment with the Bank or Employer,
Employee had or made contact with the customer, or had access to
information and files about the customer; or
F&M is a party and signatory to each employment agreement, although Prosperity is the
employer. Dkt. # 14-1, at 5. The Court has reviewed the employment agreements and it
appears that F&M’s role was limited to conveying the Confidential Information of F&M to
the plaintiffs after execution of the employment agreements. Id. at 5. The employment
agreements do not state that F&M has any other role in the employment relationship between
Prosperity and each plaintiff, and Prosperity does not designate F&M as its agent for any
other purpose. In particular, Prosperity does not grant F&M any authority to speak on
Prosperity’s behalf concerning the meaning or interpretation of the employment agreement.
The Court also notes that F&M received no consideration under these employment
agreements.
4
(d)
call on, solicit or induce any employee of the Bank or Employer whom
Employee had contact with, knowledge or, or association with in the course
of employment with the Bank or Employer to terminate employment from the
Bank or Employer, and will not assist any other person or entity in such
activities.
Id. at 6. The agreements also state that the parties’ written agreement “supersedes any other . . .
understandings, written or oral, between the Employer and/or its predecessors and the Employee”
and the agreement “cannot be varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreements.” Id. at 11.
After the August 25, 2013 meeting, Cardoni met with Anthony Davis, then-chairman and
CEO of F&M, and Eric Davis, then-president of F&M Bancorporation,4 and the Davises told
Cardoni the bank would “continue to operate in the business ‘as usual’” after the merger. Dkt. # 331, at 2. Shaffer also states that he told Eric Davis that he was contemplating not signing the
employment agreement “in light of its restrictions, and Eric Davis allegedly told Shaffer that “the
Prosperity contract would not be enforceable in an Oklahoma court and that’s what mattered since
[Shaffer] lived and worked in Oklahoma.”5 Dkt. # 33-4, at 2. Cardoni met with Pickryl on August
26, 2013. Pickryl allegedly told Cardoni that Prosperity could walk away from the merger if all of
the F&M employees who were offered employment agreements refused to sign the agreements, and
F&M would begin a downsizing process if the merger fell through. Dkt. # 33-1, at 2. Pickryl and
Gregg Jaynes, F&M’s then-vice president of human resources, declined to guarantee anyone’s
continued employment after the merger if that employee refused to sign the proposed employment
4
Plaintiffs allege that F&M Bancorporation was the corporate parent of F&M. Dkt. # 33-4,
at 1.
5
Shaffer does not allege that he shared Eric Davis’ statement with the other plaintiffs, and the
affidavits of the other plaintiffs do not reference Eric Davis’ alleged statement to Shaffer.
5
agreement. Id. On August 27, 2013, Cardoni again spoke to Pickryl and Jaynes, and Pickryl
allegedly told Cardoni that the agreement was unenforceable in Oklahoma. Id. at 3. Jaynes stated
that he agreed with Pickryl’s statement, but Cardoni was advised that his employment agreement
“could not be changed from Texas to Oklahoma . . . .” Id. at 3. Cardoni went to Jaynes’ office later
on August 27, 2013 to inquire about the employee benefits offered by Prosperity, and he also
followed up on his concerns about the choice of law and venue provisions of the agreement. Id.
Jaynes reiterated his earlier statement that the language of the proposed employment agreements
could not be changed, but he allegedly told Cardoni that it did not matter if the agreement had a
venue provision. Id. According to Cardoni, Jaynes said that “because [Cardoni] live[s] and work[s]
in Oklahoma any dispute would be decided by a court in Oklahoma under Oklahoma law and would
not be decided in Texas by a Texas court.” Id. Cardoni “understood” that Jaynes was making a
representation that Prosperity would not seek to enforce the agreement in an Oklahoma court, but
Cardoni did not speak to anyone at Prosperity about his belief. Id. There is no evidence that any
of the plaintiffs did not have an opportunity to consult with an attorney about the enforceability of
the forum selection or choice of law provisions, and plaintiffs have offered no evidence that either
Pickryl or Jaynes had any legal expertise.
Cardoni spoke to Webb, Blain, and Shaffer and repeated the alleged statements made by
Pickryl and Jaynes. Id. Pickryl called Cardoni to ask if Cardoni was going to sign the proposed
employment agreement and Pickryl “reiterated the importance of getting as close as possible to
100% acceptance.” Id. Cardoni signed the agreement on August 27, 2013 and delivered it to
Jaynes’ office at about 4 p.m. on that date, and he also delivered the signed agreements of Webb and
6
Blain.6 Cardoni states that he believed that he could have lost his job and bonuses that he had
already accrued if he did not sign agreement, and he expected that the accrued bonuses and stock
benefits were worth approximately $330,000. Id. at 4.
Each of the plaintiffs states that F&M functioned as an “‘organic growth bank,’ which
primarily generate[d] revenue and add[ed] asset value by making loans and collecting deposits
through business generation efforts of the bank’s officers.” Id. Plaintiffs claim that they were
assured that Prosperity would operate using a similar business model, but that Prosperity actually
operates under a different business model that generates revenue by “acquiring and aggregating
established banks.” Id. Plaintiffs also claim that they were assured Prosperity would not change the
terms for making loans or the plaintiffs’ “role and reporting structure” and these were important
factors in plaintiffs’ decisions to sign the agreements. Id. However, plaintiffs claim that they were
later informed that Prosperity would not use F&M’s loan terms and policies. They also claim that
their income and benefits are substantially less than they were while employed by F&M.
On June 2, 2014, plaintiffs filed this case in Tulsa County District Court. Dkt. # 2-2.
Plaintiffs seek injunctive and declaratory relief preventing defendants from enforcing the noncompetition provisions of the agreement, and they have also alleged claims of tortious interference
with business relations and false representation. Plaintiffs seek a preliminary and permanent
injunction barring enforcement of the non-competition provisions, and they seek money damages
in excess of $75,000. On June 16, 2014, defendants removed the case to federal court on the basis
6
At the hearing, counsel for Prosperity represented that the employment agreements were
fully executed on August 29, 2013, but this does not contradict Cardoni’s representation that
he delivered the agreements signed by certain plaintiffs on August 27, 2013.
7
of diversity jurisdiction.7 Defendants filed a motion to transfer venue to the Southern District of
Texas based on the forum selection clause in the agreements. After this case was filed, Prosperity
filed a case in Wharton County, Texas seeking declaratory relief and alleging claims for breach of
contract against Cardoni, Webb, Blain, and Shaffer. That case has been removed to the Southern
District of Texas. Prosperity Bank v. Cardoni et al., 14-CV-1884 (S.D. Tex.) (Houston Division).
II.
Prosperity has filed a motion to transfer venue under 28 U.S.C. § 1404. Challenges to venue
are ordinarily raised early in the case before the parties have had an opportunity to conduct
discovery. Murphy v. Schneider Nat’l, Inc., 362 F.3d 1133, 1139 (10th Cir. 2004). When reviewing
a motion to transfer venue under § 1404, a court may consider evidence outside the pleadings but
must draw all reasonable inferences and resolve factual conflicts in favor of the non-moving party.
Huang v. Napolitano, 721 F. Supp. 2d 46, 48 n.3 (D.D.C. 2010); United States v. Gonzalez &
Gonzales Bonds and Ins. Agency, Inc., 677 F. Supp. 2d 987, 991 (W.D. Tenn. 2010). The Court
also has the discretionary authority to hold an evidentiary hearing to resolve disputed factual issues.
Murphy, 362 F.3d at 1139-40. In this case, the parties have submitted evidence outside of the
pleadings, including affidavits and copies of plaintiffs’ employment agreements. At the hearing on
July 8, 2014, the parties stipulated that any witnesses would testify in a manner consistent with their
affidavits, but neither defendants nor plaintiffs stipulated to the truth of any statement contained in
any person’s affidavit. For the purpose of this Opinion and Order, the Court will assume that
7
Prosperity is incorporated in and has its principal place of business in Texas. The Davis
defendants have submitted affidavits stating that they were citizens of Texas when the case
was filed. Dkt. # 2-17; Dkt. # 2-18.
8
plaintiffs’ representations concerning the alleged statements of Eric Davis, Anthony Davis, Pickryl,
and Jaynes are true, and the Court will assume that any such statements were actually made.
III.
Defendants ask the Court to strike portions of plaintiffs’ affidavits attached to their response
to defendants’ motion to transfer venue. Dkt. # 39. In plaintiffs’ affidavits, they reference
statements made by former employees of F&M in an attempt to show that they were fraudulently
induced to sign the employment agreements offered by Prosperity. Certain statements in the
affidavits would constitute hearsay if the statements were offered for the truth of the matter asserted.
For example, Cardoni states that he spoke to Pickryl about the enforceability of the agreement in
Oklahoma, and Pickryl said that the agreement would not be enforceable in an Oklahoma court.
Dkt. # 33-1, at 3. If offered to prove that the agreement is unenforceable, the alleged statement by
Pickryl would be hearsay. However, plaintiffs argue that this statement and other similar statements
by Pickryl and Jaynes are not offered for the truth of the statements but, instead, the statements are
being offered to show that the statements were made and that plaintiffs relied on the statements
when they signed the employment agreements offered by Prosperity. Dkt. # 43, at 3. To show
fraud, a party may rely on an out of court statement that would otherwise be excluded as hearsay if
the statement is offered “for the mere fact that the statement was uttered.” Starr v. Pearle Vision,
Inc., 54 F.3d 1548, 1556 (10th Cir. 1995). The Court will consider the alleged statements of
Anthony Davis, Eric Davis, Pickryl, and Jaynes contained in the affidavits for the purpose of
evaluating plaintiffs’ argument that they were fraudulently induced to agree to the forum selection
9
clause, because the statements are not hearsay for this purpose.8 Defendants’ motion to strike
portions of plaintiffs’ affidavits (Dkt. # 39) should be denied.
IV.
Defendants seek a transfer of venue to the Southern District of Texas based on the forum
selection clause in plaintiffs’ employment agreements. Dkt. # 14. Plaintiffs respond that they were
fraudulently induced to sign the agreements by relying on statements by Anthony Davis, Eric Davis,
Pickryl and Jaynes, and they ask the Court to find that the forum selection clause is unenforceable.
Dkt. # 33.
The Court must initially determine if the parties’ agreement contains a venue selection clause
or a forum selection clause. Unlike a forum selection clause, a venue selection clause authorizes, but
does not require, litigation in certain forums and it may permit multiple acceptable forums for
litigation. SBKC Serv. Corp. v. 1111 Prospect Partners, L.P., 105 F.3d 578, 582 (10th Cir. 1997).
“The existence of a venue selection clause does not impose an absolute duty nor does it endow a
party with an absolute right to have every dispute between the parties litigated in the named forum.”
Hospah Coal Co. v. Chaco Energy Co., 673 F.2d 1161, 1163 (10th Cir. 1982). On the other hand,
forum selection clauses are presumed to be valid and the burden is on the party resisting
enforcement to show that enforcement of the clause would be unreasonable under the circumstances.
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 589 (1991); M/S Bremen v. Zapata Off-Shore
Co., 407 U.S. 1, 15 (1972); Milk ‘N’ More, Inc. v. Beavert, 963 F.2d 1342, 1346 (10th Cir. 1992).
8
This does not mean that the statements of any former F&M employee are relevant or that the
statements are attributable to Prosperity, and the Court will separately consider whether
plaintiffs have shown that the statements may be used to establish that they were
fraudulently induced to agree to the forum selection clause.
10
The party resisting enforcement of a forum selection clause “carries a heavy burden of showing that
the provision itself is invalid due to fraud or overreaching or that enforcement would be
unreasonable and unjust under the circumstances.” Riley v. Kingsley Underwriting Agencies, Ltd.,
969 F.2d 953, 957 (10th Cir. 1992). The Tenth Circuit has found that forum selection clauses fall
into two general categories - mandatory or permissive. Excell, Inc. v. Sterling Boiler & Mechanical,
Inc., 106 F.3d 318, 321 (10th Cir. 1997). A mandatory forum selection clause must contain “clear
language showing that jurisdiction is appropriate only in the designated forum.” Id. (quoting
Thompson v. Founders Group Int’l, 886 P.2d 904, 910 (Kan. Ct. App. 1994)). A permissive forum
selection clause permits suit to be brought in a particular jurisdiction, but does not prevent the
parties from litigating in a different forum. SBKC Serv. Corp., 105 F.3d at 581-82.
The contractual provision in this case is a mandatory forum selection clause requiring that
claims concerning the agreement be litigated in Texas. The agreement states that “[e]xclusive venue
of any dispute relating to this agreement shall be, and is convenient in, Texas.” Dkt. # 14-1, at 11.
The provision does not simply permit the parties to litigate in a specified forum but, instead, states
that Texas is the only proper venue. The agreement mandates that the “exclusive” venue for any
dispute arising out of the agreement is Texas, and this shows a clear intent by the parties to litigate
only in Texas. The use of the exclusive term “shall” is also evidence that the parties intended to
limit jurisdiction to a particular forum or forums. See American Soda, LLP v. U.S. Filter
Wastewater Group, Inc., 428 F.3d 921, 927 n.4 (10th Cir. 2005). There is no dispute that plaintiffs’
claims “relat[e] to this agreement,” and plaintiffs’ claims fall within the scope of the forum selection
clause. The forum selection clause is “prima facie valid” unless plaintiffs can meet their heavy
11
burden to show that the clause is invalid or that enforcement of the clause would be unjust under the
circumstances. Riley, 969 F.2d at 957.
Plaintiffs have not made any argument that the forum selection clause is permissive, as
opposed to mandatory, but they instead argue that the forum selection clause is unenforceable due
to fraudulent conduct of Prosperity. Plaintiffs must show that Prosperity made fraudulent statements
going to the forum selection clause itself. Riley, 969 F.2d at 960; Montoya v. Financial Federal
Credit, Inc., 872 F. Supp. 2d 1251, 1262 (D.N.M. 2012); Hammond v. Alfaro Oil & Gas, LLC, 2011
WL 976711 (D. Kan. Mar. 17, 2011). “A general claim of fraud or misrepresentation concerning
an entire contract does not affect the validity of a forum selection clause . . . [and] the party
challenging the clause must demonstrate that the forum selection clause itself is the product of fraud
or coercion.” Barton v. Key Gas Corp., 2006 WL 2781592, *2 (D. Colo. Sep. 26, 2006). Even if
the Court were to assume that plaintiffs’ affidavits are entirely true, the affidavits do not show that
Prosperity, or anyone acting on behalf of Prosperity, made a statement to plaintiffs about the
enforceability of the forum selection clause. Jaynes and Pickryl were employees of F&M when the
proposed employment agreements were presented to plaintiffs, and there is no evidence tending to
show that they acted on behalf of Prosperity when the employment agreements were presented to
F&M’s employees.9 At the hearing, plaintiffs argued that the statements of Pickryl and Jaynes
9
In plaintiffs’ response to defendant’s motion to strike statements in plaintiffs’ affidavits,
plaintiffs state that “[s]ince Prosperity was a party to the agreement, Prosperity clearly relied
upon and authorized F&M to present the contracts to F&M employees and make any
necessary representations . . . .” Dkt. # 43, at 5. However, this statement is not supported
by any evidence, and the mere fact that Pickryl, Jaynes, or the Davises presented the
employment agreements to plaintiffs is not sufficient to establish that they were authorized
by Prosperity to make statements about Prosperity’s beliefs concerning the enforceability
of certain provisions of the agreement.
12
should be deemed attributable to Prosperity due to the subsequent merger of F&M and Prosperity.
However, the cases cited by plaintiffs in support of this argument simply show that the statements
could be admissible under the hearsay rules, but the cases do not establish as a matter of law that the
statements of Pickryl and Jaynes are binding on Prosperity. See Genebacher v. CenturyTel Fiber
Co. II, 244 F.R.D. 485 (C.D. Ill. 2007); Sherif v. AstraZeneca, 2002 WL 23250023 (E.D. Pa. May
9, 2002). Even if the statements of Pickryl and Jaynes were relevant, many of the alleged statements
suggest that they might have wanted the merger of F&M and Prosperity to take place to reduce any
risk that current employees of F&M would lose their jobs. Dkt. # 33-1, at 2. This tends to suggest
that they wanted the merger to succeed for the benefit of F&M employees, rather than for the benefit
of Prosperity. Plaintiffs have also not presented evidence that they made any attempt to verify
Pickryl’s or Jaynes’ statements about the enforceability of the agreement and/or the forum selection
clause with Prosperity, and they do not argue that Pickryl, Jaynes, or Prosperity discouraged them
from seeking legal advice about the agreement or the forum selection clause.10 The Court also takes
note that plaintiffs were high-ranking employees of F&M, and it is reasonable to assume that they
were sophisticated businessmen. The evidence shows that plaintiffs were aware of the forum
10
There is no evidence in the record that either Pickryl or Jaynes had any legal expertise, and
it not clear that plaintiffs could have reasonably relied on Pickryl’s or Jaynes’ statements
concerning the enforceability of the agreement or any provision in the agreement. It is also
a well established legal principle that claims of fraud involve a misstatement of fact.
Myklatun v. Flotek Indus., Inc., 734 F.3d 1230, 1234-35 (10th Cir. 2013) (explaining that
fraud under Oklahoma law requires a false statement or omission as to a material fact); see
also Debnam v. FedEx Home Delivery, 2011 WL 1188437 (D.Mass. Mar. 31, 2011) (alleged
false statement asserting a legal conclusion was not a misstatement of fact that could support
a fraud claim). Even if Pickryl or Jaynes offered a legal conclusion about the enforceability
of the forum selection clause, this would not be an assertion of fact that would support
plaintiffs’ argument that they were fraudulently induced to agree to the forum selection
clause.
13
selection clause before they signed the agreement and that they appreciated the consequences of
signing the agreement. A sophisticated businessman would not sign an agreement and assume that
certain provisions were unenforceable based on the alleged oral statements of someone without
authority to bind the other party to the contract.11 Plaintiffs have not met their heavy burden to show
that the forum selection clause is invalid due to fraud.
Plaintiffs also argue that the forum selection clause is invalid due to the disparity in
bargaining power between Prosperity and plaintiffs. Dkt. # 33, at 21. They claim that they had no
role in negotiating the merger and that Prosperity refused to consider making any changes to the
agreement. In general, a forum selection clause is enforceable even if one party to the contract had
no opportunity to negotiate for the inclusion or exclusion of a forum selection clause. Carnival
Cruise Lines, Inc., 499 U.S. at 594. Plaintiffs had sufficient time to consult an attorney and they
could have refused to sign the agreement. Even though Prosperity may not have been willing to
negotiate the terms of the forum selection clause, this is not a sufficient reason by itself to declare
the forum selection clause invalid. Montoya, 872 F. Supp. 2d at 1263. Plaintiffs could have
declined to sign the agreements and look for other employment, and the allegations in their petition
show that they would likely have received other employment offers.12 Dkt. # 2-2, at 9. Plaintiffs
11
The agreement also expressly states that the written agreement “supersedes any other
employment agreements or understandings, written or oral, between the Employer and/or its
predecessors and the Employee.” Dkt. # 14-1, at 11. In other words, even if Pickryl or
Jaynes were deemed to be acting on behalf of Prosperity when the alleged statements were
made, the statements could not be used to contradict the express terms of the agreement.
12
In fact, a key component of the irreparable harm alleged in plaintiffs’ petition and motion
for preliminary injunction is that other banks have made offers of employment, but the other
banks are reluctant to hire plaintiffs because of the non-competition provisions in plaintiffs’
employment agreements with Prosperity.
14
chose to sign the agreements and keep their current jobs, and the fact that they could not negotiate
for the exclusion of the forum selection clause is not evidence of undue pressure or overreaching.
In Atlantic Marine Constr. Co., Inc. v. United States Dist. Court for the Western Dist. of
Texas, 134 S. Ct. 568 (2013), the Supreme Court explained that 28 U.S.C. § 1404(a) is the
appropriate mechanism for a federal district court to transfer a case to another federal district court
based on the presence of a forum selection clause. Id. at 579. Under § 1404(a), a court may transfer
a case to any judicial district in which it could originally have been filed “[f]or the convenience of
parties and witnesses.” The Tenth Circuit has identified several factors that should be considered
by a district court when ruling on a motion to transfer:
the plaintiff’s choice of forum; the accessibility of witnesses and other sources of
proof, including the availability of compulsory process to insure attendance of
witnesses; the cost of making the necessary proof; questions as to the enforceability
of a judgment if one is obtained; relative advantages and obstacles to a fair trial;
difficulties that may arise from congested dockets; the possibility of the existence of
questions arising in the area of conflict of laws; the advantage of having a local court
determine questions of local law; and, all other considerations of a practical nature
that make a trial easy, expeditious and economical.
Chrysler Credit Corp. v. Country Chrysler, Inc., 928 F.2d 1509, 1516 (10th Cir. 1991). However,
in a case involving the application of a mandatory forum selection clause, the standard analysis is
altered in three significant ways. Atlantic Marine Const. Co., 134 S. Ct. at 581. First, the plaintiff’s
choice of forum is entitled to no weight, because “when a plaintiff agrees by contract to bring suit
only in a specified forum--presumably in exchange for other binding promises by the defendant--the
plaintiff has effectively exercised its ‘venue privilege’ before a dispute arises.” Id. at 582. Second,
the Court should not consider arguments going to the parties’ private interests, and the Court “must
deem the private-interest factors to weigh entirely in favor of the preselected forum.” Id. A court
may consider public interest factors only, but these factors will “rarely defeat a transfer motion.”
15
Id. Third, “when a party bound by a forum-selection clause flouts its contractual obligation and files
suit in a different forum, a § 1404(a) transfer of venue will not carry with it the original venue’s
choice-of-law rules,” because it would encourage gamesmanship and could possibly allow a plaintiff
to receive an unfair advantage by filing suit in a venue with more favorable choice-of-law rules. Id.
at 583.
Plaintiffs argue that non-competition agreements are disfavored as a matter of Oklahoma
public policy, and the Court should decline to enforce the forum selection clause to avoid
transferring the case to another court that would “possibly uphold” the non-competition agreement.
Dkt. # 33, at 22-23. At the hearing, plaintiffs cited this Court’s decision in Southwest Stainless, L.P.
v. Sappington, 2008 WL 918706 (N.D. Okla. Apr. 1, 2008), and they claim that the case stands for
the proposition that a forum selection clause can be found invalid if enforcement of the underlying
contract would result in a violation of an Oklahoma public policy. However, Southwest Stainless
actually concerned the enforceability of a choice of law provision, not a forum selection clause. In
Southwest Stainless, the three defendants agreed to sell their interest in Southwest Stainless, L.P.
(Southwest) to HD Supply, Inc. (HD Supply), and they executed a non-competition agreement with
HD Supply as part of the sale. Id. at *1. The parties agreed that their contractual relationship would
be governed by Florida law. Id. Under Oklahoma’s choice of law rules, the Court found that
enforcement of the non-competition agreements would result in a violation of Oklahoma public
policy, and the Court found that Oklahoma law should govern interpretation of the non-competition
agreements. Id. at *6. There was no issue as to the enforceability of a forum selection clause in
Southwest Stainless. The Court finds that Southwest Stainless does not support plaintiffs’ argument
that a court may decline to enforce a forum selection clause when enforcement of the underlying
16
contract could possibly result in a violation of an Oklahoma public policy.13 The undisputed
evidence shows that plaintiffs signed an agreement that offered them a substantial salary and stock
benefits and, in return, Prosperity included a forum selection clause, a choice of law provision, and
non-competition provisions as part of the agreement. Under Atlantic Marine Constr. Co., plaintiffs
cannot accept the benefits of the agreement without upholding their end of the bargain. The Court
will consider Oklahoma’s public policy concerning non-competition agreements as a public interest
factor, but this will not weigh heavily in the Court’s analysis under Atlantic Marine Constr. Co. in
determining whether the forum selection clause is enforceable.
The Court will consider public interest factors that are part of the traditional § 1404(a)
analysis, and these factors include “the administrative difficulties flowing from court congestion;
the local interest in having localized controversies decided at home; [and] the interest in having the
trial of a diversity case in a forum that is at home with the law.” Atlantic Marine Constr. Co., 134
S. Ct. at 581 n.6. Plaintiffs have not presented any evidence that administrative difficulties or court
congestion will prevent plaintiffs from receiving a timely and fair trial in the Southern District of
Texas. There is also another pending case involving the same parties and subject matter in the
Southern District of Texas, and judicial economy and preservation of the parties’ resources support
both cases being in one judicial district for possible consolidation. The Court will take into account
plaintiffs’ interest in having a local forum hear a case involving Oklahoma residents, but this factor
does not weigh heavily in favor of plaintiffs because of the choice of law provision in the agreement.
13
Plaintiffs have cited two state court decisions in which state appellate courts have declined
to enforce a forum selection clause on public policy grounds. See Lapolla Indus., Inc. v.
Hess, 750 S.E.2d 467 (Ga. Ct. App. 2013); Beilfuss v. Huffy Corp., 685 N.W.2d 373 (Wis.
Ct. App. 2004). These decisions are based on state law, not federal law, and the Supreme
Court’s decision in Atlantic Marine Constr. Co. governs this Court’s application of § 1404.
17
The parties agreed that Texas law would govern the case and there would be a greater advantage for
the parties if the issues in this case were considered by a court more familiar with Texas law.
Plaintiffs have not shown that the public interest factors weigh heavily against application of the
parties’ forum selection clause, and the Court finds that the forum selection clause should be
enforced.
Defendant’s motion to transfer venue (Dkt. # 14) should be granted, and the case should be
transferred to the Southern District of Texas. Plaintiff’s motion for preliminary injunction (Dkt. #
6) remains pending.
IT IS THEREFORE ORDERED that Defendant Prosperity Bank’s Motion to Transfer
Venue (Dkt. # 14) is granted, and Defendant Prosperity Bank’s Motion to Strike Portions of the
Affidavits of Plaintiffs (Dkt. # 39) is denied.
IT IS FURTHER ORDERED that the Court Clerk is directed to transfer this case to the
United States District Court for the Southern District of Texas, Houston Division.
DATED this 9th day of July, 2014.
18
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?