The Austin Court of Appeals has reversed a Llano County district court’s order dismissing a lawsuit on forum non conveniens grounds.
Lucus Kirkpatrick and Calibrated Addiction, LLC v. Custom Tuning Team, Inc. and Robert Ivey (No. 03-22-00093-CV; January 5, 2024) arose from a contract dispute between two businesses. Kirkpatrick and Ivey, the owners of Calibrated, a Texas company that owned software for tuning vehicles by reprogramming their computers over the internet, sold the business to Custom Tuning, a Canadian company. The purchase agreement, signed by Kirkpatrick, Ivey, and Custom Tuning’s principal, a Canadian resident, specified that any notices to Calibrated should be sent to an address in Kingsland, Texas. The contract contained a choice of law provision specifying that Canadian law governed the contract. In exchange for a payment of $50,000 per month for five years (up to $10 million), Calibrated sold its records, website, and other data to Custom Tuning. Custom Tuning subsequently began making payments to Ivey, Kirkpatrick, and several others who worked for the company, including residents of Tennessee, Illinois, and Arizona. Kirkpatrick alleged that Custom Tuning stopped paying him and reallocated his share of the payments to the other partners/contractors (there is dispute about their status). Kirkpatrick sued Ivey in Llano County, where both Kirkpatrick and Ivey reside, as well as Custom Tuning and the other partners/contractors, asserting numerous theories, including breach of contract, unjust enrichment, conspiracy, fraud, fraudulent inducement, and breach of fiduciary duty. Defendants Ivey and Custom Tuning moved to dismiss on the basis of forum non conveniens, asserting that the suit should have been brought in Canada. (The remaining out-of-state defendants moved to dismiss for lack of personal jurisdiction.) The trial court granted the motion. Plaintiffs appealed.
In an opinion by Chief Justice Byrne, the court of appeals reversed. As this was not a wrongful death or personal injury case covered by § 71.051, CPRC, the court applied the common law doctrine of forum non conveniens. The doctrine requires the court to balance the plaintiff’s choice of forum (which carries a strong presumption when the plaintiff is a Texas resident) against the public and private interests in favor of an alternate forum (citations omitted). Turning first to the question of an alternate forum, the court concluded that defendants demonstrated, and the trial court did not abuse its discretion in finding, that an alternate forum existed in Canada with jurisdiction over both the parties and plaintiffs’ claims. Once defendants established this, the burden shifted to plaintiffs to show that the alternative forum was not “adequate.” Once again, the court found, and plaintiffs did not dispute, that the Canadian forum met the adequacy requirement.
However, the court reasoned, just because Ivey agreed to the application of Canadian law as part of the purchase agreement, that did not mean that he was amenable to Canadian jurisdiction or service of process. Here defendants did not present any expert testimony establishing that Ivey would be amenable to process in Canada. Nor was there any evidence that Ivey consented to Canadian jurisdiction over him. This is important because Texas courts have held that “[a] choice-of-law provision may be a factor in a minimum-contacts analysis but it does not create personal jurisdiction in the forum whose law was chosen to be applicable” (citations omitted). The court thus concluded that defendant Ivey failed to carry his burden “to show that Alberta, Canada is an available forum for claims against him and, therefore, that the claims against him should be dismissed on grounds of forum non conveniens.”
The court then took up the private and public considerations part of the balancing test. Private considerations include: “(1) the relative ease of access to sources of proof; (2) the availability of compulsory process for attendance of unwilling, and the cost of obtaining willing, witnesses; (3) the possibility of view of premises, if view would be appropriate to the action; (4) the enforceability of a judgment once obtained; and (5) all other practical problems that make trial of a case easy, expeditious, and inexpensive” (citing Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 509 (1947)). Disregarding items 3 and 4, which were inapplicable to this case, the court concluded that the remaining factors did not strongly predominate one way or the other, “which weighs in favor of honoring the plaintiff’s choice of forum.” Plaintiffs argued that proof was largely accessible and available online and did not depend on any single location. As to the witnesses, they were generally scattered around the U.S. and might not be amenable to service in either Texas or Canada. However, the court pointed out that the Texas courts have procedures for allowing parties to take depositions in a foreign jurisdiction for use in Texas, as long as the foreign jurisdiction recognizes those procedures (citation omitted). In any event, the court concluded, it wouldn’t be any harder to get non-Texas residents to testify in a Texas case than it would be to get them to do it in Canada, so this factor washed out. The same goes for the costs of litigation, which would probably be roughly equal in either case.
As to the public interests, the court noted that both Texas and Canada “have a relation to and interest in the ligitation,” based on the residencies of the parties. What tipped the scale in the Texas direction was the fact that Custom Tuning has Texas employees, maintains a Texas website, and makes a majority of its sales in Texas. Regarding Texas’s interest in the case, defendants argued that because Custom Tuning could not operate legally in Texas (because it cannot comply with U.S. environmental regulations), Texas courts should not become involved in “resolving a dispute over activity that is not legal in this state.” The court did not consider this argument because defendants did not raise the illegality defense at the trial court. In dicta, however, the court suggested that “Texas could be greatly interested in an entity allegedly doing illegal business that also defrauds or damages a Texas resident and business ….” As to the forum selection clause designating Canadian law, the court observed that the parties dispute which law applies and in what context, given that there is also an issue in the case about an alleged conspiracy to defraud plaintiffs that occurred in Tennessee. In any event, since Canada is a common law country and defendants did not establish otherwise, the court “must presume that another nation’s law is the same as that of Texas in the absence of pleading and proof of such law.”
To sum up, the court ruled that defendants failed to show that Canada was an available alternate forum for this case. It further held that “the record does not demonstrate that public or private factors favor dismissal” (at best, they were a wash). Finally, the case largely boils down to a dispute between Texas residents, Kirkpatrick and Ivey, both of whom reside in Llano County. That is perhaps the most salient fact of all. In our view, the court of appeals got this case right. Where it will go from here is anyone’s guess, but given that the parties and potential witnesses are scattered all over creation, it will be a difficult matter to try it, no matter what the forum.
