Hacienda Ford v. Smart Automotive Group, L.L.C.--Appeal from 389th District Court of Hidalgo County

 NUMBER 13-04-00605-CV

 COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI  B EDINBURG

HACIENDA FORD, Appellant,

v.

SMART AUTOMOTIVE GROUP, L.L.C., Appellee.

 On appeal from the 389th District Court of Hidalgo County, Texas.

 MEMORANDUM OPINION

 Before Justices Hinojosa, Rodriguez, and Garza

Memorandum Opinion by Justice Hinojosa

Appellant, Hacienda Ford (AHacienda@), appeals from an order of the trial court dismissing its lawsuit against appellee, Smart Automotive Group, L.L.C. (ASmart Auto@). In two issues, Hacienda contends the trial court erred in ordering the dismissal because a forum-selection clause contained in the contract between the parties is not enforceable. We affirm.

A. Background

On February 27, 2003, Hacienda entered into a AContract of Retention@ (Afirst contract@) with Smart Auto. Under the first contract, Smart Auto was to advertise, promote, and run a sales campaign from March 12, 2003 through March 22, 2003, in exchange for a promotion fee and a percentage of the gross profits obtained as a result of the promotion.

On April 11, 2003, Hacienda entered into a second AContract of Retention@ (Asecond contract@) with Smart Auto. Under the second contract, Smart Auto was to run a similar advertising and promotion campaign from April 16, 2003 through April 19, 2003. However, on April 15, 2003, Hacienda received a letter from the Texas Department of Transportation (ATxDOT@) notifying it that the sales promotion of March 12th B 22nd had violated several provisions of the Texas Motor Vehicle Commission Code. The letter warned Hacienda that a subsequent violation of the same provisions would result in a formal complaint against it. In response to the letter, Hacienda canceled the sales promotion scheduled for April 16th B 19th.

On June 13, 2003, Hacienda sued Smart Auto in the 389th District Court of Hidalgo County, Texas, alleging causes of action in fraud and deceptive trade practices, and requesting a declaratory judgment that both contracts were void and unenforceable. On April 19, 2004, the trial court rendered a default declaratory judgment against Smart Auto. However, on June 29, 2004, the trial court granted Smart Auto=s motion for new trial. Smart Auto later moved to dismiss Hacienda=s suit, asserting that the forum-selection clause and choice-of-law provision contained in the two contracts made the basis of the suit required any lawsuit to be filed in the State of Louisiana. On October 19, 2004, the trial court granted Smart Auto=s motion to dismiss, without specifying the reason. This appeal ensued.

The forum-selection clause found in the two contracts provides, in relevant part, as follows:

Jurisdiction and Forum-Selection Clause:

The parties irrevocably consent that any legal action or proceedings against it under, arising out of, or in any manner related to this agreement, must be brought in any court of the state of Louisiana, Parish of Jefferson. The parties, by execution of this agreement, expressly and irrevocably assent and submit to the personal jurisdiction of any such court in any such action or proceeding. . . .

B. Standard of Review

We review a trial court=s order of dismissal under an abuse of discretion standard. Roberts v. Padre Island Brewing Co., 28 S.W.3d 618, 620 (Tex. App.BCorpus Christi 2000, pet. denied). A trial court abuses its discretion if it acts Awithout reference to any guiding rules and principles,@ or in a way that leads to an arbitrary or unreasonable result. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241 42 (Tex. 1985). AThe mere fact that a trial judge may decide a matter within his discretionary authority in a different manner than an appellate judge in a similar circumstance does not demonstrate that an abuse of discretion has occurred.@ Id. at 242. However, Aa clear failure by a trial court to analyze or apply the law correctly is an abuse of discretion.@ McDaniel v. Yarbrough, 898 S.W.2d 251, 253 (Tex. 1995).

C. Forum-Selection Clauses

The Texas Supreme Court has determined that Aenforcement of a forum selection clause is mandatory, absent a showing that >enforcement would be unreasonable and unjust or that the clause was invalid due to fraud or overreaching.=@ See Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 793 (Tex. 2005); see also In re Automated Collection Techs., 156 S.W.3d 557, 559 (Tex. 2004) (per curiam) (citing In re AIU Ins. Co., 148 S.W.3d 109, 112 (Tex. 2004)).[1] A forum-selection clause may fall within these exceptions Aif enforcement would contravene a strong public policy of the forum in which suit was brought, or when the contractually selected forum would be seriously inconvenient for trial.@ In re AIU Ins. Co., 148 S.W.3d at 112 (citing M/S Bremen v. Zapata Off Shore Co., 407 U.S. 1, 15-17 (1972)). The party opposing enforcement of the clause bears the burden of showing how such enforcement would be unreasonable or unjust, or that the clause is invalid. In re Automated Collection Techs., 156 S.W.3d at 559.

1. Forum-Selection Clause Is Not Sufficiently Conspicuous

Hacienda first argues that the forum-selection clause is unenforceable because the clause is not sufficiently conspicuous as required by section 35.53 of the Texas Business and Commerce Code. See Tex. Bus. & Com. Code Ann. ' 35.53 (Vernon Supp. 2005). However, without reaching the merits of Hacienda=s argument, we conclude that Hacienda has failed to show that section 35.53 is applicable in this case. Section 35.53 applies to contracts Afor the sale, lease, exchange, or other disposition for value of goods for the price, rental, or other consideration of $50,000 or less.@ Id. The only evidence we have found in the record is the contract itself. Under the terms of the contract, Hacienda retained Athe services@ of Smart Auto Group and agreed to pay a promotion fee of $19,000 plus Atwenty-eight percent of the AFront-End Gross Profit@ and twenty-eight percent of the total ABack-End Gross Profit@ for each new or used vehicle delivered during or as a result of the sale.@ We conclude that the terms of the contract do not invoke section 35.53 of the Texas Business and Commerce Code.

2. Forum-Selection Clause Contains Waiver of Substantive Rights

Hacienda next argues that enforcement of the forum-selection clause is unreasonable and unjust because it contains a waiver of substantive rights. The clause provides that: AThe parties shall not be entitled in any such action or proceeding to assert any defense given or allowed under the laws of any state other than the state of Louisiana unless such defense is also given or allowed by the laws of the state of Louisiana.@ However, under the choice-of-law provision contained in both contracts,[2] Hacienda has already agreed that the contracts will be governed by the laws of the state of Louisiana. Hacienda has not challenged this provision of the contracts. Moreover, Hacienda has not identified any defenses it might wish to assert that are available under Texas law but are not available under Louisiana law. We conclude that Hacienda has failed to show how the forum-selection clause constitutes an unjust waiver of substantive rights.

3. Contracts Require Illegal Performance of Contractual Duties

Hacienda further argues that enforcement of the forum-selection clause is unreasonable and unjust because both contracts require illegal performance of contractual duties. In support of this argument, Hacienda points to the letter it received from TxDOT, delineating certain aspects of the direct-mail advertisement for the March 12 B 15 sales campaign that violated Texas law. It is well settled that a contract is void when it is for Aa thing which cannot be performed without a violation of the law . . . .@ Lewis v. Davis, 199 S.W.2d 146, 148-49 (Tex. 1947). However, there is an important distinction between (1) a contract for an illegal activity, and (2) a contract for a legal activity that can be performed in an illegal manner. See id.; cf. In re Kasschau, 11 S.W.3d 305, 313 (Tex. App. 1999) (holding a settlement agreement void where it called for the destruction of recordings of illegal phone taps in violation of a statute making it a crime to alter or destroy evidence of a crime even before the commencement of a criminal proceeding and determining that the action would be illegal even if the parties waited until after the statute of limitations on the state wire tap law ran). Hacienda does not argue that it is illegal to contract for auto sales and marketing services, only that the manner in which Smart Auto performed the services was illegal. AA contract that could have been performed in a legal manner will not be declared void because it may have been performed in an illegal manner.@ Lewis, 199 S.W.2d at 149. Accordingly, we conclude the contracts at issue are not illegal; thus, they cannot be declared void.

4. Hacienda=s Claims Render Forum-Selection Clause Inapplicable

Finally, Hacienda argues that because construction of the rights and liabilities of the parties under the contracts is not necessary to determine its claims for fraudulent inducement and deceptive trade practices, the forum-selection clause is rendered inapplicable. However, whether a forum-selection clause is applicable to an asserted cause of action depends on the specific terms of the clause itself. See Southwest Intelecom, Inc. v. Hotel Networks Corp., 997 S.W.2d 322, 324-25 (Tex. App.BAustin 1999, pet. denied). When a forum-selection clause Aencompasses all causes of action concerning the contract, the claim that a party was fraudulently induced to enter the contract does not avoid the forum-selection clause.@ My Cafe CCC, Ltd. v. Lunchstop, Inc., 107 S.W.3d 860, 867 (Tex. App.BDallas 2003, no pet.); cf. Busse v. Pacific Cattle Feeding Fund #1, 896 S.W.2d 807, 813 (Tex. App.BTexarkana 1995, writ denied) (holding forum selection clause inapplicable to fraudulent inducement claim where the clause was limited by its own terms to construction of Athis agreement and the rights and obligations of the parties arising hereto@). Therefore, the mere fact that Hacienda pleaded fraudulent inducement does not void the forum-selection clause. See My Cafe CCC, Ltd., 107 S.W.3d at 867. By its own terms, the forum-selection clause found in both contracts applies to Aany legal action or proceedings . . . under, arising out of, or in any manner related to this agreement.@ Hacienda=s claims arise out of and are related to both contracts. Accordingly, we conclude that Hacienda=s claims do not render the forum-selection clause inapplicable.

Because Hacienda failed to show that the forum-selection clause is void or that enforcement of the clause would be unreasonable or unjust, we conclude the trial court did not abuse its discretion in enforcing the clause. Hacienda=s first and second issues are overruled.

The trial court=s order of dismissal is affirmed.

FEDERICO G. HINOJOSA

Justice

Memorandum Opinion delivered and filed this

the 27th day of July, 2006.

[1] We note that before the United States Supreme Court=s decisions in M/S Bremen v. Zapata Off Shore Co. and Carnival Cruise Lines, Inc. v. Shute, state courts, including those in Texas, historically had invalidated forum-selection clauses as violating public policy. See In re AIU Ins. Co., 148 S.W.3d 109, 111 (Tex. 2004); Phoenix Network Techs. (Europe) Ltd. v. Neon Sys., 177 S.W.3d 605, 611 (Tex. App.BHouston [1st Dist.] 2005, no pet.); see also M/S Bremen v. Zapata Off Shore Co., 407 U.S. 1 (1972); Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991). Once Texas courts began enforcing forum-selection provisions, most Texas courts of appeals applied a two part test to determine whether a forum-selection clause was valid and enforceable, and not the standards applied by the United States Supreme Court in M/S Bremen and Shute. See Phoenix Network Techs., 177 S.W.3d at 612 n.4 (collecting cases). However, the Texas Supreme Court has recently issued three opinions adopting and applying the M/S Bremen/Shute standard for evaluating forum-selection clauses. See Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777 (Tex. 2005); In re Automated Collection Techs., 156 S.W.3d 557, 559 (Tex. 2004) (per curiam); In re AIU Ins. Co., 148 S.W.3d at 112; see also Phoenix Network Techs., 177 S.W.3d at 613-14. Accordingly, that is the test we apply today.

[2] The choice-of-law provision states: AThis agreement shall be governed by and construed in accordance with the laws of the state of Louisiana.@