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FRIBERG v. CARSON ENERGY

May 15, 2003

CARL F. FRIBERG, PLAINTIFF,
v.
CARSON ENERGY, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Charles R. Breyer, United States District Judge

ORDER GRANTING DEFENDANTS' MOTION TO TRANSFER

Plaintiff filed a complaint in state court alleging that defendants made false representations to induce him to invest in a oil venture that cost him dearly. Defendants removed on diversity grounds. Defendants now move to dismiss or transfer under Rule 12(b)(3) of the Federal Rules of Civil Procedure on the grounds that the contracts signed by plaintiff contain forum selection clauses that restrict venue to Dallas County, Texas.

BACKGROUND

In 1995, plaintiff, a private investor, discussed investment opportunities with representatives of defendant Carson Energy. Carson is a Texas corporation that markets opportunities to purchase minority interests in oil- and gas-drilling ventures. Carson sent plaintiff a "project book" containing information about a particular oil well prospect. The package also included an "Application Agreement" that detailed the risk, suitability requirements, and legal terms of the venture.

The Application Agreement contained a forum selection clause that read a follows:

Applicable Law. The Agreement and the application or interpretation hereof shall exclusively be governed by and construed in accordance with the laws of the State of Texas. This Agreement shall be deemed to be performable in and venue shall be mandatory in Dallas County, Texas.
On November 1, 1995, plaintiff signed the Agreement and thereby became part owner of a Texas joint venture. Over the next eight months, he signed two more such agreements to join two other ventures involving different oil wells.

On December 19, 2002, more than seven years later, plaintiff, who lives in Berkeley, filed a pro se action in superior court in Alameda County. His complaint stated causes of action for (1) fraud and deceit; (2) misrepresentation; (3) negligence; (4) breach of contract; (5) "money had and received"; (6) section 17200 violations; (7) interference with prospective economic advantage; (8) intentional infliction of emotion distress; and (9) negligent infliction of emotional distress. The complaint alleged that defendants had cold-called him when he was unemployed, financially strapped, and struggling to take care of a mother with Alzheimer's, and persuaded him to invest in oil and gas exploration. The solicitors allegedly represented the Carson companies (Carson Energy, Inc. and Carson Energy Group) to be "good, solid, ethical companies that make a lot of money for their clients." Compl. ¶ 15. They also claimed that the investment would show a profit in two years and that 75% of all well investments turn out profitable. Compl. ¶ 16. "Plaintiff became convinced that everything touted by defendants was true," Compl. ¶ 18, and thus invested a significant portion of his IRA in the oil well. Plaintiff claims to have lost over $164,000. Compl. ¶ 20.

Defendants removed the case to federal court based on diversity of citizenship, and now ask the Court to dismiss or transfer the case to Dallas County, Texas pursuant to the forum selection clauses.

DISCUSSION

"Ordinarily, tort claims are not governed by a forum selection clause." Southern Union Co. v. Southwest Gas Corp., 165 F. Supp.2d 1010, 1028 (D. Ariz. 2001) (citing Sutter Home Winery. Inc. v. Vintage Selections. Ltd., 971 F.2d 401, 407 (9th Cir. 1992)). However, "where the relationship between the parties is contractual, the pleading of . . . non-contractual theories of liability does not prevent enforcement of a forum selection clause." Chateau des Charmes Wines Ltd. v. Sabate USA. Inc., No. 01-4203, 2002 WL 413463, at *5 (N.D. Cal. Mar. 12 2002), rev'd on other grounds, 2003 WL 2012551 (9th Cir. May 5, 2003).

Federal law governs the validity of a forum selection clause. Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996). Forum selection clauses are prima facie valid and should not be disregarded unless the party challenging a clause can show that it is "unreasonable under the circumstances." Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 591 (1991). Absent evidence that enforcement of the clause would be fundamentally unfair, that accession to the clause was obtained by fraud or overreaching, or that notice was inadequate, a forum selection clause must be given effect. Id. at 595.

When a forum selection clause contains a venue provision, "[t]he prevailing rule is . . . that where venue is specified with mandatory language the clause will be enforced." Docksider, Ltd. v. Sea Tech., Ltd., 875 F.2d 762, 764 (9th Cir. 1989). If the court determines that venue is improper based on the forum selection clause, it may either dismiss the action or, if the interests of justice so require, transfer the case to any district in which it could have been brought originally. See 28 U.S.C. § 1406(a); King v. Russell, 963 F.2d 1301, 1304 (9th Cir. 1992).

The forum selection clauses in the agreements signed by plaintiff state in unambiguous terms that "venue shall be mandatory in Dallas County, Texas." Plaintiff argues that this language does not preclude venue in this district because plaintiff's claims pertain to representations made before plaintiff entered into the written agreements and thus do not "relate" to the agreements or their application or interpretation. See Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 514 (9th Cir. 1988) (whether forum selection clause applies to tort claims "depends on whether resolution of the claims relates to interpretation of the contract").

In essence, plaintiffs position is that fraudulent inducement claims are not subject to forum selection clauses in the contracts that one is fraudulently induced to sign. Plaintiff cites no authority in support of this argument. If credited, it would lead to a curious result whereby issues of contract interpretation could be litigated only in the forum designated by the forum selection clause but claims involving statements made about the contract but prior to its signature could be litigated wherever jurisdiction is proper. This result would elevate ...


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