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United States District Court, Northern District of California

May 15, 2003


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


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.


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.


"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 form over substance and breed confusion and redundancy whenever a case involves claims for both breach of contract and fraudulent inducement.

Moreover, the agreements that plaintiff signed contained integration clauses stating that the agreements "supercede[d] all oral agreements and representations." The point of such clauses is to preclude a party from using a counterparty's oral representations to contradict the written terms of a contract. See, e.g., One-O-One Enters., Inc. v. Caruso, 848 F.2d 1283, 1287 (D.C. Cir. 1988) (Ginsburg, J.) ("Were we to permit plaintiffs' use of the defendants' prior representations . . . to defeat the clear words and purpose of the Final Agreement's integration clause, contracts would not be worth the paper on which they are written.") (citation and internal quotation marks omitted). While integration clauses are not binding in cases of fraudulent inducement, this exception "must not be stretched or inflated in a way that `would severely undermine the policy of the parol evidence rule.'" Id. (quoting Call Carl, Inc. v. BP Oil Corp., 554 F.2d 623, 630 (4th Cir. 1977)). Accordingly, when a case involves "a party with the capacity and opportunity to read a written contract, who has executed it, not under any emergency, and whose signature was not obtained by trick or artifice, such a party . . . cannot later claim fraud in the inducement." Id. (citations and alterations omitted).

The Court thus rejects plaintiffs argument that his claims are not subject to the forum selection clauses in the agreements that he signed. It follows that venue must be restricted to Dallas County unless plaintiff has shown that enforcement of the clauses would be fundamentally unfair, that accession to the clauses was obtained by fraud or overreaching, or that notice was inadequate. Carnival Cruise Lines, 499 U.S. at 595.

There is nothing unfair about requiring plaintiff to litigate his claims in the venue specified in the contract. Though plaintiff claims he does not have the financial wherewithal to bring suit in a foreign jurisdiction, see Friberg Decl. ¶ 11, plaintiff has retained counsel who is presumably just as able to litigate in Texas as in this forum. There is no indication that defendants have sought to limit venue to Dallas County in a conscious effort to discourage plaintiff from pursuing legitimate claims. See id.

Plaintiff had adequate notice of the clause. The clause was included in three different agreements that plaintiff was sent for his review and then signed over the course of eight months. By signing each agreement, plaintiff represented that he was making his application for a specified number of joint venture units "in accordance with the terms and conditions herein above set forth," which conditions included the forum-selection clause. See Denefe Decl. Exs. A, B; accord Batchelder v. Kawamoto, 147 F.3d 915, 919 (9th Cir. 1998) (forum-selection clause binding even though signatory did not explicitly consent to that clause).

Finally, plaintiff has not alleged that the inclusion of the forum selection clause in the contracts was itself "the product of fraud or coercion." Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 n. 14 (1974)). Plaintiff has alleged only that he was "duped into signing the contract[s]," not that his assent to the forum selection clauses was itself improperly obtained. Richards v. Lloyd's of London, 135 F.3d 1289, 1297 (9th Cir. 1998) (citing Scherk, 417 U.S. at 519 n. 14). This is insufficient to overcome the presumption of validity that must be afforded to forum selection clauses. Id.

Because plaintiff voluntarily signed written contracts that superceded prior oral representations, and those contracts contained forum selection clauses about which plaintiff had notice and which are not alleged to have themselves been the product of fraud, the forum selection clauses are binding and venue properly lies in Dallas County, Texas.


Since plaintiff agreed that venue over any claims he might bring concerning his investments would lie in Dallas County, Texas, defendants' Rule 12(b)(3) motion is hereby GRANTED and it is ORDERED that the case be transferred to the Northern District of Texas pursuant to 28 U.S.C. § 1406(a).*fn1


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