Finley Res., Inc. v. Ep Energy E&P Co.
Finley Res., Inc. v. Ep Energy E&P Co.
Opinion of the Court
*841[¶1] Finley Resources, Inc. (Finley) appeals the district court's dismissal of its Complaint against EP Energy E&P Company (EP Energy). The district court determined the forum-selection clause contained in the contract between the parties required Finley to file its suit in Texas. Finley contends the district court erred because its claims for quiet title, declaratory judgment, and adverse possession were not subject to the forum-selection clause. We affirm.
ISSUE
[¶2] Did the district court err when it decided the forum-selection clause required Finley's lawsuit to be brought in Texas?
FACTS
[¶3] On December 28, 2007, Finley and EP Energy entered into a Purchase and Sale Agreement (Agreement) for the sale of oil and gas leases located in Converse and Niobrara Counties, Wyoming. Finley's principal place of business is in Fort Worth, Texas, and EP Energy's principal place of business is in Houston, Texas. Both entities conduct oil and gas activities in Wyoming. According to the First Amended Complaint, the Agreement required EP Energy to assign all of its interests under various leases to Finley, without limit to the depths and formations. EP Energy, however, failed to do so despite Finley's "repeated requests and demands." The dispute crystalized on September 13, 2017, when EP Energy sent an e-mail to Finley stating EP Energy retained the deep rights in certain lands described in the leases assigned to Finley.
[¶4] Finley filed this lawsuit against EP Energy in the Wyoming District Court for the Eighth Judicial District. The First Amended Complaint set forth five claims for relief: (1) quiet title; (2) declaratory judgment; (3) breach of contract; (4) breach of the implied covenant of good faith and fair dealing; and (5) adverse possession. EP Energy filed a motion to dismiss seeking to enforce the choice-of-law and forum-selection clauses contained in the Agreement.
[¶5] Section 13.10 of the Agreement provides:
Governing Law; Jurisdiction; Waiver of Trial by Jury.
(a) This Agreement is governed by the Laws of the State of Texas, excluding any choice of law rules that may direct the application of the Laws of another jurisdiction.
(b) The Parties agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transaction contemplated hereby shall be brought in the United States District Court for the Southern District of Texas or any Texas state court sitting in Houston, so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Texas, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding ... has been brought in an inconvenient forum.
(First emphasis in original; later emphases added.)
[¶6] In its Motion to Dismiss, EP Energy argued Finley's entire First Amended Complaint fell within the constraints of the forum-selection clause and must be dismissed. The district court applied Texas law and concluded, because the non-contract claims "certainly implicate the terms of the contract," the claims fell within the scope of the *842forum-selection clause. The district court granted EP Energy's Motion to Dismiss.
STANDARD OF REVIEW
[¶7] We review the district court's construction and interpretation of the forum-selection clause de novo. Larson v. Burton Constr., Inc. ,
DISCUSSION
[¶8] Finley asserts the district court abused its discretion when it dismissed Finley's lawsuit because: (1) the declaratory judgment,
Applicable Law
[¶9] The parties agree Texas law applies. The Agreement provides: "This Agreement is governed by the Laws of the State of Texas, excluding any choice of law rules that may direct the application of the Laws of another jurisdiction." (Emphasis omitted.) Wyoming courts will enforce choice-of-law provisions and apply foreign law when doing so is not "contrary to the law, public policy, or the general interests of Wyoming's citizens." See Res. Tech. Corp. v. Fisher Sci. Co. ,
Equitable Claims and the Agreement
[¶10] The parties agree Finley's contractual claims fall within the forum-selection clause. However, Finley argues the forum-selection clause excludes its equitable causes of action because they arise independent of the Agreement. Instead, Finley contends its equitable claims arise from Finley's open, notorious, exclusive, and continuous: (1) exercise of ownership over lands covered by the Lease and lands not included in the assignment; (2) operation of all oil and gas wells located on lands covered by the Lease as well as those located on lands not included in the assignment; and (3) receipt of all proceeds generated from these wells. According to Finley, EP Energy's 2017 e-mail claiming ownership of the deep rights in the Kaye Teapot Sandstone Unit located on lands covered by the leases-an e-mail received nearly ten years after the Agreement was signed-was the impetus for this action.
[¶11] Under Texas law, a "forum-selection clause should be denied force only if the facts alleged in support of the claim stand alone, are completely independent of the contract, and the claim could be maintained without reference to the contract." Pinto Tech. Ventures, L.P. v. Sheldon ,
[¶12] Here, the forum-selection clause applies to "any suit ... based on any matter arising out of or in connection with, this Agreement or the transaction contemplated ." (Emphasis added.) Finley claims this language should be read narrowly because the Agreement's later requirement of subject matter jurisdiction evidences the parties' intent to restrict application of the clause. We disagree.
[¶13] In Pinto , the court examined a forum-selection clause that applied to "any dispute arising out of" the contract. Pinto ,
[¶14] In Pinto , the Texas Supreme Court employed a "but-for test," concluding "that a party's 'claims arise out of the Agreement' when 'but for the Agreement, [the party] would have no basis to complain.' " Pinto ,
Although the Fifth Circuit has not articulated a specific test for determining when claims fall within the scope of a forum selection clause, district courts within [that] circuit usually look to three rules: (1) whether the tort claims 'ultimately depend on the existence of a contractual relationship between the parties'; (2) whether 'resolution of the claims relates to interpretation of the contract'; and (3) whether the claims 'involv[e] the same operative facts as a parallel claim for breach of contract.'
Morgan-Rinehart ,
[¶15] Application of the Texas state and federal court analytical framework requires us to conclude that all Finley's claims are within the scope of the forum-selection clause. Finley's claims for declaratory judgment and quiet title are based on its ownership pursuant to the Agreement or adverse possession. Finley argues its adverse possession claim is completely independent of the Agreement but concedes, "In fact, the adverse possession cause of action would be completely unnecessary if the [Agreement] PSA were given effect...." In other words, Finley contends EP Energy conveyed to Finley the deep rights in certain lands contained in the leases, and if it did not, Finley owns those rights by adverse possession.
*844[¶16] Adverse possession requires a claim of ownership under color of title or claim of right. Galiher , ¶ 7, 432 P.3d at 507. Color of title is defined as "an instrument which has a semblance or appearance of title but is not title in fact or law." Doenz v. Garber ,
Effect of Subject Matter Jurisdiction Requirement
[¶17] Finley argues the district court failed to account for the forum-selection *845clause's requirement that Texas courts have subject matter jurisdiction over the suit, action or proceeding. It is undisputed Texas courts have no subject matter jurisdiction to "adjudicate title to realty, including interests in oil and gas leases, in another state or country." Devon Energy Prod. Co., L.P. v. KCS Res., LLC ,
[¶18] "Absent ambiguity, contracts are construed as a matter of law" with the "primary objective ... to ascertain the parties' ... intentions as expressed in the language they chose." Plains Expl. & Prod. Co. v. Torch Energy Advisors Inc. ,
[¶19] In construing a contract, Texas courts have said, "we strive to 'give effect to all the provisions of the contract so that none will be rendered meaningless.' " El Paso Field Servs. L.P. v. MasTec N. Am., Inc. ,
[¶20] Texas courts have "definitely declared that an oil and gas lease is the same as a sale of real estate." Avis v. First Nat'l Bank of Wichita Falls ,
[¶21] Finley contends it would be unjust to deprive it of a hearing on its adverse possession claim. The Texas court considered a similar argument in In re Lyon Fin. Servs., Inc. ,
[¶22] The Texas Supreme Court has explained:
Forum-selection clauses provide parties with an opportunity to contractually preselect the jurisdiction for dispute resolution. In Texas, forum-selection clauses are generally enforceable and should be given full effect. Failing to give effect to contractual forum-selection clauses and forcing a party to litigate in a forum other than the contractually chosen one amounts to clear harassment ... injecting inefficiency by enabling forum-shopping, wasting judicial resources, delaying adjudication on the merits, and skewing settlement dynamics.
Pinto ,
[¶23] Our analysis is not governed by the label placed upon the cause of action. All Finley's claims must be resolved through an interpretation of the Agreement. Texas law does not prevent enforcement of the forum-selection clause even though the adverse possession claim is unavailable to Finley in Texas. Finley's claims necessarily will be resolved by the Texas court's determination of its contractual rights.
Wyoming's Public Policy and Enforcement of the Forum-Selection Clause
[¶24] Finley also contends, "Wyoming has a strong public policy in determining title to real property located within its boundaries" and therefore the forum-selection clause should not be enforced in this case. While a forum-selection clause is presumed valid and enforceable, there are exceptions. A party attempting to show that such a clause should not be enforced bears a heavy burden. In re Laibe Corp. ,
The right of private contract is no small part of the liberty of the citizen, and that the usual and most important function of courts of justice is rather to maintain and enforce contracts, than to enable parties thereto to escape from their obligation on the pretext of public policy, unless it clearly appear that they contravene public right or the public welfare.
Nuhome Invs., LLC v. Weller ,
*847We find no reason to look further in this case where the claim to title arises from the Agreement.
CONCLUSION
[¶25] "[Though] 'the party who brings a suit is master to decide what law he will rely on,' whether a forum-selection clause applies depends on the factual allegations undergirding the party's claims rather than the legal causes of action asserted." Pinto ,
[¶26] Affirmed.
An action for declaratory judgment allows certain persons with a qualified claim regarding a written instrument to seek a declaration of rights under that instrument.
A person in possession of real property may bring a quiet title action "against any person who claims an estate or interest therein adverse to him" to determine "the adverse estate or interest."
"To prevail on an adverse possession claim, the claimant must show 'actual, open, notorious, exclusive and continuous possession of the disputed parcel which is hostile and under claim of right or color of title.' " Galiher v. Johnson ,
Finley's claim for adverse possession alleges:
VIII. FIFTH CLAIM FOR RELIEF - ADVERSE POSSESSION
...
56. Since the date of Assignment Nos. 1 & 2 on February 28, 2008, Plaintiff has openly, notoriously, exclusively and continuously exercised ownership and control over all of the lands covered by the Subject Leases including Subject Lease No. 5 as well as those lands identified in Paragraphs 14, 15 & 16 above.
57. Since the date of Assignment Nos. 1 & 2 on February 28, 2008, Plaintiff has openly, notoriously, exclusively and continuously operated all of the oil and gas wells located on lands covered by the Subject Leases including Subject Lease No. 5 as well as those lands identified in Paragraphs 14, 15 & 16 above.
58. Since the date of Assignment Nos. 1 & 2 on February 28, 2008, Plaintiff has openly, notoriously, exclusively and continuously received all proceeds generated by operation of all oil and gas wells located on lands covered by the Subject Leases including Subject Lease No. 5 as well as those lands identified in Paragraphs 14, 15 & 16 above.
59. Plaintiff has acquired through adverse possession all right, title and interest to the Subject Leases, including Subject Lease No. 5 as well as those lands identified in Paragraphs 14, 15 & 16 above, covering all depths and formations from the surface to the core of the earth.
Paragraphs 14-16, referred to in this claim, state:
14. Defendant failed to assign to Plaintiff in Assignment No. 1 the following lands:
Subject Lease No. 1 - 0001033145/000 - Converse & Niobrara County, Wyoming
T36N, R67W - Section 5: Lots 1, 2; S2NE
T36N, R67W - Section 3: S2NE, N2SE
Subject Lease No. 2 - 0001031335/000 - Niobrara County, Wyoming
T36N, R67W - Section 6: Lots 1, 2, S/2NE & SE
T36N, R67W - Section 8: E2NE, NWNE
T36N, R67W - Section 9: NWNE, NW
Subject Lease No. 3 - 0001031351/002 - Niobrara County, Wyoming
T36N, R67W - Section 3: NESW
T36N, R67W - Section 9: SWNE, E/2SW, NWSE
Subject Lease No. 4 - 0001031351/003 - Niobrara County, Wyoming
T36N, R67W - Section 3: NESW
T36N, R67W - Section 9: SENW, E/2SW, NWSE
Subject Lease No. 7 - 0001031337/000 - Niobrara County, Wyoming
T36N, R67W - Section 27: NW
15. Defendant failed to assign to Plaintiff in Assignment No. 2 the following lands:
Subject Lease No. 6 - 0001031342/000 - Converse County, Wyoming
T36N, R67W - Section 21: SWSE, E/2SE, SENE
Subject Lease No. 8 - 0001031331/000 - Converse County, Wyoming
T36N, R67W - Section 31: Lots 1, 3, 4, E/2SW, S/2NE, SE
T36N, R67W - Section 32: SWNW
16. Defendant failed to assign to Plaintiff Subject Lease No. 5 which includes the following lands:
Subject Lease No 5 - 0001031351/001 - Converse & Niobrara County, Wyoming
T36N, R67W - Section 3: Lot 2, 3, SENW, NESW, SWSW, NESW
T36N, R67W - Section 9: SENW, E/2SW, NWSE, E/2NE, SWSE and E/2SE
T36N, R67W - Section 10: NWNW
EP Energy devotes a large portion of its brief arguing the adverse possession claim is factually and legally impossible. In Roush v. Roush , we considered a dispute between the owner of surface land claiming a partial interest in a mineral estate by virtue of adverse possession. Roush v. Roush ,
Reference
- Full Case Name
- FINLEY RESOURCES, INC., a Texas corporation, (Plaintiff) v. EP ENERGY E&P COMPANY, L.P., d/b/a EL Paso E&P Company, L.P., a Delaware limited partnership, (Defendant).
- Cited By
- 15 cases
- Status
- Published