The Texas Supreme Court recently held that no Texas precedent allows a Texas court to ignore a forum selection clause in an employment agreement.
Autonation owns automobile dealerships across the country, including Houston , Texas , and its corporate headquarters and principal place of business is in Florida . In re Autonation, Inc., 2007 WL 1861341, *1 (TX 2007) (orig. proceeding). Garrick Hatfield worked as a general manager for one of Autonation’s dealerships in Houston . In 2003, Mr. Hatfield signed a non-competition agreement that contained a Florida choice-of-law provision and forum-selection clause. Two years later, Hatfield went to work for a competitor. Autonation sought to enforce the non-competition agreement in Florida . But before learning of the first-filed Florida action, Hatfield filed a declaratory judgment action in Harris County, Texas, asking the court there to rule that Texas law governed the non-competition agreement and that the agreement was unenforceable. After learning of the Florida action, Hatfield also sought an anti-suit temporary restraining order and temporary injunction to enjoin further proceedings in the Florida action. Hatfield argued that Autonation was attempting to circumvent Texas law by pursuing the Florida action and that Florida would likely refuse to apply Texas law. (Note: The agreement also had a Florida choice of law provision in it.)
The trial court issued the anti-suit injunction, and the Houston Court of Appeals denied the petition for writ of mandamus by holding that the trial judge did not abuse his discretion by issuing the anti-suit injunction because "fundamental Texas public policy requires the application of Texas law to the question of enforceability of a non-compete agreement." Id. (citing DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 679-81 ( Tex. 1990)).
The Supreme Court of Texas acknowledged this prior precedent in DeSantis , but rejected the application of DeSantis on the grounds that a forum-selection clause is not the same as a choice-of-law clause.
The Court held that "even if DeSantis requires Texas courts to apply Texas law to certain employment disputes, it does not require suit to be brought in Texas when a forum-selection clause mandates venue elsewhere." Autonation, 2007 WL at *4. The Court also stated that "[n]o Texas precedent compels us to enjoin a party from asking a Florida court to honor the parties’ express agreement to litigate a non-compete agreement in Florida , the employer’s headquarters and principal place of business." Id . According to the Court, this holding (1) gives deference to the first-filed Florida action; (2) honors the parties’ contractual commitment; and (3) also honors principles of interstate comity. Id.