In In re JP Morgan Chase Bank, N.A., trust beneficiaries sued the trustee for alleged breaches of fiduciary duty in Dallas, Texas. No. 05-17-01174-CV, 2018 Tex. App. LEXIS 1883 (Tex. App.—Dallas March 14, 2018, original proceeding). The settlor executed the trust agreement in New York, and it included the following forum-selection clause: “The validity and effect of the provisions of this Agreement shall be determined by the laws of the State of New York, and the Trustee shall not be required to account in any court other than one of the courts of that state.” Id. The trustee filed a motion to dismiss the Texas suit due to the forum-selection clause, alleging that the beneficiaries had to file suit in New York. The trial court denied the motion, and the trustee filed a petition for writ of mandamus with the court of appeals.

In the court of appeals, the beneficiaries argued that the language of the forum-selection clause applied only to a claim for an accounting and did not apply to their breach-of-fiduciary-duty claim. The court of appeals disagreed, holding that the phrase “to account” was broader. After reviewing several definitions of the phrase, the court stated: “[W]e conclude ‘required to account in’ is used as a broad, unrestricted phrase and means relators may not be sued or otherwise required to explain alleged wrongdoing regarding the Trust or its administration in any state other than New York.” Id. The court also found support for its conclusion from the trust document in that “account” was used broadly in other portions of the trust. The court concluded the scope of the forum-selection clause included the beneficiaries’ claims for breach of fiduciary duty.

The beneficiaries also argued that trial court correctly denied the motion to dismiss because the mandatory venue statute in Texas Property Code Section 115.002(c) showed a strong public policy to keep the action in Texas. The court of appeals held that, although a venue-selection clause that was contrary to Section 115.002 would be unenforceable, the same was not true of a forum-selection clause. Id. (citing Liu v. Cici Enters., LP, No. 14-05-00827-CV, 2007 Tex. App. LEXIS 81, 2007 WL 43816, at *2 (Tex. App.—Houston [14th Dist.] Jan. 9, 2007, no pet.) (mem. op.) (“The distinction between a forum-selection clause and a venue-selection clause is critical. Under Texas law, forum-selection clauses are enforceable unless shown to be unreasonable, and may be enforced through a motion to dismiss. In contrast, venue selection cannot be the subject of private contract unless otherwise provided by statute.”)). Further, although the beneficiaries contended that proceeding in New York would be unreasonable and seriously inconvenient, they failed to present any evidence to support those contentions. The court held that the trial court abused its discretion in denying the motion to dismiss and granted mandamus relief.

Interesting Note: This is the first case in Texas to enforce a forum-selection clause contained in a trust document. “A forum-selection clause is a creature of contract.” Phoenix Network Techs. (Europe) Ltd. v. Neon Sys., Inc., 177 S.W.3d 605, 611 (Tex. App.—Houston [1st Dist.] 2005, no pet.). Interestingly, the court of appeals in In re JPMorgan Chase Bank, N.A., did not address an argument that the forum-selection clause should not be enforced because a trust is not a contract between the trustee and the beneficiary.

In 2013, the Texas Supreme Court enforced an arbitration clause that was contained in a trust document. Rachel v. Reitz, 403 S.W.3d 840 (Tex. 2013). The Court did so for two primary reasons: 1) the settlor determines the conditions attached to her gifts, which should be enforced on the basis of the settlor’s intent; and 2) the issue of mutual assent can be satisfied by the theory of direct-benefits estoppel, so that a beneficiary’s acceptance of the benefits of a trust constitutes the assent required to form an enforceable agreement to arbitrate. Id. The Court stated that generally Texas courts strive to enforce trusts according to the settlor’s intent, which courts should divine from the four corners of unambiguous trusts.  The Court noted that the settlor intended for all disputes to be arbitrated via the trust language. Id. The Court then looked to the Texas Arbitration Act, which provides that a “written agreement to arbitrate is valid and enforceable if the agreement is to arbitrate a controversy that: (1) exists at the time of the agreement; or (2) arises between the parties after the date of the agreement.” Id. (citing Tex. Civ. Prac. & Rem. Code 171.001(a) (emphasis added)). The Court noted that the statute uses the term “contract” in another provision, and that the Legislature intended for the terms “agreement” and “contract” to be different.  As the statute does not define the term “agreement,” the Court defined it as “a mutual assent by two or more persons.” Id. Thus, a formal contract is not required to have a binding “agreement” to arbitrate. The Court resolved the issue of mutual assent by looking to the theory of direct-benefits estoppel. Because the plaintiff had accepted the benefits of the trust for years and affirmatively sued to enforce certain provisions of the trust, the Court held that the plaintiff had accepted the benefits of the trust such that it indicated the plaintiff’s assent to the arbitration agreement. The Court ordered the trial court to grant the trustee’s motion to compel arbitration.

There is not a comparable statute that requires the enforcement of “agreements” for forum-selection. There could be an issue of whether the Rachel v. Reitz/arbitration-clause analysis should apply to forum-selection clauses. However, there is precedent in Texas that arbitration clauses are a type of forum-selection clause. St. Clair v. Brooke Franchise Corp., No. 2-06-216-CV, 2007 Tex. App. LEXIS 2805, 2007 WL 1095554, at *4 (Tex. App.—Fort Worth Apr. 12, 2007, no pet.) (mem. op.). See generally Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 534, 115 S. Ct. 2322, 2326, 132 L. Ed. 2d 462 (1995) (recognizing arbitration provisions are a subset of forum-selection clauses).

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Photo of David Fowler Johnson David Fowler Johnson

[email protected]
817.420.8223

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the The Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary…

[email protected]
817.420.8223

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the The Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary field in Texas. Read More

David’s financial institution experience includes (but is not limited to): breach of contract, foreclosure litigation, lender liability, receivership and injunction remedies upon default, non-recourse and other real estate lending, class action, RICO actions, usury, various tort causes of action, breach of fiduciary duty claims, and preference and other related claims raised by receivers.

David also has experience in estate and trust disputes including will contests, mental competency issues, undue influence, trust modification/clarification, breach of fiduciary duty and related claims, and accountings. David’s recent trial experience includes:

  • Representing a bank in federal class action suit where trust beneficiaries challenged whether the bank was the authorized trustee of over 220 trusts;
  • Representing a bank in state court regarding claims that it mismanaged oil and gas assets;
  • Representing a bank who filed suit in probate court to modify three trusts to remove a charitable beneficiary that had substantially changed operations;
  • Represented an individual executor of an estate against claims raised by a beneficiary for breach of fiduciary duty and an accounting; and
  • Represented an individual trustee against claims raised by a beneficiary for breach of fiduciary duty, mental competence of the settlor, and undue influence.

David is one of twenty attorneys in the state (of the 84,000 licensed) that has the triple Board Certification in Civil Trial Law, Civil Appellate and Personal Injury Trial Law by the Texas Board of Legal Specialization.

Additionally, David is a member of the Civil Trial Law Commission of the Texas Board of Legal Specialization. This commission writes and grades the exam for new applicants for civil trial law certification.

David maintains an active appellate practice, which includes:

  • Appeals from final judgments after pre-trial orders such as summary judgments or after jury trials;
  • Interlocutory appeals dealing with temporary injunctions, arbitration, special appearances, sealing the record, and receiverships;
  • Original proceedings such as seeking and defending against mandamus relief; and
  • Seeking emergency relief staying trial court’s orders pending appeal or mandamus.

For example, David was the lead appellate lawyer in the Texas Supreme Court in In re Weekley Homes, LP, 295 S.W.3d 309 (Tex. 2009). The Court issued a ground-breaking opinion in favor of David’s client regarding the standards that a trial court should follow in ordering the production of computers in discovery.

David previously taught Appellate Advocacy at Texas Wesleyan University School of Law located in Fort Worth. David is licensed and has practiced in the U.S. Supreme Court; the Fifth, Seventh, and Eleventh Federal Circuits; the Federal District Courts for the Northern, Eastern, and Western Districts of Texas; the Texas Supreme Court and various Texas intermediate appellate courts. David also served as an adjunct professor at Baylor University Law School, where he taught products liability and portions of health law. He has authored many legal articles and spoken at numerous legal education courses on both trial and appellate issues. His articles have been cited as authority by the Texas Supreme Court (twice) and the Texas Courts of Appeals located in Waco, Texarkana, Beaumont, Tyler and Houston (Fourteenth District), and a federal district court in Pennsylvania. David’s articles also have been cited by McDonald and Carlson in their Texas Civil Practice treatise, William v. Dorsaneo in the Texas Litigation Guide, and various authors in the Baylor Law ReviewSt. Mary’s Law JournalSouth Texas Law Review and Tennessee Law Review.

Representative Experience

  • Civil Litigation and Appellate Law