The Fifth Court affirmed a $3 million fraud judgment, rendered after a bench trial, reaching these conclusions:

• This choice-of-law provision did not encompass a fraud claim that did not involve construction of the referenced LLC agreeement: “This LLC Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Delaware, without regard to any principles of conflicts of law that would result in the application of the laws of any other jurisdiction.” 
• For similar reasons, Texas tort law applied in a Restatement-based choice-of-law analysis.
• Sufficient evidence supported fraud liability when “BKSI disclosed certain facts to ECOM regarding the Promenade Project’s status and operating condition, creating the false impression that it intended to continue operating the project as a long-term investment, and thus obligated BKSI to disclose the ‘whole truth’ concerning the project, specifically the approaching sale of the project to Madera.”

BK Series Investors, LLC v. ECOM Series Investors, LLC, No. 05-22-00115-CV (Apr. 7, 2023) (mem. op.).

In a case that 600 Commerce believes is the first successful attempt at a permissive interlocutory appeal since the inception of the blog, the Court of Appeals has affirmed the trial court’s application of Texas law to a personal guaranty. (Check out https://600commerce.com/?s=permissive&submit=Search to see instances where the Court declined to hear interlocutory appeals)

Coca-cola had extended credit to Robert Winspear’s business pursuant to a credit agreement and a personal guaranty from Winspear.  The credit agreement contained a choice of law provision in favor of Georgia law.  The guaranty was included on the same page as the credit agreement, but it did not contain a choice of law provision.  After Winspear’s business defaulted, Coca-Cola sued Winspear in Texas (where he and his business were located and where the agreements were executed) on the guaranty.  Winspear filed a motion seeking to apply Georgia law based on the choice of law provision in the credit agreement, but the trial court denied his motion and held that Texas law applied.

Winspear sought a permissive interlocutory appeal based on his contention that if Georgia law applied to the guaranty, it would be unenforceable and thus dispose of the entire case.  Although the Court agreed to hear the interlocutory appeal, it ultimately affirmed the trial court’s decision because the choice of law provision in the credit agreement did not apply to the separate guaranty.

Winspear v. Coca Cola, No. 05-13-00712-CV

Although the non-competition agreement at issue in this case contained a choice-of-law provision designating that Texas law would apply, the trial court applied California law to determine the plaintiff’s claims.  The Court of Appeal, however, reversed the trial court’s decision on this point, because Texas did, in fact, have a “substantial relationship to the parties or the transaction” at issue.  Specifically, although the defendant, a former executive of plaintiff (a Texas company) moved to California after being hired, the evidence established that he (1) had an office in Texas at which he often worked; (2) negotiated the contract, at least in part, in Texas; and (3) performed the contract (in part) in Texas.

Ennis, Inc. v. Dunbrooke Apparel Corp.

A franchise agreement between Applebee’s and Gator Apple (a Florida franchisee) prohibits the franchisee from soliciting or hiring anybody from another franchisee who was employed by that other franchisee within the previous six months, states that other franchisees are third party beneficiaries of the franchise agreement, and provides for liquidated damages equal to three times the employee’s annual salary. A Texas franchisee, Apple Texas, sued Gator Apple under that provision after Gator Apple hired five of Apple Texas’ current or former employees and executives. The trial court granted summary judgment for Apple Texas, awarding it liquidated damages in excess of $1.2 million. The Court of Appeals affirmed. After determining that the franchise agreement was governed by Kansas law due to its choice of law provision, the Court upheld the award of liquidated damages under Kansas law. The Court also rejected Gator Apple’s argument that a fact issue existed on its affirmative defense of waiver, as none of the waivers it relied on authorized Gator Apple (as opposed to other franchisees or Applebee’s corporate) to solicit Apple Texas’ employees.

Gator Apple, LLC v. Apple Texas Restaurants, Inc., No. 05-12-01369-CV