No Waiver of Forum Selection Clause Despite Filing Declaratory Judgment Action in Non-Selected Forum **WEB ONLY**

by McDermott Will & Emery
Contact

McDermott Will & Emery

Addressing waiver of a contractual forum selection clause, the US Court of Appeals for the Fifth Circuit affirmed a lower court’s enforcement of the clause and subsequent dismissal of a trade secrets case, finding that the filing of a declaratory judgment action in a non-selected forum did not waive the party’s right to enforce the forum-selection clause. Wellogix, Inc. v. SAP America, Inc. et al., Case No. 15-20184 (5th Cir., May 12, 2016) (per curium) (non-precedential).

Wellogix and SAP entered into a license agreement to integrate the two companies’ purchase-to-pay software functionalities for the oil and gas industry. The agreement governed the confidentiality of Wellogix’s trade secrets and included a forum selection clause, which specified Germany as “[t]he place of jurisdiction for all disputes arising between the parties out of or in connection with [the agreement].”

According to Wellogix, shortly after entering into the agreement, SAP misappropriated Wellogix’s confidential technology and used it to perform work under agreements with SAP’s other business partners and customers. Wellogix consequently filed a trade secrets theft claim against SAP in Texas state court, which was removed to the US District Court for the Southern District of Texas. The district court dismissed Wellogix’s trade secret claims for forum non conveniens, holding that the forum selection clause of the license agreement was mandatory and enforceable, and all of Wellogix’s claims against SAP were properly decided in Germany.

Several years later, SAP filed a complaint for declaratory relief against Wellogix in the same district, seeking a declaration of non-infringement and invalidity of five of Wellogix’s patents. Wellogix responded with counterclaims for patent infringement and, again, trade secrets theft. SAP moved for summary judgment to dismiss Wellogix’s trade secrets claims based on the forum selection clause. The Southern District of Texas again enforced the clause and granted dismissal for forum non conveniens.

Unsatisfied with this ruling, Wellogix filed a post-judgment motion arguing, for the first time, that diversity jurisdiction did not exist. The district court concluded that Wellogix had litigated “without breathing any jurisdictional doubts” and thus it retained supplemental jurisdiction to affirm the dismissal. Wellogix appealed to the Fifth Circuit, arguing that the district court lacked supplemental jurisdiction and, alternatively, that SAP waived its right under the forum selection clause by filing the declaratory relief action.

The Fifth Circuit found neither of Wellogix’s arguments persuasive. First, a federal court may dismiss a case for forum non conveniens without having to resolve any threshold jurisdictional issues where a foreign tribunal is “plainly the more suitable arbiter of the merits of the case.” The district court thus did not abuse its discretion by enforcing the forum selection clause. Second, under both federal and Texas state law, SAP’s declaratory relief action did not waive the clause either intentionally or by litigating contrary to the clause to prejudice Wellogix. SAP had consistently asserted and successfully enforced the clause in prior litigation with Wellogix. Further, while a party may waive its rights if it substantially invokes the judicial process in aspersion of a forum selection clause, causing detriment or prejudice to the other party, such facts were not before the Fifth Circuit. Indeed, SAP’s declaratory relief action was necessitated by Wellogix’s threat of infringement litigation in the Southern District of Texas. Moreover, Wellogix did not provide argument that any of SAP’s subjective or objective conduct satisfied the waiver standard, and neither did it allege any prejudice.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McDermott Will & Emery | Attorney Advertising

Written by:

McDermott Will & Emery
Contact
more
less

McDermott Will & Emery on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.