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Our appellate attorney, Niles Illich, recently obtained another win! In the current appeal, the appellant claimed that the trial court erred in granting our clients’ motion to dismiss the case against them. The appellant argued that the contract they entered into with our client was induced by fraud, and, because of that, the forum selection clause should not be honored. The Court of Appeals Fifth District of Texas at Dallas affirmed the trial court’s decision.
Events Leading Up to the Appeal
In February of 2019, the appellant entered into a contract with our clients. They agreed to purchase 5% of our clients’ company, Rewards Blockchain Holdings, for $200,000. One of the provisions contained a forum selection clause that said any disputes arising from the contract would be settled by a tribunal in Bermuda. Blockchain, which holds interests in cryptocurrencies, was incorporated under Bermuda law and held its registered office there.
The appellant also signed a second agreement stating that they would receive 2,000,000 cryptocurrency tokens, which could later be sold for $200,000. Essentially, this guaranteed that the appellant would receive their investment back within 100 days. Our client, however, did not sign the second agreement and said that it would not honor the guarantee.
Because our client would not sign the second contract, the appellant took the case to Texas court. They stated that Blockchain was a fictitious company and the agreements they entered into were void. During the trial, the appellant produced a letter dated October of 2019 from the Ministry of Finance, Registrar of Companies in Bermuda, stating that Blockchain did not appear on its registries.
Our clients filed a motion to dismiss the case, asserting that, per the contract, the dispute must be handled in Bermuda. The trial court granted the motion, prompting the appellant to file an appeal.
Issues on Appeal
On appeal, the appellant argued that the trial court erred in dismissing the case. Again, they asserted that the contracts were not valid because Blockchain did not exist, and even if the contracts were valid, they should not be honored because they were entered into based on deception.
The appellate court noted that the initial contract provided that Blockchain operated under the laws of Bermuda, giving evidence that the company did exist at the time of signing. Additionally, although the appellant provided a letter from the Ministry of Finance, Registrar of Companies, it did not state whether Blockchain had to register nor whether Blockchain was registered in February of 2019 (when the contracts were signed).
Concerning the matter of the contracts being induced by fraud, the appellate court recognized the appellants’ claim that they would not have agreed to the terms to have dispute resolution settled by a Bermuda tribunal had they “known that [the] representations were false.” The appellant was referring to the provision stating that Bermuda was the most fitting place to resolve issues because of its cryptocurrency laws. The appellate court pointed out that the appellant did not provide any evidence of Bermuda’s cryptocurrency laws nor any reason why the case should not be handled there.
The appellate court agreed with the trial court and upheld the decision to dismiss the case against our clients. Per contractual agreements, the matter must be resolved by a panel of arbitrators in Bermuda.
Niles is dedicated to seeking the best possible result in even the most complex appeals. For top-notch legal representation in Dallas, call Scott H. Palmer, P.C. at 469-966-7614 or submit an online contact form today!