Pierce Partners v. Morton

United States Court of Appeals
for the Fifth Circuit

No. 20-20184

Pierce Partners, GP,

Plaintiff—Appellee,

versus

Marcus Morton,

Defendant—Appellant.

Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:19-CV-335

Before Haynes, Willett, and Ho, Circuit Judges.
Per Curiam:*
Pierce Partners, GP and D’Arbonne Bend, LLC (DBL) signed a
promissory note under which Pierce Partners agreed to loan DBL $1 million
to finance the theatrical release of a movie. Marcus Morton, DBL’s managing
member, signed both the note and a Continuing Personal Guaranty of DBL’s
indebtedness. Both the promissory note and guaranty had choice-of-law and

*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
United States Court of Appeals
Fifth Circuit
FILED
December 1, 2020

Lyle W. Cayce
Clerk
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No. 20-20184
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forum-selection clauses, stating, respectively, that Texas law applied to the
contracts, and disputes arising under the contracts would be adjudicated in
Texas.
The movie had disappointing box office results, and DBL defaulted on
its loan, which triggered Morton’s obligation to pay under the guaranty.
Pierce Partners demanded Morton’s performance, but Morton has yet to
make a payment. Per the guaranty’s forum-selection clause, Pierce Partners
filed this lawsuit in the Southern District of Texas. Pierce Partners moved for
summary judgment, and the district court granted the motion.
In between the filing and service of the complaint in this case, DBL
filed a declaratory-judgment suit in California state court. D’arbonne Bend
LLC v. Pierce Partners III, LLC, No. 4:20-CV-589, 2020 WL 6484642 at *1
(S.D. Tex. Nov. 4, 2020) (recounting the California case’s procedural
history). Pierce Partners removed the case to federal court, and the case was
transferred to the Southern District of Texas. Id. The district court in that
case also granted Pierce Partner’s motion for summary judgment.
We review the district court’s grant of summary judgment in this case
de novo. Willis v. Cleco Corp., 749 F.3d 314, 317 (5th Cir. 2014). “Summary
judgment should be granted when the moving party shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Id. (internal quotation marks omitted).
On appeal, Morton only contests whether the note’s interest rate is
usurious. He argues that California law, not Texas law, applies because the
note does not have a choice-of-law provision, and California has a greater
interest in this case. Morton’s arguments fail.
First, the note does contain a choice-of-law clause: “[T]he provisions
of this Note shall be governed by the laws of the State of Texas.” See also
D’arbonne Bend LLC, 2020 at *2 (“Both the loan agreement and the guaranty
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at issue here provide in multiple clauses that Texas law will govern any
disputes.”).
Morton must show then that the choice-of-law provision is
unenforceable. “To render a choice-of-law provision unenforceable, a party
must satisfy the standards in Section 187(2) of the Restatement (Second) of
Conflict of Laws, which provides that” the choice-of-law provision governs
unless:
(a) the chosen state has no substantial relationship to the
parties or the transaction and there is no other reasonable basis
for the parties’ choice, or
(b) application of the law of the chosen state would be contrary
to a fundamental policy of a state which has a materially greater
interest than the chosen state in the determination of the
particular issue and which, under the rule of § 188, would be
the state of the applicable law in the absence of an effective
choice of law by the parties.
Cardoni v. Prosperity Bank, 805 F.3d 573, 581 (5th Cir. 2015) (applying
Texas law).
Subsection (a) does not help Morton because Pierce Partners is a
Texas corporation. Thus, “[t]he parties had a reasonable basis for agreeing
that Texas law would apply given that [Piece Partners] is headquartered in
the state.” Id. As to subsection (b), Morton only argues that California’s
maximum interest rate is 10% whereas Texas’s is 28%. So according to Mor-
ton, California has a “fundamental policy” against usury. Morton also adds
that the production of the movie occurred in California, and thus California
has a “materially greater interest” in this dispute than Texas does. But these
are all legal arguments, not factual disputes.
Morton is a citizen of Louisiana, as is DBL. Pierce Partners is a citizen
of Texas. And although the movie was produced in California, the loan was
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to pay for the movie’s theatrical release, not its production. In short, there
are no relevant fact disputes, much less genuine disputes as to any material
fact.
Plus, as the district court noted, “Morton provides the Court with no
authority suggesting that it is a fundamental policy of California to apply its
usury law to a commercial loan provided by a Texas bank to a Louisiana cor-
poration and guaranteed by a Louisiana citizen.” Just because Texas’s usury
law is not as protective as California’s does not mean that “enforcing the
parties’ bargain on this issue” offends California public policy. Cardoni, 805
F.3d at 580.
Finally, Morton argues that California law would apply in the absence
of a choice-of-law provision because Morton brought a declaratory judgment
action in California state court. But after that case was removed and trans-
ferred, the district court applied Texas law in accordance with the contract’s
forum-selection clause. D’arbonne Bend LLC, 2020 WL at *2 (explaining that
while typically the law of the transferor court applies, an exception arises
when the transfer is made to enforce a forum-selection clause).
For the reasons stated, we AFFIRM.
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