Texas Capital Bank, after being granted an extension to respond to the federal government’s request to change the venue of the trial between the bank and Ginnie Mae, has filed an objection to the request saying that a “forum selection clause” cited by government attorneys is not enforceable.
“Having lost its attempt to dismiss [TCB]’s claims, the government asks this court to transfer this case to another courthouse,” attorneys for TCB said in a court filing obtained by HousingWire’s Reverse Mortgage Daily (RMD). “The government’s motion which is based solely on a forum selection clause in the pre-bankruptcy Tail Agreement, fails for at least three independent reasons.”
The first reason is that the cited forum selection clause by the government is a portion of an executed agreement between the bank and Reverse Mortgage Funding (RMF), the bankrupt reverse mortgage lender at the center of the situation. Since the government was not a party to that agreement, its terms — and by extension, the forum selection clause — are not enforceable by the government itself.
“Courts universally hold that a non-signatory may not enforce a forum selection clause where the contract expressly precludes third parties from benefiting from or enforcing the contract,” the filing reads.
Secondly, even if the government were somehow party to that agreement, the government has not sufficiently demonstrated that the circumstances of the case are rare and novel enough to actually allow it to try and enforce the agreement on its terms.
Finally, while the forum selection clause is part of the tail agreement, the case itself is not about the agreement specifically, TCB attorneys said. Instead, it is “about the government exceeding its statutory authority and interfering with Plaintiff’s property rights,” the filing explained. “The government’s motion should therefore be denied.”
The contract, TCB goes on to say, bars third parties from enforcing the forum selection clause the government is attempting to exploit.
“But despite spending pages discussing the […] agreement, the government omits the key provision that precludes the government from benefiting from or enforcing the forum selection clause,” TCB attorneys said.
That provision is that “[n]o term or provision of th[e] agreement shall inure to the benefit of any [other] Person,” and that “no [other] Person … shall be entitled to rely upon, or to raise as a defense, in any manner whatsoever, the failure of … Bank to perform, observe, or comply with any such term or provision,” TCB’s attorneys said, citing the language of the agreement itself.
The bank also contends that precedent from prior court cases is on its side, as well as contending that the government “had no apparent awareness” of the forum selection clause prior to making its request.
In its original move to have the venue changed, the government contended that by executing a tail agreement with RMF, the bank agreed “that Dallas County, Texas, where TCB is headquartered, would be the exclusive venue for ‘any litigation involving [the tail agreement] or any loan document,’” according to the original filing requesting the move.
The case, however, was brought in a court based in Amarillo.
“TCB’s lawsuit ‘involve[s]’ both the tail agreement and loan documents […]. TCB was thus obligated to file this suit in Dallas County. TCB disregarded this obligation and chose to file in Amarillo, which has no connection to the litigation,” government attorneys said last month.
As of Tuesday evening, a decision from the presiding magistrate judge has not been filed on the court docket. In front of the magistrate judge is another pending request from the bank seeking a partial summary judgment in favor of TCB, which has a new deadline of Aug. 1.
In a February court filing responding to the government’s initial motion to dismiss, TCB said it recognized that Ginnie Mae was within its rights to “extinguish RMF’s mortgage servicing rights.” But TCB also claims that Ginnie Mae did not specify the impact this would have on the liens that the bank had a vested interest in, its attorneys said.
“But months later, Ginnie Mae took the radical step of announcing that its extinguishment of RMF’s servicing rights had also purportedly extinguished TCB’s lien — a striking collateral grab unsupported by the statute and contrary to Ginnie Mae’s prior dealings with TCB, basic fairness, and common sense,” the February filing reads.
