Forum selection clauses are generally enforceable in Kansas.
Enforceability of a forum selection clause hinges on the
following: (1) the existence of a reasonable relationship
between the selected forum and the complained about
transaction; (2) the existence of language in the clause
mandating that all suits be brought in a certain forum; and
(3) the nonexistence of fraud or duress.
Whether a forum selection clause is enforceable is a question
entirely distinct from whether a court has jurisdiction.
Parties' agreements about where to file suit do not
divest a court of personal or subject matter jurisdiction.
Instead, when an enforceable forum selection clause exists, a
court must consider whether it should exercise its
jurisdiction given the existence of the parties'
Because venue involves the proper or possible places lawsuits
may proceed, a party's complaint about a forum selection
clause violation involves a venue challenge. Venue challenges
must be timely raised in a responsive pleading or motion. See
K.S.A. 2016 Supp. 60-212(b)(3).
forum selection clause that includes conditional provisions
allowing a party to bring suit in an alternative forum is a
permissive forum selection clause as opposed to a mandatory
forum selection clause.
Under the facts of this case, Zavala's argument that
AkesoGenX Corp. violated its forum selection clause by filing
suit in Kansas, which it raised for the first time in a
motion to alter or amend under K.S.A. 2016 Supp. 60-259(f),
party asserting error must designate a record establishing
prejudicial error. Without such a record, a party's
argument will fail. An appellant's failure to include the
transcript from the hearing on the motion from which he or
she appeals stifles this court's ability to review for
from Johnson District Court; Kevin P. Moriarty, judge.
J. Bjerg, of Colantuono Bjerg Guinn, LLC, of Overland Park,
Christopher K. Snow and J. Michael Grier, of Warden Grier
LLP, of Kansas City, Missouri, and Michael P. Whalen, of
Wichita, for appellee.
Arnold-Burger, C.J., Pierron and Green, JJ.
Corp. (AKG) sued Robert Zavala, its former Chief Executive
Officer (CEO), in the Johnson County District Court for
breach of fiduciary duty and conversion. Eventually, the
district court entered default judgment against Zavala in
favor of AKG. It also ordered that Zavala pay AKG damages in
the amount of $500, 400.35. Over a month later, Zavala moved
to set aside the default judgment, arguing that AKG had
failed to properly obtain residential service of process on
him, that the district court had violated a procedural rule
regarding default judgment, and alternatively, that his lack
of prior involvement in the case had resulted from excusable
neglect. The district court rejected these arguments, but
Zavala moved the district court to reconsider. In his motion
to reconsider, Zavala raised a new argument. He asserted that
the district court lacked subject matter jurisdiction to
enter the default judgment against him because AKG had an
exclusive forum selection clause within its certificate of
incorporation which required AKG to sue him in the state of
Delaware. The district court rejected this argument as well.
Zavala now appeals the district court rulings, arguing that
each was in error.
reasons set forth below, we reject Zavala's arguments.
Accordingly, we affirm.
a Delaware corporation involved in cancer research, which
"use[d] radio waves to heat up and kill cancer cells
while preserving the normal tissue, . . . reducing the side
effects associated with traditional chemical therapy regimens
or invasive surgery." Although AKG was a Delaware
corporation, its principal place of business was in Leawood,
Kansas, a city within Johnson County, Kansas. During its
first two years of business, AKG received nearly $2 million
in capital investment for its cancer research.
after it was incorporated in 2013, Mary Kunkle began acting
as AKG's Secretary and Treasurer. Through her role as
AKG's Treasurer, Kunkle had access to AKG's finances.
Kunkle was in a romantic relationship with AKG's CEO,
Zavala. Through his role as CEO, Zavala also had access to
AKG's finances. The AKG Board of Directors (Board)
terminated both Kunkle and Zavala during their special Board
meeting on May 16, 2014.
March 2, 2015, AKG sued Kunkle in the Johnson County District
Court alleging breach of fiduciary duty and conversion of
corporate assets. AKG explained that for nearly a year, it
had asked Kunkle to explain why money was missing from its
accounts. AKG explained that Kunkle had failed to respond to
its requests. AKG alleged that through its independent review
of Kunkle's accounting from its "QuickBooks"
and available banking records, Kunkle had converted $174,
905.59. AKG alleged that Kunkle had converted company money
from AKG the entire time she worked for it.
August 19, 2015, AKG filed its first amended petition with
the Johnson County District Court. In this amended petition,
AKG reiterated its claims of breach of fiduciary duty and
conversion of corporate assets. It, however, added Zavala as
a party defendant. AKG asserted that in addition to the $174,
905.59 it believed Kunkle had converted, it believed Zavala
had converted about $195, 341. AKG explained that its Board
had asked Zavala to turn over certain financial
documents-financial statements and tax related documents-in
early 2014, but Zavala had refused the Board's requests.
This resulted in the Board's termination of Zavala as
AKG's CEO on May 16, 2014. AKG alleged that because
Zavala had refused to turn over the financial documents it
needed, it went to the Bryan Cave law firm-a firm it had
previously retained-to see if the firm had the financial
documents it needed. When AKG spoke with a representative of
Bryan Cave, it learned that Zavala had visited the firm's
office just two days before he was terminated, removing all
documents pertaining to AKG from the firm. AKG explained that
it calculated the missing $195, 341 sum from its
"QuickBooks" and available banking records.
first amended petition, AKG also stated that it intended to
serve Zavala "at his current residence address, "
which had yet to be determined. On November 23, 2015, AKG
filed a notice of service with the Johnson County District
Court that it had served process on Zavala in three ways,
each occurring on November 10, 2015. First, AKG asserted that
it had rendered personal service on Zavala in Alamo, Texas.
AKG also asserted that it had rendered residential service at
Zavala's residence in Alamo, Texas. Last, AKG asserted
that it had rendered residential service at Zavala's
residence in Walnut Creek, California.
sworn statement of Antonio Huizar, the process server from
Alamo, Texas, was attached to AKG's filing. In
Huizar's statement, Huizar explained that when he went to
the house he believed to be Zavala's, a female, who
identified herself as Zavala's mother, told him that
Zavala was not currently at home but would return home later.
He explained that a few minutes after he gave Zavala's
mother his contact information, a man, who identified himself
as Zavala, phoned him. Huizar asserted that he told Zavala
that he had a package for him, but Zavala told him to leave
it with his mother because he was not available; Zavala then
hung up. Huizar explained he called Zavala back and offered
to deliver the package to him personally, but Zavala told him
to deliver the package to his mother because he was not
available. According to Huizar, he then went back to the
place he believed to be Zavala's house and confirmed with
Zavala's mother that Zavala "did in fact currently
live at the residence." Huizar stated that once he
confirmed Zavala was residing in the house, the "service
documentation was handed to [Zavala's mother]."
Significantly, the process server from Contra Costa,
California, maintained that he rendered residential service
by leaving service documentation with a woman who claimed to
be Zavala's mother as well.
December 21, 2015, the district court entered a default
judgment against Zavala. The district court's judgment,
in substantive part, was as follows:
"On December 3, 2015, the Court conducted a scheduling
conference. Plaintiff appeared by and thru its counsel
Christopher K. Snow. Defendant Mary Kunkle appeared pro
se and participated telephonically. Defendant Robert
Zavala did not appear despite due notice of the scheduling
conference, and likewise did not timely file a responsive
pleading to Plaintiff's First Amended Petition.
Accordingly the Court hereby enters judgment by default
against Defendant Zavala with respect to Plaintiff's
claims, [and] further sets a hearing on damages with respect
to Plaintiff's claims against Defendant Zavala for
January 4, 2016 . . . ."
January 4, 2016, even though he had been served notice,
Zavala did not appear at the damages hearing. The only
evidence at the hearing came from Christopher Stevens, who
served as interim CEO following Zavala's termination.
Stevens testified that based upon his review of the
QuickBooks and bank statements, he determined that Zavala had
used a total of $500, 400.35 of AKG funds for noncorporate
purposes while CEO. Thus, Stevens requested that AKG be
reimbursed this money. Stevens also requested that Zavala
lose his 1.6% stock interest in AKG. At the end of the
hearing, the district court granted Stevens' request.
month later, on February 19, 2016, Zavala moved to set aside
default judgment and to file a responsive pleading out of
time. In this motion, Zavala argued that he had never been
served with AKG's first amended petition. Zavala
complained about how he was served process in Texas, making
no mention of how he was served process in California. He
asserted that assuming he was served on November 10, 2014,
the default judgment against him was void because it was
prematurely entered in violation of K.S.A. 2016 Supp.
60-308(a). Under K.S.A. 2016 Supp. 60-308(a), defendants who
are served out of state have 30 days to respond to a
petition. Zavala argued that because the district court's
December 21, 2015, default judgment order stated that he
failed to appear at the December 3, 2015, scheduling
conference, the district court actually entered its default
judgment against him on December 3, 2015, which was only 23
days after he had been served. He also asserted that the
default judgment should be set aside based upon excusable
neglect. Last, Zavala complained that AKG was not entitled to
any stock he may own through the default judgment.
support of his arguments, Zavala attached a sworn affidavit.
In his sworn affidavit, Zavala alleged that on November 10,
2015, AKG "served a summons and First Amended Petition
on my mother at her residence at . . . Alamo, Texas . . .
.This address is not my dwelling or usual place of
abode." He further alleged that he "did not ignore
the service of the summons and Petition" because he
"immediately contacted an attorney." This attorney
then e-mailed AKG's attorney, who responded that
"any further communication from [him] needed to be in
writing and directed to his [law] office." Zavala
asserted that "he [had] repeatedly tried to engage the
company in a dialogue concerning this dispute without
resorting to the legal process, but without success."
Finally, Zavala asserted that AKG's allegations against
him for breach of fiduciary duty and conversion were
unfounded. He stated he had a meritorious defense because
AKG's "Petition [was] wholly unfounded" and
"contain[ed] a number of false allegations about
[him]." He then stated that AKG sued him because the
Board knew he intended to sue the Board for wrongful action
taken regarding certain AKG stock in March 2015 and the Board
wanted to eliminate his presence in the company.
responded that the district court should reject Zavala's
arguments for the following reasons: (1) Zavala had not
credibly alleged that he had been served erroneously with
process; (2) Zavala had mischaracterized the district
court's default judgment by asserting that it was entered
on December 3, 2015, given that it was not filed until
December 21, 2015, which was well over the K.S.A. 2016 Supp.
60-308(a) 30-day time requirement; and (3) Zavala had
admitted he consciously chose not to participate in the
lawsuit, which did not constitute excusable neglect.
March 8, 2016, the district court held a hearing on
Zavala's motion where both parties made arguments.
Nevertheless, this hearing has not been included in the
record on appeal. Indeed, the only information about the
March 8, 2016, hearing comes from the district court much
later in its October 28, 2016, journal entry of judgment.
This journal entry summarized that hearing as follows:
"On March 8, 2016, the Court conducted the hearing and
received argument on Defendant Zavala's Motion to Set
Aside Default Judgment and to File Responsive Pleading Out of
Time. Plaintiff appeared by its counsel . . . Defendant
Zavala appeared by his counsel . . .; Defendant Kunkle
appeared on her own behalf telephonically. For the
reasons stated upon the record, the Court denied
Defendant's Motion to Set Aside the Default
Judgment. However, at the March 8, 2016 hearing, the
Court further directed the parties to file supplemental
briefs and provide certain other information for the
Court's further consideration with respect to the
equitable disgorgement remedy, specifically whether the
Default Judgment should include the Plaintiff's request
for relief that Defendant Zavala  relinquish any and all
stock ownership or any other equity interest in [AKG.] The
Court further ordered the parties to appear on April 14,
2016, for further argument on the matter." (Emphasis
end of the April 14, 2016, hearing, the district court orally
ruled that Zavala did not personally own any AKG stock;
instead, the AKG stock was held by a company called AGX
Holdings, LLC, which was owned solely by Zavala. Accordingly,
the district court ruled that its damages award could not
include an order that would require Zavala to relinquish his
stock ownership of AKG stock. This meant that the district
court would have to amend its damages award, which at that
point required Zavala to relinquish his personal stock
interest in AKG. Even so, the district court granted
AKG's request for an equitable attachment to Zavala's
ownership in AGX Holdings pending satisfaction of AKG's
damages. It also prohibited Zavala from disposing of his
ownership in AGX Holdings pending satisfaction of AKG's
August 2, 2016, Zavala filed a motion entitled: "Motion
to Reconsider and Vacate the Court's Journal Entry of
Default Judgment on the Ground that the Court Lacked
Jurisdiction over this Action based on the Exclusive Forum
Selection Clause in Plaintiff's Certificate of
Incorporation." Article X of AKG's certificate of
"Unless the Corporation consents in writing to the
selection of an alternative forum, the Court of Chancery of
the State of Delaware shall be the sole and exclusive forum
for (a) any derivative action or proceeding brought on behalf
of the Corporation, (b) any action asserting a claim of
breach of fiduciary duty owed by any director, officer or
other employee of the Corporation to the Corporation or to
the Corporation's stockholders . . . ."
asserted that the preceding language made Delaware "the
mandatory exclusive" forum for any action brought by
AKG, meaning the Johnson County District Court lacked
jurisdiction to enter a default judgment.
responded that Delaware was not the mandatory exclusive forum
for any action brought by AKG given that Article X expressly
stated that AKG may "consent in writing to the
selection of an alternative forum." AKG asserted that it
satisfied the "consent in writing" requirement
with each of its filings with the Johnson County District
Court because the filings were "written
submissions" which established that it
"'consent[ed]' to" Kansas as the forum of
the lawsuit. AKG also argued that the minutes from its
February 27, 2015, Board meeting established that AKG
consented in writing to Kansas being the forum of the
lawsuit. The minutes from that meeting, which were attached
to AKG's ...