## Facts

- About 250 plaintiffs purchased timeshare interests (2004–2006) in a Mexican resort project from a Mexican seller, DTR.
- Each purchase agreement contained a Mexico City forum-selection and Mexican choice-of-law provision for disputes over interpretation and compliance with the agreement.
- Plaintiffs alleged the villas were never built and that defendants Raintree and Starwood orchestrated a scheme using DTR as an instrumentality to collect buyers’ funds and divert them to satisfy Raintree’s debt to Starwood.
- DTR later ceased to exist as an independent company and became a Raintree affiliate through mergers.
- Plaintiffs sued only Raintree and Starwood in federal court in Illinois for fraud and related claims.
- Defendants moved to dismiss for improper venue based on the forum-selection clause; the district court dismissed, and plaintiffs appealed, arguing non-signatories could not enforce the clause.

## Issues

1. Whether non-signatories (Raintree and Starwood) could enforce the contracts’ Mexico City forum-selection clause against the purchaser-plaintiffs.
2. Whether allegations of fraud in the overall transaction rendered the forum-selection clause unenforceable absent fraud directed at the clause itself.
3. Whether the clause covered tort-based claims (fraud/conspiracy) arising from the timeshare transaction, not just contract claims.
4. Whether the court should apply Mexican law to enforceability given the contracts’ choice-of-law language when the parties litigated solely under U.S. law.

## Decision

- The Seventh Circuit affirmed dismissal for improper venue.
- Raintree and Starwood, though non-signatories, could enforce the forum-selection clause because plaintiffs’ own theory treated DTR as their controlled instrumentality, supporting mutual enforcement.
- The forum-selection clause was enforceable despite fraud allegations because plaintiffs did not allege fraud aimed specifically at the clause.
- The clause was broad enough to reach plaintiffs’ tort claims because the claims arose from rights and obligations created by the agreements.
- The court applied U.S. law to enforceability because both sides litigated the question under U.S. law, waiving reliance on Mexican law.

## Legal Principles

- A non-signatory may enforce a forum-selection clause when agency and related-party principles, as framed by the plaintiff’s allegations, make it equitable and mutual to bind both sides to the designated forum.
- Mutuality supports enforcing an exclusive forum clause to prevent one side from having multiple forum options while the other has none.
- Fraud in the inducement of the overall contract does not defeat a forum-selection clause unless the clause itself was procured by fraud or overreaching.
- A forum-selection clause covering disputes about interpretation and compliance with contractual rights and obligations can encompass tort claims that originate in the contractual relationship.
- When a contract points to foreign law but the parties argue enforceability exclusively under U.S. law, a court may treat foreign-law application as waived.

## Conclusion

The Seventh Circuit required the purchasers to litigate in Mexico City under the contracts’ forum-selection clause and held that the defendants could invoke the clause despite not signing the agreements, because plaintiffs’ allegations effectively treated the seller as defendants’ agent and the clause was neither fraudulently obtained nor limited to contract-only claims.


Adams v. Raintree Vacation Exch., LLC, 702 F.3d 436 (7th Cir. 2012)