You know the Clear Channel case in San Antonio against a bunch of banks for refusing to fund a loan that would enable private equity firms to buy a chunk of the company?  The one that a Bexar County district judge refused to dismiss in favor of a New York forum?  And the one in which the Fourth Court of Appeals denied mandamus relief?

Yesterday, the Supreme Court of Texas set the banks’ mandamus petition for oral argument — this Friday, May 16, at 2:00 p.m. 

The banks frame the legal issue thus:

Can parties seeking funding under a loan commitment with a forum selection clause circumvent the clause by pleading a tort claim in a nonforum state that, in fact, seeks enforcement of the loan commitment?  Or, are those parties bound by the forum selection clause in the loan commitment under direct benefits estoppel?

What does the clause say?  This:

You, the Sponsors and we hereby irrevocably and unconditionally submit to the exclusive jurisdiction of any state or Federal Court sitting in the City of New York over any suit, action or proceeding arising out of or relating to the Transactions or the other transactions contemplated hereby, this Commitment Letter or the Fee Letter or the performance of services hereunder or thereunder . . . .

The "exclusive" in the clause makes it a mandatory one.  So, as the banks argue, the question boils down to whether suing for tortious interference with the Commitment Letter estops Clear Channel, a non-party to the agreement, from having to abide by the forum selection clause.

Blawgletter will now consult the oracles to guess how the mandamus will turn out.  The first auspice — the Court’s setting the petition for hearing on a few days’ notice — bodes well for the banks.  Another omen — the Court’s enthusiasm for using mandamus to enforce arbitration and forum selection clauses — also predicts a good outcome for Wall Street.  A final sign — the Court’s pro-defendant tilt — pretty much seals the deal.

Except that, on the same day the Court set reached out for the case, the parties settled.  The deal carries a lower price tag — a mere $17.9 billion now — but everybody seems happy (or miserable) enough.  So scratch that hearing, Your Honors.

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