Personal Security & Safety Systems Inc. v. Motorola Inc.

Personal Security & Safety Systems Inc. (PSSI) (plaintiff) was a small start-up company that developed technology for what it called a Personal 911 System. In 1997, PSSI did not have sufficient funding to continue its operations. At the same time, Motorola Inc. (defendant) was attempting to develop a personal-security system. Motorola saw an opportunity to invest in PSSI and, in exchange, gain access to PSSI’s technology. On December 17, 1997, the parties executed three agreements in connection with Motorola’s investment: (1) a stock-purchase agreement (SPA), in which Motorola agreed to provide $12 million of financing in three different stages; (2) a product-development agreement (PDA), in which the parties agreed to collaborate on developing new products based on the existing PSSI system; and (3) a shareholder agreement. In 1999, PSSI completed its development of the Personal 911 System. Motorola refused to disburse funds required under the SPA. PSSI sued Motorola alleging breach of and misrepresentations related to the SPA. In response, Motorola moved to compel arbitration based on an arbitration clause contained in the PDA. A form of the PDA was attached as an exhibit to the SPA. The PDA’s arbitration clause stated that “any and all claims, demands, actions, disputes, controversies, . . . and other matters in question arising out of or related to” the PDA were to be arbitrated. The SPA did not contain an arbitration clause but instead contained a forum-selection clause. The forum-selection clause provided that the SPA was governed by Texas law and that Texas courts had exclusive jurisdiction over “any suit brought hereunder.” The trial court denied Motorola’s motion to compel arbitration. Motorola appealed.