Summary
holding that contract's place of performance is an important consideration with respect to personal jurisdiction
Summary of this case from Patton v. JohnsonOpinion
NO. 01-17-00097-CV
12-28-2017
GRIFFITH TECHNOLOGIES, INC. AND BENNETT W. GRIFFITH, Appellants v. PACKERS PLUS ENERGY SERVICES (USA), INC. AND PACKERS PLUS ENERGY SERVICES, INC., Appellees
On Appeal from the 55th District Court Harris County, Texas
Trial Court Case No. 2016-67543
MEMORANDUM OPINION
Griffith Technologies, Inc. sued Packers Plus Energy Services (USA), Inc. ("Packers USA") and Packers Plus Energy Services, Inc. ("Packers Canada") for breach of contract on a note and a guaranty, respectively. Packers Canada filed a special appearance, which the trial court sustained. Griffith Technologies filed this interlocutory appeal, arguing that the trial court erred by sustaining the special appearance.
We reverse and remand.
Background
Packers Canada is the parent company of Packers USA. Packers Canada is based in Calgary, Alberta, Canada. It does not maintain offices in Texas and does not conduct ongoing business in Texas. Packers USA is a Delaware corporation based in Midland, Texas. Griffith Technologies is a Texas corporation based in Spring, Texas.
In January 2014, Packers USA agreed to purchase all of Griffith's ownership interest in ReTek Energy Products, L.L.C. ("ReTek"), another Texas-based company. Packers USA agreed to pay Griffith Technologies the purchase price for the ownership interest in three installments over two years.
The transaction also included an employment agreement involving Bennett W. Griffith. While that other agreement is part of the underlying lawsuit, it does not concern the issues raised within this appeal.
Packers Canada agreed to be the guarantor for Packers USA's obligations under the note. The recital portion of the guaranty begins by stating that Packers Canada entered into the guaranty "to induce Griffith Technologies . . . to make financial accommodations to Packers [USA]." The agreement was signed on Packers Canada's behalf by Tracey Beaudoin. Beaudoin is the general counsel for both Packers Canada and Packers USA. Beaudoin traveled to Houston for the closing, and she signed all of the relevant documents on behalf of Packers Canada and Packers USA.
Packers USA made the first two payments but did not make the third and final payment. Griffith Technologies sued Packers USA and Packers Canada in Houston, Texas. Packers Canada filed a special appearance, arguing it lacked sufficient contacts with Texas for the court to have personal jurisdiction over it. The trial court granted the special appearance. This interlocutory appeal followed.
Standard of Review
"Whether a court has personal jurisdiction over a defendant is a question of law." BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). If the determination of jurisdiction depends on the resolution of questions of fact, the resolution of those facts are reviewed for legal and factual sufficiency. Id. Otherwise, we "review the trial court's legal conclusions drawn from the facts to determine their correctness." Id.
When, as here, the trial court does not issue findings of fact and conclusions of law for the special appearance, "all facts necessary to support the judgment and supported by the evidence are implied." Id. at 795. In the presence of a developed record, however, these conclusions are reviewed for legal and factual sufficiency. Id.
Applicable Law
"A nonresident defendant is subject to the personal jurisdiction of Texas courts if (1) the Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the exercise of jurisdiction does not violate federal and state constitutional due process guarantees." Kelly v. Gen. Interior Const., Inc., 301 S.W.3d 653, 657 (Tex. 2010). Texas's long-arm statute extends a trial court's jurisdiction to the scope permitted by the federal constitution's due process requirements. Id. Consistent with federal due-process protections, a state can exercise personal jurisdiction over nonresident defendants if they have "established minimum contacts with the forum state, and the exercise of jurisdiction comports with 'traditional notions of fair play and substantial justice.'" Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 575 (Tex. 2007) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158 (1945)).
A party establishes minimum contacts with the forum state if it purposefully avails itself of the privileges and benefits of conducting business in a state. Touradji v. Beach Capital P'ship, L.P., 316 S.W.3d 15, 24 (Tex. App.—Houston [1st Dist.] 2010, no pet.). The scope of the nonresident's actions that can constitute purposeful availment varies depending on the type of jurisdiction alleged: general jurisdiction or specific jurisdiction. See id. at 24-25. Here, only specific jurisdiction is at issue.
A court has specific, personal jurisdiction over a nonresident defendant if (1) the nonresident purposefully directed its activities toward the forum state or purposefully availed itself of the privileges of conducting activities there and (2) the controversy arises out of or is related to the non-resident's contacts with the forum state. Id. at 24. Such a determination ultimately concerns the relationship among the nonresident, the forum, and the litigation. Kelly, 301 S.W.3d at 658.
Certain considerations are relevant in this determination. First, only the nonresident's actions are relevant to the determination of purposeful availment; unilateral actions of the plaintiff or of a third party are not relevant. Touradji, 316 S.W.3d at 24. Also, the actions of the nonresident must be purposeful; random, isolated, or fortuitous actions are insufficient. Id. Likewise, the nonresident's actions must seek some benefit, advantage, or profit through the purposeful availment so that the nonresident can be deemed to consent to suit there. Id.
The exercise of personal jurisdiction must comport with traditional notions of fair play and substantial justice. Curocom Energy LLC v. Shim, 416 S.W.3d 893, 896 (Tex. App.—Houston [1st Dist.] 2013, no pet.). If the nonresident defendant has purposefully established minimum contacts with the forum state, then only in rare cases will a Texas court's exercise of personal jurisdiction not comport with fair play and substantial justice. Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 231 (Tex. 1991).
Personal Jurisdiction
To subject an out-of-state resident to the personal jurisdiction of the state of Texas, "the plaintiff has the initial burden to plead sufficient allegations to confer jurisdiction." Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 337 (Tex. 2009). If the plaintiff carries this burden, the burden shifts to the defendant "to negate all potential bases for jurisdiction pled by the plaintiff." Id. If the plaintiff does not carry this burden, "the defendant need only prove that it does not live in Texas to negate jurisdiction." Kelly, 301 S.W.3d at 659.
A. Pleading Jurisdictional Facts
Personal jurisdiction is claim specific. See Kelly, 301 S.W.3d at 660; Touradji, 316 S.W.3d at 25-26. Accordingly, the plaintiff must allege that the facts that give rise to the claim also subject the defendant to personal jurisdiction in Texas. See Kelly, 301 S.W.3d at 659 (holding that personal jurisdiction under specific jurisdiction can be defeated by showing claims do not arise from contacts).
Griffith Technologies asserted a claim for breach of the guaranty against Packers Canada. Griffith Technologies alleged that Packers Canada consummated the contract in Texas, that the underlying performance was due in Texas, and that Packers Canada had an office and at least one employee in Texas. We hold this is sufficient to allege personal jurisdiction. See Hoagland v. Butcher, 474 S.W.3d 802, 815 (Tex. App.—Houston [14th Dist.] 2014, no pet.) (holding contract's place of performance is an important consideration for personal jurisdiction); Huynh v. Nguyen, 180 S.W.3d 608, 619 (Tex. App.—Houston [14th Dist.] 2005, no pet.) (holding minimal pleading requirement is satisfied by allegation that nonresident defendants are doing business in Texas); Lombardo v. Bhattacharyya, 437 S.W.3d 658, 679 (Tex. App.—Dallas 2014, pet. denied) (holding allegations of ongoing business operations and tort committed in Texas is sufficient).
B. Negating Jurisdictional Facts
Because Griffith Technologies carried its burden by pleading jurisdictional facts to confer jurisdiction on the trial court, the burden shifted to Packers Canada to negate the jurisdictional bases. See Retamco Operating, 278 S.W.3d at 337. While the parties dispute the significance of certain underlying facts, none of the underlying facts are in dispute between the parties. See BMC Software, 83 S.W.3d at 794 (holding factual disputes are reviewed for legal and factual sufficiency while trial court's legal conclusions drawn from facts are reviewed for their correctness). Accordingly, we review de novo the trial court's legal conclusions drawn from the facts. See Retamco Operating, 278 S.W.3d at 337 (holding personal jurisdiction is reviewed de novo). To defeat personal jurisdiction on a legal basis, the defendant must show that "the defendant's contacts with Texas fall short of purposeful availment; for specific jurisdiction, that the claims do not arise from the contacts; or that traditional notions of fair play and substantial justice are offended by the exercise of jurisdiction." Kelly, 301 S.W.3d at 659.
Packers Canada argues, and we agree, that it disproved that it maintained an office or employed anyone within the state. Packers Canada's chief financial officer asserted in an affidavit that Packers Canada did not maintain a place of business in Texas and did not have any employees in Texas. Nothing in the record contradicts this.
Likewise, nothing in the guaranty or the underlying agreement for which the guaranty was issued required performance in Texas. The guaranty covered payment under a promissory note to obtain ownership interest in a company. The guaranty does not require anything to take place specifically in Texas. The note required payment to a specific account, but it did not identify any physical location of the account. In addition, the note specifically exempted all U.S. and Canadian legal holidays as dates for required payments, recognizing payments could come from or go to Canada.
We turn, then, to whether the Packers Canada purposefully availed itself of the privileges and benefits of conducting business in Texas during the formation of the guaranty. Griffith Technologies argues that Packers Canada is subject to personal jurisdiction based on the formation of the guaranty because the guaranty was used as an inducement for Griffith Technologies to enter into the underlying contract and because Packers Canada traveled to and was present in Texas for the signing of the guaranty.
1. Guaranty as Inducement
When considering whether an out-of-state guarantor is subject to personal jurisdiction in Texas, courts may consider how integral the guaranty was for the underlying transaction. In J.D. Fields, this Court held that "the most critical fact in [the] case . . . [was] that the defendant guarantor telephoned plaintiff's Houston office with an offer to personally guarantee the defendant company's indebtedness in order to induce plaintiff to contract with defendant company." J.D. Fields & Co., Inc. v. W.H. Streit, Inc., 21 S.W.3d 599, 604 (Tex. App.—Houston [1st Dist.] 2000, no pet.).
Likewise, in Rubinstein, the plaintiff established it was the company's "standard business practice to obtain a personal guaranty from the owners of corporations . . . before extending credit to the corporation or entity." Rubenstein v. Lucchese, Inc., 497 S.W.3d 615, 622 (Tex. App.—Fort Worth 2016, no pet.). The Fort Worth Court of Appeals emphasized this fact, and the fact that the guarantor was aware of this policy, to find the guarantor was subject to the jurisdiction of Texas. Id. at 631-32; see also Goodman Co., L.P. v. A & H Supply, Inc., 396 F. Supp. 2d 766, 772 (S.D. Tex. 2005) (considering guarantor offered guaranty to encourage plaintiff company to extend credit to defendant company as ground for finding personal jurisdiction in Texas); Tuscano v. Osterberg, 82 S.W.3d 457, 467 (Tex. App.—El Paso 2002, no pet.), overruled on other grounds BMC Software, 83 S.W.3d at 794 ("Under Texas law, [a guaranty] can serve as the basis for personal jurisdiction only if there is a showing that the guarantor offered his guarantee as an inducement to the plaintiff to enter into that contract.").
Here, the recital portion of the guaranty states that Packers Canada entered into the guaranty "to induce Griffith Technologies . . . to make financial accommodations to Packers [USA]." Packers Canada signed the guaranty containing this representation. A recital in a contract acts as the formal statement establishing the reason for the transaction. McMahan v. Greenwood, 108 S.W.3d 467, 484 (Tex. App.—Houston [14th Dist.] 2003, pet. denied). While they cannot be used to contradict the operative terms of a contract, "recitals may be looked to in determining the proper construction of the contract and the parties' intent." All Metals Fabricating, Inc. v. Ramer Concrete, Inc., 338 S.W.3d 557, 561 (Tex. App.—El Paso 2009, no pet.).
Nothing in the record contradicts the parties' assertion in the guaranty that the guaranty was entered into to induce the underlying transaction between Griffith Technologies and Packers USA. Accordingly, we consider it in determining personal jurisdiction. See J.D. Fields, 21 S.W.3d at 604; Rubenstein, 497 S.W.3d at 631-32.
2. Travel to Texas to Execute Contract
Courts also consider travel to Texas. See, e.g., Phillips Dev. & Realty, LLC v. LJA Eng'g, Inc., 499 S.W.3d 78, 90-92 (Tex. App.—Houston [14th Dist.] 2016, pet. denied); Ennis v. Loiseau, 164 S.W.3d 698, 710 (Tex. App.—Austin 2005, no pet.); see also Stull v. LaPlant, 411 S.W.3d 129, 137 (Tex. App.—Dallas 2013, no pet.) (holding, when agent negotiates contract in Texas, principal is doing business in state).
The evidence showed that Packers Canada's general counsel traveled to Texas to sign the guaranty and signed it in Texas. Packers Canada points out that its general counsel and Packers USA's general counsel is the same person. Packers Canada argues that, because Griffith Technologies knew about the general counsel's dual roles, "the evidence fails to establish that [Griffith Technologies] reasonably believed [the general counsel] was in reality solely acting on behalf of Packers Canada during the closing."
Packers Canada provides no proof that its general counsel had to be "solely acting on behalf of Packers Canada" in order for its general counsel traveling to Texas to sign the guaranty to have any significance. Regardless of the number of other roles its general counsel also played, the evidence establishes that she traveled to Texas and signed the guaranty here in her capacity as general counsel for Packers Canada.
The record establishes, then, that Packers Canada offered the guaranty as an inducement for the underlying transaction and that the general counsel of Packers Canada traveled to Texas and signed the guaranty in Texas. We hold that Packers Canada did not carry its burden of negating all of Griffith Technologies's allegations of personal jurisdiction. See Retamco, 278 S.W.3d at 337.
C. Fair Play and Substantial Justice
In evaluating whether exercising jurisdiction offends traditional notions of fair play and substantial justice, we consider (1) the burden on the defendant, (2) the interests of the forum in adjudicating the dispute, (3) the plaintiff's interest in obtaining convenient and effective relief, (4) the interstate's judicial system's interest in obtaining the most efficient resolution of controversies, and (5) the shared interests of the several states in furthering fundamental substantive social policies. Spir Star AG v. Kimich, 310 S.W.3d 868, 878 (Tex. 2010). Packers Canada argues the first three factors should defeat personal jurisdiction in this case.
For the first factor, Packers Canada argues that it carries an undue burden by having to travel to Texas from Canada. "Distance alone cannot ordinarily defeat jurisdiction." Moncrief Oil Int'l. Inc. v. OAO Gazprom, 414 S.W.3d 142, 155 (Tex. 2013). Courts have rejected this argument based on longer distances. See, e.g., Ren v. ANU Res., LLC, 502 S.W.3d 840, 852 (Tex. App.—Houston [14th Dist.] 2016, no pet.) (rejecting distance as basis for denying personal jurisdiction for defendant in China); KEC Int'l Ltd. v. Jyoti Structures Ltd., No. 09-15-00378-CV, 2016 WL 7177695, at *10 (Tex. App.—Beaumont Dec. 8, 2016, no pet.) (mem. op.) (rejecting distance as basis for denying personal jurisdiction for defendants in India).
The evidence establishes that the general counsel for both Packers USA and Packers Canada was involved heavily in the underlying transaction. As a representative of Packers USA, she is already implicated in this suit. Because she is based in Canada, it is reasonable to believe that the burden of collecting and transferring documents will not unduly increase by including Packers Canada in the Texas litigation.
For the second factor, Packers Canada argues Texas does not have any interest in adjudicating the dispute because the other defendants have already answered, because Griffith Technologies "and Packers USA are the true parties to this dispute," and because the underlying dispute involves an "essentially 'local' dispute." Packers Canada agreed to guarantee the underlying transaction. The guaranty was signed as part of the entire deal. See In re Laibe Corp., 307 S.W.3d 314, 317 (Tex. 2010) (holding document pertaining to same transaction may be read together and courts may construe all the documents as if they were part of a single, unified instrument). Packers Canada has not established that Texas has no interest in resolving this portion of the entire transaction.
For the third factor, Packers Canada argues that, because Packers USA was able to pay the first two installments under the contract, we should assume it will be able to pay the final installment upon any finding of liability and that, accordingly, Packers Canada is not a necessary party in order for Griffith Technologies to obtain convenient and effective relief. There is no evidence to support this assumption. Nor do we find support for the suggestion that one party's ability to pay a judgment should excuse a finding of liability against another.
We hold the exercise of personal jurisdiction over Packers Canada comports with traditional notions of fair play and substantial justice. See Curocom Energy, 416 S.W.3d at 896. We sustain Griffith Technologies's sole issue.
Conclusion
We reverse the trial court's grant of Packers Canada's special appearance and remand for further proceedings.
Laura Carter Higley
Justice Panel consists of Justices Higley, Massengale, and Lloyd.