Opinion
No. 05-01-00897-CV.
Opinion issued August 28, 2003.
Appeal from the 160th Judicial District Court, Dallas County, Texas, Trial Court Cause No. 99-4468-H.
Affirmed.
MEMORANDUM OPINION
William J. Hone and Falk Fish, L.L.P. (collectively Hone) bring this interlocutory appeal challenging the trial court's order granting Bernard Hanafin's special appearance and motion to dismiss. Hone asserts the trial court erred in granting Hanafin's special appearance because Hanafin is not protected by the corporate shield doctrine and his activities in Texas were sufficient to subject him to the specific jurisdiction of Texas courts. We disagree and affirm the trial court's order.
Background
In 1999, Hone sued PyMaH Corporation, PC Liquidation Trust, successor of PyMaH, and Hanafin in Texas. Hone alleged (1) PyMaH and PC breached their contractual agreement to pay for legal services rendered to PyMaH, and (2) PyMaH, PC, and Hanafin fraudulently induced Hone to continue rendering legal services with no intention of paying for the services.
The notice of appeal lists PyMaH Corporation and PC Liquidation Trust as parties to this appeal. However, the parties' briefs assert error only in the granting of Hanafin's special appearance and motion to dismiss for want of jurisdiction. No issue in this appeal involves PyMaH Corporation or PC Liquidation Trust.
Hanafin filed a special appearance alleging Texas courts lack jurisdiction over him in his individual capacity. Hanafin asserted that any contacts he had with Texas were made in a representative capacity on behalf of PyMaH and therefore he was not individually subject to the jurisdiction of Texas courts. Hone responded that because Hanafin committed a tort in Texas, he can be sued in his individual capacity. The trial court granted the special appearance and dismissed Hanafin from the underlying action. This interlocutory appeal ensued. See Tex. Civ. Prac. Rem. Code Ann. § 51.014(7) (Vernon Supp. 2003).
The trial court entered thirty-nine findings of fact in support of its decision. On appeal, Hone challenges five of those findings. The other thirty-four unchallenged findings of fact are binding on this Court, and we accept them as established facts for this appeal. Hotel Partners v. KPMG Peat Marwick, 847 S.W.2d 630, 632 (Tex.App.-Dallas 1993, writ denied).
Relevant Established Facts
Falk Fish is a law firm with an international practice with offices in Texas and California. Robert Falk is a partner in Falk Fish. Robert Falk had a professional relationship with PyMaH, a New Jersey corporation, that began before he moved to Texas and before he formed the firm of Falk Fish. In 1990, Robert Falk, while with another Texas based law firm, entered into a contract with PyMaH to represent it in patent litigation in California, New York, and Europe. Robert Falk retained the services of William Hone, a New York attorney, to assist in the litigation. The attorneys allege that several years into the representation Hanafin, a New Jersey resident and president of PyMaH, negotiated a "short term reduction in legal fees, that PyMaH would pay them a bonus and would `restore reduced fees.'" This alleged agreement was reached during a telephone call between New Jersey and California. Hanafin neither personally hired nor agreed to pay the fees from his own funds. The day to day activities of PyMaH and Hanafin were in New Jersey and Hanafin did not commingle personal assets with PyMaH's assets. Hanafin never owned a majority share of PyMaH, owning between 19 and 11% of its stock. Finally, when PyMaH hired Robert Falk as counsel, Hanafin individually did not anticipate being sued in Texas.
Issues
Because Hone does not present discrete issues, we do not resolve discrete issues.
In this appeal, Hone claims that because the tort for which Hanafin can be held individually liable was committed in Texas, Texas courts have jurisdiction over Hanafin individually regardless of the capacity in which he was acting. Also, Hone asserts Hanafin is individually subject to jurisdiction because, as a shareholder of PyMaH, Hanafin personally benefitted from Hone's rendition of legal services to PyMaH in Texas. Hone asserts the trial court has specific, not general, jurisdiction over Hanafin. Therefore, we limit our discussion to whether specific jurisdiction exists.
Applicable Law
A plaintiff bears the initial burden of pleading facts sufficient to bring a nonresident within the provision of the Texas long-arm statute. KPMG, 847 S.W.2d at 633. The Texas long arm statute authorizes the exercise of personal jurisdiction over nonresidents as far as the federal constitution permits. Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 231-32 (Tex. 1991). We use the federal due process standard in analyzing the assertion of personal jurisdiction over a nonresident defendant. Clark v. Noyes, 871 S.W.2d 508, 511 (Tex.App.-Dallas 1994, no writ). The federal constitutional due process clause limits the power of a state to assert personal jurisdiction over a nonresident defendant. Guardian, 815 S.W.2d at 226. Federal due process requires a plaintiff to show (1) a defendant has established "minimum contacts" with the forum state and (2) that the exercise of jurisdiction comports with "fair play and substantial justice." Schlobohm v. Schapiro, 784 S.W.2d 355, 356 (Tex. 1990).
When a nonresident challenges the Texas trial court's exercise of personal jurisdiction, he carries the burden of negating all bases for the exercise of jurisdiction over him. Kawaski Steel Corp. v. Middleton, 699 S.W.2d 199, 203 (Tex. 1985). The question of whether the exercise of jurisdiction is proper is a question of law but the court must first resolve any factual disputes. Hotel Partners v. Craig, 993 S.W.2d 116, 120 (Tex.App.-Dallas 1994, writ denied). We review the trial court's factual findings for legal and factual sufficiency and the court's legal conclusions de novo. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002); KPMG, 847 S.W.2d at 632. We review the evidence in a light most favorable to the trial court's ruling. Clark v. Noyes, 871 S.W.2d 508, 511 (Tex.App.-Dallas 1994, no writ). The fact finder judges the credibility of the evidence, determines the weight to be given evidence, resolves conflicts or inconsistencies in the evidence, and makes inferences from the evidence. Guardian, 815 S.W.2d at 632.
Hone asserts specific jurisdiction exists over Hanafin. "Specific jurisdiction is established if the defendant's alleged liability arises from or is related to an activity conducted within the forum." BMC, 83 S.W.3d at 796. Specific jurisdiction occurs when a tort is committed in whole or in part in Texas. Tex. Civ. Prac. Rem. Code Ann. § 17.042(2) (Vernon Supp. 2003). If specific jurisdiction is asserted, the analysis focuses on each of the defendant's contacts with the forum and the litigation. Guardian, 815 S.W.2d at 227. Thus, we analyze the relationship among Hanafin individually, Hone, and Texas. PyMaH's relationship is not considered.
Findings of Fact
Hone challenges five findings of fact contending they are (1) improper decisions on the merits of the case, (2) conclusions of law, and (3) against the great weight and preponderance of the evidence. The five challenged findings are:
Hone contends the five challenged findings are really conclusions of law and thus should be reviewed by this Court de novo. Hone cites no authority to support his argument. We do not address Hone's assertions because of his failure to properly brief the issue. Tex. R. App. P. 38.1(h).
Appellants rely on several unpublished opinions in support of their arguments. In their citations, appellants fail to note the cases are unpublished. We remind counsel of appellate rule 47.7 which requires a notation stating "not designated for publication" to be included in citations to unpublished opinions. We decline to rely on the cases because unpublished opinions have no precedential value. Tex. R. App. P. 47.7.
17. All conversations between Mr. Hanafin and Mr. Falk relating to the litigation and fees for the litigation were conducted in Mr. Hanafin's capacity as President of PyMaH for the sole benefit of PyMaH.
18. It was only because Mr. Falk happened to office in Texas that any portion of these conversations took place in Texas. At no time was Mr. Hanafin seeking the benefits of Texas law in his dealings with Mr. Falk.
19. Mr. Hanafin's business dealings, conversations and meetings with Mr. Falk were conducted solely in the interest of, for the benefit of, and on behalf of PyMaH, and were not intended to advance Mr. Hanafin's own personal interests.
24. All of Mr. Hanafin's business dealings in Texas were conducted in his capacity as President of PyMaH.
37. Mr. Hanafin never committed any tortious acts in whole or in part in the State of Texas.
Hone first asserts the five challenged findings are improper decisions on the merits of the action because they determine Hanafin's liability in the suit. Hone contends Arterbury v. American Bank Trust Co., 553 S.W.2d 943 (Tex. Civ. App.-Texarkana 1977, no writ) establishes that an allegation that a defendant committed a tort in Texas is sufficient to grant jurisdiction over the defendant and the defendant cannot show the court does not have jurisdiction over him because such would require proof relating to the merits of the alleged tort.
In Arterbury, the plaintiff sued a Louisiana corporation for wrongful repossession of a vehicle in Texas. There was no question that agents of the corporation entered Texas and repossessed the vehicle. Id. at 945-46. The trial court determined that the repossession was lawful and therefore the Texas court did not have jurisdiction over the corporation. Id.
The appellate court held the trial court incorrectly determined the merits of the action in deciding the jurisdiction question. Id. at 946. The appellate court held the trial court should have determined only if the defendant had minimum contacts with Texas. The appellate court determined there were minimum contacts because the defendant's agents had purposefully entered Texas to repossess the vehicle. Id. at 948. The question of whether the repossession was lawful had no bearing on whether the corporation had minimum contacts with Texas such that the exercise of jurisdiction over it was proper. Id.
We agree with the Arterbury court's general holding that in analyzing whether the facts are sufficient to establish personal jurisdiction over the defendant, the trial court is not to decide the merits of the underlying action. However, we disagree with Hone's contention that in determining jurisdiction, the trial court can never make any finding that may relate to an ultimate issue.
In the present case, there is no assertion that PyMaH is not subject to the trial court's jurisdiction. The only question is whether Hanafin, individually, is subject to jurisdiction for acts he alleges he took in a representative capacity for PyMaH. Under Hone's reasoning, if a plaintiff properly sues a corporation in a Texas court, he could also sue individually any employee of that corporation for acting on behalf of the corporation and the individual could not challenge the court's jurisdiction over him. To apply the holding in Arterbury as Hone suggests would violate the individual's constitutional right to contest jurisdiction. The fact that proof to defeat jurisdiction may also disprove an element of the plaintiff's cause of action cannot limit the right of the defendant to challenge jurisdiction. Nat'l Indus. Sand Ass'n v. Gibson, 897 S.W.2d 769, 774 (Tex. 1995) (orig. proceeding) (finding no jurisdiction because no tort committed); Ross F. Meriwether Assocs., Inc. v. Aulbach, 686 S.W.2d 730, 732 (Tex.App.-San Antonio 1985, no writ). Challenged findings of fact 17, 18, 19, and 24 all relate to the capacity of Hanafin in his contacts with Texas. Finding 37 is an inference from the other findings. That the trial court had to consider the capacity in which Hanafin had contact with Texas in determining jurisdiction over him individually, which is also a consideration in determining whether he is individually liable for the alleged torts, is not improper per se. We reject Hone's contention that the challenged findings of fact are improper determinations on the merits.
Hone next asserts the challenged findings of fact are against the great weight and preponderance of the evidence. In particular, Hone argues Hanafin's affidavits (1) do not contain certain information about Hanafin's relationship with PyMaH, (2) do not prove that "misrepresentations and promises were not made," and (3) do not deny contact with Texas. Thus, Hone argues that Hanafin's affidavits are conclusory because they deny only the capacity in which those contacts took place. Hone asserts that because Hanafin admits to contacts with Texas the court has jurisdiction over him regardless of the capacity in which he made those contacts because Hone has alleged Hanafin committed a tort in Texas. Again, we decline to follow Hone's mechanical application of jurisdiction law because it would deprive Hanafin of his constitutional right to object to jurisdiction. In making its decision, the trial court considered affidavits from Robert Falk and Hanafin; depositions of Falk and Hanafin; correspondence about the fees and bonus on PyMaH letterhead to Falk signed by Hanafin in a representative capacity; and other documents. The trial court considered all of the evidence presented to it and weighed the credibility of the conflicting evidence. Hone's brief on this point fails to acknowledge the existence of conflicting evidence and the trial court's role in resolving conflicts and making credibility determinations. Having reviewed all of the evidence and the unchallenged findings, we conclude the trial court's findings 17, 18, 19, 24 and 37 are not so against the great weight and preponderance of the evidence as to be manifestly unjust. Conclusions of Law
Hone also asserts five conclusions of law are improper and that Hanafin is not entitled to use of the fiduciary or corporate shield doctrine to escape exercise of jurisdiction by Texas courts. Hone claims Hanafin, acting on behalf of PyMaH, made misrepresentations, thus committing a tort and subjecting the corporation to liability and himself to individual liability. Hone argues the trial court erred in granting the special appearance because Hanafin did not negate all bases for exercising jurisdiction over him individually. Hone contends the evidence establishes Hanafin individually has minimum contacts with Texas and that the exercise of jurisdiction over him does not offend traditional notions of fair play. Hone challenges five conclusions of law: 40. Mr. Hanafin has not established minimum contacts with the State of Texas sufficient to subject him to the jurisdiction of the courts of this state. 42. Mr. Hanafin has not conducted business in his individual capacity or otherwise purposefully directed his activities to Texas, and Plaintiffs' alleged cause(s) of action does not arise from or relate to any jurisdictional contact of Mr. Hanafin with Texas. Accordingly, this Court does not have specific jurisdiction over Mr. Hanafin. 43. Any contacts of Mr. Hanafin with the State of Texas are minimal and fortuitous and the result of unilateral activity by PyMaH's counsel, Robert Hardy Falk, in relocating his legal practice to the State of Texas. 44. Mr. Hanafin is not amenable to process issued by the courts of the State of Texas. 45. The exercise of in personam jurisdiction over Mr. Hanafin by this Court would offend traditional notions of fair play and substantial justice and would deprive Defendant of due process as guaranteed by the Constitution of the United States and the Constitution of the State of Texas. This Court reviews conclusions of law drawn from the facts to determine their correctness. BMC, 83 S.W.3d at 794. If this Court determines a conclusion of law is in error but the trial court reached the proper judgment, the erroneous conclusion of law does not require reversal of the judgment. Id. Minimum Contacts
Minimum contacts analysis requires the court to determine if the nonresident purposely availed himself of the privilege of conducting activities in this state thereby invoking benefits and protections of its law. Guardian, 815 S.W.2d at 226. "There must be a `substantial connection' between the nonresident defendant and Texas arising from action or conduct of the nonresident purposefully directed toward Texas." Id. at 230. "[A] defendant should not be subject to a foreign court's jurisdiction based upon `random,' `fortuitous,' or `attenuated' contacts." Id.; CSR Ltd. v. Link, 925 S.W.2d 591, 595 (Tex. 1996) (orig. proceeding). "In analyzing minimum contacts it is not the number, but rather the quality and nature of the nonresident defendant's contacts with the forum state that are important." Id. at 230 n. 11.
Generally, jurisdiction over an individual cannot be predicated upon jurisdiction over a corporation. Clark, 871 S.W.2d at 518. An "individual's minimum contacts are "not to be judged according to their employer's activities [in the forum]. On the other hand, their status as employees does not somehow insulate them from jurisdiction. Each defendant's contacts with the forum State must be assessed individually." Calder v. Jones, 465 U.S. 783, 789 (1984) (Florida reporters individually subject to California jurisdiction when paper they worked for had highest circulation in California and suit was over allegedly libelous article that an actress living and working in California drank so much she could not work). An individual is subject to the forum's jurisdiction if (1) the corporation is the alter ego of the individual, (2) the individual is advancing his own interest, not the corporation's, or (3) he commits a tort for which he would be individually liable even if the act was within the course and scope of employment. Stuart v. Spademan, 772 F.2d 1185, 1197 (5th Cir. 1985); Saktides v. Cooper, 742
F. Supp. 382, 385 (W.D. Tex. 1990). In making a decision, the court is to look at the totality of circumstances in assessing the propriety of the exercise of jurisdiction over a nonresident. Stuart, 772 F.2d at 1192.
Here, Hone asserts Hanafin is subject to jurisdiction as an individual because Hone alleged Hanafin committed a tort in Texas for which he could be held liable even if he was acting on behalf of PyMaH. Also, Hanafin is subject to jurisdiction because as a shareholder of PyMaH he benefitted from Hone's rendition of services to PyMaH because the services increased the value of PyMaH.
In this case, the client is out of state, the court proceedings are out of state, the attorneys' client is PyMaH, not Hanafin individually. In looking at the totality of the circumstances, we conclude Hanafin individually has negated all bases for jurisdiction. We conclude the contacts of Hanafin individually with Texas do not amount to substantial contacts and Hanafin individually did not purposefully avail himself of the privilege of conducting activities in Texas. Any act taken by Hanafin was advancing the interest of PyMaH and not himself individually. Just because he also was a minority shareholder who may have benefitted from the corporation's success which may in part have been due to Hone's work is too attenuated a contact to extend jurisdiction over PyMaH to jurisdiction over Hanafin individually.
We find support for our conclusion in the case of Klenk v. Bustamante, 993 S.W.2d 677 (Tex.App.-San Antonio 1998, no writ), factually a mirror image of this case. In Klenk, Bustamante, a securities broker working in San Antonio for Smith Barney, required legal representation for charges against him for acts he committed at work. Id. at 680. Smith Barney assigned in-house counsel from its headquarters in New York to work on the case. Ultimately, Bustamante sued Smith Barney and the New York attorneys assigned to work on his case. Bustamante sued the attorneys individually for legal malpractice and deceptive trade practices alleging a conflict of interest in representing him and Smith Barney. The attorneys filed special appearances asserting they did not represent Bustamante in an individual capacity and that any services performed were done as employees of Smith Barney on behalf of Smith Barney. Bustamante asserted the Texas court had jurisdiction over the attorneys individually because the attorneys directed activities at Texas by assuming an attorney-client relationship with him, communicating with him in Texas, traveling to Texas on the case, and communicating with Texas offices of regulatory agencies about his case. He further asserted the out-of-state activities harmed him in Texas. In rejecting Bustamante's argument, the appellate court held the mere existence of an attorney-client relationship does not confer jurisdiction. Id. at 682-83. The individual attorneys did not promote business in Texas and the isolated trips and communication do not amount to activities directed at the forum, thus Texas did not have jurisdiction over the individual attorneys. Id.
In Klenk the court applied an abuse of discretion standard which the supreme court has since held is not the proper standard; however, we find support in its factual similarity to the present case. BMC, 83 S.W.3d 794 (stating that standard of review for a special appearance is factual and legal sufficiency, not abuse of discretion).
We conclude Hanafin negated the exercise of jurisdiction over him by establishing that individually he has not had sufficient minimum contacts with Hone and Texas.
Having determined that Hanafin negated minimum contacts, we need not address whether the exercise of jurisdiction over Hanafin individually comports with fair play and substantial justice. Guardian, 815 S.W.2d at 228 (if it is determined that minimum contacts were purposefully established, then the court determines if the exercise of jurisdiction comports with fair play and substantial justice). We affirm the trial court's order sustaining Bernard M. Hanafin's special appearance and dismissing the underlying action against Bernard M. Hanafin individually.