Opinion
NO. 01-18-00012-CV
07-10-2018
LONG ISLAND PIPE, INC., Appellant v. QT TRADING, LP, D/B/A MERFISH TRADING, Appellee
On Appeal from the 11th District Court Harris County, Texas
Trial Court Case No. 2017-17333
MEMORANDUM OPINION
In this interlocutory appeal from the trial court's order overruling a special appearance in a suit for breach of contract, see TEX. CIV. PRAC. & REM. CODE § 51.014(a)(7), the principal issue is whether the nonresident defendant consented to personal jurisdiction in Texas.
A New York corporation, Long Island Pipe, Inc., ordered steel pipe from a Delaware limited partnership, QT Trading, LP d/b/a Merfish Trading. Merfish Trading delivered the pipe as ordered, but Long Island Pipe failed to make payment in full. Merfish Trading filed suit in Texas state court, and Long Island Pipe filed a special appearance.
Long Island Pipe is not a Texas resident, none of the pipe was shipped to or from Texas, the alleged breach occurred outside of Texas, and Merfish Trading does not allege that Long Island Pipe has purposefully established minimum contacts in Texas that give rise to specific or general jurisdiction. Nevertheless, Merfish Trading argued—and the trial court found—that Long Island Pipe is subject to the personal jurisdiction because the contract for the sale and purchase of the pipe incorporated Merfish Trading's standard terms and conditions, including a forum-selection clause establishing Harris County as the place for litigation arising out of the contracts.
After Long Island Pipe placed its order for the pipe, Merfish Trading informed Long Island Pipe that it would not fill the order unless Long Island Pipe signed certain documentation, including a credit application and Merfish Trading's standards terms and conditions. Long Island Pipe provided Merfish Trading with some of the information requested by the credit application, but it refused to sign any of the documentation. Merfish Trading accepted the information and shipped the pipe, thereby forming a contract.
Because Long Island Pipe refused to sign Merfish Trading's standard terms and conditions, we hold that the forum-selection clause was not incorporated into the contract. We reverse the trial court's order, sustain Long Island Pipe's special appearance, and dismiss Merfish Trading's claims for lack of personal jurisdiction.
Factual Background
Long Island Pipe is a supplier of fire protection materials. It is a New York corporation with its principal place of business in New York. Albany Pipe and Nipple Manufacturing, Inc. is "a separately incorporated division" of Long Island Pipe. Like Long Island Pipe, Albany Pipe is a New York corporation with its principal place of business in New York. Neither corporation is registered to do business in Texas, and neither has any Texas contacts. Unless otherwise indicated, we will refer to Long Island Pipe and Albany Pipe collectively as "Long Island Pipe."
Merfish Trading is a Delaware limited partnership registered to do business in Texas. Merfish Pipe & Supply, NE, LLC is a distributor of steel pipe. It is a Delaware limited liability company registered to do business in New York and Pennsylvania. Merfish Trading and Merfish Pipe & Supply are part of the same corporate group; both are owned by Merfish Pipe Holdings, LLC, a company based in Houston, Texas. Unless otherwise indicated, we will refer to Merfish Trading and Merfish Pipe & Supply collectively as "Merfish."
Shortly before the events giving rise to the present suit, Long Island Pipe ordered a relatively small amount of steel pipe from Merfish. Long Island Pipe ordered the pipe by submitting a purchase order, which specified an amount and price, among other information. Merfish accepted the PO and shipped the pipe as ordered.
Later, Long Island Pipe ordered a relatively large amount of pipe through a series of POs. After receiving the POs, Merfish informed Long Island Pipe that, as a condition of its filling the order, Long Island Pipe would have to complete and sign a credit application.
On October 30, 2015, Merfish's regional sales manager, Gerald Slattery, sent an email to Long Island Pipe's chief executive officer, Robert Moss. Attached to Slattery's email was a Merfish "New Account Document Packet." The packet consisted of a cover page, credit application, terms and conditions of sale, and personal guarantee. The cover page instructed that, in order for Merfish to "set up" Long Island Pipe's "new account," Long Island Pipe had "to complete" the credit application, terms and conditions, and personal guarantee. The terms and conditions contained the following forum-selection clause:
Submission to Jurisdiction: Any controversy or claims arising out of the Contract, or the breach thereof, shall be finally settled in the
District Court of Harris County, Texas. Each party irrevocably submits to the exclusive jurisdiction of the District Court of Harris County, Texas and expressly and irrevocably waives its rights to bring suit against the other party in any court of law except that the entry of judgment or subsequent enforcement upon the award rendered, which may be entered or enforced, as applicable, in any court having jurisdiction.
In his email, Slattery explained that Merfish did not actually require Long Island Pipe to provide a personal guarantee. Instead, all Merfish required was a signed credit application:
No personal guarantees or financials required. Just need our app signed by a corporate officer with it filled out. Trade and bank references as usual. Please do not be alarmed by this request, it is that we don't have any formal paperwork in our files and our owners require it.
Slattery did not say, one way or the other, whether Merfish required a signed copy of the terms and conditions of sale. However, the signature block for the credit application was located at the bottom of the terms and conditions of sale, indicating that the credit application and the terms and conditions constituted a single document.
Moss forwarded Slattery's email to Long Island Pipe's chief financial officer, Kathy Fields, who, in turn, forwarded the email to Long Island Pipe's controller, Craig Cohen. Cohen then sent an email to Slattery, which he carbon copied to Fields. Cohen wrote, "Attached is our company credit application and trade references. Please let me know if you need any additional information." The referenced "company credit application and trade references" are not part of the record, and it is unclear exactly which documents were attached to Cohen's email. But it is undisputed that the attachments did not include a signed copy of the credit application and terms and conditions.
After receiving Cohen's email, Slattery emailed Fields. Slattery said that the parties were "getting closer" but that Merfish Pipe would "still need" a credit application "signed by a corporate officer" of Long Island Pipe.
Later that day, Fields sent Slattery an email in which she wrote, "Please see attached as requested." Again, it is unclear what documents were attached to Fields's email, but it is undisputed that the documents did not include a signed copy of the credit application and terms and conditions of sale.
About two weeks later, on November 11, Slattery sent another email to Cohen and Fields. Slattery wrote:
I had sent you our Credit application a few weeks back and you responded in a prompt manner with references and resale documents. We still require our application to be filled out and signed by a corporate officer. I am attaching the package once again in case you have misplaced it. Please return it as quickly as possible.
Five days later, Fields responded to Slattery's email. She wrote that she "was under the impression from Robert Moss that [Merfish] had everything" and that she would "follow up" with Moss. The next day, Fields sent an email to Slattery, which was carbon copied to Cohen. Fields wrote:
I spoke with Robert Moss and he is disappointed at being asked to complete and sign a credit application. We sent you the requested reference information which is what we do for all our other vendors. In addition, Mr. Moss did not require Merfish to sign a credit application for Long Island Pipe. Therefore, please cancel our order. We will not be needing it if it requires us to complete and sign a credit application.
In the email, Fields did not say whether Long Island Pipe objected to any of Merfish's terms and conditions of sale.
The next day, Slattery and Moss spoke over the phone. During the conversation, Moss assured Slattery that Long Island Pipe paid its bills. Moss told Slattery that, while he would not sign the credit application, he would provide Merfish with certain financial information. From the record, Moss and Slattery do not appear to have discussed the terms and conditions of sale in any detail—Moss did not agree to any of the terms and conditions, but he did not object to any of them either.
The following day, Fields sent Slattery another email. Attached to the email was a copy of the credit application and terms and conditions of sale. The document had been filled out, but it was not signed. The signature block consisted of five rows of requested information for the owner or officer to fill out: date, company, printed name, title, and signature. Fields had filled out the first four rows of the signature block, but she did not sign it.
Slattery stated that, after receiving the completed but unsigned credit application, Merfish "decided to proceed with the deal and shipments were made to Long Island Pipe . . . ." According to Slattery, Merfish "ultimately decided to supply the requested steel pipe" because of the "verbal guarantee" Moss made to him over the phone.
On February 8, 2016, Merfish's accounts receivable specialist, Rebecca Smith, emailed Fields regarding a "signature needed" from Long Island Pipe. Pasted into Smith's email was the signature block on the last page of the terms and conditions of sale that Cohen had emailed Slattery months earlier. As discussed above, the signature block had been filled out but not signed. In her email, Smith wrote:
I am not sure if Gerald Slattery had forwarded my requests to you to have the form signed. It was filled out but not signed. Please sign and scan back to me.Fields never signed the document.
Although Merfish never obtained a signed copy of the credit application and terms and conditions of sale, Merfish proceeded to deliver pipe on five separate occasions in 2016. Merfish sent Long Island Pipe invoices for each shipment, and the bottom of each page of the invoices stated, in boilerplate fine print, "Our general terms & conditions apply to this transaction."
After the pipe was delivered, Long Island Pipe allegedly failed to pay for it in full, leading to this suit.
Procedural History
On March 13, 2017, Merfish filed its original petition, asserting a claim for breach of contract against Long Island Pipe. Merfish alleged that it had entered into various contracts with Long Island Pipe for the sale and purchase of steel pipe. The contracts, Merfish alleged, were "in the form of 13 purchase orders" submitted by Long Island Pipe. According to Merfish, it had shipped and delivered the pipe as ordered, but Long Island Pipe had failed to pay for the pipe in full. Merfish notified Long Island Pipe "multiple times" that it had an outstanding balance, but Long Island Pipe still refused to pay. Merfish asserted that the trial court had personal jurisdiction over Long Island Pipe because the contracts incorporated Merfish's standard terms and conditions, including the forum-selection clause establishing Harris County as the place for litigation arising out of the contracts.
Long Island Pipe filed a special appearance. Long Island Pipe denied that it had any Texas contacts, and it denied having ever entered into a contract with Merfish with a forum-selection clause providing for litigation in Texas. Long Island Pipe argued that the forum-selection clause was part of the terms and conditions of the credit application, which Long Island Pipe had "expressly rejected."
Merfish filed a response to Long Island Pipe's special appearance. Merfish argued that Long Island Pipe agreed to the forum-selection clause by failing to strike through or object to the Merfish terms and conditions. Merfish further argued that Long Island Pipe's special appearance was untimely and should, therefore, be construed as a general appearance.
The trial court overruled Long Island Pipe's special appearance. Long Island Pipe appeals.
Special Appearance
In its sole issue, Long Island Pipe argues that the trial court erred in overruling its special appearance because the parties did not mutually assent to the forum-selection clause when the contracts were formed, Long Island Pipe did not ratify the forum-selection clause after the contracts were formed, and Long Island Pipe did not waive its objection by filing its special appearance untimely.
A. Standard of review and applicable law
Whether a court has personal jurisdiction over a nonresident defendant is a question of law we review de novo. Guam Indus. Servs., Inc. v. Dresser-Rand Co., 514 S.W.3d 828, 832 (Tex. App.—Houston [1st Dist.] 2017, no pet.). A plaintiff bears the burden of pleading allegations that bring a nonresident defendant within the provisions of the Texas long-arm statute. Id. A nonresident defendant challenging the court's exercise of personal jurisdiction through a special appearance carries the burden of negating those allegations. Id.
When, as here, a trial court does not issue findings of fact or conclusions of law, we imply all relevant facts necessary to support the judgment if the evidence supports them. Id. We will affirm the trial court's ruling on any legal theory that finds support in the record. Id.
In reviewing a special appearance, we must generally analyze "whether a defendant has purposefully established minimum contacts with Texas, giving rise to either specific or general jurisdiction over the defendant, and whether the assertion of jurisdiction comports with fair play and substantial justice." Id. at 833. But when, as here, the alleged basis for jurisdiction is a forum-selection clause, "the due-process and minimum-contacts analysis is unnecessary." Id. Instead, we consider "whether the trial court properly enforced, or declined to enforce, the forum-selection clause." Id.
B. The parties did not mutually assent to the forum-selection clause
In general, the Uniform Commercial Code applies to the sale of goods. See TEX. BUS. & COM. CODE § 2.102. The contracts here are for the sale and purchase of goods, specifically, steel pipe. Thus, the UCC applies.
Section 2.206 of the UCC addresses the formation of a contract for the sale of goods by an offer and acceptance. It provides, in pertinent part:
(a) Unless otherwise unambiguously indicated by the language or circumstances
Id. § 2.206(a). The comments to Section 2.206 explain that "any reasonable manner of acceptance is intended to be regarded as available unless the offeror has made quite clear that it will not be acceptable." Id. § 2.206 cmt. 1. "Either shipment or a prompt promise to ship is made a proper means of acceptance of an offer looking to current shipment." Id. § 2.206 cmt. 2.(1) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;
(2) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.
Section 2.207 of the UCC addresses the extent to which additional terms in the acceptance or confirmation of the offer are incorporated into the contract—a situation "commonly referred to as the 'battle of the forms.'" Tubelite, a Div. of Indal, Inc. v. Risica & Sons, Inc., 819 S.W.2d 801, 803 (Tex. 1991). Section 2.07 provides, in pertinent part:
(a) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance
is expressly made conditional on assent to the additional or different terms.
(b) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
TEX. BUS. & COM. CODE § 2.207(a)-(b). "Thus, unlike the 'mirror image' rule at common law, the mere fact that a merchant's acceptance form contains materially different terms than the offer does not mean that it will be considered a rejection or counter-offer." Stelluti Kerr, L.L.C. v. Mapei Corp., 703 F. App'x 214, 225 (5th Cir. 2017) (per curiam).(1) the offer expressly limits acceptance to the terms of the offer;
(2) they materially alter it; or
(3) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
Applying these provisions to the record evidence, the record shows that Long Island Pipe made an initial offer—i.e., Long Island Pipe submitted a purchase order and thereby offered to buy a specific amount of pipe for a specific price.
Merfish rejected the offer and made a counteroffer. Through Slattery's October 30 email to Moss, Merfish offered to sell the pipe if Long Island Pipe agreed to sign the credit application included in the Merfish new account document packet. The credit application included the terms and conditions of sale, which, in turn, included the forum-selection clause.
Long Island Pipe rejected Merfish's counteroffer and made its own counteroffer. On November 17, Long Island Pipe asked Merfish to "cancel" Long Island Pipe's "order," explaining that Long Island Pipe would "not be needing it if it require[d]" Long Island Pipe "to complete and sign a credit application." The next day, Long Island Pipe reiterated that Long Island Pipe would not agree to sign a credit application but offered to provide certain financial information. The next day, Long Island Pipe emailed Merfish the promised financial information along with a copy of the credit application. The credit application had been filled out but not signed. Thus, Long Island Pipe rejected Merfish's counteroffer and made its own counteroffer—i.e., Long Island Pipe offered to buy the pipe and to provide its financial information instead of signing the credit application and terms and conditions of sale. In other words, Long Island Pipe offered to buy the pipe on the express condition that it did not have to sign the credit application.
Slattery, on behalf of Merfish, stated in his affidavit that, after Merfish received the unsigned credit application and terms and conditions, Merfish "decided to proceed with the deal" and shipped the pipe ordered by Long Island Pipe. Thus, by shipping the pipe after receiving the unsigned credit application and terms and conditions, Merfish accepted Long Island Pipe's counteroffer.
Merfish contends that its acceptance of Long Island Pipe's counteroffer included its terms and conditions of sale because its invoices stated that the Merfish "general terms & conditions" applied to the transaction. Assuming without deciding that the invoice was a written acceptance or a written confirmation necessary to make enforceable the parties' contract, to the extent the boilerplate language at the bottom of Merfish's invoice purported to add additional terms to the contracts, we hold that Long Island Pipe's acceptance of the delivery of pipe did not cause the forum-selection clause to be incorporated into the contract. "Forum selection clauses are typically considered material and therefore require express assent to become binding." J.D. Fields, Inc. v. Indep. Enters., Inc., No. 4:12-CV-2605, 2012 WL 5818229, at *7 (S.D. Tex. Nov. 13, 2012). Because the forum-selection clause would have materially altered the contract, and because Long Island Pipe did not expressly assent to it, we hold that the invoice's indirect reference to the clause was a mere proposal that did not make the clause part of the contract. See TEX. BUS. & COM. CODE § 2.207(b).
See TEX. BUS. & COM. CODE § 2.201(a) (contract for sale of goods for $500 or more is unenforceable "unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and is signed by the party against whom enforcement is sought"), (b) ("Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents it satisfies the requirements of Subsection (a) against such party unless written notice of objection to its contents is given within ten days after it is received."); Enpro Sys., Ltd. v. Namasco Corp., 382 F. Supp. 2d 874, 882-84 (explaining that "written confirmation" in Section 2.207 refers to writing necessary to make sales contract enforceable under UCC's statute-of-frauds provision).
C. Long Island Pipe did not waive its special appearance by making a general appearance
Finally, we address Merfish's argument that Long Island Pipe waived its special appearance by failing to timely file it.
Under Rule 99, a defendant must file its answer by 10:00 a.m. on the first Monday after the expiration of 20 days from the date the defendant was served with citation. See TEX. R. CIV. P. 99(b). And under Rule 120a, a special appearance must be filed before the defendant's answer; provided, however, that the special appearance may be contained in the same instrument as the answer. See TEX. R. CIV. P. 120a. Thus, a defendant must file its special appearance by the deadline for filing its answer.
Merfish served Long Island Pipe on March 28, 2017. Twenty days from March 28 was Monday, April 17. Thus, Long Island Pipe's deadline for filing its special appearance was the following Monday—i.e., April 24. Long Island Pipe did not file its special appearance until April 30. Merfish argues that, by failing to timely file its special appearance, Long Island Pipe made a general appearance. We disagree.
"A party waives its special appearance if it seeks affirmative relief or invokes the trial court's jurisdiction on any question other than the court's jurisdiction prior to the trial court ruling on the special appearance." Verizon Cal. Inc. v. Douglas, No. 01-05-00707-CV, 2006 WL 490888, at *3 (Tex. App.—Houston [1st Dist.] Mar. 2, 2006, no pet.) (mem. op.). Long Island Pipe did not seek affirmative relief or invoke the trial court's jurisdiction on any question other than the court's jurisdiction before the trial court ruled on its special appearance. Long Island Pipe's special appearance was its first pleading. Moreover, "[t]he case law is quite clear that special appearances may properly be granted even after a default judgment is granted." Lewis v. Lewis, No. 13-11-00118-CV, 2011 WL 4424445, at *2 (Tex. App.—Corpus Christi Sept. 22, 2011, no pet.) (mem. op.) (citing Xenos Yuen v. Fisher, 227 S.W.3d 193, 196 (Tex. App.—Houston [1st Dist.] 2007, no pet.) and Lang v. Capital Res. Invs. I, LLC, 102 S.W.3d 861 (Tex. App.—Dallas 2003, no pet.)).
Merfish nevertheless contends that its position is supported by Boyd v. Kobierowski, 283 S.W.3d 19 (Tex. App.—San Antonio 2009, no pet.). In Boyd, a Texas buyer sued a California seller to rescind a contract for the sale of an automobile. Id. at 20-21. The trial court entered a default judgment against the seller, and the seller filed a restrictive appeal. Id. at 21. The court of appeals reversed the default judgment based on defective personal service and remanded the cause to the trial court. Id. On remand, the buyer tried repeatedly to convince the seller to file an answer, but the seller failed to either specially appear or answer, and the trial court entered a second default judgment. Id. The seller then filed a special appearance, which the trial court denied. Id.
The court of appeals affirmed the trial court's denial, holding that the seller "was presumed to have entered a general appearance" under Rule 123. Id. at 24. Rule 123 provides, "Where the judgment is reversed on appeal or writ of error for the want of service, or because of defective service of process, no new citation shall be issued or served, but the defendant shall be presumed to have entered his appearance to the term of the court at which the mandate shall be filed." TEX. R. CIV. P. 123. The court of appeals explained that the seller "could have escaped Rule 123's presumption of general appearance using Rule 120a's special appearance." Boyd, 283 S.W.3d at 24. But instead, the seller "did nothing," notwithstanding the buyer's repeated requests that the seller "file an answer . . . so that the case could move forward." Id. Thus, the court of appeals held, "By failing to timely enter a special appearance after reversal of the first default judgment, especially in light of [the buyer's] requests that he do so, [the seller] entered a general appearance which granted the trial court personal jurisdiction over him." Id. at 25.
This case is distinguishable for two principal reasons. First, this case is not on remand from a restrictive appeal, so Rule 123's presumption does not apply. Second, unlike the seller in Boyd, Long Island Pipe did not wait for months to file its special appearance, and there is no evidence that Merfish repeatedly asked Long Island Pipe to file an answer to allow the case to move forward.
We hold that Long Island Pipe did not enter a general appearance before filing its special appearance.
Conclusion
We reverse the trial court's order overruling Long Island Pipe's special appearance and render judgment dismissing Merfish's claims against it for lack of personal jurisdiction.
Harvey Brown
Justice Panel consists of Justices Higley, Brown, and Caughey.