Opinion
CIVIL ACTION NO. 3:01-CV-0207-G.
October 1, 2001.
MEMORANDUM ORDER
Before the court is the motion of the defendant Dale Brown ("Brown") to dismiss the plaintiff's claims against him for lack of personal jurisdiction. For the reasons stated below, Brown's motion is denied.
I. BACKGROUND
This suit was filed by the plaintiff Penson Financial Services, Inc. ("Penson") on January 30, 2001. Complaint at 1. Penson is a North Carolina corporation with its principal place of business located in Dallas, Texas. Id. The defendants, Brown and Tony Davis ("Davis"), are individuals who reside in the state of Nevada. Id. Penson is a clearing broker-dealer, clearing securities trades introduced to it by correspondents such as Finance 500, Inc. ("Finance 500"). Id. at 2. Davis was employed as a broker for Finance 500. Id. As a broker, he transacted business on behalf of the clients of Finance 500, including the buying and selling of securities. Id. Each of the trades that Davis introduced was processed through the Finance 500 customer accounts at Penson. Id. Penson cleared these securities trades and performed other functions pursuant to instructions from Finance 500. Id.
Among the transactions which Penson cleared for Finance 500 were the trading of securities, the transfer of funds between accounts, and the transfer of funds to outside accounts. Id. at 3. To transfer funds to accounts outside Penson and Finance 500, Davis would process a letter of authorization — which is a form letter signed by the authorizing customer before a notary public. Id. This letter authorizes Penson to transfer funds to accounts outside of Penson's internal accounting system. Id. Such transfers require these letters of authorization. Id.
Over the course of eight months, Davis submitted numerous fraudulent letters of authorization to Penson as a part of a systematic scheme to take funds from customers' accounts. Id. Penson alleges that Davis submitted forged signatures and illegitimate notarizations on the letters of authorization and faxed these letters to Penson. Id. Upon receipt of the instructions from Davis, Penson transferred funds as directed in the letters of authorization, most often to the account of Brown at Bank of America. Id. Brown received at least $2,500,000 into his account at Bank of America and then transferred some portion of these funds to Davis. Id. By this scheme, Penson alleges, Davis and Brown defrauded Penson and obtained over two million dollars from various customers of Finance 500. Id.
II. ANALYSIS A. Factual Standard: Prima Facie Case
When a nonresident defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing the district court's jurisdiction over the nonresident. Wilson v. Belin, 20 F.3d 644, 648 (5th Cir.), cert. denied, 513 U.S. 930 (1994); Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985). If the district court chooses to decide the matter without an evidentiary hearing, the plaintiff may meet its burden by presenting a prima facie case for personal jurisdiction. Wilson, 20 F.3d at 648; Thompson v. Chrysler Motors Corporation, 755 F.2d 1162, 1165 (5th Cir. 1985). The court will take the allegations of the complaint as true, except where they are controverted by opposing affidavits, and all conflicts in the facts are resolved in favor of the plaintiff. Wilson, 20 F.3d at 648. In making its determination, the court may consider affidavits, interrogatories, depositions, oral testimony, or any combination of recognized discovery methods. Thompson, 755 F.2d at 1165; Spademan, 772 F.2d at 1192.B. Legal Standard
A court determines the existence of personal jurisdiction over a nonresident defendant by examining the "(1) assertion of jurisdiction by the law of the forum;" and "(2) conformity of the law with the Constitution." Pedelahore v. Astropark, Inc., 745 F.2d 346, 347 (5th Cir. 1984). A defendant is amenable to the personal jurisdiction of a federal court sitting in diversity to the same extent that it would be amenable to the jurisdiction of a state court in the same forum. Id. Applying state law, this court must first determine whether Texas, the forum state, could assert long-arm jurisdiction. Id. Because the Texas long-arm statute confers jurisdiction to the limits of the federal constitution, Hall v. Helicopteros Nacionales de Colombia, S.A., 638 S.W.2d 870, 872 (Tex. 1982), rev'd on other grounds, 466 U.S. 408 (1984), the court need only concern itself with the federal due process inquiry. Bullion v. Gillespie, 895 F.2d 213, 215-16 (5th Cir. 1990).
C. Due Process Requirements
Due process requires the satisfaction of two elements to exercise personal jurisdiction over a nonresident: (a) the nonresident must have some minimum contact with the forum which results from an affirmative act on his part; and (b) it must be fair and reasonable to require the nonresident to defend the suit in the forum state. Spademan, 772 F.2d at 1189. The due process clause ensures that persons have "fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign." Burger King Corporation v. Rudzewicz, 471 U.S. 462, 472 (1985).
To establish minimum contacts, a nonresident defendant must do some act or acts by which he "purposefully avails [him]self of the privilege of conducting activities within the forum State, thus invoking the benefits and protection of its laws." Hanson v. Denckla, 357 U.S. 235, 253 (1958). In determining whether the exercise of jurisdiction is appropriate, the Supreme Court has focused less on presence in the forum state as a means to establish jurisdiction and looked increasingly to whether a defendant's contacts with the forum make it reasonable to require the defendant to defend the particular suit in that forum. Shaffer v. Heitner, 433 U.S. 186, 203 (1977).
Two types of in personam jurisdiction may be exercised over a nonresident defendant: specific and general. Specific jurisdiction exists if the cause of action is related to, or arises out of, the defendant's contacts with the forum, and those contacts meet the due process standard. Holt Oil Gas Corporation v. Harvey, 801 F.2d 773, 777 (5th Cir. 1986), cert. denied, 481 U.S. 1015 (1987); Wilson, 20 F.3d at 647; Spademan, 772 F.2d at 1190. General jurisdiction, on the other hand, may be found when a claim is unrelated to the nonresident's contacts with the forum but where those contacts are "continuous and systematic." Helicopteros, 466 U.S. at 415; Wilson, 20 F.3d at 647.
Because the claims in this case relate to Brown's contacts with Texas, and because Penson has not alleged that Brown has had continuous and systematic contacts with Texas, the court will not address the question of general jurisdiction.
When specific jurisdiction is at issue, the minimum contacts inquiry focuses on whether the nonresident defendant has "`purposefully directed' his activities at residents of the forum" state. Spademan, 772 F.2d at 1190 (quoting Burger King, above, 471 U.S. at 472). The purposeful availment requirement "ensures that a defendant will not be haled into a jurisdiction solely as a result of `random,' `fortuitous,' or `attenuated' contacts . . . or of the `unilateral activity of another party or a third person.'" Spademan, 772 F.2d at 1191.
D. Committing a Tort in Texas
Penson maintains that Brown is subject to the specific jurisdiction of this court because he and Davis committed a tort in Texas. Plaintiff's Response to Defendant's Motion to Dismiss Pursuant to Rule 12(b)(2) and Brief in Support ("Response") at 13. Specifically, Penson contends that Brown knew the money was coming from Texas, knew the money did not belong to Davis, and knew that Davis could not have transferred the money through standard brokerage accounts, but was using Brown's accounts instead. Id. Penson further alleges that Brown was receiving an economic benefit from the transactions. Id. Brown, however, direct the court's attention to his affidavit which states that (1) he never had any contact in Texas with Penson or any of its representatives in person, over the telephone, or in writing, (2) he did not have any specific information or knowledge, before this lawsuit, as to who Penson was or what the nature of its business was, and (3) he has not committed a tort, in whole or in part, in the state of Texas. Defendant's Motion to Dismiss Pursuant to Rule 12(b)(2) and Brief in Support ("Motion") at 7; Affidavit of Dale Brown, Appendix to Motion, Exhibit 1 ("Brown Affidavit") at 2.
Brown's affidavit refutes the allegations in Penson's complaint. However, the deposition testimony attached to Penson's response supports Penson's claims. See Thompson, 755 F.2d at 1165; Spademan, 772 F.2d at 1192 (holding that, in making its jurisdictional determination, the court may consider affidavits, interrogatories, depositions, oral testimony, or any combination of recognized discovery methods). For example, Brown's own deposition testimony supports Penson's allegations that Brown was an active participant in the alleged fraud perpetrated on Penson. Response at 8. In his deposition, Brown admitted to providing his bank account number to Davis. Id.; Appendix to Response, Exhibit A, Deposition of Dale Brown ("Brown Dep."), at 43. Moreover, the affidavit of Wm. David Simmons ("Simmons Affidavit") avers that Brown's account at Bank of America received twenty-one wire transfers from Penson's bank accounts in Texas during the ten month period from March 1, 2000 to December 31, 2000, and that such wire transfers totaled $2,050,000. Appendix to Response, Simmons Affidavit at 1-2. During the same ten month period, all of the other deposits into Brown's account totaled less than $130,000. Id. Furthermore, Brown testified that he knew that these twenty-one wire transfers were transfers of Davis's clients' money, and Brown's bank statements showed that they came from Penson's Dallas banks. Appendix to Response, Brown Dep. at 53. Brown acknowledged that he questioned Davis about why he needed Brown's account for the transfers and that Davis responded, "This is the way it has to be." Id. at 44. Then, after allowing Davis to use his account in this manner, Penson alleges that during the ten month period from March 1, 2000 through December 31, 2000, Brown provided Davis with cashiers' checks payable to Davis or made account-to-account transfers at Bank of America from Brown's account to Davis's totaling $2,026,000. Appendix to Response, Simmons Affidavit at 2. Finally, Brown admits that he financially benefitted from the scheme, testifying that he borrowed money from Davis and that the borrowed money came from Davis's clients' money. Appendix to Response, Brown Dep. at 31-32.
According to the Simmons Affidavit, the bank statements from Bank of America show on their face that the funds in question were transferred from "Penson Financial Services" in Texas. Response at 9; Appendix to Response, Simmons Affidavit at 3. Thus, the Simmons Affidavit and Brown's own deposition at a minimum create a fact question as to whether Brown participated in defrauding Penson. For purposes of determining jurisdiction, the court must resolve all factual questions in favor of Penson. Wilson, 20 F.3d at 648 (holding that all conflicts in the facts must be resolved in favor of the plaintiff).
The question remaining for the court is whether Brown's actions in Nevada will support the exercise of specific jurisdiction by this court in the state of Texas. In Calder v. Jones, 465 U.S. 783 (1984), the Supreme Court held that a defendant will be subject to jurisdiction in a particular forum if the defendant committed an intentional tort which he knows will harm the plaintiff in that forum. The Court reasoned that where the defendants had acted as "primary participants in an alleged wrongdoing intentionally directed at a [forum state] resident," they could reasonably anticipate being haled into court in the forum state. Calder, 465 U.S. at 789; see also Union Carbide Corporation v. UGI Corporation, 731 F.2d 1186, 1190 (5th Cir. 1984) (holding that an intentionally tortious act committed by a defendant outside of Texas, which resulted in an injury in Texas, was sufficient to support a court's assertion of jurisdiction within the limits of the due process clause).
The plaintiff in Calder, who lived and worked in California, brought suit in California claiming that she had been libeled in an article written and edited by the defendants in Florida. Calder, 465 U.S. at 784. Though the defendants in Calder were both Florida residents who had minimal contacts with the state of California, the Court held that jurisdiction over the defendants was proper in California based on the effects that their Florida conduct had in California. Id. at 789.
In the case at bar, Davis and Brown were the participants in an alleged fraud on Penson. They knew that their actions would have a potentially devastating impact on Penson. They also knew that Penson would feel the brunt of the injury, that is, great financial liability and loss, in Texas. In sum, Davis and Brown were primary participants in an alleged tort which had the effect of causing injury to a Texas resident. Therefore, this court may properly exercise jurisdiction over them. See Calder, 465 U.S. at 789; Union Carbide, 731 F.2d at 1190.
E. Fairness
Having concluded that Brown has purposefully established minimum contacts with Texas, the court must consider whether assertion of jurisdiction over him comports with the principles of fair play and substantial justice. Burger King, 471 U.S. at 476. When minimum contacts have been established, often the interests of the plaintiff and the forum state justify burdens on the defendant. Kervin v. Red River Ski Area, Inc., 711 F. Supp. 1383, 1394 (E.D. Tex. 1989) (citing Asahi Metal Industry Co., Ltd. v. Superior Court of California, 480 U.S. 102, 114 (1987)). The defendant may defeat personal jurisdiction, however, by presenting a compelling case that the presence of some other considerations would render jurisdiction unreasonable. Burger King, 471 U.S. at 477. It is Brown's burden to show that conducting litigation in this court would be so gravely difficult and inconvenient that he would be at a severe disadvantage in comparison to Penson. Burger King, 471 U.S. at 478 (citations omitted).
The State of Texas has an interest in providing its residents with a convenient forum for redressing injuries allegedly inflicted by out of the state actors. See id. at 473 (citations omitted). Penson has the right to choose a convenient, readily accessible forum. It is entitled to maintain this action in the locale where its alleged injury was sustained rather than in a distant forum.
Brown has demonstrated no burden that outweighs the interest of Texas and Penson in litigating this matter in Texas.
III. CONCLUSION
For the foregoing reasons, Brown's motion to dismiss is DENIED.