Opinion
NO. 14-19-00012-CV
09-01-2020
POWER RESEARCH INC. AND WANDA DAVIDSON, Appellants v. RALPH LEWIS, MICHAEL HRISTODOULAKIS, KALLIOPE HRISTODOULAKIS, NEWPORT FUEL SOLUTIONS, INC., MICHAEL H. SALES, LLC; AND KALLIOPE SALES AND OPERATION, LLC, Appellees
On Appeal from the 270th District Court Harris County, Texas
Trial Court Cause No. 2018-76110
MEMORANDUM OPINION
Appellants Power Research Inc. and Wanda Davidson (together, "Appellants") sued appellees Newport Fuel Solutions, Inc. ("Newport"), Ralph Lewis, Michael Hristodoulakis, Kalliope Hristodoulakis, Michael H. Sales, LLC, and Kalliope Sales and Operation, LLC, asserting breach of contract and other claims based on alleged misuse of trade secrets and confidential information. Newport, Lewis, Kalliope, and Michael (collectively, the "Newport Appellees") filed a special appearance, which the trial court granted. In this interlocutory appeal, Appellants assert the trial court erred in granting the special appearance because it could properly exercise specific personal jurisdiction over each of the Newport Appellees. For the reasons below, we reverse the trial court's order and remand for proceedings consistent with this opinion.
Because Kalliope and Michael share the same last name, we refer to them by their first names to avoid confusion.
BACKGROUND
I. Overview of the Parties and the Relevant Facts
Wanda formed Power Research in 1985, with its principal and sole office located in Houston, Texas. Power Research is engaged in the manufacture and sale of hydrocarbon fuel additives, which are used by commercial shipping companies and power generator industries throughout the world.
Because we also refer to Wanda's son, Blake Davidson, in this opinion, we refer to Wanda and Blake by their first names to avoid confusion.
Wanda married Lewis the same year she formed Power Research. After their marriage, Lewis became an officer and employee of Power Research. Lewis filed for divorce from Wanda in 2016 and his employment with Power Research was terminated on August 29, 2016. Lewis moved to California in November 2017.
Michael and his daughter, Kalliope, are also former Power Research employees. Michael is a resident of Greece and began his Power Research employment in 2008, working primarily as a sales director serving the Greek shipping market. Michael resigned his Power Research position in September 2018. Kalliope also is a resident of Greece and began working for Power Research in 2015, helping Michael with the operations work for sales he made in Greece. Kalliope left Power Research in May 2016.
While they were employed with Power Research, Lewis, Kalliope, and Michael signed identical "Confidentiality Agreements" that provide, in relevant part:
1. DEFINITION OF CONFIDENTIAL INFORMATION. For the duration of the agreement between PRI and [employee], which allows [employee] to represent the interests of PRI, PRI will disclose to [employee] information that PRI considers confidential or secret (the "confidential information"). The confidential information may include, but not be limited to the chemical formulation of the products, the manufacturing process, test methods and test results, technical documentation, marketing plans, competitive analyses, cost of manufacture and new products in development.
* * *
2. USE AND PROTECTION OF CONFIDENTIAL INFORMATION.
a. [Employee] acknowledges that the confidential information constitutes highly valuable information which is not generally known to the public, including trade secrets and know-how, and that but for this agreement, [employee] would have no right to receive any disclosure or use any portion of the confidential information in any manner whatsoever.
b. [Employee] agrees to keep the confidential information secret and not to disclose it to third parties. Neither [employee] nor its directors, officers, employees or agents will, without PRI's written permission, (a) disclose any of the confidential information to any person outside PRI or [employee], or (b) use or disclose any of the confidential information for any purpose other than in the performance of this agreement with PRI.
* * *
e. [Employee] will not attempt, in any manner or method, to
back engineer or analyze any PRI formulas nor any of the PRI products, for any use by [employee] or its associates, whatsoever. [Employee] agrees that the formulae are secret formulae owned exclusively by Wanda Davidson Lewis, and [employee] will neither order the breaking down or duplication of the formulae, nor, so far as is within [employee's] power, permit anyone associated with [employee] to break down or duplicate the formulas.
As part of their divorce, Wanda and Lewis also entered into an "Agreement Incident to Divorce" effective August 1, 2017. The agreement incident to divorce provides as follows with respect to Lewis's confidentiality agreement with Power Research:
* * *
4. NON-COMPETE. During the term of this Agreement and for a period of two years thereafter, [employee] shall not within the United States or internationally, directly or indirectly, either for his own account, or as a partner, shareholder, officer, director, employee, agent or otherwise; own, manage, operate, control, be employed by, participate in, consult with, perform services for, or otherwise be connected with any business the same as or similar to the business conducted by [PRI].
Pursuant to the Confidentiality Agreement between Power Research, Inc. and Ralph Lewis dated November 10, 2015, Ralph Lewis shall not, within the United States or internationally, directly or indirectly, either for his own account, or as a partner, shareholder, officer director, employee, agent or otherwise, own, manage, operate, control be employed by, participate in, consult with, perform services for, or otherwise be connected with any business the same as or similar to the business conducted by Power Research, Inc. through August 29, 2018.(emphasis in original). The agreement incident to divorce also states that Wanda owns as her "separate property" "all formulas associated with Power Research, Inc."
The Confidentiality Agreements define "PRI" as Power Research.
After his employment with Power Research was terminated, Lewis formed Newport, a Nevada corporation with its principal office in Nevada. Newport manufactures fuel treatment solutions for marine and industrial fuels and sells its product to foreign shipping companies. As part of its manufacturing process, Newport sources, blends, stores, and ships material and product in Texas.
Michael and Kalliope joined Lewis at Newport. On September 17, 2018, Kalliope formed for herself and Michael two Texas limited liability companies: Kalliope Sales and Operation, LLC and Michael H. Sales, LLC. According to Lewis, the purpose of these companies was "to clarify the independent contractor relationship between [Kalliope and Michael] and Newport."
In the underlying proceeding, Appellants also asserted claims against Kalliope Sales and Operation, LLC and Michael H. Sales, LLC. These entities did not file special appearances and are not parties to this appeal.
II. Underlying Litigation and the Newport Appellees' Special Appearance
Appellants sued the Newport Appellees in October 2018, asserting that Lewis's, Kalliope's, and Michael's work with Newport involves the disclosure of trade secrets and other confidential information Appellees obtained through their Power Research employment. These actions, Appellants assert, constitute breaches of Lewis's, Kalliope's, and Michael's confidentiality agreements with Power Research, including the agreements' "non-compete" provisions. Appellants also assert against all Appellees claims for tortious interference with contract, tortious interference with prospective business relations, violations of the Texas Uniform Trade Secrets Act, unfair competition by misappropriation, and conspiracy.
The Newport Appellees filed a special appearance, asserting that, because they are not residents of Texas, the trial court could not properly exercise general or specific personal jurisdiction over them with respect to Appellants' claims. The Newport Appellees filed a first and second amended special appearance; the second amended special appearance was set for a hearing on November 30, 2018.
On November 26, 2018, Appellants filed a first amended petition; attached to the petition were affidavits from Wanda, Wanda's son, Blake (the secretary and treasurer of Power Research), and Michael Snow (Power Research's executive vice president of global sales and technical operations). Appellants also filed a response to the Newport Appellees' special appearances on November 29, 2018, which included 19 exhibits. That same day, Appellants filed with the trial court two letters that included "a continuation of the exhibits filed" with Appellants' special appearance response. The letters included an additional 46 exhibits. In total, Appellants filed over 700 pages of exhibits.
The trial court held a non-evidentiary hearing on November 30, 2018. The trial court signed an order on December 4, 2018, granting the Newport Appellees' special appearance. Appellants timely filed this interlocutory appeal. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7).
A reporter's record of the November 30, 2018 hearing was not included with the appellate record.
GOVERNING LAW
The sole issue before us is whether the trial court erred by granting the Newport Appellees' special appearance. Challenging this decision, Appellants argue the trial court could properly exercise specific personal jurisdiction over each of the Appellees.
I. Overview of Personal Jurisdiction
An exercise of personal jurisdiction in Texas state courts turns on an application of both federal and state law. See Searcy v. Parex Res., Inc., 496 S.W.3d 58, 66 (Tex. 2016). Specifically, Texas courts may exercise personal jurisdiction over a nonresident defendant if "(1) the Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the exercise of jurisdiction is consistent with federal and state constitutional due-process guarantees." Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007); see also Watamar Holding S.A. v. SFM Holdings, S.A., 583 S.W.3d 318, 326 (Tex. App.—Houston [14th Dist.] 2019, no pet.).
The Texas long-arm statute extends personal jurisdiction over a nonresident defendant who does business in Texas. See Tex. Civ. Prac. & Rem. Code Ann. § 17.042. A nonresident defendant "does business" in Texas if it (1) "contracts by mail or otherwise with a Texas resident and either party is to perform the contract in whole or in part" in Texas, (2) "commits a tort in whole or in part" in Texas, or (3) "recruits Texas residents, directly or indirectly or through an intermediary located in [Texas], for employment inside or outside the state." Id. The Texas Supreme Court has repeatedly interpreted this statutory language to reach as far as the federal constitutional requirements of due process will allow. See Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 337 (Tex. 2009); Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 788 (Tex. 2005). Therefore, the requirements of the Texas long-arm statute are satisfied if the exercise of personal jurisdiction comports with federal due-process limitations. See Retamco Operating, Inc., 278 S.W.3d at 337-38 ("Therefore, we only analyze whether [the nonresident defendant's] acts would bring [it] within Texas's jurisdiction consistent with constitutional due process requirements.").
Personal jurisdiction over a nonresident defendant is constitutional if (1) the defendant has established minimum contacts with the forum state, and (2) asserting personal jurisdiction over the defendant does not offend traditional notions of fair play and substantial justice. Searcy, 496 S.W.3d at 66; Wormald v. Villarina, 543 S.W.3d 315, 320 (Tex. App.—Houston [14th Dist.] 2017, no pet.). Where, as here, a plaintiff asserts specific personal jurisdiction, the minimum contacts analysis focuses on the relationship between the defendant, the forum, and the litigation. See Phillips Dev. & Realty, LLC v. LJA Eng'g, Inc., 499 S.W.3d 78, 91 (Tex. App.—Houston [14th Dist.] 2016, pet. denied). Specifically, we examine whether the nonresident defendant purposefully availed itself of the privilege of conducting activities in the forum state and whether there is substantial connection between these forum contacts and the operative facts of the litigation. Moncrief Oil Int'l Inc. v. OAO Gazprom, 414 S.W.3d 142, 151 (Tex. 2013); Watamar Holding S.A., 583 S.W.3d at 326. If these considerations are met, we examine whether asserting personal jurisdiction over the defendant comports with the traditional notions of fair play and substantial justice. See Moncrief Oil Int'l Inc., 414 S.W.3d at 154-55.
II. Standard of Review and Shifting Burdens of Proof
A nonresident defendant may file a special appearance to challenge the trial court's exercise of personal jurisdiction. See Tex. R. Civ. P. 120a; see also Wormald, 543 S.W.3d at 319. The trial court determines a special appearance "on the basis of the pleadings, any stipulations made by and between the parties, such affidavits and attachments as may be filed by the parties, the results of discovery processes, and any oral testimony." Tex. R. Civ. P. 120a.
The plaintiff bears the initial burden of pleading sufficient allegations to bring the nonresident defendant within the reach of Texas's long-arm statute. Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 658 (Tex. 2010); Watamar Holding S.A., 583 S.W.3d at 326. The burden of proof then shifts to the nonresident defendant to negate all the alleged bases of jurisdiction. Retamco Operating, Inc., 278 S.W.3d at 337; see also Kelly, 301 S.W.3d at 658 ("Because the plaintiff defines the scope and nature of the lawsuit, the defendant's corresponding burden to negate jurisdiction is tied to the allegations in the plaintiff's pleading."). The plaintiff can then respond with its own evidence that affirms its allegations. Phillips Dev. & Realty, LLC, 499 S.W.3d at 85.
The nonresident defendant can negate jurisdiction on either a factual or legal basis. Kelly, 301 S.W.3d at 659; Hoagland v. Butcher, 474 S.W.3d 802, 810 (Tex. App.—Houston [14th Dist.] 2014, no pet.). Factually, the defendant can present evidence that it has no contacts with Texas, thereby disproving the plaintiff's allegations. Kelly, 301 S.W.3d at 659. Legally, the defendant can show that "even if the plaintiff's alleged facts are true, the evidence is legally insufficient to establish jurisdiction; 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." Id.; see also Hoagland, 474 S.W.3d at 810. The plaintiff can then respond with evidence that affirms its allegations, and it risks dismissal of its claims if it cannot present evidence establishing personal jurisdiction. Kelly, 301 S.W.3d at 659.
On appeal, the scope of review in a special appearance case includes all evidence in the record. Phillips Dev. & Realty, LLC, 499 S.W.3d at 85. We do not address the merits of the lawsuit when we review an order denying a special appearance. See Michiana Easy Livin' Country, Inc., 168 S.W.3d at 791-92.
The existence of personal jurisdiction is a question of law that sometimes is preceded by the resolution of factual disputes. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002); Hoagland, 474 S.W.3d at 811. Where, as here, the trial court did not issue findings of fact and conclusions of law, all relevant facts that are necessary to support the judgment and supported by evidence are implied. Old Republic Nat'l Title Ins. Co. v. Bell, 549 S.W.3d 550, 558 (Tex. 2018). But where the underlying jurisdictional facts are undisputed or otherwise established, we review a trial court's denial of a special appearance de novo. Id. (citing Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004)).
ANALYSIS
We began by considering the Newport Appellees' evidentiary challenges to the affidavits and exhibits filed with Appellants' first amended petition, special appearance response, and November 29, 2018 letters. We then examine whether the trial court erred by granting the Newport Appellees' special appearance.
I. Newport Appellees' Evidentiary Challenges
Appellants filed their first amended petition four days before the hearing on the Newport Appellees' special appearance; included with the petition were affidavits from Wanda, Blake, and Michael Snow. Additional attachments were included with Blake's and Snow's affidavits. The day before the hearing, Appellants filed a response to the Newport Appellees' special appearance and attached 19 exhibits; one exhibit was a second affidavit from Blake that included 41 attachments. That same day, Appellants filed two additional letters with a combined total of 46 exhibits.
Challenging the affidavits and exhibits included with these filings, the Newport Appellees rely on the following provision in Texas Rule of Civil Procedure 120a:
The court shall determine the special appearance on the basis of the pleadings, any stipulations made by and between the parties, such affidavits and attachments as may be filed by the parties, the results of discovery processes , and any oral testimony. The affidavits , if any , shall be served at least seven days before the hearing , shall be made
on personal knowledge, shall set forth specific facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify.Tex. R. Civ. P. 120a(3). The Newport Appellees argue that, because the affidavits and exhibits were not filed seven days before the special appearance hearing, we cannot consider them on appeal. The Newport Appellees also argue that some exhibits lack attestation that they are the "results of discovery". The appellate record does not show that the Newport Appellees raised these evidentiary objections in the trial court.
To preserve an issue for appellate review, the complaining party must present a timely and specific objection to the trial court and obtain a ruling. See Tex. R. App. P. 33.1(a). We have previously applied this precept in the special-appearance context and refused to consider evidentiary objections raised for the first time on appeal. See Wash. DC Party Shuttle, LLC v. IGuide Tours, LLC, 406 S.W.3d 723, 731 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) (in special appearance case, the appellants waived their challenge regarding the timeliness of an affidavit where the complaint was not presented in the trial court); see also Lombardo v. Bhattacharyya, 437 S.W.3d 658, 665 (Tex. App.—Dallas 2014, pet. denied) (appellant waived challenge regarding the timeliness of appellee's supplemental petition where it was not raised in the trial court before special appearance hearing); and Ennis v. Loiseau, 164 S.W.3d 698, 703 (Tex. App.—Austin 2005, no pet.) (appellant waived challenge regarding timeliness of appellee's 70 affidavits where he did not raise the objection in the trial court and obtain a ruling).
Here, because the Newport Appellees did not raise their evidentiary objections in the trial court and obtain a ruling, we cannot consider them for the first time on appeal. See Tex. R. App. P. 33.1(a); Wash. DC Party Shuttle, LLC, 406 S.W.3d at 731. Therefore, we overrule the Newport Appellees' evidentiary challenges. II. Allegations, Evidence, and an Application of Personal Jurisdiction Principles
Turning to the jurisdictional analysis, we begin by considering whether Appellants pleaded allegations sufficient to bring the Newport Appellees within the reach of Texas's long-arm statute. See Kelly, 301 S.W.3d at 658-60; see also Tex. Civ. Prac. & Rem. Code Ann. § 17.042; Huynh v. Nguyen, 180 S.W.3d 608, 619-20 (Tex. App.—Houston [14th Dist.] 2005, no pet.) ("This minimal pleading requirement is satisfied by an allegation that the nonresident defendants are doing business in Texas."). To determine whether Appellants satisfied this burden, we consider their pleadings as well as their response to the Newport Appellees' special appearance. See Max Protetch, Inc. v. Herrin, 340 S.W.3d 878, 883 (Tex. App.—Houston [14th Dist.] 2011, no pet.). We accept as true the allegations in Appellants' pleadings and response. See Yujie Ren v. ANU Res., LLC, 502 S.W.3d 840, 846 (Tex. App.—Houston [14th Dist.] 2016, no pet.).
In their third amended petition, Appellants allege that the Newport Appellees were doing business in Texas because they (1) contracted with a Texas resident for contracts to be performed in whole or in part in Texas; (2) committed a tort in Texas; and (3) recruited Texas residents for employment. See Tex. Civ. Prac. & Rem. Code Ann. § 17.042. Appellants pleaded the following jurisdictional facts to support these allegations:
• Lewis, Kalliope, and Michael signed confidentiality and non-compete agreements as part of their Power Research Employment.
• Lewis obtained confidential information and trade secrets while working for Power Research in Houston, Texas.
• Kalliope and Michael obtained confidential information from Power
Research's Houston headquarters. While working for Power Research, Kalliope and Michael regularly coordinated sales, deliveries, and other operations in Texas.Satisfying their initial burden, Appellants pleaded sufficient jurisdictional facts to support their allegations that the Newport Appellees' conduct falls within Texas's long-arm statute. See id.; see, e.g., Phillips Dev. & Realty, LLC, 499 S.W.3d at 85-86. The burden shifted to the Newport Appellees to negate all the bases of jurisdiction alleged by Appellants. See Retamco Operating, Inc., 278 S.W.3d at 337.
• Lewis formed Newport to compete directly with Power Research using Power Research's confidential and proprietary information, including its formulas, contact lists, product testing, and pricing. Through Newport, Lewis is selling products that use the same "core chemistry" as those sold by Power Research.
• Newport conducts substantial business in Texas that involves the disclosure of Appellants' confidential trade secret information. The manufacturing company that blends Newport's products is located in Texas and Newport ships components to this company's Texas facility.
• Newport stores and transports its products in Texas.
• Lewis visits Texas to conduct Newport business.
• Newport and Lewis tortiously interfered with Kalliope's and Michael's confidentiality and non-compete agreements with Power Research by soliciting them to join him at Newport.
• Kalliope and Michael formed Texas LLCs to compete with Power Research and in furtherance of the services they provide to Newport.
• Newport, Lewis, Kalliope, and Michael attempted to tortiously interfere with Texas resident Mike Snow's employment with Power Research.
In their special appearance, the Newport Appellees argued that these Texas contacts are insufficient to support an exercise of specific personal jurisdiction because there is not a substantial connection between the contacts and the operative facts of Appellants' claims. Included with their special appearance, the Newport Appellees attached affidavits from Lewis, Kalliope, and Michael that provided additional context for their Texas contacts: Lewis's Affidavit (dated November 15, 2018)
• Lewis worked at Power Research's Houston office until August 29, 2016. While working for Power Research, Lewis "developed nearly all the customers, vendor, and supplier contacts, pricing, and relationships."Kalliope's Affidavit (dated November 15, 2018)
• Lewis moved to California in November 2017 and no longer resides in Texas.
• Lewis is president of Newport. Newport "sources material, blends product and incident thereto stores and ships these material[s] and product[s] in Texas." Newport uses Seatex as its "toll blender", which blends its products for a fee. Seatex's blending plant is in El Campo, Texas. Newport also purchases storage drums from a company with a manufacturing facility in Texas. After they are blended, Newport's products are transported to the Port of Houston and shipped to other ports.
• Newport sells its products to foreign shipping companies, with the location for delivery determined by the recipient. On at least one occasion, Newport has delivered products at the Port of Houston.
• Lewis visited Texas three times in 2018 for Newport business. On one trip, Lewis was accompanied by Kalliope. During this visit, Lewis and Kalliope toured Seatex's blending facility in connection with their Newport work.
• Kalliope is a citizen and resident of Greece.
• Kalliope worked as an independent contractor in Power Research's Houston office from November 2015 through May 2016.
• While employed at Power Research, Kalliope did not receive access to formulas or blending methods.
• In July 2018, Kalliope traveled to Texas to meet with Lewis. During
that meeting, Kalliope and Lewis engaged in Newport business by "visiting a blending facility and a few freight forwarding companies."Michael's Affidavit (dated November 15, 2018)
• In her capacity as an "employee" of Newport, Kalliope has "communications with several companies that have offices or facilities in Texas," including Seatex.
• Kalliope formed a Texas LLC in September 2018 called Kalliope Sales and Operation, LLC. Kalliope also formed a corporation for Michael: Michael H. Sales, LLC. The LLCs were formed "in connection with any services that [Michael] and [Kalliope] would provide for Newport". The LLCs were formed in Texas because Lewis had a Texas address. The LLCs' organization has not been finalized, and the LLCs have not received any capitalization or assets or conducted any business or other activities.
• Michael is a citizen and resident of Greece.
• During the entirety of his ten-year employment with Power Research, Michael worked from Greece and dealt only with non-Texas customers. Michael made three visits to Power Research's Houston office. During these trips, Michael (1) settled commissions owed to him; (2) settled expense reimbursements; (3) discussed Kalliope's "plans to travel to Houston and work for [Power Research] at its Houston facility"; and (4) updated his supervisor regarding his sales strategy.
• While employed at Power Research, Michael did not receive access to formulas or blending methods.
• Since leaving Power Research, Michael has not traveled to or had any contact with anyone in Texas. Michael has not solicited or sold any products to a Texas resident.
• Any contacts Michael has had with Newport, Lewis, and Kalliope have taken place outside of Texas. Likewise, Michael's customer contacts have occurred outside of Texas.
• Kalliope formed a Texas LLC for Michael in September 2018: Michael H. Sales, LLC. The LLC was formed in Texas because Lewis had a Texas address "that could be designated as the place of business." The LLC's organization has not been finalized, and the
LLC has not received any capitalization or assets or conducted any business or other activities.To determine whether the Newport Appellees negated all alleged bases for jurisdiction, we analyze the Appellees' contacts under the due process jurisdictional framework and examine whether (1) Appellees established minimum contacts with Texas, and (2) asserting personal jurisdiction over the Appellees offends traditional notions of fair play and substantial justice. See Searcy, 496 S.W.3d at 66; Wormald, 543 S.W.3d at 320.
A. Minimum Contacts
A defendant establishes minimum contacts with a state when it "purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws." Retamco Operating, Inc., 278 S.W.3d at 338. Essentially, the purposeful availment analysis seeks to determine whether a nonresident's conduct and connection to the forum state are such that it could anticipate being haled into a court there. Moncrief Oil Int'l Inc., 414 S.W.3d at 152. This analysis uses a three-pronged approach: (1) only the defendant's contacts with the forum state are relevant — not the unilateral activity of someone else; (2) whether those contacts are purposeful rather than random, fortuitous, or attenuated; and (3) whether the defendant sought some benefit, advantage, or profit by availing itself of the jurisdiction. Moki Mac River Expeditions, 221 S.W.3d at 575; Yujie Ren, 502 S.W.3d at 848. We focus on the quality and nature of the contacts, rather than the quantity. Moncrief Oil Int'l Inc., 414 S.W.3d at 151.
Merely contracting with a Texas company does not constitute purposeful availment for jurisdictional purposes. See IRA Res., Inc. v. Griego, 221 S.W.3d 592, 597-98 (Tex. 2007) (per curiam); Info. Servs. Grp., Inc. v. Rawlinson, 302 S.W.3d 392, 400 (Tex. App.—Houston [14th Dist.] 2009, pet. denied). Likewise, "simply being employed by a Texas company" does not show purposeful availment. Info. Servs. Grp., Inc., 302 S.W.3d at 400. Rather, the defendant's contacts must reflect purposeful availment of the privilege of conducting activities within Texas, thereby invoking the benefits and protections of its laws. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76 (1985).
In addition to the purposeful availment analysis, we must determine whether Appellants' claims arise from or relate to the Newport Appellees' purposeful contacts with Texas. See Moki Mac River Expeditions, 221 S.W.3d at 575-76; Moring v. Inspectorate Am. Corp., 529 S.W.3d 145, 155 (Tex. App.—Houston [14th Dist.] 2017, pet. denied). This standard requires "a substantial connection between those contacts and the operative facts of the litigation." Moki Mac River Expeditions, 221 S.W.3d at 585.
We make this determination on a claim-by-claim basis unless we are shown that all claims arise from the same contacts with Texas. Moncrief Oil Int'l Inc., 414 S.W.3d at 150-51. Here, Appellants assert the following claims against the Newport Appellees: breach of contract; tortious interference with contract; tortious interference with prospective business relations; violation of the Texas Uniform Trade Secrets Act; unfair competition by misappropriation; and conspiracy. In the trial court and in their appellate briefs, the parties treat these claims as arising from the same forum contacts. Each of Appellants' claims stems from allegations that the Newport Appellees improperly disclosed and used Appellants' confidential information and trade secrets and unfairly competed with Power Research. Under these circumstances, we need not analyze the Newport Appellees' minimum contacts on a claim-by-claim basis. See, e.g., Moring, 529 S.W.3d at 155-56; Yujie Ren, 502 S.W.3d at 848-49.
Appellants' breach of contract claim is asserted only against Lewis, Kalliope, and Michael.
This claim is pleaded as an alternative to Appellants' claim for violation of the Texas Uniform Trade Secrets Act.
We undertake the minimum contacts analysis separately with respect to each of the Newport Appellees. See, e.g., Searcy, 496 S.W.3d at 72-79. Where necessary, we supplement our analysis with evidence provided by Appellants. See Phillips Dev. & Realty, LLC, 499 S.W.3d at 85 (after the defendant presents evidence to negate jurisdiction, the "plaintiff can then respond with its own evidence that affirms its allegations").
1. Newport
Newport's Texas contacts reflect purposeful availment of the privilege of conducting business activities within the state.
Newport is a Nevada corporation with its principal place of business in Nevada. Newport manufactures fuel treatment solutions and a significant portion of its manufacturing process takes place in Texas. As Lewis detailed in his affidavit, Newport (1) uses a Texas chemical toll blender, Seatex, to blend its products, and (2) purchases components, like storage barrels and solvents, from suppliers that have an office or are located in Texas. Newport also stores products and components in a Texas warehouse and transports its products to the Port of Houston for further delivery.
The actions of Lewis, Newport's president, are also relevant to our assessment of Newport's Texas connections. See Holloway v. Skinner, 898 S.W.2d 793, 795 (Tex. 1995) ("As a general rule, the actions of a corporate agent on behalf of the corporation are deemed the corporation's acts."); Huynh, 180 S.W.3d at 620 ("The Texas contacts of agents or employees are attributable to their nonresident principals."). Lewis stated that he visited Texas three times in 2018, "all on Newport business". During these visits, Lewis met with Seatex and two other toll blenders, as well as a prospective drum manufacturer and several freight forwarders.
Also relevant to this inquiry are Kalliope's actions on behalf of Newport. Appellants included with their exhibits the following emails sent from Kalliope in her capacity as Newport's "Operations Manager":
This list does not include all of Kalliope's emails coordinating the shipping, storage, and delivery of Newport products in Texas, but is a representative sample.
• A July 2018 email coordinating the shipping and transportation of certain Newport products that were to be loaded in Seatex's El Campo, Texas facility and shipped out of Houston.These contacts satisfy the three-pronged purposeful availment analysis outlined above: (1) they are not the unilateral activity of an entity other than Newport or its employees; (2) they are purposeful actions taken by Newport and its employees with respect to its manufacturing, storage, and transportation operations; and (3) they conferred a benefit or advantage upon Newport with respect to the operations and profitability of its business. See Moki Mac River Expeditions, 221 S.W.3d at 575; see also Gen. Refractories Co. v. Martin, 8 S.W.3d 818, 820, 822 (Tex. App.—Beaumont 2000, pet. denied) (evidence supported conclusion that defendant company's contacts constituted purposeful availment where company had processing and manufacturing operations in Texas).
• An August 2018 email with a Seatex employee coordinating the shipping of certain Newport products.
• A September 2018 email to an employee of Adam's Warehouse in Houston, Texas, coordinating the pickup of certain Newport products from Seatex's El Campo facility. In a separate email, Kalliope states that Newport has "many vessels" calling in Gulf Coast ports, including Houston, Galveston, and Corpus Christi. Kalliope instructed Adam's Warehouse that it would be responsible for the delivery of the products to the location provided.
These contacts also bear a substantial connection to the operative facts of the litigation. See Moki Mac River Expeditions, 221 S.W.3d at 585. Specifically, Appellants allege that Newport is the vehicle through which the Newport Appellees "compet[e] directly with [Power Research] using [Power Research's] confidential and proprietary information", including Power Research's formulas, customer and contact lists, product testing, and pricing. Appellants allege that Newport sells products with the same "core chemistry" as those sold by Power Research. Accordingly, Newport's Texas contacts — including the products it blends with Seatex, its pricing arrangements with other Texas vendors, and the transportation of its products — are substantially connected to these allegations and would be relevant to the resolution of Appellants' claims.
We conclude that Newport's Texas connections satisfy the minimum contacts analysis.
2. Lewis
Lewis's Texas contacts also reflect purposeful availment of the privilege of conducting business activities within the state.
Lewis worked in Power Research's Houston office from 1985 through 2016; according to Lewis's affidavit, he "developed nearly all the customers, vendor, and supplier contacts, pricing, and relationships" for Power Research. In Blake's affidavit, he states that Lewis worked in different capacities during his employment with Power Research, including as vice president of technical operations. Blake also states that Lewis maintained an office at Power Research's Houston headquarters and had access to Power Research's formulas.
Emails included with Appellants' filings show significant connections between Lewis's work with Power Research and the products he developed with Newport:
• Included with Mike Snow's affidavit is an October 2018 email sent from Lewis to a Power Research customer. In the email, Lewis states: "In creating Newport Fuel Solutions, I had the opportunity to make major upgrades to our fuel treatment line. The products are significantly stronger than those I created for Power Research Inc. Most importantly, I was able to greatly improve dosage rates, providing a dramatic reduction in costs for our clients." (emphasis added). These statements were repeated in an October 2018 email from Lewis to a Thome Ship Management representative.And, as discussed above, Lewis maintains purposeful connections to Texas through his work with Newport. Lewis came to Texas three times in 2018 in connection with Newport business and visited toll blenders, drum manufacturers, and freight forwarders. Lewis also maintains a Texas address (that he describes as a "mail forwarding service") which he uses to forward personal mail to his residence in California. Lewis states that he permitted Kalliope to use this Texas address "to form LLCs for herself and her father, Michael." According to Lewis, the purpose of these LLCs was "to clarify [Kalliope's and Michael's] independent contractor relationship" with Newport.
• In a September 2018 email from Michael to representatives of Maran Tankers, he attached an article written by Lewis. Discussing the "approach" taken by Newport with respect to the development of its products, Lewis touts "three decades of research and development".
• In an email listing Lewis's clarifications with respect to Newport's products, Lewis states: " The formulas [Power Research] is using now are the ones that I formulated for the last 32 years with updates in between, since I left [Power Research] has no one to formulate for them. I am not using the older [Power Research] formulary now , many significant changes and upgrades have been made ." (emphasis added).
• An email from Lewis to Michael stating that, "as CEO and founder of Newport", Lewis had "contracted with Seatex in Rosenberg, Texas for the manufacture of my formulas." (emphasis added).
Lewis's Texas connections (developed through both his Power Research and Newport work) provided him with significant benefits and advantages. Lewis's work in Texas with Power Research helped him develop the knowledge and skills that, as asserted in the emails above, assisted him in the development of Newport's products. These connections are such that Lewis reasonably could anticipate being haled into a Texas court in connection with claims arising from these contacts. See Moncrief Oil Int'l Inc., 414 S.W.3d at 152.
These contacts also bear a substantial connection to the operative facts of Appellants' claims. See Moki Mac River Expeditions, 221 S.W.3d at 585. The thrust of Appellants' claims is that the Newport Appellees used Power Research's confidential and proprietary information, including formulas and pricing, as part of Appellees' work with Newport. Lewis's forum contacts include approximately 30 years of work with Power Research in Texas which (as Lewis stated) provided a foundation for his current work with Newport — including the development of the allegedly unfair competitive products that relied on Power Research's confidential information. Therefore, Appellants' claims arise from or relate to Lewis's Texas contacts. See, e.g., Moncrief Oil Int'l Inc., 414 S.W.3d at 153-54 (the defendants' alleged acceptance of trade secrets in Texas constituted a substantial connection to forum state); Moring, 529 S.W.3d at 155-56 (defendant's alleged use of plaintiff's confidential information in Texas constituted a substantial connection to forum state).
In the Newport Appellees' brief on appeal, Appellees state that Lewis "never considered" the information he obtained from Power Research to be confidential. Likewise, in his affidavit, Lewis asserts he never considered the information he developed for Power Research to be confidential. But whether the obtained information falls within the scope of Power Research's confidentiality agreements goes to the merits of Appellants' claims, which we do not address at this stage of the litigation. See Michiana Easy Livin' Country, Inc., 168 S.W.3d at 791-92.
We conclude that Lewis's Texas connections satisfy the minimum contacts analysis.
3. Kalliope
Kalliope also purposefully availed herself of the privilege of conducting business activities within Texas.
According to her affidavit, Kalliope worked as an independent contractor in Power Research's Houston office from November 2015 through May 2016. Describing this period of employment in his affidavit, Blake states that Kalliope "was trained in operations" while in Houston and "learned the ins and outs of [Power Research's] business." Mike Snow, also describing Kalliope's stint in Houston, said she came "to Houston to get trained to do operations and logistics in Greece and to work for her father [Michael] in Greece." Similarly, in a June 2016 email from Lewis to Wanda, Lewis said that Kalliope "came to Houston to learn all about [Power Research] — our systems — selling — technical aspect." Lewis said the intent was that Kalliope would "go back to Greece to become a [Power Research] salesperson."
Kalliope stated that she was fired from Power Research in May 2016 and continued to help Michael in Greece with his Power Research work. At his deposition, Michael testified that Kalliope stopped working on his behalf for Power Research in September 2017.
Describing herself as an "employee" at Newport, Kalliope said she has had "communications with several companies that have offices or facilities in Texas", including Newport's toll blender Seatex. Kalliope said she visited Texas in June 2018 in connection with Newport business. During this visit, Kalliope said she met with Lewis and they "visited a blending facility and a few freight forwarding companies." And, as discussed above with respect to Newport's Texas contacts, Kalliope also engages in substantial communications with Texas blending, shipping, and storage companies that work with Newport.
In September 2018, Kalliope stated that she formed two Texas LLCs for herself and Michael: Kalliope Sales and Operation, LLC and Michael H. Sales LLC. Kalliope said she formed the LLCs "in connection with any services that [she and Michael] would provide to Newport". Kalliope used Lewis's Houston address to register the LLCs.
These contacts satisfy the three-pronged purposeful availment analysis: (1) they are not the unilateral activity of someone other than Kalliope; (2) they are purposeful actions taken with respect to Kalliope's work with Power Research and Newport; and (3) they conferred benefits or advantages upon Kalliope, namely, experience and earnings. See Moki Mac River Expeditions, 221 S.W.3d at 575; compare Yujie Ren, 502 S.W.3d at 850-51 (defendant had purposeful contacts with forum state where he traveled to Texas to learn about investment opportunities; was designated as president and CEO of Texas corporation formed to acquire Texas oil and gas interests; and conducted business on behalf of the corporation in Texas) with Info. Servs. Grp., Inc., 302 S.W.3d at 401-03 (defendant did not have purposeful contacts with Texas where he worked in the United Kingdom for a European branch of a Texas company; traveled to Texas only twice for required company conferences; and had "infrequent communications" initiated from Texas).
These jurisdictional facts also bear a substantial connection to the operative facts of the underlying litigation. See Moki Mac River Expeditions, 221 S.W.3d at 585. As discussed above with respect to Lewis's forum contacts, Appellants allege the Newport Appellees misused Power Research's confidential and proprietary information. According to multiple individuals, Kalliope was extensively trained in Power Research's operations during her time in Houston. Kalliope stated that she was terminated from Power Research when she left Houston in May 2016; therefore, any confidential information Kalliope learned during her Power Research employment would have been learned in Houston. This Texas connection would be relevant to determining if any of Power Research's information (and whether it was confidential) was or is being utilized as part of Kalliope's Newport employment. See Moncrief Oil Int'l Inc., 414 S.W.3d at 153-54. Likewise, Kalliope's 2018 visit to Newport vendors in Texas and her ongoing communications with these vendors bear a substantial connection to Appellants' claims alleging Kalliope used or disclosed Appellants' confidential information through her work with Newport. See Moring, 529 S.W.3d at 155-56 (defendant's alleged use of plaintiff's confidential information in Texas constituted a substantial connection to forum state).
In her affidavit, Kalliope states that "any information" she used as part of her Power Research employment "was non-proprietary information". As we discussed above with respect to information Lewis obtained from Power Research, whether or not this information falls within the scope of the confidentiality agreement goes to the merits of Appellants' claims and is not addressed at this stage of the litigation. See Michiana Easy Livin' Country, Inc., 168 S.W.3d at 791-92.
We conclude that Kalliope's Texas connections satisfy the minimum contacts analysis.
4. Michael
Finally, we conclude that Michael also purposefully availed himself of the privilege of conducting business activities within Texas as necessary to support an exercise of specific personal jurisdiction.
From 2008 through 2018, Michael lived in Greece and worked for Power Research. In his affidavit, Blake described Michael as Power Research's "sales director, primarily serving the worldwide Greek shipping market." Mike Snow stated in his affidavit that Michael reported to Snow, Wanda, or Lewis, all of whom worked out of Power Research's Houston office. Snow also stated that Michael "frequently made and coordinated sales to be delivered in Texas" and "could not sell [Power Research's] Texas-manufactured products whatsoever without [Power Research's] operations team in Texas receiving orders, scheduling deliveries, and preparing and sending invoices."
Appellants included with their filings numerous emails sent or received by Michael while he was a Power Research employee. These emails show that some of Michael's Power Research work involved coordinating product deliveries and vessel visits in Texas:
• A March 2018 email from a Power Research employee to Michael seeking to arrange the delivery of certain products at several Texas locations, including Houston, Port Arthur, and Galveston.Michael's signature block on these emails states that he is Power Research's "Regional Sales Director" and includes Power Research's Houston office.
• A May 2018 email from Michael to Power Research's service engineer Curtis Morton arranging vessel visits that would take place at Texas ports.
• A June 2018 email from Michael to a customer attaching Morton's completed vessel visit report. The report states that the vessel visit took place in Galveston.
• An August 2018 email from Michael to a Power Research employee arranging delivery of certain products at Corpus Christi, Texas.
During his Power Research employment, Michael made three visits to Power Research's Houston headquarters during which he (1) settled commissions owed to him; (2) settled expense reimbursements; (3) discussed Kalliope's "plans to travel to Houston and work for [Power Research] at its Houston facility"; and (4) updated his supervisor regarding his sales strategy.
On September 17, 2018, Michael sent an email to Blake resigning his Power Research position effective immediately. Appellants included with their exhibits additional emails that were "recovered" from Michael's Power Research email account allegedly showing that he forwarded certain customer information to his Newport email address shortly before his resignation. Appellants also attached additional emails showing that Michael's work with Newport began almost immediately after he resigned from Power Research:
• A September 19, 2018 email from Michael's Newport email address to a customer stating that Michael has joined Newport and touting Lewis's experience as Power Research's vice president. The email also says that "[t]he original fuel treatment chemistries formulated by Mr. Lewis maintain the identical integrity." The email's signature line states that Michael is Newport's vice president.In September 2018, Kalliope formed a Texas company called Michael H. Sales, LLC. According to Michael, the LLC was formed "in connection with" the work he and Kalliope were doing for Newport. An October 2018 letter from Newport states that Michael was issued 11,250 of the company's shares in February 2018, representing 15% of the total issuance.
• A September 23, 2018 email from Michael's Newport email address to a customer with Newport's proposed price list.
Appellants also included with their exhibits a transcript of Michael's deposition. At his deposition, Michael stated that Newport's business is "about the same" as Power Research's and involves developing, manufacturing, and selling fuel additive products. Michael testified that, since leaving Power Research, he has used "some" of Power Research's customer contact information that he developed during his tenure with the company. Michael acknowledged that he is an owner at Newport, that he holds himself out to customers as Newport's vice president, and that Newport's fuel additive products are blended in a facility in Texas.
Like Lewis and Kalliope, Michael asserts that he has not used any of Power Research's confidential information since leaving his position with the company. But, as we discussed above, whether or not this information falls within the scope of the confidentiality agreement goes to the merits of Appellants' claims and is not addressed at this stage of the litigation. See Michiana Easy Livin' Country, Inc., 168 S.W.3d at 791-92.
Like the other Newport Appellees, Michael's Texas contacts meet the three-pronged purposeful availment test. See Moki Mac River Expeditions, 221 S.W.3d at 575. Although Michael primarily worked from Greece during his Power Research employment, his tenure with the company involved reaching out to and maintaining significant relationships with individuals based in Texas. Michael reported to Snow, Wanda, and Lewis, all of whom were based in Houston. Michael also regularly coordinated with Power Research's Texas-based operations team to complete tasks central to his position, including the delivery of Power Research products and vessel visits.
Michael's employment with Newport also evidences substantial Texas contacts. Michael created a Texas LLC for the sole purpose of facilitating his work with Newport and he serves as Newport's vice president as well as a partial owner. And although Newport is a Nevada corporation, it maintains significant Texas operations with respect to the manufacturing, storage, and transportation of its products. Michael's Power Research employment - and his completion of Texas-based tasks in this role - would be relevant to Newport's business which, as Michael acknowledged, is "about the same" as Power Research's. Moreover, by creating a Texas LLC and assuming ownership in a company with significant Texas operations, Michael "reached out and created [] continuing relationship[s]" in Texas, which carry with them certain continuing obligations. See Retamco Operating, Inc., 278 S.W.3d at 339. In sum, these contacts (1) are not the unilateral activity of someone other than Michael; (2) are purposeful with respect to Michael's work at Power Research and Newport; and (3) conferred benefits or advantages upon Michael.
These contacts also bear a substantial connection to the operative facts of the underlying litigation. See Moki Mac River Expeditions, 221 S.W.3d at 585. Appellants allege that the Newport Appellees misused Power Research's confidential and proprietary information, including the company's customer and contacts lists. Michael's Texas-based contacts developed during his work with Power Research would be relevant to the resolution of these claims. See, e.g., Moncrief Oil Int'l, Inc., 414 S.W.3d at 153-54.
Appellants also assert claims alleging Michael's work with Newport breaches the non-compete agreement he signed with Power Research. This agreement states:
During the term of this Agreement and for a period of two years thereafter, [Michael] shall not within the United States or internationally, directly or indirectly, either for his own account, or as a partner, shareholder, officer, director, employee, agent or otherwise; own, manage, operate, control, be employed by, participate in, consult with, perform services for, or otherwise be connected with any business the same as or similar to the business conducted by [Power Research].Michael's ownership of and work for Newport would be relevant to the resolution of these claims, including both his and Newport's Texas contacts.
In sum, all of the Newport Appellees' Texas connections meet the "minimum contacts" standard necessary to support an exercise of specific personal jurisdiction.
B. Traditional Notions of Fair Play and Substantial Justice
We turn to whether an assertion of jurisdiction over the Newport Appellees comports with "traditional notions of fair play and substantial justice." See Retamco Operating, Inc., 278 S.W.3d at 341; Moring, 529 S.W.3d at 156. For this analysis, we consider: (1) the burden on the defendants; (2) the interests of the forum in adjudicating the dispute; (3) the plaintiff's interest in getting convenient and effective relief; (4) the international judicial system's interest in obtaining the most effective resolution of the controversies; and (5) the shared interests of the several nations in furthering fundamental substantive policies. Retamco Operating, Inc., 278 S.W.3d at 341; Moring, 529 S.W.3d at 156. "When the nonresident defendant has purposefully established minimum contacts with the forum state, only in rare instances will the exercise of jurisdiction not comport with fair play and substantial justice." Yujie Ren, 502 S.W.3d at 851. The defendant bears the burden of presenting a compelling case that the presence of some consideration would render an exercise of jurisdiction unreasonable. Dodd v. Savino, 426 S.W.3d 275, 287 (Tex. App.—Houston [14th Dist.] 2014, no pet.).
Here, the Newport Appellees do not present a compelling case that the trial court's exercise of personal jurisdiction would be unreasonable. In their appellate brief and special appearance, they did not raise any argument as to why an exercise of personal jurisdiction would offend traditional notions of fair play and substantial justice. Lewis's, Kalliope's, and Michael's affidavits briefly addressed this issue and assert the burden on them would be "substantial" because they reside in California and Greece.
But "[d]istance alone cannot ordinarily defeat jurisdiction." Moncrief Oil Int'l Inc., 414 S.W.3d at 155; see also Moring, 529 S.W.3d at 156 ("traveling burdens all nonresidents"). The Newport Appellees have not established that the exercise of jurisdiction over them would impose an unreasonable burden. Conversely, Texas has an obvious interest in providing a forum for the resolution of disputes involving alleged torts committed in whole or in part in Texas; an Appellant that is a Texas company; and claims alleging misappropriation with respect to products produced in Texas. See Yujie Ren, 502 S.W.3d at 852; ERC Midstream LLC v. Am. Midstream Partners, 497 S.W.3d 99, 112 (Tex. App.—Houston [14th Dist.] 2016, no pet.).
Moreover, Newport maintains substantial operations in Texas and Lewis stated in his affidavit that he traveled to Texas three times in 2018 in connection with Newport's business. These contacts suggest that defending against claims in Texas would not unreasonably burden Newport and Lewis. See Moring, 529 S.W.3d at 156 (in its "traditional notions" analysis, the court noted that the defendant had "managed to come to neighboring Texas many times for work").
Although Kalliope resides in Greece, she too is not a stranger to the forum state and her connections include (1) a six-month period where she resided in Texas to work at Power Research's Houston office and (2) a trip to Texas in June 2018 to visit vendors in connection with Seatex's business. Similarly, Michael has traveled to Texas and made three visits to the state during his Power Research employment. On balance, Kalliope's and Michael's status as residents of Greece does not outweigh the other factors that render Texas an appropriate forum for the resolution of the underlying claims. We conclude that, under these circumstances, haling Newport, Lewis, Kalliope, and Michael into court in Texas does not offend traditional notions of fair play and substantial justice.
CONCLUSION
We conclude the trial court has specific personal jurisdiction over Appellants' claims against the Newport Appellees. The trial court therefore erred in granting the Newport Appellees' special appearance. We reverse the trial court's order and remand this case to the trial court for further proceedings consistent with this opinion.
/s/ Meagan Hassan
Justice Panel consists of Justices Bourliot, Hassan, and Poissant.