Summary
In Sussman, a New York attorney representing a New York corporation sent a demand letter and draft complaint to a person in Texas who guaranteed a debt owed to the corporation.
Summary of this case from Swate v. LentzOpinion
No. 14-06-00116-CV
Opinion filed October 31, 2006.
On Appeal from the 334th District Court, Harris County, Texas, Trial Court Cause No. 05-64587.
Reversed and Remanded.
Panel consists of Justices ANDERSON, HUDSON, and GUZMAN.
MEMORANDUM OPINION
In this interlocutory appeal, Joseph I. Sussman challenges the trial court's order denying his special appearance. We conclude Sussman's limited contacts with the State of Texas, undertaken solely in his capacity as attorney for a foreign corporation pursuing litigation in another state, are insufficient to support specific jurisdiction as alleged. Accordingly, we reverse the trial court's order and remand for further proceedings.
Sussman has a pending claim for sanctions in connection with his special appearance. See TEX. R. CIV. P. 120a(3). Thus, we do not render judgment, but remand to give the trial court an opportunity to consider the claim.
I. FACTUAL AND PROCEDURAL BACKGROUND
Sussman is an attorney who resides in New Jersey and practices law in New York and New Jersey. He has never solicited business in Texas, owns no real or personal property in Texas, and has never been admitted pro hac vice to any court in Texas. He has no offices, telephone, bank accounts, or clients in Texas, and has never filed suit in this state. Sussman has never solicited business, entered a contract, or sold goods and services in Texas. For the purposes of this suit, Sussman's sole connection with the State of Texas is his retention, in New York, by Northern Leasing Systems, Inc. ("Northern"), a New York corporation.
Northern hired Sussman to collect debts allegedly owed by Karim Zangeneh a/k/a Karim Hagihat Zangeneh ("Zangeneh") and Jehangir Irani. According to the verified complaint filed in Northern Leasing Systems, Inc. v. Zangeneh, Index No. 12609-05 in the Civil Court of the City and County of New York, Zangeneh personally guaranteed payment on an equipment lease under which Old Heidelberg, Inc. d/b/a Old Heidelberg Inn leased credit card verification equipment from Northern. According to the verified complaint filed in Northern Leasing Systems, Inc. v. Irani, Index No. 6462-05 in the Civil Court of the City and County of New York, Irani guaranteed a similar equipment lease for Shamu Lee's, Inc. d/b/a Wellbread Bakery ("Wellbread").
By their express terms, both leases are governed by New York law, and "all actions, proceedings or litigation" under the leases are required to be prosecuted in the "County of New York, State of New York, and City of New York." The leases also include the following provision: "Lessee and Guarantor agree that any summons and/or complaint or other process to commence any litigation by [Northern] will be properly served if mailed by certified mail, return receipt requested, with delivery to either Guarantor, Lessee, or Lessee's registered agent."
Sussman sent a demand letter to Zangeneh on Northern's behalf, enclosing a draft of Northern's verified complaint. He also executed summonses for Zangeneh and Irani to appear in New York courts. Sussman performed these tasks in New York. Old Heidelberg and Wellbread filed suit against Sussman in Harris County, Texas, alleging that the action of "sending Mr. Sussman's letter with the unlawful draft complaint was itself an act of fraud on Mr. Zangeneh." Old Heidelberg and Wellbread allege that Zangeneh acted on the correspondence to his detriment and suffered emotional injury. The sole factual allegation against Sussman that pertains to Wellbread is appellees' statement that "Sussman filed a lawsuit to recover" on the debt Irani allegedly owes to Northern in his capacity as guarantor of Wellbread's payments on the equipment lease. Appellees allege that, based on these facts, Sussman intentionally inflicted emotional distress on Old Heidelberg and Wellbread. Specifically, appellees claim that Sussman's conduct is the proximate cause of their emotional distress, "as they have been forced to defend such claims filed by Sussman on behalf of Northern Leasing Systems, Inc. in the distant forum State of New York. The need to concurrently defend themselves in additional litigation as a result of the foregoing has caused severe emotional distress to [Old Heidelberg and Wellbread]."
Appellees additionally stated a claim against Sussman under the Deceptive Trade Practices Act, but conceded at oral argument that they lack consumer status and are not pursuing this claim.
II. ISSUES PRESENTED
In three issues, Sussman essentially challenges the legal and factual sufficiency of the evidence supporting the trial court's denial of his special appearance. Sussman argues that no jurisdictional facts were pleaded in appellees' petition, and that acts he performed in his capacity as New York counsel pursuing claims in New York for his New York client are not attributable to him personally. Sussman also contends that he has not purposefully availed himself of Texas law and has neither sought nor obtained any benefit of the State of Texas; rather, his contacts with Texas are merely fortuitous. Finally, Sussman argues the trial court erred in finding specific jurisdiction because appellees suffered no legally cognizable injuries.
III. STANDARD OF REVIEW
Whether a trial court has personal jurisdiction over a defendant is a question of law. Schott Glas v. Adame, 178 S.W.3d 307, 312 (Tex.App.-Houston [14th Dist.] 2005, pet. denied). When the relevant jurisdictional facts are undisputed, we review the trial court's determination de novo. Id. However, when the relevant facts are disputed, a party may challenge the trial court's underlying factual conclusions for legal and factual sufficiency before determining whether the trial court erred in granting or denying a special appearance. Id. If the trial court does not issue findings of fact, we presume the trial court resolved all factual disputes in favor of its judgment. Id. When the appellate record includes the reporter's and clerk's records, these implied findings are not conclusive and may be challenged for legal and factual sufficiency. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002).
The plaintiff has the initial burden of pleading sufficient allegations to bring the nonresident defendant within the provisions of the Texas long-arm statute. Schott Glas, 178 S.W.3d at 313. A defendant's contacts with the forum can give rise to either specific or general jurisdiction. Id. at 312-13. Specific jurisdiction is based on purposeful contacts that give rise to the cause of action. Id. at 313. General jurisdiction allows personal jurisdiction based on contacts unrelated to the litigation as long as those contacts are "continuous and systematic." Id. Upon the filing of a special appearance, the burden shifts to the defendant to negate all bases of personal jurisdiction alleged by the plaintiff. Id. "This standard does not mean that the nonresident defendant must negate every possible ground in the universe, but rather the acts in Texas alleged by the appellant to support personal jurisdiction." Walker Ins. Servs. v. Bottle Rock Power Corp., 108 S.W.3d 538, 548 (Tex.App.-Houston [14th Dist.] 2003, no pet.).
Personal jurisdiction is proper if the defendant has established "minimum contacts" with Texas and the exercise of jurisdiction comports with "traditional notions of fair play and substantial justice." Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002) (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L.Ed. 95 (1945)). "The purpose of the minimum-contacts analysis is to protect the defendant from being haled into court when its relationship with Texas is too attenuated to support jurisdiction." Id. Thus, a defendant must "purposefully avail" itself of the privilege of conducting activities in Texas and of the benefits and protections of Texas law such that the defendant could reasonably anticipate being called into a Texas court. Schott Glas, 178 S.W.3d at 312.
In determining whether a defendant has purposefully availed himself of the privilege of conducting business in Texas, "it is only the defendant's contacts with the forum that count. . . ." Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex. 2005). This ensures that a defendant is subject to personal jurisdiction based on its own purposeful activity and not the unilateral acts of a third party. Id. Personal jurisdiction may not be based on Texas contacts that are random, fortuitous, or attenuated. Id. Finally, it is the quality and nature of the defendant's contacts, rather than the quantity, that is important to the minimum-contacts analysis. Schott Glas, 178 S.W.3d at 312.
IV. ANALYSIS
We agree that Old Heidelberg and Wellbread failed to plead sufficient jurisdictional facts to bring Sussman within the reach of the Texas long-arm statute. Moreover, even if we were to read the facts pleaded as invoking the trial court's jurisdiction, we conclude that Sussman has negated all bases of jurisdiction alleged.
Appellees' factual allegations are merely that, in connection with New York litigation, (a) Sussman sent a demand letter to a person in Texas who is not a party to the instant lawsuit, but is a party to the New York action; and (b) arranged for service of process on two Texas residents who are not parties to this case but are parties to the New York lawsuits. These allegations are insufficient to confer general or specific jurisdiction on the trial court in this action.
A three-prong test must be satisfied to determine that the exercise of specific jurisdiction complies with the long-arm statute and due process guarantees: (1) the nonresident defendant must purposefully do some act or consummate some transaction as to establish minimum contacts with the forum state, (2) the cause of action must arise from or be related to these contacts, and (3) the assumption of jurisdiction by the forum state must not offend the traditional notions of fair play and substantial justice. Schlobohm v. Schapiro, 784 S.W.2d 388, 358 (Tex. 1990). The "touchstone" of this analysis is whether the nonresident has "purposefully availed" himself of the benefits of conducting business in the forum state. Michiana, 168 S.W.3d at 784. In making this decision, courts are to focus on (1) only the defendant's contacts, not the unilateral actions of a third party, (2) whether the defendant's actions were purposeful and not "random, isolated, or fortuitous"; and (3) whether "the defendant [sought] some benefit, advantage, or profit by `availing' itself of the jurisdiction." Id. at 785.
General jurisdiction requires a showing that the defendant conducted substantial activities within the forum, a more demanding minimum contacts analysis than for specific jurisdiction. General jurisdiction is present when a defendant's contacts are continuous and systematic, permitting the forum to exercise personal jurisdiction over the defendant even if the cause of action did not arise from or relate to activities conducted within the forum state. CSR Ltd. v. Link, 925 S.W.2d 591, 595 (Tex. 1996). Appellees have not alleged that Sussman is subject to the general jurisdiction of the trial court.
Here, all of Sussman's actions were performed in his capacity as the attorney for a New York corporation litigating a lawsuit in New York, and thus, are not attributable to him personally. See Ross F. Meriwether Associates, Inc. v. Aulbach, 686 S.W.2d 730, 731 (Tex.App.-San Antonio 1985, no writ) ("When an agent arrives in Texas to negotiate a contract for his principal, only the principal does business in the state. The agent, having entered into no contract, has done no business in Texas, and, therefore, has done no act nor has he consummated a transaction in Texas."). Moreover, in sending a pre-suit demand letter and in arranging for service of process, Sussman did not avail himself of the benefits of conducting business in Texas. To the contrary, these acts were performed in New York in the course of Sussman's representation of a New York client involved in litigation that was required by contract to be conducted in New York. The receipt of these documents in Texas is merely fortuitous because Sussman had no control over the location of his client's putative debtors.
When it became clear that Sussman's actions in sending a demand letter and arranging for service of process were the only "jurisdictional acts" alleged by appellees, Sussman pointed out that these acts are absolutely privileged. See Randolph v. Walker, 29 S.W.3d 271, 278 (Tex.App.-Houston [14th Dist.] 2000, pet. denied) ("Courts have deemed conduct related to the initiation of a suit as sufficiently related to a judicial proceeding and, therefore, absolutely privileged."). Appellees argue that "absolute privilege" is an affirmative defense, and that by asserting the privilege, Sussman waived his special appearance. This contention is without merit. Sussman raised his objection to consideration of privileged material in a letter brief to the trial court that was expressly in support of Sussman's special appearance." The letter states in pertinent part that "even if the Court could consider Mr. Sussman's pre-filing demand letters and phone calls for jurisdictional purposes . . . as a matter of law, those communications are not actionable, and therefore will not support [appellees' claims] . . . Consequently, they cannot constitute actionable conduct directed at the State for jurisdictional purposes either." Sussman unambiguously argued that the privileged nature of these communications prevented appellees from effectively relying on these contacts to establish jurisdiction. See in re E.I. DuPont de Nemours Co., 136 S.W.3d 218, 223 (Tex. 2004) (stating that privileged material "may not be considered by the factfinder, even when the factfinder is the trial court.").
Additionally, in the contracts that form the basis of the New York litigation, Zangeneh and Irani not only agreed that New York would be the forum for resolving disputes, but agreed that "[a]ny notice intended to be served hereunder shall be deemed sufficiently sent if sent by regular mail, postage prepaid, addressed to the party at the addresses contained herein." Those addresses are in Texas; thus, the parties to the contracts — Northern, Zangeneh, and Irani — intended that their disputes would be resolved in New York, even though documents connected with such litigation might be served or received in Texas.
Additionally, to the extent a cognizable cause of action is alleged, the claim does not arise from Sussman's contacts with Texas. In fact, appellees' petition does not allege that Sussman had any contact with Old Heidelburg or Wellbread or directed any act toward them. Although appellees allege that Sussman committed "an act of fraud on Mr. Zangeneh" by sending him a demand letter and draft complaint, Zangeneh is not a party to the instant action. Moreover, Sussman prepared the letter and complaint in New York.
Because they are corporations, appellees have no cognizable claim for intentional infliction of emotional distress. See Haygood v. Chandler, No. 12-02-00239-CV, 2003 WL 22480560, at *6 (Tex.App.-Tyler, Oct. 31, 2003, pet. denied) (mem. op.).
Appellees contend that in preparing or executing documents in New York, Sussman committed a tort in Texas, and argue that, because appellees relied on Sussman's allegedly fraudulent statements in Texas, their reliance is sufficient to confer specific jurisdiction on the trial court. However, this argument is both legally and factually flawed. As the Texas Supreme Court has recently noted, "[a]llegations that a tort was committed in Texas satisfy the Texas Long-Arm Statute, but not necessarily the U.S. Constitution; the broad language of the former extends only as far as the latter will permit." Michiana, 168 S.W.3d at 788. "The place where a plaintiff relies on fraud may determine the choice of law, but choice-of-law analysis considers all parties, local courts, legal policies, interested states, and the interstate and international systems. By contrast, minimum-contacts analysis focuses solely on the actions and reasonable expectations of the defendant." Id. at 790 (disapproving of opinions holding that specific jurisdiction turns on whether a defendant's contacts were tortious rather than on the contacts themselves); Le Meridien Hotels Resorts v. LaSalle Hotel Operating P'ship, 141 S.W.3d 870, 879B80 (Tex.App.-Dallas 2004, no pet.) (reasoning that, because "causing an injury in Texas cannot, in and of itself, establish minimum contacts sufficient to establish personal jurisdiction," proof of "tortious activities purposefully directed at the State" was insufficient to overcome special appearance). Finally, even assuming that the demand letter and service of process contained fraudulent misrepresentations, none of these communications were "directed at" appellees. It is undisputed that the documents at issue were sent to two individuals who are not parties to this suit. Appellees' "reliance" on a letter addressed to a nonparty is their own unilateral act, and therefore, insufficient to confer jurisdiction.
We agree with Sussman that the contacts alleged by appellees do not constitute "minimum contacts" for jurisdictional purposes. See generally Bergenholtz v. Cannata, No. 05-05-01288-CV, 2006 WL 1373533 (Tex.App.-Dallas, Aug. 17, 2006, no pet. h.). Accordingly, we hold that the trial court erred in denying Sussman's special appearance.
V. CONCLUSION
For the foregoing reasons, we reverse the trial court's order denying Sussman's special appearance, and remand for further proceedings consistent with this opinion.