Summary
In TPG Partners III, L.P. v. Kronfeld, No. 4:01-CV-0895-A, 2002 WL 1315798, at *3 (N.D. Tex. June 13, 2002), the plaintiff argued that the exercise of personal jurisdiction over the defendant was appropriate based on "several fraudulent and/or negligent misrepresentations" made to plaintiff, a Texas resident, by facsimile, telephone, and other communications to plaintiff's Texas headquarters.
Summary of this case from Sarkar v. Petroleum Co. of Trinidad & Tobago Ltd.Opinion
No. 4:01-CV-0895-A
June 13, 2002
MEMORANDUM OPINION and ORDER
Came on for consideration the motion of defendants Ehud Kronfeld ("Kronfeld") and Joseph Segev ("Segev") to dismiss. The court, having considered the motion, the response of plaintiff, TPG Partners III, L.P., the reply, the record, and applicable authorities, finds that the motion should be granted.
I. Plaintiff's Claims
On August 14, 2001, plaintiff filed its original petition in the 352nd Judicial District Court of Tarrant County, Texas. By notice of removal filed November 13, 2001, the action was brought before this court.
The court has not questioned the existence of subject matter jurisdiction since plaintiff did not file a motion to remand. In its original petition, plaintiff alleges that it is a limited partnership. Presumably, none of its partners is an Israeli citizen. (The court notes that the notice of removal states that plaintiff is a Delaware corporation.) In any event, the court is free to examine personal jurisdiction before subject matter jurisdiction. See Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 578 (1999).
Plaintiff alleges: Kronfeld and Segev are principals in defendant Global Electronics Trade-Seventeen Global Ltd. ("GET-17") and the architects of the business idea to revolutionize the manner in which goods are delivered globally. The system, known as "W.W. Sheeping," was to be an internet software package that consumers could use to link to major freight forwarding companies throughout the world. In 1999, Kronfeld and Segev approached David Bonderman ("Bonderman"), a partner in plaintiff, about investing in the project. The men were introduced by Dr. Arie Belldegrun ("Belldegrun"), a mutual acquaintance, at LaGuardia Airport in New York City. Following their discussions, plaintiff and defendants agreed: to form an offshore entity to conduct the business, to develop a business plan to carry out the venture, that plaintiff would fund incidental start-up expenses not to exceed $3,000,000, and, upon execution by six global freight companies of contracts acceptable to plaintiff and GET-17, for plaintiff to fund the project with $25,000,000. Plaintiff performed its part of the bargain, but no freight forwarding companies agreed to participate in the project. Ultimately, plaintiff terminated its participation. Since the termination, plaintiff learned that Kronfeld and Segev had made material misrepresentations to it.
Plaintiff asserts causes of action for negligence, negligent misrepresentation, fraud in a stock transaction in violation of Chapter 27 of the Texas Business and Commerce Code, and for unjust enrichment.
II. Grounds of the Motion
Defendants Kronfeld and Segev ask the court to dismiss the claims against them pursuant to FED. R. Civ. P. 12(b)(2) for lack of personal jurisdiction. They allege that neither of them has sufficient contacts with the State of Texas to make the exercise of jurisdiction over them proper.
III. Personal Jurisdiction
When a nonresident defendant presents a motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing that in personam jurisdiction exists. 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); D.J. Investments Inc. v. Metzeler Motorcycle Tire Agent Gregg, Inc., 754 F.2d 542, 545-46 (5th Cir. 1985). The plaintiff need not, however, establish personal jurisdiction by a preponderance of the evidence; prima facie evidence of personal jurisdiction is sufficient. WNS, Inc. v. Farrow, 884 F.2d 200, 203 (5th Cir. 1989); Wyatt v. Kaplan, 686 F.2d 276, 280 (5th Cir. 1982). The court may resolve a jurisdictional issue by reviewing pleadings, affidavits, interrogatories, depositions, oral testimony, exhibits, any part of the record, and any combination thereof. Command-Aire Corp. v. Ontario Mechanical Sales Serv., Inc., 963 F.2d 90, 95 (5th Cir. 1992). Allegations of the plaintiff's complaint are taken as true except to the extent that they are contradicted by defendant's affidavits. Wyatt, 686 F.2d at 282-83 n. 13 (citing Black v. Acme Markets, Inc., 564 F.2d 681, 683 n. 3 (5th Cir. 1977)). Any genuine, material conflicts between the facts established by the parties' affidavits and other evidence are resolved in favor of plaintiff for the purposes of determining whether a prima facie case exists. Jones v. Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1067 (5th Cir.), cert. denied, 506 U.S. 867 (1992); Bullion v. Gillespie, 895 F.2d 213, 217 (5th Cir. 1990).
In a diversity action, personal jurisdiction over a nonresident may be exercised if (1) the nonresident defendant is amenable to service of process under the law of a forum state, and (2) the exercise of jurisdiction under state law comports with the due process clause of the Fourteenth Amendment. Wilson, 20 F.3d at 646-47; Thompson v. Chrysler Motors Corp., 755 F.2d 1162, 1166 (5th Cir. 1985) (quoting Smith v. DeWalt Prods. Corp., 743 F.2d 277, 278 (5th Cir. 1984)). Since the Texas long-arm statute has been interpreted as extending to the limits of due process, the only inquiry is whether the exercise of jurisdiction over the nonresident defendant would be constitutionally permissible. Bullion, 895 F.2d at 216; Stuart, 772 F.2d at 1189.
See, e.g., Guardian Royal Exchange Assurance Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex. 1991); Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990); Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 200 (Tex. 1985).
For due process to be satisfied, (1) the nonresident defendant must have "minimum contacts" with the forum state resulting from an affirmative act on the defendant's part, and (2) the contacts must be such that the exercise of jurisdiction over the person of the defendant does not offend "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)).
The minimum contacts prong of the due process requirement can be satisfied by a finding of either "specific" or "general" jurisdiction over the nonresident defendant. Bullion, 895 F.2d at 216. For specific jurisdiction to exist, the foreign defendant must purposefully do some act or consummate some transaction in the forum state and the cause of action must arise from or be connected with such act or transaction. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985). Even if the controversy does not arise out of or relate to the nonresident defendant's purposeful contacts with the forum, general jurisdiction may be exercised when the nonresident defendant's contacts with the forum are sufficiently continuous and systematic as to support the reasonable exercise of jurisdiction. See, e.g., Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416 (1984); Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 779 (1984); Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952). When general jurisdiction is asserted, the minimum contacts analysis is more demanding and requires a showing of substantial activities within the forum state. Jones, 954 F.2d at 1068.
The second prong of the due process analysis is whether exercise of jurisdiction over the nonresident defendant would comport with traditional notions of fair play and substantial justice. International Shoe, 326 U.S. at 316. In determining whether the exercise of jurisdiction would be reasonable such that it does not offend traditional notions of fair play and substantial justice, the Supreme Court has instructed that courts look to the following factors: (1) the burden on the defendant, (2) the interests of the forum state, (3) the plaintiff's interest in obtaining relief, (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and (5) shared interest of the several states in furthering fundamental substantive social policies. Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 113 (1987) (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980)).
IV. Law Applied to the Facts
The court is concerned only with specific jurisdiction in the instant case, as plaintiff does not contend that defendants have sufficient contacts with the State of Texas to justify the exercise of general jurisdiction. Pl.'s Resp. at 3. Plaintiff contends that the exercise of personal jurisdiction is appropriate based on "several fraudulent and/or negligent misrepresentations" made to plaintiff, a Texas resident, by facsimile, telephone, and other communications to plaintiff's Texas headquarters. Id. at 4. The court is not satisfied, however, that the evidence justifies the exercise of personal jurisdiction over the individual defendants.
Plaintiff first alleges that Kronfeld and Segev sought plaintiff's investment and participation in the development of the internet-based international freight management system through their agents, Belldegrun and Orna Shulman ("Shulman"). The evidence reflects that Belldegrun was a friend of both Kronfeld and Bonderman. Kronfeld offered Belldegrun a partnership interest in the venture and asked him to assist in finding investors. Belldegrun anticipated that he would share his part in the venture with Shulman, who worked for him. At Belldegrun's request, Shulman helped schedule meetings and faxed information to Bonderman. There is no evidence that Belldegrun or Shulman was an agent in the sense that either could bind Kronfeld or Segev to anything. Rather, they were simply lining up potential investors. Bonderman, having reviewed the information faxed to him, was persuaded to meet Kronfeld and Segev in New York to discuss the venture further. He relied upon their representations at that meeting and upon their further meeting with his attorneys in New York in deciding to do business with them.
Even if Belldegrun or Shulman, acting as Kronfeld's agent, sent a solicitation containing false information to Bonderman, the evidence shows that the only harm suffered as a result was Bonderman's being induced to meet Kronfeld and Segev in New York. Plaintiff is not seeking to recover expenses incurred as a result of that trip.
Movants themselves have never come to Texas. During their meeting in New York, the parties agreed that any obligations under an agreement between them would "be carried out via a jointly owned offshore entity to be formed in a mutually agreeable jurisdiction." Pl.'s App. at 5, Bonderman decl. ¶ 18. Movants specifically stated that they did not wish to be subject to the jurisdiction of courts in the United States and Bonderman acknowledged that litigation could be very expensive. Consequently, Segev offered the use of a shelf corporation registered in Guernsey and plaintiff made arrangements in Bermuda to incorporate Global Electronic Trade Ltd. and its subsidiary, Shipco.com Ltd. The documents of incorporation reflect that Bonderman, Kronfeld, and Segev are among the directors; that the registered office of each is in Hamilton, Bermuda; and that James M. O'Brien of Fort Worth, Texas, would maintain the financial records of both companies "in accordance with the Board's requirements." P1.'s App. at 77, 95. (Contrary to plaintiff's representation, the resolutions do not state that the records will be maintained in Fort Worth, Texas.) There is no evidence that Kronfeld or Segev had even heard of plaintiff until it was named as a shareholder in Global Electronic Trade Ltd.
Most of the contacts between Kronfeld and Bonderman were through an associate of his in San Francisco. Although documents were periodically transmitted via facsimile to or from Fort Worth, Texas, they were based on the fortuity of that apparently being Bonderman's home base. And, although Bonderman provided a Fort Worth cell telephone number, he was most often contacted in other parts of the world.
In sum, although plaintiff purports to rely on the exchange of communications between the parties, it has not pointed out how any of the referenced e-mails or telephone calls were fraudulent. Rather, copies of written communications reflect that the parties were working together to solicit global interest in their venture, which plaintiff admits was to be an offshore concern.
V. Defendant Global Electronic Trade-Seventeen Global Ltd.
The court is not certain of the purpose of the discussion regarding service of process on defendant Global Electronic Trade-Seventeen Global Ltd. See P1.'s Resp. at 13-14. The materials before the court indicate that there is no such entity. Plaintiff apparently recognizes this fact since it has not moved for entry of default despite its contention that the entity was properly served. Pursuant to Local Civil Rule 55.1, if a defendant has been in default for ninety days, the presiding judge may require the plaintiff to move for entry of a default and a default judgment. The court finds that such an order would be appropriate.
The court notes that there is no evidence that such an entity was a party to any agreement. The contract reflects signatures by Bonderman, Kronfeld, and Segev, individually. Bonderman apparently signed the contract and faxed it to Segev in Israel. There is no contention that the contract was ever sent to Guernsey, despite the address at the top. Thus, a more appropriate response may be to dismiss the claims against the remaining defendant.
VI. ORDER
For the reasons discussed herein,The court ORDERS that the motion to dismiss be, and is hereby, granted and that plaintiff's claims against Kronfeld and Segev be, and are hereby, dismissed for lack of personal jurisdiction.
The court further ORDERS that by 4:30 p.m. on June 21, 2002, plaintiff take appropriate steps to cause entry of default and to seek a default judgment against defendant Global Electronic Trade-Seventeen Global Ltd. or the claims against such entity will be dismissed.
The court determines that there is no just reason for delay in, and hereby directs, entry of final judgment as to the dismissal of plaintiff's claims against Kronfeld and Segev.