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Davis v. C.A.H.

Court of Appeals of Texas, Fourteenth District, Houston
Feb 26, 2009
No. 14-08-00222-CV (Tex. App. Feb. 26, 2009)

Opinion

No. 14-08-00222-CV

Opinion filed February 26, 2009.

On Appeal from the 152nd District Court, Harris County, Texas, Trial Court Cause No. 2007-10446.

Panel consists of Justices ANDERSON and FROST and Senior Justice HUDSON.

Senior Justice J. Harvey Hudson sitting by assignment.


MEMORANDUM OPINION


In this interlocutory appeal and cross-appeal, we review two orders sustaining special appearances filed by the president of a Missouri limited partnership and three corporate officers of out-of-state corporations in underlying litigation between the corporate entities pertaining to development of an oil and gas lease in Texas. We affirm the trial court's order dismissing for lack of jurisdiction the claims against the nonresident corporate officers and reverse the trial court's order as to the Missouri-based president.

I. FACTUAL AND PROCEDURAL BACKGROUND A. The Parties

Christopher Davis is a Kansas resident and the president of Davis Investments, VI, LP, (hereinafter referred to as "Davis VI"), a Missouri limited partnership. Davis VI is a shareholder and investor in two corporations, Advanced Energy Resources, Inc. ("Advanced Energy") and Allen Drilling Acquisition Company ("Allen"), and Christopher Davis serves on the board of directors for these two entities.

Advanced Energy is a Delaware corporation with headquarters in Kansas and is a parent company of Allen and Allen Drilling Acquisition Company II ("Allen II"). Allen is a Nebraska corporation with headquarters in Kansas. Allen II is a Delaware corporation with headquarters in Kansas. Both Allen and Allen II are foreign corporations registered to conduct business in Texas. Larry J. Horbach, Phillip J. Holtgraves, and Charles A. Holtgraves are officers and directors of Allen and Advanced Energy. Horbach is a Nebraska resident, and Phillip Holtgraves and Charles Holtgraves are residents of Kansas.

Allen formed a jointly owned Texas limited liability company with Crimson Exploration, Inc. ("Crimson"), a Delaware corporation, whose headquarters is in Houston, Texas. Allen and Crimson formed this limited liability company, Elgin Holdings, LLC ("Elgin"), to develop oil and gas leases in Madison County and Hardin County, Texas (hereinafter referred to as the "Madisonville Project").

Crimson is formerly known as GulfWest Energy, Inc.

B. The Claims

Davis VI sued Advanced Energy, Allen, Crimson, and Allen II, and the three corporate officers, Larry Horbach, Phillip Holtgraves, and Charles Holtgraves, individually, asserting a number of claims pertaining to lease transfers and funding of the Madisonville Project. Davis VI alleged the following in its live petition in the trial court:

$ Larry Horbach, Charles Holtgraves, and Philip Holtgraves are nonresidents of Texas, each of whom has engaged in business in Texas. The actions and conduct of each involved a project conducted in Texas and were directed at the State of Texas.

$ Pursuant to a joint operating agreement in forming Elgin, Allen owned 52.5% and Crimson owned the remaining 47.5%. Charles Holtgraves, Phillip Holtgraves, and Larry Horbach are all officers and directors of Allen and Allen II. Larry Horbach and Charles Holtgraves are managers and/or directors of Elgin.

$ Christopher Davis is the President of Davis VI, which is a preferred shareholder and investor of Allen and Advanced Energy. Larry Horbach and Charles Holtgraves recruited Davis VI, through Davis, to invest in the Madisonville Project.

$ "Specifically, Defendants informed Mr. Davis, and thus [Davis VI], that Crimson was to convey all of its other leases and leasehold interests it had acquired in or around Madisonville, Texas, free of any liens and/or encumbrances, to the Elgin entity. The understanding between the parties was that if [Davis VI] invested money into the venture, then the funds could be used to develop the leases."

$ Allen sent a memo, via Charles Holtgraves, indicating that Crimson had completed its assignments of leases to Elgin. "Specifically, Charles A. Holtgraves sent a memo to Chris Davis on this transfer and instructed [Davis VI] to send or wire the funds for investment into [Allen]." Christopher Davis was to receive a 40% ownership interest in Allen's preferred stock. Davis VI's money was to be used to acquire Allen's ownership interest in Elgin.

$ "Chris Davis, and thus [Davis VI], relied on the representations by the Defendants, especially with respect to the conveyance of leases, to make the investment contribution they were requesting. At this time, [Allen], [Allen II], Charles A. Holtgraves, Larry J. Horbach, and Phillip J. Holtgraves, also agreed to give investors like Davis certain rights to restriction on voting and sale of assets. However, no leases were ever conveyed by Crimson to Elgin and the representations by the Defendants were purposefully false."

$ Crimson issued a memo that proposed to restructure ownership of Elgin. Elgin's assets would be conveyed back to Allen in the form of 22.5% ownership interest in the Madisonville Leases. Crimson would retain a 77.5% interest in the leaseholds. Because the leases were never conveyed to Elgin by Crimson, the proposed ownership interests were erroneous and the defendants were aware or should have been aware of this fact. "More importantly, Charles A. Holtgraves, Larry J. Horbach, and Phillip J. Holtgraves had been fraudulently representing to [Davis VI] that Crimson was in compliance and that the leases had been transferred into Elgin free and clear of any liens or encumbrances."

$ A vote on the proposed shift was to occur at a later time, but did not occur. Elgin, Crimson, and Allen, through Larry Horbach, Charles Holtgraves, and Phillip Holtgraves, informed Davis VI that they had executed an "Overall Agreement" along with an "Assignment of Overriding Royalty Interest" from Crimson.

$ No conveyance documents were recorded and Davis received unsigned copies of the documents. Some documents eventually were recorded when Davis VI, through an attorney, brought it to the defendants' attention.

$ "Defendants attempted to explain the . . . `Overall Agreement' by proclaiming the break up was necessary since no financing could be obtained by Allen to meet other areas of the project, such as drilling. Yet, Defendants failed to provide Chris Davis with specific evidence in support of this excuse."

$ Davis sent a letter outlining its grievances and objections to the proposed transaction and "poor disinformation" distributed by "Defendants, [Allen], Larry, Phillip, Charles, and [Advanced Energy]."

$ When Crimson and Allen were made aware of "the failure to record the executed assignment documents," Davis was presented with signed documents with incomplete signatures and acknowledgments, which Davis believed had been back-dated.

$ Crimson entered into a financing agreement with Wells Fargo Bank. Crimson allowed Wells Fargo to place liens on the Madisonville Project leases that were assigned to Allen but not recorded.

$ "Davis requested that his transaction be rescinded to before the misinformation was presented."

$ The defendants acted together and caused the original equity to be diluted and transferred to the defendants, Crimson, and Crimson Exploration in contradiction to the terms presented prior to Davis VI's decision to invest.

By reference, Davis VI incorporated the facts above into each of the five following claims: (1) common law fraud, (2) statutory fraud, (3) negligent misrepresentation, (4) breach of fiduciary duty, and (5) violations of the Texas Securities Act. In each of four separate sections entitled "Common Law Fraud," "Statutory Fraud," "Negligent Misrepresentation," and "Texas Securities Act," Davis VI alleged the following:

$ "The misrepresentations made to [Davis VI] by the Defendants were material and false when made."

$ "The purported facts of the transfer of the Madison Leases were known to be false when stated by the Defendants, in order to lure [Davis VI] to invest in this oil and gas venture."

$ Davis VI relied on the misrepresentations "to its injury" and seeks damages.

In a section of its pleading entitled "Breach of Fiduciary Duty," Davis VI alleged the following:

$ The misrepresentations made to Davis by the Defendants, Advanced Energy, Allen, Allen II, Charles Holtgraves individually, Phillip Holtgraves individually, and Larry Horbach, individually, were material and false when made.

$ "The purported facts of the transfer of the Madisonville Leases were known to be false by Defendants when stated to lure [Davis VI] to invest in this oil and gas venture."

$ "The actions by the Defendants were consistent with squandering and failing to protect the assets of Elgin."

$ Davis VI relied on the fraudulent misrepresentations "to its injury" and seeks damages.

Advanced Energy, Allen, and Allen II (collectively referred to as the "Advanced Energy Parties") filed a third-party petition against Christopher Davis, individually, and his attorney, individually, alleging tortious interference with the Wells Fargo financing of the Madisonville Project. The Advanced Energy Parties asserted the following five claims against Christopher Davis: (1) tortious interference with existing contract, (2) libel, (3) business disparagement, (4) tortious interference with prospective relations, and (5) conspiracy. In their live petition, the Advanced Energy Parties alleged the following facts, which were incorporated by reference for each claim:

The claims against Christopher Davis's attorney were later non-suited.

$ Allen held an interest in oil and gas leases in Madison County, Texas.

$ To separate the Madison County leases from Allen's other assets, Allen's board of directors authorized the formation of Allen II to hold leases and secure financing for drilling. Davis VI and other preferred shareholders of Allen stock were offered the opportunity to acquire a pro rata share of Allen II's preferred stock.

$ Allen negotiated a financing agreement with Wells Fargo to raise capital for drilling the Madison County leases. Wells Fargo sent a summary of the terms and conditions to Allen, which Allen accepted. Wells Fargo began preparing the final documentation for financing.

$ Christopher Davis, as a member of Allen's board of directors, received a faxed copy of Wells Fargo's terms and conditions.

$ Christopher Davis's Texas attorney, acting on behalf of Christopher Davis, emailed officers of Advanced Energy a letter alleging conversion of Allen's assets by Advanced Energy. The allegations within the letter were untrue and known to be untrue when made. This letter also was sent to Crimson and Wells Fargo. Thereafter, Wells Fargo refused to consummate financing.

$ Allen II obtained financing elsewhere on less favorable terms. Such financing prohibits Allen II's participation in future wells to be drilled on the Madison County leases.

In a section of its pleading entitled "Tortious Interference With Existing Contract," the Advanced Energy Parties alleged the following:

$ Allen II had a contractual relationship with Wells Fargo with which Christopher Davis and his attorney willfully and intentionally interfered.

$ The interference proximately caused Allen II injury that resulted in loss and actual damage.

$ Allen and Allen II had a contractual relationship with Crimson as working-interest owners in the Madison County leases. The email and letter sent by Christopher Davis and his attorney was sent willfully and with the intention of interfering with the contractual relationship between Allen and Allen II and Crimson.

$ The interference proximately caused injury to Allen and Allen II and has caused actual damage or loss.

In a section of its pleading entitled "Libel" the Advanced Energy Parties alleged the following:

$ The statements contained in the letter were published as statements of fact that referred to the Advanced Energy Parties and were defamatory and false.

$ The statements caused the Advanced Energy Parties actual injury.

In a section of its pleading entitled "Business Disparagement," the Advanced Energy Parties alleged the following:

$ "The letter constitutes the publishing of disparaging words about the [Advanced Energy] Parties['] economic interest, that were false, and the publishing of such false statements caused the [Advanced Energy] Parties special damages."

In a section of its pleading entitled "Tortious Interference with Prospective Relations," the Advanced Energy Parties alleged the following:

$ "There is a reasonable probability that [Allen II] would have entered into a business relationship with Wells Fargo, and the sending of the letter was an intentional interference with such relationship. As noted above, the letter was independently tortious or unlawful. The sending of the letter to Wells Fargo proximately caused injury to [Allen II] and due to which [Allen II] suffered actual damage or loss."

In a section of its pleading entitled "Conspiracy," the Advanced Energy Parties alleged the following:

$ Christopher Davis, his attorney, and Davis VI had a meeting of the minds to commit the tortious acts set forth in the claims against the Advanced Energy Parties.

$ The intent was accomplished by sending the letter to Wells Fargo and Crimson, which proximately caused injury to the Advanced Energy Parties.

The Advanced Energy Parties suffered actual damage or loss.

C. The Procedural Posture

Larry Horbach, Charles Holtgraves, and Phillip Holtgraves (collectively referred to hereinafter as the "Officers") filed special appearances contesting the trial court's exercise of personal jurisdiction over them as to Davis VI's claims. The trial court granted the special appearances. In response to the Advanced Energy Parties' cross-claim, Christopher Davis filed a special appearance, which the trial court also granted. Davis VI now appeals the trial court's ruling as to the Officers, and, in a cross-appeal, the Advanced Energy Parties appeal the trial court's ruling as to Christopher Davis's special appearance.

II. STANDARD OF REVIEW

Whether a trial court may exercise personal jurisdiction over nonresident corporate officers is a question of law for de novo review. See BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). The trial court did not issue findings of fact or conclusions of law. Therefore, all facts necessary to support the trial court's rulings and supported by the evidence are implied in favor of the trial court's decision. Id. at 795. Parties may challenge the legal and factual sufficiency of these implied factual findings. Id. In conducting a no evidence analysis, we review the evidence in the light most favorable to the challenged finding and indulge every reasonable inference that would support it. See City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005). We must credit favorable evidence if a reasonable factfinder could and disregard contrary evidence unless a reasonable factfinder could not. See id. at 827. We must determine whether the evidence at trial would enable reasonable and fair minded people to find the facts at issue. See id. The factfinder is the sole judge of the credibility of the witnesses and the weight of their testimony. See id. at 819.

When reviewing a challenge to the factual sufficiency of the evidence, we examine the entire record, considering both the evidence in favor of, and contrary to, the challenged finding. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). After considering and weighing all the evidence, we set aside the fact finding only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986). The trier of fact is the sole judge of the credibility of the witnesses and the weight to be given to their testimony. GTE Mobilnet of S. Tex. v. Pascouet, 61 S.W.3d 599, 615-16 (Tex.App.-Houston [14th Dist.] 2001, pet. denied). We may not substitute our own judgment for that of the trier of fact, even if we would reach a different answer on the evidence. Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998). The amount of evidence necessary to affirm a judgment is far less than that necessary to reverse a judgment. GTE Mobilnet, 61 S.W.3d at 616.

III. ISSUES AND ANALYSIS

The Texas long arm statute governs a Texas court's exercise of jurisdiction over nonresident defendants. TEX. CIV. PRAC. REM. CODE ANN. §§ 17.041B.045 (Vernon 2008). It allows a court to exercise personal jurisdiction as far as the federal constitutional requirements of due process will permit. BMC Software, 83 S.W.3d at 795. Personal jurisdiction over a nonresident defendant is constitutional when two conditions are met: (1) the defendant has established minimum contacts with the forum state, and (2) the exercise of personal jurisdiction comports with traditional notions of fair play and substantial justice. BMC Software, 83 S.W.3d at 795. For a defendant to have sufficient minimum contacts with the forum, it is essential that there be some act by which the nonresident defendant "purposefully avails" itself of the privilege of conducting activities in the forum state, thus invoking the benefits and protections of its laws. Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 784 (Tex. 2005). Although not determinative, foreseeability is an important consideration in deciding whether the nonresident defendant purposefully has established minimum contacts with Texas. BMC Software, 83 S.W.3d at 795. The concept of foreseeability is implicit in the requirement that there be a substantial connection between the defendants and Texas arising from their conduct purposefully directed toward Texas. See Guardian Royal Exch. Assur., Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 227 (Tex. 1991). A defendant should not be subject to a Texas court's jurisdiction based upon random, fortuitous, or attenuated contacts. BMC Software, 83 S.W.3d at 795.

Specific jurisdiction exists when the claims in question arise from or relate to the defendant's purposeful contacts with Texas. Am. Type Culture Collection Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002). In conducting a specific jurisdiction analysis, we focus on the relationship among the defendants, Texas, and the litigation. See Guardian Royal, 815 S.W.2d at 228. For a nonresident defendant's contacts with Texas to support an exercise of specific jurisdiction, there must be a substantial connection between the defendant's purposeful contacts with Texas and the operative facts of the litigation. See Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 585 (Tex. 2007).

We do not adjudicate the merits of the parties' claims when conducting an analysis of personal jurisdiction. Bougie v. Technical Risks, Inc., No. 14-03-01222-CV, 2004 WL 2902508, at *5 (Tex.App.-Houston [14th Dist.] Dec. 16, 2004, no pet.) (mem. op.). Rather, we review the claims and the evidence regarding only the jurisdictional facts. Id. In this case, because the parties' liability in tort is not a jurisdictional fact, we do not address the merits of those claims. See id.

Davis VI and the Advanced Energy Parties, respectively, challenge the trial court's implied findings denying specific jurisdiction.

A. Specific Jurisdiction as to the Officers

In its live petition, Davis VI alleged that the Officers, and specifically Charles Holtgraves in a memo, misrepresented the status of Crimson's transfer of its leases to the Madisonville Project, when such leases were not actually transferred. For each of Davis VI's claims, Davis VI made the same allegations: "The purported facts of the transfer of the Madisonville Leases were known to be false when stated by the Defendants to lure [Davis VI] to invest in this oil and gas venture." For the purposes of this court's jurisdictional analysis, we presume, without deciding that these allegations are true, and we examine the evidence regarding the relationship between these allegations and the Officers' purposeful contacts with Texas.

See Bougie, 2004 WL 2902508, at *5.

To meet their burden to negate all potential bases of jurisdiction, the Officers filed a joint special appearance offering the following:

$ The Officers are not residents of Texas and are neither required to maintain nor do they maintain a registered agent for service in Texas.

$ The Officers do not currently engage in business in Texas and have not engaged in business in Texas nor committed any tort, in whole or in part, within the state.

$ The nonresident Officers do not maintain a place of business in Texas and have no employees, servants, or agents within the state.

$ The nonresident Officers do not have continuous or systematic contacts with Texas.

$ The allegations by Davis VI do not arise from or relate to contacts by the Officers with Texas.

$ The actions alleged by Davis VI are directed at alleged activities committed by the Advanced Energy Parties, but not against any acts or omissions committed by the Officers in their individual capacities.

Each of the Officers provided a sworn affidavit in support of his special appearance; each affiant made the following statements:

$ He is not a resident of Texas.

$ He is a private investor.

$ He does not maintain a registered agent for service in Texas, has no employees, servants, or agents in Texas, owns no assets in Texas, nor has he committed torts in Texas. He has never engaged in business in Texas.

$ He serves as officer, director, or manager of Allen, Allen II, and Advanced Energy.

$ Allen and Allen II have obtained Certificates of Authority in Texas. Advanced Energy does not do business in Texas.

$ Any contacts he has had with Texas have been the result of actions taken in his representative capacity.

In response to the Officers' special appearances, Davis VI claimed the following:

$ The Officers serve as officers and directors of Allen and Allen II, which are companies registered in Texas. Larry Horbach and Charles Holtgraves are also managers and/or directors of Elgin.

$ The Officers solicited and recruited Davis VI, through Christopher Davis, to invest in the Madisonville Project.

$ Specifically, the Officers informed Christopher Davis, and thus Davis VI, that Crimson was to convey all of its other leases and leasehold interests acquired in or around Madisonville, free of liens or encumbrances, to the Elgin joint venture.

$ Charles Holtgraves falsely represented to Christopher Davis that Crimson completed its assignment of the Madisonville Leases to the joint venture.

$ By memo, Charles Holtgraves informed Christopher Davis of the lease assignments and instructed Davis VI to send funds for investment in Allen. In return, Davis VI was to receive ownership interest in Allen's preferred stock. Allen would use the funds to acquire an interest in Elgin.

$ The Officers, as officers and directors of Allen and Allen II, agreed to give Davis VI rights to restriction on voting and sale of assets in return for his investment.

$ Crimson did not convey the leases to Elgin.

$ The Officers' misrepresentations were purposefully false and violated the Joint Operating Agreement, which required assignment of the leases.

$ The Officers provided Davis VI with a memo issued by Crimson that proposed a break-up of the Elgin joint venture due to financing problems.

$ The Officers proposed a second agreement, the Overall Agreement, in which Allen would acquire a 22.5% ownership interest and Crimson would retain a 77.5% interest in Elgin's Madisonville Leases.

$ Because the leases were never transferred under the Joint Operating Agreement, the percentages proposed in the Overall Agreement were irrelevant and lacked consideration.

$ The Officers were aware or should have been aware of inconsistencies between the Joint Operating Agreement and the Overall Agreement.

$ The Officers should have had personal knowledge that the Madisonville Leases were never transferred.

$ The Officers were managing officers at Allen who entered into the terms and conditions of the Joint Operating Agreement and who had the duty to ensure compliance with the Joint Operating Agreement.

$ The Officers continued to represent to Davis VI that Crimson complied with the Joint Operating Agreement in transferring the leases.

$ The Officers should have been aware of the illusory percentages which formed the Overall Agreement.

$ By entering into the Overall Agreement, the Officers' conduct demonstrates purposeful intent to defraud Davis VI.

$ Elgin, Crimson, and Allen, through the Officers, informed Christopher Davis, and hence Davis VI, that they had executed the Overall Agreement and an assignment, but the conveyance documents were not recorded.

$ Wells Fargo held encumbrances on the leases, in violation of terms in the Joint Operating Agreement, and in contradiction to the representations made by the Officers.

$ The Officers engaged in fraud by circumventing terms in the Joint Operating Agreement and entering into the Overall Agreement. Such actions were purposeful and as a direct consequence of the individual actions of the defendants.

$ The Officers misrepresented facts involving the lease transfer and the liens and encumbrances held on the leases in order to gain investment support from Davis VI.

$ The actions were perpetuated and directed at Texas and concerned misrepresentations involving the Madisonville Project that is located in and being conducted in Texas.

$ The Officers failed to take action against Crimson for its breach of the Joint Operating Agreement, in failing to transfer the leases.

Davis VI submitted a number of documents in support of personal jurisdiction over the Officers. The evidence is undisputed that the Officers are directors of Advanced Energy, Allen, and Allen II.

The Officers have the burden of negating all bases of personal jurisdiction. See Moki Mac River Expeditions, 221 S.W.3d at 574. They may not avoid specific jurisdiction in Texas by claiming any alleged actions were performed in a corporate capacity, because a corporate agent is individually liable for fraudulent or tortious acts committed while in the service of his corporation. See Hyman Farm Servs., Inc. v. Earth Oil and Gas Co., 920 S.W.2d 452, 455 (Tex.App.-Amarillo 1996, no writ); Holberg v. Teal Constr. Co., 879 S.W.2d 358, 360 (Tex.App.-Houston [14th Dist.] 1994, no writ). Therefore, we individually assess each of the Officers' contacts with the forum state. See SITQ E.U., Inc. v. Reata Restaurants, Inc., 111 S.W.3d 638, 651 (Tex.App.-Fort Worth 2003, pet. denied). In doing so, we must analyze the degree of connectedness between the forum contacts and the operative facts of litigation to determine whether the operative facts involve the Officers' respective contacts with Texas. See Moki Mac River Expeditions, 221 S.W.3d at 584-85.

A substantial connection between the Officers' purposeful contacts with Texas and the operative facts of litigation must exist to find specific jurisdiction over these nonresidents. See id. at 585. Davis VI alleges that the Officers made misrepresentations regarding the transfer of the Madisonville leases, and that the Officers' communications were directed at Christopher Davis in order to procure financial backing from Davis VI. The record reflects that a memo, written by nonresident officer Charles Holtgraves and containing the alleged misrepresentations, originated in Mission, Kansas, as reflected by Allen's letterhead. The record also contains assertions that the Officers solicited nonresident Christopher Davis at his "office in Kansas City, Missouri, and [Christopher Davis's] agreement/investment discussion on behalf of Davis VI occurred in Kansas City, Missouri." Davis VI has not otherwise pleaded or presented evidence that the Officers made any representations in Texas or that Davis VI received or relied upon any representation in Texas. There is no evidence that any of the Officers' alleged communications were made in Texas or received or relied upon by Davis VI in Texas. See BMC Software, 83 S.W.3d at 797 (stating that no representations were made in Texas and no reliance on the representations occurred in Texas). The undisputed jurisdictional evidence does not support Davis VI's contention that the Officers committed a tort in whole or in part in Texas to warrant specific jurisdiction over the Officers. See id.

Davis VI argues that specific jurisdiction over the Officers may be based on the Officers' failure to prove that their alleged business dealings were not directed toward Texas. However, alleged knowledge that the brunt of the alleged damages caused by the alleged torts would be felt in Texas is insufficient to support specific jurisdiction. See Michiana Easy Livin' Country, Inc., 168 S.W.3d at 788-89. Davis VI argues that the Officers reasonably should have foreseen being subject to Texas jurisdiction as a result of their conduct; however, foreseeability is not determinative in a specific-jurisdiction analysis. See id. at 789 (rejecting jurisdiction based solely upon the effects or consequences felt in an a forum state); BMC Software, 83 S.W.3d at 795; Guardian Royal Exch. Assur., Ltd., 815 S.W.2d at 227 ("[F]oreseeability is implicit in the requirement that there be a substantial connection between the defendants and Texas arising from their conduct purposefully directed toward Texas."). Furthermore, although Davis VI complains that the Officers served as officers or directors of Texas-based Elgin, to whom Davis VI claims the Madisonville leases should have been transferred, the harm and facts alleged pertain to misrepresentations allegedly made by the Officers, irrespective of where the leases were located. See Michiana Easy Livin' Country, Inc., 168 S.W.3d at 789 (focusing specific jurisdiction analysis on a defendant's conduct and connection to the forum state).

Under the applicable standards of review and based on Davis VI's allegations and the undisputed evidence, the evidence is legally and factually sufficient to support the trial court's implied finding that there is no substantial connection between the Officers' purposeful contacts with Texas and the operative facts of the litigation. See Moki Mac River Expeditions, 221 S.W.3d at 585-88 (concluding that there was no specific jurisdiction based on the lack of a substantial connection between the defendant's purposeful contacts with Texas and the operative facts of the litigation); BMC Software, 83 S.W.3d at 797 (concluding no specific jurisdiction existed for contact that occurred outside of Texas). Accordingly, we overrule Davis VI's sole issue on appeal and affirm the trial court's order granting the Officers' special appearances.

B. Specific Jurisdiction as to Christopher Davis

The Advanced Energy Parties' five claims stem from a letter sent by Christopher Davis's Texas attorney to Advanced Energy's board members. The letter states in pertinent part:

Chris Davis has requested that we write you on his behalf as both a major preferred shareholder of [Allen] and as a director of [Advanced Energy] and [Allen] regarding the apparent attempt by certain [Advanced Energy] shareholders to convert [Allen] assets without proper corporate authorization or shareholder consent by affected [Allen] preferred shareholders.

The Advanced Energy Parties claim the letter is disparaging, untrue, and known to be untrue when written. They also claim that Allen and Allen II were negotiating financing with Wells Fargo, the lender that had begun preparing final documentation for financing at the time the letter was sent. An email with the attached letter was sent to both Crimson and a Wells Fargo representative. According to the Advanced Energy Parties' allegations, upon receipt of the letter, Wells Fargo terminated the pending loan transaction with Allen. The Advanced Energy Parties claim that the financing they secured elsewhere was on less favorable terms.

To meet the burden to negate all potential bases of jurisdiction, Christopher Davis filed a special appearance proving the following:

$ Christopher Davis is a Kansas resident. He is not a resident of Texas and neither maintains nor is required to maintain a registered agent for service in Texas.

$ He does not and has not engaged in business in Texas, nor committed any tort within the state of Texas. He is a representative of Davis VI, a Missouri partnership, whose general partner is a Missouri limited liability company.

$ As a representative for Davis VI, he was solicited in Missouri by officers of Advanced Energy and Allen to invest in the Madisonville Project.

$ Davis VI invested in the project and became a preferred shareholder of Allen. Davis is a director in Allen and Advanced Energy. Advanced Energy is a "Delaware Corporation, with its headquarters located in Mission, Kansas. [Allen] is a Nebraska Corporation, with its headquarters in Mission, Texas [sic]. [Allen] does not conduct business in Texas."

$ He does not maintain a place of business in Texas and has no employees, servants, or agents in the state.

$ He does not have continuous or systematic contacts with Texas.

$ The Advanced Energy Parties' claims do not arise from or relate to his contacts within the State of Texas.

$ The Advanced Energy Parties' claims fail to establish that his specific conduct or activities were directed at Texas and would justify imposition of jurisdiction over him.

$ The letter was written on behalf of Davis VI and on his behalf, as a director of Allen; the letter was not written on behalf of Christopher Davis individually.

$ In response to the Advanced Energy Parties' claim that Allen II had a contractual relationship with Wells Fargo, Christopher Davis avers that the letter was written in August 2006, but Allen II did not exist until September 2006. Therefore, Christopher Davis could not have tortiously interfered with a non-existent entity.

$ The letter was sent to Allen and Advanced Energy, two companies based outside of Texas. Any questioning of the companies' activities, as raised in the letter, is not activity directed at Texas, but rather, directed at the corporations and the respective officers.

$ Any claims indicating that Christopher Davis interfered with a contractual relationship among Allen, Allen II, and Crimson is misleading because Christopher Davis is a director of Allen and Advanced Energy and is no stranger to the contract.

$ In response to any defamation claims, the entities allegedly disparaged by the letter are not located in Texas, nor were the claims alleged in Texas.

$ In response to claims of interference with a corporate contract, the letter does not show that Christopher Davis's personal interests were served by writing the letter because the letter was written with the intended interests of the entities involved.

$ In response to claims of tortious interference with prospective relations, Christopher Davis, as a director, holds an important interest in the relationships asserted. However, Allen II did not exist at the time the letter was written, and therefore, Christopher Davis could not have interfered in a relationship involving a non-existent entity.

In response to Christopher Davis's special appearance, the Advanced Energy Parties claimed the following:

$ Christopher Davis committed a tort in Texas when he directed the letter to be sent to several companies in Texas: Wells Fargo, Crimson, and Crimson Operating.

Crimson Exploration Operating, Inc. (Crimson Operating) is a party to Davis VI's original suit, but is not a party on appeal.

$ Any claims by Christopher Davis that the letter was written in a representative capacity are belied by the plain language of the letter, which indicates it was written on his behalf.

The language in the letter to which the Advanced Energy Parties cite is provided above.

$ Even if Christopher Davis sent the letter in a representative capacity, such action was an ultra vires act he committed individually because neither Allen nor Advanced Energy authorized the action.

$ Even had Christopher Davis acted in a representative capacity, a corporate officer who commits tortious or fraudulent conduct directed at the forum state may be held personally liable.

$ Christopher Davis knew or should have known that Crimson and Wells Fargo would rely on the information contained in the letter and that the misinformation would damage the business relationships of the Advanced Energy Parties in Texas.

We examine the record to determine whether there is sufficient evidence to support the trial court's implied finding that it could not exercise personal jurisdiction over Christopher Davis based on specific jurisdiction. We consider the evidence pertinent to the Advanced Energy Parties' jurisdictional allegations. Christopher Davis had the burden of negating all bases of personal jurisdiction. Moki Mac River Expeditions, 221 S.W.3d at 574. Though Davis claims that the letter was written in his representative capacity as a shareholder and director, a corporate officer or employee is not shielded from the exercise of specific jurisdiction as to alleged torts for which the officer or employee may be held individually liable. Reata Restaurants, Inc., 111 S.W.3d at 651. In each of their claims, the Advanced Energy Parties allege a tort for which Christopher Davis could be held individually liable. Therefore, there is no blanket protection from jurisdiction simply because Christopher Davis's alleged acts were allegedly done in a corporate capacity. See D.H. Blair Inv. Banking Corp. v. Reardon, 97 S.W.3d 269, 277 (Tex.App.-Houston [14th Dist.] 2002, pet. dism'd w.o.j.). Because there is no pleading or proof of any theory for piercing the corporate veil, this court considers only Christopher Davis's purposeful contacts with Texas. See Commonwealth Gen. Corp. v. York, 177 S.W.3d 923, 925 (Tex. 2005) (holding, in personal-jurisdiction analysis, that contacts of corporation could not be considered as contacts of sole shareholder unless there was evidence that would support a finding that shareholder and corporation were alter egos, in which case the corporation would be viewed as the same legal person as the shareholder); Michiana Easy Livin' Country, Inc., 168 S.W.3d at 785 (stressing that in a personal-jurisdiction analysis only the purposeful Texas contacts of the defendant challenging personal jurisdiction are considered). Therefore, we assess Davis's individual contacts with the forum state. See Reata Restaurants, Inc., 111 S.W.3d at 651. In doing so, we analyze the degree of connectedness between the forum contacts and the operative facts of litigation to determine whether the operative facts involve Christopher Davis's contacts with Texas. See Moki Mac River Expeditions, 221 S.W.3d at 584-85.

Though neither the Supreme Court of Texas nor this court appears to have addressed this issue, we agree with other courts that generally a specific-jurisdiction analysis should be performed on a claim-by-claim basis. See Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 274-75 (5th Cir. 2006) (analyzing specific jurisdiction on a claim-by-claim basis because the Due Process Clause prohibits the legitimate exercise of specific jurisdiction over a defendant with respect to one claim to justify the exercise of specific jurisdiction with respect to another claim that does not arise from or relate to the defendant's forum contacts); Barnhill v. Automated Shrimp Corp., 222 S.W.3d 756, 767 (Tex.App.-Waco 2007, no pet.). However, in this case, because the Advanced Energy Parties' five claims stem from the same facts, that Davis instructed his Texas attorney to write a disparaging letter to the parties and Wells Fargo, and because Davis's special appearance is based on the same defense, i.e. that the letter was written on his behalf as a director and shareholder rather than an individual, we review the claims together.

A substantial connection between the defendant's purposeful contacts with Texas and the operative facts of the litigation must exist to find specific jurisdiction over this non-resident. See id. at 585. The operative facts demonstrate that Christopher Davis purposefully directed his attorney in Texas to send a letter on his behalf to the parties and a Wells Fargo representative. These acts are the basis for the Advanced Energy Parties' claims. Under the applicable standards of review, and based on Davis VI's allegations and the undisputed evidence, the evidence is legally and factually sufficient to support the trial court's implied finding that both Christopher Davis's attorney, who sent the letter at his direction, as well as some recipients of the letter were located in Texas. Christopher Davis's contact with his attorney in Texas, in directing the letter to be sent, was purposeful conduct — conduct that was not random, attenuated, or fortuitous. See BMC Software, 83 S.W.3d at 795; Guardian Royal Exch. Assur., Ltd., 815 S.W.2d at 227. Moreover, Christopher Davis's contact with Texas was substantially connected to and relates to the Advanced Energy Parties' claims. See Moki Mac River Expeditions, 221 S.W.3d at 585; Am. Type Culture Collection Inc., 83 S.W.3d at 806. The evidence is legally and factually insufficient to support the trial court's implied finding that there is no substantial connection between Davis's purposeful contacts with Texas and the operative facts of the claims against him.

As for notions of fair play and substantial justice, only in rare cases, upon establishing minimum contacts, will such exercise of personal jurisdiction not comport with fair play and substantial justice. Guardian Royal Exch. Assur., Ltd., 815 S.W.2d at 231. Because Christopher Davis, as Davis VI's president and sole decision maker, initiated suit in Texas against the Advanced Energy Parties and the Officers, he will be heavily involved in the trial in this case and previously has worked with a Texas attorney, as alleged, in the key events leading up to the suit. These facts, coupled with Texas's interest in adjudicating claims filed in Texas for disputes involving Texas property, show that the exercise of personal jurisdiction over Christopher Davis comports with notions of fair play and substantial justice. See id.

Under the applicable standards of review and based on the Advanced Energy Parties' allegations and the undisputed evidence, the evidence is legally and factually insufficient to support the trial court's implied finding that it could not exercise personal jurisdiction over Christopher Davis based on specific jurisdiction. See Michiana Easy Livin' Country, Inc., 168 S.W.3d at 784; BMC Software, 83 S.W.3d at 795. Therefore, we sustain the Advanced Energy Parties' sole issue. Accordingly, we reverse the trial court's order sustaining Christopher Davis's special appearance and remand for further proceedings in accordance with this opinion.

IV. CONCLUSION

For the foregoing reasons, we affirm the order granting the Officers' special appearances and reverse the order granting Christopher Davis's special appearance.


Summaries of

Davis v. C.A.H.

Court of Appeals of Texas, Fourteenth District, Houston
Feb 26, 2009
No. 14-08-00222-CV (Tex. App. Feb. 26, 2009)
Case details for

Davis v. C.A.H.

Case Details

Full title:DAVIS INVESTMENTS, VI, LP, Appellant v. CHARLES A. HOLTGRAVES, LARRY J…

Court:Court of Appeals of Texas, Fourteenth District, Houston

Date published: Feb 26, 2009

Citations

No. 14-08-00222-CV (Tex. App. Feb. 26, 2009)

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