Sealed 1 v. Sealed 1 ( 2015 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 17, 2015
No. 14-20204
Lyle W. Cayce
Clerk
SEALED APPELLANT 1; SEALED APPELLANT 2; SEALED APPELLANT
3; SEALED APPELLANT 4,
Plaintiffs–Appellants,
v.
SEALED APPELLEE 1; SEALED APPELLEE 2,
Defendants–Appellees.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:10-CV-1148
Before KING, DAVIS, and OWEN, Circuit Judges.
PER CURIAM:*
The plaintiffs in the district court sued a Saudi Arabian corporation, to
which we will refer as Father’s Co., and an executive of that company who is a
Saudi Arabian citizen, to whom we will refer as Father. The plaintiffs rely on
a contract containing a forum-selection clause to establish personal jurisdiction
over these defendants, although neither of the defendants is actually a
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
No. 14-20204
signatory to the contract. The plaintiffs assert that the contract was signed by
authorized agents of the defendants, one of whom is the son of Father. We will
refer to this individual (also a Saudi national) as Son. The other alleged agent
is a Saudi company, to which we will refer as Son’s Co., that plaintiffs contend
is an affiliate of Father’s Co. and managed by Son. The district court held that
the plaintiffs failed to provide any competent evidence that the signatories to
the contract containing the forum-selection clause were acting as agents of the
defendants in any of the dealings or contacts with the plaintiffs. The district
court accordingly dismissed the suit for lack of personal jurisdiction. We
affirm.
I
Each of the plaintiffs expected to receive commissions and fees from a
purchase by Father and Father’s Co. of an international investment
instrument known as a Bank Guarantee. An individual residing in New
Mexico, to whom we will refer as PltfNM, and a company with which he was
connected, to which we will refer as the NM Corp., expected to be involved in
the transaction on the buyer’s side. A Texas businessman, to whom we shall
refer as PltfTX, and an Illinois businessman, to whom we shall refer as PltfIL,
expected to participate on the seller’s side of the transaction.
An employee of Father’s Co., to whom we will refer as Smith, contacted
PltfNM. Smith allegedly informed PltfNM that Father had asked Smith to
seek international investment opportunities in Bank Guarantees. According
to PltfNM, Smith stated that Father’s Co. and Father would be the principals
and signatories on the buyer’s side of the transaction. Relying on Smith’s
statements, PltfNM, on behalf of his corporation, and with the assistance of
others, began seeking a Bank-Guarantee transaction.
PltfNM attempted to find a potential Bank-Guarantee seller but was met
with resistance to investing with Father’s Co. and Father, and PltfNM reported
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this to Smith. Smith purportedly told PltfNM that Father believed there would
be less resistance if Son and Son’s Co. acted on behalf of Father’s Co. and
Father. PltfNM understood that although Son and Son’s Co. would appear as
the buyers of the Bank Guarantees, Father’s Co. and Father would be the
actual buyers and Father’s Co. would fund the purchase. Because of this
understanding, PltfNM requested Smith to provide proof of Father’s Co.’s good
standing. Smith subsequently sent PltfNM a copy of a 2003 letter from the
U.S. Embassy in Saudi Arabia affirming Father’s Co.’s good standing in the
international business community. The contacts and transactions at issue in
this suit commenced in 2009, approximately six years after the date of this
letter. In June 2009, PltfNM contacted the U.S. Consulate in Jeddah, Saudi
Arabia, and with Smith’s assistance, PltfNM requested and received a letter
from the Consulate dated June 23, 2009, stating that Son and Son’s Co. were
an “established business” that had a positive reputation in the Jeddah business
community.
PltfTX is a businessman who is very familiar with international
investment instruments. Smith contacted PltfTX, and PltfTX involved PltfIL
in seeking to structure a transaction. A telephone conference between Smith,
Son, and PltfTX occurred in which Son confirmed that he was interested in
purchasing an international investment instrument, hopefully a Bank
Guarantee, and Son asked PltfTX if he would assist in finding a seller. PltfTX
advised Son that he had the resources and contacts to do so, and Son instructed
PltfTX to contact PltfNM and NM Corp. Son told PltfTX that NM Corp. and
PltfNM were his legal representatives in the United States regarding these
investment opportunities. PltfTX was successful in locating Bank Guarantees
of the type that Son had said he was seeking to purchase.
When Bank Guarantees to be purchased had been located, Smith
introduced PltfNM by telephone to a man who identified himself as the account
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No. 14-20204
manager at a Saudi bank for both Father’s Co. and Son’s Co.
PltfNM requested, and the bank sent, a letter purporting to explain the
relationship between these two companies. This June 24, 2009, letter stated:
“We’re here to confirm that [Son’s Co.] is a part of [Father’s Co.] . . . This letter
was provided as requested by the client . . . .” Enclosed with the letter was a
screenshot of Father’s Co.’s bank account information, which reflected
substantial liquid and cash equivalent assets. Six weeks later, when the
banking information required updating, the bank sent another, nearly
identical letter, and another screenshot of the account’s position.
In early July, Smith informed PltfNM that Father approved of the
transaction, and Smith sent PltfNM the Non-Circumvention, Non-Disclosure
& Working Agreement (the Agreement) signed by Son, Son’s Co., and Smith.
The plaintiffs allege that the Agreement entitled them to receive a commission
for every tranche of Bank Guarantees purchased. The Agreement contained a
forum-selection clause that read: “in the event of dispute, the laws of the State
of Texas will apply first with the US District Court for the Southern District of
Texas as the court of venue . . . . The signing parties hereby accept such
selected jurisdiction as the exclusive venue.”
The plaintiffs believe that Bank-Guarantee transactions were
consummated that would have entitled them to commissions under the
Agreement. They commenced this diversity action in the district court alleging
numerous state-law claims against Son, Son’s Co., Father, and Father’s Co.
Father’s Co. and Father moved to dismiss for lack of personal jurisdiction and
submitted affidavits from Smith and Son, which stated in part that they were
not acting on behalf of Father’s Co. or Father when they signed the Agreement
and that Son’s Co. was not affiliated with Father’s Co. in any way. Without
holding an evidentiary hearing, the district court originally denied the motion,
concluding that the plaintiffs had established a prima face case that the
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signatories to the Agreement were acting as agents for Father’s Co. and
Father. However, a motion to reconsider was filed, and the court changed
course. The court held that the plaintiffs had presented no admissible evidence
to establish an agency relationship, and therefore, the plaintiffs had not
established a prima facie case of personal jurisdiction. The district court
dismissed the suit against Father’s Co. and Father. The plaintiffs appeal.
II
The plaintiffs bear the burden of establishing personal jurisdiction. 1 We
review the district court’s dismissal for lack of personal jurisdiction de novo. 2
Because the district court did not hold an evidentiary hearing, the plaintiffs
were required to present only a prima facie case of personal jurisdiction. 3
While the district court has discretion in determining the amount of discovery
it will consider at this stage, and actually considered affidavits and certain
documentary evidence, “unless there is a full and fair hearing, [a district court]
should not act as a fact finder and must construe all disputed facts in the
plaintiff’s favor and consider them along with the undisputed facts.” 4 The
plaintiffs must ultimately prove by a preponderance of the evidence that
jurisdiction is proper. 5 But the burden is not raised to a preponderance of the
evidence until trial or “after a pretrial evidentiary hearing confined to the
1 Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 270 (5th Cir. 2006).
Panda Brandywine Corp. v. Potomac Elec. Power Co., 253 F.3d 865, 867 (5th Cir.
2
2001) (per curiam) (citing Alpine View Co. v. Atlas Copco AB, 205 F.3d 208, 214 (5th Cir.
2000)).
Walk Haydel & Assocs. v. Coastal Power Prod. Co., 517 F.3d 235, 241 (5th Cir. 2008)
3
(citing Irving v. Owens-Corning Fiberglass Corp., 864 F.2d 383, 384 (5th Cir. 1989)).
4 Id. (citing, among others, Guidry v. U.S. Tobacco Co., 188 F.3d 619, 625 (5th Cir.
1999)).
5 Id. (citing Brown v. Slenker, 220 F.3d 411, 419 (5th Cir. 2000)).
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No. 14-20204
jurisdictional issue, where both sides have the opportunity to present their
cases fully.” 6
In evaluating whether the plaintiffs have presented a prima facie case of
personal jurisdiction, we will not “credit conclusory allegations, even if
uncontroverted.” 7 To the extent the plaintiffs’ evidence is hearsay and is
“directly contradicted by defendant[s’] affidavit[s],” hearsay evidence “will not
defeat a motion for dismissal under Rule 12(b)(2).” 8 Therefore, because
Father’s Co. and Father submitted affidavits directly contradicting the
plaintiffs’ jurisdictional allegations, we must determine whether the plaintiffs
have established a prima facie case of personal jurisdiction through
nonconclusory allegations supported by admissible evidence.
III
In a diversity action, a federal court may exercise personal jurisdiction
over a nonresident defendant to the extent permitted by the law of the state in
which the court sits. 9 The only plausible basis for personal jurisdiction over
Father’s Co. and Father is an alleged agency relationship. We therefore apply
6Id. at 241-42 (citing, among others, Felch v. Transportes Lar-Mex SA, 92 F.3d 320,
326-27 (5th Cir. 1996)).
7 Panda Brandywine Corp., 253 F.3d at 869.
8 Cooper v. McDermott Int’l Inc., 62 F.3d 395, 1995 WL 450209, at *5 (5th Cir. July 6,
1995) (unpublished but precedential under 5TH CIR. R. 47.5.3); see also Beydoun v. Wataniya
Rests. Holding, Q.S.C., 768 F.3d 499, 506 (6th Cir. 2014) (stating in the context of a Rule
12(b)(2) motion: “In general, it is improper for a court to consider hearsay statements when
ruling on a motion to dismiss” (citing Kamen v. Am. Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d
Cir. 1986))); United Techs. Corp. v. Mazer, 556 F.3d 1260, 1278 (11th Cir. 2009) (plaintiff
could not use hearsay evidence to establish personal jurisdiction over the defendant when
the hearsay statements were controverted by the defendant’s affidavit).
9 FED. R. CIV P. 4(e)(1); Companion Prop. & Cas. Ins. Co. v. Palermo, 723 F.3d 557,
559 (5th Cir. 2013).
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Texas agency law to determine whether a Texas court would have exercised
jurisdiction. 10
An exercise of personal jurisdiction must also comport with the
requirements of constitutional due process. 11 An exercise of personal
jurisdiction is constitutional when “(1) the defendant has purposefully availed
himself of the benefits and protections of the forum state . . . , and (2) exercise
of jurisdiction over that defendant does not offend traditional notions of fair
play and substantial justice.” 12 Personal jurisdiction, however, is “a waivable
right,” 13 and a freely-negotiated forum-selection clause is sufficient to
constitutionally establish personal jurisdiction. 14
The plaintiffs assert that Father’s Co. and Father are subject to the
jurisdiction of the Southern District of Texas under the forum-selection clause
found in the Agreement signed by Son, Son’s Co., and Smith. If one or more of
them were acting as Father’s Co.’s and Father’s agents, jurisdiction over
10See McFadin v. Gerber, 587 F.3d 753, 761-62 & n.25 (5th Cir. 2009) (applying Texas
agency law to resolve issue of whether nonresident defendant had Texas contacts established
by an alleged in-state agent).
11 Ainsworth v. Moffett Eng’g, Ltd., 716 F.3d 174, 177 (5th Cir. 2013) (“A federal
district court sitting in diversity may exercise personal jurisdiction over a nonresident
defendant if (1) the long-arm statute of the forum state confers personal jurisdiction over that
defendant; and (2) exercise of such jurisdiction by the forum state is consistent with due
process under the United States Constitution.”).
12 Walk Haydel & Assocs. v. Coastal Power Prod. Co., 517 F.3d 235, 241 (5th Cir. 2008)
(alteration omitted) (quoting Panda Brandywine Corp., 253 F.3d at 867).
13 Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n.14 (1985).
14 Id. (“[P]arties frequently stipulate in advance to submit their controversies for
resolution within a particular jurisdiction. Where such forum-selection provisions have been
obtained through freely negotiated agreements and are not unreasonable and unjust, their
enforcement Smiths not offend due process.” (internal citations and quotation marks
omitted)); BouMatic, LLC v. Idento Operations, BV, 759 F.3d 790, 793 (7th Cir. 2014) (“A
forum-selection clause can work only if both parties are amenable to suit in the chosen forum;
to agree to a forum thus is to agree to personal jurisdiction in that forum.”); Chan v. Soc’y
Expeditions, Inc., 39 F.3d 1398, 1407 (9th Cir. 1994) (“[T]he district court erred in concluding
that the forum selection clause . . . could not confer personal jurisdiction over the parties who
entered into it.”).
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Father’s Co. and Father would be proper. 15 Therefore, our decision turns on
whether the plaintiffs established a prima facie showing of agency.
Under Texas agency law, “[a]n agent’s authority to act on behalf of a
principal depends on some communication by the principal either to the agent
(actual or express authority) or to the third party (apparent or implied
authority).” 16 We affirm the judgment of the district court because the
plaintiffs have failed to proffer any admissible evidence that could establish
either actual or apparent authority.
A
To establish actual authority, the plaintiffs must show that Father’s Co.
or Father communicated to Son, Son’s Co., or Smith that they had authority to
bind Father’s Co. or Father to the Agreement. 17 The only evidence in the record
of such communications comes from PltfNM’s affidavit. However, the relevant
statements in his affidavit are inadmissible on a Rule 12(b)(2) motion. For
example, in his affidavit, PltfNM states:
[Smith] . . . told me . . . that [Father] wanted to see if the [Bank
Guarantee] investment transaction could be “orchestrated” (his
word, not mine) by having his son, [Son], and [Son’s Co.] act on
15 See Bridas S.A.P.I.C v. Gov’t of Turkm., 345 F.3d 347, 356 (5th Cir. 2003)
(recognizing agency as a basis for binding principal nonsignatories to an arbitration
agreement); Haynsworth v. The Corp., 121 F.3d 956, 963 (5th Cir. 1997) (noting that
arbitration agreements and forum selection clauses are indistinguishable for enforceability
purposes); see also Daimler AG v. Bauman, 134 S. Ct. 746, 759 n.13 (2014) (“[A] corporation
can purposefully avail itself of a forum by directing its agents or distributors to take action
there.”); Taishan Gypsum Co. v. Gross (In re Chinese-Manufactured Drywall Prods. Liab.
Litig.), 753 F.3d 521, 531 (5th Cir. 2014) (“Daimler . . . embraces the significance of a
principal-agent relationship to the specific-jurisdiction analysis, though it suggests that an
agency relationship alone may not be dispositive.”).
16Gaines v. Kelly, 235 S.W.3d 179, 182 (Tex. 2007) (citing Hester Int’l Corp. v. Fed.
Rep. of Nigeria, 879 F.2d 170, 181 (5th Cir. 1989)).
Id.; CNOOC Se. Asia Ltd. v. Paladin Res. (SUNDA) Ltd., 222 S.W.3d 889, 899 (Tex.
17
App.—Dallas 2007, pet. denied).
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behalf of [Father] and [Father’s Co.] in going forward with the
[Bank Guarantee] that we had been working on.
This statement is hearsay. The plaintiffs are offering PltfNM’s recount
of Smith’s statement for its truth: that Father wanted Son and Son’s Co. to act
on behalf of himself and Father’s Co. 18 The plaintiffs argue that Rule
801(d)(2)(D) 19 removes these statements from the definition of hearsay because
Smith made the statement while acting as Father’s Co.’s and Father’s agent.
But under Rule 801(d)(2), when the court considers the admissibility of a
statement by a purported agent, the statement “does not by itself
establish . . . the existence or scope” of the agency relationship under
subsection (D). 20 Therefore, the plaintiffs may not use hearsay statements to
both establish the existence and scope of Smith’s agency relationship and
remove those very same statements from the definition of hearsay. 21
18See FED. R. EVID. 801(c) (“‘Hearsay’ means a statement that: (1) the declarant
Smiths not make while testifying at the current trial or hearing; and (2) a party offers in
evidence to prove the truth of the matter asserted in the statement.”).
19 Federal Rule of Evidence 801(d)(2)(D) provides:
(d) Statements That Are Not Hearsay. A statement that
meets the following conditions is not hearsay:
...
(2) An Opposing Party’s Statement. The statement
is offered against an opposing party and:
...
(D) was made by the party’s agent or employee on
a matter within the scope of that relationship and
while it existed;
...
The statement must be considered but does not by itself
establish . . . the existence or scope of the relationship
under (D).
20 FED. R. EVID. 801(d)(2).
21 Id.; see also Wilkinson v. Carnival Cruise Lines, Inc., 920 F.2d 1560, 1566 (11th Cir.
1991) (“It is well established that ‘Rule 801(d)(2)(D) requires the proffering party to lay a
foundation to show that an otherwise excludible statement relates to a matter within the
scope of the agent’s employment.’” (quoting Breneman v. Kennecott Corp., 799 F.2d 470, 473
(9th Cir. 1986))).
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PltfNM’s affidavit includes additional hearsay statements offered to
prove actual authority, but all of these inadmissible statements are directly
contradicted by affidavits submitted by Father’s Co. and Smith. For example,
Smith stated in his affidavit that he never had authority to enter a transaction
on behalf of Father’s Co. or Father and that he “specifically informed the
Plaintiffs that [Father’s Co.] and [Father] were not involved in any potential
transaction.” The plaintiffs may not establish a prima facie case of personal
jurisdiction through inadmissible evidence when that evidence is directly
contradicted by the defendants’ affidavits. 22 Therefore, the plaintiffs have not
made a sufficient showing of actual authority to establish personal jurisdiction
over Father’s Co. and Father.
B
The agency theory of apparent authority is based on estoppel. 23 “To
establish apparent authority, one must show that a principal either knowingly
permitted an agent to hold itself out as having authority or showed such lack
of ordinary care as to clothe the agent with indicia of authority.” 24 “[O]nly the
conduct of the principal is relevant.” 25
22 Cooper v. McDermott Int’l, Inc., 62 F.3d 395, 1995 WL 450209, at *5 (5th Cir. July
6, 1995) (unpublished but precedential under 5TH CIR. R. 47.5.3) (“When directly contradicted
by defendant’s affidavit, hearsay evidence will not defeat a motion for dismissal under Rule
12(b)(2).”).
23 Gaines v. Kelly, 235 S.W.3d 179, 182 (Tex. 2007).
24NationsBank, N.A. v. Dilling, 922 S.W.2d 950, 952-53 (Tex. 1996) (per curiam);
accord Gaines, 235 S.W.3d at 182.
25Gaines, 235 S.W.3d at 182 (citing NationsBank, 922 S.W.2d at 953); accord Cactus
Pipe & Supply Co. v. M/V Montmartre, 756 F.2d 1103, 1111 (5th Cir. 1985) (“Apparent
authority is created as to a third person by conduct of the principal which, reasonably
interpreted, causes the third person to believe that the principal consents to the act done on
his behalf by the person purporting to act for him.” (emphasis added) (citing RESTATEMENT
(SECOND) OF AGENCY § 27)).
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The plaintiffs rely on various documents in attempting to establish the
apparent authority of Son, Son’s Co., and Smith to execute the Agreement on
behalf of Father’s Co. and Father. First, the plaintiffs rely on the 2003 letter
from the U.S. Embassy in Saudi Arabia that affirmed Father’s Co.’s good
standing. They argue that if Father’s Co. were “not involved in the transaction
or intended to be the ultimate beneficiary of it, [Father’s Co.] would not have
provided Plaintiffs with proof of their good standing in the business
community.” But the embassy letter was written years before Father’s Co. and
Father are alleged to have decided to pursue the underlying transactions, and
the letter is not addressed to a specific entity or individual, let alone the
plaintiffs. This demonstrates that the letter was not originally procured to
serve as a representation to the plaintiffs. Furthermore, an email from Smith
to PltfNM, from Smith’s personal email address, indicates that Smith, not
Father’s Co. or Father, sent the plaintiffs the embassy letter. In his email,
Smith stated: “There is a letter from the US Embassy in favor of [Father’s Co.],
but I will have access to it tomorrow as the office where it is kept is closed now.
I used to have copy but cannot locate it now.” Neither the letter nor Smith’s
email demonstrate a manifestation by Father’s Co. or Father to the plaintiffs
that Son, Son’s Co., or Smith had authority to act on behalf of Father’s Co. or
Father. It is therefore not evidence of apparent authority. 26
Second, the plaintiffs offer the two letters from the Saudi bank as proof
that Father’s Co. and Father cloaked the alleged agents with authority. The
26 See Sanders v. Total Heat & Air, Inc., 248 S.W.3d 907, 913 (Tex. App.—Dallas 2008,
no pet.) (“Only the conduct of the principal is relevant to determining whether apparent
authority exists.” (citing Gaines, 235 S.W.3d at 182 and NationsBank, 922 S.W.2d at 952-
53)); accord Am. Soc’y of Mech. Eng’rs, Inc. v. Hydrolevel Corp., 456 U.S. 556, 566 n.5 (1982)
(“Apparent authority is the power to affect the legal relations of another person by
transactions with third persons, professedly as agent for the other, arising from and in
accordance with the other’s manifestations to such third persons.” (emphasis added) (quoting
RESTATEMENT (SECOND) OF AGENCY § 8 (1957))).
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No. 14-20204
two relevant statements from these letters are: (1) “We’re here to confirm that
[Son’s Co.] is a part of [Father’s Co.],” and (2) “This letter was provided as
requested by the client . . . .” But these statements are inadmissible hearsay
and are directly contradicted by the affidavits submitted by Father’s Co. and
Father; they therefore cannot be used to establish a prima facie case of
personal jurisdiction. 27 Furthermore, similar to the embassy letter, these
letters written by the bank are not communications that can be attributed to
either Father’s Co. or Father. While the letters state that they were provided
at the request of the client, it is ambiguous whether the term “client” refers to
Father’s Co., Son’s Co., or another. Even assuming “client” refers to Father’s
Co., the statement that Father’s Co. requested the letter would also be
inadmissible hearsay and cannot be used to establish that Father’s Co. or
Father did in fact request the letter. Therefore, the bank letters cannot
support a finding of apparent authority.
Third, the plaintiffs argue that screenshots of Father’s Co.’s bank
account enclosed with the bank letters are evidence that Father’s Co. and
Father “‘held out’ to Plaintiffs that [Smith], [Son] and/or [Son’s Co.] had the
authority to access, and ultimately use, these funds for the specific transaction
at issue.” But again, as with the letters from the embassy and the bank, the
bank account screenshots are not themselves evidence of a communication by
Father’s Co. or Father to the plaintiffs and do not establish apparent authority.
The plaintiffs argue that the account statements must have been requested by
Father’s Co. or Father because of the bank statements’ “confidential nature,”
but there is no evidence, besides the screenshots themselves, indicating that
Father’s Co. or Father authorized the account information to be transmitted to
the plaintiffs. Even assuming Father’s Co. or Father did authorize the bank
27 Cooper, 62 F.3d 395, 1995 WL 450209, at *5.
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to provide the plaintiffs with bank account screenshots, the screenshots did not
purport to communicate that Son, Son’s Co., or Smith have the authority to
enter into a Bank-Guarantee transaction on behalf of Father’s Co. or Father.
Therefore, this evidence does not establish apparent authority.
C
In the alternative, the plaintiffs invoke the single-business-enterprise
theory to request this court to equitably pierce the veil between Father’s Co.
and Son’s Co. However, the plaintiffs waived this argument by failing to raise
it before the district court. 28
* * *
The judgment of the district court is AFFIRMED.
28Celanese Corp. v. Martin K. Eby Constr. Co., 620 F.3d 529, 531 (5th Cir. 2010) (“The
general rule of this court is that arguments not raised before the district court are waived
and will not be considered on appeal.”).
13