michael-wayne-briggs-john-cockerham-individually-and-dba ( 2001 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-01-00286-CV
Michael Wayne Briggs; John Cockerham, Individually and d/b/a Briggs-Cockerham,
LLC; and Briggs-Cockerham, LLC, Appellants
v.
Seacoast Power, L.L.C.; Old Dominion Electric Cooperative; Energy Services, Inc.;
CSC Services, Inc.; Cooperative Services International; and
MCI Power Group, LLC, Appellees
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 126TH JUDICIAL DISTRICT
NO. 96-03409, HONORABLE JOHN K. DIETZ, JUDGE PRESIDING
This is an expedited appeal from an order sustaining appellees’ special appearance.1
In one issue, we are asked to determine whether a Texas court can assert in personam jurisdiction
over out-of-state corporations in a suit over a contract to be performed outside the State of Texas.
Finding no basis for jurisdiction, we affirm the district court’s order.
FACTUAL BACKGROUND
This case arises out of an agreement to provide electrical power in Ecuador. The
original contract was negotiated between Seacoast, Inc. (“Seacoast”) and INECEL, an Ecuadorian
1
We refer to Seacoast Power, L.L.C., Old Dominion Electric Cooperative, Energy Services, Inc.,
CSC Services, Inc., Cooperative Services International, and MCI Power Group, LLC, collectively
as appellees unless we refer to one of them in its individual capacity.
governmental agency. When the contract was signed, Seacoast was wholly owned by appellants
Michael Wayne Briggs and John Cockerham who were doing business as Briggs-Cockerham, LLC.2
It soon became apparent that Seacoast would be unable to fulfill its contractual obligations. To avoid
losing the contract, Briggs-Cockerham entered into a joint venture agreement whereby a new
corporation, Seacoast Power, LLC (“Seacoast Power”), was formed to perform the contract.
In December 1995, the joint venture agreement was reduced to writing in a Statement
of Principles Agreement (the “agreement”). The agreement was originally signed by three parties:
Old Dominion Electrical Cooperative, a Virginia corporation; Energy Services, Inc., a Connecticut
corporation; and Seacoast. Briggs executed the agreement in Texas on behalf of Briggs-Cockerham
and Seacoast. At oral argument, the parties agreed that a subsequent agreement was signed by all
the appellees.3 Each of the appellees is an out-of-state corporation with no agents, offices, or
property in Texas. Pursuant to the agreement’s terms, Old Dominion contributed $4.5 million and
a letter of credit for approximately $1.05 million. Energy Services provided approximately $5.5
million worth of equipment. Seacoast sold all of its outstanding shares of capital stock to the joint
venture for $100 and transferred its rights to the Ecuadorian power contract. The electrical power
operation did not go as planned. In October 1996, Ronald W. Watkins, on behalf of the joint venture,
sent Briggs a letter accusing him of breaching the agreement. Appellees later sold some of the
equipment to Marathon Oil, an unrelated Texas corporation.
2
We refer to appellants collectively as Briggs-Cockerham unless we are referring to Michael
Briggs in his individual capacity, in which case we refer to him as Briggs.
3
This document does not appear in the record.
2
Subsequent to the creation of Seacoast Power, Seacoast was sued in Texas by another
party on a breach of contract claim related to the Ecuadorian electric project. Briggs, as Seacoast’s
registered agent, received notice of the suit but failed to notify Seacoast’s board of directors.
Because Seacoast was never notified of the suit, it did not file an answer and a default judgment was
entered. Seacoast filed a bill of review contesting the default judgment.4
DISCUSSION
In one point of error, Briggs-Cockerham contests the district court’s finding that
appellees are not subject to jurisdiction in Texas. They contend that by purchasing Seacoast, a Texas
corporation, and entering into the agreement with Briggs-Cockerham, the appellees have invoked the
jurisdiction of Texas courts. We disagree.
Standard of Review
Whether personal jurisdiction exists is a question of law. Submersible Sys. v.
Perforadora Central, S.A. de C.V., 249 F.3d 413, 418 (5th Cir. 2001); Daimler-Benz
Akteingesellschaft v. Olson, 21 S.W.3d 707, 715 (Tex. App.—Austin 2000, pet. dism’d w.o.j.).
Where the facts are undisputed, we conduct a de novo review of the district court’s order. Daimler-
Benz, 21 S.W.3d at 715.
The district court did not file findings of fact and conclusions of law. When a district
court makes no findings, all facts necessary to support the judgment are implied and we will set aside
4
See Seacoast, Inc. v. LaCouture, No. 03-96-00506-CV (Tex. App.—Austin Jan. 29, 1998, no
pet.) (not designated for publication), 1998 Tex. App. LEXIS 505.
3
such implied findings only if they are so against the great weight and preponderance of the evidence
as to be manifestly erroneous or unjust. Id. Thus, if the evidence supports the court’s implied
findings, we must uphold its judgment on any valid legal theory. Id.
Jurisdiction
The law governing Texas courts’ exercise of personal jurisdiction over nonresidents
is well established. See generally CSR Ltd. v. Link, 925 S.W.2d 591 (Tex. 1996); National Indus.
Sand Ass’n v. Gibson, 897 S.W.2d 769 (Tex. 1995); In re S.A.V., 837 S.W.2d 80 (Tex. 1992);
Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223 (Tex. 1991);
Schlobohm v. Schapiro, 784 S.W.2d 355 (Tex. 1990); Zac Smith & Co. v. Otis Elevator Co., 734
S.W.2d 662 (Tex. 1987). Jurisdiction is appropriately asserted over a nonresident defendant when
(i) the Texas long-arm statute authorizes it and (ii) exercising jurisdiction is consistent with federal
and state constitutional due process guarantees. Schlobohm, 784 S.W.2d at 356. Because the Texas
long-arm statute permits a Texas court to extend its jurisdiction to the full extent of the United States
Constitution, only the Fourteenth Amendment limits this power. Guardian Royal, 815 S.W.2d at
266.
Due process requirements are satisfied where the nonresident purposefully establishes
“minimum contacts” with Texas such that maintaining suit here does not offend “traditional notions
of fair play and substantial justice.” International Shoe Co. v. Washington, 326 U.S. 310, 316
(1945); Guardian Royal, 815 S.W.2d at 230-31. Generally, minimum contacts analysis involves an
inquiry into the nonresident’s intentional activities and expectations so as to determine whether the
nonresident could reasonably anticipate being subject to Texas jurisdiction. See World-Wide
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Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980); Hanson v. Denckla, 357 U.S. 235, 253
(1958). This inquiry is necessary to determine whether the nonresident is subject to general
jurisdiction—jurisdiction based on a nonresident’s continuous and systematic contacts with Texas
justifying suit without a relationship between the nonresident’s conduct and the plaintiff’s claims—
or specific jurisdiction—jurisdiction based upon a nonresident’s particular activity. See Helicopteros
Nacionales de Colombia, S. A. v. Hall, 466 U.S.408, 414 n.9 (1984). Briggs-Cockerham does not
contend that appellees had continuous and systematic contacts with Texas sufficient to justify general
jurisdiction. Instead, they allege that appellees’ activities are sufficient to support specific jurisdiction.
Specific Jurisdiction
Briggs-Cockerham first contends that specific jurisdiction is proper because (i)
appellees contracted to buy a Texas corporation, and (ii) Briggs executed the agreement on behalf
of Briggs-Cockerham in Texas. They do not contend that appellees executed the agreement in Texas.
Rather, citing the Texas long-arm statute, they argue that where a nonresident “contracts by mail or
otherwise with a Texas resident and either party is to perform the contract in whole or in part in this
state,” then it is “doing business” in Texas and is therefore amenable to suit. Tex. Civ. Prac. & Rem.
Code Ann. § 17.042(1) (West 1997).
Because the agreement’s purpose was to provide electrical power in Ecuador, the
contract was not performable “in whole or in part in this state.” According to Briggs-Cockerham,
however, the act of purchasing a Texas corporation, by itself, satisfies jurisdictional due process
requirements. It is well settled law in Texas that the unilateral acts of those claiming a relationship
with a nonresident are insufficient to establish minimum contacts. Texas Prop. & Cas. Ins. Guar.
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Ass’n v. Boy Scouts of Am., 947 S.W.2d 682, 688 (Tex. App.—Austin 1997, no writ). Specific
jurisdiction derives from a showing that the cause of action arises out of or relates to the nonresident
defendant’s purposeful contact with Texas, not the plaintiff’s unilateral conduct. TeleVentures, Inc.
v. International Game Tech., 12 S.W.3d 900, 907 (Tex. App.—Austin 2000, pet. denied) (citing
Guardian Royal, 815 S.W.2d at 227). Thus, when assessing minimum contacts for purposes of
asserting specific jurisdiction, we focus on the relationship between the nonresident, the state, and
the litigation. Id. at 908.
Appellees incurred no jurisdictional consequences from Briggs’s unilateral execution
of the agreement. For the nonresident to avail itself “of the privilege of conducting activities within
the forum State, thus invoking the benefits and protections of its laws,” the nonresident must do
something to purposefully direct activity towards the State of Texas. Id. Here, appellees were not
directing their activity towards Texas; rather, they were responding to contract solicitations by
Briggs-Cockerham, a Texas corporation. In this context, simply contracting with a Texas corporation
is insufficient to establish minimum contacts to justify the exercise of specific jurisdiction.
TeleVentures, 12 S.W.3d at 908 (citing Burger King Corp. v. Rudzewics, 471 U.S. 462, 478 (1985)).
Because it is clear that, in this case, contracting with a Texas resident is in and of itself insufficient
to establish minimum contacts, Briggs-Cockerham’s claim that Briggs’s execution of the agreement
confers jurisdiction must fail.
Briggs-Cockerham next contends that appellees subjected themselves to jurisdiction
by returning the agreement’s signature pages to Briggs. However, the test to be applied in
determining jurisdiction is a highly realistic one, recognizing that contractual formalities are usually
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only incidental necessities of business negotiations by which to effectuate future plans which are the
real object of the business transaction. Id. Not in and of themselves insignificant, prior negotiations
must be evaluated in conjunction with the actual terms of the contract, the parties’ course of dealings,
and any contemplated future consequences, thereby making the determination of whether a
nonresident purposefully established minimum contacts with Texas more fair. See id. (citing Burger
King, 471 U.S. at 478-79). Because the signature pages were necessary to the formation of the joint
venture agreement, Briggs-Cockerham’s argument on this point is without merit.
Briggs-Cockerham also alleges that in mailing the $100 consideration to Briggs,
appellees purposefully availed themselves of the privilege of doing business in Texas. However, the
Texas Supreme Court has made clear that mailing payments to Texas is not enough to confer
jurisdiction. See U-Anchor Adver., Inc. v. Burt, 553 S.W.2d 760, 763 (Tex. 1977).
The constitutional foundation of the minimum contacts analysis is that nonresidents
must have some notice that they are amenable to suit in Texas. See World-Wide Volkswagen, 444
U.S. at 297. To assert specific jurisdiction, the cause of action must arise from the purposeful action
or conduct of the nonresident. Guardian Royal, 815 S.W.2d at 227 (citing World-Wide Volkswagen,
444 U.S. at 297). This standard encompasses an element of foreseeability. Foreseeability is
important because, in determining whether the nonresident has purposely established minimum
contacts with Texas, there is an implicit requirement that there be a “substantial connection” between
the conduct of the nonresident and Texas. Id.
Here, appellees could not have foreseen that contracting with a Texas party to provide
electrical services in Ecuador would subject them to Texas jurisdiction because Briggs-Cockerham,
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not appellees, initiated the agreement. Additionally, the contract was not performable in Texas
because the sole purpose of the joint venture agreement was to provide electrical power in Ecuador.
We conclude that the acts of executing the agreement, mailing the agreement’s signature pages, and
sending the $100 consideration for the purchase of Seacoast to Briggs in Texas, neither by themselves
nor considered together, are sufficient to sustain Briggs-Cockerham’s claim that jurisdiction over
appellees is proper.
Briggs-Cockerham further claims that by later selling Seacoast Power’s assets to
Marathon Oil, a Texas corporation, appellees established minimum contacts. Having already
concluded that, given the facts of this case, attempts to utilize contractual arrangements alone as a
means of conferring jurisdiction are insufficient, we reject this contention.
Briggs-Cockerham also argues that the letter mailed to Briggs in Texas accusing him
of breaching the joint venture agreement suffices to subject appellees to jurisdiction in Texas.
However, such correspondence is insufficient to establish minimum contacts. Engaging in
communications during contract performance is an invalid basis for establishing minimum contacts.
See TeleVentures, 12 S.W.3d at 908. “The exchange of communications between [appellees] and
[appellants] in the course of developing and carrying out the contract is in itself insufficient to
constitute purposeful availment of the benefits and protections of Texas law.” Id. (citing Holt Oil
& Gas Corp. v. Harvey, 801 F.2d 773, 778 (5th Cir. 1986)). Because we hold that neither
contracting with a Texas resident nor communicating with such resident during the performance of
this contract is sufficient to confer jurisdiction, we hold that a letter notifying Briggs-Cockerham of
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an alleged breach and termination of the joint venture enterprise is insufficient to establish jurisdiction.
See id. at 910-11.
At oral argument, Briggs-Cockerham argued that while each of the foregoing acts
alone might be insufficient to confer jurisdiction, taken together, the acts constitute adequate contact
to sustain personal jurisdiction. We disagree. The purchase of the Texas corporation, the unilateral
execution of the agreement by Briggs, mailing a payment to Texas, contracting to sell Seacoast
Power’s assets, and mailing a breach of contract notification to Briggs simply do not constitute the
purposeful availment necessary to establish minimum contacts. See Stuart v. Spademan, 772 F.2d
1185, 1194 (5th Cir. 1985).
Briggs-Cockerham next contends that, because the six appellees are the alter egos of
one another, jurisdiction is proper. They do not contend that appellees are the alter ego of a Texas
corporation, only that each nonresident is the alter ego of the other. To prevail on a claim of alter
ego, Briggs-Cockerham is required “to prove that [they have] fallen victim to a basically unfair device
by which a corporate entity has been used to achieve an inequitable result.” Lucas v. Texas Indus.,
Inc., 696 S.W.2d 372, 375 (Tex. 1984). Generally, this means that Briggs-Cockerham must show
that appellees’ corporations were used merely as a tool or business conduit of another corporation,
i.e., there must be proof of fraud. Aluminum Chems., Inc. v. Bechtel Corp., 28 S.W.3d 64, 67 (Tex.
App.—Texarkana 2000, no pet.). Briggs-Cockerham did not plead fraud. Further, because the
conduct alleged relates only to the relationship among out-of-state corporations and not to their
conduct within the state, we find no basis for jurisdiction based on claims of alter ego.
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Briggs-Cockerham further alleges that jurisdiction is proper because appellees agreed
to share losses with one another. They do not contend that any of the appellees engaged in conduct
in Texas as a consequence of the sharing agreement. This claim is similar to Briggs-Cockerham’s
alter ego theory. They cite no authority that an agreement to share losses has any jurisdictional
consequences. Accordingly, we find no basis for asserting jurisdiction based on an agreement to
share losses.
Finally, Briggs-Cockerham asserts that appellees submitted to jurisdiction by filing a
bill of review in a related proceeding. This claim is no more than a conclusory statement for which
they cite no authority. The bill of review was filed by Seacoast; none of the appellees participated
in the filing. Because Briggs-Cockerham does not explain how Seacoast’s act can be imputed to
appellees and subject them to jurisdiction, we conclude this contention is without merit.
In determining whether appellees are subject to personal jurisdiction in Texas, this
Court must focus its analysis on appellees’ actions, not Briggs-Cockerham’s unilateral acts.
Appellees’ only contact with Texas relates to contracting with Briggs-Cockerham to provide
electrical power in Ecuador. Significantly, this contact was initiated by Briggs-Cockerham. The
unilateral activity of Briggs-Cockerham will not suffice to establish jurisdiction that must result from
appellees’ purposeful conduct. In light of these principles, we hold that there are insufficient contacts
between appellees and Texas to render constitutionally permissible an exercise of jurisdiction over
appellees by a Texas court.
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CONCLUSION
Having overruled Briggs-Cockerham’s issue, we affirm the district court’s order
sustaining appellees’ special appearance.
Jan P. Patterson, Justice
Before Justices Kidd, Yeakel and Patterson
Affirmed
Filed: October 25, 2001
Do Not Publish
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