Ajmal Khan and Global Technologies & Resources v. Lal Murjani Rewachand ( 2008 )

NUMBER 13-07-465-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
AJMAL KHAN AND GLOBAL
TECHNOLOGIES & RESOURCES, Appellants,
v.
LAL MURJANI REWACHAND, Appellee.
On appeal from the County Court at Law No. 4
of Hidalgo County, Texas.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Garza and Benavides
Memorandum Opinion by Justice Benavides
In this interlocutory appeal from a denial of a special appearance, we conclude the
appellant is subject to jurisdiction in Texas because he "did business" in the State, as the
long-arm statute requires, and because exercising jurisdiction over him would not violate
any traditional federal or state guarantees of due process. See TEX . CIV. PRAC . & REM .
CODE ANN . § 17.042 (Vernon Supp. 2007); Moki Mac River Expeditions v. Drugg, 221
S.W.3d 569, 574 (Tex. 2007). We affirm.
I. BACKGROUND
The appellant is a Connecticut resident named Ajmal Khan. He is the principal in
a consulting business called Global Technologies & Resources (“Global”). In August or
September of 2002, Khan met the appellee, Lal Murjani Rewachand, at a trade show in
Chicago, Illinois called the Plastic Machinery Expo. Rewachand is a Texas resident who
owns a business in Pharr, Texas called Petco International (“Petco”). Petco manufactures
glass bottles for water, nail polish, and perfume, among other things.
At the Expo, Rewachand first noticed Khan, along with a man named Jurgen
Kukzycki, demonstrating the use of a glass-blowing machine that Rewachand thought
might be useful in his manufacturing business. The machine was manufactured by a
German company called Spilles Maschinenbau GmbH (“Spilles”). According to
Rewachand, Khan said that he was demonstrating the machine’s features as a
representative of Spilles. Khan denies that he is “a principal or agent” of Spilles, and he
instead claims that he was manning the company’s booth at the Expo as a favor to a
friend.
When Rewachand returned to Texas, he kept in contact with Khan via telephone
and e-mail. On November 21, 2002, Rewachand paid for Khan to fly to Texas and for a
three-night stay at a McAllen hotel. While in Texas, Khan visited Rewachand’s warehouse
in Pharr, and Rewachand outlined the specifications that he needed for a new glass-
blowing machine. Khan assured Rewachand that Spilles was trustworthy and would
provide him with a reliable machine.
2
Rewachand agreed to buy a machine from Spilles for $120,000, paying $60,000
immediately and the balance over the course of the next year. The contract was signed
in Pharr. Khan asked Rewachand to wire $60,000, the down payment for the machine, to
Spilles. At some point, Rewachand expressed concerns about dealing with a German
company because “issues” might arise. Khan assured him, however, that all dealings
would be through Khan and Global Technologies. He withdrew his request that Khan wire
the money to Spilles, and instead, he asked Rewachand to transfer the funds to the
account of Global.1
When the machine arrived in Texas, a technician from Spilles also arrived to install
the machine and to train Rewachand’s employees. Rewachand, however, began having
problems with the machine. He complained to Khan, but Khan referred him directly to
Spilles. Rewachand protested that this was not their agreement and that his understanding
was that Khan himself would address any problems that arose. Khan ignored his pleas.
Two years after having the machine installed, and with a $65,000 balance left to be paid
on the machine, Rewachand filed suit against Khan and Global for breach of contract,
fraud, and breach of fiduciary duties.
Khan filed a special appearance in the trial court, asserting that as a Connecticut
resident who had never “done business” in Texas, he was not amenable to the jurisdiction
of the Texas courts. The trial court denied his special appearance, and he now seeks
review through this interlocutory appeal. See TEX . CIV. PRAC . & REM . CODE § 51.014(a)(7)
1
In his affidavit, Khan agrees to this verison of events, albeit with som e vagueness. He stated:
"Plaintiff contracted with the Germ an com pany and sent funds to the G erm an com pany through a bank
account in Connecticut. I am not a principal or agent of the Germ an com pany and received no funds or profit
from the transaction." (em phasis added.). Presum ably, the bank account in Connecticut is Global’s, and
Khan, as Global’s principal, exercises som e control over it.
3
(Vernon Supp. 2007).
II. STANDARD OF REVIEW
When a Texas plaintiff sues a non-resident defendant, the plaintiff initially bears the
burden of pleading allegations sufficient to demonstrate the Texas court’s jurisdiction.
BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 793 (Tex. 2002). Next, the
burden shifts to the non-resident defendant to negate all jurisdictional bases. Id.
We review a trial court's denial of a special appearance de novo because personal
jurisdiction is a question of law. Id. at 794. We recognize, however, that the trial court
frequently must often resolve fact disputes before it reaches the jurisdictional question, and
we review these findings for legal and factual sufficiency. Id. A finding is legally insufficient
if the record reflects: (1) a complete absence of evidence of vital fact; (2) the court is
barred by rules of law or of evidence from giving weight to the only evidence offered to
prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere
scintilla; or (4) the evidence establishes conclusively the opposite of the vital fact. City of
Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005). A finding is factually sufficient unless
it is “so contrary to the overwhelming weight of the evidence as to be clearly wrong and
unjust.” Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986).
III. ANALYSIS
A Texas court may exercise personal jurisdiction over a non-resident defendant if:
(1) it is authorized to do so by the Texas "long-arm" statute, which permits jurisdiction over
a person who "does business" in Texas; and (2) the exercise of jurisdiction comports with
traditional state and federal guarantees of due process. Moki Mac, 221 S.W.3d at 574.
4
We believe the trial court’s conclusion that Khan is subject to jurisdiction under this test are
supported by legally and factually sufficient evidence.
A. “Doing Business” Under the Long-Arm Statute
The Texas long-arm statute authorizes jurisdiction over a non-resident defendant
who "does business" in the State of Texas. TEX . CIV. PRAC . & REM . CODE ANN . § 17.042.2
The statute provides, in part, that a non-resident does business in Texas if he “commits a
tort in whole or in part this state.” Id. An allegation that a tort was committed in Texas is
sufficient to satisfy this statute. Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d
777, 788 (Tex. 2005); Pessina v. Rosson, 77 S.W.3d 293, 298 (Tex. App.–Austin 2001,
pet. denied).
The facts in this case are comparable to those in Pessina. See Pessina, 77 S.W.3d
at 297. Pessina, a resident of the Principality of Monaco, traveled to Texas in order to
facilitate business dealings between a Texas corporation and an English corporation. Id.
When the Texas corporation filed for bankruptcy after the business dealings went awry, it
sued Pessina for alleged misrepresentations. Id. at 297. Pessina filed a special
appearance arguing that he was merely a representative of the English corporation, and
therefore, he was protected from the suit. Id. at 299. The court of appeals found that
Pessina was subject to Texas jurisdiction under the Texas long-arm statute, however,
2
The long-arm statute provides that a nonresident "does business" in Texas if he:
(1) contracts by m ail or otherwise with a Texas resident and either party is to perform the
contract in whole or in part in this state; (2) com m its a tort in whole or in part in this state; or
(3) recruits Texas residents, directly or through an interm ediary located in this state, for
em ploym ent inside or outside this state.
T EX . C IV . P RAC . & R EM . C OD E A N N . § 17.042 (Vernon Supp. 2007)
5
because the plaintiff had pleaded allegations of misrepresentation against Pessina in his
individual capacity:
[The] affidavit asserts that Pessina acted in his personal capacity by
negotiating for a personal interest in a future business venture and offering
to invest personal funds . . . . This case is therefore distinguishable from two
of the main cases Pessina relies upon for the contention that he is protected
from personal jurisdiction by the fiduciary shield doctrine.
Id. at 300 (emphasis added).
In this case, Rewachand has pleaded and alleged in his affidavit that Khan
negotiated for a personal interest by instructing Rewachand to wire his payment to a
Connecticut account controlled by Khan, rather than to Spilles’s bank account.
Rewachand also alleged that Khan traveled to Texas and made a misrepresentation,
thereby commiting a tort in Texas. These allegations alone easily meet Rewachand’s
burden to plead allegations that bring Khan under the long-arm statute. See Michiana, 168
S.W.3d at 788.
B. Traditional Federal and State Due Process Guarantees
“Allegations that a tort was committed in Texas satisfy the Texas Long-Arm Statute,
but not necessarily the U.S. Constitution.” Id. We must also ensure that subjecting Khan
to Texas jurisdiction does not implicate either state or federal due process guarantees.
Moki Mac, 221 S.W.3d at 574. Specifically, we must conclude that Khan has established
minimum contacts with Texas and that the exercise of jurisdiction over him comports with
traditional notions of fair play and substantial justice. See BMC Software, 83 S.W.3d at
795 (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). We believe that both
of these tests are satisfied.
6
1. Minimum Contacts
The minimum contacts necessary to establish personal jurisdiction exist when the
nonresident defendant “‘purposefully avails itself of the privilege of conducting activities
within the forum State, thus invoking the benefits and protections of its laws.’” Michiana,
168 S.W.3d at 784 (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)). There are
three parts to a "purposeful availment" inquiry. Id. at 784-85. First, only the individual
defendant's contacts with the forum state, not the unilateral activity of another party or a
third person, are relevant to the inquiry. Id. Second, the contacts relied upon must not be
"random, fortuitous, or attenuated”; they must be purposeful. Id. Finally, the "defendant
must seek some benefit, advantage or profit by 'availing' itself of the jurisdiction." Id.
The non-resident defendant’s minimum contacts can either be "specific" or
"general." PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 167 (citing
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984)). Specific
jurisdiction exists when the plaintiff’s cause of action arises out of or is related to the
defendant's contacts with the forum, whereas general jurisdiction exists where the
defendant's contacts in a forum are continuous and systematic such that jurisdiction may
be exercised even if the cause of action does not arise from or relate to activities
conducted within the forum state. PHC-Minden, 235 S.W.3d at 167. In this case, we
believe Khan’s contacts with Texas are sufficient to establish specific jurisdiction because
his trip to Texas constituted a purposeful availment of the Texas laws.
First, we note that we are examining only Khan’s unilateral contacts with
Texas—namely, his trip to the state to meet with Rewachand and his negotiation and
7
signing of a contract in the state. Considering only this unilateral contact, the contact
between Khan and Texas is certainly purposeful—not random, fortuitous, or attenuated.
This is because a person who “‘reach[es] out beyond one state and create[s] continuing
relationships and obligations with citizens of another state’ [is] subject to the jurisdiction of
the latter in suits based on their activities.” Michiana, 168 S.W.3d at 785 (quoting Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 473 (1985)). Here, the only “random” contact
Khan had with Texas was that, by happenstance, he met a Texas resident, Rewachand,
in Chicago. From that point forward, all contacts were purposeful. Khan chose to maintain
a professional relationship with Rewarchand via phone and e-mail; he chose to visit Texas
and tour Rewachand’s factory facilities; he chose to negotiate the final terms of a contract
in Texas; and he chose to sign the contract in Texas.3
Finally, we note that Khan purposefully availed himself of Texas law by virtue of his
business trip here. Nonresidents “may purposefully avoid a particular jurisdiction by
structuring . . . transactions so as neither to profit from the forum's laws nor be subject to
its jurisdiction.” Michiana, 168 S.W.3d at 785. Khan took no such measures in this case.
Although we do not believe this contact is continuous and extensive enough to support a
finding of general jurisdiction, it is certainly sufficient for the standards of specific
jurisdiction. See PHC-Minden, 235 S.W.3d at 167.
3
The Houston Court of Appeals has held that “negotiating and signing a contract in Texas is
insufficient” to support jurisdiction, but only “if perform ance takes place elsewhere.” Moni Pulo, Ltd. v. Trutec
O il & G as, Inc., 130 S.W .3d 170, 175 (Tex. App.–Houston [14th Dist.] 2003, pet. denied). In this case,
perform ance took place substantially in Texas, where the m achine was shipped and installed, and from where
Rewachand wired his paym ent.
8
2. Traditional Notions of Fair Play and Substantial Justice
Finally, having found that Khan has minimum contacts with the State of Texas, we
must decide whether subjecting him to jurisdiction here would violate "traditional norms of
fair play and substantial justice." See Moki Mac, 221 S.W.3d at 574. When evaluating
whether traditional notions of fair play and substantial justice are implicated by a state's
exercise of jurisdiction over a nonresident defendant, courts look to the following factors:
(1) the burden on the non-resident to litigate in a different forum; (2) the forum state's
interest in adjudicating the dispute; (3) the plaintiff's interest in obtaining convenient and
effective relief; (4) the interstate judicial system's interest in obtaining the most efficient
resolution of disputes; and (5) the shared interest of the respective states furthering
substantive social policies. Id.
When we view the facts of the instant case through the prism of these five factors,
we are unable to see how traditional norms of fair play and substantial justice are violated
by subjecting Khan to jurisdiction in Texas. First, although it may be somewhat
burdensome for Khan to litigate in Texas (rather than Illinois or Connecticut), the burden
is outweighed by the fact that all of the relevant actions underlying the claims took place
in Texas, and therefore, the majority of the documents and witnesses necessary for trial
are most likely in Texas also. See Guardian Royal Exch. Assurance, Ltd. v. English China
Clays, P.L.C., 815 S.W.2d 223, 233 (Tex. 1991). The ease of accessability and
transportation of such evidence is commonly considered when analyzing the burden upon
a non-resident of litigating in a different forum. See, e.g., Transportadora Egoba S.A. de
C.V. v. Arredondo, 217 S.W.3d 603, 610 (Tex. App.–San Antonio 2006, pet. denied);
9
Michel v. Rocket Eng'g Corp., 45 S.W.3d 658, 683 (Tex. App.–Fort Worth 2001, no pet.);
De Prins v. Van Damme, 953 S.W.2d 7, 16 (Tex. App.–Tyler 1997, pet. denied). Thus, in
this case, “the interests of the forum state and the plaintiff will justify the severe burden
placed upon the nonresident defendant." Guardian Royal, 815 S.W.2d at 233.
The second and third factors—the interests of Texas and of Rewachand—also favor
jurisdiction in Texas. Texas has a clear interest in adjudicating the dispute because the
claim was filed by a Texas resident and it involves alleged tortious acts which took place
in Texas. See Pessina, 77 S.W.3d at 299; see also Am. Type Culture Collection, Inc. v.
Coleman, 83 S.W.3d 801, 810 (Tex. 2002); Guardian Royal, 815 S.W.2d at 233.
Rewachand has an interest in seeing the case resolved in Texas because he is a Texas
resident and his company is in Texas. See Pessina, 77 S.W.3d at 299.
Fourth, the interests of the interstate judicial system indicate that Texas is the proper
forum. Among the three states involved in this case—Texas, Illinois, and
Connecticut—Texas stands out as the actual site of virtually all the activity. Illinois is
merely the place where the parties met, and Connecticut is merely where the defendant
resides. The claims, however, are based on misrepresentations which were allegedly
committed in Texas, and on the breach of a contract that was negotiated, signed, and
substantially performed in Texas. See id.; see also Gonzalez v. Lehtinen, No. 13-06-441-
CV, 2008 Tex. App. LEXIS 1889, at *28 (Tex. App.–Corpus Christi Mar. 13, 2008, no pet.
h.) (mem. op.).
These same reasons also relate to the fifth element—the shared interest of the
respective states furthering substantive social policies. Khan does not contend—nor can
10
we imagine any reasonable contention—that “the procedural and substantive policies of
other nations or the federal government's foreign relations policies will be affected by the
exercise of personal jurisdiction over him.” Pessina, 77 S.W.3d at 299.
Khan has the minimum contacts with Texas to be subject to specific jurisdiction, and
no traditional notions of fair play and substantial justice are violated by the exercise of
jurisdiction.
IV. FIDUCIARY SHIELD DOCTRINE DOES NOT APPLY
Finally, although Khan adamantly asserts in his affidavit that he is not an agent of
Spilles, he concedes his actions on behalf of Spilles (“favors,” as he terms it) may lead us
to conclude that a de facto agency relationship existed. If so, he argues he is protected
by the fiduciary shield doctrine, under which corporate agents generally “are not subject
to personal jurisdiction in Texas merely because their employer does business in this
state.” Cerbone v. Farb, 225 S.W.3d 764, 769 (Tex. App.–Houston [14th Dist.] 2007, no
pet.); see also Corella v. Magnuson, No. 13-07-439-CV, 2008 Tex. App. LEXIS 1099, at
*6 n.2 (Tex. App.–Corpus Christi Feb. 14, 2008, no pet.) (mem. op.).
The fiduciary shield doctrine does not apply in this case, however, because it does
not protect an employee from specific personal jurisdiction as to intentional torts or
fraudulent acts for which he may be held individually liable. Cerbone, 225 S.W.3d at 769;
Morris v. Kohls-York, 164 S.W.3d 686, 697 (Tex. App.–Austin 2005, pet. dism’d); Morris
v. Powell, 150 S.W.3d 212, 218-19 (Tex. App.–San Antonio 2004, pet. dism’d); SITQ E.U.,
Inc. v. Reata Rests. Inc., 111 S.W.3d 638, 651 (Tex. App.–Fort Worth 2003, pet. dism'd);
see also Capital Pac., L.L.C. v. Humble Garden, L.L.C., No. 01-05-00469-CV, 2005 Tex.
11
App. LEXIS 9158, at *20 (Tex. App.–Houston [1st Dist.] Nov. 3, 2005, no pet.) (mem. op.)
(“It is well settled that a corporate agent can be held individually liable for fraudulent
statements or knowing misrepresentations even when the agent makes them in the
capacity of a corporate representative.”); Morris v. Schilling, No. 13-04-00175-CV, 2005
Tex. App. LEXIS 7095, at *18 (Tex. App.–Corpus Christi Aug. 30, 2005, pet. dism’d) (mem.
op.).4
V. CONCLUSION
We conclude the defendant is subject to jurisdiction in Texas because he "did
business" in the State as the long-arm statute requires, and because exercising jurisdiction
over him would not violate any traditional federal or state guarantees of due process.
Accordingly, we affirm the trial court’s denial of special appearance.
_____________________________
GINA M. BENAVIDES,
Justice
Memorandum Opinion delivered and
filed this the 29th day of May, 2008.
4
W e note that the facts in this case are distinguishable from those in a m em orandum opinion we
recently issued in which we found the fiduciary shield doctrine applicable. See Tang v. G arcia, No. 13-06-
00367-CV, 2007 Tex. App. LEXIS 6148, at *13-16 (Tex. App.–Corpus Christi August 2, 2007, pet. denied)
(m em . op.). In Tang, the resident plaintiffs, in their pleadings, specifically referred to the nonresident
defendants as the “agents” of the com pany in question. Id. at *14 (“According to Garcia’s counterclaim ‘Tang
and/or Haigney were the agents for...Burlington.’”) (em phasis in original). In so doing, the Tang plaintiffs
waived the argum ent that the fiduciary shield doctrine was inapplicable. The facts in the instant case are quite
different. Rewachand, in his pleadings, did not assert that Khan was a Spilles agent; he accused Khan of
m isrepresenting him self as a Spilles agent. In other words, Rewachand couched his pleadings in term s of
individual— not representative— liability. See also Corella v. Magnuson, No. 13-07-439-CV, 2008 Tex. App.
LEXIS 1099, at *5-6 n.2 (Tex. App.–Corpus Christi Feb. 14, 2008, no pet.) (m em . op.) (distinguishing Tang
as a case in which “the plaintiffs chose to couch their jurisdictional allegations only in fiduciary or
representative term s and did not plead any facts raising individual liability against the nonresident
defendants”).
12