Paulette Barker, Individually and as for the Estate of Robert Barker v. Emmett J. Lescroart ( 2007 )

Reversed and Remanded and Memorandum Opinion filed February 13, 2007

Reversed and Remanded and Memorandum Opinion filed February 13, 2007.

In The

Fourteenth Court of Appeals

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NO. 14-06-00125-CV

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PAULETTE BARKER, AS NAMED EXECUTOR FOR THE ESTATE OF ROBERT BARKER, AND PAULETTE BARKER, INDIVIDUALLY, Appellants

V.

EMMETT J. LESCROART, Appellee

On Appeal from the Probate Court No. 1

Harris County, Texas

Trial Court Cause No. 355868-402

M E M O R A N D U M   O P I N I O N

In this interlocutory appeal,^[1] appellant Paulette Barker^[2] appeals the trial court=s order granting appellee Emmett J. Lescroart=s special appearance.  In a single issue, appellant argues the trial court erred when it granted appellee=s special appearance as appellee=s contacts with Texas are sufficient to give the trial court personal jurisdiction over appellee. As we determine appellee=s contacts are sufficient to establish general jurisdiction, we reverse the trial court=s order and remand this matter for further proceedings in accordance with this opinion.

Factual and Procedural Background

In November 2001, appellee, a resident of New Jersey, joined the board of directors of  Thermal Solutions, Inc. (ATSI@), a Colorado corporation. Since 1996, appellee has acted as an independent private investor managing his personal investments. Robert and Paulette Barker owned 83,000 shares of TSI stock.  At all times relevant to this litigation, the Barkers resided in Harris County, Texas.  In June 2003, appellee contacted Mr. Barker in Harris County, Texas, by telephone, to solicit the purchase of the Barker=s TSI stock. In a series of at least five telephone calls, all initiated by appellee, appellee negotiated the purchase of all 83,000 shares of the Barkers= TSI stock for $7.00 per share.  After TSI=s shareholders declined to exercise their right of first refusal, the paperwork documenting the deal between appellee and the Barkers was prepared by TSI in Colorado and the transaction was completed on August 5, 2003 when TSI issued a new stock certificate to appellee.

In December 2003, only four months after the sale of the Barker stock was completed, appellee opened negotiations with Team, Inc. (ATeam@), a Texas corporation located in Alvin, Texas, about purchasing appellee=s TSI stock. Eventually, appellee and Team reached an agreement and the sale of appellee=s TSI stock to Team closed in April 2004.  Team paid for the TSI stock with both cash and stock. As part of the stock purchase agreement, appellee agreed not to compete with Team for a period of five years.  In addition, all parties to the stock purchase agreement submitted to the jurisdiction of any federal or state court sitting in either Denver County, Colorado or Harris County, Texas in any action or proceeding arising out of or related to the agreement.

Appellee is not just an owner of Team stock. On July 30, 2004, appellee entered into a consulting agreement with Team under which he functions as an independent contractor assisting Team with its heat treatment business located in Alvin, Texas.  As payment for his consulting services appellee receives $900 per day.  In addition, as part of the compensation for his consulting services, appellee was eligible for and received an option to purchase 20,000 additional shares of Team stock.

In September 2004, appellee was elected to Team=s board of directors.  As a director, appellee is paid an annual fee of $30,000.  This is paid in both cash ($20,000) and Team common stock ($10,000).  In addition, appellee received upon his appointment as a director, an automatic grant of an option to purchase 15,000 additional shares of Team stock.

Sometime after the Barkers sold their TSI stock to appellee, Mr. Barker died.  The exact date is not clear from the appellate record.  On July 13, 2005, alleging numerous causes of action, including fraud, breach of fiduciary duty, and fraud in the sale or purchase of securities, appellant filed suit against appellee, TSI, Team and other defendants. Appellee filed a special appearance objecting to the trial court asserting personal jurisdiction over him, which the trial court granted.  This interlocutory appeal followed.

Discussion

A.      Standard of Review

The plaintiff bears the initial burden of pleading sufficient allegations to bring a nonresident defendant within the personal jurisdiction of a Texas court.  BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 793 (Tex. 2002).  A defendant challenging the court=s assertion of personal jurisdiction must negate all jurisdictional bases. Id.

Whether a court has personal jurisdiction over a defendant is a question of law, which we review de novo. Id. at 794. Frequently when deciding a special appearance, a trial court must resolve questions of fact before deciding the jurisdiction question.  Id.  When a trial court does not issue findings of fact and conclusions of law with its special appearance ruling, all facts necessary to support the judgment and supported by the evidence are implied. Id. at 795.  When the appellate record includes the reporter=s and clerk=s records these implied findings are not conclusive and may be challenged for legal and factual sufficiency in the appropriate appellate court.  Id.  However, when the special appearance is based upon undisputed and established facts, as it is here, the reviewing court conducts a de novo review of the trial court=s order granting or denying a special appearance. C-Loc Retention Systems, Inc. v. Hendrix, 993 S.W.2d 473, 476 (Tex. App.CHouston [14th Dist.] 1999, no pet.).

B.      In Personam Jurisdiction

The Texas long-arm statute governs Texas courts= exercise of jurisdiction over nonresident defendants. See Tex. Civ. Prac. & Rem. Code Ann. ' 17.041B045 (Vernon 1997 & Supp. 2006).  That statute permits Texas courts to exercise jurisdiction over nonresident defendants doing business in the state of Texas. Tex. Civ. Prac. & Rem. Code Ann. ' 17.042 (Vernon 1997). The broad language of section 17.042 extends Texas courts= personal jurisdiction as far as the federal constitutional requirements of due process will permit. BMC Software, 83 S.W.3d at 795.  Because the long-arm statute=s concept of Adoing business@ extends as far as federal due process will allow, any activity or contact which satisfies due process constitutes doing business, and any contact which does not satisfy due process does not constitute doing business, and we need not analyze the Adoing business@ requirement separate from the due process requirement. Vosko v. Chase Manhattan Bank, N.A., 909 S.W.2d 95, 98 (Tex. App.CHouston [14th Dist.] 1995, writ denied).  To determine whether the assertion of personal jurisdiction is consistent with the requirements of due process, we rely on precedent from the United States Supreme Court and other federal courts, as well as Texas decisions. BMC Software, 83 S.W.3d at 795.

Personal jurisdiction over nonresident defendants 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.  Id. (citing Int=l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154,  90 L. Ed. 95 (1945)).  The purpose of the minimum contacts analysis is to protect the defendant from being haled into court when its relationship with Texas is too attenuated to support jurisdiction.  Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002) (citing Schlobom v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990)).  The minimum contacts analysis requires that a defendant Apurposefully avail@ himself of the privilege of conducting activities within the state of Texas, thus invoking the benefits and protections of Texas law. Id. (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985)). Where the defendant has deliberately created continuing obligations between himself and residents of the forum state, he manifestly has availed himself of the privilege of conducting business there. Burger King, 471 U.S. at 475, 105 S. Ct. at 2184.

A defendant is subject to personal jurisdiction based on his own purposeful activity and not on the unilateral acts of a third party. Michiana Easy Livin= Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex. 2005).  Therefore, it is only the defendant=s contacts with the forum that count when determining whether he has purposefully availed himself of the privilege of conducting business in the state of Texas.  Id.  In addition, the acts relied upon must be Apurposeful@ rather than fortuitous.  Id. Also, a defendant must seek some benefit, advantage, or profit by Aavailing@ himself of the jurisdiction.  Id.  It is the quality and the nature of the defendant=s contacts, rather than the quantity, that is important to the minimum contacts analysis.  Am. Type Culture, 83 S.W.3d at 806.  Random, isolated, or fortuitous contacts with the forum state are insufficient to confer jurisdiction. Michiana, 168 S.W.3d at 785.

Personal jurisdiction exists if the nonresident defendant=s minimum contacts give rise to either general or specific jurisdiction.  BMC Software, 83 S.W.3d at 795B96. General jurisdiction is present when the defendant=s contacts in a forum are continuous and systematic so that the forum may exercise personal jurisdiction over the defendant even if the cause of action did not arise from or relate to activities conducted within the forum state. Id. at 796. Specific jurisdiction is established if the cause of action arises from the defendant=s contacts with the forum.  Id.  Appellant argues appellee=s contacts with Texas satisfy the requirements for both general and specific jurisdiction.  Because we determine appellee meets the requirements for the assertion of general jurisdiction we need not address appellant=s specific jurisdiction argument.

C.      Minimum Contacts with Texas

General jurisdiction may be exercised over a nonresident defendant with continuous and systematic contacts with this state.  Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 228 (Tex. 1991).  All contacts made up to the time suit is filed are relevant to the general jurisdiction inquiry. Am. Type Culture, 83 S.W.3d at 804, 807B08; Nguyen v. Desai, 132 S.W.3d 115, 118 (Tex. App.CHouston [14th Dist.] 2004, no pet.).  In support of her general jurisdiction argument, Barker cites three categories of contacts by appellee with Texas: (1) appellee=s telephone negotiations for and purchase of the Barkers= TSI stock; (2) appellee=s service on Team=s board of directors; and (3) appellee=s agreement to provide consulting services to Team.  For general jurisdiction purposes, we do not view each contact in isolation.  All contacts must be carefully investigated, compiled, sorted, and analyzed for proof of a pattern of continuing and systematic activity. Am. Type Culture, 83 S.W.3d at 809.  What constitutes continuous and systematic contacts can only be decided on a case-by-case basis. Id. at 810.

1.       Appellee=s Telephone Calls to Texas

The record is undisputed that appellee initiated all contact with Mr. Barker regarding the sale of the Barkers= TSI stock.  Thus, when considering the series of at least five telephone calls made by appellee to Mr. Barker, only the defendant=s contacts are being considered.  In addition, appellee=s contacts were not random, isolated, or fortuitous, but instead were purposeful as appellee, a private investor who spends much of his time managing his investment portfolio, initiated each of the calls to Mr. Barker in Texas as part of  appellee=s effort to acquire the Barkers= 83,000 shares of TSI stock.  Finally, appellee was seeking some benefit, advantage, or profit through these telephone calls to Mr. Barker in Texas: the acquisition of  83,000 shares of TSI stock.

2.       Appellee=s Service on Team=s Board of Directors

Barker asserts appellee=s service on Team=s board of directors should be considered when evaluating whether appellee has established a pattern of continuing and systematic contacts with Texas. In response, appellee contends his service on Team=s board of directors must be excluded from consideration of the personal jurisdiction issue as a result of the fiduciary shield doctrine.  We agree with Barker that appellee=s service as a member of Team=s board of directors should be considered when evaluating whether appellee has established a pattern of continuing and systematic contacts with Texas.

Initially, we note the so-called fiduciary shield doctrine has not been adopted by the Texas Supreme Court. Wright v. Sage Eng=g, Inc., 137 S.W.3d 238, 250 n.9 (Tex. App.CHouston [1st Dist.] 2004, pet. denied). In Vosko, we applied an aspect of the doctrine, holding that personal jurisdiction over an individual may not be based on jurisdiction over a corporation with which an individual is associated unless the corporation is the alter ego of the individual.  Vosko, 909 S.W.2d at 99. Barker, by asserting we should consider appellee=s service as a member of Team=s board of directors when determining the personal jurisdiction issue, is not seeking to impose Team=s contacts on appellee nor is she asserting appellee is the alter ego of Team.  Therefore, the fiduciary shield doctrine, as applied in Vosko, simply does not apply.

In Calder v. Jones, the Supreme Court stated that, although individuals= contacts with a forum are not to be analyzed based on their employer=s activities in that forum, Atheir status as employees does not somehow insulate them from jurisdiction.@ 465 U.S. 783, 790, 104 S. Ct. 1482, 1487, 79 L. Ed. 2d 804 (1984) . AThere is no blanket protection from jurisdiction simply because a defendant=s alleged acts were done in a corporate capacity.@ SITQ E.U., Inc. v. Reata Rests., Inc., 111 S.W.3d 638, 651 (Tex. App.CFort Worth 2003, pet. denied). Each defendant=s contacts with the forum state must be assessed on an individual basis. Calder, 465 U.S. at 790, 104 S. Ct. at 1487.  To fulfill his duties as a director, appellee must travel to Texas multiple times each year to attend the meetings of the board.  When considering appellee=s service on Team=s board of directors, only his contacts are being considered. In addition, appellee=s contacts with Texas as a result of his board service were not random, isolated, or fortuitous, but instead were purposeful as appellee chose to accept the position on the board of director=s for a Texas corporation.  Finally, appellee was seeking some benefit, advantage, or profit through his service on the board of a Texas corporation as he is compensated, in the form of cash and stock, for each year he serves. Accordingly, we hold that appellee=s service as a member of Team=s board of directors should be considered when evaluating whether appellee has established a pattern of continuing and systematic contacts with Texas.

3.       Appellee=s Consulting Agreement

Barker argues appellee=s consulting services agreement with Team should also be considered when evaluating whether appellee has established a pattern of continuing and systematic contacts with Texas.  Appellee does not address this issue.  In fact, appellee, stating that his only contacts with Texas are a few phone calls to Mr. Barker, does not mention this consulting services agreement anywhere in his brief.  For the same reasons stated under section C(2) above, we hold that appellee=s consulting services agreement with Team, which again, requires that he travel to Texas in order to carry out his contractual duties, should be considered when evaluating whether appellee has established a pattern of continuing and systematic contacts with Texas.

4.       Pattern of Continuing and Systematic Texas Contacts

The record demonstrates that appellee=s contacts with Texas have been increasing in number and quality since his initial telephone contact with Mr. Barker in June 2003. Since that telephone call, appellee has (1) purchased a significant amount of stock from Texas residents; (2) become a director of a Texas corporation; and most significantly, (3) signed an agreement to provide consulting services to a Texas corporation for a fee of $900 per day.  As appellee has deliberately created continuing obligations between himself and residents of Texas, he has manifestly availed himself of the privilege of conducting business here. Burger King, 471 U.S. at 475, 105 S. Ct. at 2184.  Accordingly, after compiling, sorting, and analyzing appellee=s Texas contacts for proof of a pattern of continuing and systematic activity, we hold that appellee has sufficient minimum contacts with Texas to anticipate being haled into a Texas court.  Am. Type Culture, 83 S.W.3d at 809.

D.      Fair Play and Substantial Justice

Having concluded that appellee has sufficient contacts with Texas to support general jurisdiction, we next consider whether the exercise of jurisdiction over him offends the traditional notions of fair play and substantial justice.  D. H. Blair Inv. Banking Corp. v. Reardon, 97 S.W.3d 269, 278 (Tex. App.CHouston [14th Dist.] 2002, pet. dism=d w.o.j.) (citing Guardian Royal, 815 S.W.2d at 231).  The following factors, when appropriate, should be considered: (1) the burden on the defendant; (2) the interests of the forum state 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 controversies; and (5) the shared interest of the several states in furthering fundamental substantive social policies.  Id.  Only in rare cases will the exercise of jurisdiction not comport with fair play and substantial justice when, as here, the nonresident defendant has purposefully established minimum contacts with the forum. Id. The burden is on the defendant to present a compelling case that the presence of some other considerations would render jurisdiction unreasonable. Guardian Royal, 815 S.W.2d at 231.

Appellee claims the exercise of jurisdiction over him is inconsistent with traditional notions of fair play and substantial justice because: (1) having to defend the suit in Texas would be excessively burdensome and inconvenient to appellee; (2) Texas has no interest in adjudicating the claims of this lawsuit; (3) the plaintiff=s interest in convenient and effective relief would be served by dismissing this suit and allowing it to be re-filed in Colorado; (4) the interstate judicial system=s interest in efficient resolution of controversies would likewise be served by dismissing this suit, allowing it to be re-filed in Colorado; and (5) the states= shared interest in furthering fundamental social policies would also be served by dismissing appellant=s suit.  We disagree.

As to the first factor, the burden on the defendant, nothing in the record indicates that litigation in Texas would be excessively burdensome or inconvenient to appellee.  The record reflects regular and continuing contacts by appellee with Texas. In addition, the record shows that appellee agreed to Texas jurisdiction for any dispute growing out of the TSI stock sale to Team.  This agreement serves as some evidence that having to litigate this dispute in Texas does not create a burden so great as to be inconsistent with the constitutional guarantees of due process.  Finally, while litigation away from home undoubtedly creates some hardship for any defendant, there is no legal requirement that this hardship must be borne instead by the plaintiff whenever the defendant is not found in the state of the plaintiff=s residence. Wright, 137 S.W.3d at 253B54 (citing General Elec. Co. v. Brown & Ross Int=l Distribs., Inc., 804 S.W.2d 527, 531B32 (Tex. App.CHouston [1st Dist.] 1990, writ denied). Regarding the second and third factors, we find it incredible for appellee to suggest that Texas has no interest in adjudicating this dispute and that the interest of the Texas plaintiff would be served by dismissing this suit.  Texas courts have an interest in providing a forum for resolving disputes involving its citizens.  D. H. Blair Inv. Banking, 97 S.W.3d at 278. Texas is certainly a convenient forum for the Texas plaintiff. In addition, litigation in Texas will provide all the parties, not just appellant and appellee, the benefits and protections of our laws. Lewis v. Indian Springs Land Corp., 175 S.W.3d 906, 919 (Tex. App.CDallas 2005, no pet.).  The fourth factor, the interstate judicial system=s interest in obtaining the most efficient resolution of the controversy, will likewise be served by litigating this matter in Texas, where the matter is already pending and all other interested parties are currently before the trial court.^[3]  Id.  The fifth factor, the shared interest of other states in furthering fundamental substantive social policies, can be implemented by Texas courts as effectively as the courts of Colorado or New Jersey.  Id.  In addition, any potential clash of the forum=s law with the fundamental substantive social policies of another state may be accommodated through an application of the forum=s choice of law rules.  Brown v. Gen. Brick Sales Co., Inc., 39 S.W.3d 291, 297 (Tex. App.CFort Worth 2001, no pet.).  As appellee, the nonresident defendant, has not presented a compelling case that the presence of some other considerations would render jurisdiction unreasonable, we find that the exercise of general jurisdiction over appellee by a Texas court does not offend traditional notions of fair play and substantial justice.

We sustain appellant=s single issue on appeal.

Conclusion

Having sustained appellant=s only issue, we reverse the trial court=s order granting appellee=s special appearance and remand this matter to the trial court for further proceedings in accordance with this opinion.

/s/      John S. Anderson

Justice

Judgment rendered and Memorandum Opinion filed February 13, 2007.

Panel consists of Justices Anderson, Hudson, and Guzman.

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^[1]  Tex. Civ. Prac. & Rem. Code Ann. ' 51.014(a)(7) (Vernon Supp. 2006).

^[2]  Appellant Paulette Barker filed suit as the executor of her husband Robert Barker=s estate as well as in her individual capacity.

^[3]   The record indicates that, of the ten defendants named in Barker=s First Amended Original Petition, only two, appellee and Michael Urban, filed special appearances. Urban=s was denied by the trial court and is presently on appeal before this court in Michael Urban v. Paulette Barker, et al, Cause Number 14-06-00387-CV.