Favour Leasing, LLC v. Patrick J. Mulligan ( 2014 )

Reverse, Render, and Dismiss; Opinion Filed June 24, 2014.
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-13-01000-CV
FAVOUR LEASING, LLC, C.F. ABBOTT FAMILY LLC, C.F. ABBOTT TRUST, AND
ORANEE H. ABBOTT TRUST, Appellants
V.
PATRICK J. MULLIGAN, AN INDIVIDUAL, AND THE LAW OFFICE OF PATRICK
J. MULLIGAN, P.C., A PROFESSIONAL CORPORATION, Appellees
On Appeal from the 14th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-12-14667-A
MEMORANDUM OPINION
Before Justices Moseley, Lang, and Brown
Opinion by Justice Lang
This is an interlocutory appeal from the trial court’s order overruling the special
appearance of Favour Leasing, LLC, C.F. Abbott Family LLC, and the LLC’s sole members, the
C.F. Abbott Trust and the Oranee H. Abbott Trust (collectively, “the Trusts and LLCs”). In three
issues, the Trusts and LLCs assert the trial court erred in overruling their special appearance
because (1) the appointment of a Texas resident as co-trustee of the Trusts did not establish
jurisdiction; (2) their admission of Texas citizenship for diversity jurisdiction purposes did not
constitute consent to personal jurisdiction; and (3) their alleged commission of torts did not
establish jurisdiction. We agree. Accordingly, we reverse the trial court’s order, render judgment
granting the special appearance, and dismiss the claims against the Trusts and LLCs for want of
jurisdiction. 1
I. FACTUAL AND PROCEDURAL CONTEXT
The facts leading to the present suit date back to 2001 when Texas attorney Patrick J.
Mulligan and The Law Office of Patrick J. Mulligan, P.C., a Texas professional corporation
(collectively, “Mulligan”) entered into an agreement with Utah attorney Charles F. Abbott to
jointly represent individuals allegedly injured by the diet drug Fenfluramine/Dexfenfluramine,
better known as “Fen-Phen.” Under the terms of the agreement, Abbott was to advertise in
California and Utah, screen potential clients for compensable injuries, and then refer qualifying
claimants to Mulligan. In turn, Mulligan agreed to pay Abbott for the advertising and screening
costs and a portion of any recovered attorney’s fees.
In July 2006, Abbott sued Mulligan in Utah alleging Mulligan had failed to pay a portion
of fees recovered. Mulligan counterclaimed and asserted Abbott had breached the agreement by
retaining clients for himself and referring clients to another attorney. The suit was referred to
arbitration and resulted in a multi-million dollar award in favor of Mulligan, which award was
confirmed by the federal district court in August 2009 and affirmed by the Tenth Circuit in
September 2011. See Abbott v. Mulligan, 647 F. Supp. 2d 1286 (D. Utah 2009), aff’d, 440 Fed.
Apx. 612 (10th Cir. 2011). 2
Mulligan attempted to collect on the judgment, but Abbott claimed he had no assets to
satisfy it. Through collection-related discovery, Mulligan learned that Abbott and his wife,
Oranee, had transferred assets to the Trusts and LLCs beginning in 2001. Mulligan alleged
1
Mulligan also named the Charles F. Abbott Trust as a defendant. In the special appearance, the Trusts and LLCs “presume[d]” the naming
of that Trust was “an incorrect designation for the C.F. Abbott Trust” and did not otherwise include the Trust in the special appearance. That
Trust is not a party to this appeal.
2
We take judicial notice of these citations. See TEX. R. EVID. 201(c), (f).
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Abbott and his wife retained control and use of the assets after the transfers, and the Trusts and
LLCs were created “in a transparent attempt to keep assets protected from collections efforts.”
Those assets included (1) Abbott’s rights to a Maui, Hawaii timeshare, which Abbott transferred
in approximately June 2010 to his wife, who then transferred the timeshare to the Oranee H.
Abbott Trust; (2) the primary residence of Abbott and his wife, transferred “[i]n or around 2005”
to the C.F. Abbott Family LLC; (3) a yacht owned by Abbott and his wife, transferred also “in or
around 2005” to Favour Leasing, LLC; (4) Abbott’s St. George, Utah condominium, which was
transferred in November 2006 to “one of the [Trusts or LLCs];” and, (5) money, which was
transferred to the Trusts and LLCs “throughout 2006-2008.”
In January 2011, Mulligan sued Abbott, Abbott’s wife, and Abbott’s law firm, Charles F.
Abbott, P.C., a Utah professional corporation. The suit was filed in federal district court in Utah
and asserted, based on Abbott, his wife, and the firm’s Utah citizenship and Mulligan’s Texas
citizenship, diversity jurisdiction as the basis for the court’s subject matter jurisdiction. Mulligan
subsequently joined the Trusts and LLCs as defendants. 3 Upon their joinder, the Trusts and LLCs
moved to dismiss the suit asserting diversity jurisdiction had been defeated by their joinder
because they were each “considered citizens of the state of Texas by reason of the citizenship of
the common trustee, Sandra Kay Harward, and the membership in the limited liability companies
in the Trusts.” Harward was a relative of the Abbotts and resided in Trinidad, Texas. Mulligan
conceded the issue and, on his motion, the claims against the Trusts and LLCs were severed from
the claims against the Abbott, his wife, and firm. 4
Mulligan then filed suit in the trial court below, alleging that, upon information and
belief, the Trusts had at least one trustee, Harward, residing in Texas; “[t]he citizenship of the
3
Mulligan also named the Charles F. Abbott Trust as a defendant in that suit. It is unclear from the record if that Trust was an original
defendant or was joined at the same time as the Trusts and LLCs.
4
The claim against Abbott, his wife, the firm, and the Charles F. Abbott Trust remains pending in the Utah federal district court.
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trust is determined based on where the trustees reside;” and, the Trusts could be served through
Harward at Harward’s primary residence. He further alleged that the LLCs had the Trusts as
their sole members; “[t]he citizenship of an LLC is based on the citizenship of its members;”
and, the Trusts could be served through their registered agent, Abbott’s wife. Mulligan claimed
the trial court had personal jurisdiction over the Trusts and LLCs because they were “all
residents of the state of Texas.” As his cause of action, Mulligan asserted as fraudulent transfers,
pursuant to the Uniform Fraudulent Transfer Act, 5 the transfers of the Maui timeshare, St.
George condominium, residence, yacht, and money were made “with actual intent to hinder,
delay, and defraud” him from collecting the $7,000,000 judgment and “without receiving a
reasonably equivalent value in exchange.”
The Trusts and LLCs responded by denying in their special appearance Mulligan’s
assertion that Harward’s Texas residency and citizenship alone made them Texas residents for
purposes of personal jurisdiction and arguing that the concepts of citizenship for diversity
jurisdiction purposes and residency for personal jurisdiction differ and involve separate inquiries.
They further argued that none of the alleged transfers occurred in Texas or concerned property
located in the state of Texas. Additionally, they claimed neither the Trusts nor the LLCs were
created, organized, or registered to do business in Texas; ever owned any property in Texas; ever
conducted business or had a place of business in Texas; or could have “reasonably anticipate[d]
being hauled [sic] into court in Texas over claims [Mulligan] brought in Utah under a contract
with a Utah forum selection clause” and “which have been litigated in the courts in Utah for
years and which still are being litigated in the courts in Utah.” Attached to the special
appearance were (1) the affidavit of Abbott’s wife, who stated she was a trustee of the Trusts and
LLCs and verified that the factual statements in the special appearance were true and correct; (2)
5
See TEX. BUS. & COM. CODE ANN. §§ 24.001-24.013 (West 2009 & Supp. 2013).
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the civil docket sheet for the Utah suit; and (3) the order dismissing the Trusts and LLCs from
the Utah suit.
Mulligan responded by filing an amended petition and a verified response and alternative
motion for continuance. In his amended petition, Mulligan identified the Trusts and LLCs in the
same manner as he did in his original petition, but as to personal jurisdiction alleged as follows:
This Court has personal jurisdiction over Defendants, nonresidents, because
Defendants consented to Texas jurisdiction and committed torts, which are the
subject of this suit, in whole or in part in Texas. This controversy arises out of
Defendants’ purposeful contacts with Texas. The exercise of personal jurisdiction
over Defendants comports with fair play and substantial justice.
Mulligan asserted again his fraudulent transfer claims and added a claim for conspiracy,
alleging the Trusts and LLCs “combined with each other and/or the Abbotts to design and
implement” the fraudulent transfers. In his verified response and motion for continuance,
Mulligan argued that, even if the Trusts and LLCs were not Texas residents by virtue of co-
trustee Harward’s Texas citizenship, the trial court could nonetheless exercise personal
jurisdiction over them because they “had sufficient minimum contacts with Texas.” Specifically,
Mulligan asserted the Trusts and LLCs consented to jurisdiction and committed the torts of
conspiracy and fraudulent transfer in Texas.
With respect to consent, Mulligan argued that by asserting in federal district court in Utah
they were each “considered citizens of the state of Texas by reason of the citizenship of the
common trustee, Sandra Kay Harward, and the membership in the limited liability companies in
the trusts,” the Trusts and LLCs “not only judicially admitted in the federal action that they were
Texas citizens, but they also sought benefit or advantage from their Texas citizenship in order to
defeat the federal court’s diversity jurisdiction.” As to the alleged commission of torts, Mulligan
argued that a tort is committed in Texas, “even if the wrongful act is performed by a nonresident
outside of Texas–-if the plaintiff is injured in Texas and the injury was foreseeable” such that the
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nonresident “could reasonably anticipate being haled into court to answer for its actions.”
Mulligan asserted the Trusts and LLCs’ “receipt of fraudulently transferred assets and their
participation in a tortious and fraudulent scheme to deprive [him] of [his] interest in the Abbotts’
assets” resulted in injury in Texas.
As an alternative to ruling on the special appearance, Mulligan requested the trial court
grant a continuance of the hearing on the special appearance to conduct jurisdictional discovery,
noting the Trusts and LLCs had refused to answer the requests for production he served on
them. 6 Attached to Mulligan’s response and motion for continuance were (1) Abbott’s
deposition testimony reflecting, in relevant part, that the Trusts and LLCs were created as part of
an estate plan and that some of the alleged transfers had occurred; (2) Harward’s declaration with
attached documents from (a) the C.F. Abbott Trust reflecting the trust was created in February
2003 and Harward was appointed co-trustee in February 2011; and (b) the Oranee H. Abbott
Trust reflecting this trust was created in April 2000 and Harward was appointed co-trustee in
March 2011; (3) Abbott’s wife’s deposition testimony discussing, in relevant part, the Trusts and
acknowledging some of the alleged transfers had occurred; (4) the Trusts and LLCs’ motion to
dismiss the Utah suit for lack of jurisdiction in which they alleged they were “considered citizens
of the state of Texas by reason of the citizenship of the common trustee, Sandra Kay Harward,
and the membership in the limited liability companies in the trusts;” and (5) the Trusts and
LLCs’ memorandum in support of the motion to dismiss.
Following a hearing in which the trial court heard only argument, the trial court overruled
the special appearance. Though requested, no findings of fact and conclusions of law were filed.
This appeal followed.
6
See TEX. R. CIV. P. 120a(3).
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II. SPECIAL APPEARANCE
In three issues, the Trusts and LLCs assert the trial court erred in denying their special
appearance because they did not consent to jurisdiction and neither the presence of co-trustee
Harward nor the alleged commission of torts is sufficient to establish personal jurisdiction.
A. Standard of Review
Whether a trial court has personal jurisdiction over a nonresident defendant is a question
of law which an appellate court reviews de novo. Moki Mac River Expeditions v. Drugg, 221
S.W.3d 569, 574 (Tex. 2007). When, as here, the trial judge does not issue findings of fact and
conclusions of law, we imply all fact findings supported by the evidence that are necessary to
support the ruling. Id.
B. Applicable Law
A court must have both subject matter jurisdiction and personal jurisdiction to render a
valid and enforceable judgment on a claim. CSR Ltd. v. Link, 925 S.W.2d 591, 594 (Tex. 1996).
1. Subject Matter Jurisdiction
Subject matter jurisdiction refers to the court’s power to hear a particular type of suit. Id.
It is conferred by constitutional or statutory provision and functions as a restriction on federal
and state power; neither a party’s waiver nor consent can confer subject matter jurisdiction upon
a court. See Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702
(1982); Carroll v. Carroll, 304 S.W.3d 366, 367 (Tex. 2010).
Diversity jurisdiction, one of two basic statutory forms of federal court subject matter
jurisdiction, 7 exists where the matter in controversy exceeds $75,000 and is between “citizens of
different states.” 28 U.SC. § 1332(a); Arbaugh v. Y&H Corp., 546 U.S. 500, 513 (2006) (citing
28 U.SC. §§ 1331 and 1332); Lincoln Prop Co. v. Roche, 546 U.S. 81, 89 (2005). Diversity
7
The other is federal question jurisdiction. 28 U.S.C. § 1331.
–7–
jurisdiction requires complete diversity of citizenship between parties, that is, no plaintiff can be
a citizen of the same state as any defendant. Lincoln Prop., 546 U.S. at 89; Getty Oil Corp. v.
Ins. Co. of N. Am., 841 F.2d 1254, 1258 (5th Cir. 1988). For purposes of diversity jurisdiction,
the citizenship of a party depends on whether the party is a natural person, a corporation, or a
non-corporate artificial entity. A natural person is a citizen of a state within the meaning of the
diversity statute if he is a United States citizen and is domiciled within the state. Newman-
Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 828 (1989). A corporation is generally a citizen of
every state by which it has been incorporated and of the state where it has its principal place of
business. See 28 U.S.C. § 1332(c)(1). A non-corporate artificial entity, such as a trust and
limited liability company, is a citizen of each state of which its members are citizens. See
Carden v. Arkoma Assocs., 494 U.S. 185, 195 (1990).
2. Personal Jurisdiction
Personal jurisdiction refers to the court’s power to bind a particular person or party to the
judgment. CSR Ltd., 925 S.W.2d at 594. It flows from the due process clause of the constitution
and protects a party from being bound to a judgment “of a forum with which he has established
no meaningful ‘contacts, ties, or relations.’” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-
72 (1985) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945)); Ins. Corp. of
Ireland, 456 U.S. at 702. In contrast to subject matter jurisdiction, personal jurisdiction is a
waiveable right, and a party can expressly or implicitly consent to it. Ins. Corp. of Ireland, 456
U.S. at 703; see also Adam v. Saenger, 303 U.S. 59, 67 (1938) (consent by voluntarily using
certain state procedures); DowElanco v. Benitez, 4 S.W.3d 866, 871 (Tex. App–-Corpus Christi
1999, no pet.) (consent by judicial admission).
Texas courts may exercise personal jurisdiction over a nonresident if (1) the Texas long-
arm statute authorizes the exercise of jurisdiction; and (2) the exercise of jurisdiction is
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consistent with federal and state constitutional due process guarantees. Moncrief Oil Intern., Inc.
v. OAG Gazprom Export, LLC, 414 S.W.3d 142, 149 (Tex. 2013). The long-arm statute allows
the exercise of personal jurisdiction over a nonresident defendant who does business in Texas.
BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002). Under the statute,
acts by a nonresident that constitute “doing business in Texas” include entering into a contract,
which is to be performed in whole or in part in Texas, with a Texas resident and committing a
tort in whole or in part in Texas. TEX. CIV. PRAC. & REM. CODE ANN. § 17.042 (West 2008);
Moncrief, 414 S.W.3d at 149. A court’s exercise of personal jurisdiction over a nonresident is
consistent with due process when (a) the nonresident defendant has established minimum
contacts with the state, and (b) the exercise of jurisdiction comports with “traditional notions of
fair play and substantial justice.” Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d
333, 338 (Tex. 2009).
a. Minimum Contacts
The requirement of minimum contacts protects the nonresident defendant from being
haled into court when his relationship with the state is too attenuated to support jurisdiction. Am.
Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002); Assurance
Generales Banque Nationale v. Dhalla, 282 S.W.3d 688, 696 (Tex. App.-–Dallas 2009, no pet.).
Therefore, the focus of a minimum contact analysis is whether the nonresident “purposefully
availed” himself of the privilege of conducting activities within the state, “invoking the benefits
and protections of its laws.” Moncrief, 414 S.W.3d at 150. The activities are analyzed based on
quality and nature, not quantity. Id. at 151. A nonresident defendant’s contacts with a forum
state can give rise to (i) general jurisdiction or (ii) specific jurisdiction. Am. Type, 83 S.W.3d at
806; Assurance Generales, 282 S.W.3d at 696.
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i. General Jurisdiction
General jurisdiction arises without regard to the nature of the claim presented. PHC-
Minden, L.P. v. Kimberly-Clark, Corp., 235 S.W.3d 163, 168 (Tex. 2007); see also Walden v.
Fiore, 134 S. Ct. 1115, 1121 n.6 (2014). It involves a court’s ability to exercise jurisdiction over
a nonresident’s claim regardless of whether the claim is related to the defendant’s contacts with
the state. Walden, 134 S. Ct. at 1121 n.6; PHC-Minden, 235 S.W.3d at 168. General jurisdiction
contacts must be substantial, continuous, and systematic such that they approach the frequency
and nature of the activities of local businesses. See Daimler AG v. Bauman, 134 S. Ct. 746, 754
(2014); Moncrief, 414 S.W.3d at 150; PHC-Minden, 235 S.W.3d at 168 (citing Charles W.
“Rocky” Rhodes, Clarifying General Jurisdiction, 34 SETON HALL L. REV. 807, 811 (2004)).
ii. Specific Jurisdiction
Specific jurisdiction exists when the cause of action arises from or is related to purposeful
activities in the state. Moncrief, 414 S.W.3d at 150. A specific jurisdiction analysis focuses on
the relationship between the nonresident defendant, the forum state, and the litigation. Walden,
134 S. Ct. at 1121; Assurances Generales, 282 S.W.3d at 697. The contacts are analyzed on a
claim-by-claim basis unless all claims arise from the same forum contacts. Moncrief, 414
S.W.3d at 150. Specific jurisdiction minimum contacts are present if (1) the nonresident
defendant has purposefully availed himself of the privilege of conducting activities in the forum
state, and (2) the cause of action arises from or relates to those contacts. See Moki Mac, 221
S.W.3d at 576.
b. Traditional Notions of Fair Play and Substantial Justice
A court considers whether the exercise of jurisdiction comports with traditional notions
of fair play and substantial justice only if minimum contacts are established. Foley v. Trinity
Indus. Leasing Co., 314 S.W.3d 593, 602 (Tex. App.-–Dallas 2010, no pet.). If a nonresident has
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minimum contacts with the state, rarely will the exercise of jurisdiction over the nonresident
offend traditional notions of fair play and substantial justice. Moncrief, 414 S.W.3d at 154-55.
C. Burden of Proof
The plaintiff and defendant bear shifting burdens of proof in a challenge to personal
jurisdiction. Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 658 (Tex. 2010). The initial
burden is carried by the plaintiff, who must plead sufficient facts to bring a nonresident
defendant within the provisions of the Texas long-arm statute. Id. Once the plaintiff has met his
burden, the burden shifts to the nonresident defendant to negate all bases of jurisdiction alleged
in the plaintiff’s petition. Id. If the plaintiff fails to allege any jurisdictional facts, the
nonresident defendant meets his burden by presenting evidence of nonresidency. Id. at 658-59.
If the nonresident defendant produces evidence negating personal jurisdiction, the burden returns
to the plaintiff to show that, as a matter of law, the court has personal jurisdiction over the
defendant. See Assurances Generales, 282 S.W.3d at 695. A trial court determines the special
appearance from the pleadings, discovery, and any stipulations, affidavits, attachments, and oral
testimony. TEX. R. CIV. PROC. 120a(3).
D. Application of Law to Facts
In his original petition, Mulligan did not allege facts under the Texas long-arm statute,
alleging instead that the Trusts and LLCs were Texas residents based primarily upon the position
taken in the Utah federal court that the Trusts and LLCs were “citizens” of Texas for diversity of
citizenship purposes. The Trusts and LLCs responded by asserting co-trustee Harward’s Texas
residency and citizenship alone did not make them Texas residents for personal jurisdiction
purposes because the concepts of citizenship for diversity jurisdiction purposes and residency for
personal jurisdiction differ. Further, the Trusts and LLCs argued the alleged transfers did not
occur in Texas or concern property located in Texas. The Trusts and LLCs also asserted they
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were not created, organized, or registered to do business in Texas; never owned any property in
Texas; never conducted or had a place of business in Texas; and could not have reasonably
anticipated being haled into a court in Texas. These assertions were supported by Abbott’s
wife’s affidavit testimony. On this record, that satisfied the burden of proof of the Trusts and
LLCs to present evidence of nonresidency. See Kelly, 301 S.W.3d at 658-59. The burden then
shifted to Mulligan to show, as a matter of law, that the trial court had personal jurisdiction over
the Trusts and LLCs. Assurances Generales, 28 S.W.3d at 695.
As stated, Mulligan’s bases for jurisdiction, as alleged in his amended petition and
verified response, were consent and the commission of torts in Texas.
1. Consent
We now address the second issue raised by the Trusts and LLCs, which focuses on
Mulligan’s consent argument. Mulligan contended the Trusts and LLCs demonstrated Texas
jurisdiction in their motion to dismiss the Utah suit when they said they were “considered
citizens of the state of Texas by reason of the citizenship of the common trustee, Sandra Kay
Harward, and the membership in the limited liability companies in the trusts.” Mulligan states
this assertion was a judicial admission that the Trusts and LLCs were subject to personal
jurisdiction in Texas and demonstrated that the Trusts and LLCs sought benefit or advantage
from their Texas citizenship in order to defeat diversity jurisdiction in Utah court.
a. Judicial Admission
Personal jurisdiction may be conferred on a court by judicial admission. DowElanco, 4
S.W.3d at 871. A judicial admission is an assertion of fact by a party that is conclusively
established in a live pleading and that the party is barred from later disputing. See Horizon/CMS
Healthcare Corp. v. Auld, 34 S.W.3d 887, 905 (Tex. 2000). Accordingly, the success of
Mulligan’s argument that the Trusts and LLCs judicially admitted to personal jurisdiction hinges
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on whether the facts considered in determining if diversity jurisdiction exists are the same facts
considered in determining if personal jurisdiction exists. However, as the Trusts and LLCs argue
in their brief, and argued to the trial court, diversity jurisdiction citizenship is a concept distinct
from residency for personal jurisdiction purposes.
Diversity jurisdiction is a restriction on federal and state power and focuses on the
citizenship of the parties to a suit. See Carden, 494 U.S. at 195; Ins. Corp. of Ireland, 456 U.S.
at 702. Personal jurisdiction protects liberty interests and focuses on the relationship between the
defending party and forum state. See Burger King, 471 U.S. at 471-72; Ins. Corp. of Ireland, 456
U.S. at 702. The analysis of a court as to these separate propositions involves different facts and
entirely different concepts. The law is clear. An admission of Texas citizenship for federal
diversity jurisdiction purposes is not an admission of Texas residency for purposes of state court
personal jurisdiction. We cannot accept Mulligan’s contention to the contrary. Cf. Daimler-
Benz Aktiengesellschaft v. Olson, 21 S.W.3d 707, 719-20 (Tex. App.-–Austin 2000, pet. dism’d
w.o.j.) (concluding party’s allegations, in federal court petition alleging unlawful use of federally
registered trademarks and service marks, that it had spent large sums of money to advertise its
trademarks and service marks and had used its trademarks and service marks throughout Texas,
with the result that its marks had attained inestimable good will in Texas, amounted to judicial
admission that it had sufficient contacts with Texas such that state court could exercise personal
jurisdiction over party); DowElanco, 4 S.W.3d at 871 (concluding defendant’s admission, in
answer filed in federal court, that he was “an alien who resides in Hidalgo County, Texas” was
judicial admission in state court for personal jurisdiction purposes).
b. Benefit and Advantage
Also, we cannot accept Mulligan’s contention that the Trusts and LLCs’ assertion of
citizenship demonstrated the Trusts and LLCs sought benefit or advantage from their Texas
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citizenship to defeat diversity jurisdiction in Utah court. While a party may implicitly consent to
jurisdiction by availing itself of certain state procedures, see Adam, 303 U.S. at 67-68, the benefit
or advantage Mulligan alleged the Trusts and LLCs obtained by their Texas citizenship, that is,
defeating diversity jurisdiction, derives from federal statute not Texas law. See 28 U.S.C. §
1332; cf. GJP, Inc. v. Gosh, 251 S.W.3d 854, 880 (Tex. App.-–Austin 2008, no pet.)
(nonresident defendant enjoyed benefit and protection of Texas laws by closing sale in Texas);
Arterbury v. Am. Bank & Trust Co., 553 S.W.2d 943, 948 (Tex. Civ. App.-–Texarkana 1977, no
writ) (nonresident bank which through its agent repossessed a car in Texas enjoyed benefit and
protection of Texas laws, including right to resort to Texas courts).
Because the Trusts and LLCs did not consent to personal jurisdiction by judicial
admission or by seeking benefit from the Texas citizenship to defeat diversity jurisdiction, we
decide the Trusts and LLCs’ second issue in their favor.
2. Commission of Torts
In their third issue, the Trusts and LLCs assail Mulligan’s second basis for jurisdiction,
that the commission of torts, stemmed from the Trusts and LLCs’ “receipt of fraudulently
transferred assets and their participation in a tortious and fraudulent scheme to deprive [him] of
[his] interest in the Abbotts’ assets and to hinder, delay, and/or defraud [him].” Although
recognizing that the alleged transfers occurred outside Texas, Mulligan asserted that the Trusts
and LLCs could foresee being haled into state court because they knew Mulligan was a Texas
resident and the injury resulting from their tortious acts would be suffered in Texas.
As we stated above, a trial court may exercise specific jurisdiction over a nonresident
defendant who commits a tort in whole or in part in Texas. See TEX. CIV. PRAC. & REM. CODE
ANN. § 17.042. However, the plaintiff must show the defendant has established minimum
contacts with the state and the exercise of jurisdiction comports with traditional notion of fair
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play and substantial justice. See Marchand, 83 S.W.3d at 795. A showing of foreseeability of
harm in the forum state is insufficient. Michiana Easy Livin’ Country, Inc. v. Holten, 168
S.W.3d 777, 788 (Tex. 2005). Rather, the plaintiff must show a substantial connection between
the contacts and the operative facts of the litigation. Moki Mac, 221 S.W.3d at 585.
Mulligan did not allege in his amended petition or verified response a connection to
Texas other than the injury to Mulligan individually and as to his P.C., Texas plaintiffs. See
Michiana, 168 S.W.3d at 788. Mulligan did not assert any alleged tortious actions occurred in
Texas. The operative facts of Mulligan’s claims against the Trusts and LLCs, as set forth in his
amended petition, are (1) the creation of the Trusts and LLCs in the early 2000s; (2) the Trusts
and LLCs conspired with the Abbotts to fraudulently transfer the Maui timeshare, the Abbotts’
residence, the St. George condominium, the yacht, and funds from the Abbotts to the Trusts and
LLCs; and (3) the Trusts and LLCs’ receipt of those assets between 2005 and 2010. The Trusts
and LLCs argue most of these operative facts pre-date the breach of contract counterclaim
Mulligan filed against Abbott and the multi-million dollar award in damages to Mulligan.
Further, the Trusts and LLCs assert their sole connection to Texas is the presence of Texas
resident Harward, a co-trustee of the Trusts, and the operative facts alleged by Mulligan pre-date
Harward’s appointment by one to ten years. The Trusts and LLCs argue because there is no
evidence Harward participated in the creation of the Trusts and LLCs or the transfers, no
substantial connection exists between Harward’s appointment and the operative facts of
Mulligan’s claims. We agree. Cf. Retamco, 278 S.W.3d at 340 (affirming exercise of specific
jurisdiction where nonresident defendant “was a willing participant in transaction with an
affiliated Texas company”).
Based upon our conclusion that Mulligan did not show a substantial connection between
the Trusts and LLCs, the state, and his causes of action, we need not consider whether the
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exercise of jurisdiction comports with traditional notions of fair play and substantial justice. See
Foley, 314 S.W.3d at 602. We decide the Trusts and LLCs third issue in their favor.
3. Purposeful Appointment of Co-Trustee
In their first issue, in apparent response to Mulligan’s oral assertion at the special
appearance hearing that they purposefully appointed Harward as co-trustee of the Trusts, the
Trusts and LLCs argue that the appointment of Harward alone is insufficient to establish general
jurisdiction over them. We need not address this issue, or appellees’ corresponding response.
There was no testimony offered at the hearing. Accordingly, we decide whether the trial court
erred in denying the special appearance from a review of the clerk’s record alone. See TEX. R.
CIV. P. 120a(3); Michiana, 168 S.W.3d at 782 (“If all the evidence is filed with the clerk and
only arguments by counsel are presented in open court, the appeal should be decided on the
clerk’s record alone.”).
III. CROSS-POINT – REMAND FOR JURISDICTIONAL DISCOVERY
In a “cross-point,” Mulligan urges that if we sustain any of the Trusts and LLCs’ issues,
we should remand the case for the trial court to consider Mulligan’s request for continuance
asserted as an alternative form of relief in his response to the special appearance. However,
Mulligan did not file a cross-appeal, a pre-requisite for obtaining favorable relief on appeal. See
TEX. R. APP. P. 25.1(c). Accordingly, we do not address this issue.
IV. CONCLUSION
Having decided in favor of the Trusts and LLCs on issues two and three, we reverse the
trial court’s order overruling the special appearance, render judgment granting the special
appearance, and dismiss Mulligan’s claims against the Trusts and LLCs for want of jurisdiction.
/Douglas S. Lang/
131000F.P05 DOUGLAS S. LANG
JUSTICE
–16–
S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
FAVOUR LEASING, LLC, C.F. ABBOTT On Appeal from the 14th Judicial District
FAMILY LLC, C.F. ABBOTT TRUST, Court, Dallas County, Texas
AND ORANEE H. ABBOTT TRUST , Trial Court Cause No. DC-12-14667-A.
Appellants Opinion delivered by Justice Lang. Justices
Moseley and Brown participating.
No. 05-13-01000-CV V.
PATRICK J. MULLIGAN, AN
INDIVIDUAL, AND THE LAW OFFICE
OF PATRICK J. MULLIGAN, P.C., A
PROFESSIONAL CORPORATION ,
Appellees
In accordance with this Court’s opinion of this date, we REVERSE the trial court’s order
on defendants’ special appearance and RENDER judgment GRANTING the special appearance
and DISMISSING the claims against Favour Leasing, LLC, C.F. Abbott Family LLC, C.F.
Abbott Trust, and Oranee H. Abbott Trust.
We ORDER that appellants Favour Leasing, LLC, C.F. Abbott Family LLC, C.F. Abbott
Trust, and Oranee H. Abbott Trust recover their costs of this appeal from appellees Patrick J.
Mulligan, an Individual, and the Law Office of Patrick J. Mulligan, P.C., A Professional
Corporation.
Judgment entered this 24th day of June, 2014.
/Douglas S. Lang/
DOUGLAS S. LANG
JUSTICE
–17–