Landmark Land Company, Inc. and William Vaughn III A/K/A William W. Vaughan Iii v. R. Sebastian Bennett, ph.D. ( 2012 )

NUMBER 13-12-00117-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
LANDMARK LAND COMPANY, INC. AND Appellants,
WILLIAM VAUGHN A/K/A WILLIAM W. VAUGHAN III,
v.
R. SEBASTIAN BENNETT, PH.D., Appellee.
On appeal from the 404th District Court
of Cameron County, Texas.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Garza and Vela
Memorandum Opinion by Justice Garza
Appellants, Landmark Land Company, Inc. (“Landmark”) and William Vaughn III
(“Vaughn”) a/k/a William W. Vaughan III, bring this accelerated, interlocutory appeal of
the trial court’s order denying their special appearances. See TEX. CIV. PRAC. & REM
CODE ANN. § 51.014(a)(7) (West Supp. 2011). By three issues, appellants contend that:
(1) Vaughn is not subject to the specific jurisdiction of the trial court; (2) the fiduciary
shield doctrine protects Vaughn from the exercise of general jurisdiction over him; and
(3) there is no evidence establishing personal jurisdiction over Landmark under the alter
ego theory. We affirm.
I. BACKGROUND
In August 2011, appellee, R. Sebastian Bennett, Ph.D., sued South Padre Island
Development, L.P. (“SPID, LP”), South Padre Island Development, L.L.C. (“SPID,
LLC”), Landmark, South Padre Island Golf Villas Association (“the Association”), and
Vaughn.1 Bennett alleged that he suffered damages when he was induced to purchase
a home at South Padre Island Golf Course, a development in Laguna Vista, Texas, on
the misrepresentation that the home was covered by “all risk” insurance, when it was
not. Bennett claimed that a misrepresentation was specifically made to him by SPID,
LP through SPID, LLC that the “all risk” insurance coverage covered replacement costs
from any damage to the home, including windstorm and flood damage. The alleged
misrepresentation occurred in Texas. Bennett further alleged that Landmark controls
the operations of SPID, LP and SPID, LLP and makes all contractual decisions for those
entities, including the selection of insurance. Bennett claimed that in February 2010, he
noticed problems with water pooling toward his home after a rain storm. In June 2010,
after a heavy rain storm, Bennett noticed that portions of the drywall and flooring in the
home were saturated with water. In the course of reporting the damage to his insurance
agent, Bennett learned that his insurance claims would not be paid because his
insurance coverage did not cover all risks and did not cover many of the losses he had
suffered.
1
Out of these defendants, only Vaughn and Landmark are parties to this interlocutory appeal.
2
Vaughn filed a special appearance in which he asserted that: (1) Bennett’s
petition alleges that he (Vaughn), as Landmark’s officer and legal counsel, was involved
in the decision not to procure the “all risk” insurance, and therefore, Bennett appears to
be contending that Vaughn is subject to specific jurisdiction; (2) Bennett has not alleged
the type of contacts that would support general jurisdiction over Vaughn; and (3)
Bennett has made no allegations that would support jurisdiction over Vaughn under an
alter ego theory. Vaughn supported his special appearance with his own affidavit, in
which he stated that he is not a resident of Texas, does not individually conduct
business in Texas, owns no property in Texas, has no telephone listing in Texas, and
has no agent in Texas with authority to conduct business on his behalf. He further
stated that he made no representation to Bennett either in his individual or
representative capacity pertaining to Bennett’s claims.
Landmark filed a special appearance in which it asserted that it conducts no
business in Texas, has not entered into a contract with a Texas resident, owns no
property in Texas, has no telephone listing in Texas, and has no employees in Texas.
Landmark further asserted that Bennett failed to: (1) adduce proof that jurisdiction over
Landmark can be sustained on the basis of an alter ego theory, (2) allege that
Landmark is subject to specific jurisdiction, or (3) allege that Landmark is subject to
general jurisdiction. Landmark attached the affidavit of Vaughn, in which he additionally
asserted that the daily operations of Landmark and the other corporate defendants are
separate, that the corporations file separate income tax returns, maintain separate
books and accounts, and conduct separate shareholder and directors’ meetings.
On January 18, 2012, the trial court held a hearing on Vaughn and Landmark’s
3
special appearances. Appellants called one witness, Vaughn; Bennett called three
witnesses: Mark Kerney, Debbie Camacho, and Justin Awtrey. We summarize the
pertinent testimony adduced at the hearing below.
A. William Vaughn
Vaughn testified that he is employed by DPMG, Inc., a Delaware corporation with
its principal place of business in Maryland; DPMG, Inc. is a subsidiary of Landmark.
Landmark is a Delaware corporation with its principal place of business in Maryland.
Landmark is a holding company that has no employees and has been engaged in the
development of property since the early 1970s. Vaughn is an officer and director of
Landmark. SPID, LLC is also a subsidiary of Landmark. According to Vaughn, he has
never been a resident of Texas and has never owned property or conducted business in
Texas. Vaughn testified that he had never made any representations regarding
Bennett’s home and he has never spoken to Bennett.
On cross-examination, Vaughn stated that he is the president, general counsel,
and a member of the board of directors of Landmark. Vaughn testified that SPID, LP
was converted into SPID, LLC in the “mid-2000s.”2 Pursuant to questions from the trial
court, Bennett’s counsel stated that Bennett purchased his condominium from SPID,
LLC, which is a subsidiary of Landmark, but Bennett alleges that the subsidiaries are
controlled and directed by Landmark. Vaughn testified that Mark Kerney, the director of
the SPID golf course, was sent to the site by Landmark. According to Vaughn,
Landmark owns no property and has no employees; its subsidiaries build golf courses.
In the case of the Laguna Vista project, SPID, LP—later changed to SPID, LLC—owned
2
Vaughn testified that the LP was converted into an LLC in 2006 to take advantage of the change
in the Texas franchise tax administration.
4
and operated the property.
Bennett’s counsel questioned Vaughn about Plaintiff’s Exhibit 8, a three-page
print-out depicting Landmark’s website. The website identifies Landmark as “Golf,
Resort & Community Developers.” It refers to the experience of “Landmark’s
management team” and states that “Landmark’s greatest asset has always been its
employees,” specifically noting that it “has employed each of the 15 top corporate
officers for over 20 years.” The website identifies Justin Awtrey as project director of
the South Padre Island Golf Club. Vaughn confirmed that Awtrey is in charge of the
operations at the South Padre Island Golf Club in Laguna Vista and serves on the
Association’s board as the representative of the developer, SPID, LLC.
Vaughn said that over the years, he had two or three discussions with Dave Hall,
then an insurance agent with Coleman, Hall & Heinze insurance agency in Port Isabel.
Vaughn denied being involved in the placement of insurance coverage for the Golf
Villas Condominiums, but admitted that he discussed the condominium insurance
coverage with Hall. Vaughn testified that the Association requested Hall to provide the
broadest insurance coverage available for the condominiums, but that there are always
exclusions in insurance policies. After Hurricane Katrina, for example, wind-driven rain
became a common exclusion and coverage for it could not be purchased. At the time,
no coverage was available to the Association for wind-driven rain. Hall sometimes
attended the Association’s meetings to explain various coverage options and upgrade
options available to individual homeowners for additional coverage of their personal
property. Vaughn stated that the insurance company determined that the damage to
Bennett’s residence resulted from high winds that blew water through the windows.
5
Multiple units sustained water damage from rain blowing through shingles or through
windows, and the insurance company took the position that its exclusion precluded
reimbursement for that type of damage.
Vaughn testified that SPID, LLC is a Delaware corporation that is licensed to do
business in Texas. Vaughn is a vice president of SPID, LLC. Vaughn confirmed that
DPMG, Inc. is authorized to do business in Texas and has the same office and
corporate officers as Landmark and SPID, LLC. Bennett’s counsel introduced into
evidence a flyer showing the various types of residences available at the Laguna Vista
development; the flyer identifies the development as “A Landmark Land Community.”
Vaughn testified that Bennett’s residence is a townhouse. Mark Kerney, then an
employee of SPID, LP, came to Texas in 1996.
Vaughn stated that he traveled to Laguna Vista for director’s meetings “every
three months or so.” Vaughn estimated that he has made 20 or 30 business trips to
Cameron County, each lasting a couple of days, on business related to the Laguna
Vista development. On occasion, other corporate officers visited the area; Gary Kerney,
an employee of DPMG, Inc. (father of Mark Kerney, co-manager of the South Padre
Island Golf Development), traveled to the site occasionally. Vaughn stated that
“probably” four of the five top corporate officers of DPMG, Inc. and Landmark are the
same people. Vaughn also said that Gerald Barton, the CEO and chairman of
Landmark, has been to the Laguna Vista development, and that “up until three or four
years ago,” Landmark regularly held its shareholders’ meetings at Laguna Vista.
On re-direct examination, Vaughn clarified that he never made any
representations to Bennett, and Landmark could not have made any such
6
representation because “[t]here was nobody at Landmark to make representations.”
B. Mark Kerney
Kerney testified that he was sales and marketing director or vice president of
SPID, LLC. Kerney stated that his father, Gary Kerney, was senior vice president of
Landmark. Kerney testified that the relationships of the various Landmark subsidiaries
are “very complicated” and that he does not “know the details.” He confirmed that
Landmark’s trademark emblem, the orange oak tree, has always been used by SPID,
LLC. Kerney stated that Landmark made the decision to develop the golf course project
at Laguna Vista and set up various companies to carry out the project in Cameron
County. Kerney stated that there were corporate meetings for various corporations held
at Laguna Vista, but he did not know which entities. In the “early days,” Kerney said
that his paychecks came from Landmark’s offices.
On cross-examination, Kerney clarified that his paychecks were issued by “New
Delos Partners” and “South Padre Island Development.”
C. Debbie Camacho
Camacho testified that she is the custodian of records at Coleman, Hall &
Heinze. She stated that Hall, now deceased, handled the insurance account with the
South Padre Island Golf Course properties; Hall handled the account from his office or
by meeting people at the Laguna Vista golf course.
D. Justin Awtrey
Awtrey testified that his father is Jim Awtrey, who is a board member and former
officer of Landmark. Awtrey stated that he works at the South Padre Island Golf Club
Development and is SPID, LLC’s representative on the Association’s board. Awtrey
7
stated that, in accepting the position as project manager for the golf course, he spoke to
Gary Kerney, then executive vice president of Landmark. He said that Gary Kerney, in
his capacity as Landmark vice president, “oversaw the project down here.” Awtrey
confirmed that the Association negotiated the insurance coverage for the Golf Villas
through Coleman, Hall & Heinze. According to Awtrey, Vaughn actually made decisions
regarding the types of insurance coverage that were obtained for the Golf Villas
property.
II. STANDARD OF REVIEW AND APPLICABLE LAW
The issue on appeal is whether the trial court erred in denying appellants’ special
appearances. Issues of personal jurisdiction are questions of law and reviewed de
novo. Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 337 (Tex.
2009) (citing BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002)).
The plaintiff has the initial burden to “plead sufficient allegations to confer jurisdiction.”
Id. Once that burden is met, the defendant seeking to avoid the court’s jurisdiction
takes on the burden to negate “all potential bases for jurisdiction pled by the plaintiff.”
Id. Where, as here, the lower court does not make findings of fact and conclusions of
law in support of its ruling, “all facts necessary to support the judgment and supported
by the evidence are implied.” Id.
Non-residents are subject to the personal jurisdiction of Texas courts if: (1)
jurisdiction is authorized under the state’s long-arm statute; and (2) it comports with
guarantees of the U.S. and Texas Constitutions. Id. (quoting Moki Mac River
Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007)). Under Texas’s long-arm
statute, a non-resident defendant is within the court’s jurisdiction if the defendant
8
conducts business in the state. See PHC–Minden, L.P. v. Kimberly-Clark Corp., 235
S.W.3d 163, 166 (Tex. 2007) (noting that the long-arm statute’s language extends as far
as the U.S. and Texas Constitutions permit, so courts should also rely on due process
precedents as guides). Thus, the exercise of personal jurisdiction is constitutional
when: (1) the non-resident defendant has established minimum contacts with the
forum; and (2) the exercise of jurisdiction follows the traditional notions of fair play and
substantial justice. Id. (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).
The Texas Supreme Court recently expanded on the meaning of the phrase “fair
play and substantial justice”:
Although this “fair play” and “substantial justice” test is well known to
appellate courts, the expression is imprecise. It gains meaning, however,
when viewed in light of the “minimum contacts” a defendant has with the
forum. Significant contacts suggest that the defendant has taken
advantage of forum-related benefits, while minor ones imply that the forum
itself was beside the point. When a nonresident defendant has
purposefully availed itself of the privilege of conducting business in a
foreign jurisdiction, it is both fair and just to subject that defendant to the
authority of that forum’s courts.
Spir Star AG v. Kimich, 310 S.W.3d 868, 872 (Tex. 2010) (citations omitted).
“A defendant’s contacts with a forum can give rise to either specific or general
jurisdiction.” Id. (citing CSR Ltd. v. Link, 925 S.W.2d 591, 595 (Tex. 1996)). “General
jurisdiction exists when a defendant’s contacts are continuous and systematic, even if
the cause of action did not arise from activities performed in the forum state.” Id. (citing
CSR, 925 S.W.2d at 595).
The Spir Star court also restated the principles governing specific jurisdiction:
A court has specific jurisdiction over a defendant if its alleged liability
arises from or is related to an activity conducted within the forum. CSR,
925 S.W.2d at 595. Unlike general jurisdiction, which requires a “more
demanding minimum contacts analysis,” id. at 595, specific jurisdiction
9
“may be asserted when the defendant’s forum contacts are isolated or
sporadic, but the plaintiff’s cause of action arises out of those contacts
with the state.” 4 CHARLES ALAN W RIGHT & ARTHUR R. MILLER, FEDERAL
PRACTICE & PROCEDURE § 1067.5 (3d ed. 2002). In such cases, “we focus
on the ‘relationship among the defendant, the forum[,] and the litigation.’”
Moki Mac, 221 S.W.3d at 575–76 (quoting Guardian Royal [Exch.
Assurance, Ltd. v. English China Clays, P.L.C.,] 815 S.W.2d [223], 228
[(Tex. 1991)]. Specific jurisdiction is appropriate when (1) the defendant’s
contacts with the forum state are purposeful, and (2) the cause of action
arises from or relates to the defendant’s contacts. See Retamco, 278
S.W.3d at 338.
Spir Star, 310 S.W.3d at 873.
III. DISCUSSION
In his original petition, Bennett pleaded that Landmark “makes all major
contractual decisions” for SPID, LLC and the Association, including the “selection of and
placement of insurance for properties within the association, including the home
purchased by Plaintiff.” Bennett pleaded that Landmark, acting through Vaughn, made
the decision not to procure insurance coverage in compliance with the Association’s
strict requirements. Bennett also pleaded that SPID, LP and SPID, LLC were “acting at
the control and direction of Landmark” when they misrepresented the scope of the
insurance coverage on Bennett’s home. We conclude that Bennett’s pleadings were
sufficient to satisfy his initial burden because they alleged facts that would support
specific jurisdiction, and thus shifted the burden to appellants to negate all potential
bases alleged. See El Puerto de Liverpool v. Servi Mundo Llantero, 82 S.W.3d 622,
629 (Tex. App.—Corpus Christi 2002, pet. dism’d w.o.j.).
A. Specific Jurisdiction Over Vaughn
By their first issue, appellants contend that the trial court did not have specific
jurisdiction over Vaughn because there is “no connection between Vaughn’s contacts
10
with Texas and the operative facts of the litigation.” Appellants further argue that
although Vaughn admitted that he discussed the insurance coverage for the properties
with Hall, “that contact is not substantially connected to the operative facts of the
litigation.”
We disagree. As noted, specific jurisdiction is appropriate when (1) the
defendant’s contacts with the forum state are purposeful, and (2) the cause of action
arises from or relates to the defendant’s contacts. Spir Star, 310 S.W.3d at 873. The
gravamen of Bennett’s complaint is that he purchased his home based on the
representation by SPID, LLC that it was covered by “all risk” insurance, when it was not,
and that Landmark, acting through Vaughn, made the decision not to procure the “all
risk” insurance coverage as represented. Vaughn testified that he traveled to the
Laguna Vista development “every three months or so” for director’s meetings, for a total
of twenty or thirty trips, each lasting a couple of days. Vaughn also admitted that “over
the years,” he had several discussions with Hall regarding the insurance coverage for
the Laguna Vista properties. Significantly, Awtrey testified that Vaughn actually made
decisions regarding the types of insurance coverage obtained for the Golf Villas
property. We conclude that this evidence shows that, considering only Vaughn’s
contacts with Texas, his contacts with Texas were purposeful and the cause of action
arose from or related to his contacts with Texas. See id. We hold that Vaughn had the
necessary minimum contacts sufficient to allow Texas courts to assert specific
jurisdiction over him.
We must now determine whether jurisdiction is consistent with traditional notions
of fair play and substantial justice. See id. at 878.
11
“‘Only in rare cases . . . will the exercise of jurisdiction not comport with fair play
and substantial justice when the nonresident defendant has purposefully established
minimum contacts with the forum state.’” Id. (quoting Guardian Royal, 815 S.W.2d at
231). To evaluate this component, we consider Vaughn’s contacts in light of: (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 or international judicial system’s interest in obtaining the most efficient
resolution of controversies; and (5) the shared interest of the several nations or states in
furthering fundamental substantive social policies. Id. To defeat jurisdiction, appellants
must present “‘a compelling case that the presence of some consideration would render
jurisdiction unreasonable.’” Id. at 878–79 (quoting Burger King Corp. v. Rudzewicz, 471
U.S. 462, 477 (1985)).
Requiring Vaughn to defend Bennett’s claim in Texas would not impose an
undue burden on him. See id. at 879. Vaughn testified that he travels to Texas for
director’s meetings “every three months or so.” Secondly, Texas has a significant
interest in exercising jurisdiction over controversies arising from injuries a Texas
resident sustains as a result of misrepresentations regarding insurance coverage. See
id. Third, Bennett has an interest in resolving the controversy in Texas because that is
where the alleged misrepresentation and damage occurred. See id. The fourth and
fifth factors are not particularly applicable. We conclude that the burden on appellants
of defending against the suit is minimal, and is outweighed by Bennett’s and Texas’s
interests in adjudicating the dispute here. See id. at 879–80. Asserting personal
12
jurisdiction over Vaughn comports with traditional notions of fair play and substantial
justice. See id. at 880.
We hold the trial court correctly concluded that it had personal jurisdiction over
Bennett’s claims against Vaughn. We overrule appellants’ first issue.
B. Fiduciary Shield Doctrine
By their second issue, appellants contend that the fiduciary shield doctrine
protects Vaughn from the exercise of general jurisdiction over him. Because we have
already determined that the trial court properly exercised specific jurisdiction over
Vaughn, we need not determine whether he was subject to the court’s general
jurisdiction. See TEX. R. APP. P. 47.1.
C. Jurisdiction Over Landmark
By their third issue, appellants contend that no personal jurisdiction can be
imputed to Landmark pursuant to an alter ego theory. Specifically, appellants argue
that the evidence does not establish that Landmark exercised a degree of control over
SPID, LLC greater than that normally associated with common ownership and
directorship. See Spir Star, 310 S.W.3d at 873–74 (citing PHC–Minden, 235 S.W.3d at
172).
A parent company and its subsidiary may be “fused” for jurisdictional purposes if
the plaintiff proves that “the parent controls the internal business operations and affairs
of the subsidiary.” BMC Software, 83 S.W.3d at 799. “But the degree of control the
parent exercises must be greater than that normally associated with common ownership
and directorship; the evidence must show that the two entities cease to be separate so
that the corporate fiction should be disregarded to prevent fraud or injustice.” Id. A
13
parent company cannot be subjected to personal jurisdiction based on the local
activities of its subsidiary when “the subsidiary’s presence in the state is primarily for the
purpose of carrying on its own business and the subsidiary has preserved some
semblance of independence from the parent and is not acting as merely one of its
departments . . . .” 4A W RIGHT & MILLER, FEDERAL PRACTICE AND PROCEDURE § 1069.4
(3d ed. 2002). “[T]he party seeking to ascribe one corporation's actions to another by
disregarding their distinct corporate entities [must] prove this allegation, because Texas
law presumes that two separate corporations are distinct entities.” PHC—Minden, 235
S.W.3d at 173.
Appellants argue that the evidence does not show that Landmark exercised a
degree of control over SPID, LLC greater than that normally associated with common
ownership and directorship. Bennett points to the following in support of his argument
that Landmark and its subsidiaries are fused into one operation: (1) Landmark includes
its subsidiaries in presenting consolidated financial statements in its Securities and
Exchange Commission (SEC) 10-Q filings; (2) in marketing its properties through its
website, Landmark identifies the Laguna Vista development as a “Landmark” project;
(3) Mark Kearny was directed to the Laguna Vista development by his father, Gary
Kearney, and by Doug Barton, the son of Gerald Barton, chairman and CEO of
Landmark; (4) Vaughn testified that Landmark made the decision to acquire the Laguna
Vista property; (5) Mark Kearney testified that decisions regarding the development
were approved by Landmark; and (6) Landmark utilizes its logo, an oak tree, on its
internet marketing materials to “brand” its golf course resort communities, and the
14
marketing flyer for the South Padre Island Golf Club identified the development as a
“Landmark Land Community.”
In response, appellants argue that federal securities regulations permit a
registrant to file with its consolidated subsidiaries, and that the consolidated filing is not
evidence that Landmark exercised a degree of control over SPID, LLC greater than that
normally associated with common ownership and directorship.
Vaughn’s affidavit, attached to Landmark’s special appearance, states, in
pertinent part:
Defendant Landmark Land Company, Inc. and the other corporate
Defendants are distinct and adequately capitalized financial units and are
separate by [sic] incorporated and maintained. The daily operations of
Defendant Landmark Land Company, Inc. and the other corporate
Defendants are separate. The other corporate Defendants file income tax
returns separate from the consolidated return filed by Defendant
Landmark Land Company, Inc. Defendant Landmark Land Company, Inc.
and the other corporate Defendants maintain separate books and
accounts. Defendant Landmark Land Company, Inc. and the other
corporate Defendants conduct separate meeting[s] of their shareholder[s]
and directors.
The Texas Supreme Court has relied on the following factors in determining
whether a subsidiary is “separate and distinct from its parent corporation for personal
jurisdiction purposes”: (1) the amount of the subsidiary's stock owned by the parent
corporation; (2) the existence of separate headquarters; (3) the observance of corporate
formalities; and (4) the degree of the parent’s control over the general policy and
administration of the subsidiary. PHC–Minden, 235 S.W.3d at 175 (citing 4A W RIGHT &
MILLER, FEDERAL PRACTICE & PROCEDURE § 1069.4). Ultimately, the evidence must
establish that the two entities are not factually and legally separate and the corporate
15
veil should therefore be pierced to prevent fraud or injustice. BMC Software, 83 S.W.3d
at 799.
Parent companies normally exercise at least some control over their subsidiaries,
and “[a] subsidiary corporation will not be regarded as the alter ego of its parent merely
because of stock ownership, a duplication of some or all of the directors or officers, or
an exercise of the control that stock ownership gives to stockholders.” Gentry v. Credit
Plan Corp. of Houston, 528 S.W.2d 571, 573 (Tex. 1975). The Texas Supreme Court
has held that “‘[a]ppropriate parental involvement includes monitoring the subsidiary’s
performance, supervision of the subsidiary’s finance and capital budget decisions, and
articulation of general policies.’” PHC–Minden, 235 S.W.3d at 176 (quoting 16 MOORE'S
FEDERAL PRACTICE § 108.42[3][b]). To pierce the corporate veil in the personal-
jurisdiction context, there must be “something beyond the subsidiary’s mere presence
within the bosom of the corporate family.” Id. (quoting Dickson Marine, Inc. v.
Panalpina, Inc., 179 F.3d 331, 338 (5th Cir. 1999)).
Here, the evidence shows that SPID, LLC is a wholly-owned subsidiary of
Landmark. Landmark has its corporate headquarters in Maryland. Plaintiff’s Exhibit No.
10, a copy of SPID, LLC’s “Texas Franchise Tax Public Information Report,” shows that
SPID, LLC’s “principal office” address is the same as Landmark’s. There is little
evidence in the record regarding the observance of corporate formalities, other than
Vaughn’s assertion in his affidavit that the companies maintain separate books and
conduct separate meetings. Although not evidence of the absence of corporate
formalities, Landmark’s marketing flyers and website marketing deliberately obfuscated
any distinction between the entities by identifying the Laguna Vista project as a
16
Landmark development. The evidence that Landmark exercised a degree of control
over SPID, LLC greater than that normally associated with common ownership and
directorship is: (1) Mark Kearney’s testimony that Landmark made the decision to
purchase the property and develop it as a golf resort and that Landmark approved
decisions regarding the golf course development; (2) up until the last three or four
years, Landmark regularly held its shareholders’ meetings at Laguna Vista; and (3)
Awtrey’s testimony that Gary Kerney “oversaw” the Laguna Vista project in his capacity
as Landmark’s executive vice president.
We conclude that this evidence constitutes some evidence that Landmark and
SPID, LLC may be fused for jurisdictional purposes. See Spir Star, 310 S.W.3d at 880
(“Under the appropriate standard of review, our task ends when, as here, some
evidence supports the trial court’s denial of AG’s special appearance.”). Because
Bennett pleaded allegations sufficient to confer jurisdiction under an alter ego theory,
appellants had the burden to negate that basis for jurisdiction. See Retamco, 278
S.W.3d at 337. We conclude that appellants failed to negate the alter ego basis for
jurisdiction. See id. We hold that the trial court did not err in exercising personal
jurisdiction over Landmark under an alter ego theory. We overrule appellants’ third
issue.
As noted, Bennett pleaded an alter ego theory by alleging that Landmark “makes
all major contractual decisions” for SPID, LLC and the Association. He further pleaded
specific allegations of misrepresentation and fraudulent conduct by SPID, LLC “acting at
the control and direction of Landmark.” In its special appearance, Landmark argued
that it was not subject to the court’s general or specific jurisdiction and that personal
17
jurisdiction could not be exercised over it under an alter ego theory of jurisdiction.
Construing Bennett’s pleadings liberally as pleading allegations which confer general
jurisdiction over Landmark itself, we address Landmark’s assertion in its special
appearance that it is not subject to the court’s general jurisdiction.
General jurisdiction is subject to a “dispute-blind” analysis—without regard to the
nature of the claim—and involves a “more demanding minimum contact analysis.”
PHC–Minden, 235 S.W.3d at 168. However, the requisite level of minimum contacts
must be substantial and involve a defendant who has been engaged in longstanding
business with the forum state. Id. In a minimum contacts analysis, the threshold issue
to determine is whether the foreign corporation has “continuous and systematic general
business contacts” with the forum state. Helicopteros Nacionales de Colombia, S.A. v.
Hall, 466 U.S. 408, 416 (1984). Continuous and systematic contacts are determined
only on a “case-by-case basis” and should be examined for the quality of the contacts,
rather than the quantity. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801,
810 (Tex. 2002).
The second prong of a general jurisdiction analysis requires the court to evaluate
“whether the assertion of personal jurisdiction comports with fair play and substantial
justice.” Guardian Royal, 815 S.W.2d at 228. To make this evaluation, the court is
advised to look at several factors, including: (1) the burden on the defendant; (2) the
interest 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
states in furthering fundamental substantive social policies. Id.
18
Vaughn is president, general counsel, and a member of Landmark’s board of
directors. Vaughn testified that “up until three or four years ago,” Landmark regularly
held shareholders’ meetings at Laguna Vista. As noted above, Vaughn testified that he
has made twenty or thirty business trips to Texas related to the Laguna Vista
development. Awtrey testified that Gary Kerney “oversaw” the Laguna Vista project in
his capacity as Landmark’s executive vice president. We hold that these contacts,
which are more than isolated, rise to a sufficient level that are continuous and
systematic to satisfy general jurisdiction. See Spir Star, 310 S.W.3d at 872 (noting that
general jurisdiction exists when a defendant’s contacts are continuous and systematic,
even if the cause of action did not arise from activities performed in the forum state).
Having found that Landmark had minimum contacts with the state of Texas, we
must decide whether subjecting it to jurisdiction here would violate “traditional norms of
fair play and substantial justice.” See Guardian Royal, 815 S.W.2d at 228 (listing
factors to consider).
Viewing the facts through the prism of the factors, we conclude that traditional
norms of fair play and substantial justice are not violated by subjecting Landmark to
jurisdiction in Texas. First, although it may be somewhat burdensome for Landmark to
litigate in Texas (rather than in Maryland, where its corporate office is located), the
burden is outweighed by the fact that all of the alleged misrepresentations took place in
Texas, and therefore, the majority of the documents and witnesses necessary for trial
are in Texas. Moreover, the burden on Landmark must be viewed in light of the fact
that “up until three or four years ago,” it regularly held its shareholders’ meetings in
Laguna Vista. See id. at 232 (noting that “the interests of the forum state and the
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plaintiff will justify the severe burden placed upon the nonresident defendant”). The
second and third factors—the interests of Texas and Bennett—also favor jurisdiction in
Texas. Texas has an interest in adjudicating the dispute because the claim was filed by
a Texas resident and involves alleged misrepresentations and fraudulent conduct that
occurred in Texas. See id. at 232–33. Bennett’s interest is served by having his claims
adjudicated in Texas, where he resides and where the alleged misrepresentations and
fraudulent conduct occurred. See Pessina v. Rosson, 77 S.W.3d 293, 299 (Tex. App.—
Austin 2001, pet. denied). The interests of the interstate judicial system indicate that
Texas is the proper forum. Again, Bennett’s claims are based on misrepresentations
which were allegedly committed in Texas and allegedly fraudulent conduct that occurred
in Texas. See id. These same reasons relate to the fifth factor, the shared interest of
the respective states in furthering substantive social policies.
Based on the preceding factors, we conclude that the exercise of personal
jurisdiction over Landmark comports with fair play and substantial justice. See Spir
Star, 310 S.W.3d at 872. We hold that the trial court did not err in exercising general
jurisdiction over Landmark.
IV. CONCLUSION
We hold that the trial court did not err in denying Landmark’s and Vaughn’s
special appearances. We affirm.
DORI CONTRERAS GARZA
Justice
Delivered and filed the
20th day of September, 2012.
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