Douglas Elliman Realty, LLC v. Griffin Partners III-520/2017 L.P. as Successor in Interest to DLF/GP 520 Post Oak, LLC PFP 520 Post Oak, Inc. and 520 Partners, Ltd. ( 2023 )

Opinion issued February 28, 2023.
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-21-00083-CV
———————————
DOUGLAS ELLIMAN REALTY, LLC, Appellant
V.
GRIFFIN PARTNERS III-520/2017 L.P. AS SUCCESSOR IN INTEREST
TO DLF/GP 520 POST OAK, LLC PFP 520 POST OAK, INC. AND 520
PARTNERS, LTD., Appellee
On Appeal from the 157th District Court
Harris County, Texas
Trial Court Case No. 2020-03683
MEMORANDUM OPINION
Appellee filed suit against Appellant Douglas Elliman Realty, LLC stemming
from the purported breach of a commercial property lease. Appellee asserted claims
against Douglas Elliman Realty, LLC and others for tortious interference,
conspiracy, and declaratory relief claiming they had interfered with the performance
of the commercial property lease by causing the lessee to terminate the lease. In this
interlocutory appeal, Appellant Douglas Elliman Realty, LLC challenges the trial
court’s order denying its special appearance. In its sole issue, it contends the trial
court erred in denying its special appearance because it is not subject to general or
specific jurisdiction in Texas.
We affirm the trial court’s ruling based on specific jurisdiction.
Factual Background
Appellee Griffin Partners III – 520/2017 L.P. as Successor in Interest to
DLF/GP 520 Post Oak, LLC PFP 520 Post Oak, Inc. and 520 Partners, Ltd. (“Griffin
Partners”) is a commercial real estate investment, development, and property
management firm in Houston, Texas. In 1998, Griffin Partners’ predecessor-in-
interest executed a lease with tenant John Daugherty Real Estate, Inc. (“JDRE”) for
commercial offices located at 520 Post Oak Boulevard in Houston, Texas, the terms
of which were later extended through May 31, 2027 (“Post Oak Lease”).
Appellant Douglas Elliman Realty, LLC (“DE New York”) is a limited
liability company incorporated in New York with its principal place of business in
New York. DE New York is a “holding company that holds the stock or membership
interests of certain operating subsidiaries, many of which engage in some aspect of
2
purchasing or selling real estate.” DE New York “is not and has never been
incorporated or licensed to do business in any state, including the State of Texas, as
is required to engage in real estate transaction as a broker.” DE New York, along
with its affiliates, is one of the largest residential brokerage companies in the United
States.
JDRE was a well-regarded real estate firm that specialized in high-end luxury
homes and apartments in Houston, Texas. John A. Daugherty, Jr. was its sole
shareholder (“Daugherty”).
Jacob Sudhoff (“Sudhoff”) is a Texas resident who owns several real estate
companies in Houston, Texas, including Premier Texas Brokerage LLC (“Premier”)
and Sudhoff Companies, LLC (“Sudhoff Companies”). Sudhoff’s businesses are
primarily engaged in the business of sales and marketing of luxury homes and high-
density residential condominiums in the Houston market. Catherine Lee (“Lee”) is
Sudhoff’s business partner.
In 2018, Howard Lorber (“Lorber”), DE New York’s Executive Chairman,
and Kenneth Haber (“Haber”), DE New York’s Executive Vice President and
General Counsel, began talking to Sudhoff and Lee about a future real estate
brokerage business venture. By January 15, 2019, Sudhoff had signed a licensing
agreement with DE New York for use of the “Douglas Elliman Real Estate” logo
and trade dress. Sudhoff and DE New York, however, soon decided to enter into a
3
real estate brokerage joint venture, rather than a licensing arrangement. In July 2019,
DE New York formed Douglas Elliman of Texas, LLC (“DE Texas”), and DE Texas
and Premier formed Real Estate Associates of Houston, LLC (“REAH”).
Earlier in 2019, Sudhoff had also proposed to Haber and others at DE New
York that there was a possibility of “doing some type of arrangement” with JDRE,
if DE New York was amenable. Sudhoff testified that prior to entering talks with
DE New York, he and Daugherty had been “discussing a potential deal” between
Sudhoff Companies and JDRE but that deal never came to fruition. Sudhoff
contends that he reached out to Daugherty when Sudhoff was negotiating his joint
venture arrangement with DE New York because Sudhoff’s business focuses on the
Houston condominium market and Sudhoff “was looking to align with a traditional
brokerage.”
In April 2019, after DE New York “signed off” on the location and before
formally establishing a joint venture with Sudhoff or negotiating its details, Sudhoff
and Lee leased office space on Kirby Drive in Houston, Texas for the proposed joint
venture between Sudhoff and DE New York (“Kirby Lease”). Sudhoff testified that
he tried to get a “deal done” with JDRE before they signed the Kirby Lease, but they
were unable to do so.
On June 5, 2019, Daugherty and Cheri Fama (“Fama”), JDRE’s president,
joined Sudhoff for a trip to New York to meet with some of DE New York’s senior
4
officers, including Lorber and Haber. Sudhoff had informed Haber the week before
that he was coming to New York, and that he had arranged for Daugherty to join
him. Sudhoff told Haber:
As timing is now at a critical point for [Daugherty] and his brokerage.
We have been in talks with [Daugherty] during the entire time of our
talks. His GCI is 35m. 1.4b a year in Houston. His firm is 52 years old
and [Lorber] had a call with [Daugherty] about 10 months ago.
When asked why Sudhoff arranged for Daugherty to meet with DE New
York’s officers in June 2019, Daugherty explained, “My understanding was that
Douglas Elliman New York was getting into the real estate business in Texas [and]
Sudhoff and Lee were going to represent the Texas operation.” According to
Daugherty, he understood that Sudhoff was assisting DE New York’s entry into the
Texas market because Sudhoff “kept representing that Douglas Elliman New York
was going to own 51 percent of the Texas operation and that Douglas Elliman New
York could fire them, Sudhoff and Lee, but they could not, Lee and Sudhoff, could
not fire New York.” This was confirmed by Haber who told Daugherty that DE New
York “had complete control of what was going to happen in Texas.” Daugherty
testified that Haber also told him that he “was in charge of Texas.” Haber, however,
denies telling Daugherty that he “was in charge of Texas, [DE Texas] or [REAH]
(neither of which had [] even been formed as of June 2019), and I did not state that
[DE New York] was controlling or would control what was going to be done in
Texas.”
5
On June 7, 2019, Haber sent a mutual Non-Disclosure Agreement (“NDA”)
to JDRE’s Daugherty and Fama. The proposed NDA states in part, “You have
expressed an interest in pursuing a business transaction between John Daugherty
Realtors and Douglas Elliman Real Estate or its affiliate.” The signature block
indicates that Haber, as the company’s Executive Vice President and General
Counsel, would be signing the NDA on behalf of “Douglas Elliman Real Estate.”
On June 12, 2019, Daugherty sent a revised and executed version of the NDA to
Haber. Daugherty’s version added a non-solicitation agreement. Haber informed
Daugherty that he could not “execute the Agreement as revised” because “DE does
not enter into ‘non-hire’ agreements,” and the proposed non-solicitation agreement
was not acceptable to Haber.
On June 18, 2019, Lorber sent Scott Durkin (“Durkin”), DE New York’s
Chief Operating Officer, to Houston, Texas to meet with Sudhoff, Daugherty, and
Fama. According to Sudhoff, Sudhoff’s meeting with Durkin was one of the final
steps to getting Sudhoff’s deal done with DE New York. After meeting with
Sudhoff, Durkin “gave his blessing to” Lorber and REAH was formed the next
month. REAH is the joint venture between DE Texas—DE New York’s wholly
owned subsidiary—and Premier—Sudhoff’s company.
Daugherty, Fama, Sudhoff, Lee, and Durkin had lunch at the River Oaks
Country Club in Houston, Texas during Durkin’s June 2019 trip to Houston.
6
According to Daugherty, Durkin told him that DE New York would be moving into
Houston first and then other cities around Texas. Daugherty testified that Durkin
“was representing Douglas Elliman New York and representing that they were going
to be the 51 percent owners of the Texas operation for Douglas Elliman.” He
testified Sudhoff made the same representation. Daugherty testified that Durkin told
him Sudhoff and Lee would “be representing Douglas Elliman New York” and that
Sudhoff repeated this representation to JDRE multiple times in Texas, knowing
JDRE would not agree to an acquisition by a Sudhoff-led company or startup
company. When asked why Durkin was meeting with him in Houston, Daugherty
responded, “[DE New York] and [DE Texas] wanted to buy my company to open
up their Texas operation.” Daugherty testified that he communicated with Sudhoff
repeatedly between June 2019 and February 2020 regarding JDRE’s acquisition and
Sudhoff told him that he was acting on DE New York’s behalf.
Durkin confirmed that he traveled to Houston, Texas on June 18, 2019 to meet
with Sudhoff, and that he had lunch with Daugherty, Fama, and Sudhoff at the River
Oaks Country Club in Houston during his trip. Durkin, however, denied telling
Daugherty that DE New York would “be controlling what’s going on in Houston or
that [DE New York] would own 51% of [REAH].” Durkin also denied overhearing
Sudhoff state that DE New York would “control and own 51% of [REAH] or that
[DE New York] could fire [REAH] but [REAH] could not fire [DE New York].”
7
On July 2, 2019, DE New York formed DE Texas. DE Texas is a member-
managed Texas limited liability company, and DE New York is its sole member.
Under the terms of the DE Texas operating agreement, which is governed by Texas
law, DE New York has the exclusive power to “hire and appoint officers, agents
and/or employees to act on behalf of” DE Texas and all of DE Texas’ profits and
losses are “allocated 100%” to DE New York. Although DE New York is entitled
to all of DE Texas’ profits, DE New York “shall not have any liability for the
obligations or liabilities of [DE Texas], except to the extent provided in the Code.”
DE New York contends that DE Texas does not employ, and has never employed,
anyone in the State of Texas on behalf of DE New York, and that DE Texas is not
licensed as a real estate broker by the State of Texas. According to DE New York,
DE Texas maintains books and accounts separate from DE New York, and has its
own assets, including an ownership interest in REAH.
On July 17, 2019, DE Texas and Premier signed the Limited Liability
Company Agreement for REAH—the joint venture between DE Texas and Premier.
(“REAH Agreement”).1 Pursuant to the REAH Agreement, REAH is governed by
two managers, one appointed by DE Texas and the other by Premier. The REAH
Agreement is between Premier, DE Texas, Sudhoff as Premier’s manager, Haber as
1
According to the REAH Agreement, REAH “was formed as a Texas limited liability
company pursuant to the filing of its Certificate of Formation (the “Certificate of
Formation”) with the Secretary of State of the State of Texas on July 10, 2019.”
8
DE Texas’ manager, and Sudhoff and Lee in their individual capacities. DE Texas
acquired a 1% ownership stake in REAH and Premier, Sudhoff’s company, acquired
the remaining 99 %. Sudhoff is responsible for REAH’s day-to-day operations, but
he cannot make any “major decisions” for REAH without Haber’s prior written
consent. The REAH Agreement defines “major decisions” as, among other things,
the formation of any subsidiary and “any decisions related to audit, tax or legal
matters.” Haber signed the REAH Agreement on behalf of DE Texas, by and
through DE New York, its managing member, and Sudhoff signed the agreement on
behalf of Premier.
On July 17, 2019, Premier and DE Texas executed an Equity Purchase Option
Letter Agreement that gave DE Texas the option, exercisable at DE Texas’s sole
election, to purchase “not less than 25%, but not more than 50%” of Premier’s
interest in REAH. Sudhoff explained that Lorber and Haber devised that
arrangement to retain for DE New York “the right to buy into the company in a larger
way.”
On July 24, 2019, Lee updated Haber regarding Sudhoff’s negotiations with
JDRE. According to Lee, one of the next steps in the process was to “circulate the
executed NDA to all parties.”2 She also informed Haber that Daugherty and Fama
2
On August 6, 2019, Haber sent a revised non-disclosure agreement to Daugherty.
Lee is presumably referring here to the revised August non-disclosure agreement,
because the June 2019 NDA was never executed.
9
would provide them with JDRE’s financial statements, which they could use to
determine the company’s value. Lee stated, “Ken [Haber], we would look for you
to take the lead on figuring out what you all think is appropriate.”
On August 6, 2019, Haber emailed Daugherty regarding a revised non-
disclosure agreement (“Revised NDA”). Fama and Sudhoff were copied on the
email. Haber states, “I met with [Sudhoff] this morning and had him sign the mutual
NDA between the two of you, which is attached hereto. Please note that we deleted
[the non-solicitation agreement Daugherty had proposed] from the NDA, as we had
previously discussed. In any event, if in order, please sign and return to [Sudhoff],
so that you and he can move forward with your possible transaction.” The Revised
NDA states, “You have expressed an interest in pursuing a business transaction
between John Daugherty Realtors and Real Estate Associates of Texas, LLC d/b/a
Douglas Elliman Real Estate or its affiliate.” The Revised DNA is signed by Sudhoff
on behalf of REAH as REAH’s Chief Executive Officer. The Revised NDA refers
to the same proposed transaction as the original NDA, but REAH was substituted as
the purchaser of JDRE in place of DE New York. REAH, which was formed in July
2019, did not exist when Haber sent the original NDA to JDRE in June 2019.
On August 7, 2019, Sudhoff emailed Daugherty regarding the JDRE
acquisition and stated, “As we discussed last[,] Elliman has a formula that is their
standard for acquisitions based off the numbers.” Haber is copied on the email.
10
Notably, the only Elliman company involved in the transaction with a history of
prior acquisitions at that time was DE New York. Daugherty already knew about
DE New York’s formula because when Haber and Daugherty met in New York in
June 2019, Haber told Daugherty that DE New York had a “standard formula they
used to purchase companies around the United States.”
On August 24, 2019, Sudhoff told Haber that Lee would be meeting with
Daugherty later that week and Sudhoff suggested providing Daugherty with an
“equation to purchase,” which according to Sudhoff, would help them determine
whether they “are even in the same ball park of getting a deal done.” On August 27,
2019, Lee followed up with Haber, asking for Haber’s “thoughts on just a formula
proposal and whether that might work.”
On September 1, 2019, Sudhoff sent JDRE a draft letter of intent (“Draft
LOI”) memorializing certain terms related to the acquisition of JDRE, including the
purchase price, payout structure, and additional compensation. DE New York’s
trademark and logo were displayed on every page of the Draft LOI. The proposed
signatories were Sudhoff for REAH and Daugherty for JDRE. On November 13,
2019, DE New York hosted an event at the Post Oak Hotel in Houston, Texas.3 The
3
DE New York does not challenge Griffin Partners’ characterization of the event.
Rather, DE New York contends that the event is irrelevant because (1) it was held
over a month before the letter of intent or asset purchase agreement were signed;
(2) it “had nothing to do with Appellee or the Lease;” and (3) “neither the LOI and
APA were discussed at the Wealth Report meetings.”
11
event was publicized as “Douglas Elliman Celebrates the Arrival of its Global
Platform in Texas” and states, “Howard M. Lorber, Scott Durkin, Jacob Sudhoff and
Susan de Franca invite you to attend The Wealth Report.” According to Haber, DE
New York has a relationship with Knight Frank, an international brokerage firm
based in London, and Knight Frank produces a report entitled “The Wealth Report,”
which shows what “rich people like to buy and where rich people like to live.”
Daugherty and Fama attended the event. When asked what was discussed at the
event, Daugherty testified, DE New York was “coming into [] Texas—they were
getting into the Texas market.” According to Daugherty, he met with DE New
York’s CEO, Lorber, after the event and Lorber told him “they were excited about
getting into the Texas market.”
On December 14, 2019, JDRE’s representatives and counsel met with Sudhoff
and Lee to discuss the principal terms of the JDRE acquisition. According to JDRE’s
counsel, it “was mentioned” during the meeting that “DE [was] not moving into
JDRE’s existing space on Post Oak and assuming the existing [Post Oak Lease]
obligations.”
On December 20, 2019, Lee emailed Daugherty and Fama a letter of intent
with respect to the proposed acquisition of JDRE by “Real Estate Associates of
Houston, LLC d/b/a Douglas Elliman Texas” (“LOI”). Lee’s signature block
appears on her email and identifies her as the Chief Operating Officer and in-house
12
counsel for “Douglas Elliman Real Estate Texas.” Sudhoff, who had negotiated the
terms of the Draft LOI, was copied on the email. The LOI includes more detailed
information than the Draft LOI, which Sudhoff had sent to Daugherty on September
1, 2019.
On December 21, 2019, Lee emailed a copy of the LOI to Lorber and Haber.
Lee wrote, “We are meeting with [JDRE] today at noon to finalize this agreement
but wanted you to also review the terms and let us know if there are any issues.”
Durkin and Sudhoff were copied on the email. There is no evidence Lorber or Haber
reviewed the LOI, responded to Lee’s email or objected to the terms of the LOI.
Haber stated in his declaration that he had “no recollection of reviewing” the LOI.
Durkin also declared that he had never been provided with “any letter of intent”
related to the acquisition of JDRE “before the documents were executed by the
parties thereto.”
On December 21, 2019, Sudhoff learned that the proposed acquisition of
JDRE had been leaked to the media. Sudhoff and Steve Larkin (“Larkin”), DE New
York’s Vice President of Public Relations, were approached by media outlets
seeking confirmation of the acquisition and requesting interviews. Sudhoff
forwarded a link of one article to Lorber, Durkin, and Susan DeFranca.4 According
4
Susan DeFranca is the president and chief executive officer of Douglas Elliman
Development Marketing.
13
to Sudhoff, there had been a “group of agents that wanted to leave” JDRE before the
leak and Sudhoff believed that “the reason for the leak was to be able to help retain
[those] agents.” Sudhoff explained that “telling [these agents] that Elliman” was
buying JDRE “was buying time to get [them] to stay on board.”
Larkin summoned the public relations and marketing personnel from DE New
York, DE Texas, and REAH to manage the publicity surrounding the acquisition.
One of the people involved, John Robbins (“Robbins”) from “Douglas Elliman Real
Estate–Texas,”5 forwarded a proposed press release, designated as “Internal Only,”
to Sudhoff, Lee, and Larkin. The press release was entitled, “Douglas Elliman
Continues Statewide Expansion in Texas, Third Largest Real Estate Brokerage in
the United States to acquire Houston-Based John Daugherty Realtors.” The press
release also states that “Douglas Elliman, the nation’s second largest residential real
estate brokerage company, announced today that it has entered into a letter of intent
to acquire John Daugherty Realtors.” Lee forwarded the press release to Haber, and
Haber in turn emailed Larkin expressing concerns about the assertion in the press
release that DE New York was purchasing JDRE. According to Haber, the press
release needed to be revised to reflect that “DE Texas” was the entity acquiring
JDRE. Robbins also emailed a list of talking points about the JDRE acquisition to
Sudhoff and Lee. Larkin was copied on the email.
5
This information is from Robbins’ email signature block.
14
On December 22, 2019, JDRE’s counsel sent Daugherty and Fama his
preliminary comments regarding the LOI “prepared by DE” for the acquisition of
JDRE, which Daugherty forwarded to Sudhoff the next day, on December 23, 2019.
Summarizing the LOI’s terms, JDRE’s counsel noted that, among other things, “DE
Realty” would not be assuming JDRE’s Post Oak Lease and JDRE would move its
personnel to DE’s offices on Kirby Drive in Houston, Texas.6
On December 23, 2019, DE New York or REAH hosted what Haber describes
as a “launch event” at the Post Oak Hotel in Houston, Texas attended by Haber,
Durkin, Larkin, Sudhoff, Daugherty, Fama, and JDRE’s agents.7 According to
Daugherty, Durkin announced in front of him and the other 100 or so meeting
attendants that DE New York was purchasing JDRE. Haber testified that
“Daugherty announced [JDRE’s] deal with [REAH] to JDRE’s agents and others in
attendance, and I gave a short speech to the crowd concerning [DE New York’s]
growth and capabilities.” When asked if it was “announced at that meeting that
Elliman New York had acquired John Daugherty Real Estate,” Sudhoff stated that
“it was discussed that there was an arrangement made between the two parties.”
Sudhoff explained that “the goal was to try to retain agents that were wanting
to leave [JDRE] at the time” and “one of the ways that we thought that was good to
6
The LOI defines REAH as “DE.”
7
Haber testified that REAH hosted the event. Daugherty testified that DE New York
paid for the event.
15
retain these agents after we just made this announcement [about the acquisition] was
to be able to bring [Durkin] into town so that . . . they could learn more and get to
see somebody . . . from Elliman New York and [have Durkin] answer questions that
we just couldn’t even answer about the resources . . . and you know, training and
everything that the agents really wanted.” The anticipated acquisition, however, also
concerned some of JDRE’s agents and after the launch event at the Post Oak Hotel,
Mark Menendez, President of DE Texas, reported to Sudhoff, Lee, Durkin, Larkin,
and others that “most of the [JDRE] agents that had apprehension to the new
structure [had] turned a positive corner after the event.” According to Sudhoff, only
five of JDRE’s 125 agents left the company.
On the same day as the launch event, Sudhoff and Daugherty executed the
LOI. According to Daugherty, the LOI was executed after the event at the Post Oak
Hotel. The LOI is on Douglas Elliman Real Estate’s letterhead, which reflects that
the company was “Est. 1911,” and includes Douglas Elliman Texas’ name and
address at the top under the letterhead. Sudhoff signed the LOI on behalf of
“Douglas Elliman Texas” and Daugherty signed on behalf of JDRE.
Subsection (e) of the LOI required JDRE to use its best efforts to terminate
the Post Oak Lease and relocate its agents to 2001 Kirby Drive, in Houston, Texas
where REAH’s offices were located. When asked if he ever discussed Subsection
(e) of the LOI with Haber, Sudhoff testified that he had not discussed the terms of
16
the LOI with Haber and he did not know if Haber had any concerns about Section
(e). When asked if he ever discussed the Post Oak Lease with Haber, Sudhoff
testified, “It was not really about the lease itself just was about, you know, is you
know, is the plan to stay at that location or if it is—the plan is to relocate them to
2001 Kirby and we had said the plan was always to relocate to 2001 Kirby.” Sudhoff
testified that it was DE New York’s standard practice to not assume a lease and
REAH did not assume the Post Oak Lease based on advice from counsel and DE
New York. Sudhoff further testified he had neither seen the Post Oak Lease nor was
he aware of its terms.8
Sudhoff testified that his associate Lee had been communicating with Haber
about the LOI. When asked if she had kept Haber “fully apprised of the letter of
intent,” Lee responded that she was sure she and Haber had talked about it but she
did not know “specifically at what point in time we discussed it.”
On December 23, 2019, Haber emailed Lee a “a form of a draft asset purchase
agreement” that he had received from Jacob Herzek (“Herzek”), another of DE New
York’s vice presidents. In his email, Haber noted, “You may not need everything,
but it[’]s a good starting point.” According to Haber, Lee had requested a “form
agreement for the acquisition of the company.” A few days later, Herzek sent Lee
8
Sudhoff considered JDRE’s obligation to use its best efforts to terminate the Post
Oak Lease to be a “nonissue” because Daugherty “had always said to us that he
would easily be able to take care of it because of his relationship with the Griffins.”
17
additional documents to accompany the asset purchase agreement, including a legal
checklist and bill of sale.
On January 9, 2020, JDRE and REAH executed an Asset Purchase Agreement
for the acquisition of JDRE (“APA”). Under the APA, REAH did not assume the
Post Oak Lease and JDRE was required to use its best efforts to terminate the Post
Oak Lease and relocate its employees and agents to 2001 Kirby, Houston, Texas.
On January 11, 2020, Griffin Partners’ representatives, Fred and Edward Griffin,
met Daugherty, Fama, JDRE’s counsel, Sudhoff, and Lee. Sudhoff allegedly
informed Griffin Partners at that time that JDRE had been acquired by DE New York
or REAH, the buyer would not be assuming the Post Oak Lease, JDRE was
terminating or repudiating the Post Oak Lease, and JDRE would be moving its staff
and personnel out of its Post Oak offices. One month later in February 2020, REAH
terminated the APA, after having allegedly acquired most of JDRE’s agents and
JDRE filed for bankruptcy a few days later.
Procedural Background
On January 17, 2020, Griffin Partners sued DE Texas, Sudhoff Companies,
and Sudhoff for tortious interference with the Post Oak Lease and conspiracy. On
18
August 1, 2020, Griffin Partners filed its First Amended Petition naming DE Texas,
Sudhoff Companies, Premier, Sudhoff, REAH, and DE New York as defendants.9
On November 11, 2020, Griffin Partners filed its Second Amended Petition
naming DE Texas, Sudhoff Companies, Sudhoff, REAH, DE New York, and
Premier as defendants. Griffin Partners asserted claims against the named
defendants for tortious interference with contract and conspiracy. It also sought a
declaratory judgment that “DE Texas was used to perpetrate tortious interference
with the [Post Oak] Lease to benefit its owner DE New York such that its corporate
form should be disregarded and liability imposed upon DE New York for any final
judgment entered in this action against DE Texas,” and “[REAH] was used to
perpetrate tortious interference with the [Post Oak] Lease to benefit its owners DE
New York and Premier such that its corporate form should be disregarded and
liability imposed upon DE New York and Premier, jointly and severally, for any
final judgment entered in this action against [REAH].”
Griffin Partners alleged that the named defendants, including DE New York,
had “tortiously interfered and conspired to tortiously interfere with the [Post Oak]
Lease by requiring JDRE to repudiate the Lease as a condition of Defendants’
acquisition of JDRE.” Griffin Partners also alleged that DE Texas and REAH were
9
Although Griffin Partners initially asserted claims against JDRE for repudiation and
breach of contract in its original petition, Griffin Partners did not name JDRE as a
defendant in its amended petition.
19
DE New York’s alter egos and DE Texas, REAH, Sudhoff, Sudhoff Companies, and
Premier were DE New York’s agents.10
DE New York filed a Special Appearance and an original answer, and the
parties conducted jurisdictional discovery. The trial court held a hearing on DE New
York’s special appearance and issued its ruling denying the special appearance on
January 26, 2021. The trial court did not issue findings of fact and conclusions of
law. This interlocutory appeal followed.11
Personal Jurisdiction
DE New York challenges the trial court’s denial of its special appearance,
contending the trial court lacks general and specific jurisdiction over it, and
challenging the trial court’s implied findings that it is subject to personal jurisdiction
in Texas based on the theories of alter ego and agency. DE New York argues the
trial court does not have general jurisdiction over it because DE New York is not
headquartered in Texas, does not do business in Texas, and is not otherwise “at
home” in Texas. DE New York further contends that the trial court lacks specific
jurisdiction over it because DE New York has not purposefully availed itself of the
benefits of conducting business in Texas and it has no connection to the allegations
10
Griffin Partners’ agency and alter ego theories were presumably included to support
its jurisdictional claims with respect to DE New York.
11
See TEX. CIV. PRAC. & REM. CODE § 51.014(a)(7) (permitting interlocutory appeal
from denial of special appearance).
20
in Griffin Partners’ lawsuit because it was not involved in the drafting and
negotiation of the LOI or APA. DE New York also contends there is legally and
factually insufficient evidence supporting the trial court’s implied findings that DE
Texas or REAH are DE New York’s alter egos or that Sudhoff or Lee were DE New
York’s agents thus permitting those parties’ contacts to be imputed to DE New York
for purposes of establishing personal jurisdiction.
Applicable Law
A. Personal Jurisdiction
A court may assert personal jurisdiction over a nonresident defendant only if
the Texas long-arm statute and due process requirements of the Fourteenth
Amendment to the United States Constitution are satisfied. See U.S. CONST. amend.
XIV, § 1; TEX. CIV. PRAC. & REM. CODE § 17.042; Guardian Royal Exch. Assurance,
Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226–27 (Tex. 1991). The
Texas long-arm statute allows Texas courts to exercise personal jurisdiction over a
nonresident defendant who is doing “business in this state” and “commits a tort in
whole or in part in this state.” TEX. CIV. PRAC. & REM. CODE § 17.042(2). The reach
of the long-arm statute extends to the full extent permitted by the Due Process Clause
of the Fourteenth Amendment. M & F Worldwide Corp. v. Pepsi-Cola Metro.
Bottling Co., Inc., 512 S.W.3d 878, 885 (Tex. 2017). Due process is satisfied when
the nonresident defendant has established minimum contacts with the forum state
21
and the exercise of jurisdiction over the nonresident defendant comports with
traditional notions of fair play and substantial justice. See id.; see also Int’l Shoe
Co. v. Washington, 326 U.S. 310, 316 (1945).12 A nonresident defendant’s minimum
contacts with a forum are established when the defendant “purposefully avails itself
of the privilege of conducting activities within the forum state, thus invoking the
benefits and protections of its laws.” M & F Worldwide Corp., 512 S.W.3d at 886;
Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1024–25 (2021); see
also TV Azteca v. Ruiz, 490 S.W.3d 29, 37 (Tex. 2016).
The Texas Supreme Court has characterized the “purposeful availment”
requisite as the “touchstone of jurisdictional due process.” Michiana Easy Livin’
Country, Inc. v. Holten, 168 S.W.3d 777, 784 (Tex. 2005). There are three important
aspects of the purposeful-availment inquiry. Id. at 785. First, only the defendant’s
contacts with the forum state count. Id. This ensures that a defendant is not haled
into a jurisdiction solely by the unilateral activities of a third party. Id. Second, the
acts relied on must be purposeful; a defendant may not be haled into a jurisdiction
12
DE Realty does not argue that the exercise of personal jurisdiction over DE Realty
in Texas violates traditional notions of fair play and substantial justice. We thus
limit our inquiry to whether DE Realty has sufficient minimum contacts with Texas.
See Madison Dev. Group LLC v. Mattress Firm, Inc., 608 S.W.3d 376, 400 (Tex.
App.—Houston [1st Dist.] 2020, no pet.) (affirming denial of special appearances
after finding sufficient minimum contacts for specific jurisdiction and stating
specially appearing defendants “have not demonstrated or argued that exercising
jurisdiction would offend traditional notions of fair play and substantial justice”).
22
solely based on contacts that are “random, isolated, or fortuitous.” Id. Third, a
defendant “must seek some benefit, advantage, or profit by ‘availing’ itself of the
jurisdiction.” Id. By “invoking the benefits and protections of a forum’s laws, a
nonresident consents to suit there.” Id.A defendant’s contacts with a forum state can give rise to either general or
specific jurisdiction. Ford Motor Co., 141 S. Ct. at 1024. Specific jurisdiction
exists when the claims involved in the litigation relate to or arise from the
nonresident defendant’s contacts with the forum state. Id.; see also M & F
Worldwide Corp., 512 S.W.3d at 885. The defendant’s contacts with the forum state
(1) must be purposeful, and (2) the cause of action must “arise from or relate to”
those contacts. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 579–80
(Tex. 2007). “There must be a substantial connection between th[e forum] contacts
and the operative facts of the litigation.” Id. at 585.
General jurisdiction “involves a court’s ability to exercise jurisdiction over a
nonresident defendant based on any claim, including claims unrelated to the
defendant’s contacts with the state.” M & F Worldwide Corp., 512 S.W.3d at 885
(quotation omitted); see also Bristol-Myers Squibb Co. v. Superior Ct. of Cal., 137
S. Ct. 1773, 1780 (2017). (“A court with general jurisdiction may hear any claim
against that defendant, even if all the incidents underlying the claim occurred in a
different State.”). For general jurisdiction to exist, the defendant’s contacts with the
23
forum state must be continuous and systematic. See Daimler AG v. Bauman, 571
U.S. 117, 127 (2014); see also M & F Worldwide Corp., 512 S.W.3d at 885.
Although there is not a precise formulation for the point at which “jurisdictional
contacts reach a tipping point,” the general-jurisdiction inquiry is “very different
from a specific jurisdiction inquiry” and involves a “more demanding minimum
contacts analysis,” with a “substantially higher threshold.” PHC-Minden, L.P. v.
Kimberly-Clark Corp., 235 S.W.3d 163, 167–68 (Tex. 2007) (quotations omitted).
With respect to a corporation, the “paradigm” forums for the exercise of
general jurisdiction are the place of incorporation and principal place of business.
Ford Motor Co., 141 S. Ct. at 1024; see also Daimler AG, 571 U.S. at 137. “Those
affiliations have the virtue of being unique—that is, each ordinarily indicates only
one place—as well as easily ascertainable.” Daimler AG, 571 U.S. at 137. Such
bases afford a plaintiff “recourse to at least one clear and certain forum in which a
corporate defendant may be sued on any and all claims.” Id. “[C]ourt[s] may assert
general jurisdiction over foreign . . . corporations to hear any and all claims against
them when their affiliations with the State are so ‘continuous and systematic’ as to
render them essentially at home in the forum State.” Id. at 127 (quoting Goodyear
Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)); see also Old
Republic Nat’l Title Ins. Co. v. Bell, 549 S.W.3d 550, 565 (Tex. 2018) (“Even when
a defendant’s contacts may be continuous and systematic, they are insufficient to
24
confer general jurisdiction if they fail to rise to the level of rendering a defendant
‘essentially at home in the forum [s]tate.’”). Whether a corporate defendant is “at
home” in the forum state requires “an appraisal of [its] activities in their entirety,
nationwide and worldwide.” Daimler AG, 571 U.S. at 139 n.20. “A corporation
that operates in many places can scarcely be deemed at home in all of them.” Id. To
determine whether a nonresident defendant has continuous and systematic contacts
with Texas sufficient to support general jurisdiction, the court examines the
defendant’s contacts and forum-related activities up to the time suit was filed. See
PHC–Minden, 235 S.W.3d at 170.
A trial court determines a special appearance “on the basis of the pleadings,
any stipulations made by and between the parties, such affidavits and attachments as
may be filed by the parties, the results of discovery processes, and any oral
testimony.” TEX. R. CIV. P. 120a(3); see Touradji v. Beach Cap. P’ship, L.P., 316
S.W.3d 15, 23 (Tex. App.—Houston [1st Dist.] 2010, no pet.) (“The plaintiff’s
original pleadings as well as its response to the defendant’s special appearance can
be considered in determining whether the plaintiff satisfied its burden.”). When a
case involves multiple defendants, their contacts cannot be aggregated. See Loya v.
Taylor, No. 01-14-01014-CV, 2016 WL 6962312, at *3 (Tex. App.—Houston [1st
Dist.] Nov. 29, 2016, pet. denied) (mem. op.). Rather, the plaintiff must specify, and
the court must examine, each defendant’s actions and contacts with the forum. Id.25
The plaintiff and the defendant bear shifting burdens of proof in a challenge
to personal jurisdiction. See Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d
142, 149–150 (Tex. 2013); Kelly v. Gen. Interior Constr., 301 S.W.3d 653, 658–59
(Tex. 2010). The plaintiff bears the initial burden of pleading allegations sufficient
to bring a nonresident defendant within the provisions of the Texas long-arm statute.
Moncrief Oil Int’l Inc., 414 S.W.3d at 149. If the plaintiff meets its initial burden,
the burden shifts to the nonresident defendant to negate the plaintiff’s alleged bases
for jurisdiction. Id. The defendant can negate jurisdiction either by disproving the
plaintiff’s allegations or by showing that the evidence is legally insufficient to
establish jurisdiction, taking the plaintiff’s allegations as true. Kelly, 301 S.W.3d at
659.
B. Standard of Review
Whether a trial court has personal jurisdiction over a nonresident defendant is
a question of law we review de novo. Old Republic Nat’l Title Ins., 549 S.W.3d at
558 (citing Moncrief Oil Int’l Inc., 414 S.W.3d at 150). The trial court must
frequently resolve fact questions before deciding the jurisdictional question. BMC
Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). The trial court
is the sole judge of the witnesses’ credibility and the weight to be given their
testimony. Predator Downhole Inc. v. Flotek Indus., Inc., 504 S.W.3d 394, 402
(Tex. App.—Houston [1st Dist.] 2016, no pet.). We will not disturb a trial court’s
26
resolution of conflicting evidence that turns on such credibility or weight. Id. When,
as here, the trial court does not issue findings of fact and conclusions of law, all fact
findings necessary to support the judgment and supported by evidence are implied.
Old Republic Nat’l Title Ins., 549 S.W.3d at 558 (citing BMC Software, 83 S.W.3d
at 795).
If the defendant challenges the sufficiency of the evidence supporting an
implied finding, we review such findings using the standard sufficiency analysis
applicable to civil cases. See BMC Software, 83 S.W.3d at 794; see also Ennis v.
Loiseau, 164 S.W.3d 698, 706 (Tex. App.—Austin 2005, no pet.) (stating courts
consider entire record and conduct “ordinary sufficiency review” when determining
whether evidence is sufficient to support trial court’s fact findings for purposes of
special appearance). We will affirm the trial court’s ruling on any legal theory that
finds support in the record. Guam Indus. Servs., Inc. v. Dresser-Rand Co., 514
S.W.3d 828, 832 (Tex. App.—Houston [1st Dist.] 2017, no pet.); see also Predator
Downhole Inc., 504 S.W.3d at 402.
The test for legal sufficiency is “whether the evidence at trial would enable
reasonable and fair-minded people to reach the verdict under review.” City of Keller
v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). When conducting a legal sufficiency
review, we view the evidence in the light favorable to the verdict, credit favorable
evidence if a reasonable factfinder could, and disregard any contrary evidence unless
27
a reasonable factfinder could not. Id. at 807. So long as the evidence falls within
the zone of reasonable disagreement, we may not substitute our judgment for that of
the factfinder. Id. at 822. A legal-sufficiency challenge will be sustained if the
record reveals that evidence offered to prove a vital fact is no more than a scintilla
or the evidence conclusively establishes the opposite of a vital fact. Id. at 810.
Evidence does not exceed a scintilla if it is so weak as to do no more than create a
mere surmise or suspicion that the fact exists. Ford Motor Co. v. Ridgway, 135
S.W.3d 598, 601 (Tex. 2004).
In a factual-sufficiency challenge, we consider and weigh all the evidence,
both supporting and contradicting the finding. Mar. Overseas Corp. v. Ellis, 971
S.W.2d 402, 406–07 (Tex. 1998). We may set aside the finding only if it is so
contrary to the overwhelming weight of the evidence as to be clearly wrong and
unjust. Id. at 407. We may not substitute our own judgment for that of the fact
finder or pass upon the credibility of witnesses. Id. (stating “the court of appeals
may not pass upon the witnesses’ credibility or substitute its judgment for that of the
jury, even if the evidence would clearly support a different result”).
Once we determine that the trial court’s findings are supported by sufficient
evidence, or if the material facts are undisputed, we review the trial court’s ruling
on a special appearance de novo. Baker Hughes Inc. v. Brooks, 405 S.W.3d 246,
249 (Tex. App.—Houston [14th Dist.] 2013, pet. denied).
28
Specific Jurisdiction
Griffin Partners argues that DE Realty is subject to specific jurisdiction in
Texas because (1) DE New York “deliberately targeted and exploited” the Texas
residential real estate market, (2) “DE Texas and DE Houston were the tools through
which [DE New York] executed its plan to extract profit from real estate activity in
Texas, [and DE New York] is responsible, in a jurisdictional sense, for DE Texas’
and DE Houston’s activity,” (3) DE Texas’ and DE Houston’s contacts with Texas
are attributable to DE New York because those companies are DE New York’s alter
ego, and (4) Sudhoff, DE Texas, and DE Houston are DE New York’s agents and
thus, their contacts with Texas are attributable to DE Realty.13
Because the issue is dispositive, we first consider Griffin Partners’ specific
jurisdiction arguments based on agency principles.
A. Agency
An agent is one who is authorized to transact business or manage some affair
for a person or entity. Townsend v. Univ. Hosp., 83 S.W.3d 913, 921 (Tex. App.—
Texarkana 2002, pet. denied). A principal is liable for the acts of another acting as
its agent only when the agent has actual or apparent authority to do those acts. See
Gaines v. Kelly, 235 S.W.3d 179, 182 (Tex. 2007). Actual authority is dependent
13
Griffin Partners also asserts that DE New York is subject to general jurisdiction in
Texas. Because we resolve the issue based on specific jurisdiction, we need not
address the general jurisdiction argument.
29
upon the existence of some communication by the principal to the agent. See id.;
see also Greenfield Energy, Inc. v. Duprey, 252 S.W.3d 721, 734 (Tex. App.—
Houston [14th Dist.] 2011, no pet.) (“Actual authority is created through written or
spoken words or conduct of the principal communicated to the agent.”) (citation
omitted). Apparent authority, on the other hand, arises “either from a principal
knowingly permitting an agent to hold [himself] out as having authority or by a
principal’s actions that lack such ordinary care as to clothe an agent with the indicia
of authority, thus leading a reasonably prudent person to believe that the agent has
the authority [he] purports to exercise.” Id. (quoting Baptist Mem. Hosp. Sys. v.
Sampson, 969 S.W.2d 945, 948 (Tex. 1998)). “[A]pparent authority must be based
on the acts of the principal” and “is limited to the scope of responsibility that is
apparently authorized.” Gaines, 235 S.W.3d at 184 (quoting First Valley Bank of
Los Fresnos v. Martin, 144 S.W.3d 466, 471 (Tex. 2004)). Mere declarations of an
alleged agent, standing alone, are “incompetent to establish either the existence of
the alleged agency or the scope of the alleged agent’s authority.” Gaines, 235
S.W.3d at 183–84. “Because apparent authority is an estoppel principle, a party
seeking to recover under such legal theory must show justifiable reliance on the
principal’s words or conduct resulting in harm to the party.” See Reliant Energy
Servs, Inc. v. Cotton Valley Compression, L.L.C., 336 S.W.3d 764, 784 (Tex. App.—
Houston [1st Dist.] 2011, no pet.). The standard courts employ when evaluating the
30
reasonableness of a third party’s assumptions about apparent authority “is that of a
reasonably prudent person, using diligence and discretion to ascertain the agent’s
authority.” See Gaines, 235 S.W.3d at 182–83 (citing Chastain v. Cooper & Reed,
257 S.W.2d 422, 427 (Tex. 1953)); see also Reliant Energy Servs., Inc., 336 S.W.3d
at 787 (“‘[R]easonable diligence to ascertain [an] agent’s authority’ is part of the
standard under Texas law for determining whether a person is ‘reasonably prudent’
in the context of apparent authority. . .”) (quoting Gaines, 235 S.W.3d at 182–83).
Authority to act on the principal’s behalf and control are the two essential
elements of agency. See Exxon Mobil Corp. v. Rincones, 520 S.W.3d 572, 589 (Tex.
2017). “[T]he key question is whether the principal has the right to control the agent
with respect to the details of that conduct.” State Farm Mut. Auto Ins. Co. v. Traver,
980 S.W.2d 625, 627 (Tex. 1998). A “principal’s right of control presupposes that
the principal retains the capacity throughout the relationship to assess the agent’s
performance, provide instructions to the agent, and terminate the agency relationship
by revoking the agent’s authority.” See Exxon Mobil Corp., 520 S.W.3d at 590; see
also Coleman v. Klockner & Co. AG, 180 S.W.3d 577, 588 (Tex. App.—Houston
[14th Dist.] 2005, no pet.) (“The critical element of an agency relationship is the
right to control, and the principal must have control of both the means and details of
the process by which the agent is to accomplish his task in order for an agency
relationship to exist.”). Agency is not presumed and a party alleging the existence
31
of an agency relationship bears the burden of proving it. See Exxon Mobil Corp.,
520 S.W.3d at 589.
Griffin Partners argues that Sudhoff’s contacts with Texas can be imputed to
DE New York for jurisdictional purposes because Sudhoff was acting as an agent of
DE New York when the parties negotiated and executed the LOI and APA for
JDRE’s acquisition. DE New York responds that Griffin Partners failed to establish
agency for jurisdictional purposes based on Sudhoff’s contacts because
(1) Sudhoff’s declarations are insufficient to establish the existence of an agency or
the scope of Sudhoff’s authority; (2) DE New York “denied that it ever cloaked
Sudhoff, Lee or REAH to act as its agent or on its behalf”’ and; (3) none of DE New
York’s conduct “would lead a reasonably prudent person using diligence and
discretion to suppose the agent had authority to act on behalf of the principal.”
Griffin Partners argues that Sudhoff was DE New York’s agent for purposes
of the JDRE acquisition, including the drafting and negotiating of the LOI and APA,
because several of DE New York’s officers and Sudhoff represented to Daugherty
that DE New York was moving into the Texas market and DE New York would be
the majority owner of the Texas operations with control over Sudhoff. Griffin
Partners also points to other evidence of agency, such as Sudhoff’s signature on the
Revised NDA on what Griffin Partners describes as DE New York’s letterhead, and
DE New York listing Sudhoff and Lee on DE New York’s website as the newest
32
members of DE New York’s national sales management team, allowing Sudhoff,
Lee, and REAH to use “Douglas Elliman” signs, and providing Sudhoff and Lee
with @elliman.com email addresses. Griffin Partners further contends that DE New
York “held Sudhoff out as its agent by naming him as one of the [DE New York]
representatives hosting and conducting the Wealth Report” event in Houston, Texas.
Daugherty testified that Sudhoff told him he was a representative of DE New
York. According to Daugherty, Sudhoff told him “Douglas Elliman New York is
coming into Texas to get in the residential real estate business, and they will be
owning 51 percent of [the] Douglas Elliman Texas operation.” Sudhoff also told
Daugherty that “New York can fire me, but I can’t fire them.” Daugherty further
testified that Haber and Durkin told him that DE New York was getting into the
Texas market and would be the majority owner of the Texas enterprise. Daugherty
claims Sudhoff made these same representations to JDRE in Haber’s and Durkin’s
presence and that Haber and Durkin did not deny or refute Sudhoff’s statements.
According to Daugherty, Haber told him that DE New York “had complete control
of what was going to happen in Texas” and Haber “was in charge of Texas.”
While Sudhoff’s declarations standing alone do not establish an agency
relationship or the scope of any alleged agency, Griffin Partners also relies on
Haber’s and Durkin’s alleged declarations and their silence when Sudhoff
purposefully made his declarations of authority in their presence. See Gaines, 235
33
S.W.3d at 183–84 (stating agent’s declarations, standing alone, are “incompetent to
establish either the existence of the alleged agency or the scope of the alleged agent’s
authority”). DE New York suggests that Haber’s and Durkin’s alleged statements
and failures to correct Sudhoff’s statements do not constitute evidence of an agency
relationship because Haber and Durkin denied making or overhearing any such
statements.
In his declaration, Haber stated “Sudhoff is not employed by and has no
position or role at either DE [New York] or Douglas Elliman of Texas, LLC [DE
Texas].” Haber denied ever telling Daugherty or anyone associated with JDRE that,
among other things: (1) “Sudhoff was representing DE [New York];” (2) DE New
York “was, is or will be the majority owner, 51% owner, or the owner” of REAH;
(3) DE New York could fire REAH, but REAH could not fire DE New York, or; (4)
DE New York “is or will be in charge or in control of” REAH and “what happens in
Houston or Texas.” Haber also denied overhearing anyone, including Sudhoff, make
such statements to Daugherty or JDRE. Haber also denied ever hearing Sudhoff or
anyone else “make such statements to Daugherty or anyone associated with JDRE.”
In his declaration, Durkin, like Haber, denied making or overhearing anyone make
such representations to Daugherty or JDRE. Durkin also denied telling Daugherty
or anyone else at lunch in June 2019, that DE New York “will be controlling what’s
going on in Houston or that [DE New York] would own 51% of Real Estate
34
Associates of Houston, LLC [REAH]” or overhearing “Sudhoff state that [DE New
York] is going to control and own 51% of [REAH], or that [DE New York] could
fire [REAH] but [REAH] could not fire [DE New York].”
While Haber’s and Durkin’s testimony refutes Daugherty’s testimony
regarding the existence of an agency relationship between Sudhoff and DE New
York or the scope of such agency, their testimony does not render Daugherty’s
testimony insufficient to establish an agency relationship. In a special appearance,
the trial court is the sole judge of the witnesses’ credibility and the weight to be given
their testimony. See Guam Indus. Servs., Inc., 514 S.W.3d at 832. Thus, it was the
trial court’s province to evaluate the witnesses’ credibility on this issue and the
weight to be given their testimony. We will not “disturb [the] trial court’s resolution
of conflicting evidence that turns on the credibility or weight of the evidence.” Id.(quoting Ennis, 164 S.W.3d at 706).
The record also reflects that Sudhoff and Lee kept Haber—and Lorber to a
lesser extent—informed of any developments with respect to the JDRE acquisition
at all stages of the transaction. Before it was finalized, Lee sent copies of the LOI
to Lorber, Haber, and Durkin and asked them to “review the terms and let us know
if there are any issues.” The pricing information in the LOI was based on DE New
York’s “standard formula.” There was also evidence Haber had the ability to
negotiate the terms of the LOI himself, but he declined to do so and instead instructed
35
Sudhoff and REAH to negotiate the terms of the acquisition with JDRE. Haber also
testified that he had Sudhoff sign the Revised NDA between REAH and JDRE.
Thus, in addition to Daugherty’s testimony regarding statements made by Haber,
Durkin, and Sudhoff regarding agency, this is some evidence of the control DE New
York exercised over Sudhoff concerning the drafting and negotiating of the LOI and
the APA. See Exxon Mobil Corp., 520 S.W.3d at 590 (stating “principal’s right of
control presupposes that the principal retains the capacity throughout the relationship
to assess the agent’s performance, provide instructions to the agent, and terminate
the agency relationship by revoking the agent’s authority”); State Farm Mut. Auto
Ins. Co., 980 S.W.2d at 627 (“[T]he key question is whether the principal has the
right to control the agent with respect to the details of that conduct.”).
Griffin Partners also argues that DE New York clothed Sudhoff and Lee with
the indicia of authority in 2019 by (1) listing Sudhoff and Lee on www.elliman.com,
DE New York’s website, as the newest members of DE New York’s national sales
management team; (2) allowing Sudhoff, Lee, and REAH to put a “Douglas
Elliman” sign outside their Houston, Texas office; and (3) providing Sudhoff and
Lee with @elliman.com email addresses, which Sudhoff and Lee used to
communicate with Daugherty and Fama regarding JDRE’s acquisition.14 DE New
14
Griffin Partners asserts that Lee, Sudhoff’s associate, and REAH are also agents of
DE New York.
36
York argues that Sudhoff’s, Lee’s, and REAH’s use of the @elliman.com email
domain and the Douglas Elliman signs, and the contents of the elliman.com website
are insufficient to create an agency relationship. While these circumstances,
standing alone, may be insufficient to establish apparent authority, this evidence is
nonetheless relevant to assess the reasonableness of Daugherty’s assumption that an
agency relationship existed between DE New York and Sudhoff. See Gaines, 235
S.W.3d at 183 (stating that when assessing existence of agent’s apparent authority,
courts examine principal’s conduct and reasonableness of third party’s assumptions
about authority).
DE New York argues that Daugherty and JDRE could not have reasonably
relied on any statements Sudhoff allegedly made about DE New York’s involvement
in Texas before the APA was signed, because Daugherty admitted that JDRE “did
not perform due diligence regarding who was in control or involved in REAH.”
According to DE New York, any representations Sudhoff allegedly made to
Daugherty regarding DE New York’s “involvement could not have reasonably
induced Daugherty to sign the APA or LOI, as [the LOI and APA] clearly
contradicted any such statements, and it was Daugherty’s responsibility to evaluate
the truth of their veracity when the APA and LOI did not reflect them.” The question
before us, however, is whether Daugherty used “reasonable diligence to ascertain
[Sudhoff’s] authority,” not whether Daugherty exercised due diligence to ascertain
37
whether DE New York was the majority owner of REAH. See Reliant Energy
Servs., Inc., 336 S.W.3d at 787 (“‘[R]easonable diligence to ascertain [an] agent’s
authority’ is part of the standard under Texas law for determining whether a person
is ‘reasonably prudent’ in the context of apparent authority. . .”) (quoting Gaines,
235 S.W.3d at 182–83). Furthermore, Daugherty did not expressly testify that he
did not perform any due diligence. Rather, Daugherty testified that he did not ask
for proof of DE Texas’ ownership or investigate whether “Elliman Texas even
existed” when Haber allegedly told Daugherty that he would be “the one that was in
charge of Texas.” Daugherty’s testimony merely demonstrates that he did not
inquire about DE Texas—the corporate entity DE New York intended to use to
exercise its purported control over its Texas operations. This does not establish that
Daugherty did not use reasonable diligence to determine whether Sudhoff was DE
New York’s agent.
DE New York also argues Daugherty’s reliance on Sudhoff’s statements was
not reasonable because “Daugherty never said that Sudhoff held himself out to be
an agent of [DE New York], and [Daugherty] admitted he knew [DE New York]
was not a party to the APA or LOI.” Although Sudhoff did not use the term “agent”
to describe his relationship with DE New York, as previously discussed, Daugherty
testified Sudhoff represented to him that DE New York exercised such control over
the Texas operations, including the JDRE acquisition, and that DE New York could
38
fire Sudhoff and Lee, but Sudhoff and Lee could not fire DE New York. A
principal’s right to control the agent is an essential element of agency. See Exxon
Mobil Corp., 520 S.W.3d at 590 (stating “principal’s right of control presupposes
that the principal retains the capacity throughout the relationship to assess the agent’s
performance, provide instructions to the agent, and terminate the agency relationship
by revoking the agent’s authority”).
When asked if he knew that DE New York had not signed the LOI, Daugherty
testified he was told “in New York that Sudhoff was representing Elliman New
York.” Daugherty explained that he “never knew Elliman New York was not
involved in” JDRE’s acquisition and he testified he “would have never signed that
[LOI] if I wasn’t under the clear understanding that Elliman New York wasn’t the
controlled owner.” Had DE New York been a signatory to the LOI or APA, this
would have been some evidence that Sudhoff was acting on DE New York’s behalf
when he negotiated the LOI and APA, but the absence of this fact does not mean
that Daugherty’s reliance on Sudhoff’s statements was unreasonable because DE
New York could still have exercised the requisite control over Sudhoff’s activities.
See id.
Moreover, Griffin Partners does not argue that Sudhoff was DE New York’s
agent for purposes of the JDRE acquisition because DE New York was a party to
the JDRE transaction. Rather, Griffin Partners argues that Sudhoff was acting as DE
39
New York’s agent with respect to the JDRE acquisition because this transaction was
part of DE New York’s overarching plan to enter the Texas residential real estate
market using its subsidiaries and affiliates and DE New York’s financial interest in
the transaction. The LOI and APA both require JDRE to use its best efforts to
terminate the Post Oak Lease. According to Griffin Partners, DE New York
tortiously interfered with the Post Oak Lease by requiring JDRE to terminate the
lease in the LOI and APA. Whether or not DE New York was a signatory to the LOI
or APA, the evidence reflects that DE New York not only had a financial stake in
the Texas enterprise, it was also the puppet master pulling the strings behind the
acquisition.
The record also reflects that DE New York took an active and visible role in
acquiring JDRE both leading up to and after the signing of the LOI and prior to the
signing of the APA. According to Daugherty, it was during the early meetings in
New York and in Houston, Texas in June 2019 that Lorber, Durkin, Haber, and
Sudhoff represented to Daugherty that DE New York was getting involved in the
Texas real estate market and Sudhoff would be acting on its behalf, and DE New
York would be in “complete control” of the business endeavor, such that DE New
York could fire Sudhoff, but Sudhoff could not fire DE New York.
While any of these factors standing alone may be insufficient to establish the
existence and scope of an agency relationship, we hold that DE New York’s actions
40
as a whole would lead a reasonably prudent person to believe that Sudhoff was
authorized to act as DE New York’s agent for purposes of the JDRE acquisition,
including the drafting and negotiation of the LOI and APA. This is more than a
scintilla of evidence supporting the trial court’s implied finding that Sudhoff was
authorized to act as DE New York’s agent. See City of Keller, 168 S.W.3d at 810
(stating legal-sufficiency challenge will be sustained if evidence offered to prove
vital fact is no more than mere scintilla).
Although there is conflicting evidence over whether Sudhoff had authority to
act on DE New York’s behalf, it was the trial court’s prerogative to evaluate the
credibility of the witnesses and assess the amount of weight to give such evidence
and we must defer to those findings. See Guam Indus. Servs., Inc., 514 S.W.3d at
832 (stating trial court is sole judge of witnesses’ credibility and weight to be given
testimony for purposes of special appearance); see also City of Keller, 168 S.W.3d
at 822 (stating court must not substitute its judgment for that of factfinder so long as
evidence falls within zone of reasonable disagreement). Considering all the
evidence before us, we cannot say that the evidence supporting the trial court’s
implied finding that an agency relationship existed between Sudhoff and DE New
York is so contrary to the overwhelming weight of the evidence as to be clearly
wrong and unjust. See Mar. Overseas Corp., 971 S.W.2d at 407.
41
We conclude there is legally and factually sufficient evidence supporting the
trial court’s implied finding that Sudhoff was authorized to act as DE New York’s
agent for purposes of the JDRE acquisition.15
B. Sudhoff’s Contact with Texas
Having determined there is legally and factually sufficient evidence
supporting the trial court’s implied finding that Sudhoff was authorized to act as DE
New York’s agent for purposes of the JDRE acquisition, we now consider whether
Sudhoff’s contacts with Texas are sufficient to confer personal jurisdiction over DE
New York in Texas.16 See generally Baker Hughes Inc., 405 S.W.3d at 249 (stating
15
DE New York also argues that Griffin Partners cannot rely on the affidavits of Fred
and Edward Griffin to establish an agency relationship between Sudhoff and DE
New York because the affidavits contain “legal conclusions and factual deficiencies
regarding interpretation of the LOI and APA and Sudhoff and Lee’s legal capacity
to act on behalf of” DE New York. See TEX. R. CIV. P. 120a(3) (stating when
deciding special appearance, court may consider affidavits submitted by party if
affidavits “set forth specific facts as would be admissible in evidence”); see also
Ennis v. Loiseau, 164 S.W.3d 698, 703–04 (Tex. App.—Austin 2005, no pet.). We
need not decide that issue because even without the affidavits of Fred and Edward
Griffins, there is sufficient evidence supporting the trial court’s implied agency
finding.
16
We understand Griffin Partners to argue that, as DE New York’s agent, Sudhoff’s
contacts are attributable to DE New York for purposes of both general and specific
jurisdiction.
Although Sudhoff is a Texas resident and the court unquestionably has personal
general jurisdiction over him individually, this fact alone does not subject DE New
York to general jurisdiction in Texas. See Daimler AG v. Bauman, 571 U.S. 117,
136 (2014) (“Even if we were to assume that [Daimler’s subsidiary] MBUSA is at
home in California, and further to assume MBUSA’s contacts are imputable to
Daimler, there would still be no basis to subject Daimler to general jurisdiction in
California, for Daimler’s slim contacts with the State hardly render it at home
there.”) (emphasis added). Furthermore, while agency relationships “may be
42
appellate courts review trial court’s ruling on special appearance de novo when trial
court’s findings are supported by sufficient evidence). Relevant here, an agent’s
contacts with a forum state may be imputed to its nonresident principal for purposes
of establishing personal jurisdiction. See Greenfield Energy, Inc., 252 S.W.3d at
733; see also Stocksy United v. Morris, 592 S.W.3d 538, 547 (Tex. App.—Houston
[1st Dist.] 2019, no pet.) (stating agent’s contacts may serve as basis for exercise of
personal jurisdiction over foreign principal). Thus, for purposes of our specific-
jurisdictional analysis, we impute Sudhoff’s contacts with Texas to DE New York.
See Greenfield Energy, Inc., 252 S.W.3d at 733; see also Stocksy United, 592
S.W.3d at 547.
Specific jurisdiction exists when the plaintiff’s cause of action arises from or
relates to the nonresident defendant’s contacts with the forum state. See Ford Motor
Co., 141 S. Ct. at 1025; see also Moki Mac, 221 S.W.3d at 576 (stating specific
relevant to the existence of specific jurisdiction[,]” because “a corporation can
purposefully avail itself of a forum by directing its agents or distributors to take
action there[,] . . . [i]t does not inevitably follow . . . that similar reasoning applies
to general jurisdiction.” Id. at 135 n.13. The Daimler court expressly declined to
address whether an agency relationship is also relevant for purposes of establishing
general jurisdiction. Id. at 134–35 (“This Court has not yet addressed whether a
foreign corporation may be subjected to a court’s general jurisdiction based on the
contacts of its in-state subsidiary. . . . But we need not pass judgment on invocation
of an agency theory in the context of general jurisdiction, for in no event can the
appeals court’s analysis be sustained.”). In any event, we need not decide the issue
of general jurisdiction because we find that DE New York is subject to specific
jurisdiction in Texas.
43
jurisdiction is established if nonresident defendant’s alleged liability arises out of or
is related to its activity within forum). A nonresident defendant’s minimum contacts
with a forum are established for purposes of specific jurisdiction when the defendant
“purposefully avails itself of the privilege of conducting activities within the forum
state, thus invoking the benefits and protections of its laws.” M & F Worldwide
Corp., 512 S.W.3d at 886 (quoting Moncrief Oil Int’l Inc., 414 S.W.3d at 150).
To determine whether a defendant has purposefully availed itself of the
benefits of conducting activities within the forum state, thus involving the benefit
and protection of its law, we consider (1) “only the defendant’s contacts with the
forum” state; (2) the defendant’s “purposeful” acts, as opposed to “random, isolated,
or fortuitous” events; and (3) whether the defendant sought “some benefit,
advantage, or profit by ‘availing’ itself of the jurisdiction” such that it impliedly
consents to suit there. M & F Worldwide Corp., 512 S.W.3d at 886 (quoting
Michiana Easy Livin’ Country, Inc., 168 S.W.3d at 785). The defendant’s contacts
must show “that the defendant deliberately ‘reached out beyond its home—by, for
example, exploi[ting] a market in the forum State or entering a contractual
relationship centered there.” Ford Motor Co., 141 S. Ct. at 1025 (quoting Walden
v. Fiore, 571 U.S. 277, 285 (2014) (internal quotation omitted)).
For purposes of specific jurisdiction, purposeful availment “has no
jurisdictional relevance unless the defendant’s liability arises from or relates to the
44
forum contacts.” TV Azteca, 490 S.W.3d at 52 (quoting Moki Mac, 221 S.W.3d at
579). A claim arises from or relates to a defendant’s forum contacts if there is a
“substantial connection between those contacts and the operative facts of the
litigation.” TV Azteca, 490 S.W.3d at 52 (quoting Moki Mac, 221 S.W.3d at
585); see also Walden, 134 S. Ct. at 1121 (“For a State to exercise jurisdiction
consistent with due process, the defendant’s suit-related conduct must create a
substantial connection with the forum State.”). The “substantial connection”
standard is mainly concerned with whether the defendant’s contacts will be “the
focus of the trial,” “consume most if not all of the litigation’s attention,” and are
“related to the operative facts” of the underlying claim. See TV Azteca, 490 S.W.3d
at 52–53 (quoting Moki Mac, 221 S.W.3d at 585)).
Sudhoff negotiated the LOI and APA with JDRE, a real estate brokerage firm
with its headquarters and principal place of business in Houston, Texas, and JDRE’s
owner, Daugherty, a Texas resident. Except for the June 2019 trip to New York,
most of Sudhoff’s meetings with JDRE regarding the JDRE acquisition occurred in
Texas and the JDRE acquisition concerned real estate transactions in Texas. The
LOI and the APA were negotiated by Sudhoff in Texas and contain the operative
contractual language at issue in this case requiring JDRE to “use its best efforts to
terminate the [Post Oak] Lease” and relocate its agents and employees to REAH’s
45
offices on Kirby Drive in Houston, Texas. This contractual obligation to “terminate”
the Post Oak Lease is at the heart of Griffin Partners’ tortious-interference claim.
In its second amended petition, Griffin Partners specifically alleges that DE
New York, DE Texas, REAH, Sudhoff, Sudhoff Companies, and Premier “tortiously
interfered and conspired to tortiously interfere with the [Post Oak] Lease by
requiring JDRE to repudiate the [Post Oak] Lease as a condition of Defendants’
acquisition of JDRE.” Thus, there is a substantial connection between Sudhoff’s
contacts in Texas concerning the LOI and APA and the operative facts of Griffin
Partners’ suit for tortious interference. See TV Azteca, 490 S.W.3d at 52–53 (stating
“substantial connection” standard mainly concerns whether contacts will be “the
focus of the trial” and “consume most if not all of the litigation’s attention,” and
whether contacts are “related to the operative facts” of the claim) (quoting Moki
Mac, 221 S.W.3d at 585); Moki Mac, 221 S.W.3d at 575 (stating for cause of action
to “arise from or relate to” purposeful forum contacts, “there must be a substantial
connection between those contacts and the operative facts of the litigation”); see
generally Ford Motor Co., 141 S. Ct. at 1026 (clarifying requirement that suit “relate
to” defendant’s contacts with forum “contemplates that some relationships will
support jurisdiction without a causal showing”).
Based on the evidence before us, we conclude that Sudhoff’s contacts with
the forum state are sufficient to confer specific jurisdiction over DE New York in
46
Texas. See Stocksy United, 592 S.W.3d at 547 (stating agent’s contacts may serve
as basis for exercise of personal jurisdiction over foreign principal). Because we
hold the trial court has specific personal jurisdiction over DE New York, we need
not address whether general jurisdiction is present.
Conclusion
We lift the stay previously imposed in this cause, and we affirm the trial
court’s denial of DE New York’s special appearance.
Veronica Rivas-Molloy
Justice
Panel consists of Justices Landau, Hightower, and Rivas-Molloy.
47