Masterguard, L.P. v. Eco Technologies International LLC D/B/A Yellowblue

REVERSE and REMAND; and Opinion Filed August 22, 2013.
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-12-01318-CV
MASTERGUARD, L.P., Appellant
V.
ECO TECHNOLOGIES INTERNATIONAL LLC D/B/A YELLOWBLUE, Appellee
On Appeal from the 162nd Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-11-09905
OPINION
Before Justices Moseley, Bridges, and Lang-Miers
Opinion by Justice Lang-Miers
In this interlocutory appeal, appellant MasterGuard L.P. challenges the trial court’s order
sustaining the special appearance of appellee Eco Technologies International LLC d/b/a
YellowBlue (Eco Technologies). Because we conclude that Eco Technologies is subject to
specific jurisdiction in Texas, we reverse the trial court’s order.
BRIEF AND EVIDENCE FILED UNDER SEAL
Before considering MasterGuard’s issues, we must address one preliminary matter. In
both this Court and the trial court, portions of the deposition of Mark Allen Schroder, Eco
Technologies’s President, as well as certain exhibits, were designated as confidential and filed
under seal. The appellant’s brief was filed under seal as well. At oral argument, this Court
asked the parties to specifically designate the portions of the clerk’s record which were filed
under seal pursuant to the agreed protective order entered in the trial court on February 2, 2012.
The parties did so by letter. Because the protective order is not included in the record, we do not
know the parties’ stated reasons for wanting the information to be kept out of the public record.
This raises a significant dilemma on appeal because our opinions are a matter of public
record, even when designated as memorandum opinions pursuant to Rule 47.4 of the Texas
Rules of Appellate Procedure. See TEX. GOV’T CODE ANN. § 552.022(a)(12) (West 2012) (“final
opinions, including concurring and dissenting opinions, and orders issued in the adjudication of
cases” are “public information”); TEX. R. CIV. P. 76a.1 (“No court order or opinion issued in the
adjudication of a case may be sealed.”). And facts that are necessary for us to discuss as part of
our consideration of the issues presented by this appeal are included only in the portions of the
record that are designated confidential. Schroder was the only witness deposed in connection
with Eco Technologies’s special appearance and some of his testimony is designated
confidential. One of the exhibits that is designated as confidential is the only evidence of the
terms of the relationship between Eco Technologies and defendant Billy Cox. The affidavits
filed in connection with the special appearance are not designated as confidential but are also
general and do not include specific facts necessary to our review. The parties’ briefs not filed
under seal are similarly general.
We have made every effort to preserve the confidentiality of the information the parties
have designated as confidential. But we cannot decide this appeal without mention of some key
jurisdictional facts. See R.V.K. v. L.L.K., 103 S.W.3d 612, 614–15 (Tex. App.—San Antonio
2003, no pet.) (court “attempted to strike a fair balance” between the parties’ interest in keeping
sealed portion of record confidential with interest of court and public in fulfilling responsibilities
as court of record); Trilogy Software, Inc. v. Callidus Software, Inc., 143 S.W.3d 452, 456 n.1
(Tex. App.—Austin 2004, pet. denied) (because technological and proprietary information at
issue was filed under seal, court’s references “are deliberately vague to preserve
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confidentiality”). And some of those jurisdictional facts are presented only in material
designated as confidential. Consequently, we have avoided references to as much information as
possible that the parties designated as confidential and have made some references deliberately
vague to avoid disclosure of that information.
BACKGROUND
MasterGuard, a Texas limited partnership, is a wholesaler of fire and safety products used
in residences. MasterGuard contends that the success of its business depends on the experience
and skill of the direct-sales dealers who sell MasterGuard’s products through group and in-home
presentations to consumers. Billy Cox, a defendant in the trial court but not a party to this
appeal, was the President of MasterGuard. Disputes arose between Cox and MasterGuard. Cox
and MasterGuard entered into a severance agreement that included confidentiality and
noncompetition provisions in exchange for a monetary severance. After entering into the
severance agreement, Cox formed Eco Technologies with other former employees of
MasterGuard. Alleging that Cox’s actions relating to Eco Technologies were in violation of
Cox’s severance agreement, among other complaints, MasterGuard sued Eco Technologies and
Cox. Cox lives and works in Texas and has not filed a special appearance or otherwise
challenged the trial court’s jurisdiction over MasterGuard’s claims against him individually.
In its operative petition, MasterGuard alleged causes of action for breach of contract,
breach of fiduciary duty, tortious civil theft liability, fraud in the inducement, defamation,
business disparagement, and trade secret misappropriation against Cox individually, and causes
of action for tortious interference with contractual relationships, unfair competition, and civil
conspiracy against both Eco Technologies and Cox. MasterGuard alleges that Eco Technologies
interfered with several contracts, including the severance agreement between MasterGuard and
Cox and MasterGuard’s contracts with its independent directors and dealers. MasterGuard
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contends that Eco Technologies induced Cox to breach the severance agreement by “among
other things, directly and indirectly soliciting MasterGuard dealers to terminate their contractual
relationships with MasterGuard . . . .” MasterGuard further contends that this conduct of Eco
Technologies also interfered with MasterGuard’s contractual relationships with its “independent
directors and dealers.”
MasterGuard’s unfair competition and civil conspiracy claims against Eco Technologies
are based on the same conduct, as well as the claimed disclosure of MasterGuard’s trade secrets.
MasterGuard alleges:
Upon information and belief, Cox is both an owner of [Eco
Technologies] and [an Eco Technologies] independent dealer.
Cox, individually and through [Eco Technologies], has competed
with the direct sales business of MasterGuard, and directly and
indirectly recruited and attempted to recruit MasterGuard directors
and dealers located in Texas and elsewhere to terminate their
business and contractual relationships with MasterGuard and to
employ their expertise and services in marketing through direct
sales the products wholesaled by Cox’s competing business. As a
direct result of these efforts, dozens of MasterGuard dealers have
terminated their relationships with MasterGuard and began
representing [Eco Technologies] and [Eco Technologies’s]
independent sales force is comprised mostly of former
MasterGuard dealers and sales personnel.
Eco Technologies filed a special appearance, verified by its President, Mark Schroder. In
its special appearance, Eco Technologies included averments that it is a resident of Iowa and that
it has not conducted business in Texas in connection with the allegations in MasterGuard’s
petition. Eco Technologies’s operating agreement reveals that Eco Technologies is a limited
liability company organized under Iowa law. The operating agreement provides that “the
Company’s business and the management of its affairs will be exercised and conducted solely by
the Members and those persons designated by them” in accordance with the agreement. Cox is a
member of Eco Technologies with less than a majority interest in the company.
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In connection with Eco Technologies’s special appearance, MasterGuard deposed
Schroder as the corporate representative of Eco Technologies. Schroder testified that Eco
Technologies was formed by Cox and others in Iowa. The principal and only office of Eco
Technologies is in Iowa. Its officers and employees are in Iowa. Eco Technologies has
independent dealers in Texas. Schroder explained Eco Technologies’s business as follows:
Q. Explain what exactly YellowBlue or Eco Technologies’
business is.
A. They – it is an LLC that was established to be a direct sales
company.
Q. What does it sell?
A. Energy-saving products.
Q. Can you elaborate?
A. We sell products to end users, consumers, such as reflective
insulation materials, solar-powered attic fans. I’d also like to add
that we, YellowBlue/Eco Technologies, does not sell to the end
user. I need to rephrase that. We sell to independent authorized
dealers which in turn sell to end users, consumers.
Q. So your independent dealers purchase the product from Eco
Technologies, and then they in turn sell it to consumers. Is that
how –
A. That is correct.
Q. – how it works? Okay. And do they collect a percentage of
what they sell – [counsel’s objection omitted] – [to] the
independent dealers?
A. We sell to the independent authorized dealer. They, in other
words, purchase the product at wholesale from Eco Technologies
International and in turn sell it to the end user/consumer, and they
determine what price they sell it for. The percentage or how much
they choose to keep is their business. It’s not our business.
Eco Technologies’s business success is determined by its sales to its independent dealers, not by
the independent dealers’ sales to consumers.
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Schroder testified that Cox “is involved in some capacity” with one of the independent
dealers in Texas. Eco Technologies has contracts with each of its independent dealers, according
to Schroder’s testimony. All of the products that are sold by independent dealers are shipped out
of a warehouse in Iowa. Schroder testified that Eco Technologies sells only to its independent
dealers, not to any consumers, and has never directly sold a product to an end user in Texas. Eco
Technologies ships products to its independent dealers in Texas, but does not know where or to
whom the dealers sell the products. Schroder could not testify as to specific instances, but stated
that some of Eco Technologies’s independent dealers “at one time perhaps may have been
affiliated with MasterGuard.” Eco Technologies recruits its independent dealers, and Schroder
admitted that Cox recruits for Eco Technologies “through” a Texas dealer.
In support of its opposition to the special appearance, MasterGuard submitted the
affidavit of Chris Roberts, its President. Roberts testified in support of the facts pleaded in
MasterGuard’s petition. MasterGuard also submitted its agreements with Cox, excerpts from
Schroeder’s deposition, and the Eco Technologies operating agreement, as well as other exhibits.
After a hearing, 1 the trial court granted Eco Technologies’s special appearance and made
findings of fact and conclusions of law in support of its order. This appeal followed.
ISSUES
In three issues, MasterGuard contends the trial court erred by sustaining Eco
Technologies’s special appearance. In its first issue, MasterGuard contends that Eco
Technologies is subject to general jurisdiction in Texas because one of its members is a
domiciliary of Texas. In its second issue, MasterGuard asserts that Eco Technologies is subject
to general jurisdiction in Texas because it “employs numerous independent dealers in the State
who conduct large scale marketing and sales of [Eco Technologies’s] products in the State.” In
1
The appellate record does not include a reporter’s record of this hearing.
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its third issue, MasterGuard argues that Eco Technologies is subject to specific jurisdiction in
Texas because MasterGuard’s causes of action relate to purposeful tortious acts committed by
Eco Technologies against MasterGuard in Texas. Because we sustain issue three, we do not
need to address issues one and two. See TEX. R. APP. P. 47.1 (opinion must address issues
“necessary to final disposition of the appeal”).
APPLICABLE LAW
Texas courts may exercise personal jurisdiction over a nonresident defendant only if
(1) the Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the exercise of
jurisdiction does not violate federal and state constitutional due process guarantees. Schlobohm
v. Schapiro, 784 S.W.2d 355, 356 (Tex. 1990). The broad “doing business” language in Texas’s
long-arm statute allows the trial court’s jurisdiction to “reach as far as the federal constitutional
requirements of due process allow.” Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569,
574 (Tex. 2007) (quoting Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C.,
815 S.W.2d 223, 226 (Tex. 1991)). Personal jurisdiction is consistent with due process “when
the nonresident defendant has established minimum contacts with the forum state, and the
exercise of jurisdiction comports with traditional notions of fair play and substantial justice.” Id.
(internal quotation marks omitted) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316
(1945)).
A defendant establishes minimum contacts with a state when it “purposefully avails itself
of the privilege of conducting activities within the forum state, thus invoking the benefits and
protections of its laws.” Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338
(Tex. 2009) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)). In Moki Mac, the court
explained that there are three issues to consider in determining whether a defendant purposefully
availed itself of the privilege of conducting activities in Texas. See Moki Mac, 221 S.W.3d at
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575. First, only the defendant’s contacts with the forum are relevant, not the unilateral activity
of another party or third person. Id. (citing Michiana Easy Livin’ Country, Inc. v. Holten, 168
S.W.3d 777, 784 (Tex. 2005)). Second, the contacts relied upon must be purposeful rather than
random, fortuitous, or attenuated. Id. Third, the defendant “must seek some benefit, advantage
or profit by ‘availing’ itself of the jurisdiction.” Id. (quoting Michiana, 168 S.W. 3d at 785). A
defendant may purposefully avoid a particular forum by structuring its transactions in such a way
as to neither profit from the forum’s laws nor subject itself to jurisdiction there. Id.
A nonresident defendant’s forum-state contacts may give rise to two types of personal
jurisdiction. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795–96 (Tex. 2002).
Specific jurisdiction is established if the defendant’s alleged liability arises from or is related to
an activity conducted within the forum. Id. at 796. General jurisdiction is present when a
defendant’s contacts are continuous and systematic so that the forum may exercise personal
jurisdiction over the defendant even if the cause of action did not arise from or relate to activities
conducted within the forum state. Id. A general jurisdiction inquiry 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, 168 (Tex. 2007).
STANDARD OF REVIEW
The plaintiff bears the initial burden to plead sufficient allegations to bring the
nonresident defendant within the reach of Texas’s long-arm statute. Am. Type Culture
Collection, Inc. v. Coleman, 83 S.W.3d 801, 807 (Tex. 2002). But upon filing a special
appearance, the nonresident defendant assumes the burden to negate all the bases of personal
jurisdiction alleged by the plaintiff. Id.
Whether a court has personal jurisdiction over a defendant is a question of law. Id. at
805–06. In resolving this question of law, however, a trial court must frequently resolve
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questions of fact. Id. If a trial court enters an order granting a special appearance, and the trial
court issues findings of fact and conclusions of law, the appellant may challenge the fact findings
on legal and factual sufficiency grounds. See BMC Software Belgium, 83 S.W.3d at 794. The
trial court’s legal conclusions are reviewed de novo. Id. We explained the standard of review of
the trial court’s findings and conclusions in Hotel Partners v. KPMG Peat Marwick, 847 S.W.2d
630, 632 (Tex. App.—Dallas 1993, writ denied):
The trial court’s findings of fact are binding upon the appellate
court unless challenged on appeal. As the trier of fact, the trial
judge may draw reasonable inferences from the evidence. We may
not disregard his findings of fact on appeal if the record contains
some evidence of probative value from which these inferences may
be drawn, or unless the findings are so contrary to the
overwhelming weight of the evidence as to be manifestly wrong.
Although a party may not challenge a trial court’s conclusions of
law for factual sufficiency, we may review the conclusions the trial
court draws from the facts to determine their correctness.
Id. (citations omitted); see also Davey v. Shaw, 225 S.W.3d 843, 849 (Tex. App.—Dallas 2007,
no pet.) (“When a trial court’s findings of fact are unchallenged on appeal, they occupy the same
position and are entitled to the same weight as the verdict of a jury. . . . ‘They are binding on an
appellate court unless the contrary is established as a matter of law, or if there is no evidence to
support the finding.’”) (quoting McGalliard v. Kuhlmann, 722 S.W.2d 694, 696 (Tex. 1986)).
ANALYSIS
Exercise of Personal Jurisdiction Consistent with Due Process
We need address only the third issue, whether Eco Technologies is subject to specific
jurisdiction in Texas because MasterGuard’s causes of action relate to purposeful tortious acts
committed by Eco Technologies against MasterGuard in Texas.
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I. Requirements for exercise of specific jurisdiction
A. Applicable law
Specific jurisdiction exists “if the defendant’s alleged liability arises out of or is related to
the defendant’s activities conducted within the forum.” Olympia Capital Assocs., L.P., v.
Jackson, 247 S.W.3d 399, 406 (Tex. App.—Dallas 2008, no pet). There must be a “substantial
connection” between the nonresident’s contacts with the forum and the operative facts of the
litigation. Id. (citing Moki Mac, 221 S.W.3d at 585). A conspiracy claim alone is not enough to
establish personal jurisdiction. See Nat’l Indus. Sand Ass’n v. Gibson, 897 S.W.2d 769, 773
(Tex. 1995) (“Thus, we decline to recognize the assertion of personal jurisdiction over a
nonresident defendant based solely upon the effects or consequences of an alleged conspiracy
with a resident of the forum state.”).
B. MasterGuard’s allegations
In addition to its conspiracy claim, MasterGuard has asserted claims for tortious
interference with contract and unfair competition against Eco Technologies. As explained
above, MasterGuard contends that Eco Technologies interfered with the severance agreement
between MasterGuard and Cox as well as MasterGuard’s contracts with its independent dealers.
In its petition, MasterGuard alleges that Cox,
individually and through [Eco Technologies], has competed with
the direct sales business of MasterGuard, and directly and
indirectly recruited and attempted to recruit MasterGuard directors
and dealers located in Texas and elsewhere to terminate their
business and contractual relationships with MasterGuard and to
employ their expertise and services in marketing through direct
sales the products wholesaled by Cox’s competing business.
Unlike the dealer agreements between Eco Technologies and its own independent dealers, the
severance agreement between Cox and MasterGuard is a contract entered into in Texas between
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Texas residents. The agreement expressly provides that is “governed by and construed in
accordance with the laws of the State of Texas.”
By pleading that Eco Technologies, through Cox’s actions, interfered with Texas
contracts and unfairly competed with MasterGuard’s business in Texas, MasterGuard has
pleaded “sufficient allegations to bring the nonresident defendant within the reach of Texas’s
long-arm statute.” Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 658 (Tex. 2010); see
also TEX. CIV. PRAC. & REM. CODE ANN. § 17.042 (West 2008) (nonresident does business in
Texas if nonresident commits a tort in whole or in part in Texas). As a result, the burden shifted
to Eco Technologies to “negate all bases of personal jurisdiction alleged” by MasterGuard. See
Kelly, 301 S.W.3d at 658.
II. Minimum contacts/purposeful availment
We next consider whether Eco Technologies negated MasterGuard’s contention that
Cox’s activities may provide a basis for personal jurisdiction over Eco Technologies in Texas,
and whether the exercise of jurisdiction over Eco Technologies is consistent with due process. In
determining whether Eco Technologies established minimum contacts with Texas by
purposefully availing itself of the privilege of conducting business within Texas, we consider the
three issues identified in Moki Mac: i) whether the contacts were the defendant’s, not those of a
third party; ii) whether the defendant’s contacts were purposeful; and iii) whether the defendant
sought some benefit, advantage, or profit by availing itself of the jurisdiction. See Moki Mac,
221 S.W.3d at 575.
A. Only defendant’s contacts
In complaining about Eco Technologies’s interference with its contracts, MasterGuard is
primarily complaining about the actions of Cox, who lives and works in Texas and who has not
challenged the trial court’s exercise of personal jurisdiction over him. But in determining
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whether Eco Technologies had minimum contacts with Texas, only Eco Technologies’s forum
state contacts matter, not the unilateral acts of a third party. See IRA Res., Inc. v. Griego, 221
S.W.3d 592, 596 (Tex. 2007) (per curiam). Contacts of an agent or corporate representative,
however, may be sufficient to confer jurisdiction on the principal. See Olympia Capital Assocs.,
L.P., 247 S.W.3d at 412–13. Consequently, the question is whether Cox’s actions are
attributable to Eco Technologies for purposes of the specific jurisdiction analysis. We conclude
that they are.
1. Status as member
Eco Technologies was formed under Iowa law. And under Iowa law, Cox is not
necessarily an agent of Eco Technologies solely because he is a member. See IOWA CODE
§ 489.301 (West, Westlaw through 2013 Legis. Sess.) (“A member is not an agent of a limited
liability company solely by reason of being a member.”). But the same statutory section also
provides that “[a] person’s status as a member does not prevent or restrict law other than this
chapter from imposing liability on a limited liability company because of the person’s conduct.”
Id.
The Iowa Court of Appeals recently discussed the application of section 489.301 in Three
Minnows, LLC v. Cream, LLC, No. 12-0591, 2013 WL 1453246, at *1 n.1 (Iowa Ct. App. April
10, 2013). The court explained that under the Iowa Code, an LLC is presumed to be managed by
its members unless the members agree that the company will be managed by a manager. See id.
(citing IOWA CODE § 489.407). Under section 489.301, “[g]enerally, only managers can bind an
LLC unless another party, such as a member, is given authorization to do so by a manager as a
principal.” Id. at *4. And in Three Minnows, where the LLC at issue was “manager-managed,”
a member did not have authority to bind the LLC to a contract. Id. The LLC’s articles of
organization expressly provided that “unless authorized to do so by the operating agreement, or
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by a manager or managers of the Company, no member, agent or employee of the Company shall
have any power to bind the Company in any way . . . .” Id.
Here, in contrast, Eco Technologies’s operating agreement provides that “[t]he conduct
of the Company’s business and the management of its affairs will be exercised and conducted
solely by the Members.” And Cox is one of Eco Technologies’s members. Although members
can delegate to officers, “[i]n all events, the officers shall be subject to the direction and control
of the Members.”
2. Agency relationship
Under Iowa law, “the party asserting an agency relationship must prove its existence by a
preponderance of the evidence.” Three Minnows, LLC, 2013 WL 1453246, at *4 (citing
Chariton Feed & Grain, Inc. v. Harder, 369 N.W.2d 777, 789 (Iowa 1985)). The Three
Minnows court explained that agency “results from (1) manifestation of consent by one person,
the principal, that another, the agent, shall act on the former’s behalf and subject to the former’s
control and, (2) consent by the latter to so act.” Id. (quoting Pillsbury Co. v. Ward, 250 N.W.2d
35, 38 (Iowa 1977)). An agency relationship can be established through the agent’s actual or
apparent authority to act on behalf of the principal. Id. (citing Fed. Land Bank of Omaha v.
Union Bank & Trust Co. of Ottumwa, 290 N.W. 512, 514–15 (Iowa 1940)). Because the LLC’s
articles of organization in Three Minnows expressly provided that no member would have
authority to bind the LLC, there was no express authority as a matter of law. Id. at *5. Here, in
contrast, the operating agreement of Eco Technologies expressly provides for management by
the members. In accordance with Iowa Code §489.407, in a “member-managed” limited liability
company, “[t]he management and conduct of the company are vested in the members.” IOWA
CODE § 489.407.2.a (West, Westlaw through 2013 Reg. Leg. Sess.). As a member, Cox has
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express authority to act on behalf of Eco Technologies. See Three Minnows, LLC, 2013 WL
1453246, at *5. 2
Eco Technologies argues that “Eco Technologies does not control Cox and Cox was not
Eco Technologies’ agent for purposes of the jurisdictional analysis,” citing Coleman v. Klockner
& Co. AG, 180 S.W.3d 577, 588 (Tex. App.—Houston [14th Dist.] 2005, no pet.). 3 In Coleman,
the question was whether Klöckner Industrial Installations, Inc. (Industrial), a Delaware
corporation with its principal place of business in New York, was the agent of its parent
corporation, Klöckner Industrie–Anlagen GmbH INA (INA), itself a wholly-owned subsidiary of
a German holding company. See id. at 583. Industrial, through its president Klaus Brosig, had
entered into contracts with Texas residents. Id. at 584. Brosig was not a Texas resident. See id.
at 588–89 (discussing Brosig’s “visits” to Texas). The court concluded Brosig’s and Industrial’s
contacts could not be attributed to INA because there was insufficient evidence that INA
“controlled” Industrial or Brosig. Id. at 590. There was no evidence that INA directed Brosig to
travel to Texas or otherwise controlled the means and details of Brosig’s work, and there was no
evidence that Industrial had actual authority to negotiate or enter into contracts on INA’s behalf.
Id. Mutual benefit alone was not enough. Id.
2
MasterGuard also argues that Cox is a corporate representative of Eco Technologies, and asserts that “[w]hile not specifically
addressing LLC’s, Texas courts have long held that the contacts of a corporate representative undertaken on behalf of the entity will be imputed
to the entity for jurisdictional purposes.” See Nikolai v. Strate, 922 S.W.2d 229, 240 (Tex. App.—Fort Worth 1996, writ denied) (contacts of
attorney who was shareholder, director, and officer of professional corporation could be imputed to corporation for jurisdictional purposes);
Beecham v. Pippin, 686 S.W.2d 356, 363 (Tex. App.—Austin 1985, no writ) (although “precise relationship” between individual and corporation
not clear from record, “[i]t is clear from the record that [the individual] entered into the contract on behalf of [the corporation], and therefore the
contacts of [the individual] relative to the contract will be imputed to [the corporation],” citing Int’l Shoe, 326 U.S. at 320); see also Leesboro
Corp. v. Hendrickson, 322 S.W.3d 922, 929 (Tex. App.—Austin 2010, no pet.) (corporate representative’s acts on the corporation’s behalf are
considered acts of the corporation itself in determining whether the representative has minimum contacts with forum); Latch v. Gratty, Inc., 107
S.W.3d 543, 545 (Tex. 2003) (per curiam) (acts of corporate agent on behalf of principal ordinarily deemed to be corporation’s acts). As the
Court noted in International Shoe, “[s]ince the corporate personality is a fiction, although a fiction intended to be acted upon as though it were a
fact, . . . it is clear that unlike an individual its ‘presence’ without, as well as within, the state of its origin can be manifested only by activities
carried on its behalf by those who are authorized to act for it.” Int’l Shoe, 326 U.S. at 316.
3
Eco Technologies also cites Coleman to support its argument that because Eco Technologies does not control “the day-to-day
operations” of its independent dealers, the contacts of those dealers with Texas cannot be attributed to it. This argument is made in response to
MasterGuard’s second issue contending that general jurisdiction exists because Eco Technologies has contracts with independent dealers in
Texas. Because this argument is relevant only to the exercise of general jurisdiction, we do not consider it further.
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Here, in contrast to Coleman, Cox had actual authority to negotiate or enter into contracts
on behalf of Eco Technologies. The operating agreement for Eco Technologies expressly
provides that its business will be conducted solely by its members. In Coleman, it was the
contacts of one entity and its president that the plaintiff sought to attribute to a different entity.
See id. at 588. Here, it is a principal of the entity itself whose contacts are at issue. And in
Coleman, the contacts were for the “mutual benefit” of the two entities. See id. at 590. Here,
Cox is alleged to be recruiting dealers to contract with Eco Technologies. Schroeder testified
that the “paperwork” for these contracts would be sent to him, and a contractual relationship
would be created between Eco Technologies and the independent dealer. “Corporations, by their
very nature, cannot function without human agents. As a general rule, the actions of a corporate
agent on behalf of the corporation are deemed the corporation’s acts.” Holloway v. Skinner, 898
S.W.2d 793, 795 (Tex. 1995).
We conclude that the facts presented here are more like those in Horizon Shipbuilding,
Inc. v. Blyn II Holding, LLC, 324 S.W.3d 840, 848 (Tex. App.—Houston [14th Dist.] 2010, no
pet.), than those in Coleman. In Horizon, the defendants were an Alabama corporation and its
principals. Id. at 844. The principals, Short and Forrest, resided in Mississippi and Alabama, but
traveled to Texas in connection with a contract that was a subject of the lawsuit. Id. at 849. The
trial court denied the special appearances of Short and Forrest as well as the special appearance
of Horizon, the corporation of which they were principals. Id. at 844. The court of appeals
rejected the argument that the actions of Short and Forrest were not attributable to Horizon for
the purposes of evaluating Horizon’s jurisdictional contacts with Texas. Id. at 848. The court
noted that Short was president and general manager of Horizon, while Forrest was a project
manager and director of operations for an unincorporated division of Horizon. Id. The court
relied on Holloway, 898 S.W.2d at 795, for the proposition that the actions of a corporate agent
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are deemed to be the corporation’s acts, and on Huynh v. Nguyen, 180 S.W.3d 608, 620 (Tex.
App.—Houston [14th Dist.] 2005, no pet.), for the proposition that the Texas contacts of agents
or employees are attributable to their nonresident principals. Id. The court affirmed the denial of
the special appearance. Id. at 851.
MasterGuard offered evidence showing that Cox had actual authority to conduct Eco
Technologies’s business under the express terms of Eco Technologies’s operating agreement.
The operating agreement, identified by Schroeder in his deposition, provides that only the
members of Eco Technologies may manage and conduct its affairs. Schroeder confirmed that
Cox has a membership share of the net profits and losses of Eco Technologies. Schroeder
acknowledged that Cox has a voice in the direction of Eco Technologies. As a member of a
member-managed limited liability company with express authority to conduct Eco
Technologies’s business, Cox was Eco Technologies’s agent. See Three Minnows, LLC, 2013
WL 1453246, at *1. And Cox conducted Eco Technologies’s business when he recruited dealers
to enter into contracts with Eco Technologies.
3. Cox’s contacts attributable to Eco Technologies
Although the evidence showed that Eco Technologies’s business was conducted by its
members, the trial court did not make any findings regarding the residence of any member of
Eco Technologies. Instead, the trial court found that “[n]o officer of Eco Technologies is a
Texas resident.” It is undisputed that Cox is not an officer of Eco Technologies. But there is no
finding that the business of Eco Technologies is conducted by its officers rather than its
members, nor is there evidence to support such a finding. Instead, as we have discussed, the
evidence supports a finding that Cox is an agent of Eco Technologies: he is a member of Eco
Technologies, a “member-mananged” limited liability company that he, with others, formed; he
has express authority to act on Eco Technologies’s behalf under its operating agreement; he or an
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entity with which he is connected recruits dealers to enter into contractual relationships with Eco
Technologies from which Eco Technologies expects to profit; Eco Technologies has entered into
contracts with the recruited dealers, evidencing both its consent that Cox act on its behalf and
Cox’s consent to do so; and Eco Technologies, not Cox, controls the structure and terms of the
contractual relationships with the recruited dealers. We conclude that Cox’s contacts with Texas
are attributable to Eco Technologies for purposes of the specific jurisdiction analysis.
B. Contacts were purposeful
The evidence offered through Schroder’s testimony and Eco Technologies’s operating
agreement supported a finding that Eco Technologies’s contacts were purposeful.
MasterGuard’s claims arise out of Cox’s recruitment of dealers for Eco Technologies. Schroder
admitted that Eco Technologies’s own “in-force dealer network” recruits its independent dealers.
He testified that Eco Technologies has independent dealers in Texas. He testified that Eco
Technologies was created in May, 2011, five months after Cox and MasterGuard entered into the
severance agreement, and that Eco Technologies had no independent dealers at the time it was
formed. Schroeder admitted that Cox lives in Texas and is “involved in some capacity” with one
of Eco Technologies’s first independent dealers. Schroder also admitted that Cox, “through” that
dealer, recruited independent dealers for Eco Technologies.
Additionally, Schroder testified that he may not necessarily discuss the recruitment of a
particular independent dealer with Cox or the recruiting dealer in advance, and “on occasion,”
may not become aware of the new dealer until “the paperwork shows up.” But Eco
Technologies, not the recruiting dealer, is the party to the contract with the new dealer. Eco
Technologies, not the recruiting dealer, controls the relationship with the new dealer. Eco
Technologies emphasizes in its brief that it has structured these transactions to be governed by
Iowa law. And Eco Technologies sets the terms under which it does business with that dealer,
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requiring that all sales from Eco Technologies to its independent dealers take place in Iowa.
Although contractual disputes between Eco Technologies and its Texas dealers would be settled
pursuant to Iowa law, the recruitment of these dealers was undertaken in Texas and is the basis
for MasterGuard’s tortious interference and unfair competition claims.
In the trial court’s findings of fact, the trial court stated that “Eco Technologies does not
send its officers, employees or agents into the State of Texas to conduct business,” that “Eco
Technologies does not send agents to Texas to conduct business of behalf of Eco Technologies,”
and that “Eco Technologies did not and has not conducted business in the State of Texas in
connection with the allegations in the Petition.” The trial court also made a conclusion of law
that “Eco Technologies has not committed any tort, in whole or in part, in the State of Texas.”
The trial court’s very general findings were in part supported by Schroder’s verification of Eco
Technologies’s special appearance, which was comprised of similarly general statements. Based
on Schroder’s more specific testimony about Eco Technologies’s actual business activities,
however, Eco Technologies did not have to “send” Cox to Texas to conduct business, for
example, because he was already there. And although its contracts with independent dealers
were governed by Iowa law, it is the creation of those contractual relationships by Cox in Texas
in alleged violation of his severance agreement that is the subject of MasterGuard’s claims, not
disputes arising out of the contracts themselves. We conclude that Eco Technologies’s activities
through Cox in Texas were “purposeful rather than random, fortuitous, or attenuated.” See Moki
Mac, 221 S.W.3d at 575.
C. Benefit, advantage, or profit
We also conclude that Eco Technologies sought a “benefit, advantage or profit by
availing itself of the jurisdiction.” See Moki Mac, 221 S.W.3d at 575. MasterGuard’s
allegations are that Eco Technologies, through Cox, sought to establish relationships with
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independent dealers who were or had been affiliated with Master Guard. As Schroeder testified,
Eco Technologies’s only sales are to its independent dealers, not to consumers. Establishing
contractual relationships with independent dealers in Texas would result in increased sales by
Eco Technologies, and a benefit, advantage, or profit to Eco Technologies. See id.
D. Conclusion as to minimum contacts
Considering the evidence in the light most favorable to the judgment and indulging every
reasonable inference that would support the trial court’s findings, we conclude that the evidence
is legally and factually insufficient to support the trial court’s findings that Eco Technologies has
no agent in Texas and that “Eco Technologies did not and has not conducted business in the
State of Texas in connection with the allegations in the Petition.” See Hotel Partners, 847
S.W.2d at 632 (explaining standard of review). The findings are “so contrary to the
overwhelming weight of evidence as to be manifestly wrong.” Id. Eco Technologies did not
negate the bases for the exercise of personal jurisdiction by the trial court. See Kelly, 301
S.W.3d at 658. The trial court erred by concluding that Eco Technologies did not have sufficient
contacts with the state of Texas to subject it to the personal jurisdiction of Texas’s courts.
III. Fair play and substantial justice
In addition to minimum contacts, the exercise of personal jurisdiction must satisfy
traditional notions of fair play and substantial justice. Moki Mac, 221 S.W.3d at 574 (citing Int’l
Shoe, 326 U.S. at 316). Determining this issue involves consideration of the burden on the
nonresident defendant, the forum state’s interest in adjudicating the dispute, the plaintiff’s
interest in obtaining convenient and effective relief, the interstate judicial system’s interest in
obtaining the most efficient resolution of controversies, and the shared interest of several states
in furthering substantive social policies. Davey, 225 S.W.3d at 851 (citing Asahi Metal Indus.
Co. v. Superior Court of CA, Solano Cty., 480 U.S. 102, 113 (1987)). However, when a
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nonresident has purposefully established minimum contacts with the forum state, it will be only a
rare case when the exercise of jurisdiction over that defendant does not comport with traditional
notions of fair play and substantial justice. Id. at 851–52.
Other than Eco Technologies’s general statement that the exercise of jurisdiction would
offend traditional notions of fair play and substantial justice, nothing in the record indicates
litigation in Texas would be a hardship. Cox, the member of Eco Technologies with knowledge
of facts relevant to this lawsuit, lives and works in Texas, is already a defendant in the lawsuit,
and has not challenged the trial court’s jurisdiction over him. See Davey, 225 S.W.3d at 708
(discussing similar circumstances). Schroder testified that Cox “would have the most
information” about how certain Texas entities became authorized dealers for Eco Technologies.
As discussed, the recruitment of independent dealers on Eco Technologies’s behalf was
undertaken by Cox in Texas. Texas courts also have an interest in this litigation because of the
alleged torts committed against Texas residents. See id. MasterGuard is a Texas limited
partnership with its principal place of business in Dallas County. Cox was employed by
MasterGuard in Texas, and the agreement Cox is alleged to have breached is governed by Texas
law. The actions constituting Cox’s alleged breach of contract and Eco Technologies’s alleged
torts occurred in Texas. Because there is a “substantial connection” between Eco Technologies’s
contacts with Texas and the operative facts of the litigation, see Moki Mac, 221 S.W.3d at 585, it
would not offend any interest of the interstate judicial system to require Eco Technologies to
answer claims in Texas. Given that MasterGuard and Texas have legitimate interests in
litigating this case in Texas and the burden on Eco Technologies is minor, we conclude that the
exercise of jurisdiction over Eco Technologies in Texas does not offend traditional notions of
fair play and substantial justice. See RSR Corp. v. Siegmund, 309 S.W.3d 686, 708–09 (Tex.
App.—Dallas 2010, no pet.) (citing Guardian Royal Exch. Assurance, Ltd., 815 S.W.2d at 231).
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CONCLUSION
We conclude that the Texas long-arm statute permits the exercise of jurisdiction over Eco
Technologies and the assertion of jurisdiction is consistent with notions of fair play and
substantial justice. The trial court erred in granting Eco Technologies’s special appearance.
Accordingly, we sustain MasterGuard’s third issue and reverse the trial court’s order granting the
special appearance of Eco Technologies. We remand the cause for further proceedings.
/Elizabeth Lang-Miers/
ELIZABETH LANG-MIERS
JUSTICE
121318F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
MASTERGUARD, L.P., Appellant On Appeal from the 162nd Judicial District
Court, Dallas County, Texas
No. 05-12-01318-CV V. Trial Court Cause No. DC-11-09905.
Opinion delivered by Justice Lang-Miers,
ECO TECHNOLOGIES Justices Moseley and Bridges participating.
INTERNATIONAL LLC D/B/A
YELLOWBLUE, Appellee
In accordance with this Court’s opinion of this date, the trial court’s order granting the
plea to the jurisdiction of appellee Eco Technologies International LLC d/b/a YellowBlue is
REVERSED. We REMAND the cause to the trial court for further proceedings.
.
It is ORDERED that appellant MasterGuard, L.P. recover its costs of this appeal from
appellee Eco Technologies International LLC d/b/a YellowBlue.
Judgment entered this 22nd day of August, 2013.
/Elizabeth Lang-Miers/
ELIZABETH LANG-MIERS
JUSTICE
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