Personal Jurisdiction Notes

Posted on April 22, 2010 by Mike Northrup

Personal Jurisdiction challenges is one area of the law that I've found interesting since I took Dean Frank Newton's conflicts of law class in law school.  Recently there have been a number of personal jurisdiction opinions that have come out.   I've summarized what I see as the highlights of some of those cases below:

  • In Jackson v. Hoffman, the Fourteenth Court of Appeals held that the filing of a faulty affidavit by the defendant did not waive the jurisdiction challenge.  The court also held that the defendant did not waive the jurisdiction challenge by filing a motion for sanctions in the court of appeals after the plaintiff appealed the order granting the defendant's special appearance.  The court's opinion may be found here.
  • In Zinc Nacional, S.A. v. Bouche Trucking, Inc., the Texas Supreme Court held that the mere act of sending goods through Texas does not establish personal jurisdiction under a specific contacts analysis.  The court's opinion may be found here.
  • In Touradji v. Beach Capital Partnership, L.P., the First Court of Appeals held that jurisdiction must be examined on a claim-by-claim basis insofar as examining specific jurisdiction.  The court further held that if the plaintiff does not plead sufficient jurisdictional facts, a defendant can meet its burden of negating jurisdiction merely by proving that it is not a Texas resident.  Finally, the court holds that unilateral acts of the plaintiff cannot be used to establish jurisdiction; it must be the defendant's purposeful conduct that established personal jurisdiction.  The court examines a number of individual claims pleaded in this case, and in that regard the opinion may be of interest for those wanting a more detailed review.  The court's opinion may be found here.
  • In 2007 East Meadows, L.P. v. RCM Phoenix Partners, L.L.C., the Dallas Court of Appeals holds that specific jurisdiction is "dispute-specific."   The court futher holds that RCM Phoenix did not purposefully avail itself of Texas by using a third-party broker to market real property that was located in Indiana.  Finally, the court holds that where a contract gave the plaintiff the unilateral decision to select the location of the closing of the sale which never closed, the nonresident defendant could not be said to have purposefully availed itself of Texas law.  The court's opinion may be found here.

 

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Welcome to Texas: Personal Jurisdiction Over Non-Resident Directors of Texas Corporations

Posted on November 23, 2009 by Byron Henry

The Dallas Court of Appeals recently all but held that a non-resident officer and director of a Texas corporation is subejct to personal jurisdiction in Texas.  After reviewing the law on personal jurisdiction, the court decided that there was no general jurisdiction over the defendants who were California residents. 

Turning to specific jurisdiction, the court addressed whether the defendants' ongoing business relationship between Texas and California and the dispute over control of a Texas corporation constituted doing business in Texas.  The court agreed with the reasoning of a Fourth Circuit case:

Excellent reasons exist for alowing a State to assert jurisdiction over non-resident directors of domestic corporations.  A chartering state has a strong, even compelling interest in providing a forum for redressing harm done by corporate fiduciaries, harm endured principally by a resident of that State, the corporation. . . . Given the high degree of regulation over corporate fiduciaries, the State's interst in providing a convenient forum for a derivative suit charging malfeasance or nonfeasance of a director cannot be overemphasized.

The court hedged its bet slightly by acknowledging the lack of authority from the Texas Supreme Court or state legislature on the subject.  Thus, the court went on to find that the defendants' other contacts were sufficient to support personal jurisdiction.  One caveat, the plaintiff in the case, as well as the other shareholders were Texas residents.  Would the analysis change if all of the shareholders, officers, and directors were non-residents?  The court's opinion in TexVa, Inc. v. Boone can be found at this link.

Readers note:  This issue is currently before the Texas Supreme Court in the case of Kelly v. General Interior Constr., Inc.  Readers can go to Don Cruse's Texas Supreme Court blog, or its companion site, docketdb.com and find more infornation about that case here and here.

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Jurisdictional Discovery: Don't Jump the Gun on Depositions!

Posted on November 20, 2009 by Mike Northrup

This blog entry comes courtesy of Cowles & Thompson's Melinda Newman:

The Eastland Court of Appeals recently held that a trial court abused its discretion by refusing to hear a special appearance motion filed by a California corporation until after the defendant’s corporate representative appeared for deposition in Texas. In IRN Realty Corporation v. Hernandez, Vicenta Hernandez filed suit against IRN, alleging various causes of action stemming from the purchase of real estate in Nolan County. Prior to hearing its special appearance, Hernandez noticed the deposition of IRN’s corporate representative. IRN filed a motion to quash, urging the court to first rule on its special appearance and contending that it would be unjust for a Texas court without jurisdiction to require its corporate representative to appear for a deposition. The trial court granted the motion to compel, awarded monetary sanctions, and ordered IRN to present its representative for deposition before it would rule on the special hearing. After IRN ignored the court’s order and failed to present its representative for deposition, the trial court struck IRN’s pleadings.

The court observed Rule 120a’s mandate that a hearing on a special appearance be heard and determined before any other plea or pleading. It also noted, however, that the rule also specifically provides for the means of obtaining a continuance of the special appearance hearing so a deposition may be conducted: affidavits of the party opposing the special appearance. Here, Hernandez did not file any such affidavit stating that she could not present facts essential to justify her opposition to the special appearance or that she needed to depose IRN’s corporate representative regarding jurisdiction -- she simply noticed IRN’s corporate deposition. Thus, while the court made clear it did not condone the actions of IRN in refusing to obey a court order, it held that the trial court abused its discretion in abating the hearing on the special appearance and striking IRN’s pleadings. The court’s opinion may be found here.  One issue that was not addressed was location: i.e., had Hernandez properly submitted an affidavit and obtained a court order allowing the deposition, could she have forced the IRN representative to come to Texas for his deposition or would she have had to depose him in California?

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Discovery in challenges to the exercise of personal jurisdiction

Posted on October 9, 2009 by Mike Northrup

The Houston First District Court of Appeals has held that a trial court abused its discretion by denying the plaintiffs discovery of jurisdictional facts pertaining to the defendants' personal appearance.  In Lamar v. Poncon, John and Nanci Lamar sued Eric Poncon, Morgan's Rock Hacienda, and Ecolodge for negligence in causing injuries arising out of a car accident that occurred when the Lamars travelled to Nicaragua.  Morgan's Rock and Poncon filed special appearances to challenge the exercise of jurisdiction.

On three separate occasions, the Lamars moved for jurisdictional discovery, each time providing additional information as to what information they were seeking and why the jurisdictional discovery sought was needed.  Each time the trial court denied the request.   The trial court eventually sustained the special appearances, after which the Lamars appealed and complained of the rulings on their motions for discovery.

The court of appeals observes that Civil Procedure Rule 120a(3) governs jurisdictional discovery and under the rule, a party opposing a special appearance may have discovery into jurisdictional facts if it presents an affidavit that it cannot provide facts essential to justify its opposition to the special appearance.  The court held that a denial under this rule is governed by an abuse of discretion standard.  The court then recites all of the efforts the Lamars made to obtain the necessary information and concludes that the trial court abused its discretion by denying the jurisdictional discovery.  From a practitioner's standpoint, the court does not explain how the trial court's denial was a failure to follow guiding rules and principles or otherwise arbitrary.   Nor does the court indicate at what point (after the first motion, second motion or third motion, or all three), the denial of discovery constituted an abuse of discretion.

The court reverses an order granting the special appearance and remands the case to the trial court for further proceedings.  The court's opinion may be found here.

 

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Personal Jurisdiction and the Fidiciary Shield Doctrine

Posted on April 29, 2009 by Mike Northrup

The Dallas Court of Appeals has added another opinion to the stack of authority recognizing and applying the corporate fiduciary shield doctrine.  In Nichols v. Lin, Nichols brought suit for breach of contract against Tseng Lin, YJ USA, and others.  Nichols sought to hold Lin responsible for the breach on a theory of alter ego.  Lin filed a special appearance, which the trial court sustained.

In an interlocutory appeal, Nichols complained that the trial court abused its discretion in excluding evidence relating to his alter ego allegation.  He also argued that the special appearance should have been denied. 

In its review of the excluded evidence, the court of appeals concluded that there was no abuse of discretion because the evidence was not relevant to Nichols' argument that Lin was an alter ego.  As to the application of the fiduciary shield doctrine, the court observes that this doctrine protects a nonresident corporate officer or employee from a trial court's exercise of general jurisdiction over the individual when all of his contacts with Texas were made on behalf of his employer.  Here, the evidence demonstrated that Lin's contacts with Texas were all made on behalf of his corporate employer.  The court of appeals observes that proof the individual was an alter ego will defeat application of the fiduciary shield doctrine.   However, in this case, Nichols' citations to the record failed to support his written contentions with respect to alter ego.  Therefore, the court of appeals affirmed the trial court's order.  The opinion may be found at this link.

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Waiver of Special Appearances in Default Challenges

Posted on March 23, 2009 by Mike Northrup

The San Antonio Court of Appeals has held that a party challenging a default judgment may well risk losing the opportunity to challenge the exercise of personal jurisdiction over him unless special precautions are taken.

In Boyd v. Kobierowski, Kobierowski, a Texas resident, sued Boyd, a California resident, in Texas for breach of contract, fraud, misrepresentation and DTPA violations.  All causes of action arose from the sale of a vehicle  Boyd sold to Kobierowski. 

Boyd did not answer the suit and Kobierowski took a default judgment against Boyd.  Boyd subsequently filed a restricted appeal to challenge the default judgment.  He prevailed on appeal because of a defect in personal service.  See Appeal No. 04-06-0041-CV. 

On remand, Kobierowski repeatedly tried to get Boyd to answer the suit, but Boyd did not respond.  Kobierowski then took a second default judgment.  Boyd subsequently filed a special appearance and a motion for new trial subject to the special appearance.  The trial court denied the special appearance, but granted the motion for new trial.  In a second (interlocutory) appeal, Boyd argued that it was error to deny his special appearance.

The court of appeals reviews the history of the special appearance rules in Texas, pointing out that historically Texas' special appearance rules put a defaulting defendant to an election of either collaterally attacking the default judgment or making a general appearance and attempting to directly set aside the default.  The San Antonio Court of Appeals holds that the present special appearance practice in Texas creates a ppresumption of a general appearance, but that Rule 120a establishes an exception to the presumption if the exception is properly employed.   The court holds that a non-resident defendant may enter a special appearance after a judgment is reversed for defective or no service, but the failure to file a special appearance following a remand results in a general appearance.   Because Boyd filed nothing for the five months following remand, the court of appeals holds that Boyd made a general appearance.

The court's opinion may be found here.  One question raised by the court's opinion is whether the result would have been different had there been no evidence that Kobierowski made numerous attempts to get Boyd to file an answer?  Or, would the result have been different if the elapsed time between remand and the filing of the special appearance were one month or one week?
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In case you're ever in a car accident with someone insured by a foreign insurance company...

Posted on March 2, 2009 by David Oliveros

Assume a foreign insurance company provides auto insurance cards that specifically cover accidents both in the home country and the United States.  If a car accident occurs in Texas, can the insurer avoid personal jurisdiction in the suit by alleging that it did not purposefully avail itself to Texas?

This was the issue before the Dallas Court of Appeals in Assurances Generales Banque Nationale v. Dhalla.

Progressive Insurance sued Dhalla for negligence in causing a car accident.   Dhalla, a Canadian National, sought coverage from his auto insurer, Assurances Generales.

Assurances Generales, a Canadian company, refused to cover the accident, which occurred in Texas.   When Dhalla asserted a third-party action, Assurances Generales made a special appearance to contest jurisdiction.  Dhalla's argued that Assurances Generales purposefully availed itself to Texas when it issued Dhalla an insurance card with the following statement: "This certificate is valid within Canada and the U.S.A.  This card should be carried in the insured vehicle for production as proof of insurance when demanded by police."

Assurances Generales argued the following:

  • Incorporated in Canada;
  • No registered agent in Texas;
  • No place of business in Texas;
  • Doesn't employ any Texans and does not actively recruit Texas for employment;
  • No Texas licenses and not qualified to do business in Texas;
  • No customers in Texas and doesn't sell products in Texas;
  • Doesn't pay taxes in Texas;
  • Has not advertised in Texas;
  • Never submitted to jurisdiction of a Texas Court.

Assurances Generales lost in the trial court and subsequently appealed.

Did Dhalla establish personal jurisdiction?

No. The Court of Appeals held that the general statement on the insurance card was insufficient evidence to show  Assurances Generales purposefully directed its activities toward Texas.  Yes, the card mentioned the U.S.  But the Court held that Dhalla must show that Assurances Generales purposely availed itself of Texas, not just the U.S.  Because Dhalla did not  purposefully direct its activities toward Texas, the Court found no personal jurisdiction.

Read the opinion here.
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