Ric Schuman, Great Northern Capital, Inc., and Wall Street Partners v. TSP Development Limited--Appeal from 113th District Court of Harris County

Reversed and Remanded and Memorandum Opinion filed July 26, 2005

Reversed and Remanded and Memorandum Opinion filed July 26, 2005.

In The

Fourteenth Court of Appeals

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NO. 14-04-01159-CV

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RIC SCHUMAN, GREAT NORTHERN CAPITAL, INC., AND

WALL STREET PARTNERS, INC. Appellants

V.

TSP DEVELOPMENT, LIMITED, Appellee

_________________________________________________________________

On Appeal from the 113th District Court

Harris County, Texas

Trial Court Cause No. 04-48596

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M E M O R A N D U M O P I N I O N

This is an interlocutory appeal from the trial court=s order denying the special appearances of three nonresidents. We reverse the trial court=s order and remand this case with instructions to dismiss for lack of personal jurisdiction.

I. Factual and Procedural Background

Appellee, TSP Development, Limited (ATSP@), alleges that on or about December 24, 2003, it entered into a consulting agreement with appellants, Ric Schuman, a resident of Florida, Great Northern Capital, Inc., a Florida corporation, and Wall Street Partners, Inc., a Georgia corporation (collectively, the AConsultants@). The Consultants allegedly received $12,500 from TSP and allegedly failed to perform any of the services required by the consulting agreement. TSP sued them for breach of contract. The Consultants filed special appearances contesting personal jurisdiction. After a hearing at which the parties presented no evidence, the trial court denied the special appearances.[1] In this interlocutory appeal, the Consultants challenge the trial court=s jurisdictional ruling.

II. Standard of Review

Whether the Consultants are subject to personal jurisdiction in Texas is a question of law subject to de novo review. See BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). The trial court did not issue any findings of fact or conclusions of law. Therefore, all facts necessary to support the trial court=s ruling and supported by the evidence are implied in favor of the trial court=s decision. Id. at 795. Parties may challenge the legal and factual sufficiency of these implied factual findings. Id. In conducting a no-evidence analysis, we review the evidence in the light most favorable to the challenged finding and indulge every reasonable inference that would support it. See City of Keller v. Wilson, __ S.W.3d __, __, No. 02-1012, 2005 WL 1366509, at *10 (Tex. June 10, 2005). We must credit favorable evidence if a reasonable factfinder could do so and disregard contrary evidence unless a reasonable factfinder could not do so. See id., __ S.W.3d at __, 2005 WL 1366509, at *14. We must determine whether the evidence at trial would enable reasonable and fair-minded people to find the facts at issue. See id. The factfinder is the sole judge of the credibility of the witnesses and the weight of their testimony. See id., __ S.W.3d at __, 2005 WL 1366509, at *8. This court must sustain a no-evidence challenge if the record shows any one of the following: (1) a complete absence of a vital fact; (2) rules of law or evidence bar the court from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a scintilla; or (4) the evidence establishes conclusively the opposite of the vital fact. See id. __ S.W.3d at __, 2005 WL 1366509, at *2.

When reviewing a challenge to the factual sufficiency of the evidence, we examine the entire record, considering both the evidence in favor of, and contrary to, the challenged finding. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). After considering and weighing all the evidence, we set aside the fact finding only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986). The trier of fact is the sole judge of the credibility of the witnesses and the weight to be given to their testimony. GTE Mobilnet of S. Tex. v. Pascouet, 61 S.W.3d 599, 615B16 (Tex. App.CHouston [14th Dist.] 2001, pet. denied). We may not substitute our own judgment for that of the trier of fact, even if we would reach a different answer on the evidence. Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998). The amount of evidence necessary to affirm a judgment is far less than that necessary to reverse a judgment. GTE Mobilnet, 61 S.W.3d at 616.

III. Analysis and Discussion

In two issues, the Consultants challenge the trial court=s implied findings of specific and general jurisdiction and its denial of their special appearances. The Texas long-arm statute governs Texas courts= exercise of jurisdiction over nonresident defendants. Tex. Civ. Prac. & Rem. Code Ann. '' 17.041B.045 (Vernon 1997); Guardian Royal Exch. Assur., Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex. 1991). It allows courts to exercise personal jurisdiction as far as the federal constitutional requirements of due process will permit. See BMC Software, 83 S.W.3d at 795. Thus, we rely on precedent from the United States Supreme Court and from other federal courts, as well as Texas decisions, in determining whether a nonresident defendant has shown that the exercise of personal jurisdiction violates federal due process guarantees. Id.

Personal jurisdiction over a nonresident defendant is constitutional when two conditions are met: (1) the defendant has established minimum contacts with the forum state, and (2) the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. Id. A nonresident defendant that purposefully has availed itself of the privileges and benefits of conducting business in Texas has sufficient contacts to allow Texas courts to exercise personal jurisdiction over the nonresident. Id. Although not determinative, foreseeability is an important consideration in deciding whether the nonresident defendant purposefully has established minimum contacts with Texas. Id. The concept of foreseeability is implicit in the requirement that there be a substantial connection between the defendants and Texas arising from their conduct purposefully directed toward Texas. See Guardian Royal, 815 S.W.2d at 227. A defendant should not be subject to a Texas court=s jurisdiction based upon random, fortuitous, or attenuated contacts. BMC Software, 83 S.W.3d at 795.

A. Did the Consultants waive their special appearances?

In its response to the Consultants= special appearances, TSP alleged the Consultants waived their special appearances in Texas state court by appearing and submitting to the jurisdiction of a federal bankruptcy court in a bankruptcy proceeding allegedly involving TSP and the Consultants. When a case has been removed from state court to federal court and remanded back to state court, a party waives its objection to the state court=s personal jurisdiction when it answers in federal court without objecting to the federal court=s jurisdiction over it. See Velco Chems. Inc. v. Polimeri Europa Ams., Inc., No. 14-03-00395-CV, 2004 WL 1965643, at *4B5 (Tex. App.CHouston [14th Dist.] Sept. 7, 2004, no pet.) (mem. op.). Our record, however, shows that this case has been in Texas state courts since its filing. Further, there is no evidence in the record relating to any alleged waiver of personal jurisdiction in federal bankruptcy court. Accordingly, the trial court erred to the extent it impliedly found that the Consultants waived their special appearances.

B. Did the trial court properly conclude that it could exercise personal jurisdiction over the Consultants based on specific jurisdiction?

In conducting a specific-jurisdiction analysis, we focus on the relationship among the defendants, Texas, and the litigation. See Guardian Royal, 815 S.W.2d at 228. Specific jurisdiction exists if TSP=s claims against the Consultants arise from or relate to their purposeful contacts with Texas. See Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002). TSP satisfied its initial burden of pleading allegations sufficient to bring the Consultants, all nonresidents, within the provisions of the long-arm statute. See id. at 807. Therefore, the Consultants had the burden to negate all bases of personal jurisdiction alleged by TSP. Id.

When reaching a decision to exercise or decline jurisdiction, the trial court should rely only on the necessary jurisdictional facts and should not reach the merits of the case. Baldwin v. Household Int=l, Inc., 36 S.W.3d 273, 277 (Tex. App.CHouston [14th Dist.] 2001, no pet.). However, if the court=s jurisdiction hinges on the fact that the Consultants entered into a contract with TSP, a resident of Texas, to be performed in whole or in part by either party in Texas, the Consultants can defeat the attempted exercise of jurisdiction by a Texas court by proving that they did not enter into such a contract with TSP. See Ross F. Meriwether & Assocs., Inc. v. Aulbach, 686 S.W.2d 730, 732 (Tex. App.CSan Antonio 1985, no writ.)

TSP alleged in its petition that the Consultants are subject to specific jurisdiction in Texas because the consulting agreement was executed in Texas and performable in Harris County, Texas. In its petition, TSP stated that a copy of the consulting agreement was attached to the pleading. However, the petition in our record has no documents attached. In support of their special appearances, the Consultants each filed supporting affidavits that stated they had never entered into any contract that was performable in whole or in part in Texas. Although TSP filed a response, it submitted no evidence to the trial court regarding the Consultants= special appearances.

After carefully reviewing the record, we conclude the evidence conclusively proves that TSP=s claims against the Consultants do not arise from or relate to the Consultants=purposeful contacts with Texas. Contrary to TSP=s allegations in its original petition, our record does not contain any evidence that the Consultants entered into a contract that was performable in whole or in part in Texas. In addition, the Consultants, in each of their affidavits, negated all bases for specific jurisdiction alleged by TSP. Based on the record before us, we conclude that the evidence is legally insufficient to support an implied finding by the trial court that the Consultants are subject to specific jurisdiction in Texas as a result of the consulting agreement being executed and performable in Texas.

C. Did the trial court properly conclude that it could exercise personal jurisdiction over the Consultants based on general jurisdiction?

General jurisdiction implicates a more demanding minimum-contacts analysis, requiring a showing that the defendants conducted substantial activities within the forum. CSR, Ltd. v. Link, 925 S.W.2d 591, 595 (Tex. 1996). General jurisdiction exists when a defendant has Acontinuous and systematic general business contacts@ with Texas so that Texas courts may exercise personal jurisdiction over the defendant even if the plaintiff=s claims did not arise from or relate to the defendant=s activities purposefully directed to Texas. See Helicopteros Nacionales de Colombia, S.A. v Hall, 466 U.S. 408, 414B16, 104 S. Ct. 1868, 1872B73, 80 L. Ed. 2d 404 (1984); Am. Type Culture Collection, 83 S.W.3d at 809B10. In conducting a general-jurisdiction analysis, we are concerned with the quality rather than the quantity of the contacts. See Am. Type Culture Collection, Inc., 83 S.W.3d at 809B10. In assessing the quality of the contacts, we do not review each contact in isolation. See id. at 809. We carefully investigate, compile, sort, and analyze all contacts to determine if together they are sufficient to support general jurisdiction. Id.

TSP did not present the trial court with any evidence relating to these personal jurisdiction issues. In support of their special appearances, the managing director of Great Northern and the managing member of Wall Street Partners each filed supporting affidavits, which state, among other things, that Great Northern and Wall Street Partners have:

! never sought to do business or maintained an office in Texas;

! never owned or leased property in Texas;

! never maintained a mailing address or telephone number in Texas;

! never solicited Texas residents for any purpose nor have any of their employees on their behalf;

! not purposefully established any contacts with any person or entity in Texas nor have any of their employees on their behalf;

! never had continuous or systematic contacts with Texas nor have any of their employees on their behalf;

! never done business in Texas; and

! never entered into a contract to do any business in Texas nor have any of their employees on their behalf.

In support of his special appearance, Schuman filed a supporting affidavit, which states, among other things, that Schuman has:

! never resided or maintained a residence in Texas;

! never owned or leased property in Texas;

! never maintained an office, mailing address, or telephone number in Texas;

! never advertised in Texas;

! never solicited a Texas resident for any purpose;

! not purposefully established any contacts with any person or entity in Texas; and

! never had continuous or systematic contacts with Texas or anyone in Texas.

After carefully reviewing the record, we conclude the evidence conclusively proves that the Consultants do not have continuous and systematic general business contacts with Texas. Our record does not contain any evidence that the Consultants have conducted business in Texas or had continuing contacts with Texas. In addition, the Consultants, in each of their affidavits, conclusively negated any basis for general jurisdiction. Therefore, based on the record before us, we conclude that the evidence is legally insufficient to support an implied finding by the trial court that it could exercise personal jurisdiction over the Consultants under a general-jurisdiction theory.

IV. Conclusion

The Consultants did not waive their special appearances. The evidence before the trial court conclusively proves that TSP=s breach-of-contract claim does not arise from or relate to the Consultants=purposeful contacts with Texas and thus provides no basis for specific jurisdiction. Moreover, the evidence conclusively shows that the Consultants have not established continuous and systematic general business contacts with Texas to support general jurisdiction. Therefore, the trial court erred in denying the Consultants= special appearances. Accordingly, we sustain the Consultants= two issues, reverse the trial court=s order denying their special appearances, and remand this case to the trial court with instructions to dismiss the claims against the Consultants for lack of personal jurisdiction.

/s/ Kem Thompson Frost

Justice

Judgment rendered and Memorandum Opinion filed July 26, 2005.

Panel consists of Chief Justice Hedges and Justices Fowler and Frost.

[1] In the statement of facts in their appellate brief, the Consultants assert that no evidence was offered at the special-appearance hearing. TSP has not filed an appellate brief and has not contradicted this factual assertion. Accordingly, we accept it as true. See Tex. R. App. P. 38.1(f).