Solgas Energy Limited v. Global Steel Holdings Limited f/k/a Global Infrastructure Holdings Limited--Appeal from 38th Judicial District Court of Uvalde CountyAnnotate this Case
SOLGAS ENERGY LIMITED,
GLOBAL STEEL HOLDINGS LIMITED f/k/a Global Infrastructure Holdings Limited,
From the 38th Judicial District Court, Uvalde County, Texas
Trial Court No. 05-09-24,865-CV
Honorable Mickey R. Pennington, Judge Presiding
Opinion by: Karen Angelini, Justice
Sitting: Karen Angelini, Justice
Sandee Bryan Marion, Justice
Steven C. Hilbig, Justice
Delivered and Filed: July 3, 2007
Solgas Energy Limited appeals the trial court's order denying its request for jurisdictional discovery and granting the special appearance filed by Global Steel Holdings Limited f/k/a Global Infrastructure Holdings Limited. We affirm the trial court's order.
In June of 2003, Solgas Energy Limited, a limited liability company incorporated under the laws of the Isle of Man, entered into an agreement ("Concession") with the federal government of Nigeria and Ajaokuta Steel Company Limited, a Nigerian company wholly owned by the federal government of Nigeria. The Concession obligated Solgas to complete, refurbish and expand the Ajaokuta Steel Plant in Nigeria and to build a gas processing plant to supply the steel plant with electrical power.
In 2004, Solgas began searching for a subcontractor to assist it in preforming its obligations under the Concession. Solgas asserts that a subcontractor was sought to increase the efficiency and profitability of the steel plant. Global Steel counters that Solgas was primarily a natural gas company and needed the assistance of a steel company to fulfill its commitments.
Solga's principal business office is located in Uvalde, Texas. Thomas Russell, the chairman and CEO of Solgas, stated that Solgas received e-mail correspondence from numerous representatives of the "Global Steel corporate family" "push[ing] hard for the opportunity to participate in the project." Russell stated that the representatives identified themselves as working for "Ispat," "LNM Holdings," and "the Mittals." Russell further stated that "[w]e were consistently told that we were dealing with 'Ispat,' a well-known Indian steel conglomerate, recognized for its expertise in revitalizing steel plants in the developing world." In late 2003 and early 2004, Russell received four telephone calls from different representatives of LNM Holdings originating either in India or the United Kingdom expressing "Ispat's interest in working with Solgas on the Ajaokuta Project." In response to a request for information regarding LNM Holdings, Russell stated that he received information via e-mail "regarding Ispat and Lakshmi Mittal, the President and Chairman of LNM Holdings/Ispat." During the spring and summer of 2004, Pramod Mittal, president of Global Steel, contacted Russell at least three times by telephone to express thanks for inviting him to Nigeria to view the steel plant facility and to express interest in the project.
Global Steel also is incorporated under the laws of the Isle of Man, and its principal place of business is in Dubai. No representative of Global Steel ever traveled to Texas or the United States in connection with the project or conducted any negotiations or performed any work in Texas. No documents relevant to the project were executed in Texas.
In May of 2004, Solgas and Global Steel entered into a Confidentiality Agreement. Global Steel was identified in the agreement as "Global Infrastructure Holdings, Ltd. ("GIHL"), their Subsidiaries and Affiliates, hereinafter referred to as ("LNM")." The purpose of the agreement was to maintain the confidentiality of information exchanged as the parties pursued "discussions specifically regarding the possibility of pursuing a mutually beneficial business venture concerning the production of steel, the generation of power, and an LPG gas processing plant located in or near Ajaokuta, Kogi State, Nigeria." The Confidentiality Agreement provided that it would be governed by Texas law.
On July 18, 2004, Solgas and Global Steel entered into a memorandum containing the terms pursuant to which the parties intended to pursue the fulfillment of the Concession obligations. The agreement was subject to the consent of the federal government of Nigeria. The memorandum provided that it would be governed by English law, and any dispute was to be resolved by arbitration "under LCIA Rules in London."
On August 11, 2004, Solgas sent a letter to the federal government of Nigeria stating that Solgas had been unsuccessful in securing the necessary capital required to fulfill its obligations. The letter stated that Solgas sought to dissolve the Concession. On August 12, 2004, Solgas and the federal government of Nigeria entered into an agreement terminating the Concession. After the termination of the Concession with Solgas, Global Steel entered a new concession agreement with the federal government of Nigeria relating to the steel plant.
In December of 2004, Solgas initiated an arbitration proceeding against the federal government of Nigeria and Ajaokuta Steel Company Limited in the International Chamber of Commerce. The federal government of Nigeria and Ajaokuta Steel responded in March of 2005.
In September of 2005, Solgas filed the underlying lawsuit against Global Steel in a Texas district court alleging breach of contract and tortious interference with contract. With regard to personal jurisdiction, the petition alleged, "This Court has jurisdiction over the parties to this matter as each has purposefully established minimum contacts with this state." Global Steel responded with a special appearance.
In March of 2006, Solgas filed its first amended original petition. Solgas did not amend the allegation with regard to personal jurisdiction; however, Solgas expanded its factual allegations to state that Global Steel bribed key Nigerian officials to coerce the federal government of Nigeria into terminating the Concession with Solgas and entering into the agreement with Global Steel. Solgas also added a claim for fraud.
In April of 2006, Global Steel filed a motion for a protective order against "extremely broad and burdensome" discovery requests propounded by Solgas. Global Steel asserted, "These discovery requests are not limited to issues raised by Global Steel's Special Appearance, and to the extent they relate to jurisdiction at all, they are not limited to Global Steel's Ajaokuta-related contacts with the state of Texas." In May of 2006, Solgas filed a motion to compel, seeking an order requiring Global Steel to fully respond to the discovery requests Solgas had propounded. After a hearing, the trial court granted Global Steel's motion for protection and ordered that Global Steel was not required to "additionally respond to any of the discovery propounded by [Solgas]." The trial court also denied Solgas's motion to compel "without prejudice to reconsideration after this Court's hearing on the Special Appearance," which was set for August 10, 2006.
In July of 2006, Solgas amended its petition for a second time. In this second amended petition, Solgas expanded its personal jurisdiction allegations as follows:
This Court has general and specific jurisdiction over Global Steel, as either Global Steel or its alter egos Ispat Industries, Mittal Steel USA, Mittal Steel Company N.V., LNM Holdings and their affiliated companies have purposefully established minimum contacts with Texas and with the United States as a whole. General jurisdiction has been established through the systematic and continuous shipment of steel products by these companies and/or their affiliates, into the State of Texas. Specific jurisdiction has been established because Global Steel's liability to Solgas is the direct result of Global Steel and/or its affiliates deliberately entering into a transaction consummated and having substantial effects within the State of Texas.
Solgas also filed a response to the special appearance, re-urging its motion to compel and requesting that the hearing on the special appearance be continued until jurisdictional discovery was completed. Solgas further filed a notice to take the deposition of L.K. Sharma, president of Global Steel. Global Steel filed a motion to quash the deposition. After a hearing, the trial court entered an order denying Solgas's motion to compel discovery, including Sharma's deposition, and its motion for a continuance. The trial court's order granted Global Steel's special appearance.Standard of Review and Jurisdictional Standards
The plaintiff bears the initial burden of pleading sufficient allegations to invoke jurisdiction under the Texas long-arm statute. Moki Mac River Expeditions v. Drugg, No. 04-0432, 2007 WL 623805, at *2 (Tex. Mar. 2, 2007). The nonresident defendant then assumes the burden of negating all bases of jurisdiction in those allegations. Id. Because the question of a court's exercise of personal jurisdiction over a nonresident defendant is one of law, we review a trial court's determination of a special appearance de novo. Id. When, as here, the trial court does not make findings of fact and conclusions of law in support of its ruling, we infer all facts necessary to support the judgment and supported by the evidence. Id.
Texas courts may assert in personam jurisdiction over a nonresident if: (1) the Texas long-arm statute authorizes the exercise of jurisdiction; and (2) the exercise of jurisdiction is consistent with federal and state constitutional due-process guarantees. Id. The long-arm statute's broad doing-business language allows the statute to reach as far as the federal constitutional requirements of due process will allow. Id. at *3. Thus, the requirements of the Texas long-arm statute are satisfied if an assertion of jurisdiction accords with federal due-process limitations. Id.
Federal due-process requirements limit a state's power to assert personal jurisdiction over a nonresident defendant. Id. Personal jurisdiction is proper when the nonresident defendant has: (1) established minimum contacts with the forum state; and (2) the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. Id.
Minimum contacts are sufficient for personal jurisdiction when the nonresident defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws. Id. There are three parts to a "purposeful availment" inquiry. Id. First, only the defendant's contacts with the forum are relevant, not the unilateral activity of another party or a third person. Id. Second, the contacts relied upon must be purposeful rather than random, fortuitous, or attenuated. Id. Finally, the defendant must seek some benefit, advantage or profit by availing itself of the jurisdiction. Id.
A nonresident defendant's forum-state contacts may give rise to two types of personal jurisdiction. Id. at *4. If the defendant has made continuous and systematic contacts with the forum, general jurisdiction is established whether or not the defendant's alleged liability arises from those contacts. Id. In contrast, when specific jurisdiction is alleged, we focus the minimum-contacts analysis on the relationship among the defendant, the forum, and the litigation. Id.Specific Jurisdiction
Specific jurisdiction is established if the defendant's alleged liability arises out of or is related to an activity conducted within the forum. Id. In order to arise out of conduct in the forum, there must be a substantial connection between the contacts or conduct and the operative facts of the litigation. Id. at 12. Thus, for the trial court to have had specific jurisdiction over Global Steel: (1) Global Steel must have purposefully made minimum contacts with Texas; and (2) Solgas's causes of action must have arisen from or related to those contacts. Commonwealth General Corp. v. York,
177 S.W.3d 923, 925 (Tex. 2005).
In its brief, Solgas argues that the following activities are sufficient to satisfy the minimum contacts requirement: (1) Global Steel directed six telephone calls to Solgas's representative in Texas to entice Solgas to enter into the confidentiality agreement; (2) Global Steel sent e-mail correspondence and electronic presentations to Solgas at its headquarters in Uvalde, Texas; and (3) Global Steel executed a confidentiality agreement containing a Texas choice-of-law clause. The law is well-established, however, that these contacts are not sufficient to satisfy the minimum contacts requirement. See, e.g. Alenia Spazio S.p.A. v. Reid, 130 S.W.3d 201, 213 (Tex. App.--Houston [14th Dist.] 2003, pet. denied) (contracting with a Texas entity and numerous telephone and facsimile communications with people in Texas relating to an alleged contract do not establish minimum contacts); Moni Pulo Ltd. v. Trutec Oil & Gas, Inc., 130 S.W.3d 170, 175-76 (Tex. App.--Houston [14th Dist.] 2003, pet. denied) (negotiating and signing a contract in Texas is insufficient if performance takes place elsewhere even where agreement contains Texas choice-of-law provision); Austin & Austin Enterprises, Inc. v. Equinox Capital Corp., No. 14-01-00444-CV, 2002 WL 59036, at *4 (Tex. App.--Houston [14th Dist.] Jan. 17, 2002, no pet.) (choice-of-law clause may be consideration but does not by itself establish consent to ligation only consent to application of forum's laws; telephone calls and payments were insufficient to establish minimum contacts); TeleVentures, Inc. v. Int'l Game Tech., 12 S.W.3d 900, 908-10 (Tex. App.--Austin 2000, pet. denied) (contracting with Texas corporation and numerous and repeated contacts by telephone, mail and facsimile regarding contract insufficient to satisfy minimum contacts); Magnolia Gas Co. v. Knight Equip. & Mfg. Corp., 994 S.W.2d 684, 691 (Tex. App.--San Antonio 1998, no pet.) (merely contracting with Texas corporation, sending payments to Texas, and engaging in communications with Texas corporation during performance of the contract is insufficient); TST/Impreso, Inc. v. Lynch, No. 05-94-01747, 1995 WL 500227, at *6 (Tex. App.--Dallas Aug. 15, 1995, writ denied) (contractual choice of law provision is not a voluntary submission to personal jurisdiction in Texas without express understanding of that effect; issue is personal jurisdiction, not choice of law). Accordingly, the record does not establish sufficient minimum contacts to give rise to specific jurisdiction over Global Steel.General Jurisdiction
Solgas concedes in its brief that it cannot establish sufficient contacts to support general jurisdiction over Global Steel; however, Solgas complains that it was prevented from presenting such contacts by the trial court's erroneous refusal to compel jurisdictional discovery. We review a trial court's order denying a motion for continuance under an abuse of discretion standard. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 800 (Tex. 2002). A trial court abuses its discretion when it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law. Id.
The crux of Solgas's complaint is that it should have been permitted to pursue additional discovery to establish its alter ego allegations. Personal jurisdiction may exist over a nonresident defendant if the relationship between the foreign corporation and its parent corporation that does business in Texas is one that would allow the court to impute the parent corporation's "doing business" to the subsidiary. BMC Software Belgium, N.V., 83 S.W.3d at 798.
. "The party seeking to ascribe one corporation's actions to another by disregarding their distinct corporate entities must prove this allegation." Id.; see also PCC Sterom, S.A. v. Yuma Exploration & Production Co., No. 01-06-00414-CV, 2006 WL 2864478, at *13 (Tex. App.--Houston [1st Dist.] Oct. 5, 2006, no pet.) (noting burden on plaintiff is exception to general rule that nonresident defendant must negate all bases for personal jurisdiction). "Texas law presumes that two separate corporations are distinct entities." BMC Software Belgium, N.V., 835 S.W.3d at 798. A subsidiary corporation will not be regarded as the alter ego of its parent merely because of stock ownership, a duplication of some or all of the directors or officers, or an exercise of control that stock ownership gives to stockholders. Id. at 799. "To 'fuse' the parent company and its subsidiary for jurisdictional purposes, the plaintiffs must prove the parent controls the internal business operations and affairs of the subsidiary." Id. "[T]he evidence must show that the two entities cease to be separate so that the corporate fiction should be disregarded to prevent fraud or injustice." Id.
The question in this case is whether the trial court abused its discretion in determining that Solgas's alter ego allegation did not entitle it to pursue additional discovery in an effort to establish an alter ego connection. In Barron v. Vanier, 190 S.W.3d 841, 849-50 (Tex. App.--Fort Worth 2006, no pet.), the Fort Worth court examined the general standards developed in federal law for determining whether additional jurisdictional discovery should be permitted. The court noted that federal courts will allow discovery to proceed if the plaintiff shows that "further discovery might demonstrate facts sufficient to constitute a basis for jurisdiction" or when "the movant makes a good-faith showing, provides a colorable basis for, or makes a prima facie case of personal jurisdiction, or provides a reason to believe that discovery would reveal sufficient minimum contacts." Id. In Barron, the court held that the trial court abused its discretion in denying the motion for continuance based on the need for additional jurisdictional discovery because at least some of the requested information was "possibly material to establishing personal jurisdiction." Id. at 849.
Barron, however, involved a request for additional discovery regarding the contacts of the defendants themselves. In this case, Solgas is requesting additional discovery seeking to establish that: (1) various entities are the alter egos of Global Steel; and (2) those entities have sufficient contacts with Texas to establish general jurisdiction. Under these circumstances, the trial court was required to review the pleadings and the evidence presented to determine whether Solgas made a good-faith showing or provided a colorable basis for believing that discovery would reveal sufficient minimum contacts. Id. Stated differently, did Solgas show that further discovery might demonstrate facts sufficient to constitute a basis for jurisdiction? Id.
The record contains the affidavit of Global Steel's president stating: (1) Global Steel is neither a parent or a subsidiary of LNM Holdings N.V., Mittal Steel Company N.V., Mittal Steel USA, Inland Steel Co., International Steel Group, or Ispat International N.V.; (2) Global Steel is not a related business enterprise with any of these other companies; (3) none of the companies have overlapping ownership interests with Global Steel (4) none of the companies share common directors or officers or offices or employees with Global Steel; and (5) none of the companies directs the day-to-day operations of Global Steel. Although Global Steel is the holding company of Ispat Industries Ltd., a company registered in India, Global Steel's president asserts that Global Steel does not direct its day-to-day operations.
Solgas broadly alleges an alter ego relationship between Global Steel and various other entities including Ispat Industries, Mittal Steel USA, Mittal Steel Company N.V., LNM Holdings and their affiliated companies. The only support Solgas provides for its allegations, however, is that references to various entities were made during the initial negotiations regarding the project. References to various entities that might be under consideration as a potential party to a business transaction, however, does not provide a basis for believing that additional discovery would reveal that any of these entities controlled the internal business operations and affairs of Global Steel or that Global Steel controlled their internal business operations and affairs. See BMC Software Beligium, N.V., 83 S.W.3d at 798. Moreover, Solgas does not allege any reasons "the corporate fiction should be disregarded to prevent fraud or injustice." Id.; see also Le Meridien Hotels & Resorts v. LaSalle Hotel Operating P'ship, I, L.P., 141 S.W.3d 870, 882 (Tex. App.--Dallas 2004, no pet.) (noting fraud-or-injustice requirement was specifically included by the Supreme Court in test for establishing alter ego for jurisdictional purposes).
Furthermore, with regard to the minimum contacts these other entities may have with Texas, Solgas refers to acquisitions by these other entities that occurred after its Concession was terminated to establish contacts, not with Texas, but with the United States. (1) Solgas then asserts, "With all of these products being produced and distributed within the United States, it is not difficult to assume that a substantial portion of these products are being shipped to Texas." Finally, Solgas makes reference to the assets maintained by Mittal at Citibank, noting that Citibank has branches throughout Texas.
Given the broad nature of the allegations and the absence of any showing that an alter ego relationship could be established, the trial court did not abuse its discretion in denying the motion to compel and the continuance. See BMC Software Belgium, N.V., 83 S.W.3d at 800. Solgas has failed to allege sufficient information which, if existing and discovered, could support its alter ego allegations and thereby support general jurisdiction. See Barron, 190 S.W.3d at 849-50; see generally Lonny J. Hoffman, Rethinking the Special Appearance Rule: Does 120a Offend Due Process when "Alter Ego" is Asserted as the Jurisdictional Basis?, 46 Baylor L. Rev. 559 (1994) (addressing problems in allowing discovery when alter ego theory is asserted to establish personal jurisdiction).Traditional Notions of Fair Play and Substantial Justice
Even if sufficient minimum contacts were established or if discovery would have enabled Solgas to establish general jurisdiction through its alter ego theory, exercising jurisdiction over this dispute would offend traditional notions of fair play and substantial justice. When an "international dispute" is involved, the following factors, when appropriate, should be considered in determining whether the exercise of jurisdiction by a state court would offend traditional notions of fair play and substantial justice: (a) the unique burdens placed upon the defendant who must defend itself in a foreign legal system; and (b) the procedural and substantive policies of other nations whose interests are affected as well as the federal government's interest in its foreign relations policies." Guardian Royal Exchange Assur., Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 228 (Tex. 1991).
In this case, the subject matter of the agreement between Solgas and Global Steel relates to the operation of a steel plant in Nigeria, and the agreement required the consent of the federal government of Nigeria, which owned the steel plant. In addition, the agreement between the parties setting forth their obligations with regard to the Nigerian steel plant was governed by English law, and any dispute was to be resolved by arbitration under LCIA Rules in London. Moreover, Solgas has alleged that Global Steel bribed Nigerian governmental officials causing them to terminate Solgas's Concession and contract with Global Steel. Under these circumstances, Texas's interest in adjudicating a lawsuit involving Nigerian government officials concerning a business transaction relating to a Nigerian steel plant is tenuous while the lawsuit, including its allegations regarding the bribery of Nigerian officials, clearly implicates the policies of other nations whose interests are affected as well as the federal government's interest in its foreign relation policies. See, e.g. Alenia Spazio, S.p.A., 130 S.W.3d at 221-22 (noting plaintiff sought to recover "based on an alleged plan that contemplated obtaining rights from the Russian government" and "financing from the Italian government" thereby raising "important concerns regarding the substantive policies of Italy and Russia and the impact that the exercise of jurisdiction might have on the United States government's foreign-relation policies vis-a-vis these countries"); Moni Pulo Ltd., 130 S.W.3d at 180 (noting "Nigerian government's ownership ab initio of all minerals in the country and retention of the power to grant leases and approve all assignments suggests it takes a close interest in these matters and would hardly view [the lawsuit] as a private matter between private parties"). Under these circumstances, the exercise of personal jurisdiction by a Texas court would offend the traditional notions of fair play and substantial justice.Conclusion
The trial court's order is affirmed.
Karen Angelini, Justice
1. For example, in its motion for continuance, Solgas refers to the acquisition of LNM Holdings by Ispat International in December of 2004, resulting in "all of the companies with which Solgas conducted negotiations [becoming] a single entity." Solgas further refers to the 2005 acquisition by Mittal Steel of International Steel Group, "a package of five U.S. steel companies" resulting in the acquisition of "8 U.S. steel mills, giving Mittal approximately 40% of the U.S. market for flat-rolled steel used in automobiles."