The Short Arm of the Law: Special Appearances and Personal Jurisdiction

Transcription

1 The Short Arm of the Law: Special Appearances and Personal Jurisdiction by Gregory J. Lensing 1 Appellate Section of the Dallas Bar Association September 18, Staff Attorney, Court of Appeals for the Fifth District of Texas at Dallas. Everything said herein represents my own personal views and opinions, and nothing said herein represents the views of the Court of Appeals or any of its members.

2

3 I. Thumbnail Sketch of the Law of Personal Jurisdiction A. General principles Before a state court can exercise jurisdiction over a nonresident defendant, that exercise of jurisdiction must (1) be authorized by the state s long-arm statute, and (2) be consistent with the Due Process Clause of the Fourteenth Amendment. CSR Ltd. v. Link, 925 S.W.2d 591, 594 (Tex. 1996) (orig. proceeding). These rules also apply to federal courts sitting in diversity. See, e.g., Burger King Corp. v. Rudzewicz, 105 S. Ct (1985); Keeton v. Hustler Magazine, Inc., 104 S. Ct (1984). The Texas Supreme Court has interpreted Texas s long-arm statute to reach as far as the Due Process Clause allows. U Anchor Adver., Inc. v. Burt, 553 S.W.2d 760, 762 (Tex. 1977). So in cases governed by Texas law, courts can and often do skip step one of the analysis entirely. E.g., Bearry v. Beech Aircraft Corp., 818 F.2d 370, 373 (5th Cir. 1987); Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002). On the other hand, sometimes they insist on quoting and even analyzing the applicability of some provision of the long-arm statute, even though it cannot possibly affect the outcome of the case. An exercise of personal jurisdiction comports with the Due Process Clause if (1) the defendant has established minimum contacts with the forum state, and (2) the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002); see generally Burger King Corp. v. Rudzewicz, 105 S. Ct. 2174, (1985). B. Minimum contacts What is a contact for purposes of assessing the defendant s contacts with the forum state? A contact is an act manifesting purposeful availment of the privilege of conducting activities in the forum state, thus invoking the benefits and protections of its laws. Michiana Easy Livin Country, Inc. v. Holten, 168 S.W.3d 777, 784 (Tex. 2005). A contact has three characteristics. First, it must stem from the defendant s own conduct, and not the unilateral activity of another party or a third person. Second, it must be purposeful, as contrasted with activity that is random, isolated, or fortuitous. Third, the defendant must have sought some benefit, advantage, or profit by availing itself of the forum, thus implicitly consenting to jurisdiction there. Id. at 785. Contacts are weighed for sufficiency differently depending on whether the lawsuit arises from or relates to the defendant s contacts with the forum state. If the lawsuit does not arise from or relate to the defendant s contacts with the forum state, then the plaintiff is said to be relying on general jurisdiction over the defendant. In a general-jurisdiction case, minimum contacts are present only if the defendant has continuous and systematic contacts with the forum state. Helicopteros Nacionales de Colombia, S.A. v. Hall, 104 S. Ct. 1868, & n.9 (1984); Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 807 (Tex. 2002). Usually, the defendant must be engaged in longstanding business in the forum state, such as marketing or shipping products, or performing services or maintaining one or more offices there; activities that are less extensive than that will not qualify for general in 1

4 personam jurisdiction. PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 168 (Tex. 2007) (internal quotations and citation omitted). If the lawsuit does arise from or relate to the defendant s forum contacts, then the plaintiff is said to be relying on specific jurisdiction over the defendant. Helicopteros Nacionales de Colombia, S.A. v. Hall, 104 S. Ct. 1868, 1872 & n.8 (1984). In a specificjurisdiction case, the minimum-contacts threshold is less demanding than in the generaljurisdiction context. See BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 797 (Tex. 2002) (noting that general jurisdiction requires a more demanding minimum contacts analysis than specific jurisdiction). C. Fair play and substantial justice If the defendant has minimum contacts with the forum state, the court must then consider whether the exercise of personal jurisdiction would nevertheless offend traditional notions of fair play and substantial justice. Factors that may be considered in this analysis are (1) the burden on the defendant, (2) the interest of the forum state in deciding the dispute, (3) the plaintiff s interest in obtaining convenient and effective relief, (4) the interstate judicial system s interest in obtaining convenient and effective relief, and (5) the shared interest of the several states in furthering fundamental substantive social policies. Burger King Corp. v. Rudzewicz, 105 S. Ct. 2174, 2184 (1985); Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 228 (Tex. 1991). If the defendant is a foreign national, the last two Burger King factors do not apply. Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 232 n.17 (Tex. 1991). However, the court should give significant weight to the unique burdens placed upon one who must defend oneself in a foreign legal system, and it should also consider the procedural and substantive policies of other relevant nations, as well as the federal interest in national foreign-relations policies. Asahi Metal Indus. Co. v. Superior Court, 107 S. Ct. 1026, 1033, 1034 (1987). II. General Jurisdiction and Minimum Contacts A. U.S. Supreme Court The Court has addressed general jurisdiction only twice. In one case, it found that general jurisdiction was proper. In the other, it found that it was not. Perkins v. Benguet Consol. Min. Co., 72 S. Ct. 413 (1952). In the first case, the defendant was a company organized under the laws of the Philippine Islands. Id. at 415. It owned mining properties in the Philippines. Id. at 419. During World War II, the company s president returned to his home state of Ohio, where he maintained an office, kept company files, conducted correspondence and directors meetings, and generally ran the company during and immediately after the war. Id. A nonresident of Ohio sued the company in Ohio, alleging that she was a shareholder and was entitled to dividends and certain stock certificates. Id. at 415. The Court held that Ohio could exercise personal jurisdiction over 2

5 the company, based on the president s continuous and systematic supervision of the necessarily limited wartime activities of the company. Id. at Helicopteros Nacionales de Colombia, S.A. v. Hall, 104 S. Ct (1984). In the second case, the defendant, Helicol, was a Colombian corporation. Id. at Plaintiffs sued Helicol in Texas for wrongful death over a helicopter crash in Peru. Id. at 1870, At the time of the crash, the decedents were working on a pipeline-building joint venture that had hired Helicol to provide helicopters. Id. at Helicol had only the following Texas contacts: Helicol s CEO attended a meeting of the joint venture in Houston at which he made Helicol s proposal to supply helicopters. Id. Helicol purchased about 80% of its helicopter fleet, as well as spare parts and accessories, from Bell Helicopter in Fort Worth. Id. It also sent prospective pilots to Fort Worth for training and other personnel to Fort Worth for technical consultation. Id. And it accepted checks from the joint venture that were drawn on a Texas bank. Id. The Court held that Texas could not exercise personal jurisdiction over Helicol because its Texas contacts were not the kind of continuous and systematic general business contacts the Court found to exist in Perkins. Id. at In one frequently quoted passage, the Court stated that purchases and related trips, standing alone, are not a sufficient basis for a State s assertion of jurisdiction. Id. at B. Texas Supreme Court The Texas Supreme Court has addressed general jurisdiction in two recent cases. In the more recent case it gave a more thorough account of the theoretical underpinnings of general jurisdiction than you ll usually find in the cases. PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163 (Tex. 2007). Kimberly-Clark tried to implead PHC-Minden into a wrongful-death case in Texas. Id. at 165. The decedent had been treated at a Louisiana hospital owned by PHC-Minden in the course of her final illness. Id. The evidence showed that PHC-Minden was a nonresident limited partnership, and that the only facility it owned was the hospital in Louisiana. Id. at 170. It did not advertise in Texas, owned no property in Texas, maintained no offices or bank accounts in Texas, and had no registered agent for service of process in Texas. Id. On the other hand, it sent employees to two business-related meetings in Texas, paid Texas vendors about $1.5 million over about 3 ½ years, and had two contracts with Texas companies. Id. at One of the Texas companies agreed to conduct a marketing study of residents in the hospital s service area, and the other company was a radiology P.A. that provided specialty coverage via teleradiology equipment. Id. at 171. The court concluded that PHC-Minden s contacts were more like those in Helicopteros than those in Perkins, so it held that general jurisdiction over PHC-Minden was not constitutionally permissible. Id. The theoretical discussion of general jurisdiction is found at pp , and in it the court endorses the proposal by some commentators to think of general jurisdiction as disputeblind jurisdiction. That is, you ignore the specifics of the lawsuit before the court and assume that the suit has absolutely nothing to do with Texas like a slip-and-fall in the defendant s home office. Then you decide whether the nonresident s Texas contacts are so pervasive that it is reasonable to hale it into Texas court for that hypothetical dispute. Another possibly important 3

6 passage is this quotation from Wright and Miller s treatise: Usually, the defendant must be engaged in longstanding business in the forum state, such as marketing or shipping products, or performing services or maintaining one or more offices there; activities that are less extensive than that will not qualify for general in personam jurisdiction. Id. at 168 (citation omitted). This decision should provide some helpful concrete benchmarks for parties when they are trying to explain to the court what continuous and systematic contacts are. Another useful aspect of the decision is its holding that you begin counting contacts as of a reasonable number of years before the lawsuit is filed and you stop counting the date the lawsuit is filed. Id. at Post-filing contacts do not count. Id. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801 (Tex. 2002). Veterans of the Persian Gulf War sued 82 defendants in Texas, alleging that the defendants had supplied materials that Iraq used to create biological and chemical weapons. Id. at 804. ATCC specially appeared. Id. The evidence showed that ATCC was a District of Columbia corporation with its principal place of business in Maryland. Id. at 807. Its business consisted of serving as a long-term repository center for living microorganisms, viruses, and cell lines, and of selling biological research materials to purchasers throughout the United States and abroad. Id. at 804. It maintained no places of business in Texas and was not authorized to do business in Texas. Id. at 807. It advertised in national and international journals, and it sent catalogues only on request. Id. It sold products to Texas residents for at least 18 years, and when the suit was filed some 3.5% of ATCC s annual sales were to Texas residents. Id. It shipped all products F.O.B. Maryland. Id. As for its repository services, ATCC performed all of those services in Maryland; over the 15 to 20 years before suit was filed, 2.7% of the patents in ATCC s repository came from Texas residents. Id. ATCC had a contract with UT Southwestern to propagate and test cell lines, which it did in Maryland. Id. at Finally, ATCC purchased $378,000 of supplies from Texas vendors over a five-year period, some of which were shipped F.O.B. Texas, and ATCC representatives attended five scientific conferences in Texas over seven years. Id. at 808. The trial court denied ATCC s special appearance, and the San Antonio Court of Appeals affirmed. Id. at 804. The Texas Supreme Court reversed. It discounted ATCC s sales of products to Texans because it shipped its goods F.O.B. Maryland, thus demonstrating an intent to avoid availing itself of the benefits and protections of Texas law. Id. at 808. ATCC s service contracts counted for little because it performed its services in Maryland. Id. at ATCC s purchases from Texas vendors counted for little because purchases from the forum state always count for little. Id. at 808. Attendance at conferences in Texas counted for little since ATCC did not select the conference sites. Id. at 809. The court compiled all these contacts, compared them to Perkins and Helicopteros, and held that ATCC s contacts were more like the contacts in Helicopteros. Id. at Accordingly, it rendered judgment of dismissal for ATCC. Id. at 810. C. Texas Courts of Appeals The supreme court s decisions in Coleman and PHC-Minden embrace a standard for general jurisdiction minimum contacts that may be quite a bit more rigorous than Texas courts had been using previously. The Dallas Court of Appeals hopped on the bandwagon soon after Coleman in the case of Counter Intelligence, Inc. v. Calypso Waterjet Sys., Ins., 216 S.W.3d 512 4

7 (Tex. App. Dallas 2007, pet. denied). A Texas machine manufacturer sued a Maryland company, Counter Intelligence, that had bought one of the seller s machines through an independent distributor in Pennsylvania. To support general jurisdiction, the seller proved that Counter Intelligence had a longstanding and ongoing purchasing relationship with a different company headquartered in Texas. For several years, Counter Intelligence bought tons of raw material from the Texas company to the tune of about $2 million a year. It used the internet frequently to make purchases and check on orders. Despite this ongoing relationship with a Texas enterprise, the Dallas Court of Appeals reversed the trial court and held that this is not the kind of substantial contact with the state of Texas that would support general jurisdiction under Coleman and, before that, Helicopteros. Without even mentioning Coleman or PHC-Minden, the Houston First Court of Appeals offered this strong statement about general jurisdiction: Texas courts often consider the lack of an office, agent, or the solicitation of business as determinative to the exercise of general jurisdiction. Ashdon, Inc. v. Gary Brown & Assocs., Inc., No CV, 2008 WL , at *8 (Tex. App. Houston [1st Dist.] May 29, 2008, no pet. h.). HIT LIST. To reach its holding the Counter Intelligence court had to distinguish a 1993 case, Temperature Systems, Inc. v. Bill Pepper, Inc., 854 S.W.2d 669 (Tex. App. Dallas 1993, writ dism d by agr.). In that case, the court held that general jurisdiction was proper because a Wisconsin heating and air conditioning dealer had interdistributor relationships with a bunch of Texas distributors of the same kind of equipment. When the Wisconsin company needed equipment it didn t have, it could get it from the Texas dealers, and vice versa. In my view, that was not enough to establish general jurisdiction over the Wisconsin company, and the Counter Intelligence court both distinguished Temperature Systems and acknowledged that its continued viability may be in question after Coleman. 216 S.W.3d at 525 n.1. Its continued viability is even more seriously in doubt after PHC-Minden. Someone needs to get a court to say it s been overruled. III. Specific Jurisdiction and Minimum Contacts A. U.S. Supreme Court Most of the Court s personal-jurisdiction cases are about specific jurisdiction. I ll discuss only two of the most famous. Burger King Corp. v. Rudzewicz, 105 S. Ct (1985). Michigan resident John Rudzewicz and a business partner negotiated a franchise agreement with Burger King, a Florida corporation. Id. at Their restaurant did not thrive, and they fell fall behind in their monthly payments to Burger King. Id. Although Burger King eventually terminated the franchise agreement, Rudzewicz and his partner refused to cease operating their restaurant as a Burger King. Id. at Burger King sued them in federal court in Florida, and the district court denied the defendants motions to dismiss for lack of personal jurisdiction. Id. The Eleventh Circuit reversed, holding that the exercise of personal jurisdiction violated Rudzewicz s due-process rights. Id. at

8 The Supreme Court reversed the Eleventh Circuit and held that Florida s assertion of jurisdiction over Rudzewicz did not offend due process. In one paragraph, it encapsulated the three-part formula later reiterated by the Texas Supreme Court in Michiana: minimum contacts requires purposeful availment, which means (1) not random, fortuitous, or attenuated contacts, and (2) not the unilateral activity of another party or third person, but (3) availment of the privilege of conducting business in the forum state and taking advantage of the benefits and protections of the forum s laws. Id. at In a contract case like this one, the court should consider the whole course of the relationship, from the prior negotiations, to the contract terms themselves, to the contemplated future performance and consequences, in deciding whether the defendant purposefully established minimum contacts with the forum state. Id. at Here, Rudzewicz entered a 20-year contract with Burger King in Florida, after negotiations with Burger King personnel in Florida. He was required to make regular payments to Burger King in Florida, and submitted to long-term and exacting regulation of his restaurant from Florida. Interestingly, the Court also gave some weight to the Florida choice-of-law clause in the contract, even though there was apparently no forum-selection clause therein. The choice-of-law clause, combined with the 20-year relationship Rudzewicz established with Burger King s Miami headquarters, showed Rudzewicz s deliberate affiliation with the forum State and the reasonable foreseeability of possible litigation there. Id. at Asahi Metal Indus. Co. v. Superior Court, 107 S. Ct (1987). This famous case on the exercise of personal jurisdiction over nonresident product manufacturers in product-liability cases is famously inconclusive inconclusive because no majority could be formed as to whether the nonresident manufacturer had established minimum contacts with the relevant state, California. The case arose from a fatal motorcycle crash in California. Id. at The plaintiff sued the motorcycle tire tube manufacturer, Cheng Shin, in California state court, and Cheng Shin impleaded Asahi, manufacturer of the tube s valve assembly. Id. Asahi, a Japanese corporation, raised a personal-jurisdiction defense to the thirdparty claim. Id. Evidence showed that Asahi s valve assemblies were manufactured in Japan and shipped to Cheng Shin in Taiwan. Id. Cheng Shin sold its finished tubes to purchasers all over the world. Id. The president of Asahi duly attested that Asahi has never contemplated that its limited sales of tire valves to Cheng Shin in Taiwan would subject it to lawsuits in California. Id. The trial court ruled against Asahi, the court of appeals reversed, and the California Supreme Court reversed again. Id. at The Supreme Court granted certiorari and ruled in favor of Asahi, but a majority could agree only that the exercise of personal jurisdiction offended traditional notions of fair play and substantial justice. Id. at The Court cited the unique burdens placed upon foreign defendants and the lack of a strong California interest in adjudicating an indemnity dispute between two foreign companies in the course of reaching its conclusion. Id. As for minimum contacts, a four-justice plurality concluded that a manufacturer s placing its product into the stream of commerce, without more, is not sufficient purposeful availment of the forum state to constitute minimum contacts, even if the defendant is aware that the stream will eventually wash its products ashore in the forum state. Id. at 1032 (plurality op.). Another four justices would have held that Asahi s knowledge that Cheng Shin regularly sold products containing Asahi valve assemblies in California did satisfy the minimum-contacts test. Id. at 1037 (Brennan, J., concurring). To date, the Court has not revisited the issue, leaving it to the states and the lower 6

9 federal courts to adopt a knowledge or a knowledge-plus test for stream-of-commerce jurisdiction. B. Texas Supreme Court The Texas Supreme Court has addressed specific jurisdiction in a couple of significant recent cases. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569 (Tex. 2007). This case addressed the question of how close the relationship must be between the defendant s Texas contacts and the plaintiff s cause of action in order to satisfy specificjurisdiction minimum contacts. Moki Mac was a Utah-based river-rafting outfitter. Id. at 573. The Druggs lived in Texas, and 13-year-old Andy Drugg went on a Moki Mac river-rafting trip. Id. He was fatally injured in a fall from a ledge. Id. The Druggs sued Moki Mac in Texas. Id. The trial court denied Moki Mac s special appearance, and the court of appeals affirmed based on a specific-jurisdiction theory. Id. The supreme court reversed. It concluded that there was evidence of purposeful availment by Moki Mac it regularly advertised in Texas, it engaged in significant marketing efforts in Texas, and it sent the Druggs a brochure and a release. Id. at But it concluded that the Druggs claims were not sufficiently related to those Texas contacts. It surveyed the jurisprudence in other jurisdictions and settled on the following test: there must be a substantial connection between [the defendant s] contacts and the operative facts of the litigation. Id. at 585. The Druggs argued that the operative facts of the litigation included the misrepresentations that Moki Mac made in the promotional materials it sent into Texas, thus satisfying the relatedness requirement. Id. But the court disagreed. The court concluded that the focus of the trial would be the events that took place during the hike and the adequacy of the supervision provided by Moki Mac s guides. Id. The connection between the promotional materials and the operative facts that led to Andy s death were not sufficiently direct to meet due-process concerns. Id. Michiana Easy Livin Country, Inc. v. Holten, 168 S.W.3d 777 (Tex. 2005). This case arose from a contract between a Texan and a non-texan. Texan James Holten wanted an RV, and he wanted a good deal. Id. at 784. He tracked down a factory outlet for Coachman RV s, a company located in Indiana called Michiana Easy Livin Country. Id. He contacted Michiana, bought an RV, and had it shipped to him in Texas at his expense. Id. Then he sued Michiana in Texas for breach of contract and fraud. Id. The trial court denied Michiana s special appearance, and the court of appeals affirmed. The supreme court reversed, holding that Michiana did not have minimum contacts with Texas. It concluded that Michiana s single Texas contact fell far short of the requirements for stream of commerce jurisdiction even under the most liberal approach to that doctrine. Id. at 786 ( [A]s we have noted before, stream-of-commerce jurisdiction requires a stream, not a dribble. ). Nor did the single contract between Holten and Michiana suffice. Three factors seemed to play into this conclusion: the transaction was solicited by the Texan, it was an isolated sale, and the consumer used the product in a state where the seller otherwise did no 7

10 business. See id. at The court rejected a line of decisions in which lower courts had approved the exercise of personal jurisdiction over nonresidents based solely on the foreseeability that their conduct would cause harm in Texas, even if the nonresident did not initiate the contact. Id. at The court also disapproved a line of decisions in which lower courts had focused on whether the nonresident s contacts with Texas were tortious instead of on whether they amounted to proper minimum contacts. Id. at Finally, the court held that a contractual forum-selection clause in favor of the county of Michiana s principal office should not be ignored in ascertaining whether Michiana had purposefully availed itself of Texas. Id. at C. Texas Courts of Appeals In a specific-jurisdiction case, it can be difficult to follow the Michiana directive to consider only the defendant s contacts with Texas and not its potential for liability when assessing minimum contacts. The court arguably blurred the lines between the two in Kelly v. General Interior Construction, Inc., No CV, 2008 WL , at *3 4 (Tex. App. Houston [14th Dist.] July 3, 2008, pet. filed). The dissent seems to have the better of the argument on that point. Id. at *9 (Frost, J., dissenting). If a Texas company sells its services to a nonresident, and the Texas company renders its services to the nonresident outside of Texas, the nonresident will not be subject to specific jurisdiction in Texas in a lawsuit for nonpayment and breach of a noncompetition agreement effective only in the nonresident s home state. This is so even if the contract contains a Texas choice-of-law clause and recites (contrary to fact) that the contract would be performable in Texas. Healix Infusion Therapy, Inc. v. S. Fla. Infectious Diseases & Tropical Med. Ctrs., LLC, No CV, 2008 WL (Tex. App. Houston [1st Dist.] July 24, 2008, no pet. h.) (mem. op.). IV. Fair Play and Substantial Justice You don t hear much about this second element of the test for the constitutionality of the exercise of personal jurisdiction over a non-resident. When this element is dispositive, the defendant is often a citizen of a foreign country, as in Asahi Metal Indus. Co. v. Superior Court, 107 S. Ct (1987). Another example is Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223 (Tex. 1991). But in an interesting recent case, the Dallas Court of Appeals held that a California lawyer was not subject to personal jurisdiction in a Texas legal-malpractice case arising from legal work he did in California. The court seemed to rely on both the minimum-contacts element and the fair-play element, and in connection with the latter noted that the lawyer was a single parent and would be subject to unusual hardship if forced to litigate the case in Texas. Bergenholtz v. Cannata, 200 S.W.3d 287, 297 (Tex. App. Dallas 2006, no pet.). On the other hand, a similar argument failed to carry the day in Cartlidge v. Hernandez, 9 S.W.3d 341, 350 (Tex. App. Houston [14th Dist.] 1999, no pet.) ( Cartlidge notes... traveling to Houston would be a tremendous burden on him because he is a self-employed solo practitioner and he is married with two infant children. While we empathize with Cartridge s position, we cannot 8

11 agree that a trial on the merits in Houston would offend traditional notions of fair play and substantial justice. ). A. Waiver V. Procedural Issues in Special Appearances Rule 120a provides that a special appearance shall be made by sworn motion filed prior to motion to transfer venue or any other plea, pleading or motion; provided[,] however, that a motion to transfer venue and any other plea, pleading, or motion may be contained in the same instrument or filed subsequent thereto without waiver of such special appearance; and may be amended to cure defects. The issuance of process for witnesses, the taking of depositions, the serving of requests for admissions, and the use of discovery processes, shall not constitute a waiver of such special appearance. Every appearance, prior to judgment, not in compliance with this rule is a general appearance. TEX. R. CIV. P. 120a(1). Moreover, [a]ny motion to challenge the jurisdiction provided for herein shall be heard and determined before a motion to transfer venue or any other plea or pleading may be heard. TEX. R. CIV. P. 120a(2). Dawson-Austin v. Austin, 968 S.W.2d 319 (Tex. 1998). Husband sued nonresident Wife for divorce in Texas. Wife filed a pro se pleading that included a special appearance, motion to quash citation, plea to the jurisdiction, plea in abatement, and original answer. The pleading was verified in part, but the verification omitted any reference to the special appearance. The trial court overruled the special appearance because it was not verified and because the other motions in the document were not made subject to the special appearance. Wife filed an amended special appearance, which the trial court overruled on the merits. The court appeals affirmed the denial of Wife s first special appearance because it was unsworn and affirmed the denial of her amended special appearance because Wife argued her motion to quash before she filed the amended special appearance. Id. at 321. The Texas Supreme Court reversed. It laid down a general rule that a party enters a general appearance when it (1) invokes the judgment of the court on any question other than jurisdiction, (2) recognizes by its acts that an action is properly pending, or (3) seeks affirmative action from the court. Id. at 322. On the facts of this case, it first held that the lack of a verification is a curable defect. Next, it held that the lack of a verification does not have to be cured before the special appearance is ruled upon; it just has to be cured before the defendant makes a general appearance. Id. Third, it held that Wife s other motions and pleas were automatically subject to her special appearance by virtue of Rule 120a, so she didn t have to include such language in her filing. Id. at As to the hearing of Wife s motion to quash, the court found no waiver there because the hearing took place at Husband s insistence and contrary to Wife s motion for continuance filed the day of the hearing. The motion for continuance was not itself a waiver because Rule 120a permits the filing of subsequent motions and pleadings without waiver of the special appearance. Id. at 323. The opinion contains a notable gloss on the discovery provisions of Rule 120a(1). On the face of the rule, the use of discovery processes, shall not constitute a waiver of such special appearance. TEX. R. CIV. P. 120a(1). The Dawson-Austin opinion suggests that this free pass to 9

12 conduct discovery is limited to jurisdictional discovery: Dawson-Austin was also entitled to seek a postponement of the special appearance hearing until she could complete discovery, as expressly permitted by Rule 120a, and she was entitled to ask for more time for discovery on her motion to quash, provided she did not attempt to take that discovery before the special appearance was decided. 968 S.W.2d at 323 (emphasis added). On the merits, the court held that Texas had jurisdiction to grant Husband s divorce, but it lacked personal jurisdiction to divide the marital estate because Wife had no meaningful contacts with Texas. Id. at , Exito Elecs. Co., Ltd. v. Trejo, 142 S.W.3d 302 (Tex. 2004) (per curiam). The supreme court lent defendants a hand in this case too. This was a products-liability case against a Taiwanese manufacturer. Id. at Exito made a special appearance and lost in the trial court. The court of appeals affirmed on waiver grounds that the plaintiffs hadn t even raised. The supreme court disagreed with all of the lower court s waiver grounds and reversed for further proceedings. Id. at 304. To summarize: Exito made a Rule 11 agreement with plaintiffs counsel extending Exito s time to file its initial pleading and filed that agreement with the trial court before filing its special appearance. Id. The supreme court held that such conduct does not constitute a general appearance prior to the special appearance and does not waive the special appearance, even if the agreement is not made expressly subject to a special appearance. Id. at 306. Exito filed two discovery motions and obtained rulings on them before the specialappearance hearing. The discovery related solely to personal jurisdiction. Id. The supreme court held that this conduct also did not constitute waiver: [A] trial court s resolution of discovery matters related to the special appearance does not amount to a general appearance by the party contesting personal jurisdiction. Id. at 307. Finally, the court of appeals held that Exito s verification of its special appearance and its verification of a supporting affidavit were defective, leaving Exito with no proof. Id. The supreme court assumed that the court of appeals was correct on this legal point, but it rejected the court s conclusion that this meant Exito automatically lost. Id. The record also contained the pleadings and the deposition of Exito s corporate representative. Id. The court concluded that [a]ny defect in proof goes to the merits; it is simply not a waiver issue. Id. at 308. So the supreme court sent the case back to the court of appeals, and it affirmed the trial court on the merits of its denial of Exito s special appearance. Exito Elecs., Co., Ltd. v. Trejo, 166 S.W.3d 839 (Tex. App. Corpus Christi 2005, no pet.). The Houston First Court of Appeals recently followed the trend of declining to find waiver based on other motions that are pressed before the special appearance but also somehow relate to that special appearance. In that case, the specially appearing defendant moved to strike an amended pleading that the plaintiff filed just before the special-appearance hearing. The defendant argued that the amended pleading needed to be struck because it would have given the 10

13 plaintiffs additional grounds for continuing the special-appearance hearing. The court of appeals disagreed with the trial court and held that this motion to strike was sufficiently closely connected to the special appearance as not to constitute a waiver. First Oil PLC v. ATP Oil & Gas Corp., No CV, 2008 WL , at *7 11 (Tex. App. Houston [1st Dist.] May 22, 2008, no pet. h.). Preserving your special appearance after suffering a default judgment. For a discussion of this issue, see Julia F. Pendery, Shawn M. McCaskill & Hilaree A. Casada, Dealing with Default Judgments, 35 ST. MARY S L.J. 1, 40 (2003). B. Partial Special Appearance? Partial special appearances are a rare animal, but Rule 120a does recognize the possibility by stating that [a] special appearance may be made as to an entire proceeding or as to any severable claim involved therein. TEX. R. CIV. P. 120a(1). I have never seen a partial special appearance, but I can imagine seeing one in a family-law case in which the court might have sufficient personal jurisdiction to render a decree of divorce affecting a nonresident spouse but not to divide the marital estate if the nonresident spouse lacks minimum contacts with Texas. See Dawson-Austin v. Austin, 968 S.W.2d 319 (Tex. 1998). Even rarer, perhaps, is the appellate decision holding in an ordinary civil case that a special appearance had to be sustained as to one claim but affirming its denial as to two others. That s exactly what happened in Kelly v. General Interior Construction, Inc., No CV, 2008 WL (Tex. App. Houston [14th Dist.] July 3, 2008, pet. filed). C. Burden of Proof Issues The Texas rule: The plaintiff bears the initial burden of pleading allegations sufficient to bring a nonresident defendant within the provisions of the long-arm statute. But upon filing a special appearance, the nonresident defendant assumes the burden to negate all the bases of personal jurisdiction alleged by the plaintiff. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 807 (Tex. 2002) (citations omitted). For some discrete issues on which the plaintiff always bears the burden of proof, see Part VI, infra. 1. What does all bases of jurisdiction mean? What are the bases of personal jurisdiction alleged by the plaintiff? According to one court, [t]his standard does not mean that the nonresident defendant must negate every possible ground in the universe, but rather the acts in Texas alleged by the appellant to support personal jurisdiction. Walker Ins. Servs. v. Bottle Rock Power Corp., 108 S.W.3d 538, 548 (Tex. App. Houston [14th Dist.] 2003, no pet.). Some courts have said that if the plaintiff makes no jurisdictional allegations in its petition, the defendant carries its burden simply by proving that it is a nonresident. E.g., Bruno s, Inc. v. Arty Imports, Inc., 119 S.W.3d 893, 897 (Tex. App. Dallas 2003, no pet.). The Waco Court of Appeals recently expressed some disagreement with that rule, holding that the 11

14 plaintiff may be able to raise additional jurisdictional issues in its special-appearance response or special-appearance evidence. Zimmerman v. Glacier Guides, Inc., 151 S.W.3d 700, (Tex. App. Waco 2004, no pet.). Cautionary tale: Defendants should be cautious before assuming that the plaintiff has made no jurisdictional allegations and relying solely on proof of nonresidency. In a productsliability suit arising from a fire caused by an XBOX video game system, the defendant relied solely on proof of nonresidency because the plaintiff appeared to have alleged no acts by the defendant in Texas. Ji-Haw Indus. Co., Ltd. v. Broquet, No CV, 2008 WL , at *1, 2 (Tex. App. San Antonio Feb. 20, 2008, no pet.). The court of appeals disagreed, even though the only reference to events in Texas pleaded by the plaintiff seems to have been that [a]ll or a substantial part of the events or omissions giving rise to this claim occurred in Duval County, Texas. Id. at *2. Cautionary tale part 2: Ltd. Logistics Servs., Inc. v. Villegas, No CV, 2008 WL (Tex. App. Corpus Christi Aug. 27, 2008, no pet. h.). Villegas was a truck driver employed by a Texas company called SDS. He was injured when a fellow SDS employee backed his truck into him and pinned him against a wall during a delivery to a Bath and Body Works store in McAllen. He sued non-resident Limited Logistics, among others, asserting that Limited Logistics was engaged in a single business enterprise with SDS and Bath and Body Works. After Limited Logistics filed its special appearance, Villegas amended to add allegations that Limited Logistics negligently hired [SDS] as an independent contractor, and SDS had in turn negligently hired the co-worker who ran into Villegas. Limited Logistics did not amend its special appearance to address this new allegation, and the trial court denied the special appearance. On interlocutory appeal, the Corpus Christi Court of Appeals affirmed because Limited Logistics did not specifically argue in the trial court that it did not retain control over SDS as Villegas alleged in his negligent-hiring claim. One could argue that Limited Logistics should not have had to make such an argument because Villegas himself apparently pleaded that Limited Logistics hired SDS as an independent contractor, and so SDS s contacts should not be imputed to Limited Logistics. Moreover, the contract between Limited Logistics and SDS was in the record, so the court of appeals could see for itself what kind of control Limited Logistics had. But because Limited Logistics did not specifically address this new jurisdictional basis, it basically waived its appeal. The dissenting justice reviewed the contract and would have held that SDS really was an independent contractor whose contacts could not be imputed to Limited Logistics. 2. Does the burden ever shift back to the plaintiff? According to Corpus Christi, it does: Once the defendant has produced credible evidence negating all bases of jurisdiction, the plaintiff bears the ultimate burden to establish that the Texas court has personal jurisdiction over the defendant as a matter of law. M.G.M. Grand Hotel, Inc. v. Castro, 8 S.W.3d 403, 408 (Tex. App. Corpus Christi 1999, no pet.). Citing the Corpus Christi rule favorably: Oryx Capital Int l, Inc. v. Sage Apts., L.L.C., 167 S.W.3d 432, 441 (Tex. App. San Antonio 2005, no pet.); Riviera Operating Corp. v. Dawson, 29 S.W.3d 905, 908 (Tex. App. Beaumont 2000, pet. denied). 12

15 Rejecting the Corpus Christi rule: LeBlanc v. Kyle, 28 S.W.3d 99, 101 n.1 (Tex. App. Texarkana 2000, pet. denied) ( The Corpus Christi court cited no authority for this language, and we decline to follow it. ). D. Discovery and Special Appearances 1. In the trial court The rules are generally silent, except for Rule 120a s proviso that [t]he issuance of process for witnesses, the taking of depositions, the serving of requests for admissions, and the use of discovery processes, shall not constitute a waiver of such special appearance. TEX. R. CIV. P. 120a(1). Anecdotally, it seems that some trial judges are well-disposed to motions for protective orders that seek to limit discovery to jurisdictional facts until the special appearance can be heard. But a specially appearing defendant should expect to have to participate in some discovery. That is the lesson of Barron v. Vanier, 190 S.W.3d 841 (Tex. App. Fort Worth 2006, no pet.). The specially appearing defendants in that case set their special appearances for hearing and opposed the plaintiff s request for a continuance, which was based on the need for jurisdictional discovery. The trial court denied the request for a continuance and sustained the special appearances. On appeal, the court of appeals reversed, holding that, under the particular circumstances, the plaintiff had not been given a fair opportunity to conduct jurisdictional discovery in the eight months that elapsed between the filing of the lawsuit and the specialappearance hearing. On the other hand, in a case citing Barron, the San Antonio Court of Appeals upheld the trial court s decision not to allow the plaintiff to go on a fishing expedition to try to create alter ego jurisdiction over a foreign corporation. Solgas Energy Ltd. v. Global Steel Holdings Ltd., No CV, 2007 WL (Tex. App. San Antonio July 3, 2007, no pet.). Unlike the plaintiff in Barron, Solgas did not make a sufficient threshold showing that it might be able to make out a case for alter ego if only the discovery were permitted. Id. at *7. 2. During an interlocutory appeal Can the appealing litigant get a stay of discovery (or perhaps a stay of all proceedings in the trial court) while an interlocutory appeal is pending? The rules are silent on the subject, but it seems likely that a court would look favorably on a request for such relief. It would seem to hollow out the value of the defendant s constitutional right to be free from suit in the jurisdiction if the defendant still had to participate in discovery and motions practice during the pendency of its interlocutory appeal. In one case, the appealing defendants asked the court of appeals to stay all trial-court proceedings during the pendency of their interlocutory appeal. The plaintiffs asked the court of appeals to limit the stay so as to permit discovery against another defendant that was not a party to the interlocutory appeal. The defendants-appellants did not agree with this, presumably because they didn t want to get left behind as discovery proceeded without them. The court of appeals did not stay the entire case, but it did stay all discovery pending final determination of the interlocutory appeal. Lattin v. Barrett, 127 S.W.3d 276 (Tex. App. Waco 2003, order). 13

16 E. Evidence Parties can use affidavits as special-appearance evidence if they file those affidavits at least seven days before the special-appearance hearing. TEX. R. CIV. P. 120a(3). Those affidavits shall be made on personal knowledge, shall set forth specific facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify. Id. That means conclusory affidavits are not probative evidence on a special appearance. Rogers v. TexWest, L.L.C., No CV, 2008 WL , at *4 (Tex. App. Dallas Aug. 12, 2008, no pet. h.). However, if the affidavit satisfies the requirements of personal knowledge and competency to testify on its face, the trial court does not have to strike it even if other evidence indicates that the affiant was testifying without personal knowledge. Asshauer v. Farallon Capital Partners, L.P., No CV, 2008 WL , at *6 (Tex. App. Dallas Feb. 12, 2008, no pet.). F. Reporter s Record Not Necessarily Required Failing to bring forward a reporter s record of the special-appearance hearing is not necessarily fatal to a subsequent appeal. If everyone agrees that no evidence was taken at the hearing and that all the evidence was on file and is contained in the reporter s record, the appellate courts will not hold that the losing party forfeits its appeal for failure to bring forward a reporter s record. Michiana Easy Livin Country, Inc. v. Holten, 168 S.W.3d 777 (Tex. 2005). Still, I would consider insisting on a reporter s record for every special-appearance hearing. Too many important things can happen that a record can prove very helpful in preserving. Your opponent could make some admissions or stipulations that you need preserved for posterity. The trial court could make evidentiary rulings on filed evidence that you need to capture. If there is a request for continuance, that should definitely be taken of record. An unusual illustration of the helpfulness of a reporter s record is Milacron Inc. v. Performance Rail Tie, L.P., No CV, 2008 WL (Tex. App. Texarkana Aug. 27, 2008, no pet. h.). Milacron got sued but never answered or otherwise appeared until the time of trial. The first day of trial, apparently after opening statements, Milacron filed its special appearance. But there was no reporter s record to explain exactly how or when Milacron filed the special appearance. There was no reporter s record to show that Milacron requested a hearing on its special appearance or objected to any failure to rule on it. Because Milacron could not demonstrate that it did all these things before proceeding to trial on the merits, the appellate court held that it had to affirm the denial of its special appearance. G. Interlocutory Appeal Use It or Lose It? The Waco Court of Appeals recently held, with virtually no discussion or analysis, that a party who passes up the opportunity to take an interlocutory appeal from a special-appearance ruling may not challenge that ruling on an appeal from a subsequent final judgment. Matis v. Golden, 228 S.W.3d 301, 305 (Tex. App. Waco 2007, no pet.). The chief justice filed a short concurring opinion highlighting the importance of this understated holding but not explaining why this is the rule. Id. at 312 (Gray, C.J., concurring). 14

17 The Austin Court of Appeals has disagreed with Matis and held that an aggrieved party can wait until its appeal from the final judgment to challenge interlocutory special-appearance rulings. GJP, Inc. v. Ghosh, 251 S.W.3d 854, (Tex. App. Austin 2008, no pet.). H. Standard of Review on Appeal There was a controversy about this for a while. The Texas Supreme Court settled the controversy in 2002, holding that the ultimate conclusion about whether the defendant is subject to personal jurisdiction is a question of law reviewed de novo, while the trial court s findings of fact are reviewed for legal and factual sufficiency of the evidence. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). I have never seen a case in which the appellate court drew any kind of distinction between factual and legal sufficiency, and I certainly haven t seen a case in which the appellate court reversed and remanded for a new hearing because the evidence was legally but not factually sufficient. Some special-appearance appeals mention sufficiency challenges to particular fact findings, but it is somewhat rare for the appeal to turn on the fact findings. One case in which the fact findings proved crucial is Ashdon, Inc. v. Gary Brown & Assocs., Inc., No CV, 2008 WL (Tex. App. Houston [1st Dist.] May 29, 2008, no pet.). The plaintiffs claimed that the nonresident defendant, which was a former sales agent for the plaintiffs, converted samples and promotional materials it had obtained from the plaintiffs. The plaintiffs said they gave the defendant the samples and promotional materials when it was in Texas. The defendant said it was given the samples and promotional materials in Florida. The trial court granted the defendant s special appearance, and the court of appeals affirmed because the trial court was entitled to pick and choose between the two stories, both of which were supported by the evidence. VI. Imputing Contacts A. Agency When a plaintiff tries to impute the contacts of one entity to another non-resident entity, the plaintiff will generally bear the burden of proof throughout the special-appearance proceeding. Agency is an example. To impute the contacts of one entity to another on the ground that the first entity is the agent of the second entity, the plaintiff must prove that the agency relationship exists. Capital Fin. & Commerce AG v. Sinopec Overseas Oil & Gas, Ltd., No CV, 2008 WL (Tex. App. Houston [1st Dist.] May 22, 2008, no pet.) (relying on IRA Res., Inc. v. Griego, 221 S.W.3d 592 (Tex. 2007)); Olympia Capital Assocs., L.P. v. Jackson, 247 S.W.3d 399, 413 (Tex. App. Dallas 2008, no pet.). In Olympia Capital, the Dallas Court of Appeals used the familiar test from the vicarious-liability context to ascertain whether the purported agent was really an agent or just an independent contractor whose contacts would not be imputed: did the nonresident defendant have the right to dictate the means and details of the putative agent s work, or just the end to be accomplished? Olympia Capital Assocs., 247 S.W.3d at