Opinion
04-21-00213-CV
03-30-2022
AIKG, LLC d/b/a Andretti Indoor Karting & Games, Appellant v. CSP CONSULTANTS GROUP, LLC, Appellee
From the 73rd Judicial District Court, Bexar County, Texas Trial Court No. 2018CI12924 Honorable Tina Torres, Judge Presiding
Luz Elena D. Chapa, Justice Liza A. Rodriguez, Justice Lori I. Valenzuela, Justice
MEMORANDUM OPINION
Luz Elena D. Chapa, Justice
REVERSED AND RENDERED
Appellant AIKG, LLC d/b/a Andretti Indoor Karting & Games appeals the trial court's order overruling its special appearance, arguing the trial court did not have personal jurisdiction over it. We reverse the trial court's order overruling AIKG's special appearance and render judgment dismissing appellee CSP Consultants Group, LLC's lawsuit against AIKG for lack of personal jurisdiction.
BACKGROUND
AIKG is a company formed in Georgia that operates indoor karting and gaming facilities in Florida, Georgia, and Texas. Its principal place of business is Georgia. CSP is a low voltage engineering firm formed in Virginia. CSP alleged it entered into an agreement with AIKG to provide low voltage designs for AIKG's then-forthcoming San Antonio, Texas facility. CSP further alleged that after it provided AIKG with the designs, AIKG refused to pay for them.
CSP did not identify where it maintained its principal place of business, noting only that it had a Texas location.
CSP filed suit against AIKG for breach of contract and quantum meruit in 2018, pleading a fraud claim and additional jurisdictional facts in its third amended petition. AIKG filed a special appearance arguing the trial court did not have personal jurisdiction over it and seeking dismissal of all claims. CSP responded by arguing the court had both specific and general jurisdiction over AIKG, and the court should overrule AIKG's special appearance. After a hearing, the trial court overruled AIKG's special appearance.
This appeal followed.
PERSONAL JURISDICTION
AIKG argues the trial court erred by denying its special appearance because the trial court did not have personal jurisdiction over it either through general or specific jurisdiction. We agree.
A. Standard of Review
Whether a trial court has personal jurisdiction over a nonresident defendant is a question of law we review de novo. Luciano v. SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 8 (Tex. 2021). "When, as here, the trial court does not issue findings of fact and conclusions of law with its judgment, we presume all factual disputes were resolved in favor of the trial court's decision unless they are challenged on appeal." Id.
B. Challenging Personal Jurisdiction Through a Special Appearance
"A court must have . . . personal jurisdiction over the parties to issue a binding judgment." Id. at 7-8. "Personal jurisdiction involves a court's ability to bind a particular party to that judgment." Id. at 8. "The plaintiff bears the initial burden of pleading allegations that suffice to permit a court's exercise of personal jurisdiction over the nonresident defendant." Searcy v. Parex Res., Inc., 496 S.W.3d 58, 66 (Tex. 2016). A nonresident defendant may make a special appearance for the purpose of objecting to a trial court's exercising personal jurisdiction over them. Tex.R.Civ.P. 120a(1). "If the plaintiff's allegations are sufficient, the burden shifts to the defendant to negate all bases of personal jurisdiction alleged by the plaintiff." FedEx Corp. v. Contreras, No. 04-19-00757-CV, 2020 WL 4808721, at *3 (Tex. App.-San Antonio Aug. 19, 2020, no pet.) (mem. op.). "In considering whether the plaintiff met her initial burden, we may consider both her petition and her response to the special appearance." Id. The special appearance shall be determined by the court based on the pleadings, affidavits, and attachments that may be filed by the parties. Tex.R.Civ.P. 120a(3).
C. General Jurisdiction
"A defendant's contacts with the forum can give rise to either general or specific jurisdiction." Luciano, 625 S.W.3d at 8. "A court has general jurisdiction over a nonresident defendant whose affiliations with the State are so continuous and systematic as to render [it] essentially at home in the forum State." Id. (alteration in original) (internal quotation marks omitted). A company is "essentially at home" in a forum state under whose laws it is organized and of the state where it has its principal place of business. Careington Int'l Corp. v. First Call Telemedicine, LLC, No. 05-20-00841-CV, 2021 WL 1731753, at *5 (Tex. App.-Dallas May 3, 2021, no pet.) (mem. op.).
Although a company may be "essentially at home" in a different state, "[a] [company] that operates in many places can scarcely be deemed at home in all of them." LG Chem, Ltd. v. Granger, No. 14-19-00814-CV, 2021 WL 2153761, at *4 (Tex. App.-Houston [14th Dist.] May 27, 2021, no pet.) (mem. op.). A finding of general jurisdiction would require a "relatively high level" of continuous and systematic contacts with the forum state based on an appraisal of the company's activities in their entirety, nationwide, and worldwide. See Daimler AG v. Bauman, 571 U.S. 117, 129-30 (2014) (identifying rare case where company was incorporated under laws of Philippines, ceased its operations there during World War II, and its president moved to Ohio, where he kept office, maintained company's files, and oversaw company's activities). This sets a "high bar" of continuous and systematic contacts, requiring the defendant to be "almost entangled in a web-with the forum state." Searcy, 496 S.W.3d at 72; e.g., Old Republic Nat'l Title Ins. Co. v. Bell, 549 S.W.3d 550, 565 (Tex. 2018). It is not met by a company that merely "engages in a substantial, continuous, and systematic course of business" within the forum state. Daimler, 571 U.S. at 138.
CSP pleaded the following jurisdictional facts in support of both general and specific jurisdiction:
• AIKG is registered with the Texas Secretary of State to do business in Texas.
• AIKG maintains an agent for service of process in Texas.
• AIKG's facility was constructed in San Antonio, Texas.
• AIKG operates three of its five facilities in Texas, including the one in San Antonio.
• AIKG uses over $8,000,000 in personal property for its San Antonio facility, for which it is assessed property taxes by the Bexar Appraisal District.
• CSP operates in Texas.
• The two CSP representatives that provided design/consulting services are Texas residents.
• The design/consulting services CSP provided were provided in Texas.
• All or a substantial part of the events giving rise to the claims asserted by CSP occurred in Bexar County, Texas.
AIKG filed a special appearance objecting to the trial court's personal jurisdiction over it accompanied by a declaration made by Stan Manousos-the managing member of AIKG. AIKG argued there were no minimum contacts with Texas warranting the trial court's exercise of personal jurisdiction over it. Manousos stated AIKG was a limited liability company formed under Georgia law and Georgia was its principal place of business. He conceded AIKG did business in Texas, but explained AIKG did not conduct any business with CSP in Texas related to CSP's allegations. Manousos further stated AIKG did not enter into a contract with CSP for design and consulting services for a Texas project located in San Antonio, Texas. He also stated none of the acts, omissions, or transactions related to CSP's claims occurred in Texas.
Manousos also stated he resides in Orange County, Florida.
CSP responded to the special appearance by arguing the trial court had both general and specific jurisdiction over AIKG. In support of its response, it included a declaration made by Josh Vickery. Vickery explained "AIKG requested that CSP provide services for facility in San Antonio. CSP presented pricing terms for design and planning services that were acceptable to AIKG, and began working on the project." Vickery explained CSP and AIKG then entered into a contract for the design and consulting services for the San Antonio facility. He further explained that after "multiple phases of review and revisions," CSP presented its "design documents and drawings" to AIKG, and AIKG accepted its design work. Vickery also asserted he performed consulting work for AIKG while he was a Texas resident. He further stated, another Texas resident-Bob LaDouceur, CSP's chief operations officer-also worked on the designs in Texas.
Vickery provided an initial declaration in 2019 that was also attached to the response. However, the 2019 declaration does not identify his role with CSP, that it was made on personal knowledge, or otherwise affirmatively show why he was competent to testify to the facts. See Tex. R. Civ. P. 120a(3). Like the 2021 declaration, it stated AIKG and CSP entered into a contract.
CSP also produced a few emails, but none of them are addressed from anyone at AIKG to anyone in Texas, or vice versa. In one email, an individual named "Bill Kroll" contacts CSP. Kroll's email signature block shows he worked for a contractor named ARCO Murray, and he and his employer were located in Illinois. ARCO Murray emailed LaDouceur about the designs for the San Antonio facility, and AIKG employees or executives were copied on the email. More than a year later, in an email, Kroll mentions an entity named "FSG" replacing CSP on low voltage.
The evidence also includes a substantial number of exhibits related to an Orlando, Florida project-a project CSP states was the basis for nearly identical work on the San Antonio facility. Among other things, CSP includes the scope of work for the Orlando project, price points for it, and internal emails between AIKG employees and executives related to the Orlando project.
CSP also produced a handful of other documents in support of its response including (1) AIKG's registration as a foreign limited liability company in Texas; (2) its registered agent information from Texas's Secretary of State website; and (3) AIKG's Bexar County Appraisal District (CAD) information. AIKG's registration provides it was organized under the laws of Georgia and had its principal office in Roswell, Georgia. The CAD information explains AIKG owns property in San Antonio appraised at $8 million. CSP also included what it states are (1) the design drawing it submitted to AIKG and (2) the one AIKG used, claiming they show AIKG used its work without payment.
CSP's brief omits any reference to where either company was formed or maintains a principal place of business.
The evidence demonstrates AIKG is a Georgia-formed LLC with its principal place of business in Georgia. At most, it engages in a substantial, continuous, and systematic course of business in Texas; however, it does not demonstrate such exceptional affiliations with Texas that are so continuous and systematic as to render AIKG "essentially at home" here and subject to suit in Texas for any cause of action arising anywhere in the world. See Daimler, 571 U.S. at 139; Luciano, 625 S.W.3d at 8. Because CSP has failed to demonstrate AIKG's contacts with the state are so continuous and systematic as to render it "essentially at home" in Texas, AIKG is not subject to general jurisdiction in Texas. See Daimler, 571 U.S. at 139; Luciano, 625 S.W.3d at 8.
D. Specific Jurisdiction
Texas courts may also exercise "personal 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 due-process guarantees." Luciano, 625 S.W.3d at 8. The long-arm statute states "[i]n addition to other acts that may constitute doing business," a nonresident does business in Texas if (1) they contract "with a Texas resident and either party is to perform the contract in whole or in part in this state" or "commits a tort in whole or in part in this state." Tex. Civ. Prac. & Rem. Code § 17.042. "Consistent with federal due-process protections, a state may assert personal jurisdiction over a nonresident defendant only if the defendant has established minimum contacts with the forum state such that maintenance of the suit does not offend traditional notions of fair play and substantial justice." Luciano, 625 S.W.3d at 8 (internal quotation marks omitted). "The minimum contacts necessary for specific jurisdiction are established if the defendant purposefully avails itself of the privilege of conducting activities in the forum state, and the suit arise[s] out of or relate[s] to the defendant's contacts with the forum." Id. at 8-9 (alterations in original) (internal quotation marks omitted).
The purposeful-availment inquiry and the relatedness inquiries are "two co-equal components" in our analysis. Luciano, 625 S.W.3d at 17 (internal quotation marks omitted). For purposeful availment, the defendant must take some action to "purposefully avail[] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws. Where the defendant has deliberately engaged in significant activities within a state, he manifestly has availed himself of the privilege of conducting business there." Id. at 9 (internal quotation marks omitted). Only the defendant's contacts with the forum are relevant, and the contacts relied upon must be purposeful rather than random, fortuitous, or attenuated. Moncrief Oil Int'l, Inc. v. OAO Gazprom, 414 S.W.3d 142, 151 (Tex. 2013) (internal quotation marks omitted). Such contacts must "create continuing relationships and obligations with citizens of another state." Id. (internal quotation marks omitted). Finally, a plaintiff must prove a nonresident defendant seeks a benefit, advantage, or profit from the forum market. Id.
"[P]urposeful availment has no jurisdictional relevance unless the defendant's liability [1] arises from or [2] relates to the forum contacts." TV Azteca v. Ruiz, 490 S.W.3d 29, 52 (Tex. 2016) (internal quotation marks omitted). "[A] plaintiff must demonstrate a substantial connection between the defendant's forum contacts . . . and the operative facts of the litigation." In re Christianson Air Conditioning & Plumbing, LLC, No. 20-0384, 2022 WL 333367, at *5 (Tex. Feb. 4, 2022) (alteration in original) (internal quotation marks omitted); Kelly v. Gen. Interior Const., Inc., 301 S.W.3d 653, 660-61 (Tex. 2010) (explaining plaintiff must "plead, and when challenged by the evidence, present evidence that the relevant acts (i.e., those connected to [their] claims) occurred, at least in part, in Texas"). The first half of the relatedness inquiry, that a defendant's liability arises from the forum contacts, "asks about causation." Luciano, 625 S.W.3d at 15 (internal quotation marks omitted).
The relatedness inquiry also includes the "related to" requirement which "contemplates that some relationships will support jurisdiction without a causal showing." Id. (internal quotation marks omitted). "That does not mean anything goes"; it "incorporates real limits to adequately protect nonresident defendants." Id. (internal quotation marks omitted). "A special appearance must be granted when this connection is too attenuated to satisfy specific jurisdiction's due-process concerns." Christianson, 2022 WL 333367, at *5 (internal quotation marks omitted).
1. Purposeful Availment
We begin by noting CSP has presented significant evidence demonstrating AIKG has taken multiple actions to purposefully avail itself of the privilege of conducting activities in Texas. This evidence including (1) registering to do business in Texas; (2) maintaining an agent for service of process in Texas; (3) operating three of its five facilities in Texas; and (4) owning the property where the San Antonio facility was constructed. AIKG does not dispute this evidence, and none of it is random, fortuitous, or attenuated. Moreover, the establishment of three facilities in Texas with significant business activity demonstrates AIKG's contacts with Texas created continuing relationships and obligations and that AIKG is doing business in Texas for profit. See Christianson, 2022 WL 333367, at *5 (internal quotation marks omitted). However, our inquiry does not end here because as indicated above, this evidence has no jurisdictional relevance unless the suit arises out of or relates to AIKG's contacts with Texas.
2. Whether the Suit Arises out of or Relates to AIKG's Contacts with Texas
CSP argues its claims arise directly out of AIKG's planning, design, and construction activities in Texas, including the adoption of CSP's designs to procure bids for the installation of equipment for the San Antonio project. To demonstrate specific jurisdiction, CSP was required to show a substantial connection between AIKG's forum contacts and the operative facts of the litigation. See id. "In other words, specific jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction." Luciano, 625 S.W.3d at 14 (internal quotation marks omitted). And "the exercise of specific jurisdiction is prohibited if the suit does not aris[e] out of or relat[e] to the defendant's contacts with the forum." Id. (alterations in original and internal quotation marks omitted).
CSP alleged in its petition that it entered a contract with AIKG to provide low voltage engineering designs for a later-built San Antonio facility. CSP further alleged it provided the designs to AIKG but was never paid, and AIKG had internal discussions showing it intended to, and did, defraud CSP by obtaining the designs without paying for them. CSP also alleged in the alternative even if there was no contract, it was still entitled to recover the reasonable value of its services. Based on these allegations, the operative facts of this litigation concern principally whether the parties entered into an agreement, whether AIKG breached the agreement, whether AIKG paid CSP for its services, and whether AIKG intended to defraud CSP. This would be the focus of trial, consume most if not all of the litigation's attention, and the overwhelming majority of the evidence would be directed to these facts. See Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 585 (Tex. 2007) (concluding operative facts of litigation related to accident in Arizona would be focus of trial, consume most if not all of the litigation's attention, and overwhelming majority of evidence would be directed to whether reasonable care exercised by hiking guide and defendant's sending of promotional materials to Texas did not establish substantial connection between Texas and operative facts of litigation).
CSP has presented no evidence showing any of the foregoing actionable conduct occurred in Texas. See TV Azteca, 490 S.W.3d at 53-54. The record shows no evidence of any negotiations in Texas; any offers or acceptances made in Texas; AIKG's acceptance of designs in Texas; AIKG's performance in Texas; AIKG was aware of CSP's employees being in Texas; AIKG capitalized on CSP's presence in Texas; AIKG intentionally targeted Texas for design work; or any injury or damages were suffered in Texas. Nor do the internal emails CSP provided demonstrate any AIKG employees or executives directed any misrepresentations to CSP in Texas, intended any misrepresentations be relied upon by anyone in Texas, or any damages occurring in Texas.
In other words, the record contains no evidence showing AIKG chose CSP-a Virginia company-based on the designers' location in Texas. As CSP explained, AIKG chose it because it had previously completed some Florida work for AIKG. To agree with CSP and base jurisdiction on the lone fact that AIKG made designs for a San Antonio facility without any evidence that there is a substantial connection between the operative facts of the litigation and AIKG's contacts with Texas, would amount to a but-for analysis, which the Texas Supreme Court has repeatedly rejected. See, e.g., Old Republic, 549 S.W.3d at 561 (rejecting but-for analysis (citing Moki Mac, 221 S.W.3d at 581)).
CSP also argues the trial court properly asserted personal jurisdiction over AIKG because of the work it did on the San Antonio project. However, the relatedness requirement is not concerned about the plaintiff's contacts; it focuses on the connection between the defendant, the forum, and the litigation. See Luciano, 625 S.W.3d at 16 ("the defendant, the forum, and the litigation' [] [are] the essential foundation of specific jurisdiction"); Old Republic, 549 S.W.3d at 561 ("[A] proper minimum-contacts analysis looks to the defendant's contacts with the forum state itself, not the defendant's contacts with persons who reside there." (citation omitted)); Weeks Marine Co., LLC v. Landa, 629 S.W.3d 742, 751 (Tex. App.-San Antonio 2021, no pet.) (concluding no specific jurisdiction where no nexus between defendant, litigation, and Texas and rejecting contacts with forum of plaintiff).
CSP does not offer any evidence showing the scope of work for the San Antonio project, but it cites to a scope of work for the Orlando, Florida project as proof.
Accordingly, even though there is evidence showing AIKG purposefully availed itself of conducting activities in Texas, there is no evidence of a substantial connection between AIKG's contacts with the forum and the operative facts of this litigation. See Luciano, 625 S.W.3d at 14; Salgado v. OmniSource Corp., No. 01-16-00943-CV, 2017 WL 4508085, at *5 (Tex. App.- Houston [1st Dist.] Oct. 10, 2017, no pet.) (mem. op.) ("While there is evidence in the record that OmniSource has Texas customers, was registered with the Texas Comptroller, and filed franchise taxes in Texas, there is nothing that demonstrates that these contacts were substantial enough to justify subjecting OmniSource to general jurisdiction in Texas, especially where Salgado's claims do not arise from or relate to such contacts."). We therefore hold the trial court lacked specific jurisdiction over AIKG and the trial court erred when it denied AIKG's special appearance. See Christianson, 2022 WL 333367, at *5.
CONCLUSION
Based on the foregoing, we reverse the trial court's order denying AIKG's special appearance. We render judgment dismissing CSP's lawsuit against AIKG for lack of personal jurisdiction.