Opinion
NO. 3-01-CV-2160-R
May 21, 2002
FINDINGS AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Defendant Lazard Freres Co., L.L.C. ("Lazard") has filed a motion to dismiss for lack of personal jurisdiction or, in the alternative, to transfer venue. For the reasons stated herein, the motion to dismiss should be granted.
I.
In August 1999, Steven E. Thomas ("Thomas") was solicited by John Dow ("Dow") of Airborne, Inc. ("Airborne") to become the Chief Financial Officer of FirstFlight Management, L.L.C. ("FirstFlight"), a start-up fractional aircraft ownership company. (Jt. App. at 14, ¶ 11; 32-33, ¶ 3). At the time, Thomas was the Controller of Bombardier Business Jet Solutions, a fractional ownership company based in Texas. ( Id. at 14, ¶ 12; 33, ¶ 7). Thomas traveled to New York City where he met with Dow at the offices of Lazard Freres Co., an investment banking firm. ( Id. at 14, ¶ 11; 32-33, ¶ 3). As a result of this meeting, "it was clear to [Thomas] that Airborne and Lazard were in serious discussions about forming a new company for the fractional aircraft ownership project." ( Id. at 33, ¶ 3).
The FirstFlight program called for Airborne to purchase and refurbish pre-owned Dassault Falcon 50 jets and lease or sell them in fractional shares to its clients. (Jt. App. at 45).
The next month, Dow called Thomas in Texas and told him that Lazard had agreed to invest $20 million in the FirstFlight venture. ( Id. at 14, ¶ 11; 33, ¶ 5). However, before he was offered the CFO position, Thomas returned to New York for a final interview with David Tanner of Lazard. ( Id. at 14, ¶ 11; 34, ¶ 9). At this interview, Tanner confirmed that Lazard had committed to fund the FirstFlight project and represented that an outside consultant, Bain Company, had evaluated and approved the investment. ( Id. at 16, ¶ 13; 34, ¶¶ 9-10). Tanner also stated that "Lazard always has the final approval for the CFO position in every investment they make due to its importance in their exit strategy." ( Id. at 34, ¶ 9) (emphasis in original). A few days later, Thomas was offered and accepted the CFO position with FirstFlight. ( Id. at 35, ¶ 11; 40-43). He relocated to upstate New York and began his employment on November 1, 1999. ( Id. at 15, ¶ 12; 37, ¶ 20). Ultimately, Lazard decided not to invest in FirstFlight and withdrew from the project in late 1999. ( Id. at 2, ¶ it). Thomas lost his job shortly thereafter.
On October 1, 2001, Thomas sued Lazard, Dow, Airborne, and FirstFlight in state district court for breach of contract, fraud, negligence, and violations of the Texas Deceptive Trade Practices Act. Lazard timely removed the case to federal court and has filed a motion to dismiss for lack of personal jurisdiction or, in the alternative, to transfer venue. The motion has been fully briefed by the parties and is ripe for determination.
Federal diversity jurisdiction is proper because Thomas is a citizen of Texas, all defendants are citizens of New York, and the amount in controversy exceeds $75,000, exclusive of interest and costs. (Def. Not, of Rem. at 1-2, ¶¶ 4-9). See 28 U.S.C. § 1332 (a)(l).
II.
The assumption of personal jurisdiction over a non-resident defendant in a diversity case involves a two-step inquiry. First, the defendant must be amenable to service of process under the forum state's long-arm statute. Mink v. AAAA Development, L.L.C., 190 F.3d 333, 335 (5th Cir. 1999) Ham v. La Cienega Music Co., 4 F.3d 413, 415 (5th Cir. 1993). Second, the exercise of jurisdiction must comport with due process. Mink, 190 F.3d at 335; Ham, 4 F.3d at 415. The Texas Supreme Court has determined that the state's long-arm statute reaches as far as the federal constitutional requirements of due process permit. Irving v. Owens-Corning Fiberglass Corp., 864 F.2d 383, 385 (5th Cir.), cert. denied, 110 S.Ct. 83 (1989); see also Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 200 (Tex. 1985). Accordingly, the Court need only address the due process prong of the inquiry.
Due process for jurisdictional purposes consists of two elements. First, the defendant must have sufficient "minimum contacts" with the forum state. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945); Wilson v. Belin, 20 F.3d 644, 647 (5th Cir.), cert. denied, 115 S.Ct. 322 (1994). These "minimum contacts" may be analyzed in terms of specific jurisdiction or general jurisdiction. Helicopteros Nacionales de Colombia S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984); Ruston Gas Turbines, Inc. v. Donaldson Co., 9 F.3d 415, 418 (5th Cir. 1993). Specific jurisdiction exists when the contacts with the forum state arise from, or are directly related to, the cause of action. Wilson, 20 F.3d at 647. General jurisdiction is proper when the defendant has other "continuous and systematic" contacts with the forum unrelated to the pending litigation. Id.
If a non-resident defendant has sufficient minimum contacts with the forum state, the Court then must consider whether the exercise of personal jurisdiction would "offend traditional notions of fair play and substantial justice." Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 114, 107 S.Ct. 1026, 1033, 94 L.Ed.2d 92 (1987); Wilson, 20 F.3d at 647. This inquiry focuses on several factors, including: (1) the burden on the non-resident defendant; (2) the interests of the forum state; (3) the interest of the plaintiff in securing relief; (4) the interest of the judicial system in obtaining the most efficient resolution of controversies; and (5) the shared interests of the several states in furthering fundamental substantive social policies. Asahi Metal, 107 S.Ct. at 1033; Bearry v. Beech Aircraft Corp., 818 F.2d 370, 377 (5th Cir. 1987).
The plaintiff has the burden to establish a prima facie case of personal jurisdiction over a non-resident defendant. Kelvin Services, Inc. v. Lexington State Bank, 46 F.3d 13, 14 (5th Cir. 1995). The Court can make this determination without an evidentiary hearing based on the complaint, affidavits, and information obtained during discovery. Colwell Realty Investments, Inc. v. Triple T Inns of Arizona, Inc., 785 F.2d 1330, 1333 (5th Cir. 1986). The jurisdictional allegations set forth in the complaint must be taken as true and any conflicts in the evidence must be resolved in favor of the plaintiff. Bullion v. Gillespie, 895 F.2d 213, 217 (5th Cir. 1990).
III.
Thomas tacitly concedes that Lazard does not have the type of "continuous and systematic" contacts with Texas necessary to establish general jurisdiction. Rather, he maintains that the exercise of specific jurisdiction is proper because Lazard "sought out Mr. Thomas' services and purposefully entered into the Agreement with Mr. Thomas, a Texas resident, that required Mr. Thomas to perform a substantial portion of his contractual obligations in Texas . . ." (Plf. Resp. at 18).
The mere fact that Lazard is authorized to conduct business in Texas and has appointed an agent for service of process in this state is not sufficient to support the exercise of general jurisdiction. See Wenche Siemer v. Learjet Acquisition Corp., 966 F.2d 179, 182 (5th Cir. 1992), cert. denied, 113 S.Ct. 1047 (1993).
A.
A federal court may assume specific jurisdiction over a non-resident defendant that "purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Electrosource, Inc. v. Horizon Battery Technologies, Inc., 176 F.3d 867, 871 (5th Cir. 1999), quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239-40. 2 L.Ed.2d 1283 (1958). The purposeful availment requirement "ensures that a defendant will not be haled into a jurisdiction solely as a result of `random,' `fortuitous,' or `attenuated' contacts, or of the `unilateral activity' of another party or a third person." Id. at 871-72, quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 (1985). The contacts with the forum must be such that "it is foreseeable that the defendant `should reasonably anticipate being haled into court there.'" Id. at 872, quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980). In making this determination, the Court may consider: (1) the quality, nature, and extent of the defendant's activities in the forum state; (2) the foreseeability of consequences within the forum from activities outside the state; and (3) the relationship between the cause of action and the defendant's contacts. Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700 F.2d 1026, 1028 (5th Cir. 1983), cert. denied, 104 S.Ct. 2180 (1984), quoting Prejean v. Sonatrach, Inc., 652 F.2d 1260, 1268 (5th Cir. 1981).
B.
Thomas argues that Lazard has sufficient "minimum contacts" with Texas because it actively solicited, negotiated, and entered into a contract with a Texas resident in this state. (Plf. Resp. at 18). Despite this bold assertion, there is no evidence that David Tanner or anyone else at Lazard had any contact with Thomas in Texas. Thomas was solicited by John Dow on behalf of Airborne. (Jt. App. at 32, ¶ 3). Although he interviewed with Tanner and other Lazard representatives, those meetings occurred in New York. ( See id. at 2, ¶ 8; 32-33, ¶ 3; 34-35, ¶¶ 9-10). Nor is Lazard a party to the employment agreement made the basis of this suit. The only parties to this agreement are Thomas and Dow on behalf of Airborne. ( Id. at 32-33, ¶¶ 3-4).
Eytan Tigay, a managing director in Lazard's private equity group, candidly admits that "[i]t is possible that I had a courtesy telephone call with Mr. Thomas after we met at Lazard's offices in New York, but I do not specifically recall any such telephone call taking place." (Jt. App. at 2, ¶ 9). For his part, Thomas presents no evidence or argument that Tigay called him in Texas.
Recognizing that Lazard has no direct contacts with Texas, Thomas suggests that the exercise of specific jurisdiction is nevertheless proper under a "joint enterprise" theory. (Plf. Resp. at 20-22), citing e.g., Fincher v. B D Air Conditioning and Heating Co., 816 S.W.2d 509, 512 (Tex.App.-Houston [1st Dist.] 1991, writ denied), cert. denied, 113 S.Ct. 77 (1992) (partners are jointly and severally liable for all liabilities of the partnership); R.L. Lipsey, Inc. v. Panama-Williams, Inc., 611 S.W.2d 917, 920 (Tex.Civ.App.-Houston [14th Dist.] 1981, writ ref'd n.r.e.) (one joint venturer has authority to bind other joint venturers to contracts made in furtherance of the joint enterprise). This argument impermissibly confuses the concepts of liability and personal jurisdiction. While the relationship between Lazard and Airborne may be significant in evaluating their ties to the forum, "the requirement of minimum contacts must be met as to each defendant." Salem Radio Representatives, Inc. v. Can Tel Market Support Group, 114 F. Supp.2d 553, 556-57 (N.D. Tex. 2000), citing Rush v. Savchuk, 444 U.S. 320, 331-32, 100 S.Ct. 571, 579, 62 L.Ed.2d 516 (1980).
Moreover, even if Lazard is liable on the employment agreement, merely entering into a contract with a Texas resident is not sufficient to confer jurisdiction over a nonresident defendant. See Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999). Instead, the Court must look to factors such as the place of performance, the place of contracting, and the law governing the contract. See Jones v. Petty-Ray Geophysical, Geosource, Inc., 954 F.2d 1061, 1068-69 (5th Cir.), cert. denied, 113 S.Ct. 193 (1992). The employment agreement is silent as to the law governing the contract, but strongly suggests that the place of performance is New York. (Jt. App. at 40-41). This militates against finding personal jurisdiction in Texas.
The contract provides, inter alia, that Thomas the company's headquarters in Elmira, New York and will be reimbursed for moving expenses associated with his relocation to the Elmira/Corning area. (Jt. App. at 40).
The Court concludes that any contact Lazard may have had with Texas "rests on nothing but the mere fortuity that [Thomas] happens to be a resident of the forum." Patterson v. Dietze, Inc., 764 F.2d 1145, 1147 (5th Cir. 1985), quoting Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 497 n. 26 (5th Cir. 1974). Such fortuities are insufficient to satisfy the requirements of due process. Id. Accordingly, there is no basis to support the exercise of specific jurisdiction over Lazard in this state.
RECOMMENDATION
Lazard's motion to dismiss for lack of personal jurisdiction should be granted. All claims against this defendant should be dismissed without prejudice.