Opinion
No. 07-11-0065-CV
September 28, 2011.
Appealed from the 181st District Court of Randall County; No. 62,365-B; Honorable John B. Board, Presiding.
Before QUINN, C.J., and CAMPBELL and PIRTLE, JJ.
Memorandum Opinion
American Preferred Services, Inc. (APS) appeals the trial court's order denying its special appearance in a lawsuit filed by Matthew C. Allen, Jr. and Teddie J. Allen (the Allens) and various trusts against APS (and others) asserting claims of misrepresentation and the violation of the Texas Securities Act. According to APS, it is not subject to personal jurisdiction in Texas, and the trial court erred in holding otherwise. We affirm. Background
In 2002, the Allens, who resided in Memphis, Texas, sought estate planning services, mentioned that to their insurance agent Frank Bice, and subsequently received communications from Lawrence Rasche. Living in Indiana, Rasche traveled to Texas to meet with the Allens and discuss various planning options, including the creation of a charitable remainder annuity trust. The Allens found the latter of interest, and this resulted in Rasche contacting APS.
George Brown, the president of APS, had worked with Doug Houk of the National Heritage Foundation (NHF) "in the charitable arena for some time." Though the record fails to disclose whether Brown induced Houk or NHF to create a charitable annuity program (program), "APS [was] involved with NHF's . . . annuity program from its inception. . . ." APS also served as the program's "administrator," a relationship APS displayed on its letterhead. As administrator, it "implement[ed] the gift annuities for" NHF. That task included, but was not limited to, 1) the creation of brochures marketing the program, 2) the preparation of income flow "illustrations" to be used by salesmen (such as Rasche) to induce prospective clients into contracting with NHF, and 3) the creation of documents needed by a client to "implement" an annuity, such as the application form and actual agreement.
APS, as opposed to NHF, owned the requisite software.
More importantly, the corporate representative of APS testified that NHF was not involved in the application or agreement process itself. Rather, the record discloses that APS, on behalf of NHF and through individuals such as Rasche would 1) provide the marketing data to the prospective annuitants, 2) secure the execution of the written application and agreement, 3) receive the annuitants' lump sum payment for the annuity as well as the executed application and agreement, and 4) forward the application, agreement, and payment to NHF with directions regarding the monthly annuity installment NHF became obligated to pay and the monthly payment date. The same corporate representative also stated that "if annuitants, for example, needed some kind of service, if they moved and changed their address or if they wanted to have their checks electronically deposited . . . or something like that, they might call us for that."
This evidence does more than merely suggest that APS acted as a representative of NHF. Coupling the ability to issue an application, secure an executed agreement, and receive payment from a prospective client all without input from NHF with the power to then inform NHF to pay a sum certain at a time certain connotes an authority to bind NHF.
The aforementioned procedure was utilized in the case at bar. APS garnered relevant data about the Allens from Rasche, and prepared income projections, an annuity agreement, and an application for them to consider and execute. Rasche received those documents from APS and delivered them to the Allens. The latter, upon reviewing the data generated by APS, agreed to and ultimately consummated the annuity transaction. And, per the directive of APS, all the required documents and payment for the annuity were returned to APS. At that point, APS informed NHF of its obligation to send a specific monthly annuity payment to the Allens by a specific day of the month. Furthermore, those payments were sent for a number of years but stopped when NHF sought Chapter 11 bankruptcy protection. And, though a large portion of their initial capital was returned to them via the bankruptcy proceeding, the Allens sued to recover damages arising from misrepresentations and omissions contained in the documentation generated and supplied by APS.
Analysis
From the information of record, one can reasonably infer that the claims urged by the Allens arose from the particular economic transaction described above. Admittedly, APS had no offices or employees in Texas. Yet, it worked with an intermediary who travelled to that state to engage in a business transaction. Furthermore, APS not only knew that the intermediary was conducting business in Texas but also purposefully created the documents it knew were needed to consummate a deal in Texas between a company it represented and Texas residents. Some of those very documents were not generic but rather specific to the Allens and their situation. In reliance on them and their contents, the Texas residents completed the transaction, and the paperwork and payment were sent to APS, which company apparently accepted the obligation on behalf of NHF. However, APS did not intend or expect its involvement to end there. As the administrator of NHF's program, it stood ready to perform other services needed by "annuitants" such as the Allens and related to performance of the annuity agreement. Simply put, APS' decision to mingle with Texas residents over the long term was not simply fortuitous.
Another inference that one could reasonably derive is that APS expected to reap financial gain through its interaction with the same Texas residents. Again, it agreed to act as the program's administrator and received compensation for that. A portion of that compensation came from the Allens via receipt of its percentage or share of the annuities purchase price.
The Texas Supreme Court reiterated of late that personal jurisdiction over a non-resident may arise from the execution of one contract, but not if that contract encompassed only one contact. Retamco Operating, Inc. v. Republic Drilling, Inc., 278 S.W.3d 333, 339-40 (Tex. 2009); Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 787 (Tex. 2005) (stating that it "is true that in some circumstances a single contract may meet the purposeful-availment standard . . . [a] long-term franchise agreement may establish minimum contacts because, though it stems from a single contract, it involves many contacts over a long period of time. Similarly, a life-insurance policy may stem from a single contract, but necessarily involves a series of contacts until death does the parties part"). Furthermore, it is not necessary that the non-resident appear on Texas soil for the one contract to suffice. Retamco Operating, Inc. v. Republic Drilling, Inc., 278 S.W.3d at 339-40, quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (stating that "`[j]urisdiction . . . may not be avoided merely because the defendant did not physically enter the forum state.'") What must be shown (under the theory of jurisdiction invoked here) is that the non-resident purposefully availed itself of the privilege of conducting activities in Texas, the cause of action relates to or arises from those activities, and the exercise of jurisdiction over the non-resident comports with traditional notions of fair play and substantial justice. Id. at 339-41. The evidence of record permitted the trial court to legitimately conclude that the first two criteria were met.
As for the third indicia, seldom will the exercise of personal jurisdiction over a non-resident offend traditional notions or fair play and substantial justice "when the nonresident defendant has purposefully established minimum contacts with the forum state." Id. at 342. Such contacts exist here. And, much as it does not offend such notions to exercise jurisdiction when an insurance contract is involved, McGee v. Internationall Life Ins. Co., 355 U.S. 220, 223-24, 78 S.Ct. 199, 201, 2 L.Ed.2d 223 (1957), the same should be no less true when the dispute concerns an annuity. Both arise from a single contract wherein the parties foresee or expect a long-term relationship. To quote the writing in McGee:
It cannot be denied that [a state] has a manifest interest in providing effective means of redress for its residents when their [annuity companies] refuse to pay claims. These residents would be at a severe disadvantage if they were forced to follow . . . [such companies] to a distant State in order to hold it legally accountable. When claims were small or moderate[,] individual claimants frequently could not afford the cost of bringing an action in a foreign forum — thus in effect making the company judgment proof. Often the crucial witnesses — as here on the company's defense of suicide — will be found in the [company's] locality. Of course there may be inconvenience to the [company] if it is held amenable to suit in [Texas] where it had this contract but certainly nothing which amounts to a denial of due process.
Id.
It may well be that the actual annuity contract was not between the Allens and APS. But, when the evidence indicates that APS acted as NHF's administrator, performed the requisite steps to secure a binding contract, knew it was dealing with Texas residents, knowingly reaped financial benefit from interacting with the Allens, and expected to perform any ministerial duties related to the contract and needed by either NHF and the Texas residents, the absence of an actual contractual relationship between the plaintiff and defendant is of minimal effect.
Because we conclude that the trial court did not err in denying the special appearance of APS, we overrule the issue before us and affirm the trial court's decision.
CONCURRING OPINION
While concurring with the opinion of Chief Justice Quinn, I write separately to address the dissenting opinion of Justice Campbell. Relying upon IRA Resources, Inc. v. Griego, 221 S.W.3d 592 (Tex. 2007) (per curiam), and Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 576-79 (Tex. 2007), Justice Campbell concludes that Appellant, American Preferred Services, Inc. ("APS"), "did not otherwise purposefully avail itself of the privilege of conducting activities within Texas, but that it simply was fortuitous that [Appellees] resided in our state." American Preferred Services, Inc. v. Harrison, No. 07-11-0065-CV, 2011 Tex.App. LEXIS ___, at *__ (Tex.App.-Amarillo Sept. 28, 2011, no pet. h.) (Campbell, J., dissenting). For the reasons to follow, I respectfully disagree.
Analysis
This case involves not only the distinction between the legal concepts of "specific jurisdiction" and "general jurisdiction," it also involves an analysis of the constitutional limits of specific jurisdiction See McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957); Helicopteros Nacionales De Colom. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984).
The Texas long-arm statute authorizes personal jurisdiction over a nonresident defendant who "does business" in Texas. Tex. Civ. Prac. Rem. Code Ann. § 17.042(1) (West 2008). The Due Process Clause of the Fourteenth Amendment, however, operates to limit the power of this state to assert such in personam jurisdiction over a nonresident defendant. Helicopteros, 466 U.S. at 413-14 (citing Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565, 5 Otto 714 (1878)). Consistent with this constitutional limitation, in order for the courts of this state to exercise adjudicatory authority over a nonresident defendant pursuant to this statute, that defendant must have constitutionally sufficient contacts with Texas "such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" Id. at 414 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)).
As a general rule, a sovereign's exercise of adjudicatory authority, either general or specific, requires some act by which the defendant "purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." See Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). See also Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 784 (Tex. 2005). When a nonresident defendant's in-state activities are "continuous and systematic," and when those activities are "so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities," a court is said to be exercising "general jurisdiction" over that defendant. International Shoe, 326 U.S. at 317-18; Helicopteros, 466 U.S. at 414, n. 9; Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. ___, 131 S.Ct. 2846, 180 L.Ed.2d 796, 2011 U.S. LEXIS 4801 (2011). When a court exercises in personam jurisdiction over a nonresident defendant in a suit arising out of or related to that defendant's contacts with the forum state, that court is exercising "specific jurisdiction" over the defendant. Helicopteros, 466 U.S. at 414, n. 8. Specific jurisdiction is implicated when the controversy in question arises from or relates to conduct purposely directed at the forum state and it depends on an "affiliatio[n] between the forum and the underlying controversy," principally, activity or an occurrence that takes place in the forum state and is therefore subject to that state's regulation. Goodyear, 131 S.Ct. at 2851 (quoting von Mehren Trautman, Jurisdiction to Adjudicate: A Suggested Analysis, 79 Harv. L. Rev. 1121, 1136 (1966)).
What appears to distinguish Chief Justice Quinn's opinion from Justice Campbell's opinion is whether the specific facts of this case sufficiently invoke the specific jurisdiction of the lower court. Chief Justice Quinn discusses the fact that APS worked with an intermediary, Lawrence Rasche, who traveled to Texas for the specific purpose of engaging in the business transaction that led to the creation of a charitable trust operated by the National Housing Foundation ("NHF") which eventually became the subject of this suit. Additionally, he discusses the fact that APS served as the administrator of the annuity program operated by NHF. Justice Campbell equates APS's involvement with the creation and administration of the contested annuity to the activities of the appellant in IRA Resources, Inc., and then concludes that the lower court lacked specific jurisdiction. I write for the purpose of clarifying that I do not believe that consideration of Rasche's activities is necessary to reach the conclusion that the lower court had specific jurisdiction.
Justice Campbell specifically questions whether use of an "intermediary," as that term is used, is sufficient to invoke the special jurisdiction of the lower court. American Preferred Services, Inc. v. Harrison, No. 07-11-0065-CV, 2011 Tex.App. LEXIS ___, n. 3., at *__ (Tex.App.-Amarillo Sept. 28, 2011, no pet. h.) (Campbell, J., dissenting).
This case is distinguishable from IRA Resources, Inc. in at least one significant manner. In IRA Resources, Inc., the nonresident defendant was not involved in the formation of the business transaction that was the very essence of the dispute. Much like APS, IRA Resources, Inc. acted as the third-party administrator of the self-directed individual retirement account that was used to funnel money into an investment that was the real subject of the controversy. Unlike this case, IRA Resources, Inc. was not involved in the pre-investment business transaction. Here, APS was involved in the preparation of income flow "illustrations" and annuity creation documents purposely directed to Texas residents for the purpose of inducing them to enter into a business transaction with NHF which would ultimately profit APS. Coupled with evidence that APS acted as NHF's administrator and stood ready to perform other ministerial duties related to the business transaction, I would find that APS purposely availed itself of the privilege of conducting activities within this state, thereby invoking the benefits and protections of its laws. Accordingly, I would find that the lower court did not err in finding that it had adjudicatory authority over APS by virtue of its specific jurisdiction.
DISSENTING OPINION
Finding myself in disagreement with my colleagues, I must respectfully dissent from the majority's opinion and the Court's judgment affirming the trial court. I would reverse the trial court's denial of the special appearance filed by American Preferred Services, Inc. ("APS").
Like the majority, for convenience I will refer to appellees as "the Allens." On appeal, in support of the trial court's order, the Allens rely primarily on the proposition that specific jurisdiction in Texas may be based on a misrepresentation directed toward Texas by the nonresident defendant. The majority, however, finds the trial court's order may be affirmed on another basis. It focuses on the relationship between APS and the now-bankrupt National Heritage Foundation, Inc., the issuer of the annuity. The majority is correct that APS letterhead stated it to be "administrator" for the foundation's charitable gift annuity program. And the majority correctly notes, as the trial court found, that evidence showed APS performed certain tasks in its capacity as "administrator." From my review of the record, however, the role of APS with regard to administration of the annuity seems analogous to that described in IRA Resources, Inc. v. Griego, 221 S.W.3d 592 (Tex. 2007) (per curiam), in which that company's role was found insufficient to support specific jurisdiction. 221 S.W.3d at 597-98.
The Allens' brief on appeal contains the assertion, "A misrepresentation made by a nonresident defendant directed toward Texas is sufficient to assert specific jurisdiction." They cite Wright v. Sage Engineering, Inc., 137 S.W.3d 238, 252 (Tex.App.-Houston [1st Dist.] 2004, pet. denied); Boissiere v. Nova Capital LLC, 106 S.W.3d 897, 904-06 Tex.App.-Dallas 2003, no pet.) and Shapolsky v. Brewton, 56 S.W.3d 120, 135 (Tex.App.-Houston [14th Dist.] 2001, pet. denied). Such a statement may have reflected the law in Texas at one time, but if so, no longer. See Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 790-91 (Tex. 2005) (disapproving opinions including Boissiere, 106 S.W.3d at 904-05).
See also Meader v. IRA Resources, Inc., 178 S.W.3d 338, 347-48 (Tex.App.-Houston [14th Dist.] 2005, no pet.) (also finding contacts during administration of IRA insufficient to support jurisdiction).
Further, I conclude that APS did not otherwise purposefully avail itself of the privilege of conducting activities within Texas, but that it simply was fortuitous that Mr. and Mrs. Allen resided in our state. See Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 576-79 (Tex. 2007) (discussing examples of purposeful contact sufficient to support exercise of specific jurisdiction). All of the actions of APS in question occurred in Pennsylvania. It appears undisputed that, although APS prepared the financial illustrations for the proposed charitable annuity from information about the Allens that Lawrence Rasche provided APS, and prepared the application form and the annuity agreement, APS had no direct contact with the Allens. It also appears undisputed that APS did not initiate the transaction with the Allens, but had never heard of them before Rasche contacted APS. In short, I would find that APS has negated the bases of personal jurisdiction asserted by the Allens in this case, and would reverse the trial court's order denying APS's special appearance. Because the Court does not do so, I respectfully dissent.
By its use of the term "intermediary," I do not understand the majority to be suggesting Rasche was acting as an agent of APS in his dealings with the Allens. The Allens' pleadings allege that Rasche was an agent of the Allens, as one of their "financial and investment advisors" and owed them fiduciary duties. The trial court's findings refer to Rasche as "a financial planner with whom APS was working." Rasche testified that after meeting with the Allens, seeking an annuity that would meet their needs he obtained "illustrations back and forth from many different places."