Opinion
05-19-01551-CV
11-08-2022
WARREN CHEN AND DYNACOLOR, INC., Appellants v. RAZBERI TECHNOLOGIES, INC., THOMAS J. GALVIN, LIVEOAK VENTURE PARTNERS I, L.P., LIVEOAK VENTURE PARTNERS 1A, L.P., KENNETH L. AND VIRGINIA T. BOYDA, AS TRUSTEES OF THE BOYDA FAMILY REVOCABLE TRUST DATED 10/12/1990, AND JIRI AND ROSEMARY MODRY, AS TRUSTEES OF THE JRAM TRUST UDT 8/21/1996, Appellees
On Appeal from the 193rd Judicial District Court Dallas County, Texas Trial Court Cause No. DC-18-16568
Before Justices Schenck, Smith, and Garcia
MEMORANDUM OPINION ON REMAND
CRAIG SMITH JUSTICE
This case returns to us on remand from the Supreme Court of Texas. Appellants Warren Chen and DynaColor, Inc. appeal the trial court's denial of their special appearances. Because we conclude that the trial court has personal jurisdiction over all of appellees' claims against appellants, except their claim asserted in Count II, we affirm the trial court's order denying appellants' special appearances as to appellees' causes of action in Counts I, III, IV, V, VI, and VII; reverse and render an order granting appellants' special appearances as to Count II; and remand this case to the trial court to conform the judgment according to and consistent with this opinion.
Factual and Procedural History
The underlying facts and procedural history are well-known to the parties and have been set out in our prior opinions as well as the supreme court's opinion; thus, we will limit our discussion of the facts and procedural history to those relevant to determine whether the trial court had personal jurisdiction over appellants.
On April 28, 2021, this Court reinstated its prior opinion concluding that the special appearance order merged into the final judgment and that, because appellants failed to file a timely notice of appeal from the final judgment, the interlocutory appeal became moot. Chen v. Razberi Techs., Inc., 639 S.W.3d 105, 107 (Tex. App.-Dallas 2020), rev'd, 645 S.W.3d 773, 775 (Tex. 2022). We, therefore, dismissed the interlocutory appeal. Id. The supreme court disagreed that the jurisdictional issue presented in the interlocutory appeal became moot and explained that, under Rule 27.3 of the Texas Rules of Appellate Procedure, this Court should have treated the interlocutory appeal as a premature notice of appeal when the interlocutory order merged into the final judgment. Chen v. Razberi Techs., Inc., 645 S.W.3d 773, 783 (Tex. 2022). The supreme court further explained that this Court should have addressed the personal-jurisdiction issue and, thus, reversed and remanded the case to this Court "to consider only the merits of the personal-jurisdiction issue." Id.
See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7) (permitting an appeal from an interlocutory order that grants or denies a special appearance under Tex.R.Civ.P. 120a, which allows a defendant to specially appear and object to the court's personal jurisdiction over the defendant).
Appellees also brought suit against Avigilon Corporation and Avigilon USA Corporation, which are not parties to this appeal.
Issues Raised
In their opening brief, appellants listed eight issues for our review and generally argued that the trial court erred by denying their special appearances. In their supplemental brief filed in conjunction with their response to appellees' motions for rehearing and en banc reconsideration, appellants more concisely framed their issue as whether the trial court incorrectly denied their special appearances when: (a) the forum selection clause relied on by appellees is in a contract appellants did not sign, and appellees have presented no cognizable legal theory or sufficient evidence supporting enforcement of the clause against appellants as nonparties; (b) there is no evidence appellants' contacts with Texas are continuous and systematic as to establish general jurisdiction; (c) there is no evidence that a substantial connection exists between appellants' contacts with Texas and the facts underlying appellees' claims; and (d) exercising jurisdiction over appellants would offend the notions of fair play and substantial justice.
The eight issues appellants listed in their "Issues Presented" section are as follows: (1) Did the Court err in finding that appellees sufficiently pleaded and proved jurisdictional facts?; (2) Did the Court err in finding that appellants failed to disprove all jurisdictional facts alleged by appellees?; (3) Did the Court err in considering appellees' alter ego argument?; (4) Did the Court err in finding that jurisdiction over appellants in Texas is consistent with fair play or substantial justice?; (5) Did the Court err, as the evidence was legally insufficient to support any presumed findings that would support specific or general jurisdiction over DynaColor?; (6) Did the Court err, as the evidence was factually insufficient to support any presumed findings that would support specific or general jurisdiction over DynaColor?; (7) Did the Court err, as the evidence was legally insufficient to support any presumed findings that would support specific or general jurisdiction over Chen?; and (8) Did the Court err, as the evidence was factually insufficient to support any presumed findings that would support specific or general jurisdiction over Chen?
Of course, not all of the investors are Texas residents, so it would seem to be a close question as to specific jurisdiction with regards to the claims of the non-Texas resident investors. Additionally, there may be capacity questions, i.e., are the investors proceeding as individuals or bringing a derivative claim.
We treat appellants' appeal as one global issue of whether the trial court erred by denying their special appearances and include the four sub-issues listed above in our analysis. Because this Court invited further briefing on the merits in conjunction with the motions for rehearing and en banc reconsideration, we decline to conclude, as appellees suggest, that appellants waived certain issues in their opening brief by failing to adhere to the briefing rules or that it was inappropriate for appellants to submit a new, substantive brief. See Tex. R. App. P. 38.1(i) ("The brief must contain a clear and concise argument for the contentions made, with appropriate citations to authorities and to the record."); Tex.R.App.P. 38.7 ("A brief may be amended or supplemented whenever justice requires, on whatever reasonable terms the court may prescribe.").
Personal Jurisdiction
Whether a trial court has personal jurisdiction over a nonresident defendant is a question of law that appellate courts review de novo. Old Republic Nat'l Title Ins. Co. v. Bell, 549 S.W.3d 550, 558 (Tex. 2018). Often, however, a trial court must resolve questions of fact before deciding the question of jurisdiction. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). When a trial court does not issue findings of fact and conclusions of law in conjunction with its special appearance ruling such as in the case here, all facts necessary to support the judgment that are supported by the evidence are implied. Id. at 795. These implied findings may be challenged for legal and factual sufficiency when the appellate record includes the reporter's and clerk's records. Id. If the relevant facts are undisputed, the appellate court need not consider any implied findings of fact and considers only the legal question of whether the undisputed facts establish personal jurisdiction. Old Republic, 549 S.W.3d at 558.
Although appellants filed a request for findings of fact and conclusions of law, the record does not contain a notice of past due findings or reflect that the trial court made findings of fact and conclusions of law.
As the supreme court has repeatedly held, the "effects test" is not an alternative to the traditional "minimum contacts" analysis, and it does not displace the factors reviewing courts look to in determining whether a defendant purposefully availed itself of the state. See Old Republic Nat'l Title Ins. Co. v. Bell, 549 S.W.3d 550, 565 (Tex. 2018) (citing Moncrief Oil, 414 S.W.3d at 151).
Texas courts may assert personal jurisdiction over a nonresident defendant if (1) the Texas long-arm statute authorizes the exercise of jurisdiction and (2) the exercise of jurisdiction is consistent with federal and state constitutional due process guarantees. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007). The Texas long-arm statute is satisfied when a nonresident defendant does business in Texas, which includes "commit[ing] a tort in whole or in part" in Texas. Tex. Civ. Prac. & Rem. Code Ann. § 17.042(2); Luciano v. SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 8 (Tex. 2021); Moki Mac, 221 S.W.3d at 574. The exercise of personal jurisdiction over such nonresident defendant is constitutional when (1) the nonresident defendant has established minimum contacts with the forum state and (2) the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. BMC Software, 83 S.W.3d at 795.
A nonresident defendant's contacts with the forum state can give rise to general or specific jurisdiction. Luciano, 625 S.W.3d at 8. General jurisdiction is established when the defendant has continuous and systematic contacts with the forum, rendering it essentially at home in the forum state, regardless of whether the defendant's alleged liability arises from those contacts. TV Azteca v. Ruiz, 490 S.W.3d 29, 37 (Tex. 2016). Specific jurisdiction is established when the nonresident defendant's alleged liability arises from or is related to the defendant's activity conducted within the forum state. BMC Software, 83 S.W.3d at 796.
A party may also expressly consent to personal jurisdiction or waive the right to challenge personal jurisdiction in a specific forum by agreeing to submit to that forum through a forum selection clause. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n.14 (1985). When parties freely negotiate in an arms-length transaction to include a forum selection clause in a written agreement, the clause is valid and enforceable unless the opponent establishes a compelling reason not to enforce it, such that enforcement would be unreasonable or unjust or that the clause was procured by fraud. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10-15 (1972). Thus, when a party contractually consents to jurisdiction in the forum state, it is not necessary to analyze whether the party established minimum contacts with the forum state thereby conferring personal jurisdiction. In re Fisher, 433 S.W.3d 523, 532 (Tex. 2014) (orig. proceeding).
The plaintiff bears the initial burden to plead sufficient allegations to bring a nonresident defendant within the provisions of the Texas long-arm statute. Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 658 (Tex. 2010). Once the plaintiff has met the initial burden of pleading sufficient jurisdictional allegations, the defendant bears the burden to negate all bases of personal jurisdiction alleged by the plaintiff. Id. "Because the plaintiff defines the scope and nature of the lawsuit, the defendant's corresponding burden to negate jurisdiction is tied to the allegations in the plaintiff's pleading." Id. If the defendant presents evidence in its special appearance disproving the plaintiff's jurisdictional allegations, the burden shifts back to the plaintiff to establish the court has personal jurisdiction. Id. at 659. The plaintiff should amend the petition if it lacks sufficient allegations to bring the defendant under the long-arm statute or if the plaintiff presents evidence that supports a different basis for jurisdiction in the special appearance response. Id. at 659, 659 n.6. Raising jurisdictional allegations for the first time in a response to the special appearance is not sufficient. Steward Health Care Sys. LLC v. Saidara, 633 S.W.3d 120, 128-29 (Tex. App.-Dallas 2021, no pet.) (en banc); see also Kelly, 301 S.W.3d at 658 n.4 ("additional evidence merely supports or undermines the allegations in the pleadings").
Jurisdictional Allegations in Original Petition
Appellees Razberi Technologies, Inc., Thomas J. Galvin, LiveOak Venture Partners I, L.P., LiveOak Ventures Partners 1A, L.P., Kenneth L. and Virginia T. Boyda, as Trustees of the Boyda Family Revocable Trust Dated 10/12/1990, and Jiri and Rosemary Modry, as Trustees of the JRAM Trust UDT 8/21/1996 brought suit against Chen and DynaColor alleging fraud, fraudulent inducement, and breach of fiduciary duty in relation to a stock purchase agreement between Razberi, of which Galvin was president, and the remaining appellees. Appellees further alleged that DynaColor was a non-resident corporation that had conducted business in Texas, that Chen was a Taiwanese national who resided in Taiwan and had conducted business in Texas, and that this lawsuit arose out of, and is related to, DynaColor and Chen's activities in Texas. "Each of the Defendants purposefully availed themselves of the privileges and protections of Texas law in the matters related to the claims stated in this lawsuit, and it would not be fundamentally unfair to hale them into Court into Texas."
Appellees also brought suit against Avigilon Corporation and Avigilon USA Corporation, which are not parties to this appeal.
I question, too, whether Chen's approval of a statement in his capacity as director of Razberi would permit attributing any misrepresentations in said statement to Chen.
The appellees also alleged that Razberi's principal place of business was in Dallas County; Razberi was "formed as the joint-venture vehicle between Galvin and DynaColor"; DynaColor was its majority shareholder; Chen was the CEO of DynaColor and one of two of Razberi's directors; DynaColor sold components of network video recorder (NVR) systems to Razberi to use in manufacturing and selling the Razberi systems; Razberi sold systems to Avigilon; and DynaColor guaranteed certain aspects of Razberi's contract with Avigilon. When Chen informed Galvin that DynaColor would no longer be investing in Razberi, Razberi sought investors elsewhere. The business relationship between Razberi and Avigilon was critical to the investors' decision to invest in Razberi through a Stock Purchase Agreement. Ultimately, the investors (the LiveOak entities, the Boydas, and the Modrys) contributed approximately $3,500,000 to Razberi.
DynaColor and Chen were not parties to the Stock Purchase Agreement. However, in connection with the Stock Purchase Agreement, Razberi and DynaColor entered into a Purchase Agreement under which Razberi would continue to order parts from DynaColor and DynaColor would provide product repair services to Razberi. Razberi also agreed to immediately pay certain amounts due to DynaColor from the invested funds.
Avigilon subsequently reduced its order forecast and then completely stopped ordering from Razberi and instead began ordering from DynaColor directly. Generally, appellees allege that appellants secretly decided to cut Razberi out by moving forward with a plan for DynaColor to usurp Razberi's corporate opportunities to wrongfully compete against Razberi despite Chen's fiduciary duties to Razberi and its shareholders and that appellants failed to disclose such information during the stock purchase negotiations.
Appellees met their initial pleading burden to bring appellants within the provisions of the Texas long-arm statute by alleging that appellants conducted business in Texas and that the claims asserted in the lawsuit arose out of and were related to their activities in Texas. See Far East Machinery Co. v. Aranzamendi, No. 05-21-00267-CV, 2022 WL 4180472, at *4 (Tex. App.-Dallas Sept. 13, 2022, no pet. h.) (mem. op.) (plaintiff met initial burden of pleading sufficient allegations to permit court's exercise of personal jurisdiction by pleading defendant "is engaged in business in the State of Texas"); Saidara, 633 S.W.3d at 129 ("A plaintiff's petition satisfies the long-arm statute when it alleges the defendant did business, which includes committing a tort in whole or in part in Texas.").
However, appellees did not allege in their original petition that the trial court had general jurisdiction over appellants or that appellants consented to jurisdiction through a forum-selection clause in an agreement entered into by the parties. Nor did appellees allege generally that appellants entered into agreements with appelleesor incorporate or attach such agreements to their original petition. See Tri-State Bldg. Specialties, Inc. v. NCI Bldg. Sys., L.P., 184 S.W.3d 242, 247 (Tex. App.- Houston [1st Dist.] 2005, no pet.) (concluding it was appropriate for trial court to consider agreement containing forum selection clause when ruling on special appearance because agreement was incorporated into and attached to original petition); see also Leary v. Coinmint, LLC, No. 14-20-00375-CV, 2022 WL 1498197, at *1, 3 (Tex. App.-Houston [14th Dist.] May 12, 2022, no pet.) (mem. op.) (plaintiffs satisfied initial burden by asserting in their amended petition that their claims fell under a valid forum selection clause). Appellees also failed to amend their original petition to include such allegations. See Kelly, 301 S.W.3d at 659, 659 n.6.
Furthermore, appellees did not argue that the trial court had general jurisdiction over appellants in their response to appellants' special appearances or at the hearing on appellants' special appearances, and appellees acknowledge in their supplemental brief in this Court that they never argued the trial court had general jurisdiction over appellants.
Separate and apart from the effect of the supreme court's mandate and the impossibility of finding the merits of the summary judgment to have been waived, I would also reiterate my view that the trial court lacked subject matter jurisdiction to render a judgment while this Court was vested with jurisdiction over that question. See Chen v. Razberi Techs., Inc., 649 S.W.3d 232, 237 (Tex. App.-Dallas 2021, no pet.) (Schenck, J., dissenting), reversed by 645 S.W.3d 773 (Tex. 2022). Having already reversed our judgment finding the merits appeal to be lost to mootness, the supreme court was not obliged to, and did not, reach the question of what should be done with the merits judgment. Of course, had the issue already been waived, this remand to us would be pointless.
The original petition does reference "related agreements" to the Stock Purchase Agreement, specifically the Purchase Agreement between Razberi and DynaColor, which provided that Razberi would continue to order parts from DynaColor and DynaColor would provide product repair services to Razberi. However, besides the Purchase Agreement, the petition does not name the other "related agreements," set out who the agreements were between, or explain their content.
Because general jurisdiction and consent to jurisdiction by forum selection clauses were not alleged in appellees' petition as a basis for personal jurisdiction, the trial court could not rely on either theory to support a finding of personal jurisdiction over appellants. We now turn to whether appellees carried their burden in response to appellants' special appearances, other pleadings, affidavits, and evidence presented at the hearing to establish that the trial court did have specific jurisdiction over appellants as pleaded. See Tex. R. Civ. P. 120a(3) ("The court shall determine the special appearance on the basis of the pleadings, any stipulations made by and between the parties, such affidavits and attachments as may be filed by the parties, the results of discovery processes, and any oral testimony.").
Minimum Contacts with Texas
To exercise specific jurisdiction over a nonresident defendant, the defendant's contacts with the forum state must be purposeful and the cause of action must arise from or relate to those contacts. Moki Mac, 221 S.W.3d at 575-76. We therefore focus on the relationship among the forum, the defendant, and the litigation. Id. To determine whether a defendant's contacts are purposeful, the court should consider only the defendant's contacts with the forum state, not the unilateral activity of a third party. Id. at 575. The contacts cannot be random, fortuitous, or attenuated, and the defendant must seek some benefit, advantage, or profit by availing himself of the jurisdiction. Id. "A defendant establishes minimum contacts with a state when it 'purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws.'" Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex. 2009) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)). "The defendant's activities, whether they consist of direct acts within Texas or conduct outside Texas, must justify a conclusion that the defendant could reasonably anticipate being called into a Texas court." Id. (quoting Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002)).
For a cause of action to arise from or relate to the nonresident defendant's contacts, there must be a substantial connection between those contacts and the operative facts of the litigation. Moki Mac, 221 S.W.3d at 585. Plaintiff's claim does not have to arise "but for" the defendant's contacts, and the defendant's contacts are not required to be the "proximate cause" of liability. TV Azteca, 490 S.W.3d 53. "Instead, we consider what the claim is 'principally concerned with,' Moncrief Oil [Int'l Inc. v. OAO Gazprom], 414 S.W.3d [142,] 157 [Tex. 2013], whether the contacts will be the 'focus of the trial' and 'consume most if not all of the litigation's attention,' and whether the contacts are 'related to the operative facts' of the claim, Moki Mac, 221 S.W.3d at 585." Id. "[I]f the actionable conduct occurs in Texas, we have never required that the lawsuit also arise directly from the nonresident defendant's additional conduct." Luciano, 625 S.W.3d at 18. "The relevance of the additional conduct . . . is not to establish that those contacts constitute [defendant's] minimum contacts with Texas, but to establish that the actionable conduct in Texas itself constitutes minimum contacts" by showing that the defendant purposefully availed itself of Texas. TV Azteca, 490 S.W.3d at 54.
We must analyze jurisdictional contacts on a claim-by-claim basis, unless all claims arise from the same forum contacts. Moncrief Oil, 414 S.W.3d at 150. Here, appellees brought seven causes of action against appellants; not all claims involve the same appellees and same appellants:
(1) Count I (Fraud and Fraudulent Inducement): the investors alleged that appellants committed fraud by making material misrepresentations and omissions that they knew were false, or that they recklessly made as positive assertions without any knowledge of their truth, and fraudulently
induced the investors to enter into the Stock Purchase Agreement and related agreements by making such misrepresentations and omissions.
(2) Count II (Fraud by Nondisclosure): the investors alleged that appellants concealed from, or failed to disclose to, the investors that DynaColor planned to, and did, usurp the opportunity to sell the NVR systems to Avigilon in competition with Razberi.
(3) Count III (Statutory Fraud under Tex. Bus. & Com. Code Ann. § 27.01): the investors alleged that appellants made a false representation to them for the purpose of inducing them to enter into the Stock Purchase Agreement and that they relied upon the false representation in entering into the agreement.
(4) Count IV (Violation of Texas Securities Act): the investors alleged that Razberi offered or sold securities to the investors by means of an untrue statement of a material fact or omission; that Chen, as Razberi's director, knew the untruth or omission; that his knowledge may be imputed to Razberi; that appellants directly or indirectly controlled Razberi and knew of the untruth or omission; and that appellants, with intent to deceive the investors, materially aided Razberi in its actions.
(5) Count V (Negligent Misrepresentation): in the alternative, the investors and Galvin alleged that appellants negligently made material misrepresentations and omissions and intended for the investors and
Galvin to rely upon their misrepresentations and omissions by investing in Razberi.
(6) Count VI (Breach of Fiduciary Duty): Galvin alleged that Chen owed him a fiduciary duty as a shareholder of Razberi because Chen was a director of Razberi and that Chen breached his fiduciary duties of candor, loyalty, and honesty. Galvin also alleged that DynaColor owed him a fiduciary duty because it was the majority shareholder of Razberi and DynaColor also breached its fiduciary duties of candor, loyalty, and honesty to Galvin. Razberi alleged that, as director, Chen breached his fiduciary duties of candor, loyalty, and honesty to Razberi.
(7) Count VII (Breach of Fiduciary Duty): the investors alleged that Chen owed a fiduciary duty to them because he was a director and they were shareholders of Razberi and that he breached his fiduciary duties of candor, loyalty, and care by usurping and diverting to DynaColor corporate opportunities that belonged to Razberi. Chen further breached his duties through dishonesty and deception regarding his and DynaColor's acts and plans with respect to Avigilon.
The operative facts of Counts I, III, IV, and V, are that appellants made misrepresentations or omissions to the investors, which the investors relied upon in deciding to enter into the Stock Purchase Agreement with Razberi. Some of the alleged misrepresentations, according to the affidavits of Galvin and the investors, are contained in the Stock Purchase Agreement:
3.6 Changes. Since the date of the most recent unaudited balance sheet included in the Financial Statements, there has not been:
(a) any change in the assets, liabilities, financial condition or operating results of the Company from that reflected in the Financial Statements, except changes in the ordinary course of business, that has had a Material Adverse Effect; [or]
(m) to its knowledge, any other event or condition of any character that has had a Material Adverse Effect."
5.1 Representations and Warranties. Except as set forth in or modified by the Schedule of Exceptions, the representations and warranties made by the Company in Section 3 shall be true and correct in all respects as of the date of such Closing.
The investors allege that other misrepresentations occurred during Galvin's presentations to them regarding Razberi's business, specifically its business relationship with Avigilon. But, there is no evidence in the record that appellants were parties to these presentations, assisted Galvin in preparing the documents for the presentations, or approved the presentations.
The record also shows that DynaColor and Chen were not signatories to the Stock Purchase Agreement. However, according to the investors' affidavits, they "required the Razberi Board of Directors and the existing Razberi shareholders to approve the transaction and the specific agreements" "[a]s a condition for entering into the Stock Purchase Agreement and the other contracts." The record supports this contention. The term sheet, which is signed by Chen on behalf of DynaColor, provides in relevant part: "The business, assets, financial condition, operations, results of operations and prospects of the Company are substantially as have been represented to LiveOak and no change will have occurred which, in LiveOak's sole judgment, is or may be materially adverse to the Company." Furthermore, although appellants deny that they negotiated the term sheet in Texas, August 2014 emails between Galvin and Chen show that Chen sent James Chan to Razberi's office, on behalf of DynaColor, to negotiate the terms of the Stock Purchase Agreement and its related agreements. Specifically, Chen wrote:
According to his affidavit, James Chan is an attorney licensed to practice in Arizona and Florida, who has handled some legal matters for Chen.
After the first glance at the term sheet of Live Oak, and to save time, I think DynaColor also needs someone to help communicate and reflect our concerns effectively and efficiently to Live Oak. So I would assign my legal counsel James Chan to get in touch with you and to work with [Razberi's] attorney to consolidate the case negotiation, he stays in Dallas area and can reach [Razberi] conveniently.
After the meeting, Galvin wrote to Chen memorializing that he met with Chan at the Razberi office and that he believed he understood DynaColor's concerns. He said he would address those concerns in a revised term sheet and then listed the changes including that DynaColor would be placed on equal footing with the new investor so that dividends were shared equally and liquidation priorities were identical,
DynaColor would receive $500,000 immediately upon closing toward the past due amount Razberi owed DynaColor, and the remaining balance would then be paid on a schedule. Thus, Chen and DynaColor, through their agent, negotiated the terms of the Stock Purchase Agreement and its related agreements in Texas, on at least one occasion. See Searcy v. Parex Res., Inc., 496 S.W.3d 58, 77-78 (Tex. 2016) (owner company's executive had actual and apparent authority to sell owned company shares and actively negotiated their sale in Texas).
Chen executed the Action by Unanimous Written Consent of the Board of Directors on behalf of himself as a director of Razberi and the Action by Written Consent of the Stockholders on behalf of DynaColor as its CEO. The Consent of the Board of Directors authorized Galvin to execute the Stock Purchase Agreement as well as the other related agreements. The Actions of the Board and the Stockholders acknowledge that Razberi is a Delaware Corporation and that the actions are being taken in accordance with Delaware Law and the by-laws of Razberi. Neither expressly references any action to be taken in Texas. However, the Memorandum of Closing provides that the closing took place on November 5, 2014, in Austin, Texas and that "[a]ll of the transactions at the Closing were deemed to take place simultaneously and no delivery or payment was considered made until all deliveries and payments were completed." Thus, here, unlike in Rapaglia v. Lugo, 372 S.W.3d 286, 291 (Tex. App.-Dallas 2012, no pet.), in which this Court concluded that there was no evidence the nonresident shareholder "had any knowledge of, consented to, or ratified the actions allegedly taken in Texas by her husband" and upon which plaintiff's causes of action were based, Chen and DynaColor knew the agreement was being negotiated and executed in Texas and the alleged misrepresentations in the approved agreement are the very misrepresentations upon which the investors' claims against appellants are based.
The agreements executed along with the Stock Purchase Agreement, and approved with written consent by Chen, consisted of the following: Amended and Restated Certificate of Incorporation, Exchange Agreement, Investors Rights Agreement, Rights of First Refusal and Co-Sale Agreement, Voting Agreement, Purchase Agreement with DynaColor, and Promissory Note Payable to DynaColor.
In Rapaglia, the focus of plaintiff's suit was a 2003 meeting in Dallas in which plaintiff alleged that the defendants attended and conspired against him for the purpose of defrauding him and other shareholders. 372 S.W.3d at 289. The nonresident wife denied participating in the 2003 meeting and asserted that her sole act as a shareholder was signing, in Florida, a Notice of Action by the Shareholders. Id.
Brumback v. Steele, No. 03-09-00439-CV, 2010 WL 1633155 (Tex. App.- Austin Apr. 21, 2010, no pet.) (mem. op.), is also instructive. In Brumback, the Austin Court of Appeals concluded that three nonresident directors purposefully availed themselves of jurisdiction in Texas when they approved of a deferred compensation plan offered to an independent contractor who they knew worked at the company located in Texas, was offered the plan in Texas, and agreed to the plan in Texas. 2010 WL 1633155, at *1, 4. Similarly, here, Chen, as a director of Razberi, specifically approved the Stock Purchase Agreement. He knew the agreement was being negotiated in Texas and executed in Texas with mostly Texas investors. Likewise, DynaColor, as a shareholder, approved Razberi's issuance of Series A Preferred Stock pursuant to the agreement, knew it was being negotiated and executed in Texas, and enjoyed the benefits of the parties entering into the Stock Purchase Agreement.
We recognize that "[t]here is a subtle yet crucial difference between directing a tort at an individual who happens to live in a particular state and directing a tort at that state." TV Azteca, 490 S.W.3d at 43. The mere fact that a nonresident defendant directed a tort at a plaintiff who lives in Texas and allegedly suffered injuries in Texas, without more, does not establish jurisdiction over the nonresident defendant. Id. The "'effects' of the alleged tort must connect the defendant to the forum state itself, not just to a plaintiff who lives there." Old Republic, 549 S.W.3d at 564 (citing Walden v. Fiore, 571 U.S. 277, 287-88 (2014)).
In Old Republic, the supreme court distinguished the transfer of Texas-based assets to a nonresident defendant from the transfer of money, a fungible asset, and explained that the transfer of Texas-based business operations and real property derived profit from Texas and created a continuing connection with Texas. 549 S.W.3d at 563-64. Here, in conjunction with the execution of the Stock Purchase Agreement, which the investors allege they were induced into by appellants' misrepresentations and omissions, DynaColor received Preferred Stock in exchange for its common stock, it acquired a new purchase contract with Razberi in which it would continue to sell parts to Razberi in Texas, and it was immediately paid $500,000 out of the sale of the stock. It also received a promissory note, for the remaining $595,706 that Razberi owed DynaColor under previous purchase agreements, which was enforceable in Texas.
Appellants' control over Razberi and its sale of stock to outside investors was not random, fortuitous, or attenuated. DynaColor willingly invested over two-million dollars into Razberi as a start-up company and became an eighty-five percent shareholder; Razberi was a controlled subsidiary of DynaColor. Chen willingly became a director of Razberi and was involved in regular oversight of Razberi through email communications, including approving Razberi's business plans, being involved in sales strategy and generating leads, obtaining and reviewing financial statements and budgets, and transferring funds for Razberi's operations. Thus, appellants purposefully availed themselves of jurisdiction in Texas.
Although neither party addresses the fact that the Modrys, two of the investors, are California residents, we note that there is not a separate requirement, when exercising personal jurisdiction over a defendant, for the plaintiff to reside in the forum State. TV Azteca, 490 S.W.3d at 40-41 (relying on Keeton v. Hustler Mag., Inc., 465 U.S. 770 (1984)). While it is often relevant to the inquiry, the focus is on the relationship between the defendant, the forum, and the litigation, not the plaintiff, the forum, and the litigation. Id. The connection between the Modrys' causes of action and Texas is not weak because, like the other investors, they claim to have suffered harm in Texas when they entered into the Stock Purchase Agreement in Texas with a Texas-based company as a result of its director's and majority shareholder's misrepresentations and omissions. Cf. Bristol-Myers Squibb Co. v. Superior Ct. of Cal., S.F. Cty., ____ U.S. ____, 137 S.Ct. 1773, 1782 (2017) (holding that the connection between the nonresidents' claims and the forum was weak because the relevant plaintiffs were not California residents, did not claim to have suffered harm in California, and the conduct giving rise to their claims occurred elsewhere).
We conclude that the investors' claims as alleged in Counts I, III, IV, and V arise from or relate to appellants' contacts with Texas and that appellants purposefully availed themselves of Texas. Therefore, the trial court did not err in denying appellants' special appearances as to these four causes of action.
The operative facts of Count II are that appellants failed to disclose to the investors that DynaColor planned to usurp Razberi's contract with Avigilon and, as such, induced the investors into purchasing stock in Razberi. Although we concluded that appellants' approval of the alleged misrepresentations and omissions in the Stock Purchase Agreement arises from or relates to its contacts with Texas, we cannot conclude the same as to the allegation that they failed to disclosure information to the investors before the execution of the Stock Purchase Agreement. There is no evidence that appellants ever met with the investors in Texas. Even when Chan negotiated terms, it was with Galvin, not the investors. The evidence concerning Chen's direct discussions with the investors shows that Chen was in Taiwan and that the investors either reached out to him in Taiwan or visited him in Taiwan as part of their due diligence in deciding to invest in Razberi. The record otherwise indicates that the investors negotiated directly with Razberi, not appellants. Thus, without more, such as a specific duty to disclose, we cannot conclude that appellants' conduct of sitting mute in Taiwan constitutes directing a tort at Texas or arises from or relates to their contacts with Texas. Therefore, we conclude the trial court did not have personal jurisdiction over appellants as to Count II and erred in denying their special appearances as to that count.
However, we do not reach the same conclusion as to appellees' claims for breach of fiduciary in Counts VI and VII. Although the causes of action concern similar operative facts in that they involve appellants failure to disclose DynaColor's business with Avigilon, they also involve allegations of an ongoing duty and relationship between appellants and various appellees as shareholders and the company itself, not just potential investors to the company as alleged in Count II. There are four fiduciary relationships alleged in Counts VI and VII: (1) between Galvin, as a shareholder of Razberi, and Chen, as a director of Razberi; (2) between Galvin, as shareholder, and DynaColor, as majority shareholder; (3) between Razberi and Chen, as its director; and (4) between the investors, as shareholders, and Chen, as director. In their opening brief, appellants argue that shareholders do not owe fiduciary duties to each other. Appellees argue that, under Delaware law, shareholders do owe fiduciary duties to one another. Whether DynaColor owes a fiduciary duty to Galvin and the other investors is a question regarding the merits of the allegations and, thus, not one that we decide when faced solely with the question of whether the trial court has personal jurisdiction over the parties. See, e.g., Cornerstone Healthcare Grp. Holdings, Inc. v. Nautic Mgmt. VI, L.P., 493 S.W.3d 65, 73 (Tex. 2016) ("whether the respondents' conduct was ultimately tortious is not before us and is not relevant to the minimum-contacts analysis").
"[W]hen the claim arises from a breach of fiduciary duty based on a failure to disclose material information, the fact that the [defendant] continually communicated with the forum while steadfastly failing to disclose material information shows the purposeful direction of material omissions to the forum state." Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 213 (5th Cir. 1999). Appellees allege that Chen, as director, failed to disclose DynaColor's intentions of contracting with Avigilon, Chen's knowledge that Avigilon would eventually cease doing business with Razberi, and Chen's knowledge that DynaColor entered into a non-disclosure agreement with Avigilon regarding their future business relationship. According to the record, these ongoing negotiations occurred before, during, and after the timeframe of when Razberi was seeking investors and the investors executed the Stock Purchase Agreement. After the potential investors became shareholders in Razberi, the record shows that Avigilon began decreasing its orders with Razberi and ultimately ceased ordering from Razberi.
Galvin reached out to DynaColor on several occasions to see if it knew why and specifically asked whether DynaColor was involved. In March 2015, Blake Yeh, DynaColor's Sales Manager for North America, represented to Galvin via email that DynaColor was not doing business with Avigilon and suggested it might be a different company: "We have not received any call or email from Avigilon regarding to sales or quality issues since you finalized the contract with them." On May 1, 2015, Yeh again represented via email to Galvin that DynaColor was not doing business with Avigilon directly.
To be sure, and because Razberi's board of directors wanted further assurance, Galvin asked Chen directly. On May 28, 2015, Galvin emailed Chen to confirm that DynaColor was not providing NVR technology to Avigilon directly or through another DynaColor partner. Chen responded on May 29, 2015: "We didn't provide NVR technology to Avigilon nor through other third parties." Chen then asked if there was a way Galvin could renegotiate and restore business with Avigilon.
The investors, or their representatives-Ben Scott, Krishna Srinivasan, Kenneth Boyda, and Jiri Modry-became members of the board of directors when the Stock Purchase Agreement was executed. Galvin and Chen were the original two directors.
Chen's alleged failure to disclose material information he knew about DynaColor (of which he was CEO) to Razberi (of which he was director) and to its shareholders (Galvin and the investors) while continually communicating to Razberi in Texas about Razberi's business shows that Chen purposefully directed material omissions to Texas. Likewise, DynaColor's failure to disclose its business with Avigilon to Razberi, of which it was a shareholder, when asked and when continuing to do business in Texas with Razberi shows it purposefully directed material omissions to Texas.
Furthermore, our earlier analysis of whether appellants' additional conduct showed that they purposefully availed themselves of jurisdiction in Texas as to Counts I, III, IV, and V is equally applicable to Counts VI and VII. Appellants chose to form Razberi with Galvin and, although it was formed as a Delaware corporation, they chose for it to be headquartered in Texas. Razberi did business in Texas and many of the contracts between Razberi and DynaColor were governed by Texas law. Additionally, Chen chose to sit on Razberi's board of directors subjecting himself to fiduciary duties, and DynaColor chose to invest in and help manage Razberi as its controlled subsidiary. Therefore, appellants' contacts with Texas were not the result of the unilateral activity of another person. They were purposeful and direct, and appellees' allegations in Counts VI and VII arise from or relate to those contacts.
Fair Play and Substantial Justice
To be consistent with federal and state constitutional due process guarantees, the exercise of personal jurisdiction over a nonresident defendant must also comply with traditional notions of fair play and substantial justice. Moncrief Oil, 414 S.W.3d at 154. Rarely will the exercise of personal jurisdiction over a nonresident defendant not comport with due process guarantees when the nonresident defendant has purposefully availed itself of the forum state and, thus, established minimum contacts with the forum. Id. at 154-55. This is because "[r]equiring nonresidents to comply with the laws of the jurisdictions in which they choose to do business is not unreasonable, burdensome, or unique." TV Azteca, 490 S.W.3d at 56.
To determine whether exercising personal jurisdiction over a nonresident defendant comports with traditional notions of fair play and substantial justice we examine the following factors, if applicable: (1) the burden on the defendant; (2) the interests of the forum state in adjudicating the dispute; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the international judicial system's interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several nations in furthering fundamental substantive social policies. Moncrief Oil, 414 S.W.3d at 155. For a resident of another country, not just another state, we also consider the burdens placed on the defendant in defending itself in a foreign legal system, the state's regulatory interests, the procedural and substantive policies of other nations whose interests are affected, and the federal government's interest in its foreign relations policy. TV Azteca, 490 S.W.3d at 55.
Although subjecting Chen and DynaColor to suit in Texas may be burdensome to them because the distance between Taiwan and Texas is great, distance alone cannot defeat personal jurisdiction. Moncrief Oil, 414 S.W.3d at 155. Chen also asserts that traveling to Texas for litigation would be expensive and an undue hardship for him because he would be away from DynaColor and, as CEO, he needs to be present in Taiwan to run his company. However, DynaColor has already participated in arbitration and litigation with Razberi in Texas due to Razberi's failure to pay DynaColor amounts owed under the November 2014 contract and promissory note associated with the Stock Purchase Agreement. See DynaColor, Inc. v. Razberi Techs., Inc., 795 Fed.Appx. 261 (5th Cir. Jan. 9, 2020) (unpublished per curiam opinion). Therefore, "[a]ny added burden on [appellants to litigate this case in Texas] is relatively minimal and does not outweigh Texas's interest in adjudicating a dispute involving the alleged usurpation of a corporate opportunity in Texas involving Texas assets." Cornerstone, 493 S.W.3d at 74. Moreover, DynaColor consented to suit in Texas in various agreements it entered into with Razberi and the investors, and as CEO of DynaColor, Chen should have anticipated traveling to Texas to participate in DynaColor's litigation should such arise. See Cap. Tech. Info. Servs., Inc. v. Arias & Arias Consultores, 270 S.W.3d 741, 752 (Tex. App.-Dallas 2008, pet. denied).
Additionally, the interests of Texas in adjudicating the tort claims that appellants allegedly committed against appellees in Texas is high. See Moncrief Oil, 414 S.W.3d at 155. Appellees' interest in obtaining relief in Texas is also high as the Stock Purchase Agreement and related documents were executed in Texas, Razberi is located in Texas, and all but one appellee is a Texas resident. Furthermore, although Taiwan may also have an interest in resolving controversies regarding whether its residents committed tortious acts, Taiwan's interest is not as high as Texas's interest because Texas is where the alleged torts were committed or, at the very least, directed. And, appellees' suit against Avigilon, which did not challenge the trial court's jurisdiction, would proceed in Texas regardless of appellants' presence. The most efficient way to resolve disputes is in one proceeding instead of splitting litigation into multiple proceedings across multiple jurisdictions. TV Azteca, 490 S.W.3d at 55. We conclude that this is not one of those rare occasions where exercising jurisdiction over a nonresident defendant, who has minimum contacts with Texas, offends traditional notions of fair play and substantial justice. See Moncrief Oil, 414 S.W.3d at 156.
Conclusion
We conclude that the trial court had personal jurisdiction over appellants as to Counts I, III, IV, V, VI, and VII and did not err in denying their special appearances as to those counts. We further conclude that the trial court did not have personal jurisdiction over appellants as to Count II. Therefore, we affirm the order of the trial court as to Counts I, III, IV, V, VI, and VII and reverse and render an order granting appellants' special appearances as to Count II. We remand this case to the trial court to conform its judgment with the opinion of this Court.
Schenck, J., concurring and dissenting.
JUDGMENT
In accordance with this Court's opinion of this date, the order of the trial court denying appellants WARREN CHEN AND DYNACOLOR, INC.'s special appearances is AFFIRMED as to appellees' causes of action in Counts I, III, IV, V, VI, and VII, and REVERSED as to appellees' causes of action in Count II. We RENDER an order granting appellants' special appearances as to Count II. We REMAND this cause to the trial court to conform its judgment with this Court's opinion.
It is ORDERED that appellees RAZBERI TECHNOLOGIES, INC., THOMAS J. GALVIN, LIVEOAK VENTURE PARTNERS I, L.P., LIVEOAK VENTURE PARTNERS 1A, L.P., KENNETH L. AND VIRGINIA T. BOYDA, AS TRUSTEES OF THE BOYDA FAMILY REVOCABLE TRUST DATED 10/12/1990, AND JIRI AND ROSEMARY MODRY, AS TRUSTEES OF THE JRAM TRUST UDT 8/21/1996 recover their costs of this appeal from appellants WARREN CHEN AND DYNACOLOR, INC.
CONCURRING AND DISSENTING OPINION ON REMAND
DAVID J. SCHENCK JUSTICE
I concur with the majority's decision to affirm the trial court's order denying appellants' special appearances as to Count VII with respect to appellant Warren Chen and reverse and render an order granting appellants' special appearances as to Count II. I dissent from the remainder of the judgment. I also write to provide guidance to the trial court on remand and to explain why, in my view, remanding the case to the trial court to conform the judgment according to and consistent with the opinion cannot be understood to reinstate the trial court's final judgment.
Background
I have no complaint with the background set forth in the majority opinion, but I will set out the facts and procedural history necessary to explain where I disagree with the majority.
The underlying lawsuit involved, among other things, claims for fraud and breach of fiduciary duty regarding the purchase of certain stock. Appellants filed a special appearance.
The petition contained the following jurisdictional allegations.
Appellees Razberi Technologies, Inc., Thomas J. Galvin, LiveOak Venture Partners I, L.P., LiveOak Ventures Partners 1A, L.P., Kenneth L. and Virginia T. Boyda, as Trustees of the Boyda Family Revocable Trust Dated 10/12/1990, and Jiri and Rosemary Modry, as Trustees of the JRAM Trust UDT 8/21/1996, brought suit against appellants Chen and DynaColor alleging fraud, fraudulent inducement, and breach of fiduciary duty in relation to a stock purchase agreement between Razberi, of which Galvin was president, and the remaining appellees.1 Appellees further alleged that DynaColor was a non-resident corporation that had conducted business in Texas, Chen was a Taiwanese national who resided in Taiwan and had conducted business in Texas, and this lawsuit arose out of, and is related to, DynaColor and Chen's activities in Texas.
The appellees also alleged that Razberi's principal place of business was in Dallas County; Razberi was "formed as the joint-venture vehicle between Galvin and DynaColor"; DynaColor was its majority shareholder; Chen was the CEO of DynaColor and one of two of Razberi's directors; DynaColor sold components of network video recorder (NVR) systems to Razberi to use in manufacturing and selling the Razberi systems; Razberi sold systems to Avigilon; and DynaColor guaranteed certain aspects of Razberi's contract with Avigilon. When Chen informed Galvin that DynaColor would no longer be investing in Razberi, Razberi sought investors elsewhere. The business relationship between Razberi and Avigilon was critical to the investors' decision to invest in Razberi through a Stock Purchase Agreement. Ultimately, the investors (the LiveOak entities, the Boydas, and the Modrys) contributed approximately $3,500,000 to Razberi.
DynaColor and Chen were not parties to the Stock Purchase Agreement. However, in connection with the Stock Purchase Agreement, Razberi and DynaColor entered into a Purchase Agreement under which Razberi would continue to order parts from DynaColor and DynaColor would provide product repair services to Razberi. Razberi also agreed to immediately pay certain amounts due to DynaColor from the invested funds.
Avigilon subsequently reduced its order forecast and then completely stopped ordering from Razberi and instead began ordering from DynaColor directly. Generally, appellees allege that appellants secretly decided to cut Razberi out by moving forward with a plan for DynaColor to usurp Razberi's corporate opportunities to wrongfully compete against Razberi despite Chen's fiduciary duties to Razberi and its shareholders and that appellants failed to disclose such information during the stock purchase negotiations.
The trial court denied appellants' special appearances, and on December 10, 2019, appellants filed an accelerated notice of appeal challenging the trial court's denial of the special appearances. Two weeks later, appellants filed a motion to stay the trial court's proceedings. On January 14, 2020, appellants filed their opening brief in their interlocutory appeal.
While appellants' motion to stay remained pending before this Court, appellees subsequently filed motions for summary judgment, which the trial court granted on February 19, 2020. On March 12, 2020, a motions panel of this Court denied appellants' motion to stay. On June 30, 2020, the trial court signed a final judgment in appellees' favor. The final judgment stated, "The Court previously disposed of certain issues and claims in the above-referenced February 19, 2020 Order, the June 18, 2020 Order, and two nonsuit orders signed on April 23, 2020. These orders and all other orders of the Court in this case are incorporated herein."
Appellants did not file a second notice of appeal following that judgment to reassert its claim that the trial court lacked jurisdiction, and appellees moved to dismiss this appeal as moot. The merits panel assigned to hear the appeal initially granted that motion. After consideration of appellants' motion for rehearing, we granted rehearing and withdrew our earlier opinion dismissing appellants' interlocutory appeal. Appellees then sought further rehearing to reinstate dismissal of the appeal. The Court, with a dissent, granted the appellees' motion for rehearing, withdrew the order granting appellants' motion for rehearing, and reinstated the Court's earlier opinion dismissing appellants' appeal as moot because they failed to file a separate notice of appeal from the final judgment.
Appellants filed a petition for review with the Texas Supreme Court. The Texas Supreme Court held we were obligated to treat the previously perfected appeal as an appeal from the final judgment, but only as to the issues raised in the existing appeal. See Chen v. Razberi Techs., Inc., 645 S.W.3d 773, 775 (Tex. 2022). The court then reversed and remanded the case to our Court "for disposition of the special appearance on the merits."
Discussion
I. The Trial Court Lacked Personal Jurisdiction over Defendants Where the Alleged Forum Contacts Pertain to Inaction and Where the Actor Had No Duty to Act
A. Personal Jurisdiction
Texas courts may exercise personal jurisdiction over a nonresident defendant only if (1) the Texas long-arm statute permits the exercise of jurisdiction and (2) the assertion of jurisdiction satisfies constitutional due-process guarantees. Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 657 (Tex. 2010). The long-arm statute provides, in relevant part, that in addition to other acts that may constitute doing business, a nonresident does business in this state if the nonresident commits a tort, in whole or in part, in this state. Tex. Civ. Prac. & Rem. Code Ann. § 17.042. Personal jurisdiction over a nonresident defendant satisfies constitutional due-process guarantees when the nonresident defendant has established minimum contacts with the forum state and the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. Kelly, 301 S.W.3d at 658.
Minimum contacts are established when the nonresident defendant purposefully avails himself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws. Id. at 657-58. In determining purposeful availment, we consider (1) the defendant's own actions but not the unilateral activity of another party, (2) whether the defendant's actions were purposeful rather than random, isolated, or fortuitous, and (3) whether the defendant sought some benefit, advantage, or profit by availing itself of the privilege of doing business in Texas. Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex. 2005). The focus is the relationship among the defendant, the forum, and the litigation. Id. at 790 (quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984)). In this analysis, we do not assess the quantity of the contacts, but rather their nature and quality. Moncrief Oil Int'l, Inc. v. OAO Gazprom, 414 S.W.3d 142, 151 (Tex. 2013).
A defendant's contacts with a forum can give rise to either specific or general jurisdiction. Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex. 2009). 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. See TV Azteca v. Ruiz, 490 S.W.3d 29, 37 (Tex. 2016) (citing Daimler v. Bauman, 571 U.S. 117, 127 (2014)). By contrast, courts may exercise specific jurisdiction when the defendant's alleged liability arises from or is related to its activities conducted within the forum. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 576 (Tex. 2007); accord Bristol-Myers Squibb Co. v. Superior Court of Cal., 137 S.Ct. 1773, 1780 (2017). The "arises from or relates to" requirement lies at the heart of specific jurisdiction by defining the required nexus between the nonresident defendant, the litigation, and the forum state. Moki Mac, 221 S.W.3d at 579. In order for a nonresident defendant's contacts in a forum state to support an exercise of specific jurisdiction, there must be a substantial connection between those contacts and the operative facts of the litigation. Id. at 585; accord Walden v. Fiore, 571 U.S. 277, 284 (2014). The operative facts of the litigation are those facts the trial court will focus on to prove the nonresident defendant's liability. See Jani-King Franchising, Inc. v. Falco Franchising, S.A., No. 05-15-00335-CV, 2016 WL 2609314, at *5 (Tex. App.- Dallas May 5, 2016, no pet.) (mem. op.), overruled on other grounds by Steward Health Care Sys. LLC v. Saidara, 633 S.W.3d 120, 129 (Tex. App.-Dallas 2021, no pet.); see also Saidara, 633 S.W.3d at 126.
For specific jurisdiction, we analyze the defendant's contacts on a claim-by-claim basis to determine whether each claim arises out of or is related to the defendant's forum contacts. See TV Azteca v. Ruiz, 490 S.W.3d 29, 37 (Tex. 2016). But, when all the claims arise from the same forum contacts, a claim-by-claim analysis is not required. See Luciano v. SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 18 (Tex. 2021).
Because the minimum-contacts test is intended to ensure that the defendant could reasonably anticipate being sued in the forum's courts, foreseeability is an important consideration in the analysis. TV Azteca, 490 S.W.3d at 46 (citing World- Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980); BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002)). But foreseeability alone will not support personal jurisdiction. Id. Instead, the defendant must reasonably anticipate being sued in the forum because of actions the defendant "purposefully directed toward the forum state." Id. (quoting Asahi Metal Indus. Co. v. Superior Court of Cal., 480 U.S. 102, 112 (1987) (plurality opinion)). The simple knowledge that the defendant is dealing with a person in Texas or that his alleged misconduct or inaction elsewhere might have an effect here will not establish the requisite minimum contacts. See Old Republic Natl Title Ins. Co. v. Bell, 549 S.W.3d 550, 565 (Tex. 2018). Rather, the defendant must seek some benefit, advantage, or profit by itself of the jurisdiction. See id at 559 (citing Moncrief Oil, 414 S.W.3d at 151).
In addition to minimum contacts, due process requires the exercise of personal jurisdiction to comply with traditional notions of fair play and substantial justice. See Moncrief Oil, 414 S.W.3d at 154. We undertake this evaluation in light of the following factors, when appropriate: (1) the burden on the defendant; (2) the interests of the forum in adjudicating the dispute; (3) the plaintiffs interest in obtaining convenient and effective relief; (4) the international judicial system's interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several nations in furthering fundamental substantive social policies. Id. at 155 (citing Asahi, 480 U.S. at 113; Spir Star AG v. Kimich, 310 S.W.3d 868, 878 (Tex. 2010).
B. Causes of Action
(1) Count I (Fraud and Fraudulent Inducement): the investors alleged that appellants committed fraud by making material misrepresentations and omissions that they knew were false, or that they recklessly made as positive assertions without any knowledge of their truth, and fraudulently induced the investors to enter into the Stock Purchase Agreement and related agreements by making such misrepresentations and omissions.
(2) Count II (Fraud by Nondisclosure): the investors alleged that appellants concealed from, or failed to disclose to, the investors that DynaColor planned to, and did, usurp the opportunity to sell the NVR systems to Avigilon in competition with Razberi.
(3) Count III (Statutory Fraud under Tex. Bus. & Com. Code Ann. § 27.01): the investors alleged that appellants made a false representation to them for the purpose of inducing them to enter into the Stock Purchase Agreement and that they relied upon the false representation in entering into the agreement.
(4) Count IV (Violation of Texas Securities Act): the investors alleged that Razberi offered or sold securities to the investors by means of an untrue statement of a material fact or omission; that Chen, as Razberi's director, knew the untruth or omission; that his knowledge may be imputed to Razberi; that appellants directly or indirectly controlled Razberi and knew of the untruth or omission; and that appellants, with intent to deceive the investors, materially aided Razberi in its actions.
(5) Count V (Negligent Misrepresentation): in the alternative, the investors and Galvin alleged that appellants negligently made material misrepresentations and omissions and intended for the investors and Galvin to rely upon their misrepresentations and omissions by investing in Razberi.
(6) Count VI (Breach of Fiduciary Duty): Galvin alleged that Chen owed him a fiduciary duty as a shareholder of Razberi because Chen was a director of Razberi and that Chen breached his fiduciary duties of candor, loyalty, and honesty. Galvin also alleged that DynaColor owed him a fiduciary duty because it was the majority shareholder of Razberi and DynaColor also breached its fiduciary duties of candor, loyalty, and honesty to Galvin. Razberi alleged that, as director, Chen breached his fiduciary duties of candor, loyalty, and honesty to Razberi.
(7) Count VII (Breach of Fiduciary Duty): the investors alleged that Chen owed a fiduciary duty to them because he was a director and they were shareholders of Razberi and that he breached his fiduciary duties of candor, loyalty, and care by usurping and diverting to DynaColor corporate opportunities that belonged to Razberi. Chen further breached his duties through dishonesty and deception regarding his and DynaColor's acts and plans with respect to Avigilon.
C. Application of Law to Facts
With respect to Count VII, I concur with the majority that exercise of personal jurisdiction comports with traditional notions of substantial justice and fair play where Chen, as a director, owed a fiduciary duty to the corporation in his directorial actions, and this duty "includes the dedication of [his] uncorrupted business judgment for the sole benefit of the corporation" See Ritchie v. Rupe, 443 S.W.3d 856, 868 (Tex. 2014). Similarly, Chen would owe that duty to the investors.2
I will concede that even this is a close and difficult question given that the only connection Chen appears to have with this forum State is through an agent. But given Chen's status as a foreign national serving as an officer of a business selling products to other businesses in this country, I believe that he should have anticipated the prospect of being haled into a state within the United States if we credit the plaintiffs' theories as we should.3 As the company he served as a director had its principal place of business in Texas, I believe he should have anticipated any claim of breach of fiduciary duty to be filed here, even if his own physical contacts with the State were very limited.
Additionally, I concur with the majority with regards to Count II, that the trial court could not have jurisdiction over appellants for the allegation they sat mute in Taiwan.
However, as for any alleged breach of fiduciary duty against DynaColor, the supreme court specifically declined to recognize a common-law cause of action for "shareholder oppression," so no similar specific jurisdiction as to Razberi's claim for breach of fiduciary duty against DynaColor. See Ritchie, 443 S.W.3d at 891. To the extent the majority concludes that whether DynaColor owes such a duty is soley a question of merits, not jurisdiction, I disagree. We must evaluate jurisdiction claim-by-claim addressing the relationship between the claim, the forum, and the defendant as we go. See TV Azteca, 490 S.W.3d at 37, 41 (citing Calder v. Jones, 465 U.S. 783, 780 (1984)). Moreover, because the minimum-contacts test is intended to ensure that the defendant could reasonably anticipate being sued in the forum's courts, foreseeability of a potential claim is an important-indeed, controlling-consideration in the analysis. See id. at 46 (citing World-Wide Volkswagen, 444 U.S. at 297; BMC Software, 83 S.W.3d at 795). I question how any foreign national could foresee a suit for breach of fiduciary duty to a fellow shareholder where no such relationship exists and the presence of the shareholder in that state is the alleged basis for exercise of jurisdiction. See id. Thus, I dissent from the majority's affirming of the denial of DynaColor's special appearance as to Count VI.
The majority also affirms the trial court's order as to the remaining Counts I, III, IV, and V after concluding appellants committed fraud and otherwise deceived investors through the actions or statements of their agent, James Chan, as he represented appellants during the negotiations of a term sheet prior to the signing of the Stock Purchase Agreement. The term sheet contained a statement that: "The business, assets, financial condition, operations, results of operations and prospects of the Company are substantially as have been represented to LiveOak and no change will have occurred which, in LiveOak's sole judgment, is or may be materially adverse to the Company." The majority goes a step further to conclude that Chen and DynaColor purposefully availed themselves of the benefits of conducting business in this State because there was evidence that Chen, as a director of Razberi,4approved the Stock Purchase Agreement, Chen and DynaColor knew the Stock Purchase Agreement was being negotiated and signed in Texas, and that alleged misrepresentations in the approved agreement are the same ones negotiated in the term sheet.
But in order for a nonresident defendant's contacts in a forum state to support an exercise of specific jurisdiction, there must be at least some-indeed a "substantial"-connection between those contacts and the facts the trial court will focus on to prove the nonresident defendant's liability. See Moki Mac, 221 S.W.3d at 585; accord Walden, 571 U.S. at 284; Jani-King Franchising, Inc. v. Falco Franchising, S.A., No. 05-15-00335-CV, 2016 WL 2609314, at *5 (Tex. App.- Dallas May 5, 2016, no pet.) (mem. op.), overruled on other grounds by Steward Health Care Sys. LLC v. Saidara, 633 S.W.3d 120, 129 (Tex. App.-Dallas 2021, no pet.); see also Saidara, 633 S.W.3d at 126. The facts necessary to prove appellants' liability here appear to be whether Chen or DynaColor disclosed any changes or conditions they knew of that would affect the investors' or Galvin's decisions. Thus, the complained of conduct is, as in Count II, failure to disclose, which is a non-action and not "the defendant's conduct that must form the necessary connection with the forum State." See Walden, 571 U.S. at 285. By this theory, a defendant could be haled into any state or country where they were continuously engaged in not acting-a concept antithetical to the notion of purposeful availment.
II. Having Affirmed in Part the Trial Court's Order, the Majority Cannot Be Understood to Reinstate the Trial Court's Final Judgment
The majority opinion disposes of the special appearance on the merits, but the opinion does not address what effect, if any, the trial court's judgment entered while the appeal of the special appearance remained pending. Instead, the majority opinion remands the case to the trial court to conform the judgment according to and consistent with the opinion. I believe further direction would be helpful here in view of this case's tortured history through our Court.
By affirming in part the trial court's order, I do not believe that we can be taken as leaving the partial or final judgments in place, nor could I understand the majority's opinion to reinstate the trial court's judgment. To reach that decision, the Court would have to conclude the right to review of the summary judgment was lost either by briefing waiver or waiver by failing to file a second notice of appeal. In other words, either the judgment should be reinstated because the parties failed to challenge that judgment in their initial briefs filed in January 2020 a month before the judgment was even entered, or the judgment should be reinstated because the parties failed to file a separate notice of appeal after the judgment was entered, which the Texas Supreme Court has already held to be error. See Chen v. Razberi Techs., Inc., 645 S.W.3d 773, 782 (Tex. 2022).
This Court did not invite the parties to file supplemental briefing after the supreme court's decision and remand to this Court. However, the parties did file supplemental briefs in response to our order inviting them to do so in our order issued after this Court withdrew the first opinion dismissing the case as moot and before the second opinion reinstating the earlier opinion. In those supplemental briefs, they clearly argued not only the merits of the special appearances but also whether the trial court had jurisdiction to render final judgment while the interlocutory appeal was pending in this Court. Accordingly, it cannot be that this Court's judgment reinstates the trial court's final judgment because of any briefing waiver by appellants.
For these reasons, I would provide more complete guidance to the trial court on remand in order to make clear that its summary judgment order must be vacated.5
Conclusion
Thus, I concur in part with and dissent in part from the majority's judgment and write separately to express my understanding that this Court's judgment cannot possibly be understood to reinstate the trial court's summary judgment or final judgment.