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finding insufficient contacts with Texas where the defendant entered an oral contract with a Texas-based plaintiff to purchase some of the plaintiff's "Texas-based business," visited the plaintiff in Texas, and maintained a "business relationship" with the plaintiff "for several years"
Summary of this case from English Tea Shop U.S. Corp. v. HallOpinion
Civil Action No. 3:04-CV-861-K.
March 28, 2005
MEMORANDUM OPINION AND ORDER
Before the Court is Defendants Thomas C. Teather ("Dr. Teather"), Anne G. Teather ("Mrs. Teather"), Dragon Point Racing ("Dragon Point"), and Melbourne United Laser Vision Association, L.L.C.'s ("Melbourne") motion to dismiss. For the following reasons, the Court GRANTS the motion.
I. Factual Background
Plaintiff Robert Norwood ("Mr. Norwood") operates Plaintiff Norwood Autocraft, Inc. ("Norwood Autocraft"), a business that produces, builds, repairs, and maintains custom-made high performance sports cars. Mr. Norwood lives in and Norwood Autocraft (collectively "Plaintiffs") operates in Texas.
Dr. Teather is a physician who lives, works, and operates his medical practice in Florida. Dr. Teather was a customer of Mr. Norwood's for several years. In August 2002, the two men discussed Dr. Teather purchasing and running some of Mr. Norwood's car building programs, specifically the GTO and P4 programs. Ultimately, the two men orally agreed Dr. Teather would purchase the programs from Mr. Norwood for $350,000. As part of the agreement, Dr. Teather was able to use Mr. Norwood's name in the business name. As partial payment, Dr. Teather agreed to complete the work on two vehicles purchased by other Norwood Autocraft customers, who had already partially paid for the work. Mr. Norwood shipped the parts, molds, and equipment for these programs to Dr. Teather. Although Dr. Teather began operating the business, the work on the two vehicles was never completed.
Any correspondence between the men regarding the purchase of the programs took place via mail or telephone. Dr. Teacher conducted all telephone conversations from Florida.
Plaintiffs sued Defendants alleging numerous causes of action related to the alleged breach of contract regarding Dr. Teather's purchase of the P4 program.
II. Legal Standards
When a nonresident defendant files a motion to dismiss for lack of personal jurisdiction, the plaintiff has the burden to show the court does have jurisdiction. Gundle Lining Constr. Corp. v. Adams County Asphalt, Inc., 85 F.3d 201, 204 (5th Cir. 1996). To determine this jurisdiction, the court may receive affidavits, interrogatories, depositions, or oral testimony. Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985). If the court rules on a motion to dismiss for lack of jurisdiction based on the parties' submissions rather than conducting an evidentiary hearing, the plaintiff meets his burden by presenting a facts sufficient to establish a prima facie case of jurisdiction. Cent. Freight Lines Inc. v. APA Transp. Corp., 322 F.3d 376, 380 (5th Cir. 2003); Felch v. Transportes Lar-Mex S.A. de C.V., 92 F.3d 320, 326 (5th Cir. 1996). The court accepts as true uncontroverted allegations and resolves any factual conflicts in the plaintiff's favor. Cent. Freight Lines, 322 F.3d at 380; Bullion v. Gillespie, 895 F.2d 213, 215 (5th Cir. 1990).
A federal court sitting in diversity has personal jurisdiction over a nonresident defendant to the extent a state court in the forum state has jurisdiction. Cent. Freight, 322 F.3d at 380. In Texas, exercising personal jurisdiction over a nonresident defendant is proper if: (1) the defendant has committed an act that confers jurisdiction under the Texas long-arm statute; and (2) exercising jurisdiction does not violate due process guaranteed by the Fourteenth Amendment of the United States Constitution. Jones v. Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1067 (5th Cir. 1992). Because the Texas long-arm statute reaches as far as the limits of due process, the court need only determine whether jurisdiction over the defendants is constitutionally permissible. Id. (citing Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990)).
The Constitution permits the exercise of personal jurisdiction when: (1) a defendant purposefully avails himself of the benefits and protections of the forum state by establishing minimum contacts with the forum state; and (2) exercising jurisdiction over a nonresident defendant does not offend traditional notions of fair play and substantial justice. Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 113 (1987); Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
Minimum contacts with the forum state must be significant enough so that a nonresident defendant should reasonably anticipate being haled into court in the forum state. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980). Under the minimum contacts analysis, the contacts may give rise to either general or specific jurisdiction. Gundle, 85 F.3d at 205. General jurisdiction occurs if the nonresident defendant maintains "continuous and systematic" contacts with the forum state unrelated to the cause of action. Helicopteros Nationales de Columbia, S.A. v. Hall, 466 U.S. 408, 414 (1984). Specific jurisdiction occurs if the cause of action is related to, or arises from, the nonresident defendant's contacts with the forum state. Id.
III. Analysis
A. Contacts with Forum StateDr. Teather is a medical doctor who lives, works, and runs his medical practice, in Florida. Because there is a contradiction in Plaintiffs' versus Defendants' evidence regarding visits Dr. Teather has made to Texas, the Court resolves the factual conflict in Plaintiffs' favor. See Cent. Freight Lines, 322 F.3d at 380. Plaintiffs' evidence establishes that Dr. Teather has been to Texas "at least three times for various reasons." While Mr. Norwood's declaration does not establish the reasons for Dr. Teather's visits, it does establish that Dr. Teather would "always stop by the shop to inspect it, check out our operations and speak to and seek the counsel of [Mr. Norwood] . . . and other Norwood Autocraft employees."
Mrs. Teather also lives and conducts her business in Florida. Mrs. Teather has never been in contact with Plaintiffs, nor has she ever lived or conducted business in Texas. Dragon Point is a Florida limited liability company formed in March 2003. The Teathers are managing partners of Dragon Point. The company has no agents or representatives in Texas. Melbourne is Dr. Teather's company through which he practices medicine. Melbourne has not engaged in business in Texas and has no office, employees, or agents in Texas.
B. General Jurisdiction
General jurisdiction is a difficult standard to meet under the "continuous and systematic contacts" test. Submersible Sys., Inc. v. Perforadora Cent., S.A. de C.V., 249 F.3d 413, 419 (5th Cir. 2001). Plaintiffs' evidence fails to establish the Defendants maintained "continuous and systematic contacts" with Texas unrelated to this cause of action to meet this heavy burden. None of the Defendants (1) reside in Texas, (2) maintain offices, mailing addresses, or telephone numbers in Texas, (3) owns, rents or leases real property in Texas, (4) pays taxes in Texas, or (5) maintains any bank accounts in Texas. Therefore, the Court concludes Defendants may not be subjected to general jurisdiction in Texas. See Examination Mgmt. Services, Inc. v. Partners for Ins., L.L.C., No. Civ. 3:03-CV-1665-B, 2005 WL 280323, at *2 (N.D. Tex. Feb. 3, 2005) (Boyle, J.)
C. Specific Jurisdiction
Specific jurisdiction permits the exercise of personal jurisdiction over a nonresident defendant only when the nonresident defendant's contacts with the forum state arise from, or are directly related to, the cause of action. See Helicopteros, 466 U.S. at 414.
1. Minimum Contacts
The Court concludes the minimum contacts alleged by Plaintiffs do not constitute the minimum contacts necessary to comport with constitutional due process. See Freudensprung v. Offshore Technical Servs., Inc., 379 F.3d 327, 344 (5th Cir. 2004). Therefore, this Court cannot exercise personal jurisdiction over Defendants because they lack sufficient minimum contacts with Texas.
In examining the contacts, the Court looks to the quality, not simply the quantity, of the contacts, and whether they intimate purposeful availment by the nonresident defendant of the benefits of the forum state. See Goddard v. Nat'l Ass'n of Physician Recruiters, Inc., No. Civ. 3:04-CV-1424-H., 2005 WL 50871, at *4 (N.D. Tex. Jan. 11, 2005) (Sanders, Senior J.) (citing Brown v. Flowers Indus., Inc., 688 F.2d 328, 333 (5th Cir. 1982)). The purposeful availment requirement prevents a defendant from being haled into a jurisdiction merely because of a "random, fortuitous, or attenuated" contact or because of a third-party's one-sided action. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984)).
a. Dr. Teather
The Court finds that Plaintiffs have not presented sufficient facts to constitute a prima facie case of jurisdiction over Dr. Teather. Even resolving controverted facts in the Plaintiffs' favor, the Court finds the following be the only evidence of contacts Dr. Teather had with Texas: (1) entered into an oral agreement with Mr. Norwood, through telephonic and mail correspondence while Dr. Teather was in Florida, to purchase some of his Texas-based business to operate in Florida; (2) visited Mr. Norwood three times in Texas; (3) had numerous telephone conversations with Mr. Norwood in Texas; (4) had a business relationship for several years with Mr. Norwood which included mail and facsimile correspondence and shipment of items to and from Texas; and (5) received auto parts sent by Mr. Norwood from Texas.
These contacts are insufficient and do not establish that Dr. Teather intended to avail himself of the privilege of doing business in Texas. See Freudensprung, 379 F.3d at 344-45; Holt Oil Gas Corp. v. Harvey, 801 F.2d 773, 778 (5th Cir. 1986). First, it is well established that "merely contracting with a resident of the forum state is insufficient to subject the nonresident to the forum's jurisdiction." Freudensprung, 379 F.3d at 344 (citing Holt, 801 F.2d at 778). In this case, Plaintiffs concede there is no written agreement or contract, merely an oral one. Moreover, the Fifth Circuit has repeatedly held that the combination of a contract between the nonresident defendant and a resident of the forum, payments mailed to the forum state, and communications made relating to the execution and performance of the contract do not establish sufficient minimum contacts to support the exercise of specific personal jurisdiction over the nonresident defendant. See id. (concluded that limited contacts of (1) entering into contract with Texas corporation, (2) sending agreement from Oklahoma to Texas, (3) sending checks from Oklahoma to Texas in partial performance of contractual obligations, and (4) engaging in extensive telephonic and written communication with Texas corporation were insufficient to support exercise of specific jurisdiction).
Moreover, the Fifth Circuit has determined that the place in which the contract is to be performed is key in determining whether entering into a contract with a resident of the forum state is sufficiently purposeful to satisfy minimum contacts. See Dickson Marine Inc. v. Panalpina, Inc., 179 F.3d 331, 337-38 (5th Cir. 1999); Jones, 954 F.2d at 1068-69. In Dickson Marine, the plaintiff asserted personal jurisdiction based primarily on a repair contract it formed with an out-of-state defendant. Dickson Marine, 179 F.3d at 337. In that case, the court emphasized that the majority of the contract's performance occurred outside of the forum state. Id. at 338. It further noted that once the repairs outside the forum state had occurred, and payment had been made, all contact between the parties would cease. Id. The court concluded that this type of contractual relationship created only limited contacts between the defendant and the forum state, thereby failing to satisfy the minimum contacts analysis. Id. In this case, the oral agreement between Mr. Norwood and Dr. Teather is an insufficient minimum contact as well. Mr. Norwood agreed to sell parts of his Texas-based business to Dr. Teather who would then operate them in Florida. The oral agreement took place during phone conversations the men had while Mr. Norwood was in Texas and Dr. Teather was in Florida. Mr. Norwood shipped the requested parts, molds, and equipment to Dr. Teather in Florida. Once payment for the sale was made, which included partial performance to be done in Florida, and the goods were all shipped to Florida, the contractual relationship would be completed, as in Dickson Marine. See id. at 337-38. The Court concludes this contractual relationship cannot satisfy the minimum contacts analysis. See id. at 338.
Lastly, Plaintiffs argue that because Dr. Teather is a managing member of both Dragon Point and Melbourne, other Defendants in this case, he is subject to the jurisdiction of this Court. This argument confuses the concepts of liability and personal jurisdiction. See Salem Radio Representatives, Inc. v. Can Tel Market Support Group, 114 F. Supp.2d 553, 556 (N.D. Tex. 2000) (Sanders, Senior J.) (citing Rush v. Savchuk, 444 U.S. 320 (1980)). The parties' relationship with each other may be significant in evaluating their ties to the forum; however, the requirement of minimum contacts must be met as to each defendant. See Salem, 114 F. Supp.2d at 556-57. There is no showing that Dr. Teather had any relationship with Dragon Point or Melbourne such that he would anticipate being haled into court in Texas.
The Court concludes that Dr. Teather lacks sufficient minimum contacts with Texas to support the exercise of personal jurisdiction.
b. Mrs. Teather
The Court similarly finds that Mrs. Teather does not have sufficient minimum contacts. There is no evidence that Mrs. Teather ever visited Texas on business or spoke to Plaintiffs. Rather, Plaintiffs' only evidence the Court has personal jurisdiction over Mrs. Teather is that her husband, Dr. Teather, paid Mr. Norwood using the Teathers' joint checking account in Florida.
The Fifth Circuit has previously concluded that a defendant's action of sending money from an out-of-state bank account to a plaintiff's Texas bank account is not a sufficient minimum contact. Patterson v. Dietze, 764 F.2d 1145, 1146 (5th Cir. 1985). Since this action would be insufficient as to Dr. Teather, it logically follows then that Dr. Teather's payment to Mr. Norwood, drawn on Dr. Teather's Florida joint checking account, could not be a sufficient minimum contact as to Mrs. Teather.
Plaintiffs also argue that because Mrs. Teather is a managing member of Dragon Point, another Defendant, she is subject to the jurisdiction of this Court. The Court does not agree with this argument for the same reasons as discussed above in relation to Dr. Teather.
The Court concludes Mrs. Teather lacks sufficient minimum contacts with Texas to support the exercise of personal jurisdiction.
c. Dragon Point Racing, L.L.C.
Plaintiffs allege this Court has jurisdiction over Dragon Point. As evidence, Plaintiffs claim that Dr. Teather and Mrs. Teather are managing members and, therefore, agents of Dragon Point. Plaintiffs contend that because the Court has jurisdiction over Dr. and Mrs. Teather, it also may exercise jurisdiction over Dragon Point.
In general, the proper exercise of personal jurisdiction over a nonresident corporation may not be based solely upon the contacts with the forum state of another corporate entity with which the defendant may be affiliated. Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 335 (1925); Hargrave v. Fibreboard Corp., 710 F.2d 1154, 1159 (5th Cir. 1983). Here, Dragon Point is a Florida limited liability company whose primary place of business is at Dr. Teather's residence in Florida. Further, Dragon Point has never had employees, agents, or representatives who reside or work in Texas. The Court finds these instances do not create minimum contacts sufficient to exercise personal jurisdiction over Dragon Point.
Plaintiffs also contend that Dragon Point's action of suing Mr. Norwood is a sufficient minimum contact. Plaintiffs' own evidence establishes Dragon Point did not sue Mr. Norwood. In a separate agreement from the sale of the programs, Dr. Teather agreed to purchase an unfinished GTO-style vehicle ("GTO") from Mr. Norwood for $75,000. Mr. Norwood executed and delivered to Dr. Teather a bill of sale for the GTO. At a later point in time, Dr. Teather informed Mr. Norwood that the GTO's unfinished condition was a breach of their agreement. A demand letter followed in which Mr. James Fallace stated that he was the attorney representing Dr. Teather and the entity, Dragon Point. Mr. Fallace informed Mr. Norwood that if Dr. Teather's money was not refunded, a lawsuit would be instituted. A lawsuit was eventually filed against Mr. Norwood in Florida state court. Although Dragon Point was referenced in the demand letter, Dr. Teather was the sole named plaintiff in the Florida lawsuit. This argument fails based on the evidence establishing Dragon Point did not sue Mr. Norwood. Furthermore, even if Dragon Point had sued Mr. Norwood, the suit was initiated in Florida, not Texas. The Court fails to see how this could establish a sufficient minimum contact with Texas.
Dragon Point lacks sufficient minimum contacts with Texas to support the exercise of personal jurisdiction.
d. Melbourne
Plaintiffs also argue the Court has jurisdiction over Melbourne. In support of their contention, Plaintiffs list the following facts: (1) Dr. Teather corresponded with Plaintiffs using Melbourne letterhead; (2) Dr. Teather corresponded with Plaintiffs using Melbourne's return address; (3) invoices from Mr. Norwood's companies list Melbourne as billing addressee; (4) invoices from Mr. Norwood's companies list Melbourne's street address as billing address; (5) Plaintiffs sometimes shipped parts to Dr. Teather at Melbourne's address; and (6) Dr. Teather is an agent for Melbourne and his actions are, therefore, imputed to Melbourne because of its subsequent ratification.
Mere usage of letterhead is not sufficient to establish minimum contacts with the forum state. See 3D Sys., Inc. v. Aarotech Labs., Inc., 160 F.3d 1373, 1380 (Fed. Cir. 1998) (existence of defendant's name on subsidiary's letterhead insufficient to establish minimum contacts with forum state, even when plaintiff able to show that letterhead reached forum state); Santos v. Sacks, 697 F. Supp. 275, 284 (E.D. La. 1988) (listing of one defendant's name on letterhead of another defendant not sufficient to establish minimum contact with forum state). Furthermore, in regards to the use of Melbourne's return address for shipment and billing purposes, the Court notes that Melbourne's return address is a Florida address, not a Texas address; therefore, it does not support a contact with Texas.
The Court finds Melbourne lacks sufficient minimum contacts with Texas to support the exercise of personal jurisdiction.
2. Fair Play and Substantial Justice
Plaintiffs failed to establish Defendants had sufficient minimum contacts with Texas. The Court finds that subjecting a defendant to the jurisdiction of a forum with which it had insufficient minimum contacts would run afoul of principles of fair play and substantial justice. See Woodson v. Copeland Trucking, No. Civ. 3:01-CV-2216-H, 2002 WL 245975, at *3 (N.D. Tex. Feb. 15, 2002) (Sanders, Senior J.).
D. Improper Venue and Insufficient Service of Process
Because the Court finds Plaintiffs' complaint should be dismissed for lack of personal jurisdiction, it need not consider Defendants' remaining grounds for dismissal based upon allegations of improper venue and insufficient service of process
IV. Conclusion
For the reasons stated above, Defendants' Motion to Dismiss is hereby GRANTED and the case is DISMISSED without prejudice.
SO ORDERED.