Opinion
Civil Action No. 3:04-CV-0019-B.
September 15, 2004
MEMORANDUM ORDER
Before the Court is 1) Defendants Palmer Plaza Partners ("Plaza Partners") and Alex S. Palmer's Motion to Dismiss or Alternative Motion to Stay and/or Transfer, filed by joint submission on April 8, 2004; and 2) Plaintiffs WorkPlaceUSA, Inc. and John Amend's Agreed Motion to Suspend the Scheduling Order, filed September 3, 2004. For the reasons explained below, the Court GRANTS Plaza Partners's motion to transfer this case to the Middle District of Tennessee and DENIES as moot WorkPlace's agreed motion to suspend the scheduling order.
Throughout this order, Defendants will be referred to collectively as "Plaza Partners" or "Defendants." Plaintiffs will be referred to collectively as "WorkPlace" or "Plaintiffs." In its analysis, the Court finds it unnecessary to differentiate between the organizational and individual plaintiffs and defendants, respectively, because the activities of their constituent members are deemed largely coextensive.
I. Factual and Procedural Background
The background facts are derived from Plaintiffs' Original Petition and on facts gleaned from the parties' court papers and corresponding attachments. Where there may be a dispute over a stated fact the Court has so indicated by claiming the fact as one stated by that party to be true.
This case arises out of a default on a commercial property lease between Defendants and a third party. Plaintiff WorkPlaceUSA, Inc. ("WorkPlace") is a Delaware corporation with its principal place of business in Texas. (Pls.' Orig. Pet. ("Compl.") ¶ 1); (Defs.' Mot. Dismiss/Stay/Transfer ("Defs.' Mot.") 2). Plaintiff John Thomas Amend, WorkPlace's president, is a citizen and resident of Texas. (Compl. ¶ 2); (Defs.' Mot. 2). WorkPlace is a commercial real estate brokerage firm that represents clients in negotiating commercial leases. (Defs.' Mot. 2). Defendant Plaza Partners is a Tennessee general partnership. (Aff. of Alex S. Palmer. ¶ 3, Joint App. at Ex. A, Tab 1, at 6 [hereinafter "Palmer Aff.")). Its managing partner, Defendant Alex S. Palmer, is a citizen and resident of Tennessee. (Palmer Aff. ¶¶ 1-2). Plaza Partners owns and manages an office building located in Nashville, Tennessee called Palmer Plaza. (Palmer Aff. ¶ 3).
In February 2002, Amend, on behalf of WorkPlace, represented MCI WorldCom Communications, Inc. ("WorldCom") in negotiations to lease Palmer Plaza. (Defs.' Mot. 2) Plaza Partners and WorkPlace ultimately entered into a Professional Services Fee Agreement (the "Agreement") on February 19, 2002. (Compl. ¶ 7). Under its terms, Plaza Partners agreed to pay WorkPlace a 4% commission on the total gross revenues it received from WorldCom during the life of the lease. (Defs.' Mot. 2). One-half of the commission was to be paid at the time Plaza Partners and WorldCom entered into a lease agreement, with the remaining half to be paid once WorldCom occupied the Palmer Plaza space, or as "commencement" was otherwise defined in the lease. ( Id.)
Amend traveled to Tennessee on two occasions to meet with Palmer and to inspect the property. (Aff. of John Thomas Amend ¶ 4, Joint App. at Ex. B, Tab 2, at 7 [hereinafter "Amend Aff."]). During the course of lease negotiations, Plaza Partners became concerned about WorldCom's financial ability to fulfill its prospective lease obligations, given the substantial costs associated with building out the office space and paying commissions to WorkPlace. (Palmer Aff. ¶ 9). To ease Plaza Partners's worries over WorldCom, WorkPlace agreed to an Addendum to the Agreement (the "Addendum") entitling Plaza Partners to recover a portion of commission fees paid to WorkPlace in the event WorldCom defaulted under the lease. (Palmer Aff. ¶ 10 Ex. 2 thereto). The Addendum stated that any dispute arising thereunder would be governed by Tennessee law and that the parties agreed to submit to the jurisdiction of Tennessee courts for its enforcement. (Palmer Aff., Ex. 2 ¶ 4).
On June 3, 2002, WorldCom and Plaza Partners entered into a 10-year lease of two floors of Palmer Plaza. (Palmer Aff. ¶ 11). Soon after entering into the lease, WorldCom filed for bankruptcy protection, which constituted an event of default under the lease. (Palmer Aff. ¶ 13). On June 10, 2003, Palmer wrote Amend to notify WorkPlace that WorldCom intended to reject the lease pursuant to the Bankruptcy Code. (Palmer Aff. ¶ 14 Ex. 3 thereto). On August 31, 2003, WorldCom formally rejected the lease and stopped making monthly payments to Plaza Partners. (Palmer Aff. ¶ 17).
On October 8, 2003, Plaza Partners made demand upon WorkPlace to refund the commission fees it believed it was entitled to under the Addendum. (Palmer Aff. ¶ 18 Ex. 4 thereto). A payment deadline of October 31, 2003 was set in the letter. ( Id.) On November 3, 2003, Amend's attorney wrote a letter to Palmer raising WorkPlace's concerns over its obligations under the Addendum and requesting that Plaza Partners provide certain financial information. (Palmer Aff. ¶ 19 Ex. 5 thereto). Plaza Partners's attorney responded two days later with a letter addressing Amend's concerns and stressing that Plaza Partners expected WorkPlace to live up to its obligations under the Addendum. (Palmer Aff. ¶ 19 Ex. 6 thereto).
On November 10, 2003, WorkPlace filed a declaratory judgment action in Texas state court, seeking a declaration that it had no obligation to Plaza Partners under the agreements between them. (Pls.' Orig. Pet., Joint App. at Ex. A, Tab 2). Plaza Partners claims that it did not have knowledge of that suit when it filed an action against WorkPlace for compensatory damages in Tennessee state court just over a month later on December 12, 2003. (Palmer Aff. ¶¶ 20-21). Both the Texas and Tennessee actions were subsequently removed to federal court, in the Northern District of Texas and the Middle District of Tennessee, respectively. (Defs.' Mot. 5). In the Middle District of Tennessee, WorkPlace filed a motion to transfer the case to the Northern District of Texas. On July 8, 2004, Judge Robert L. Echols of the Middle District of Tennessee issued a thoughtful memorandum opinion denying that motion. (Order, Palmer Plaza Partners et al. v. WorkPlaceUSA, Inc. et al., No. 3:04-0134 (M.D. Tenn. July 8, 2004)). On April 8, 2004, Plaza Partners filed in this Court a motion to dismiss for lack of personal jurisdiction and improper venue, or, alternatively, to stay the case or transfer it to the Middle District of Tennessee. On September 3, 2004, WorkPlace filed an agreed motion to suspend the Scheduling Order in this case until the Court resolves the jurisdictional issue presented in Plaza Partners's motion.
II. Analysis
A. Legal Standard
The plaintiff bears the burden of proof to show that a nonresident defendant is subject to the Court's jurisdiction. Gundle Lining Constr. Corp. v. Adams County Asphalt, Inc., 85 F.3d 201, 204 (5th Cir. 1996) (citations omitted). Two preconditions must be met: (1) the nonresident must be amenable to service of process under Texas's long-arm statute; and (2) the assertion of jurisdiction over the nonresident must comport with the Due Process Clause of the Constitution. Jones v. Petty-Ray Geophysical, Geosource, Inc., 954 F.2d 1061, 1067 (5th Cir. 1992). Because Texas's long-arm statute has been held to co-extend with the limits of due process, the Court need only determine whether jurisdiction over Plaza Partners is constitutionally permissible. Id. at 1067-68 (citing Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990)). To meet the federal constitutional test of due process, two elements must be satisfied: (1) the defendant must have purposefully availed itself of the benefits and protections of the forum state by establishing "minimum contacts" with that state such that it should reasonably anticipate being haled into court there; and (2) the exercise of jurisdiction over the defendant must not offend traditional notions of fair play and substantial justice. Jones, 954 F.2d at 1068.
"The Court may determine the jurisdictional issue by receiving affidavits, interrogatories, depositions, oral testimony, or any combination of the recognized methods of discovery." Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985).
The "minimum contacts" test can be met by contacts giving rise to either general or personal jurisdiction. Gundle, 85 F.3d at 205. Specific jurisdiction exists when the nonresident defendant's contacts with the forum state arise from, or are directly related to, the cause of action. Id. (citation omitted). "General personal jurisdiction is found when the nonresident defendant's contacts with the forum state, even if unrelated to the cause of action, are continuous, systematic, and substantial." Marathon Oil Co. v. Ruhrgas, 182 F.3d 291, 295 (5th Cir. 1999) (citation omitted). In either context, the Court considers the totality of the circumstances in conducting the minimum contacts analysis; no single factor is determinative. Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985). The analysis ultimately reduces to whether the nonresident defendant purposefully availed itself of the privilege of conducting business in this state, thereby invoking the benefits and protections of Texas law. Id. at 1191.
B. General Jurisdiction
WorkPlace appears to concede that this Court does not have general jurisdiction over Plaza Partners, as it raises no argument that Plaza Partners has engaged in substantial, systematic and continuous activities in Texas. Marathon Oil, 182 F.3d at 295. On the contrary, Plaza Partners has stated that it does not own or lease property in Texas, conduct any business in Texas, employ anyone living in Texas, or maintain any bank accounts in this state. (Palmer Aff. ¶¶ 4, 5) The Court thus finds that there is no basis upon which to assert general jurisdiction over Plaza Partners.
C. Specific Jurisdiction
WorkPlace argues that the following contacts demonstrate that Plaza Partners has purposefully availed itself of the privileges of conducting activities in Texas: WorkPlace signed the agreements between the parties in Dallas; negotiations regarding the agreements involved communications emanating from Dallas; WorkPlace's performance under the agreements took place in Dallas; and Plaza Partners sent a demand for payment to WorkPlace in Dallas.
Almost all of these activities, however, involve WorkPlace's own unilateral activities, which are insufficient to establish specific jurisdiction over a nonresident defendant. Patterson v. Dietze, Inc., 764 F.2d 1145, 1146-47 (5th Cir. 1985) (finding that "trial court was obliged to disregard [plaintiff's] actions, for `[t]he unilateral activities of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State.'") (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)); Hydrokinetics, Inc. v. Alaska Mech., Inc., 700 F.2d 1026, 1029 (5th Cir. 1983) (finding no purposeful availment of benefits of Texas law where no performance by defendant was to take place in Texas other than for payment for goods). WorkPlace contends that it negotiated the agreements between the parties and performed under them in Texas. And WorkPlace maintains that communications between Texas, Tennessee, and Oklahoma (where negotiations on WorldCom's side were principally conducted) constituted the essence of the agreements. But the Fifth Circuit has consistently held that the mere exchange of communications between the forum and foreign states during the course of developing and carrying out contracts is insufficient to constitute purposeful availment of the protections of Texas law. See Holt Oil Gas Corp. v. Harvey, 801 F.2d 773, 778 (5th Cir. 1986); Hydrokinetics, 700 F.2d at 1029; see also Baron Co., Inc. v. Bank of New Jersey, 497 F.Supp. 534, 537-38 (E.D. Pa. 1980) (finding no personal jurisdiction in Pennsylvania where Pennsylvania consultant prepared documents in Pennsylvania, performed under contract in Pennsylvania, and exchanged phone calls and correspondence with nonresident defendant). Rather, any communications to or from Texas arising from the agreements between the parties to this lawsuit were merely a consequence of the fortuitous fact that WorkPlace operates in Texas and Amend is a Texas resident. Patterson, 764 F.2d at 1147.
Nor does the fact that Plaza Partners sent a demand for payment to Texas constitute purposeful availment of the Texas legal system. See Thousand Trails, Inc. v. Foxwood Hill Prop. Owners Assoc., 1999 WL 172322, at *3 (N.D. Tex. March 22, 1999).
The Tenth Circuit's decision in National Business Brokers, Ltd. v. Jim Williamson Productions, Inc., though not binding on this Court, is instructive given its factual similarity with this case. 16 Fed. Appx. 959 (10th Cir. 2001) (unpublished). In National Business Brokers, a Colorado business broker sued a Louisiana seller of a Louisiana business for allegedly breaching listing agreements between them. The seller had contacted the seller by phone, facsimile, and e-mail on at least 60 occasions requesting information and services pursuant to the listing agreements. Id. at 960. The Colorado broker put buyers in contact with the seller after the buyers had agreed that all negotiations for the purchase of the business would be conducted through the broker. Id. After the business was sold to the buyers secured by the broker, the broker sued the seller claiming that it never received the sales commission due under the listing agreements. Id.
The Colorado district court found that it lacked personal jurisdiction over the Louisiana seller because the broker failed to show that the seller signed the listing agreements or initiated the telephone, facsimile, and e-mail communications as part of a specific or intentional effort to conduct business within the state of Colorado. Id. at 962-63. "[B]eyond the fortuitous fact that [the broker's] business was located in Colorado, Colorado had no specific relationship to the listing agreements or the process of locating a buyer. . . ." Id. at 963. Likewise, here WorkPlace has not demonstrated that Plaza Partners sought to conduct business within the state of Texas. On the contrary, it was WorkPlace that initiated contact with Plaza Partners to negotiate a lease for space located in Tennessee. (Palmer Aff. ¶ 6). WorkPlace was simply an agent of WorldCom with whom Plaza Partners dealt to help secure a lease deal with WorldCom. That WorkPlace was located in Texas was a mere fortuity.
Simply because Plaza Partners contracted with a Texas resident does not subject it to jurisdiction here. See Holt, 801 F.2d at 778. In fact, the Addendum specifically provided that Tennessee law would govern. (Palmer Aff., Ex. 2 ¶ 4). Though not determinative, choice-of-law provisions are entitled to some weight in deciding whether a nonresident defendant has purposefully invoked the jurisdiction of the forum. Stuart, 772 F.2d at 1195; Hydrokinetics, 700 F.2d at 1029. Furthermore, it appears that no one on behalf of Plaza Partners ever traveled to Texas in connection with the agreements between the parties. On the contrary, WorkPlace's president, Amend, and another WorkPlace employee made two trips to Tennessee to meet Palmer and to inspect the Palmer Plaza facilities. (Amend Aff. ¶ 4; Ballou Aff. ¶ 3, Joint App. at Ex. B, Tab 1, at 5). In short, the Court finds that WorkPlace has failed to show that Plaza Partners should have reasonably anticipated being haled into court in Texas given its limited contacts with this state.
As Plaza Partners points out, Plaza Partners did not seek out WorkPlace's services. Rather, WorkPlace initiated contact with Plaza Partners to negotiate a new lease on behalf of its client, WorldCom. (Palmer Aff. ¶ 6).
D. Traditional Notions of Fair Play and Substantial Justice
In light of the Court's conclusion that WorkPlace has failed to establish that Plaza Partners had minimum contacts with the state of Texas, it need not reach the fairness prong of the constitutional test. Nevertheless, the Court finds that subjecting a defendant to the jurisdiction of a forum with which it had no minimum contacts would run afoul of principles of fair play and substantial justice. Woodson v. Copeland Trucking, 2002 WL 245975, at *3 (N.D. Tex. Feb. 15, 2002). Furthermore, having found that personal jurisdiction over Plaza Partners is wanting, the Court need not address whether this case presents an instance of anticipatory filing such to constitute an exception to the so-called "first-filed" rule.
The "first-filed" rule generally holds that a later-filed action should be dismissed when an action involving the same issues were presented in an earlier-filed action. Serco Serv. Co., L.P. v. Kelley Co., Inc., 1994 WL 715913, at *2 (N.D. Tex. May 24, 1994).
E. Transfer
Although this Court lacks personal jurisdiction over Plaza Partners for the reasons explained above, it is not divested of the power to transfer the case to another forum under either 28 U.S.C. § 1404(a) or § 1406(a). Goldlawr, Inc. v. Heiman, 369 U.S. 463, 465-66 (1962); Aguacate Consol. Mines, Inc., of Costa Rica v. Deeprock, Inc., 566 F.2d 523, 524 (5th Cir. 1978); 28 U.S.C. §§ 1404(a), 1406(a). The Court finds that the interests of justice would be served by a transfer of this case to the Middle District of Tennessee, where an action involving identical parties and nearly identical issues is pending. See CD Solutions v. Tooker, 965 F.Supp. 17, 20-21 (N.D. Tex. 1997). Because this case is being transferred to another forum, the Court denies as moot WorkPlace's agreed motion to suspend the scheduling order.
III. Conclusion
For the reasons set forth in this order, it is ORDERED that Defendants' Motion to Dismiss, or in the Alternative, Stay and/or Transfer is GRANTED, and this case is hereby TRANSFERRED to the Middle District of Tennessee pursuant to 28 U.S.C. § 1404(a). Plaintiffs' Agreed Motion to Suspend the Scheduling Order is DENIED as moot.
SO ORDERED.