Summary
finding that party to agreement with Texas forum-selection clause consented to personal jurisdiction in Texas for suits arising out the agreement
Summary of this case from Alliantgroup, L.P. v. FeingoldOpinion
Civil Action No. SA-05-CA-0593-XR.
May 19, 2006
ORDER
On this date, the Court considered Defendants' motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). After careful consideration, the Court denies Defendants' motion (docket no. 14).
I. Factual and Procedural Background
Plaintiff XPEL Technologies Corporation ("XPEL") is a Nevada corporation with its principal place of business in San Antonio, Texas. XPEL creates protective coating design kits for automobile paint, headlights, and windows. Each design kit is tailored to fit a specific automobile make and model, e.g. 2000 BMW M Roadster. These highly proprietary design kits form the thrust of XPEL's business. XPEL markets its products to protective coating installers, who require access to design kits to manufacture vehicle-specific protective coatings for installation.
XPEL's design kits are available on its website,www.xpel.com, through its Design Access Program ("DAP"). Access to DAP is protected by an End User Licence Agreement ("EULA"). The EULA embodies the rights and obligations of XPEL and the licensee/user. DAP access is limited to registered users who accept the EULA's terms. Users signify their acceptance of the EULA by clicking on the "I Accept" button when the EULA is presented. By clicking on the "I Accept" button, a "clickwrap" agreement is formed. Refusing the EULA prevents a user from accessing DAP.
"A `clickwrap' agreement appears when a user first installs computer software obtained from an online source or attempts to conduct an Internet transaction involving the agreement and purports to condition further access to the software or transaction on the user's consent to certain conditions there specified; the user `consents' to these conditions by `clicking' on a dialog box on the screen, which then proceeds with the remainder of the software installation or Internet transaction." Kevin W. Grierson, Annotation, Enforceability of "Clickwrap" or "Shrinkwrap" Agreements Common in Computer Software, Hardware, and Internet Transactions, 106 A.L.R. 5th 309 n. 1 (2003).
The EULA is presented to users with "I Accept" or "I Decline" buttons.
Defendant Rob Freeman ("Freeman"), a Maryland citizen, is the sole owner of Defendant Maryland Performance Works Ltd. ("Maryland Performance"), a Maryland corporation. Freeman formed Maryland Performance in 1997, as a sole proprietorship, for the purpose of manufacturing and installing automobile protective coatings. In April 2003, Freeman incorporated Maryland Performance as an S corporation. To properly manufacture and install protective coating, Maryland Performance needed access to vehicle-specific design kits. This need resulted in Maryland Performance becoming a licensee of XPEL's DAP.
On June 25, 2001, Maryland Performance initially accepted the DAP EULA in order to download design kits. The EULA allegedly provided that "[a]ll disputes between the parties shall be resolved by binding arbitration . . . to be held in Bexar County, Texas, U.S.A., the county of [XPEL's] headquarters. . . . Either party may take any legal action in court needed to protect any right pending completion of the arbitration, personal and exclusive jurisdiction being in the Bexar County, Texas, U.S.A. . . . Exclusive venue for . . . all disputes concerning this EULA or between the parties shall be in Bexar County, Texas, U.S.A., the county of [XPEL's] headquarters. . . . The entire relationship will be governed by internal Texas law without application of conflict of law rules." EULA, § 10.7.
In June 2004, Freeman and non-parties Michael Mayall, Matthew Mayall, and Brian Stephens formed Defendant Proform Protective Films Inc. ("Proform"). The Mayalls are former XPEL employees, whom XPEL has filed a separate lawsuit against in the 73rd Judicial District Court, Bexar County, Texas alleging, among other things, misappropriation of trade secrets and theft of XPEL's intellectual property. XPEL claims Proform was formed to directly compete with XPEL through the use of stolen trade secrets and intellectual property, namely XPEL's design kits and database. Freeman and Maryland Performance allegedly used XPEL's design kits to create protective coatings that were sold as products under the Proform brand name. XPEL asserts that Maryland Performance and Freeman misrepresented their intentions for accessing DAP by re-branding its products under the Proform brand name. It is unclear when XPEL learned of Proform's existence.
In the state court action, XPEL also sued the Mayalls' company, Pro-Tect Film Distributing, Inc. ("Pro-Tect"), a Nevada corporation with a principal place of business in Las Vegas, Nevada. XPEL alleges, and documents associated with Freeman's application for a business loan support, that Pro-Tect is a Proform satellite office. Resp., at Ex. C-8 (handwritten notes describing Las Vegas store as a satellite office).
XPEL attached a January 5, 2004 website comment thread discussing the XPEL-Maryland Performance-Freeman-Proform relationship:
I just had may STi done by Skip over at PFTFilms.com. . . . he uses genuine 3M X-Pel materials, but gets his materials from Rob over at Maryland Performance Works (he private labels the 3M X-Pel materials as Proform — he buys the X-Pel materials and layouts from 3M and cuts everything himself at the shop. Rob is probably one of the biggest distributors of X-Pel on the [E]ast [C]oast, and he's done thousands of cars in his lifetime. . . .
Resp., at Ex. B-4. Maryland Performance and Proform appear to be business partners with Protective Film Technologies, LLC. Maryland Performance's and Proform's website,www.proformauto.com, lists Protective Film Technologies, LLC as a "Partner", and includes a link to its website,www.PFTFilms.com. Protective Film Technologies, LLC's website includes the same Proform brand label found on Maryland Performance's and Proform's website.
On May 27, 2005, XPEL amended the EULA — eliminating the binding arbitration clause. The amended EULA provided that "[a]ll disputes between the parties shall be resolved by a court sitting in Bexar County, Texas, USA, the county of [XPEL's] headquarters. . . . To obtain certainty, this Agreement establishes sole and exclusive jurisdiction for all disputes between the parties as stated above. LICENSEE expressly agrees to not contest the same, to submit to the same, and waives all objections to the same." EULA, § 10.4. Between May 31, 2005 and June 23, 2005, Maryland Performance allegedly accepted the amended EULA on twenty-nine (29) separate occasions. During this time period, Maryland Performance downloaded three hundred fourteen (314) design kits. On June 23, 2005, XPEL terminated its relationship with Maryland Performance.
On June 27, 2005, XPEL filed suit against Maryland Performance, Freeman, and Proform (collectively, "Defendants") alleging breach of the EULA, fraud, fraudulent inducement, misrepresentation, unjust enrichment, misappropriation of trade secrets, conversion, tortious interference with existing and prospective contracts, unfair competition, misuse of proprietary information, and theft of trade secrets. Specifically, XPEL alleges that Maryland Performance, together with Freeman and Proform, unlawfully used XPEL's proprietary design kits, knowingly misrepresented their intentions and activities as to how the design kits were to be used, and violated the EULA by (1) conducting their business at a location different than that provided to XPEL, (2) creating, offering, and selling competing goods, (3) creating and using a competitive design kit database for manufacturing similar products, and (4) failing to protect XPEL's intellectual property rights. Am. Complaint, at ¶¶ 17-23. XPEL requests actual damages, exemplary damages, permanent injunctive relief mandating Defendants' compliance with the terms of the EULA, judgment declaring Defendants' use of XPEL's property as unlawful, and attorney's fees.
On July 26, 2005, Defendants filed an Original Answer subject to a plea to the Court's jurisdiction. On September 23, 2005, Defendants filed a motion to dismiss for lack of personal jurisdiction claiming they had insufficient contacts with Texas to warrant the Court's exercise of specific or general personal jurisdiction. Defendants allege they are located and reside in Maryland, perform all business functions in Maryland, and the alleged breach of any licensing agreement took place in Maryland, if at all. Outside of one isolated business trip, Defendants claim to have never been physically present in Texas. Though Maryland Performance admits accepting the EULA each time it accessed DAP to buy design kits, it claims the Texas forum selection clause XPEL relies upon was not included in any such agreements.
In the summer of 2002, Freeman, as a representative of Maryland Performance, visited XPEL's San Antonio, Texas offices for installation training. Freeman Aff., at ¶¶ 3, 9.
In November 2005, Defendants allegedly launched a software program titled, "Kit Access Technology" ("KAT"). KAT and XPEL's DAP are allegedly similar programs offering vehicle-specific protective coating design kits for purchase. Maryland Performance's and Proform's website touts the Proform brand and design kits:
"Proform" quickly became one of the nations leading brands for [clear protective coatings] and merged into a co-op company in 2004. Profrom Protective Films Inc. is now one of the worlds leading authority on clearbra technology offering a "kit that fits" mentality the industry needed . . . PROFORM Protective Designs has just started offering a web-based service with access to top-quality kits for the most demanding installer. . . . Just log-in, look up a pattern and start ordering or cutting. Proform kits offer the best "edge to edge" coverage while not detracting from the aesthetics of the vehicle. [They're] designed BY installers FOR installers and, in our experience, that's the only way to go.See http://www.proformauto.com/proform/home/.
II. Personal Jurisdiction Standard
When a nonresident defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing that the defendant has sufficient contacts with the forum State to warrant the district court's exercise of personal jurisdiction. Guidry v. U.S. Tobacco Co., 188 F.3d 619, 625 (5th Cir. 1999); Wilson v. Belin, 20 F.3d 644, 648 (5th Cir. 1994). When a court rules on a motion to dismiss for lack of personal jurisdiction without holding an evidentiary hearing, the nonmovant need only make a prima facie showing of jurisdiction, and the court must accept as true the nonmovant's uncontroverted allegations and resolve all factual disputes in its favor. Guidry, 188 F.3d at 625. If there are conflicts between some of the facts alleged by the plaintiff and those alleged by the defendant in their affidavits, such conflicts must be resolved in the plaintiff's favor for the purposes of determining whether a prima facie case has been established. Id. at 626. In resolving a jurisdictional issue, the court may review pleadings, affidavits, interrogatories, depositions, oral testimony, exhibits, any part of the record, and any combination thereof. Command-Aire Corp. v. Ontario Mech. Sales Serv., Inc., 963 F.2d 90, 95 (5th Cir. 1992). The prima facie case requirement does not require the court to credit conclusory allegations, even if uncontroverted. Panda Brandywine Corp. v. Potomac Elec. Power, 253 F.3d 865, 868 (5th Cir. 2001).A federal district court in a particular state may exercise personal jurisdiction over a defendant to the extent permitted by the applicable state law. Submersible Sys., Inc. v. Perforadora Central, S.A., 249 F.3d 413, 418 (5th Cir. 2001). If the state long-arm statute allows the district court to exercise personal jurisdiction, the exercise of personal jurisdiction must also be proper under the Due Process Clause of the Fourteenth Amendment. Id. Because Texas courts have construed the Texas long-arm statute to extend to the limits of the Constitution, the Court will focus on the federal due process inquiry. Bullion v. Gillespie, 895 F.2d 213, 216 (5th Cir. 1990). Thus, jurisdiction over nonresidents, Maryland Performance, Proform, and Freeman, is only proper if it comports with due process.
The exercise of personal jurisdiction is consistent with due process when (1) a nonresident defendant has purposefully availed itself to the benefits and protections of the forum state's laws by establishing minimum contacts with the forum state; and (2) the exercise of personal jurisdiction does not offend traditional notions of fair play and substantial justice. Panda Brandywine, 253 F.3d at 867. The due process clause ensures that nonresidents receive "fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985). "[W]hether the minimum contacts are sufficient to justify subjection of the nonresident to suit in the forum is determined not on a mechanical and quantitative test, but rather under the particular facts upon the quality and nature of the activity with relation to the forum state." Mississippi Interstate Express, Inc. v. Transpo, Inc., 681 F.2d 1003, 1006 (5th Cir. 1982).
A nonresident defendant's contacts with the forum state may support either specific or general jurisdiction. Wilson, 20 F.3d at 647. Specific jurisdiction arises when the "litigation results from alleged injuries that `arise out of or relate to' those activities" the defendant purposefully directed to the forum state. Burger King, 471 U.S. at 472 (quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed. 2d 404 (1984)). For the exercise of specific jurisdiction to be appropriate, the non-resident defendant's activities must have purposefully availed itself to the benefits and protections of the forum's laws, such that it should reasonably anticipate being haled into the forum's courts. Id., 471 U.S. at 474. General jurisdiction, on the other hand, is based on a nonresident defendant's contacts with the forum state that are unrelated to the litigation. Helicopteros, 466 U.S. at 414. The exercise of general jurisdiction requires the defendant's contacts to be "sufficiently systematic and continuous as to support a reasonable exercise of jurisdiction." Stuart v. Spademan, 772 F.2d 1185, 1191 (5th Cir. 1985) (citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984)).
Whether analyzed through the guise of specific or general jurisdiction, "the constitutional touchstone [of a personal jurisdiction analysis is] whether the defendant purposefully established `minimum contacts' in the forum State." Burger King, 471 U.S. at 472 (citing International Shoe Co. v. Washington, 326 U.S. 310, 326 (1945)). Requiring a defendant to purposefully avail itself to the benefits and protections of the forum State's laws "ensures that a defendant will not be haled into a jurisdiction solely as a result of `random,' `fortuitous,' or `attenuated' contacts . . . or of the `unilateral activity of another party or a third person.'" Id. at 475 (citations omitted). Because XPEL does not argue that Defendants' contacts are sufficient to justify the exercise of general jurisdiction, the Court will analysis Defendants' contacts with Texas for purposes of determining whether the exercise of specific jurisdiction is warranted.
Even when a defendant has minimum contacts with the forum state, an exercise of personal jurisdiction must also be reasonable in light of the forum's interest in the litigation in question. Submersible Sys., 249 F.3d at 418 (citing Asahi Metal Indus. Co., Ltd. v. Superior Court of Calif., 480 U.S. 102, 113-14 (1987)). The court must determine whether maintaining the suit offends traditional notions of fair play and substantial justice. See Shaffer v. Heitner, 433 U.S. 186, 204 (1977).
III. Analysis
A. Maryland Performance's Motion to Dismiss for Lack of Personal Jurisdiction.XPEL argues that Maryland Performance has sufficient contacts with Texas to justify the exercise of specific personal jurisdiction. Specifically, XPEL asserts that Maryland Performance (1) entered into hundreds of EULAs with a business headquartered in Texas, each of which was to be performed in Texas and included valid Texas forum selection and choice-of-law clauses and (2) Maryland Performance maintained an interactive website marketing its products to Texas consumers. Maryland Performance argues that it is a small Maryland corporation with neither a physical presence nor any contacts in Texas. Maryland Performance contends that "there is no basis for the exercise of specific jurisdiction over [it] particularly where the alleged breach of the EULA forming the basis of the complaint occurred solely in Maryland, if at all." Mot., at 2.
XPEL appears to support its jurisdictional argument with allegations that Maryland Performance directed tortious and fraudulent acts at Texas by misrepresenting its purpose for entering the EULAs and theft of trade secrets. These allegations are somewhat conclusory in nature, and will not be addressed by the Court in determining whether Maryland Performance purposefully availed itself to the benefits of conducting business in Texas. As discussed below in section III., C., XPEL sharpens its tortious and fraudulent acts argument in addressing Freeman's contacts with Texas.
The Fifth Circuit has clearly held that merely entering into a contract with a resident of the forum state will not support the exercise of personal jurisdiction over a nonresident defendant. Spademan, 772 F.2d at 1192. Likewise, engaging in communications with a resident of the forum state during the course of performing a contract is insufficient to subject a nonresident to the district court's jurisdiction. See Holt Oil Gas Corp. v. Harvey, 801 F.2d 773, 778 (5th Cir. 1986). Nor does the combination of executing a contract in the forum state and engaging in communications with a resident during the course of performance satisfy the minimum contacts inquiry. Spademan, 772 F.2d at 1193. As such, Maryland Performance did not purposefully avail itself to the benefits and protections of Texas' laws by executing the EULAs and a single trip to XPEL's San Antonio headquarters for installation training.
XPEL, relying on Mink v. AAAA Development LLC, 190 F.3d 333 (5th Cir. 1999), asserts that Maryland Performance's interactive website supports the Court's exercise of personal jurisdiction. The Court agrees that Maryland Performance's website is clearly a main component of its business through which customers may exchange information, place product orders, and access the allegedly infringing KAT database. Despite the interactive nature of the website, "[t]here is no evidence that [Maryland Performance] has ever entered into contracts, conducted business transactions, or otherwise interacted with Texas residents via its website." Central Freight Lines Inc. v. APA Transport Corp., 322 F.3d 376, 381 n. 4 (5th Cir. 2003) (holding that the mere availability of the defendant's website did not support the exercise of personal jurisdiction absent evidence of the defendant and Texas consumers transacting business electronically). The mere availability of Maryland Performance's interactive website to Texas consumers is insufficient to justify the Court's exercise of personal jurisdiction.
Maryland Performance's lack of physical presence in Texas, however, will not allow it to escape the Court's jurisdictional reach. By accepting the EULA and its Texas forum selection clause, Maryland Performance consented to this Court's exercise of personal jurisdiction for suits arising out of the EULA. See American Airlines, Inc. v. Rogerson ATS, 952 F. Supp. 377, 381 n. 5 (N.D. Tex. 1996) ("[E]ven if the forum-selection clause was ATS's only contact with the State of Texas, the Court would be inclined to hold that specific personal jurisdiction exists."). The question is whether the EULA's forum selection clause is enforceable.
The proper law to apply to questions regarding the enforceability of forum selection clauses is federal, whether jurisdiction is based on diversity, federal question, or a combination of the two. Haynsworth v. The Corporation, 121 F.3d 956, 962 (5th Cir. 1997). Under federal law, forum selection clauses are presumed valid. M/S Bremen v. Zapata Off-Shore Co, 407 U.S. 1, 15 (1972); see also Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 594-95 (1991). The Fifth Circuit has consistently followed this rule. See Haynsworth, 121 F.3d at 962; Kevlin Servs., Inc. v. Lexington State Bank, 46 F.3d 13, 15 (5th Cir. 1995). The presumption of enforceability may be overcome, however, by a clear showing that the forum selection clause is "`unreasonable' under the circumstances." Haynsworth, 121 F.3d at 963 (citing The Bremen, 407 U.S. at 10). Unreasonableness potentially exists where (1) the incorporation of the forum selection clause into the agreement was the product of fraud or overreaching; (2) the party seeking to escape enforcement "will for all practical purposes be deprived of his day in court" because of the grave inconvenience or unfairness of the selected forum; (3) the fundamental unfairness of the chosen law will deprive the plaintiff of a remedy; or (4) enforcement of the forum selection clause would contravene a strong public policy of the forum state. Id. (citing Carnival Cruise Lines, 499 U.S. at 595; The Bremen, 407 U.S. at 12-13, 15, 18). The party resisting enforcement on these grounds bears a "heavy burden of proof." Id. (citing The Bremen, 407 U.S. at 17).
Here, the EULA unambiguously established that all disputes would be governed by Texas law with Bexar County, Texas being the exclusive venue:
Texas internal law governs the entire relationship and all rights and obligations of the parties. Exclusive venue for . . . all disputes concerning this EULA or between the parties shall be in Bexar County, Texas, U.S.A., the county of LICENSOR's headquarters.Org. EULA, § 10.7.
All disputes between the parties shall be resolved by a court sitting in Bexar County, Texas, USA, the county of LICENSOR's headquarters. . . . To obtain certainty, this Agreement establishes sole and exclusive venue and jurisdiction for all disputes between the parties as stated above. LICENSEE expressly agrees to not contest the same, to submit to the same, and waives all objections to the same.
Am. EULA, § 10.4. The forum selection clauses of both the original EULA and amended EULA were sufficient to make Maryland Performance aware that it was subject to being haled into a Texas court.
In the Defendants' motion, Maryland Performance fails to argue that the forum selection clause is not enforceable. Maryland Performance claims it is "unaware of ever `clicking on' the EULA . . . Plaintiff attached to the complaint" and XPEL failed to provide notice of any EULA amendments. XPEL provided the affidavit of Ryan Pape, XPEL's vice president of information technology, which discussed the evolution of the EULA and attached the pre- and post-May 27, 2005 agreements. Both EULAs informed end-user licensees that the agreements were subject to amendment: "This EULA is renewed for subsequent one month periods on the first day of each month, subject to the renewal provisions set forth herein, and, if LICENSEE has fully complied with this EULA by LICENSEE accepting LICENSOR's then current standard EULA, which may contain terms materially different than this EULA." EULA, § 9.1 (emphasis added). Because the Court is required to construe all non-conclusory factual disputes in favor of XPEL, Maryland Performance's argument fails.
The Court fails to see any reason for not enforcing the EULA's Texas forum selection and choice-of-law clauses. Maryland Performance has neither argued that enforcement of the forum selection clause is unreasonable under the circumstances of this case nor is there any evidence of fraud or overreaching by XPEL. See Carnival Cruise Lines, 499 U.S. at 595. Requiring Maryland Performance to defend XPEL's claims in Texas is not so inconvenient as to deprive it of its day in court. While XPEL has not offered a rationale (nor was it required to) for the inclusion of a forum selection clause in the EULA, there is no evidence that XPEL insisted on the clause in bad faith. Had Maryland Performance chosen not to accept the forum selection clause, it could have rejected the entire EULA and contracted with a different protective coating design kit provider. Maryland Performance accepted the EULA, including consenting to the jurisdiction of a court sitting in Bexar County, Texas, and should not now complain about this Court's exercise of personal jurisdiction. See American Airlines, 952 F.Supp. at 381 n. 5 ("A party who consents to jurisdiction in a forumselection clause should not later be able to claim that such jurisdiction violates due process.").
This case is factually similar to Kevlin Services, Inc. v. Lexington State Bank, in which the Fifth Circuit enforced a form contract's Texas forum selection clause and reversed the district court's dismissal for lack of personal jurisdiction. 46 F.3d 13, 15 (5th Cir. 1995). In Kelvin Services, the plaintiff, a Texas resident, executed a contract with a North Carolina bank to administer benefit services to the bank's customers. Id. at 14. The contract provided for the application of Texas law with all disputes to be settled in Dallas County, Texas. Id. After plaintiff filed suit in Dallas County, the bank removed the case to federal court and filed a motion to dismiss for lack of personal jurisdiction. Id. The district court dismissed the case because the forum selection clause was ambiguous and plaintiff had otherwise failed to establish the bank had minimum contacts with Texas. Id. The Fifth Circuit reversed finding the only reasonable interpretation of the contract was that proper venue was in Dallas County. Id. at 15. "Because [the bank] has failed to sufficiently prove the enforcement of the choice of forum provision would be unreasonable due to fraud or overreaching, we find that the choice of forum provision validly contracts for venue in Dallas County, Texas, thereby granting the district court jurisdiction over [the bank]." Id.
Having found that Maryland Performance's consent to jurisdiction satisfies the minimum contacts inquiry, Maryland Performance may still avoid the Court's jurisdiction by proving the assertion of jurisdiction is so unfair and unreasonable that it offends the traditional notions of fair play and substantial justice. Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 215 (5th Cir. 1999). Maryland Performance, however, must present a compelling case demonstrating that defending itself in Texas would be so difficult and inconvenient that it would be at a substantial disadvantage to XPEL. Burger King, 471 U.S. at 478. In analyzing whether the exercise of personal jurisdiction offends the traditional notions of fair play and substantial justice, the Court must balance the following factors: (1) the burden on the nonresident defendant of having to defend itself in the forum; (2) the interests of the forum state in the case; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in the most efficient resolution of controversies; and (5) the shared interests of the states in furthering fundamental social policies. Id.
Maryland Performance argues that (1) it is a small company with no Texas contacts that will be substantially burdened if required to defend against XPEL's allegations in Texas; (2) Texas has nominal interest in this dispute because all of the alleged conduct occurred in Maryland; (3) XPEL would not be impacted by litigating this dispute in Maryland; (4) a Maryland court would most effectively resolve the controversy, and (5) "[t]he protection of . . . small entities, with typically smaller resources and less bargaining power would make the exercise of specific jurisdiction over [Maryland Performance] unreasonable in this case." Maryland Performance claims amount to a "David versus Goliath" argument, which the Fifth Circuit has rejected. See International Software Sys, Inc. v. Amplicon, Inc., 77 F.3d 112, 116 (5th Cir. 1996) ("[A] forum selection clause was upheld in Carnival Cruise Lines even where the plaintiffs were individuals. ISSI's David verus Goliath argument is not persuasive."). First, while litigation in Texas may be inconvenient for Maryland Performance, XPEL would be equally inconvenienced if required to litigate in Maryland. Second, Maryland Performance has contacts with Texas, including doing business with XPEL, a San Antonio, Texas-based company, making payments to XPEL in Texas, and accepting hundreds of EULAs that were governed by Texas law and identified Bexar County, Texas as the exclusive venue for resolving the parties' disputes. Third, Texas has an interest in enforcing contracts that are to be interpreted under Texas law. See Central Freight Lines, 322 F.3d at 384-85 ("Texas would seem to have an interest in adjudicating its domiciliary's [claims] that is sufficient to satisfy Due Process concerns about traditional notions of fair play and substantial justice."). Fourth, XPEL has the right to choose a convenient, readily accessible forum, and is entitled to maintain this action where the alleged injury occurred rather than in a distant forum. Finally, Maryland Performance consented to the jurisdiction of a court sitting in Bexar County, Texas by executing the EULA. American Airlines, 952 F.Supp. at 381 (holding that a nonresident defendant's consent to a Texas forum selection clause, standing alone, was sufficient to satisfy the traditional notions of fair play and substantial justice).
For the reasons stated herein, the Court's exercise of personal jurisdiction over Maryland Performance comports with due process. Maryland Performance's motion to dismiss for lack of personal jurisdiction is denied.
B. Proform's Motion to Dismiss for Lack of Personal Jurisdiction.
The same jurisdictional analysis does not apply to Proform. Proform never accepted the terms of the EULA and Texas forum selection clause. As such, Proform did not consent to the exclusive jurisdiction of a court sitting in Bexar County, Texas. XPEL asserts that the exercise of jurisdiction over Proform is still warranted because Maryland Performance and Proform operate as a single business enterprise. Alternatively, XPEL requests that the Court allow it to conduct discovery as to Proform's contacts with the state of Texas.
The single business enterprise theory "applies when corporations are not operated as separate entities, but rather integrate their resources to achieve a common business purpose." El Puerto de Liverpool v. Servi Mundo Llantero, 82 S.W.3d 622, 636 (Tex.App.-Corpus Christi 2002, pet. dism'd w.o.j.); see also Judson Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec, 2005 WL 822911, at *2 (W.D. Tex. April 6, 2005). Though the Texas Supreme Court has not expressly adopted the single business enterprise theory, Southern Union Co. v. City of Edinburg, 129 S.W.3d 74, 87 (Tex. 2003), lower Texas courts have, and the Fifth Circuit appears to presume its acceptance. See, e.g., id.; see also Fielding v. Hubert Burda Media, Inc., 415 F.3d 419, 428 (5th Cir. 2005). To evaluate a single business enterprise claim, courts look to a number of factors, including (1) common employees; (2) common offices; (3) centralized accounting; (4) payment of wages by one corporation to the other's employees; (5) common business name; (6) services rendered by the employees of one corporation on behalf of the other; (7) undocumented transfers of funds between corporations; (8) unclear allocations of profits and losses between corporations; and (9) common ownership. DeLaHoya v. Coldwell Banker Mexico, Inc., 125 Fed. Appx. 533 (5th Cir. 2005).
XPEL has alleged some facts in support of the single business enterprise allegation, which address some of the theory's factors. XPEL alleges that Maryland Performance and Proform are similarly operated. Both businesses are operated out of same address in Maryland. Proform's Nevada satellite office (Pro-Tect) apparently is "doing business as" Maryland Performance. Maryland Performance and Proform utilize the same website,www.proformauto.com. Freeman is a principal for Proform and Maryland Performance. Freeman obtained a loan for Maryland Performance, the proceeds of which were distributed to Maryland Performance and Proform. Maryland Performance, Proform, and Freeman have not controverted any of these "common operation" allegations.
Though XPEL's allegations do not address each single business enterprise factor, they are sufficient to establish a prima facie case for the exercise of personal jurisdiction. Even if they are not sufficient to establish a prima facie case, XPEL has alleged sufficient facts to entitle it to conduct discovery related to personal jurisdiction and the merits of this case. At this time, Proform's motion to dismiss for lack of personal jurisdiction is denied, subject to re-urging after the close of discovery.
C. Freeman's Motion to Dismiss for Lack of Personal Jurisdiction.
XPEL alleges that Freeman is subject to personal jurisdiction in Texas because he purposefully directed tortious and fraudulent conduct at a Texas resident. Freeman argues that he did not have any contacts with Texas, or alternatively, "[a]t most . . . may have clicked on an End User License Agreement with Xpel as a representative of [Maryland Performance], not as an individual consumer." Mot., at 8. Freeman's claim that he has no contacts with Texas is disingenuous and based on a misinterpretation of the fiduciary shield doctrine.
The fiduciary shield doctrine provides "that an individual's transaction of business within the state solely as a corporate officer does not create personal jurisdiction over that individual though the state has in personam jurisdiction over the corporation." Spademan, 772 F.2d at 1197. Although the Texas Supreme Court has not formally adopted the fiduciary shield doctrine, Texas courts of appeal have limited its application to the exercise of general jurisdiction. Ennis v. Loiseau, 164 S.W.3d 698, 707 (Tex.App. — Austin 2005, no pet.). Because XPEL has not argued that Freeman is subject to the exercise of general jurisdiction, the fiduciary shield doctrine does not prevent the Court's exercise of specific personal jurisdiction.
"Although not formally adopted by the supreme court, the doctrine is consistent with the court's language in Siskind v. Villa Foundation for Education, Inc., 642 S.W.2d 434, 437-38 (Tex. 1982) (can impute individual liability to corporate officers upon proof of alter ego), and with the Supreme Court's holding in Calder v. Jones, 465 U.S. 783, 790, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984) (jurisdiction proper over corporate officers, individually, because they were "primary participators in an alleged wrongdoing intentionally directed at" forum state)." Ennis, 164 S.W.3d at 707 n. 4.
Even if the fiduciary shield were adopted by this Court, it would not protect Ennis from the exercise of specific jurisdiction. Courts recognize that a corporate officer is not protected from the exercise of specific jurisdiction, even if all of his contacts were performed in a corporate capacity, if the officer engaged in tortious or fraudulent conduct, directed at the forum state, for which he may be held personally liable. This rule is not based on an exception to the fiduciary shield doctrine, but rather on the well-established principle that "a corporate officer is primarily liable for his own torts." One's "status as an employee does not somehow insulate [him] from jurisdiction" and "there is no blanket protection from jurisdiction simply because a defendant's alleged acts were done in a corporate capacity."Id. at 707-08 (citations omitted). "[I]f the evidence suggests that the nonresident officer participated in tortious or fraudulent activities, which were directed at Texas and for which he may be held personally liable, then there is sufficient basis to assert specific jurisdiction over him." Id. at 708-09. XPEL has alleged that Freeman directed tortious and fraudulent acts at a Texas resident, for which he may be held personally liable.
The issue is whether Freeman's alleged tortious and fraudulent conduct constitutes a purposeful availment to the benefits and protections of the laws of the state of Texas. A single intentional or fraudulent act by a nonresident defendant directed toward Texas that gives rise to a plaintiff's cause of action can support a finding of minimum contacts. Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 211 (5th Cir. 1999) (citing Calder v. Jones, 465 U.S. 783 (1984)). The foreseeable effects of the nonresident's tortious conduct are assessed as part of minimum contacts analysis. Id. The mere fact injury was foreseeable in the forum state is insufficient to establish specific jurisdiction, absent the direction of specific acts toward the forum. Id. "When the actual content of communications with a forum gives rise to intentional tort causes of action, this alone constitutes purposeful availment. The defendant is purposefully availing himself to `the privilege of causing a consequence' in Texas." Id. at 213 (citation omitted).
XPEL alleges that "Freeman misrepresented his contractual rights on behalf of Maryland Performance . . . to obtain design kits via the Design Access Program to resell under Proform's private label." Resp., at ¶ 40. "Each time . . . Freeman accessed the Design Access Program to secure design kits to sell under Proform's name, he was misrepresenting to XPEL his intended use for those kits." Resp., at ¶ 40. Freeman admits to executing the EULA, accessing DAP, and downloading design kits for use by Maryland Performance. Although Freeman executed the EULA while physically present in Maryland, the agreement was electronically communicated to XPEL in Texas. To the extent Freeman misrepresented his reasons for using DAP, such conduct was directed at XPEL in Texas.
This is not a case where XPEL "fortuitously" resides in Texas, such that Freeman would be shocked to be haled into a Texas court. Freeman allegedly in his capacity as a Maryland Performance representative executed numerous, if not hundreds, of one-month renewable licensing agreements with a Texas resident that were governed by Texas law and included a Texas forum selection clause. Freeman traveled to XPEL's headquarters in San Antonio, Texas to learn proper design kit installation techniques. Freeman clearly knew that the effects of his allegedly tortious and fraudulent acts would impact a Texas-based corporation. Furthermore, haling Freeman into a Texas court does not offend the traditional notions of fair play and substantial justice because he will already be present in this Court as Maryland Performance's corporate representative.
XPEL's jurisdictional argument against Freeman is not based on his execution of the EULAs. XPEL, on the other hand, asserts Freeman committed tortious and fraudulent acts by misrepresenting his and/or Maryland Performance's purposes for executing the EULAs.
While it is a close question as to whether Freeman's direction of allegedly tortious and fraudulent acts at Texas satisfies the purposeful availment inquiry, the Court finds the contacts sufficient to establish a prima facie case for the exercise of personal jurisdiction. XPEL has alleged sufficient facts to entitle it to conduct discovery related to personal jurisdiction and the merits of this case. At this time, Freeman's motion to dismiss for lack of personal jurisdiction is denied, subject to re-urging after the close of discovery.
Conclusion
For the reasons stated herein, Defendants' motion to dismiss for lack of personal jurisdiction (docket no. 14) is DENIED.
As stated in the Court's May 1, 2006 order, the Court enters the following Amended Scheduling Order:
3. The parties shall file all motions to amend or supplement pleadings or to join additional parties by September 1, 2006.
4. All parties asserting claims for relief shall FILE their designation of potential witnesses, designation of testifying experts, and list of proposed exhibits, and shall SERVE on all parties, but not file the materials required by FED. R. CIV. P. 26(a)(2)(B) by September 15, 2006. Parties resisting claims for relief shall FILE their designation of potential witnesses, designation of testifying experts, and list of proposed exhibits, and shall SERVE on all parties, but not file the materials required by FED. R. CIV. P. 26(a)(2)(B) by September 29, 2006. All designations of rebuttal experts shall be FILED within 15 days of receipt of the report of the opposing expert.
5. An objection to the reliability of an expert's proposed testimony under Federal Rule of Evidence 702 shall be made by motion, specifically stating the basis for the objection and identifying the objectionable testimony, within 30 days of receipt of the written report of the expert's proposed testimony, or within 30 days of the expert's deposition, if a deposition is taken, whichever is later.
6. The parties shall complete all discovery on or before November 1, 2006. Counsel may by agreement continue discovery beyond the deadline, but there will be no intervention by the Court except in extraordinary circumstances, and no trial setting will be vacated because of information obtained in post-deadline discovery.
7. All dispositive motions shall be filed no later than December 1, 2006. Dispositive motions as defined in Local Rule CV-7(h) and responses to dispositive motions shall be limited to 20 pages in length.
8. This case is set for a Pretrial Conference on February 8, 2007 at 9:30 A.M. and Trial/Jury Selection on February 20, 2007 at 9:30 A.M., in Courtroom No. 3, First Floor of the John H. Wood, Jr. Courthouse, 655 E. Durango, San Antonio, Texas 78206. The parties shall file their pretrial submissions in the form set out in Rule CV-16(e) to the Local Rules for the Western District not later than February 1, 2007.