Garcia Hamilton & Assocs., L.P. v. RBC Capital Mkts., LLC

• Decision Date: 10 June 2020
• Docket Number: Civil Action No. 4:19-CV-4141
• Citation: 466 F.Supp.3d 692
• Parties: GARCIA HAMILTON & ASSOCIATES, L.P., Plaintiff, v. RBC CAPITAL MARKETS, LLC, Defendant.
• Court: U.S. District Court — Southern District of Texas

466 F.Supp.3d 692

GARCIA HAMILTON & ASSOCIATES, L.P., Plaintiff,

v.RBC CAPITAL MARKETS, LLC, Defendant.

Civil Action No. 4:19-CV-4141

United States District Court, S.D. Texas, Houston Division.

Signed June 10, 2020

Laura A. Hernandez, Ruth Monty Willars, Monty & Ramirez LLP, Houston, TX, for Plaintiff.

David Lance Currie, Monica Elizabeth Gaudioso, Carrington, Coleman, Sloman & Blumenthal, LLP, Dallas, TX, for Defendant.

ORDER

Andrew S. Hanen, United States District Judge

Pending before the Court is Defendant RBC Capital Markets, LLC's ("RBC") Motion to Dismiss for Lack of Personal Jurisdiction. (Doc. No. 10). Plaintiff Garcia Hamilton & Associates, L.P. ("GHA") filed a response thereto (Doc. No. 11) and RBC replied (Doc. No. 12). The Court also allowed GHA to file a partial sur-reply. (See Doc. No. 13, Ex. 1; see also Doc. No. 16). Finally, RBC filed a response to GHA's sur-reply. (Doc. No. 21).

Having carefully considered the parties' various arguments, the record in this case, and the applicable law, the Court reluctantly grants RBC's motion and dismisses GHA's case without prejudice.

I. Background

According to GHA's complaint, on May 7, 2019, E.I. Du Pont DE Nemours ("DuPont") announced the approval of a separation of DowDuPont's Agriculture Division. (Doc. No. 1 at 3). That separation allowed DuPont the ability to pay bond holders the face value of their DuPont bonds because the DuPont bonds were "callable."¹ (Id. ). GHA pleaded that it sold nearly 22.5 million DuPont bonds to RBC on May 8, 2019 at a price of $100.337 per bond. (Id. ). The following day (May 9th), GHA sold RBC another 47 million DuPont bonds at a price of $100.350 per bond. (Id. ). On May 9th—the same day GHA sold the 47 million DuPont bonds to RBC—RBC allegedly resold those same bonds to a third party.² (Id. ).

On May 10, 2019, when Bloomberg updated its online system and displayed the fact that the DuPont bonds were callable, it became clear that RBC allegedly purchased and resold DuPont bonds at a price above their face value. (See id. ). In other words, the callable feature allegedly made the bonds less valuable. Once the Bloomberg system was updated, the third party purchaser apparently demanded that RBC reverse their transaction; RBC complied with that request. (Id. ). On May 16th—after GHA received the sales proceeds from the May 9th transaction (or after the transaction "settled")—RBC demanded that GHA cancel the May 9th transaction; alternatively, RBC asked GHA to refund an "overpayment" of $161,641.58. (Id. at 4). RBC allegedly argued that the bonds sold at the May 9th sale should have been sold at virtually face value ($100.004) instead of the price it paid ($100.350). (Id. ). RBC also supposedly told GHA that GHA should have to cancel and correct the trade since RBC had to do so with the third party. (Id. ).

Over the next few months, RBC sent GHA several demands for a refund of the alleged overpayment based on the theory of mutual mistake, claiming it required reformation of their contract. (See id. ). GHA repeatedly responded that there was no evidence of a mistake or error. (Id. at 4–5). On October 7, 2019, GHA received a letter from RBC's counsel that threatened to file a lawsuit in the Southern District of New York if GHA did not send RBC approximately $161,000 by October 16. (Id. at 5). GHA maintained that there was no mutual mistake and that it did not intend to refund the alleged overpayment. (Id. at 5–6).

Following these exchanges, GHA filed this declaratory judgment lawsuit seeking a judgment declaring that: (1) the parties' May 9, 2019 bond sale was not formed under a mutual mistake; (2) GHA did not breach the parties' contract; (3) GHA did not breach the duty of good faith and fair dealing; and (4) RBC is not entitled to a judgment for unjust enrichment. (Id. at 6). RBC responding by filing a motion to dismiss for lack of personal jurisdiction. (Doc. No. 10). GHA filed a response and RBC replied. (Doc. Nos. 11 and 12). Additionally, GHA filed a sur-reply with the Court's approval (at least as to Section A). (Doc. No. 13, Ex. 1; Doc. No. 16). With the Court's permission, RBC filed a response to GHA's sur-reply.³ (Doc. Nos. 16 and 21).

A few weeks after this suit was filed, RBC filed a lawsuit against GHA in the Southern District of New York for: (1) reformation; (2) breach of contract; (3) breach of good faith and fair dealing; and (4) unjust enrichment. (See generally S.D.N.Y. Case No. 1:19-cv-10247-NRB). GHA filed a motion to dismiss for lack of personal jurisdiction, or alternatively to stay or transfer the case to this Court. (Id. at Doc. No. 9). Since this lawsuit was the "first filed," the District Court in New York graciously stayed its case pending this Court's decision concerning RBC's motion to dismiss. (Id. at Doc. No. 13).

II. Legal Standard

A claim against a defendant over whom the court lacks personal jurisdiction must be dismissed. FED. R. CIV. P. 12(b)(2). When a district court rules on a Rule 12(b)(2) motion without a hearing, as is the case here, the plaintiff must make a prima facie showing of jurisdiction. Johnston v. Multidata Sys. Int'l Corp. , 523 F.3d 602, 609 (5th Cir. 2008). A court may consider the contents of the record, including affidavits or other recognized methods of discovery, in deciding whether to exercise specific jurisdiction. Stuart v. Spademan , 772 F.2d 1185, 1192 (5th Cir. 1985). Courts accept a plaintiff's non-conclusory, uncontroverted allegations as true, and resolve conflicts between the facts contained in the parties' affidavits in the plaintiff's favor. Panda Brandywine Corp. v. Potomac Elec. Power Co. , 253 F.3d 865, 868 (5th Cir. 2001).

In a diversity action, a federal court may exercise personal jurisdiction over a non-resident defendant if: (1) the long-arm statute of the forum state allows the exercise of personal jurisdiction over the defendant; and (2) the exercise of personal jurisdiction over that defendant is consistent with the Fourteenth Amendment to the United States Constitution. Mullins v. TestAmerica, Inc. , 564 F.3d 386, 398 (5th Cir. 2009). The two-part jurisdictional inquiry collapses into a single step in this forum because the Texas long-arm statute extends to the limits of federal due process. TEX. CIV. PRAC. & REM. CODE § 17.042 ; Johnston , 523 F.3d at 609 ; Schlobohm v. Schapiro , 784 S.W.2d 355, 357 (Tex. 1990). To meet the requirements of due process, the plaintiff must demonstrate: (1) that the non-resident purposely availed himself of the benefits of the forum state by establishing minimum contacts with the state; and (2) that the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice. Mullins , 564 F.3d at 398.

"Minimum contacts" can give rise to either specific personal jurisdiction or general personal jurisdiction. Lewis v. Fresne , 252 F.3d 352, 358 (5th Cir. 2001). Specific jurisdiction exists if the asserted claims arise out of or relate to the defendant's contacts with the forum. Cent. Freight Lines Inc. v. APA Transp. Corp. , 322 F.3d 376, 381 (5th Cir. 2003). The contacts must indicate that the nonresident defendant "purposefully availed himself of the benefits of the forum state." See Hanson v. Denckla , 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958) ; Brown v. Flowers Indus. Inc. , 688 F.2d 328, 333 (5th Cir. 1982). In contrast, general jurisdiction exists for any cause of action if the nonresident defendant's contacts with the forum are so substantial, continuous, and systematic that the defendant is essentially "at home" in the forum. See Monkton Ins. Servs., Ltd. v. Ritter , 768 F.3d 429, 432 (5th Cir. 2014) (citing Daimler AG v. Bauman , 571 U.S. 117, 139, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014) ).

III. Analysis

GHA bears the burden of showing a prima facie case of this Court having personal jurisdiction over RBC. See Johnston , 523 F.3d at 609. GHA argues that RBC is subject to both general and specific personal jurisdiction in this case. As will be evident from the discussion below, the Court, while convinced that the result is correct, is quite sure that the opposite result would be much more equitable. As now-Justice Gorsuch has written, "[i]ndeed, a judge who likes every result he reaches is very likely a bad judge, reaching for results he prefers rather than those the law compels." A.M. v. Holmes , 830 F.3d 1123, 1170 (10th Cir. 2016) (Gorsuch, J., dissenting). While this Court is not enthralled with the result in this case, it also understands that it is quite possible that the Southern District of New York will also reach the decision that it does not have jurisdiction over GHA.⁴ If so, the parties will not be left without remedies. RBC could sue GHA in Texas or GHA could sue RBC in New York. With that being said, the Court will address each category of personal jurisdiction in turn.

A. General Personal Jurisdiction

General personal jurisdiction permits the Court to hear "any and all claims" against a defendant business entity when the defendant's "affiliations with the State are ‘so continuous and systematic’ as to render them essentially at home in the forum State." Daimler , 571 U.S. at 127, 134 S.Ct. 746 (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown , 564 U.S. 915, 919, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011) ). In other words, general personal jurisdiction is "all-purpose jurisdiction." BNSF Ry. Co. v. Tyrrell , ––– U.S. ––––, 137 S. Ct. 1549, 1558, 198 L.Ed.2d 36 (2017) (collecting cases); see also In re DePuy Orthopaedics, Inc., Pinnacle Hip Implant Prod. Liab. Litig. , 888 F.3d 753, 778 (5th Cir. 2018) (general jurisdiction "allows for jurisdiction over all claims against the defendant, no matter [its] connection to the forum.") (citations omitted).

The paradigm hallmarks of general personal jurisdiction for a "corporation" are its place of incorporation and its principal place of business.⁵

Monkton , 768 F.3d at 432 (citing Daimler , 571 U.S. at 139, 134...