Klenk v. Bustamante

• Citation: 993 S.W.2d 677
• Decision Date: 16 December 1998
• Docket Number: No. 04-98-00576-CV,04-98-00576-CV
• Parties: (Tex.App.-San Antonio 1998) Leslie K. KLENK, Jeffrey R. Zuckerman, and Gregory F. Taylor, Appellants, v. Nicolas BUSTAMANTE, Appellee
• Court: Court of Appeals of Texas

Page 677

993 S.W.2d 677 (Tex.App.-San Antonio 1998)

Leslie K. KLENK, Jeffrey R. Zuckerman, and Gregory F. Taylor, Appellants, v. Nicolas BUSTAMANTE, Appellee

No. 04-98-00576-CV

In the Fourth Court of Appeals San Antonio

December 16, 1998

Rehearing Overruled March 3, 1999

From the 166th Judicial District Court, Bexar County, Texas Trial Court No. 97-CI-09322

[Copyrighted Material Omitted]

Before PHIL HARDBERGER, Chief Justice, ALMA L. LOPEZ, Justice, PAUL W. GREEN, Justice

OPINION

PAUL W. GREEN, Justice

This is an accelerated appeal from the denial of the special apprearances of Leslie K. Klenk, Jeffrey R. Zuckerman, and Gregory F. Taylor (collectively, "the attorneys"). See Tex.Civ.Prac. & Rem Code Ann. 's 51.014(a)(7)(Vernon Supp. 1998). This appeal questions the propriety of personal jurisdiction over out-of-state corporate counsel who allegedly committed tortious acts while representing a corporate employee working and residing in Texas. Because the attorney's lack sufficient minimum contacts with Texas as a matter of law, we reverse the trial court's order and dismiss the case.

Background

Until he was terminated in 1997, Bustamante was a securities broker in the San Antonio office of Smith Barney, Inc. Upon his termination, Bustamante filed suit against Smith Barney and J.Steven Austin, manager of the San Antonio office. In his first amended petition, Bustamante added the attorneys, who were in-house counsel at Smith Barney's New York headquarters as defendants.¹ Once the trial court ordered the majority of Bustamante's claims to arbitration, the only remaining causes of action were for legal malpractice and deceptive trade practices, both associated with an alleged conflict of interest.² In his second amended petition, Bustamante added a conversion claim against all defendants.

The core factual dispute in the case underlying this appeal is the existence of an attorney-client relationship between Bustamante contends the attorneys represented him in their individual capacity in several matters associated with his employment at Smith Barney. In support of their special appearance, the attorneys submitted sworn affidavits contending they did not represent Bustamante in an invidual capacity and that any legal services provided Bustamante were performed as employees of Smith Barney. Facts pertinent to each attorney are summarized below.

The Klenk Representation

Bustamante claims Klenk represented him in her individual capacity because she held herself out as his attorney and represented to him that he was her client.³ He contends the representation commenced with a Securities and Exchange Commission (SEC) investigation of Bustamante and Smith Barney, which was conducted from the SEC's Fort Worth office. Bustamante further maintains Klenk neglected to inform him of any limitations on the scope of her representation in the SEC matter. Over long-distance telephone calls to San Antonio, Klenk provided legal advice and procured confidential information from Bustamante in Fort Wort. Klenk also met with Bustamante in New York to review the SEC investigation.

To controvert these allegations, Klenk submitted an affidavit, stating she represented Bustamante only on behalf of Smith Barney. Notably, all evidence of Klenk's correspondence related to the SEC investigation, all subpoenas and document requests were directed to Smith Barney. Finally, Klenk's conversations with Bustamante, whether by telephone or in person, occurred in New York.

The Zuckerman Representation

According to Bustamante, Zuckerman assigned Klenk to the SEC matter and supervised her work. Zuckerman also responded to Bustamante's concern over the potential conflict of interest in Klenk's representation of both Bustamante's case. Bustamante's cases. Bustamanted characterizes this response as proof that Klenk represented him.

By affidavit, Zuckerman conceded supervising Klenk but emphasized that all of his work regarding the SEC matter occurred in New York. Zuckerman stated he never personally advised Bustamanted but met him only once in New York. Finally, Zuckerman informed Bustamante that Smith Barney could no longer represent him, which Zuckerman reiterated by correspondence on Smith Barney stationery.

The Taylor Representation

In 1995, Smith Barney's San Antonio office became aware that Manuel von Schulenburg, a former Smith Barney employee and co-worker of Bustamante, was inciting Smith Barney clients to complain about their investments. Bustamante allleges that this activity was directed at this clients and that Taylor was assigned to assist him in the vo Schulenburg matter. Taylor admitted assisting Bustamante in the matter but maintained he did so on behalf of Smith Barney.

Guillermo Durand, a Smith Barney client, filed a complaint with Smith Barney about Bustamante after the Mexican peso devaluation. Bustamante claims Taylor represented him in the Durand matter, which culminated in a federal securities arbitration. Bustamante blamed the arbitration on Taylor's deficient representation. Taylor, on the other hand, claimed he acted pursuant to a legitimate strategy. Finally, all of Taylor's correspondence associated with these investigations was printed on Smith Barney stationery.

STANDARD AND SCOPE OF REVIEW

A party filing a special appearance bears the burden of negating all bases of personal jurisdiction. See Siskind v. Villa Found. for Educ., Inc., 642 S.W. 2d 434, 438 (Tex. 1982). On interlocutory appeal, we review the denial of a special appearance for an abuse of discretion. Magnolia Gas Co. v. Knight Equip. & Mfg. Corp., No. 4-98-00156-CV, slip op. at 6, 1998 WL 652548 *3, (Tex.App.-San Antonio, Sept. 23, 1998, no pet.). Under this standard, we defer to the trial court's resolution of factual issues and uphold the court's decision absent a showing of arbitrariness or unreasonableness. See Walker v. Packer, 827 S.W. 2d 833, 839-840 (Tex.1992). In other words, the attorneys must establish the trial court could reasonably have reached only one conclusion. See id. at 841. However, we review the trial court's legal conclusions de novo. Id.

Because the record lacks findings of fact and conclusions of law, all questions of fact are presumed to support the judgement. See Zac Smith & Co. v. Otis Elevator Co., 734 S.W. 2d 662, 666 (Tex.1987). These findings of fact are inconclusive, however, because the appellate record contains a reporter's record. Id.

PERSONAL JURISDICTION

The exercise of jurisdiction over a nonresident defendant must comport with both the Texas long-arm statue, and (2) state and federal constitutional due process guarantees. Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815.S.W. 2d 223, 226 (Tex. 1991); Schlohohm v. Schapiro, 784 S.W.2d 355, 357 (Tex.1990). Because the broad language of Texas's long-arm statue allows the statue to reach as far as the federal constitution permits, our decision in this case turns on a due process analysis. See Schlobohm, 784 S.W. 2d at 357. This due process inquiry is two-fold: (1) the defendants must have purposely established minimum contacts with the forum state; and (2) the exercise of jurisdiction must comport with "fair play and substantial justice." See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476, 105 S. Ct. 2174, 85 L.Ed. 2d 528 (1985).

In deciding whether the attorney's established minimum contacts with Texas, we examine their intentional activities and expectations. To establish minimum contacts with the forum state, the attorney's must have purposefully availed themselves of the privilege of conducting activities within the forum state, thus enjoying the benefits and protections of its law. See id. at 474-75, 105 S.Ct. 2174. The attorneys' activities must justify a conclusion that they reasonably anticipated being called into a Texas court. See id. at 475, 105 S.Ct. 2174; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.E.d.2d 490 (1980). The focus of the minimum contacts analysis differs slightly between the two catergories of personal jurisdiction-general and specific. See Schlohohm, 784 S.W.2d at 357. Bustamante contends the facts of this case implicate bothy types of jurisdiction. We disagree.

General Jurisdiction

General jurisdictiion arises when a non-resident defendant engages in continuous and systematic contacts with the forum state. Guardian Royal Exch., 815 S.W.2d at 230. The events giving rise to the cause of action need not have occurred in the forum state. See CSR Ltd. v. Link, 925 S.W.2d 591, 594 (Tex.1996). However, the defendant's activities within the forum state must be substantial. Schlobohm, 784 S.W.2d at 357.

Bustamante asserts general jurisdiction over the attorneys is proper because they performed legal services for Smith Barney's Texas office. To support his contention, Bustamante alleges the attorneys engaged in long-distance communication between New York and Texas, made trips to Texas, and represented Texans.

These activities were not substantial. Furthermore, only Klenk traveled to Texas for the purpose of preparing another Smith Barney employee for her SEC testimony. Additionally, the trip was made after Bustamante had been notified that any attorney-client relationship was ended. As a matter of law, these contacts are insufficient to support general jurisdiction. See Billingsley Parts & Equipment., Inc. v. Vose, 881 S.W.2d 165, 169 (Tex.App.- Houston [1st Dist.] 1994, writ denied) holding general jurisdiction improper despite non-resident's initiation of contact with Texas company, numerous phone calls to Texas, and cashing checks drawn on a Texas bank). Accordingly, we cannot sustain the trial court's ruling on this ground. We therefore turn to the question of specific jurisdiction.

Specific Jurisdiction

Specific jurisdiction requires that a defendant purposefully direct his activities toward residents of the forum state and that the cause of action arise out of or...