Fintech Fund, F.L.P. v. Horne

• Decision Date: 10 November 2020
• Docket Number: No. 18-20449,18-20449
• Parties: FINTECH FUND, F.L.P., Plaintiff-Appellant Cross-Appellee, v. RALPH HORNE, Defendant-Appellee Cross-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

FINTECH FUND, F.L.P., Plaintiff-Appellant Cross-Appellee, v. RALPH HORNE, Defendant-Appellee Cross-Appellant.

No. 18-20449

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

November 10, 2020

Appeal from the United States District Court for the Southern District of Texas

USDC No. 4:18-CV-1125

Before OWEN, Chief Judge, and JONES and STEWART, Circuit Judges.

PRISCILLA R. OWEN, Chief Judge:^*

Fintech Fund, F.L.P. appeals the district court's forum non conveniens dismissal of this case. Ralph Horne cross-appeals, asserting that the district court did not have personal jurisdiction over him. Because the district court properly exercised jurisdiction over Horne, and the parties agreed to pursue these claims in the United Kingdom, we affirm.

I

Plaintiff Fintech Fund, F.L.P. is a Texas limited partnership that licenses biometric verification technology. Fintech's principal place of business is in Sugar Land, Texas. Prior to this suit, Fintech licensed that technology to its U.K. affiliate, CrossVerify Ltd. Defendant Ralph Horne, a U.K. citizen, was the former CEO of CrossVerify.

According to Fintech, Horne failed to deliver as CrossVerify's CEO. Fintech alleges that immediately prior to becoming CEO, Horne met with several individuals interested in starting a new company that would utilize the trade secrets that Horne learned through his employment with CrossVerify. Then, about six months after that meeting, Horne allegedly "deceived Fintech into giving him access to Fintech's servers by stating that he needed to perform a security audit of the servers." Horne contacted Fintech through calls and emails to Marcus Andrade, a limited partner of Fintech responsible for its management. Fintech alleges those calls and emails were fraudulent because no security was needed. After Andrade gave Horne access to Fintech's server, Horne and his associates allegedly downloaded "highly confidential and proprietary information belonging to Fintech." Fintech terminated the license with CrossVerify, and, approximately two weeks later, Horne resigned as CEO of CrossVerify.

The day after Horne resigned, Fintech sued him in federal district court in Houston, Texas. Fintech sued under the Computer Fraud and Abuse Act¹ (CFAA) and the Defend Trade Secrets Act² (DTSA), alleging that Horne, or someone acting in concert with him, accessed Fintech's servers based in the United States and downloaded confidential information.

As a part of his employment, Horne signed a "Non-Disclosure, Confidentiality, Inventions, and Non-Solicitation Agreement" (the Agreement). The Agreement contained three provisions related to where suits between the parties should be brought. First, Section 12(A) contained an arbitration clause:

12. Arbitration and Dispute Resolution

A. Except for any claims against [Fintech], all disputes, controversies or claims arising out of or relating to this Agreement (including for any breach, invalidity or interpretation of this Agreement), any non-contractual obligations arising out of or in connection with this Agreement, the relationship between Horne and [CrossVerify], services performed for or on behalf of [CrossVerify], shall be finally adjudicated by arbitration under the London Court of International Arbitration ("LCIA") Rules in force at the date of this Agreement, which are deemed to be incorporated by reference into this section 12A, subject to other provisions of this section 12A. . . . For the avoidance of doubt, the arbitration agreement in this section 12A is governed by English law. The parties intend the arbitration to be expedited.

Second, Section 12(D) contained a fallback provision in case the arbitration clause was invalidated:

12. Arbitration and Dispute Resolution

. . . .

D. If the provisions for arbitration in this Agreement are for any reason invalidated or deemed unenforceable the parties agree to submit to the exclusive jurisdiction and venue of the federal courts located in Houston, Texas, USA, for any legal suit, action or proceeding arising out of or based upon this Agreement, the breach of this Agreement, or any other aspect of the parties' relationship, including claims against [CrossVerify] or [Fintech] and/or their or against their affiliates (including DTN and NAC) and their affiliates, subsidiaries, shareholders, officers, directors, supervisors, managers, employees, agents, consultants, or attorneys, in their capacity as such or otherwise may have against Horne. Further, the parties expressly agree that this forum selection clause is mandatory and not permissive, and the parties agree not to object to adjudication in Houston, Texas on grounds of forum non-conveniens.

Third, Section 14 contained a choice of law and forum-selection clause:

14. Choice of Law; Jurisdiction and Venue. Except as to claims against [Fintech], this Agreement and any dispute or claim arising out of or in connection with it or its subject matter or formulation (including non-contractual disputes or claims) shall be governed and construed in accordance with the laws of England and Wales. Each party irrevocably agrees that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this Agreement or its subject matter or formation (including non-contractual disputes or claims), except as to claims against [Fintech].

Based, in part, on those provisions, Horne moved to dismiss the case for lack of personal jurisdiction, lack of subject matter jurisdiction, and improper venue. The district court determined that it had personal jurisdiction and subject matter jurisdiction over Fintech's claims.³ The district court also concluded that the Southern District of Texas was a proper venue.⁴ However, the court sua sponte determined that the case should be dismissed under forum non conveniens.⁵ Fintech appeals the district court's forum non conveniens dismissal. Horne cross-appeals, arguing that if forum non conveniens was inappropriate, this court should still dismiss the case for lack of personal jurisdiction.

II

We first address whether the district court properly exercised personal jurisdiction over Horne. "Whether the district court can properly exercise personal jurisdiction over the defendant is an issue of law we review de novo."⁶ "If, as here, the court rules on personal jurisdiction without conducting an evidentiary hearing, the plaintiff bears the burden of establishing only a prima facie case of personal jurisdiction."⁷ In evaluating whether the plaintiff has met that burden, "the court must accept as true all uncontroverted allegations in the complaint and must resolve any factual disputes in favor of the plaintiff."⁸

Because the Texas long-arm statute extends as far as constitutional due process permits, we need only consider if the exercise of jurisdiction comports with the Due Process Clause.⁹ "Where the plaintiff alleges specific jurisdiction, as here, due process requires (1) minimum contacts by the defendant purposefully directed at the forum state, (2) a nexus between the defendant's contacts and the plaintiff's claims, and (3) that the exercise of jurisdiction over the defendant be fair and reasonable."¹⁰ "Once a plaintiff establishes minimum contacts between the defendant and the forum state, the burden of proof shifts to the defendant" to make a "compelling case"¹¹ that "the assertion of jurisdiction is unfair and unreasonable."¹² Horne argues that Fintech did not meet its burden of showing minimum contacts by Horne purposefully directed at the forum state, and that even if Fintech met its burden, exercising personal jurisdiction would not be fair or reasonable.

Fintech alleges that Horne made fraudulent statements in phone calls and sent emails to Andrade fraudulently indicating that a security audit was needed when it actually was not. At the time Andrade received the calls and emails, he was in Sugar Land, Texas. The district court held that those phone calls and emails constituted sufficient minimum contacts to satisfy due process concerns.¹³ Horne argues that the phone calls and emails are insufficient contacts because Horne was not aware that Andrade was in Texas when he made the calls and sent the emails. The district court was not persuaded by Horne's argument and held that because "Andrade is [Fintech's] representative," Horne's contacts were "directed toward [Fintech]," a Texas company.¹⁴ As the district court pointed out, Horne knew Fintech is a Texas company.¹⁵ Further, the district court noted that at least one email that Horne sent to Andrade was sent to "fintechfund@crossverify.global," further illustrating that Horne was purposefully contacting Fintech.¹⁶

We agree with the district court's analysis. That Andrade was in Texas when Horne called and emailed him may have been fortuitous, "but the tortious nature of the directed activity constitutes purposeful availment," satisfying the minimum contacts requirement.¹⁷ Horne purposefully called and emailed Andrade. Those are his tortious contacts with the forum. Horne quotes Revell v. Lidov for the proposition that he "must be chargeable with knowledge of the forum at which his conduct is directed."¹⁸ Revell is distinguishable. Revell involved an allegedly libelous publication that criticized the plaintiff.¹⁹ The plaintiff sued in Texas, arguing that he suffered the effects of that publication there.²⁰ We noted that the only connection the case had with Texas was that the plaintiff resided there, which the defendant did not know.²¹ The publication "contain[ed] no reference to Texas, nor [did] it refer to the Texas activities of [plaintiff], and it was not directed at Texas readers."²² We held that the defendant did not direct any action at Texas.²³ Here, Horne directed his allegedly tortious conduct at Texas, and he directed it at a Texas entity that he knew was a Texas entity. Those facts are determinative. Accordingly, Horne had sufficient minimum contacts with Texas to satisfy the...