Flanagan v. Royal Body Care, Inc.

• Decision Date: 28 August 2007
• Docket Number: No. 05-06-01557-CV.,05-06-01557-CV.
• Parties: Patrick FLANAGAN, Appellant v. ROYAL BODY CARE, INC., Appellee.
• Court: Texas Court of Appeals

232 S.W.3d 369

Patrick FLANAGAN, Appellant v. ROYAL BODY CARE, INC., Appellee.

No. 05-06-01557-CV.

Court of Appeals of Texas, Dallas.

August 28, 2007.

R. Lynn Fielder, Fisk & Fielder, P.C., Dallas, for appellant.

R. Brent Cooper, R. Douglas Rees, Cooper & Scully, P.C., Dallas, for appellee.

Before Justices WHITTINGTON, BRIDGES, and LANG-MIERS.

OPINION

Opinion by Justice LANG-MIERS.

Appellant Patrick Flanagan appeals the trial court's order overruling his special appearance. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(7) (Vernon 2005). In four issues, Flanagan contends the evidence is legally and factually insufficient to support a finding of general or specific jurisdiction, and the exercise of jurisdiction over him does not comport with traditional notions of fair play and substantial justice. We conclude Flanagan is subject to specific jurisdiction and affirm the trial court's order.

FACTUAL BACKGROUND

Flanagan is the inventor of two ingredients for skin-care products, Crystal Energy and Flanagan Microclusters (silica hydride), which were manufactured in Arizona by Flanagan Technologies, Inc. (now dissolved).¹ Appellee Royal Body Care, Inc. (RBC) is a Texas corporation with its principal place of business in Irving, Texas, and is a multi-level, world-wide distributor of nutritional supplements. Clinton H. Howard is its chief executive officer.

In 1997 and 1998, Flanagan Technologies and RBC² entered into an exclusive licensing agreement whereby RBC would market products containing Flanagan Microclusters. Pursuant to the licensing agreement, RBC manufactured and sold two skin-care products containing Flanagan's inventions: Microhydrin, which contained Flanagan Microclusters; and Crystal Energy, which was essentially a diluted solution of Flanagan's invention by the same name. RBC continued to sell products containing Flanagan's inventions until mid-2002, when the parties terminated their relationship because of a business dispute. From 1997 until mid-2002, RBC purchased over $15 million in ingredients from Flanagan Technologies.

At some point, Canadian residents Diane and Brian Ward filed a products-liability suit in Texas against RBC, Howard, Flanagan, and others, claiming that Diane Ward applied a mixture of Microhydrin and Crystal Energy to her face, resulting in a severe burn. The Wards alleged all defendants, among other things:

failed to conduct reasonable research to discover or correct the defects in the products;

failed to post adequate warnings of the dangers presented by the use of the products;

negligently marketed the product as a safe product;

failed to inform the consumer of information they knew about risks involved in using the products; and

breached express and implied warranties because the products Mycrohydrin and Crystal Energy were not fit for their ordinary or intended use.

Flanagan filed a special appearance, which the trial court granted.³ RBC then filed a third-party petition for contribution against Flanagan and Flanagan Technologies. Flanagan again filed a special appearance, which the trial court denied.⁴ This accelerated, interlocutory appeal followed.

STANDARD OF REVIEW

Whether a court has personal jurisdiction over a nonresident defendant is a question of law that often requires the resolution of factual issues. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex.2002); Kytel Int'l Group, Inc. v. Rent-A-Ctr., Inc., 132 S.W.3d 717, 719 (Tex.App.-Dallas 2004, no pet.). When, as in this case, the trial court does not issue findings of fact and conclusions of law to support its ruling on a special appearance, we will imply the trial court found all facts necessary to support the judgment that are supported by the evidence. BMC Software, 83 S.W.3d at 795. But when, as in this case, the record includes the reporter's and clerk's records, those implied findings are not conclusive and may be challenged for legal and factual sufficiency. Id.

In a legal sufficiency review, we will affirm the implied findings of the trial court if there is more than a scintilla of evidence to support them. BMC Software, 83 S.W.3d at 795. More than a scintilla of evidence exists if the evidence would enable reasonable and fair minded people to differ in their conclusions. Morris v. Kohls-York, 164 S.W.3d 686, 692 (Tex. App.-Austin 2005, pet. dism'd). A factual sufficiency challenge requires proof that an implied finding was "so contrary to the overwhelming weight of the evidence as to be clearly wrong and manifestly unjust." See id. (internal citation omitted).

PERSONAL JURISDICTION

The plaintiff bears the initial burden of pleading sufficient allegations to invoke jurisdiction over a defendant under the Texas long-arm statute. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex.2007); Am. Type Culture Collection v. Coleman, 83 S.W.3d 801, 807 (Tex.2002). The plaintiff's original pleadings as well as its response to the defendant's special appearance can be considered in determining whether the plaintiff satisfied that burden.⁵ TEX.R. CIV. P. 120a(3); Ennis v. Loiseau, 164 S.W.3d 698, 705 (Tex.App.-Austin 2005, no pet.). If the plaintiff satisfies its initial burden, the nonresident defendant then assumes the burden of negating all bases of jurisdiction in those allegations. Moki Mac, 221 S.W.3d at 574; BMC Software, 83 S.W.3d at 793.

The Texas long-arm statute authorizes courts to exercise jurisdiction over nonresident defendants doing business within Texas. See TEX. CIV. PRAC. & REM.CODE ANN. § 17.042 (Vernon 2005). The long-arm statute reaches as far as possible consistent with federal constitutional guarantees of due process of law. Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex.1991). An exercise of personal jurisdiction over a nonresident defendant is consistent with federal due process requirements if the defendant has established minimum contacts with Texas. BMC Software, 83 S.W.3d at 795. A nonresident defendant's minimum contacts may result in either general or specific personal jurisdiction. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 413-14, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984); BMC Software, 83 S.W.3d at 795-96.

In evaluating the extent of a defendant's contacts with Texas, the touchstone of our jurisdictional analysis is "purposeful availment." Moki Mac, 221 S.W.3d at 575 (citing Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 784-85 (Tex.2005)). In determining whether a defendant has purposefully availed itself of the privilege of conducting activities within Texas, we look only to the defendant's contacts and not unilateral contacts of third parties. Moki Mac, 221 S.W.3d at 575. We examine only purposeful contacts of the defendant that are not random, isolated, or fortuitous. Id. We search for evidence in the record showing the defendant availed itself of the forum by seeking some benefit, advantage, or profit. Id.

In analyzing the exercise of specific jurisdiction, we focus on the relationship between the defendant, the forum, and the litigation. Helicopteros, 466 U.S. at 414, 104 S.Ct. 1868; Moki Mac, 221 S.W.3d at 575-76. Specific jurisdiction arises when the nonresident defendant has established minimum contacts by purposefully availing itself of the privilege of conducting activities in Texas and its liability arises from or is related to those contacts. Moki Mac, 221 S.W.3d at 576. General jurisdiction arises when the defendant has established continuous and systematic contacts with Texas, even if the cause of action does not arise from or relate to those contacts, and requires a more demanding minimum-contacts analysis. Am. Type Culture, 83 S.W.3d at 806-07.

It is a well-settled rule of Texas jurisprudence that, in addition to the minimum-contacts requirement, the trial court's exercise of specific jurisdiction must comport with traditional notions of fair play and substantial justice. See, e.g., BMC Software, 83 S.W.3d at 795; Guardian Royal, 815 S.W.2d at 228. To defeat jurisdiction, it is incumbent upon the non-resident defendant to present a compelling case that the presence of some consideration would render jurisdiction unreasonable. Guardian Royal, 815 S.W.2d at 231. In a fair-play analysis, the factors we consider are the five factors outlined by the United States Supreme Court: (1) the burden on the nonresident defendant; (2) the forum state's interest in adjudicating the dispute; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several states in furthering substantive social policies. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); Guardian Royal, 815 S.W.2d at 231.

SPECIFIC JURISDICTION

A. Did Flanagan purposefully avail himself of the privilege of doing business in Texas?

In his second and third issues, Flanagan contends he is not subject to specific jurisdiction in this case because "RBC has not pled, alleged, argued, or proved that Flanagan committed a tort in whole or in part in Texas," "[t]here must be some connection between the tort of the non-resident and Texas to establish specific personal jurisdiction," and the exercise of jurisdiction over him does not comport with traditional notions of fair play and substantial justice.

RBC alleges in its pleadings against Flanagan that the Wards' claims "arise in part from their assertion that the products sold by RBC to [the Wards] were improperly labeled or marketed." And RBC alleges "Flanagan required he, individually, approve all labels, medical claims, and promotional materials about the products sold to RBC by [Flanagan Technologies]." RBC also alleges that Flanagan "developed Microhydrin and Crystal Energy, and approved all labels, literature, news releases and articl...