Gutierrez v. Cayman Islands Firm
| Decision Date | 27 March 2002 |
| Docket Number | No. 04-01-00637-CV.,04-01-00637-CV. |
| Citation | 100 S.W.3d 261 |
| Parties | Filemon Garza GUTIERREZ; Ernesto Anzaldua Garcia; Nerea Anzaldua De Gomez; Arturo Garza Uribe; Beatriz Anzaldua De Garza; Maria Luisa Cavazos Garza; Delta Products Company, S.A.; Nocando Mem Holdings, Ltd.; and Javier Vasquez Castro, Individually and on behalf of all other similarly situated Plaintiffs, Appellants, v. The CAYMAN ISLANDS FIRM OF DELOITTE & TOUCHE; Deloitte & Touche Tohmatsu International; Michael Pilling; and Glen W. Wigney, Appellees. |
| Court | Texas Court of Appeals |
Allan B. Diamond, Brian T. Burris, Sofia Adrogue, Diamond McCarthy Taylor & Finley, Houston, David Bryant, Dallas, F. Witcher McCullough, III, Michael S. Truesdale, William T. Reid, IV, Diamond McCarthy Taylor & Finley, Austin, Edward C. Snyder, Gerald T. Drought, Martin, Drought & Torres, Inc., San Antonio, for appellants.
Luther H. Soules, III, Paul D. Andrews, Soules & Wallace, P.C., San Antonio, Robb L. Voyles, Baker Botts, L.L.P., Austin, Alan R. Struble, Darren L. McCarty, M. Byron Wilder, Gibson, Dunn & Crutcher, L.L.P., Dallas, Ricardo G. Cedillo, Davis, Cedillo & Mendoza, Inc., San Antonio, William V. Dorsaneo, III, Dallas, for appellees.
Sitting: PHIL HARDBERGER, Chief Justice, CATHERINE STONE, Justice, and PAUL W. GREEN, Justice.
Opinion by: CATHERINE STONE, Justice.
This is an accelerated, interlocutory appeal of the trial court's order sustaining the special appearances of Deloitte Touche Tohmatsu International (DTT); the Cayman Islands Firm of Deloitte & Touche (DT-Cayman); and two DT-Cayman employees, Michael Pilling and Glen W. Wigney. We conclude that the trial court did not err in granting the special appearance of DTT; therefore, we affirm that portion of the trial court's judgment. However, because we conclude the trial court abused its discretion in ruling that it could not exercise personal jurisdiction over DT-Cayman and its employees, we reverse and remand that portion of the judgment.
Filemon Garza Gutierrez and the eight other named defendants (collectively, Gutierrez) represent a class of over 1,000 foreign investors — principally from Mexico and Latin America — who invested money through InverWorld Ltd., later known as I.G. Services Ltd. (collectively, InverWorld). InverWorld was a financial advice and investment firm organized under Caymanian laws but headquartered in San Antonio Texas. Gutierrez's suit contends various Deloitte & Touche entities performed inadequate audits of InverWorld, thereby causing damages to InverWorld investors.
DTT is organized as a Swiss "verein" (loosely translated, a conglomerate), an international league of accounting firms, including DT-Cayman and Deloitte & Touche U.S.A., L.L.P. (DT-US). DTT considers each of its member firms to be an independent entity. Neither DTT nor DT-Cayman has offices, property, or employees in Texas. Glen Wigney and Michael Pilling, the individual employees of DT-Cayman, are Canadian citizens. DT-US has branch offices and employees throughout the United States, including in Texas.
InverWorld engaged DT-Cayman to serve as its independent accounting and auditing firm. The bulk of the auditing work was carried out in San Antonio by DT-US's Texas branch (DT-Texas), after which DT-Cayman resolved any questions, approved and formatted the report, and disseminated the final product. Although each audit DT-Cayman issued indicated InverWorld was financially sound, the company was actually grossly insolvent at the time later reports were issued. Gutierrez claims InverWorld was involved in an elaborate "Ponzi scheme."1 After InverWorld collapsed, Gutierrez and his fellow investors lost over $325 million. Gutierrez filed a class action against DTT, DT-Cayman, and DT-Texas alleging causes of action for fraud, negligent misrepresentation, civil conspiracy, and violations of the Texas Securities Act. Currently, InverWorld is enmeshed in bankruptcy proceedings in both the Cayman Islands and San Antonio, a receivership established in San Antonio, and Texas-based federal criminal prosecutions against two InverWorld partners.
DTT, DT-Cayman, and DT-Cayman's individually-named partners, Pilling and Wigney, filed a special appearance. During discovery, before the hearing on the special appearance, Gutierrez filed a motion to compel DT-Cayman to produce its practice manual. The trial court granted the motion and ordered DT-Cayman to produce its practice manual to Gutierrez. DT-Cayman filed a petition for writ of mandamus and a motion for emergency stay and temporary injunction to contest production of the manual. This court issued a conditional writ barring production of the manual. After a hearing, the trial court sustained the special appearance of DTT, DT-Cayman, and the individually named defendants. This interlocutory appeal ensued.
As a threshold issue presented for review, Gutierrez argues that DT-Cayman waived its special appearance when it filed its petition for writ of mandamus and motion for emergency relief without specifying that its appearance before the Fourth Court of Appeals was "subject to" the special appearance.
An objection to a Texas court's exercise of jurisdiction over a nonresident must be made by special appearance filed under Rule 120a of the Texas Rules of Civil Procedure. See TEX.R. CIV. P 120a(2). Rule 120a "requires strict compliance." Morris v. Morris, 894 S.W.2d 859, 862 (Tex.App.-Fort Worth 1995, no writ). A special appearance must be made and determined on sworn motion prior to any other plea, pleading, or motion that seeks affirmative relief. TEX.R. CIV. P. 120a(1), (2); Dawson-Austin v. Austin, 968 S.W.2d 319, 323 (Tex.1998) (). Any appearance before judgment that is not in compliance with Rule 120a constitutes a general appearance. TEX.R. CIV. P. 120a(2); Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 201 (Tex.1985). A party contesting jurisdiction must not seek affirmative relief on any question other than that of the court's jurisdiction before the special appearance is determined. TEX.R. CIV. P. 120a(2) (). Any intervening appearance to invoke the trial court's judgment about a "question other than the court's jurisdiction" is a general appearance. Angelou v. African Overseas Union, 33 S.W.3d 269, 275 (Tex.App.-Houston [14th Dist.] 2000, no pet.).
These limitations notwithstanding, the special appearance rule specifically provides:
The issuance of process for witnesses, the taking of depositions, the serving of requests for admissions, and the use of discovery processes, shall not constitute a waiver of such special appearance.
TEX.R. CIV. P. 120a(1). DT-Cayman argues it did not waive its special appearance because (1) the petition and motion were not "pleadings;" (2) an original proceeding is a formally independent matter; and (3) Rule 120a specifies that the use of discovery processes does not constitute waiver. We agree.
First, this court distinguished a "pleading" from an "application" by defining a pleading as a means to allege a cause of action or ground of defense. See In re L.A.M. & Assocs., 975 S.W.2d 80, 84 (Tex. App.-San Antonio 1998, orig. proceeding). Given that definition, DT-Cayman's petition and motion are not "pleadings" because neither a cause of action nor a ground of defense is alleged in either document. Second, jurisdiction of the various trial courts and appellate courts is independently conferred by law. See, e.g., TEX. GOV'T CODE ANN. § 22.220 (Vernon 1988) (). Therefore, we decline to hold that a party's appearance before an appellate court constitutes a general appearance before the trial court. Third, we consider the use of mandamus proceedings to challenge discovery orders a "use of discovery processes" envisioned by Rule 120a.
This court has held that Rule 120a specifically contemplates ongoing discovery by the party challenging jurisdiction, and that nothing in the rule limits discovery to matters relating to the special appearance. Case v. Grammar, 31 S.W.3d 304, 311 (Tex.App.-San Antonio 2000, no pet.). Under similar circumstances, the El Paso court rejected the argument that objections to discovery requests equated a general appearance and noted, "We do not believe the rule's intent is to force a defendant to choose between waiving valid discovery objections or waiving its jurisdictional challenge." See Moore v. Elektro-Mobil Technik GmbH, 874 S.W.2d 324, 328 (Tex.App.-El Paso 1994, writ denied). That reasoning is equally applicable here. The only means a party has to challenge an order compelling production of allegedly privileged matters is by seeking mandamus relief.
Accordingly, we hold DT — Cayman did not waive its special appearance. We overrule issue one.
In issues two and three, Gutierrez challenges the trial court's ruling sustaining DT — Cayman's special appearances, contending (1) the contacts with Texas were sufficient; and (2) jurisdiction over a Texas agent of a foreign principal should be attributable to the principal. In issue four, Gutierrez challenges the trial court's ruling sustaining DTT's special appearance because he alleges DTT has a worldwide presence and acted as a "conduit" for activities in Texas.
On interlocutory appeal, we review the trial court's grant or denial of a special appearance for an abuse of...
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