In re China Oil and Gas Pipeline Bureau, 14-02-00170-CV.

• Decision Date: 22 August 2002
• Docket Number: No. 14-02-00170-CV.,14-02-00170-CV.
• Citation: 94 S.W.3d 50
• Parties: In re CHINA OIL AND GAS PIPELINE BUREAU, Relator.
• Court: Texas Court of Appeals

94 S.W.3d 50

In re CHINA OIL AND GAS PIPELINE BUREAU, Relator.

No. 14-02-00170-CV.

Court of Appeals of Texas, Houston (14th Dist.).

August 22, 2002.

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Ben H. Sheppard Jr., Frank L. Hill, Houston, for relator.

Guy S. Lipe, Martin J. Seigel, Houston, for respondent.

Panel consists of Justices HUDSON, FOWLER, and EDELMAN.

OPINION

WANDA McKEE FOWLER, Justice.

In this original proceeding, relator, China Oil and Gas Pipeline Bureau ("China Oil"), seeks a writ of mandamus ordering the trial court to vacate its orders of October 25, 2001, and January 25, 2002, denying China Oil's Amended Plea to the Jurisdiction and Motion to Dismiss. The real parties in interest, Lisa P.H. Lin, Paul C.K. Lin, and Europamerica Originals, Inc. ("the Lins"), contend the trial court correctly denied the motion. We conditionally grant the writ.

I. FACTUAL AND PROCEDURAL HISTORY

The Lins live in Austin, Texas. Mrs. Lin is the sole shareholder in Europamerica Originals, Inc., a Texas corporation. China Oil is a wholly-owned subsidiary of the China National Petroleum Company, which is wholly owned by the People's Republic of China. According to the Lins, in 1996, they, China Oil, and others¹ agreed to form and manage a joint venture company known as the Langfang Huanmei Pipeline Pig Technical Service Co., Ltd. ("Huanmei"). The company was formed to make and sell oil and gas pipeline equipment in China and service other Chinese and non-Chinese energy companies. A "joint venture memorandum" was signed by the parties, with Mr. Lin signing as agent of Europamerica. According to the Lins, they never received or signed any final contract formally establishing Huanmei. They claim China Oil forged Mr. Lin's signature on the document China Oil claims is the contract finally establishing Huanmei.

According to the Lins, unaware of the forgeries and having accepted the representations made by China Oil, they invested capital, time, and energy in the joint venture. They claim they were told by China Oil that they owned 50% of the shares in the venture and would receive half of the profits. The Lins claim, however, they learned in 2000 that they were not actually registered as 50% shareholders and they would not receive any profits from the venture. The Lins and Europamerica then sued China Oil, its president, and other individuals in the 157th District Court of Texas. The Lins alleged breach of contract, breach of fiduciary duty, and fraud.

The Lins never served process on China Oil; however, several individual defendants were served while traveling in Texas and China Oil became aware of the suit through these individuals. From February through July of 2000, a representative of China Oil forwarded numerous letters to the district court claiming, among other things, the trial court had no jurisdiction over China Oil based on an arbitration clause in the written joint venture contract (the one the Lins claim they never saw and the one Knapp claims somebody forged his name to) that requires arbitration in China. The trial court characterized at least one of the letters as a "special appearance," and by order dated March 31, 2000, found it had subject matter jurisdiction and that there were sufficient contacts for personal jurisdiction. Thus, the trial court denied the "special appearance." No representative of China Oil was present at the "special appearance" hearing. On August 29, 2000, the trial court granted summary judgment in favor of the Lins in the amount of $23.3 million, plus postjudgment interest. The individual defendants were non-suited. All of this was done without China Oil being represented.

In September of 2000, China Oil retained counsel and filed a motion to vacate, modify, correct and reform the judgment and for new trial. In the motion, China Oil claimed the following: (1) as a foreign sovereign, it is immune from suit under the Foreign Sovereign Immunities Act of 1976 ("FSIA") and, therefore, the trial court lacked subject matter jurisdiction over it; (2) the trial court never acquired personal jurisdiction over China Oil because China Oil was never served in accordance with section 1608(b) of the FSIA; and (3) the Lins' claims are subject to mandatory arbitration in China pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. At the same time, China Oil removed the suit to federal court pursuant to section 1441(d) of the United States Code, which grants an absolute right of removal to foreign sovereigns. 28 U.S.C. § 1441(d). China Oil claimed the 30-day removal period under section 1446(b) of the United States Code had never begun to run because China Oil had never been served, and that good cause existed for extending the removal period as permitted by section 1441(d). The Lins moved to remand the case back to state court because the removal was untimely. The Lins based their argument on the fact that a China Oil representative sent numerous letters to the trial court. On December 11, 2000, the federal district court granted the motion to remand.

On January 5, 2001, a judge assigned to sit in the 157th District Court after the prior judge's retirement and before appointment of a new judge, conducted an oral hearing on the motion to vacate. The judge vacated the summary judgment and granted a new trial. The judge also decided to leave the issues of sovereign immunity, personal jurisdiction, and arbitration to the newly-appointed judge. Finally, the judge also ruled that the Lins would be given the opportunity to amend their petition to address the FSIA and conduct discovery on those issues.

In response to this ruling, the Lins filed a third amended petition. China Oil filed a plea to the jurisdiction and motion to dismiss, and later, an amended plea and motion. The trial court conducted an oral hearing on the amended plea and motion. China Oil called Mr. Lin to the stand to testify about the arbitration issue; however, the trial court interrupted the hearing before the testimony was complete and stated it would take up the sovereign immunity issue first and then, if necessary, resume the testimony on the arbitration issue. Without ever resuming the hearing, the trial court later entered an order denying China Oil's motion finding (1) China Oil waived sovereign immunity under the FSIA, (2) China Oil failed to establish the existence of a valid arbitration clause, and (3) the trial court has subject matter and personal jurisdiction over China Oil. By letter, China Oil requested the opportunity to complete the hearing on the arbitration issue. The trial court granted this request and resumed the hearing, stating that it had not intended to rule on the arbitration issue. At the hearing, Mr. Lin completed his testimony and the trial court heard argument on the arbitration issue and requested additional briefing. Ultimately, the trial court entered an order finding the Lins did not have to arbitrate and reaffirming its October 25, 2001, order. After this ruling, the parties agreed that further proceedings in the trial court would be stayed pending the resolution of the mandamus proceeding. China Oil filed this petition for writ of mandamus.

II. RELATOR'S ARGUMENTS:

China Oil has two arguments: (1) the trial court lacks jurisdiction over the Lins' claims because neither the waiver nor the commercial activities exceptions to the FSIA applies; and (2) the trial court erred in holding that China Oil has no right to arbitrate the Lins' claims. It is undisputed that China Oil is an agency or instrumentality of a foreign state, China. Thus, the FSIA applies. The questions presented by the petition are whether the trial court erred in (1) finding any of the exceptions to the FSIA applicable, and (2) finding China Oil failed to establish a valid arbitration clause under the Convention of the Recognition and Enforcement of Foreign Arbitral Awards.

China Oil contends that the court's ruling that China Oil waived its immunity from suit — based on letters sent from China Oil to the trial court — is without merit. It argues the waiver exception is narrowly construed and authorizes jurisdiction only if the foreign state made a conscious decision to participate in the litigation. China Oil argues its letters exhibited no such decision; rather, the letters consistently took the position, for various reasons, that the trial court should not hear the case.

We will not discuss in detail the Lins' arguments regarding the commercial activities exception and arbitration because, as we explain below, any ruling on these issues by this court is premature. We merely note the Lins' position that neither issue bars the court's assertion of authority over the case.

III. REAL PARTY IN INTERESTS' ARGUMENTS:

In response, the Lins argue the trial court correctly decided in favor of jurisdiction and against arbitration because (1) both the waiver and commercial activities exceptions apply; and (2) they are not required to arbitrate².

IV. STANDARD OF REVIEW:

A. Mandamus

Mandamus is an extraordinary remedy available only in limited circumstances. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753 (Tex.2001). A court should issue mandamus only to correct a clear abuse of discretion or the violation of a legal duty when there is no other adequate remedy at law. Id.; In re Daisy Mfg. Co., 17 S.W.3d 654, 658 (Tex.2000).

A claim of immunity under the FSIA is in the nature of a special appearance in that it precludes a trial court from exercising jurisdiction over a suit brought against a foreign sovereign unless an exception is applicable. See East Europe Domestic Int'l, Sales Corp. v. Terra, 467 F.Supp. 383, 387 (S.D.N.Y.1979), aff'd, 610 F.2d 806 (2d Cir.1979) (stating FSIA is intended to be long-arm statute and designed to embody requirements of minimum jurisdictional contacts and adequate notice); Linton v. Airbus Industrie, 934 S.W.2d 754, 757 (Tex.App.-Houston ...