Magic House Ab v. Shelton Beverage L.P.

• Decision Date: 06 March 2003
• Docket Number: No. 05-02-01048-CV.,05-02-01048-CV.
• Parties: MAGIC HOUSE AB, Appellant, v. SHELTON BEVERAGE L.P. and Dianne Shelton d/b/a Shelton Beverage, Appellees.
• Court: Texas Court of Appeals

99 S.W.3d 903

MAGIC HOUSE AB, Appellant, v. SHELTON BEVERAGE L.P. and Dianne Shelton d/b/a Shelton Beverage, Appellees.

No. 05-02-01048-CV.

Court of Appeals of Texas, Dallas.

March 6, 2003.

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Kathryn K. Whipple, Dallas, for Appellant.

Theodore Carl Anderson, Kilgore & Kilgore, P.L.L.C., Dallas, for Appellee.

Before Justices BRIDGES, FARRIS,¹ and ROSENBERG.²

OPINION

Opinion By Justice ROSENBERG(Assigned).

This is an appeal of an interlocutory order denying Magic House AB's (Magic House) special appearance in this case brought by Shelton Beverage L.P. and Dianne Shelton d/b/a Shelton Beverage (collectively, Shelton). In three issues, Magic House argues the special appearance should have been granted.³ Because we conclude the trial court lacked both specific and general jurisdiction over Magic House, we reverse the trial court's order and render judgment dismissing Shelton's claims against Magic House for lack of jurisdiction.

FACTUAL AND PROCEDURAL BACKGROUND

Magic House is a Swedish corporation that manufactures the energy drinks Nice and Niagra (now Nexcite). On or about September 15, 2000, Magic House entered into a distribution agreement with Michigan Trading Post, Inc. (MTPI). This distribution agreement provided that MTPI would have the exclusive right to distribute the energy drinks in Florida, Texas, Nevada, California, and New York. The agreement later extended the distribution rights to the entire United States. MTPI granted Shelton exclusive distribution rights in Texas.

Subsequently, Shelton discovered that the beverage products were already widely available in Texas. The unauthorized products came from RLW Marketing, Inc. (RLW). RLW had a distribution agreement with MTPI for all of the United States except Texas. Shelton demanded that MTPI address the situation. Under the distribution agreement, Shelton sought relief against MTPI in arbitration. The arbitrator awarded Shelton a nominal award. According to Shelton, during the arbitration, Magic House transferred assets out of MTPI.

Shelton filed suit against Magic House, MTPI, RLW, their principals, and related entities.⁴ Shelton's allegations against Magic House consisted of claims that it exercised that degree of control over MTPI to establish that MTPI was the alter ego of Magic House. Shelton asserted that Magic House fraudulently transferred assets from MTPI to Magic House to deprive Shelton of a legitimate arbitration award against MTPI. Shelton also alleged a civil conspiracy in the transfer of funds and sought a constructive trust over certain assets of Magic House.

Magic House filed a special appearance alleging that Texas courts did not have specific or general jurisdiction. The trial court denied the special appearance, and this interlocutory appeal ensued. No findings of fact or conclusions of law were filed with the record.

Standard of Review and Applicable Law

In determining whether the trial court's ruling on a special appearance is correct, appellate courts review the trial court's factual findings for legal and factual sufficiency and review the trial court's legal conclusions de novo. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). When a trial court does not issue findings of fact and conclusions of law with its special appearance ruling, all facts necessary to support the judgment and supported by the evidence are implied. Id. at 795. When the appellate record includes the reporter's and clerk's records, these implied findings are not conclusive and may be challenged for legal and factual sufficiency in the appropriate appellate court. Id. For legal sufficiency points, if there is more than a scintilla of evidence to support the finding, the no-evidence challenge fails. Id.

Texas courts may exercise jurisdiction over a nonresident when (1) the Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the exercise of jurisdiction is consistent with federal and state constitutional guarantees of due process. See TEX. CIV. PRAC. & REM.CODE ANN. §§ 17.041-17.069 (Vernon 1997 & Supp.2003); Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002), cert. denied, 71 U.S.L.W. 3445, ___ U.S. ___, 123 S.Ct. 1271, 154 L.Ed.2d 1025 (2003); Schlobohm v. Schapiro, 784 S.W.2d 355, 356 (Tex.1990); Temperature Sys., Inc. v. Bill Pepper, Inc., 854 S.W.2d 669, 674 (Tex.App.-Dallas 1993, writ dism'd by agr.). Our long-arm statute authorizes the exercise of jurisdiction over those who do business in Texas. TEX. CIV. PRAC. & REM.CODE ANN. § 17.042 (Vernon 1997). Section 17.042 of the civil practice and remedies code defines "doing business" as (1) contracting by mail or otherwise with a Texas resident with performance either in whole or in part in this state; (2) commission of a tort in whole or in part in this state; or (3) recruitment of Texas residents, directly or through an intermediary located in this state, for employment inside or outside this state. Id. The broad language of the long-arm statute's "doing business" requirement allows the statute to reach as far as the federal constitution permits. Am. Type Culture Collection, Inc., 83 S.W.3d at 806; Schlobohm, 784 S.W.2d at 357.

Federal constitutional requirements of due process limit the power of the state to assert personal jurisdiction over a nonresident defendant. See Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex.1991). The due process test requires a plaintiff to show that the defendant has purposely established "minimum contacts" with the forum state and, if so, the plaintiff must show the exercise of jurisdiction comports with traditional notions of "fair play and substantial justice." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985); Schlobohm, 784 S.W.2d at 357.

The "minimum contacts" analysis requires the court to determine whether the nonresident defendant purposefully availed himself of the privilege of conducting activities within the forum state, thereby invoking the benefits and protections of its law. See BMC Software, 83 S.W.3d at 795; Guardian Royal, 815 S.W.2d at 226. The essential goal of the "purposeful availment" requirement is to protect a nonresident defendant from being haled into a jurisdiction based solely on random, fortuitous, or attenuated contacts. Guardian Royal, 815 S.W.2d at 226. Instead, a nonresident defendant's activity, whether it consists of direct acts within the forum or conduct outside the forum, must justify a conclusion that the defendant should reasonably anticipate being haled into court there. Schlobohm, 784 S.W.2d at 357. The exercise of personal jurisdiction is proper when the contacts proximately result from actions of the nonresident defendant that create a substantial connection with the forum state. Guardian Royal, 815 S.W.2d at 226.

A defendant's contacts with a forum can give rise to either specific jurisdiction or general jurisdiction. Id. at 227-28; Schlobohm, 784 S.W.2d at 357. Specific jurisdiction exists when the nonresident defendant's activities have been "purposefully directed" to the forum and the litigation results from injuries arising out of or relating to those activities. Guardian Royal, 815 S.W.2d at 228. The minimum-contacts analysis for specific jurisdiction is somewhat narrow, focusing on the relationship among the defendant, the forum, and the litigation. Id.; Schlobohm, 784 S.W.2d at 357. "It is the quality and nature of the defendant's contacts, rather than their number, that is important to the minimum-contacts analysis." Am. Type Culture Collection, Inc., 83 S.W.3d at 806. "Although not determinative, foreseeability is an important consideration in deciding whether the nonresident defendant has purposefully established `minimum contacts' with the forum state." BMC Soft ware, 83 S.W.3d at 795; see Burger King Corp., 471 U.S. at 475, 105 S.Ct. 2174 (contrasting act of "purposeful availment" with "random," "fortuitous," or "attenuated" contacts). Conversely, the minimum-contacts analysis for general jurisdiction is broader and demands a showing of substantial activities in the forum state. Guardian Royal, 815 S.W.2d at 228; Schlobohm, 784 S.W.2d at 357.

In addition to minimum contacts with the forum state, personal jurisdiction requires that the exercise of jurisdiction comport with traditional notions of fair play and substantial justice. See BMC Software, 83 S.W.3d at 795 (citing Int'l Shoe Co. v. Wash., 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)). In determining whether the exercise of jurisdiction will offend traditional notions of fair play and substantial justice, the following factors are considered: (1) the burden on the nonresident defendant; (2) the forum state's interest in adjudicating the dispute; (3) the plaintiffs 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 fundamental, 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 228. Consideration of the fair-play analysis is separate and distinct from the minimum-contacts issue. It is unlikely that the exercise of jurisdiction will fail the fairplay analysis because the minimum-contacts analysis encompasses so many considerations of fairness. Schlobohm, 784 S.W.2d at 357-58.

The plaintiff bears the initial burden of pleading sufficient allegations to bring a nonresident defendant within the provisions of the long-arm statute. BMC Software, 83 S.W.3d at 794. A defendant must negate all bases of jurisdiction even if there are no jurisdictional allegations in a plaintiffs petition. Temperature Sys., Inc., 854 S.W.2d at 673. In such a case, proof that a...