Memorial Hosp. System v. Fisher Ins. Agency, Inc.

• Decision Date: 18 June 1992
• Docket Number: No. C14-91-00678-CV,C14-91-00678-CV
• Parties: MEMORIAL HOSPITAL SYSTEM, Appellant, v. FISHER INSURANCE AGENCY, INC., Appellee. (14th Dist.)
• Court: Texas Court of Appeals

Page 645

835 S.W.2d 645

MEMORIAL HOSPITAL SYSTEM, Appellant, v. FISHER INSURANCE AGENCY, INC., Appellee.

No. C14-91-00678-CV.

Court of Appeals of Texas,

Houston (14th Dist.).

June 18, 1992.

Rehearing Denied July 23, 1992.

Thomas Daniel Hollaway, Houston, for appellant.

Christopher S. Goodwin, Houston, for appellee.

Before JUNELL, ROBERTSON and DRAUGHN, JJ.

OPINION ON MOTION FOR REHEARING

ROBERTSON, Justice.

On motion for rehearing, the original opinion is withdrawn and this opinion is substituted. The motion for rehearing is overruled.

Memorial Hospital System (Memorial) appeals from an order sustaining a plea to jurisdiction and a motion for new trial in favor Fisher Insurance Agency (Fisher). Raising two points of error, Memorial contends that Fisher had sufficient contacts with Texas to justify the exercise of jurisdiction and that Fisher's failure to answer constituted conscious disregard. We reverse.

The principal question presented is whether a Texas court has personal jurisdiction over a defendant whose sole contact with the forum state was to send fraudulent misrepresentations through a single telephone call. When reaching a decision to exercise or decline jurisdiction, the merits of the cause of action are not at issue.

On June 30, 1987, Carlos Mejia, an employee of Robert Kelly Company, presented himself for admission at Memorial Hospital System in Houston, Texas for a work related injury. On that date, Fisher Insurance Agency was contacted by Memorial to verify the existence of workers' compensation insurance coverage for Carlos Mejia. An employee of Fisher advised Memorial that the employees of Robert Kelly Company were covered by workers' compensation insurance. Relying on this information, Memorial admitted Carlos Mejia to the hospital on July 1, 1987 and provided treatment through July 17, 1987.

Subsequently, it was discovered that the policy for Robert Kelly Company would not provide coverage in the state of Texas. Memorial filed suit against Fisher on August 11, 1989, alleging negligent misrepresentation on the part of Fisher. A default judgment was granted against Fisher in the principal amount of $6,013.50 on May 14, 1991. Thereafter, Fisher filed a special appearance objecting to the jurisdiction and a motion for new trial, which were later sustained by the trial court.

I. TEXAS LONG-ARM STATUTE

In order to exercise jurisdiction over a non-resident, Texas law requires that such jurisdiction be authorized under the Texas long arm statute and consistent with federal and state constitutional guarantees of due process. See TEX.CIV.PRAC. & REM.CODE ANN. § 17.041--s 17.069 (Vernon 1986). The Texas long arm statute expressly authorizes the exercise of jurisdiction over nonresidents "doing business" in Texas. TEX.CIV.PRAC. & REM.CODE ANN. § 17.042 (Vernon 1986). In addition to other acts that may constitute doing business, a nonresident does business in this state, if the nonresident "commits a tort in whole or in part in this state." Id.

In the instant case, Fisher negligently represented to Memorial that Carlos Mejia was covered by workers' compensation insurance in Texas. Relying on this information, Memorial admitted Mejia and provided treatment. Thereafter, Memorial discovered that the information given by Fisher was false. In a negligent misrepresentation case, even if the representation occurs outside the state of Texas, a tort is committed in Texas, if reliance thereon occurred in Texas. See Portland Sav. & Loan Ass'n v. Bernstein, 716 S.W.2d 532 (Tex.App.--Corpus Christi 1985, writ ref'd n.r.e.), cert. denied, 475 U.S. 1016, 106 S.Ct. 1200, 89 L.Ed.2d 313 (1986); Hoppenfeld v. Crook, 498 S.W.2d 52 (Tex.Civ.App.--Austin 1973, writ ref'd n.r.e.). Since Memorial has alleged a tort committed in part in Texas, the requirement for jurisdiction under the Texas long arm statute has been satisfied.

We now must determine if the exercise of jurisdiction is consistent with the federal and state constitutional guarantees of due process. The Texas Supreme Court has held that the broad language of section 17.042 allows the long arm statute to reach as far as the federal constitution permits. See U-Anchor Adv., Inc. v. Burt, 553 S.W.2d 760, 762 (Tex.1977), cert. denied, 434 U.S. 1063, 98 S.Ct. 1235, 55 L.Ed.2d 763 (1978).

II. FEDERAL TEST--DUE PROCESS

The United States Constitution allows jurisdiction over a nonresident defendant if: (1) the nonresident defendant has purposely established "minimum contacts" with the forum state; and (2) the exercise of jurisdiction comports with "fair play and substantial justice." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76, 105 S.Ct. 2174, 2183-84, 85 L.Ed.2d 528, 542-43 (1985); International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). An essential goal of the federal due process test is to protect the nonresident defendant. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980).

Under the minimum contacts analysis, it must be determined whether the nonresident defendant has purposefully availed itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws. Burger King, 471 U.S. at 474-75, 105 S.Ct. at 2183. Those activities, whether they consist 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. World-Wide Volkswagen, 444 U.S. at 297, 100 S.Ct. at 567. This "purposeful availment" requirement ensures that a defendant will not be called into a jurisdiction based solely upon "random," "fortuitous" or "attenuated" contacts or the "unilateral activity of another party or a third person." Burger King, 471 U.S. at 475, 105 S.Ct. at 2183.

The minimum contacts analysis has been further developed into specific and general jurisdiction. When specific jurisdiction is asserted, the cause of action must arise out of or relate to the nonresident defendant's contact with the forum state in order to satisfy the minimum contacts requirement. Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). This analysis focuses on the relationship among the defendant, forum, and litigation. Id., (citing Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 2579, 53 L.Ed.2d 683 (1977)). When general jurisdiction is asserted, the defendant's activities in the forum are continuing and systematic; thus there does not have to be a relationship between the defendant's particular act and the cause of action. Helicopteros, 466 U.S. at 414, 104 S.Ct. at 1872.

Once it has been concluded that the nonresident defendant purposefully established minimum contacts with the forum state, it must be determined whether maintenance of the suit comports with "traditional notions of fair play and substantial justice." International Shoe Co., 326 U.S. at 316, 66 S.Ct. at 158. Factors to consider in this analysis, among other things, include: (1) the burden on the defendant; (2) the interest of the forum state in adjudicating the dispute; and (3) the plaintiff's interest in obtaining convenient and effectual relief. World-Wide Volkswagen, 444 U.S. at 292, 100 S.Ct. at 564. Therefore, even if the nonresident defendant has purposely established minimum contacts with the forum state, the exercise of jurisdiction may not be fair and reasonable under the facts in a particular case. Burger King, 471 U.S. at 477-78, 105 S.Ct. at 2184-2185.

III. TEXAS TEST--DUE PROCESS

In an effort to ensure compliance with the federal constitutional standard, the Texas Supreme Court modified the formula used to determine whether the exercise of jurisdiction is consistent with due process. Schlobohm v. Schapiro, 784 S.W.2d 355 (Tex.1990). In order for Texas to have jurisdiction over a nonresident, the record must show that:

(1) The nonresident defendant or foreign corporation must purposefully do some act or consummate some transaction in the forum state (2) The cause of action must arise from, or be connected with, such act or transaction. Even if the cause of action does not arise from specific contact, jurisdiction may be exercised if the defendant's contacts with Texas are continuing and systematic;

(3) The assumption of jurisdiction by the forum state must not offend traditional notions of fair play and substantial justice, consideration being given to the quality, nature, and extent of the activity in the forum state, the relative convenience of the parties, the benefits and protection of the laws of the forum state afforded the respective parties, and the basic equities of the situation.

Schlobohm, 784 S.W.2d at 358. All three prongs of the test must be met to support jurisdiction; however, the test is not to be used mechanically since it is only a guideline for analyzing the federal requirements. Id. In the present case, Memorial is asserting specific jurisdiction over Fisher, premised on the latter's contact with Texas through a single telephone conversation.

A. SPECIFIC JURISDICTION

When specific jurisdiction is asserted, the focus is on the relationship between the defendant, the forum, and the litigation. Lujan v. Sun Exploration & Production Co., 798 S.W.2d 828, 831 (Tex.App.--Dallas 1990, writ denied). The defendant must have purposefully established "minimum contacts" with Texas. Guardian Royal Exch. v. English China, 815 S.W.2d 223 (Tex.1991). There must be a substantial connection between the nonresident's action or conduct directed toward Texas and the cause of action in Texas. Id.

In analyzing minimum contacts, it is not the number but rather the quality and nature of the nonresident's contacts with the forum state that is important. Texas Commerce Bank National Ass'n v. Interpol Lim. Partnership, 703 S.W.2d 765 (Tex.App.--Corpus Christi 1985, no writ); Product Promotions, Inc. v. Cousteau, ...