Michael Dodd & 3D Global Solutions, Inc. v. Savino

• Decision Date: 16 January 2014
• Docket Number: No. 14–12–00555–CV.,14–12–00555–CV.
• Parties: Michael DODD and 3D Global Solutions, Inc., Appellants v. Brian J. SAVINO, Appellee.
• Court: Texas Court of Appeals

426 S.W.3d 275

Michael DODD and 3D Global Solutions, Inc., Appellants

v.Brian J. SAVINO, Appellee.

No. 14–12–00555–CV.

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

Jan. 16, 2014.

Denice Smith, Andrew E. Rubenstein, Houston, for Appellants.

Ba Mau Nguyen, Amy Elizabeth Tabor, Houston, for Appellee.

Panel consists of Justices BOYCE, JAMISON, and BUSBY.

SUBSTITUTE OPINION

MARTHA HILL JAMISON, Justice.

We issued an opinion in this case on October 31, 2013, affirming the trial court's judgment. Appellants subsequently filed a motion for rehearing. Without changing our previous disposition, we deny the motion for rehearing, withdraw our earlier opinion, and issue this substitute opinion in its place.

This is an appeal from a no-answer default judgment granted in favor of Brian J. Savino. Appellants Michael Dodd and 3D Global Solutions, Inc. present the following four questions for review: (1) whether Dodd may be held individually liable under an alter ego theory of liability; (2) whether the trial court abused its discretion by denying their Craddock motion for new trial; (3) whether the trial court erred by denying their special appearance; and (4) whether the evidence is legally sufficient to support the award of damages and attorney's fees. We affirm the trial court's judgment.

BACKGROUND¹

The controversy in this case stems from a failed investment transaction. In June 2011, Michael Dodd, a California resident, mailed a stock offering to two prospective investors: Brian Savino, a Houston native; and Augusta Energy Partners, a Swiss company. The offer solicited a $10 million investment in 3D Global Solutions, Inc., a Delaware corporation where Dodd served as president and CEO. At the time of Dodd's letter, 3D Global was actively trying to expand into the fuel distribution business. Dodd envisioned that Savino, an experienced oil trader, would facilitate the corporation's expansion efforts.

Savino considered the offer. Between July and September 2011, Dodd engaged in regular telephone and email communications with Savino in Texas. The parties discussed the building of a business relationship, which contemplated that Savino and Augusta would become equity investors in 3D Global, and that Savino would work for 3D Global as an oil trader in Houston. Dodd requested that Savino and Augusta each provide $150,000 in earnest money, which would be refundable in ten days if their transaction failed to close. Dodd also requested that Savino and Augusta approve the use of $1.2 million of their investment proceeds to make personal payments to Dodd. Savino agreed to the proposals and wire transferred the earnest money payment to Dodd's bank account in Indiana.

After receiving the earnest money payment, Dodd traveled to Houston to meet with Savino and continue their business negotiations. The parties went to the Houston offices of Ernst & Young, where Savino personally engaged the accounting firm to perform due diligence on the proposed transaction. Dodd agreed to reimburse Savino one-third of Ernst & Young's fee, with Savino and Augusta bearing the remaining share. In another meeting, Dodd also agreed to reimburse certain expenses that Savino incurred when he traveled to 3D Global's offices in New York and New Jersey.

Ernst & Young performed an accounting of 3D Global and found that its net present value did not correspond with the representations made by Dodd. Savino further learned during the course of due diligence that Dodd had commingled his personal funds with 3D Global's and that the corporation was not adequately capitalized. Based on these findings, Savino and Augusta decided not to close on the investment. Savino requested, pursuant to the terms of his agreement with Dodd, that his earnest money be returned. Dodd made repeated assurances to Savino that his reimbursement was forthcoming. Despite his representations, Dodd never returned the money.

On November 17, 2011, Savino filed an original petition in Texas alleging causes of action for breach of contract, quantum meruit, and money had and received. Savino claimed that appellants had failed to return his earnest money within ten days of their failed investment transaction. Savino also alleged that appellants had failed to reimburse him for the one-third share of the Ernst & Young fee and for other travel expenses that they had promised to pay. Savino effectuated service on the Texas Secretary of State, who forwarded the petition and citation to 3D Global's registered agent in Delaware. Appellants' answer was due to be filed no later than December 27, 2011, but no answer was timely received.²

Savino filed a motion for default judgment on January 4, 2012, and an amended motion on February 6, 2012. After each filing, a copy of the motion and a notice of hearing were served on both Dodd and 3D Global. Again, appellants filed no responsive pleading. After the trial court granted Savino a default judgment, appellants filed a motion for new trial and special appearance. In denying appellants' special appearance, the trial court signed written findings of fact and conclusions of law, determining that specific jurisdiction was proper over both Dodd and 3D Global. The court overruled appellants' motion for new trial by operation of law.

SPECIAL APPEARANCE

We begin with appellants' third issue, which disputes the trial court's exercise of personal jurisdiction.

A. Governing Law

A court must have personal jurisdiction over a defendant before it can issue a binding judgment against him. CSR Ltd. v. Link, 925 S.W.2d 591, 594 (Tex.1996). If the defendant is a nonresident, a Texas court may exercise jurisdiction over him if the exercise is authorized by the Texas long-arm statute. SeeTex. Civ. Prac. & Rem.Code § 17.042. The supreme court has interpreted the broad language of the Texas long-arm statute to extend Texas courts' exercise of personal jurisdiction “as far as the federal constitutional requirements of due process will permit.” BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex.2002). Those requirements are fulfilled if the defendant has “certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)). Minimum contacts are sufficient to support the exercise of personal jurisdiction if they show that the nonresident defendant has purposefully availed himself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws. See id. at 319, 66 S.Ct. 154;Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 784 (Tex.2005). In determining whether the purposeful-availment requirement is satisfied, courts consider only the defendant's contacts with the forum state, and not the unilateral activity of a third party. Michiana, 168 S.W.3d at 785. The defendant's contacts with the forum state must be purposeful rather than merely fortuitous. Id. Additionally, the defendant must seek some benefit, advantage, or profit by availing himself of the forum. Id.

Personal jurisdiction may be either general or specific. Zinc Nacional, S.A. v. Bouche Trucking, Inc., 308 S.W.3d 395, 397 (Tex.2010). A trial court may exercise general jurisdiction over a defendant whose contacts with the forum state have been continuous and systematic. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 575 (Tex.2007); BMC Software, 83 S.W.3d at 796. When general jurisdiction is at issue, only the defendant's pre-suit contacts are relevant. PHC–Minden, L.P. v. Kimberly–Clark Corp., 235 S.W.3d 163, 169 (Tex.2007). On the other hand, when there is a substantial connection between the defendant's purposeful contacts with Texas and the operative facts of the litigation, a trial court may properly exercise specific jurisdiction over the defendant. Moki Mac, 221 S.W.3d at 585.

A defendant challenging a Texas court's personal jurisdiction must negate every jurisdictional basis that is alleged. BMC Software, 83 S.W.3d at 793;Nat'l Indus. Sand Ass'n v. Gibson, 897 S.W.2d 769, 772 (Tex.1995). Thus, the plaintiff has the initial burden of pleading sufficient facts to bring the nonresident defendant within the provisions of the Texas long-arm statute. BMC Software, 83 S.W.3d at 793;Brocail v. Anderson, 132 S.W.3d 552, 556 (Tex.App.-Houston [14th Dist.] 2004, pet. denied). If the plaintiff fails to do so, then proof of the defendant's non-residency is sufficient to negate personal jurisdiction. Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 658–59 (Tex.2010). If the plaintiff does allege sufficient jurisdictional facts, then the defendant can defeat jurisdiction in several ways. The defendant can introduce evidence contradicting the plaintiff's factual allegations, or show that the defendant's contacts with the forum state fall short of purposeful availment, or demonstrate that traditional notions of fair play and substantial justice are offended by the exercise of jurisdiction. Id. at 659. If specific jurisdiction is at issue, as here, then the defendant may also show that the plaintiff's claims do not arise from the defendant's contacts with Texas. Id.

B. Standard of Review

Whether a trial court has personal jurisdiction over a defendant is a question of law we review de novo. Moki Mac, 221 S.W.3d at 574;BMC Software, 83 S.W.3d at 794. When, as here, the trial court issues findings of fact and conclusions of law in connection with its ruling on the special appearance, the defendant may challenge the trial court's factual findings for legal and factual sufficiency. BMC Software, 83 S.W.3d at 794. On appeal, the scope of review includes all evidence in the record. Vosko v. Chase Manhattan Bank, N.A., 909 S.W.2d 95, 99 (Tex.App.-Houston [14th Dist.] 1995, writ...