Michiana Easy Livin' Country v. Holten

• Decision Date: 02 September 2005
• Docket Number: No. 04-0016.,04-0016.
• Citation: Michiana Easy Livin' Country v. Holten, 168 S.W.3d 777, 48 Tex. Sup.Ct. J. 78 (Tex. 2005)
• Parties: MICHIANA EASY LIVIN' COUNTRY, INC., d/b/a Michiana R.V., Petitioner, v. James G. HOLTEN, Respondent.
• Court: Texas Supreme Court

Page 777

168 S.W.3d 777

MICHIANA EASY LIVIN' COUNTRY, INC., d/b/a Michiana R.V., Petitioner, v. James G. HOLTEN, Respondent.

No. 04-0016.

Supreme Court of Texas.

Argued January 6, 2005.

Decided May 27, 2005.

Rehearing Denied September 2, 2005.

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William G. Rossick, Watson & Rossick, Austin, Charles A. Watson, Kelly Michael Kowis, Watson, Kowis & Rossick, Houston, Larry D. Thompson, and Robert G. Smith Jr., Lorance & Thompson, P.C., Houston, for Petitioner.

Brock C. Akers and Neal Kieval, Phillips & Akers, P.C., Houston, for Respondent.

Craig Madison Patrick, Craddock Reneker & Davis, L.L.P., Dallas, and Evelyn L. Becker, O'Melveney & Myers LLP, Washington, DC, for Others.

Justice BRISTER delivered the opinion of the Court, in which Chief Justice JEFFERSON, Justice HECHT, Justice OWEN, and Justice GREEN joined.

James Holten decided to buy a $64,000 Coachmen recreational vehicle sight unseen. Eschewing every RV dealer in Texas, he sought a lower price from Michiana Easy Livin' Country, Inc., an outlet store that only did business in Indiana. Holten called Michiana in Indiana, sent payment to Indiana, paid for delivery from Indiana, and agreed to resolve every dispute in Indiana. But when a dispute actually arose, he filed suit in Texas.

The trial court and court of appeals denied Michiana's special appearance. Because of a conflict in the decisions of the courts of appeals,¹ we have jurisdiction to review this conclusion.² Finding Michiana does not have minimum contacts with Texas, we reverse.

I

A. Petition and Brief

We first address two questions of error preservation.

First, Holten argues that Michiana cannot assert a minimum-contacts challenge because it was raised for the first time in Michiana's brief on the merits rather than in its petition for review.³ In its petition for review, Michiana stated the issue presented as follows:

Whether factually and legally sufficient evidence exists in the Clerk's Record to support the implied finding by the trial court that Michiana committed a tort in Texas — the only basis for personal jurisdiction over Michiana by Texas courts.

Both the opinion below and the petition for review here list undisputed facts showing that Michiana had no contact with Texas or Texans except for the alleged tort. Michiana's petition is correct — the sole ground on which the court of appeals based jurisdiction was the commission of a tort in Texas.⁴ The argument that this conclusion was incorrect necessarily included the subsidiary argument detailed in Michiana's brief — that without that ground, jurisdiction did not exist. This is all the rules require.⁵

B. The Record in Pretrial Hearings

Second, the appellate record contains no reporter's record of the special appearance hearing. Though candidly conceding that no oral testimony or new exhibits were presented at that hearing, Holten nevertheless argues we must presume evidence was presented that supports the trial court's order.

It is difficult to state a bright-line rule regarding unrecorded pretrial proceedings, as they come in so many shapes and sizes. Many pretrial "hearings" take place entirely on paper, while others involve a personal appearance in court.⁶ In some the parties must file all evidence with the clerk;⁷ in others they must present it in open court;⁸ in most the manner of presentation is discretionary;⁹ in at least one the answer is unclear.¹⁰

What is clear is that a reporter's record is required only if evidence is introduced in open court; for nonevidentiary hearings, it is superfluous.¹¹ If all the evidence is filed with the clerk and only arguments by counsel are presented in open court, the appeal should be decided on the clerk's record alone.¹²

The difficulty of course is that the absence of a reporter's record does not tell us whether a pretrial hearing was nonevidentiary, or evidentiary but not preserved. Presuming them all the former unfairly penalizes a party that presents evidence in open court that the other party does not bother to preserve. But presuming them all the latter would require every hearing to be recorded — whether evidentiary (to show what was presented) or not (to show nothing was). Besides being wasteful, this would frustrate the intent of our appellate rule requiring a reporter's record only "if necessary to the appeal."¹³

For some years now the trend has been away from full evidentiary hearings in open court for most pretrial matters. While we have generally encouraged oral hearings when arguments may be helpful,¹⁴ both the Legislature and this Court have discouraged oral presentation of testimony and evidence when they can be fairly submitted in writing.¹⁵ Counsel can almost always direct the trial court's attention to pertinent deposition excerpts, discovery responses, or affidavits in less time than it takes to recreate them in open court. Presuming that most pretrial proceedings are evidentiary would not only discourage this trend, but would encumber thousands of routine hearings by requiring formal proof that no proof was offered.

Accordingly, we have in the past presumed that pretrial hearings are nonevidentiary absent a specific indication or assertion to the contrary.¹⁶ If the proceeding's nature, the trial court's order, the party's briefs, or other indications show that an evidentiary hearing took place in open court, then a complaining party must present a record of that hearing to establish harmful error.¹⁷ But otherwise, appellate courts should presume that pretrial hearings are nonevidentiary, and that the trial court considered only the evidence filed with the clerk.

It is true that a dozen years ago in Piotrowski v. Minns we stated: "[a] litigant who fails to request that the reporter record pretrial proceedings risks waiver of any complaint with respect to error occurring during those proceedings."¹⁸ But the appellant there conceded that the special appearance hearing was evidentiary.¹⁹ Moreover, since that time the rules have changed so that court reporters no longer attend court and make a record only "when requested" but now must do so "unless excused by agreement of the parties."²⁰ The former rule implied a lack of diligence when the losing party requested no record;²¹ the current rule implies an agreement that no record was made because none was needed.

Either party, of course, may allege that a hearing was evidentiary, but that allegation must be specific. Merely asserting that the trial court "considered evidence at the hearing" is not enough — trial courts do that when a hearing is conducted entirely on paper, or based solely on affidavits and exhibits filed beforehand. Instead, there must be a specific indication that exhibits or testimony was presented in open court beyond that filed with the clerk. As the rules of professional conduct prohibit assertions that a hearing was evidentiary when it was not,²² and as events in open court can usually be confirmed by many witnesses, there is no reason to expect that such assertions will be lightly fabricated.

Our appellate rules are designed to resolve appeals on the merits, and we must interpret and apply them whenever possible to achieve that aim.²³ Accordingly, we decline to presume the special appearance hearing here was evidentiary when everyone concedes it was not.

II

A. Background

As its name invertedly suggests, Michiana is located in Indiana a few miles from the Michigan border. It is a separate legal entity from the manufacturer or any other dealers of Coachmen RVs. It has neither employees nor property in Texas, and is not authorized to do business here. It does not advertise in Texas or on the Internet, and thus did not solicit business from Holten or anyone else in Texas.

The sale at issue here was initiated entirely by Holten. Seeking a cheaper price than he could get from any of Coachmen's many dealers in Texas, Holten called the Coachmen factory. He was informed that Coachmen did not sell directly from the factory, but that a lower price could be obtained from Michiana, a "factory outlet." Holten obtained Michiana's number from the factory and placed the call that initiated the transaction here.

The RV was constructed and equipped outside Texas. It was paid for outside Texas. It was shipped to Texas at Holten's request and entirely at his expense.

The question presented is whether suit can be brought in Texas based on a nonresident's alleged misrepresentations in a telephone call with a Texas resident. The courts of appeals are split on this question of specific jurisdiction²⁴ — some holding it would violate constitutional standards,²⁵ and others (including the lower court here) that it would not.²⁶

B. Purposeful Availment

For half a century, the touchstone of jurisdictional due process has been "purposeful availment." Since Hanson v. Denckla, "it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws."²⁷

Three aspects of this requirement are relevant here. First, it is only the defendant's contacts with the forum that count: purposeful availment "ensures that a defendant will not be haled into a jurisdiction solely as a result of . . . the `unilateral activity of another party or a third person.'"²⁸

Second, the acts relied on must be "purposeful" rather than fortuitous.²⁹ Sellers who "reach out beyond one state and create continuing relationships and obligations with citizens of another state" are subject to the jurisdiction of the latter in suits based on their activities.³⁰ By contrast, a defendant will not be haled into a jurisdiction solely based on contacts that are "random, isolated, or fortuitous."³¹

Third, a defendant must seek some benefit, advantage, or profit by "availing" itself of the jurisdiction.³² Jurisdiction is premised on notions of implied...