Nikolai v. Strate

• Decision Date: 11 April 1996
• Docket Number: No. 2-94-289-CV,2-94-289-CV
• Citation: 922 S.W.2d 229
• Parties: Leonard NIKOLAI, Appellant, v. George J. STRATE, Brice A. Tondre, Madden and Strate, P.C., and Strate and Tondre, P.C., Appellees.
• Court: Texas Court of Appeals

Page 229

922 S.W.2d 229

Leonard NIKOLAI, Appellant, v. George J. STRATE, Brice A. Tondre, Madden and Strate, P.C., and Strate and Tondre, P.C., Appellees.

No. 2-94-289-CV.

Court of Appeals of Texas,

Fort Worth.

April 11, 1996.

Rehearing Overruled June 13, 1996.

William L. Smith, Jr., Argyle, for Appellant.

Cowles & Thompson, P.C. and Charles T. Frazier, Jr. and Gregory J. Lensing, Dallas, for Appellees.

Before DAUPHINOT and RICHARDS, JJ., and JOE L. DRAUGHN, J. (Sitting by Assignment).

OPINION

RICHARDS, Justice.

In this appeal we must decide if a Texas court can exercise personal jurisdiction over a Colorado attorney being sued by a Texas resident for malpractice stemming from a Colorado lawsuit where the Colorado attorney has been licensed to practice law in Texas since 1967 and has handled about fifteen cases in Texas over the past ten years. The trial court ruled that it did not have personal jurisdiction over the Colorado attorney, his partner, and their professional corporation. We affirm in part and reverse in part, holding that a Texas court has personal jurisdiction over the Colorado attorney and his professional corporation, but not over the partner.

Background

Appellant Leonard Nikolai, a Texas resident since 1981, was sued in Colorado state court in 1987 by April Green, the eighteen-year-old niece of his former wife, for allegedly sexually molesting her in 1981. Before moving to Texas in 1981, Nikolai, an airline pilot, had lived in Colorado.

Nikolai notified his liability insurers, Farmers Alliance Mutual Insurance Company (Farmers) and United Services Automobile Association Properties Fund, Inc. (USAA), of the suit. USAA retained the Colorado law firm Madden & Strate, P.C. (now named Strate & Tondre, P.C.) to defend Nikolai, and Farmers retained Eric Peterson, a Colorado attorney, for Nikolai. But because both insurers notified Nikolai that it might dispute its defense and coverage obligations, Nikolai also retained a Texas attorney, Mike Lipscomb.

Although appellee George Strate initially assumed responsibility of Nikolai's case, Barbara Larson, an associate, primarily handled the case under the supervision of appellee Brice Tondre. Strate and Tondre are shareholders in Strate & Tondre, P.C.

After consultation with his attorneys, in September 1987 Nikolai filed for bankruptcy in Texas to ease his financial burdens. His attempt to remove the Colorado suit to the bankruptcy court in Texas was, however, ultimately unsuccessful. After remand, Green filed a complaint in the bankruptcy court against Nikolai seeking to except from discharge Green's sexual assault claim against Nikolai. In response, Nikolai filed a counterclaim against Green alleging malicious prosecution or abuse of process.

In April 1988, Farmers informed Nikolai that it was denying coverage and withdrawing its defense. Nikolai and USAA then modified their contract to provide that Nikolai would waive any indemnification claim against USAA in return for USAA's continued funding of his defense in accordance with his policy. This was done because Nikolai desired unqualified exoneration, not a settlement of any kind. In 1989, Tondre and Madden & Strate filed suit in Colorado state court for Nikolai against Green and Green's attorney for tortious interference with contract and against Farmers for breach of its insurance policy and bad faith. The suit was undertaken by Tondre under a contingency fee agreement.

The Colorado suit against Nikolai was set for trial on October 17, 1989. At a mandatory settlement conference held on October 11, 1989, at which Strate appeared in place of Tondre, a settlement of both Green's suit and Nikolai's suit was reached. The parties agreed that Green would dismiss all of her claims against Nikolai and that Nikolai would dismiss all of his claims against Green. USAA agreed to pay Green $5,000, and Farmers, who had reappeared on Nikolai's behalf because of a change in Colorado insurance law, agreed to pay Green $25,000. Because of the settlement, the bankruptcy court later dismissed Nikolai's counterclaim against Green in the bankruptcy.

Green's suit was dismissed on November 13, 1989, and Nikolai's claims against Green were dismissed the next day. Nikolai's claims in his suit against the other defendants were later resolved in 1992.

Procedural History

Nikolai filed this suit against USAA and appellees Strate, Tondre, and Strate & Tondre, P.C. in July 1993, alleging breach of contract, deceptive trade practices, negligence, gross negligence, fraud, and breach of fiduciary duty. Strate, Tondre, and Strate & Tondre, P.C. filed a special appearance challenging the exercise of personal jurisdiction over them. In support, Strate filed an affidavit, while Tondre testified at an evidentiary hearing on the special appearance.

The trial court sustained the special appearances of Strate, Tondre, and Strate & Tondre, P.C. At Nikolai's request, the trial court entered findings of fact and conclusions of law, but only as to Tondre. The trial court severed the claims against Strate, Tondre, and Strate & Tondre, P.C., and this appeal followed.

Overview of Personal Jurisdiction

A Texas court may exercise personal jurisdiction over a nonresident if two conditions are met. First, the Texas long arm statute must authorize the exercise of jurisdiction. Second, the exercise of jurisdiction must be consistent with federal and state constitutional guarantees of due process. Schlobohm v. Schapiro, 784 S.W.2d 355, 356 (Tex.1990).

The long arm statute extends personal jurisdiction to nonresident defendants "doing business" in Texas, where the "business" conducted by the nonresident in Texas is continuous and systematic, or where litigation arises out of or is related to the "business" conducted by the nonresident defendant in Texas. See O'Brien v. Lanpar Co., 399 S.W.2d 340 (Tex.1966). The Texas long arm statute provides:

In addition to other acts that may constitute doing business, a nonresident does business in this state if the nonresident:

(1) contracts by mail or otherwise with a Texas resident and either party is to perform the contract in whole or in part in this state;

(2) commits a tort in whole or in part in this state; or

(3) recruits Texas residents directly or through an intermediary located in this state, for employment inside or outside this state.

TEX.CIV.PRAC. & REM.CODE. § 17.042 (Vernon 1986).

The Texas Supreme Court has held that the broad language of the Texas long arm statute's "doing business" requirement allows the statute to reach as far as the federal constitution permits. Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex.1991); Schlobohm, 784 S.W.2d at 357.

To satisfy due process, the plaintiff must overcome two hurdles to justify the exercise of personal jurisdiction over a nonresident defendant. First, the plaintiff must show that the nonresident defendant has purposefully established "minimum contacts" with Texas. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102 (1945); Asahi Metal Indus. Co. v. Superior Court of California, 480 U.S. 102, 105, 107 S.Ct. 1026, 1028, 94 L.Ed.2d 92, 100 (1987). Second, the plaintiff must show that the "maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " International Shoe, 326 U.S. at 316, 66 S.Ct. at 158, 90 L.Ed. at 102; Schlobohm, 784 S.W.2d at 357.

The United States Supreme Court has extensively developed the first prong of the test, the minimum contacts analysis. An essential goal of the minimum contacts test is to protect the nonresident defendant. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490, 498 (1980). This goal requires a determination whether the nonresident defendant has purposely availed itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protection of its laws. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-75, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528, 541-42 (1985). This "purposeful availment" requirement ensures that a nonresident defendant will not be haled into a jurisdiction based solely on "random," "fortuitous," or "attenuated" contacts or the "unilateral activity of another party or a third person." Id. at 475, 105 S.Ct. at 2183, 85 L.Ed.2d at 542; Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 417, 104 S.Ct. 1868, 1873, 80 L.Ed.2d 404, 412-13 (1984); World-Wide Volkswagen, 444 U.S. at 298, 100 S.Ct. at 567, 62 L.Ed.2d at 502. Furthermore, nonresident defendants must have fair warning that a particular activity may subject them to the jurisdiction of a foreign sovereign. Burger King, 471 U.S. at 472, 105 S.Ct. at 2181-82, 85 L.Ed.2d at 540-41. Some overt act is required by a nonresident defendant to subject it to the possibility of being haled into a foreign court.

Where a forum seeks to assert specific jurisdiction over an out-of-state defendant who has not consented to suit there, this "fair warning" requirement is satisfied if the defendant has "purposefully directed" his activities at residents of the forum and the litigation results from alleged injuries that "arise out of or relate to" those activities.

Id. at 472, 105 S.Ct. at 2182, 85 L.Ed.2d at 540-41 (citations omitted).

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 foreign state. Id. at 474-75, 105 S.Ct. at 2183, 85 L.Ed.2d at 541-42. The substantial connection between the nonresident defendant and the forum state necessary for a finding of minimum contacts must come about by action or conduct of the nonresident defendant purposefully directed toward the forum state. Id.

Isolated contacts by a nonresident defendant with the forum state or its residents are not sufficient for a court to assume...