Retamco Operating v. Republic Drilling Co.

• Decision Date: 27 February 2009
• Docket Number: No. 07-0599.,07-0599.
• Parties: RETAMCO OPERATING, INC., Petitioner, v. REPUBLIC DRILLING COMPANY, Respondent.
• Court: Texas Supreme Court

278 S.W.3d 333

RETAMCO OPERATING, INC., Petitioner, v. REPUBLIC DRILLING COMPANY, Respondent.

No. 07-0599.

Supreme Court of Texas.

Argued September 11, 2008.

Decided February 27, 2009.

James L. Drought, Calhoun Bobbitt, Drought Drought & Bobbitt LLP, James W. Carter IV, San Antonio TX, for Petitioner.

Juan M. Castillo, Ray B. Jeffrey, Patricia F. Miller, Stumpt Craddock Massey & Farrimond, PC, Jeffrey D. Small, Law Office of Jeff Small, San Antonio, Douglas Alexander, Alexander Dubose Jones & Townsend, LLP, Austin TX, for Respondent.

Justice GREEN delivered the opinion of the Court.

In this case, we decide whether a Texas court has personal jurisdiction over an out-of-state company accused of violating the Uniform Fraudulent Transfer Act (UFTA) by acting as the transferee of Texas oil and gas interests. We hold that, under the facts of this case, the defendant is subject to the jurisdiction of the Texas courts and, therefore, reverse the court of appeals' judgment and remand for trial.

I

Retamco Operating, Inc. (ROI), a Texas corporation, sued Paradigm Oil, Inc. (Paradigm), another Texas corporation, in a Texas district court, over unpaid royalties related to oil and gas interests in several Texas counties. After a finding of discovery abuse, sanctions were assessed against Paradigm and the trial court entered a $16 million default judgment against Paradigm.¹ Following this interlocutory judgment, ROI amended its petition to include a claim against Republic Drilling Company (Republic), a California corporation, for violation of the Uniform Fraudulent Transfer Act. See TEX. BUS. & COM.CODE § 24.001-.013. ROI claimed that during the pendency of the litigation, Paradigm assigned to Republic² a 72% interest in Paradigm's oil and gas wells and leases in Fayette County and a 72% interest in an option to acquire an interest in a lease in Dimmit and Webb Counties.³ ROI alleged that these transfers were fraudulent, and that they led to Paradigm's insolvency, rendering it unable to satisfy ROI's claims.

In response to the amended petition, Republic filed a special appearance, arguing that it does not have minimum contacts with Texas, and that even if it did, ROI's cause of action did not arise from or relate to those contacts. It also argued that the trial court's assertion of jurisdiction offended traditional notions of fair play and substantial justice. Specifically Republic argued that because the allegedly fraudulent assignment of the Texas leases occurred entirely outside of Texas—in California—the Texas court did not have personal jurisdiction over Republic. Following a hearing, the trial court denied Republic's special appearance, making no findings of fact or conclusions of law. Republic then filed an interlocutory appeal with the court of appeals. The court of appeals reversed, holding that Republic is not subject to personal jurisdiction in Texas. 2007 WL 913206, *6-7. Because we conclude that by its actions Republic subjected itself to the jurisdiction of Texas courts, we reverse the court of appeals' judgment.

II

Under the Texas long-arm statute, the plaintiff has the initial burden to plead sufficient allegations to confer jurisdiction. American Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 807 (Tex.2002). The defendant seeking to avoid being sued in Texas then has the burden to negate all potential bases for jurisdiction pled by the plaintiff. Id. When, as here, the trial court does not make findings of fact and conclusions of law in support of its ruling, "all facts necessary to support the judgment and supported by the evidence are implied." BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex.2002) (citations omitted). Here, ROI has pled that Republic is subject to personal jurisdiction because it is the fraudulent transferee of Texas real property—oil and gas interests. Republic does not dispute that the property at issue is located in Texas or that it was transferred from Paradigm to Republic. However, Republic argues that because the transaction causing the transfer occurred in California, jurisdiction is negated. For the reasons discussed below, we disagree.

Personal jurisdiction is a question of law which we review de novo. Id. at 794. "Texas courts may assert in personam jurisdiction over a nonresident if (1) the Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the exercise of jurisdiction is consistent with federal and state constitutional due-process guarantees." Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex.2007).

(1) The Long Arm Statute

As an initial matter, Republic argues that ROI "never fulfilled its initial pleading burden to bring Republic within the reach of the long-arm statute," because ROI alleged no acts that constitute "doing business" under the long-arm statute. But the Texas long-arm statute's broad doing-business language "allows the statute to reach as far as the federal constitutional requirements of due process will allow." Id. at 575 (citations omitted); accord Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 788 (Tex.2005).⁴ Therefore, we only analyze whether Republic's acts would bring Republic within Texas' jurisdiction consistent with constitutional due process requirements. See Moki Mac, 221 S.W.3d at 575 (citations omitted); Guardian Royal Exch. Assur., Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex.1991).⁵

(2) Due Process Constraints

Under constitutional due-process analysis, personal jurisdiction is achieved when (1) the non-resident defendant has established minimum contacts with the forum state, and (2) the assertion of jurisdiction complies with "traditional notions of fair play and substantial justice." Moki Mac, 221 S.W.3d at 575 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)). We focus on the defendant's activities and expectations when deciding whether it is proper to call the defendant before a Texas court. Int'l Shoe Co., 326 U.S. at 316, 66 S.Ct. 154.

(A) Minimum Contacts

A defendant establishes minimum contacts with a state when it "purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958) (citing Int'l Shoe Co., 326 U.S. at 319, 66 S.Ct. 154). "The defendant's activities, whether they consist of direct acts within Texas or conduct outside Texas, must justify a conclusion that the defendant could reasonably anticipate being called into a Texas court." Am. Type Culture Collection, 83 S.W.3d at 806 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)). A nonresident's contacts can give rise to either specific or general jurisdiction. Am. Type Culture Collection, 83 S.W.3d at 806. General jurisdiction arises when the defendant's contacts with the forum are continuous and systematic. Id. at 807. Specific jurisdiction, which is alleged here, arises when (1) the defendant purposefully avails itself of conducting activities in the forum state, and (2) the cause of action arises from or is related to those contacts or activities. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985); National Indus. Sand Ass'n v. Gibson, 897 S.W.2d 769, 774 (Tex.1995). In a specific jurisdiction analysis, "we focus ... on the `relationship among the defendant, the forum [,] and the litigation.'" Moki Mac, 221 S.W.3d at 575-76 (citing Guardian Royal, 815 S.W.2d at 228).

1. Purposeful Availment

We consider three issues in determining whether a defendant purposefully availed itself of the privilege of conducting activities in Texas:

First, only the defendant's contacts with the forum are relevant, not the unilateral activity of another party or a third person. Second, the contacts relied upon must be purposeful rather than random, fortuitous, or attenuated. Thus, 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. Finally, the defendant must seek some benefit, advantage or profit by availing itself of the jurisdiction.

Moki Mac, 221 S.W.3d at 575 (internal citations and quotations omitted). Additionally, the minimum-contacts analysis is focused on the quality and nature of the defendant's contacts, rather than their number. Am. Type Culture Collection, 83 S.W.3d at 806. Here, these considerations lead us to conclude that Republic purposefully availed itself of the privilege of conducting activities in Texas.

Republic's contacts with Texas were purposeful, not random, fortuitous, or attenuated. Oil and gas interests are real property interests. Renwar Oil Corp. v. Lancaster, 154 Tex. 311, 276 S.W.2d 774, 776 (1955); State v. Quintana Petroleum Co., 134 Tex. 179, 133 S.W.2d 112, 115 (1939) (citing Sheffield v. Hogg, 124 Tex. 290, 77 S.W.2d 1021, 1030 (1934)). Republic was aware that the oil and gas interests it received were located in Fayette, Dimmit, and Webb Counties, Texas. Thus, Republic purposefully took assignment of Texas real property. And while Republic may not have actually entered the state to purchase this real property, "[j]urisdiction ... may not be avoided merely because the defendant did not physically enter the forum state." Burger King, 471 U.S. at 476, 105 S.Ct. 2174 ("So long as a commercial actor's efforts are `purposefully directed' toward residents of another state, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there."). Republic, by taking assignment of Texas real property, reached out and created a continuing relationship in Texas. Under the assignment, it is liable for obligations and expenses related to the interests. This ownership also...