Trois v. Apple Tree Auction Ctr., Inc.

• Decision Date: 05 February 2018
• Docket Number: No. 16-51414,16-51414
• Citation: 882 F.3d 485
• Parties: Charles J. TROIS, Plaintiff–Appellant v. APPLE TREE AUCTION CENTER, INCORPORATED; Samuel Schnaidt, Defendants–Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

882 F.3d 485

Charles J. TROIS, Plaintiff–Appellant

v.APPLE TREE AUCTION CENTER, INCORPORATED; Samuel Schnaidt, Defendants–Appellees

No. 16-51414

United States Court of Appeals, Fifth Circuit.

Filed February 5, 2018

David Clay Snell, Bayne, Snell & Krause, San Antonio, TX, for Plaintiff–Appellant.

Erica Escobar Valladares, Esq., Langley & Banack, Incorporated, San Antonio, TX, for Defendants–Appellees.

Before STEWART, Chief Judge, and JOLLY and OWEN, Circuit Judges.

E. GRADY JOLLY, Circuit Judge

This appeal presents issues of personal jurisdiction and venue. A Texas citizen sued Ohio citizens in a Texas court based on two distinct claims: first, breach of a contract executed and performed in Ohio; and second, fraudulent misrepresentation made during a conference call from Ohio to Texas. The question thus before us is whether the Texas court may properly assert personal jurisdiction over the Ohio defendants in each or either claim, and if so, whether the Texas court is the proper venue. We hold that the breach-of-contract claim cannot be tried in the Texas courts, but the fraud claim, based on misrepresentations, finds a home in Texas.

I.

Charles Trois is the owner of a collection of guns, artwork, and other items. He is domiciled in Texas. Samuel Schnaidt is president of Apple Tree, an Ohio auction center, and is domiciled in Ohio.

In spring 2016, Michael Barrick, a Kentucky citizen, contacted Trois about selling some of his collectible items through an Apple Tree auction. Barrick explained that he received a fee for any of his solicitations that resulted in an auction commission for Apple Tree. In this first phone call, Trois expressed interest in dealing with Apple Tree, so Barrick contacted Trois in Texas, by phone, at least twice more. In these calls, Schnaidt was on the line and, according to Trois, knew Trois lived in Texas. It was during these conversations that Schnaidt allegedly misrepresented Apple Tree's marketing tools and the auction arrangements to Trois. Based on these communications, the parties came to a preliminary agreement that Apple Tree would auction Trois's collectible items. Trois then traveled to Ohio, where he and Apple Tree resumed negotiations and entered into a contract for auctions of Trois's collectibles to be held in Ohio. The execution and result of the Apple Tree auctions fell far short of Trois's expectations. Trois sued Schnaidt and Apple Tree (collectively, "the defendants") in Texas state court. The defendants removed the case to Texas federal court. The question is whether the Ohio defendants may be sued in Texas and, if so, whether that court is the proper venue.

II.

Trois's complaint asserts two claims: first, breach of contract and, second, fraud based on misrepresentation. The defendants moved to dismiss the complaint for lack of personal jurisdiction and for improper venue.¹ Trois alleges that the defendants are subject to specific personal jurisdiction in Texas on the basis of sufficient minimum contacts with Texas and, further, because the claims arose from or related to those contacts. He also alleges that venue is proper in the Western District of Texas. The defendants, on the other hand, contend that there has not been sufficient contact with Texas and that this case belongs in Ohio.

Following briefing, the district court dismissed the breach-of-contract claim for lack of personal jurisdiction. As to the fraud claim, the court found personal jurisdiction but dismissed for improper venue. Trois timely appealed. We address personal jurisdiction with respect to the breach-of-contract claim and fraud claim, respectively. We then turn to venue.

III.

"This Court reviews de novo the district court's determination regarding personal jurisdiction." Religious Tech. Ctr. v. Liebreich , 339 F.3d 369, 373 (5th Cir. 2003). "When, as here, the district court did not conduct an evidentiary hearing on defendant[s'] motion to dismiss, the party seeking to assert jurisdiction is required only to present sufficient facts to make out a prima facie case supporting jurisdiction." Cent. Freight Lines Inc. v. APA Transport Corp. , 322 F.3d 376, 380 (5th Cir. 2003). "In resolving this issue, not only the well-pleaded allegations of the complaint may be considered, but also factual showings made by way of depositions [and] affidavits ...." Simon v. United States , 644 F.2d 490, 497 (5th Cir. 1981).

In this diversity case, the exercise of personal jurisdiction over a nonresident defendant must comport with both federal due-process requirements and the long-arm statute of Texas. Paz v. Brush Engineered Materials, Inc. , 445 F.3d 809, 812 (5th Cir. 2006). Because Texas's long-arm statute extends to the limits of federal constitutional due process, only one inquiry is required. Latshaw v. Johnston , 167 F.3d 208, 211 (5th Cir. 1999). Under due-process requirements, the defendant must have requisite minimum contacts with the forum state, and the exercise of jurisdiction in the forum state must not infringe on "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). Because Trois argues that the district court has specific personal jurisdiction, he must show the defendants' contacts with Texas "arise from, or are directly related to, the cause of action." Wilson v. Belin , 20 F.3d 644, 647 (5th Cir. 1994).

A.

We address first the breach-of-contract claim. "Specific jurisdiction may be found when a foreign defendant ‘has "purposefully directed" his activities at residents of the forum ....’ " Religious Tech. Ctr. , 339 F.3d at 375 (citations omitted) (quoting Burger King Corp. v. Rudzewicz , 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) ); see also Stripling v. Jordan Prod. Co., LLC , 234 F.3d 863, 871 (5th Cir. 2000) ("The focus here is on whether the nonresident ‘purposefully availed’ itself of the benefits of the forum state."). Because "specific personal jurisdiction is a claim-specific inquiry," McFadin v. Gerber , 587 F.3d 753, 759 (5th Cir. 2009), "only those acts which relate to the formation of the contract and the subsequent breach are relevant." Religious Tech. Ctr. , 339 F.3d at 375. This includes "prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing." Burger King Corp. , 471 U.S. at 479, 105 S.Ct. 2174.

The district court found no personal jurisdiction concerning the contract claim because the auction contract was executed and performed solely in Ohio. We agree. The only alleged Texas contacts related to contract formation or breach are Schnaidt's conference calls negotiating the agreement while Trois was in Texas. But, standing alone, that is insufficient purposeful availment to establish jurisdiction over this breach-of-contract claim. See McFadin , 587 F.3d at 760 ("[C]ommunications relating to the performance of a contract themselves are insufficient to establish minimum contacts."); Holt Oil & Gas Corp. v. Harvey , 801 F.2d 773, 778 (5th Cir. 1986) (holding that "communications [to Texas] in the course of developing and carrying out the contract was in itself ... insufficient to constitute purposeful availment" where "the contract was centered in Oklahoma"). This claim, centered solely on a contract that the defendants executed and performed in Ohio, is not properly heard in a Texas court.² The district court correctly determined that it does not have personal jurisdiction over the defendants regarding the breach-of-contract claim.

B.

Next we turn to whether the court erred in finding that it has personal jurisdiction over the defendants as to the fraud claim.³ The defendants argue it did err because their contacts did not form the necessary connection with Texas. Importantly, the minimum-contacts test for personal jurisdiction in fraud differs from that in contract.⁴ "A forum State's exercise of jurisdiction over an out-of-state intentional tortfeasor must be based on intentional conduct by the defendant that creates the necessary contacts with the forum." Walden v. Fiore , ––– U.S. ––––, 134 S.Ct. 1115, 1123, 188 L.Ed.2d 12 (2014). "The proper focus of the minimum contacts inquiry in intentional-tort cases is the relationship among the defendant, the forum, and the litigation." Id. at 1126 (internal quotation marks omitted).

At the outset, we must determine whether Barrick's Texas contacts with Trois may be imputed to the defendants by virtue of an agency relationship between the defendants and Barrick. A defendant may be subject to personal jurisdiction because of the activities of its agent within the forum state, McFadin , 587 F.3d at 761, so the question here is whether the parties' finder's-fee arrangement, without more, constitutes a sufficient agency relationship to justify imputing Barrick's Texas contacts to the defendants. The parties apply Texas law,⁵ under which the "evidence must establish that the principal has both the right: (1) to assign the agent's task; and (2) to control the means and details of the process by which the agent will accomplish that task." Indian Harbor Ins. Co. v. Valley Forge Ins. Grp. , 535 F.3d 359, 364 (5th Cir. 2008) (emphasis added).

In McFadin v. Gerber , we held that there was no agency relationship sufficient to establish minimum contacts with Texas where a nonresident defendant had a revenue-sharing agreement with an independent sales representative selling goods in Texas. 587 F.3d at 758, 761–62. We reasoned that the defendant did not direct the representative to sell the goods in Texas, even though the representative did so. Id. at 761. The same holds true here. Barrick and Apple Tree had a finder's-fee arrangement under which Barrick would receive a commission for his successful solicitation of Trois in Texas, but there is no evidence the defendants controlled Barrick's solicitations, let alone directed Barrick to solicit in Texas. Thus, the finder's fee agreement...