UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

COMMERCE CAPITAL, L.P.,

Plaintiff,

VS.

THE PRIVATEBANK,

Defendant.

)

)

)

) CIVIL ACTION NO.

)

) 3:05-CV-0700-G

)

)

)

MEMORANDUM OPINION AND ORDER

Before the court is the motion of defendant The PrivateBank (“PrivateBank”)

to dismiss plaintiff Commerce Capital, L.P. (“Commerce Capital”)’s petition for

declaratory judgment for lack of personal jurisdiction, or, alternatively, for failure to

join a party, or, alternatively, for improper venue. For the reasons discussed below,

PrivateBank’s motion is denied.

I. BACKGROUND

Commerce Capital and PrivateBank each entered into loan agreements with

Open Systems Group, Inc. (“Open Systems”). Plaintiff’s Original Petition for

 

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Declaratory Judgment (“Petition”) ¶ 7, attached to Notice of Removal; Affidavit of

Charles W. Davis (“Davis Affidavit”) ¶ 9, attached to Appendix in Support of

Defendant The PrivateBank’s Motions to Dismiss (“PrivateBank’s Appendix”) at 2. 

PrivateBank obtained a guaranty from Para-Docs LLC (“Para-Docs”) for its loan to

Open Systems. Davis Affidavit ¶ 10. 

Commerce Capital filed a UCC-1 Financing Statement in Texas regarding its

security interest in certain collateral of Open Systems. Petition ¶ 10. Commerce

Capital also entered into a subordination agreement with PrivateBank, in which

PrivateBank agreed that its security interest in Open Systems’ collateral, with the sole

exception of equipment, would be subordinated to the security interest of Commerce

Capital. Id. ¶ 11; Davis Affidavit ¶ 12. Open Systems subsequently defaulted on

both loans. Petition ¶ 12; Davis Affidavit ¶ 9. After providing notice to PrivateBank,

Commerce Capital conducted a private sale of Open Systems’ collateral, not including

its equipment. Petition ¶ 15. 

Commerce Capital filed a petition for declaratory judgment in the 193rd

District Court of Dallas County, Texas on March 14, 2005, seeking a declaration that

its security interest in Open Systems’ collateral and equipment has priority over any

security interest held by PrivateBank. Id. ¶¶ 18, 19; Notice of Removal ¶ 1. 

PrivateBank removed the action to this court on April 11, 2005. See generally Notice

of Removal. PrivateBank filed the instant motion to dismiss on April 11, 2005. See

 

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generally Defendant The PrivateBank’s Motions to Dismiss with Supporting Brief

(“PrivateBank’s Motion to Dismiss”).

II. ANALYSIS

PrivateBank seeks dismissal of Commerce Capital’s request for declaratory

relief on three grounds: (1) lack of personal jurisdiction over PrivateBank; (2) failure

to join parties necessary for just adjudication; and (3) improper venue.

A. Personal Jurisdiction

1. The Factual Standard: A Prima Facie Case

When a nonresident defendant moves to dismiss for lack of personal

jurisdiction, the plaintiff bears the burden of establishing the district court’s

jurisdiction over the nonresident. Wilson v. Belin, 20 F.3d 644, 648 (5th Cir.), cert.

denied, 513 U.S. 930 (1994); Gardemal v. Westin Hotel Company, 186 F.3d 588, 592

(5th Cir. 1999). If the district court chooses to decide the matter without an

evidentiary hearing, the plaintiff may meet its burden by presenting a prima facie case

for personal jurisdiction. Wilson, 20 F.3d at 648; Gardemal, 186 F.3d at 592.

The court will take the allegations of the complaint as true, except where they

are controverted by opposing affidavits, and all conflicts in the facts are resolved in

favor of the plaintiff. Wilson, 20 F.3d at 648; Gardemal, 186 F.3d at 592. In making

its determination, the court may consider affidavits, interrogatories, depositions, oral

testimony, or any combination of recognized discovery methods. Allred v. Moore &

 

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Peterson, 117 F.3d 278, 281(5th Cir. 1997), cert. denied, 522 U.S. 1048 (1998);

Thompson v. Chrysler Motors Corporation, 755 F.2d 1162, 1165 (5th Cir. 1985).

2. The Legal Standard

A federal district court may exercise personal jurisdiction over a nonresident

defendant if: (1) the long-arm statute of the forum state permits the exercise of

personal jurisdiction over the defendant; and (2) the exercise of such jurisdiction by

the forum state is consistent with due process under the United States Constitution. 

Revell v. Lidov, 317 F.3d 467, 469 (5th Cir. 2002); see also J.R. Stripling v. Jordan

Production Company, LLC, 234 F.3d 863, 869 (5th Cir. 2000). Applying state law,

this court must first determine whether Texas, the forum state, could assert long-arm

jurisdiction. Pedelahore v. Astropark, Inc., 745 F.2d 346, 347 (5th Cir. 1984). Because

the Texas long-arm statute confers jurisdiction to the limits of the federal

constitution, Access Telecom, Inc. v. MCI Telecommunications Corporation, 197 F.3d 694,

716 (5th Cir. 1999), cert. denied, 531 U.S. 917 (2000); Hall v. Helicopteros Nacionales

de Colombia, S.A., 638 S.W.2d 870, 872 (Tex. 1982), rev’d on other grounds, 466 U.S.

408 (1984), the court need only concern itself with the federal due process inquiry. 

Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999); Ruston Gas Turbines, Inc. v.

Donaldson Company, Inc., 9 F.3d 415, 418 (5th Cir. 1993); see also TEX. CIV. PRAC. &

REM. CODE ANN. § 17. 041, et seq. (Vernon 1997) (Texas long-arm statute).

 

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3. Due Process Requirements

Due process requires the satisfaction of two elements to exercise personal

jurisdiction over a nonresident defendant: (1) the nonresident must have some

minimum contact with the forum that results from an affirmative act on its part such

that the nonresident defendant could anticipate being haled into the courts of the

forum state; and (2) it must be fair or reasonable to require the nonresident to defend

the suit in the forum state. Burger King Corporation v. Rudzewicz, 471 U.S. 462,

474-77 (1985). The Due Process Clause ensures that persons have a “fair warning

that a particular activity may subject [them] to the jurisdiction of a foreign

sovereign.” Id. at 472 (quoting Shaffer v. Heitner, 433 U.S. 186, 218 (1977) (Stevens,

J., concurring)). 

a. Minimum Contacts

To establish minimum contacts, a nonresident defendant must do some act by

which 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 (1958) (citing International Shoe Company v. Washington,

326 U.S. 310, 319 (1945)); see also Electrosource, Inc. v. Horizon Battery Technologies,

Ltd., 176 F.3d 867, 871 (5th Cir. 1999). The unilateral activity of one asserting a

relationship with the nonresident defendant does not satisfy this requirement. 

World-Wide Volkswagen Corporation v. Woodson, 444 U.S. 286, 298 (1980) (quoting

 

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Hanson, 357 U.S. at 253). In determining whether the exercise of jurisdiction is

appropriate, the Supreme Court has considered whether a defendant’s contacts with

the forum state make it reasonable to require the defendant to defend the particular

suit in that forum. Shaffer, 433 U.S. at 203; Quill Corporation v. North Dakota, 504

U.S. 298, 307 (1992).

Minimum contacts can be sufficient to establish two types of in personam

jurisdiction over a nonresident defendant: specific jurisdiction and general

jurisdiction. Specific jurisdiction exists if the cause of action is related to, or arises

out of, the nonresident defendant’s contacts with the forum state and those contacts

meet the due process standard. Stripling, 234 F.3d at 871 (quotations and citations

omitted). “Specific jurisdiction over a nonresident corporation is appropriate when

that corporation has purposefully directed its activities at the forum state and the

‘litigation results from alleged injuries that “arise out of or relate to” those activities.’” 

Alpine View Company Limited v. Atlas Copco AB, 205 F.3d 208, 215 (5th Cir. 2000)

(quoting Burger King, 471 U.S. at 472; Helicopteros, 466 U.S. at 414). General

jurisdiction, on the other hand, may be found when the claim is unrelated to the

nonresident’s contacts with the forum, but where those contacts are “continuous and

systematic.” Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 415-16

(1984); Alpine View, 205 F.3d at 215.

 

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Under either a specific or general jurisdiction analysis, “the constitutional

touchstone remains whether the defendant purposefully established ‘minimum

contacts’ in the forum [s]tate.” Burger King, 471 U.S. at 474 (quoting International

Shoe, 326 U.S. at 316). The “purposeful availment” requirement of the minimum

contacts inquiry “ensures that a defendant will not be haled into a jurisdiction solely

as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts . . . or of the ‘unilateral

activity of another party or a third person.’” Id. at 475 (citations omitted). A

plaintiff must establish a substantial connection between the nonresident defendant

and the forum state. Jones v. Petty-Ray Geophysical, Geosource, Inc., 954 F.2d 1061,

1068 n.9 (5th Cir.), cert. denied, 506 U.S. 867 (1992). “[W]hether the minimum

contacts are sufficient to justify subjection of the non-resident to suit in the forum is

determined not on a mechanical and quantitative test, but rather under the particular

facts upon the quality and nature of the activity with relation to the forum state.” 

Mississippi Interstate Express, Inc. v. Transpo, Inc., 681 F.2d 1003, 1006 (5th Cir. 1982)

(emphasis added); see also Coats v. Penrod Drilling Corporation, 5 F.3d 877, 884 (5th

Cir. 1993), cert. denied, 510 U.S. 1195 (1994).

This court has specific personal jurisdiction over PrivateBank because of its

contacts with Open Systems, a Texas corporation, out of which this litigation arises. 

The Fifth Circuit has stated that a district court has specific jurisdiction over a

nonresident corporation when that corporation has purposefully directed its activities

 

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* A similar test has been developed in the Ninth Circuit. That court has

adopted a “but for” test to determine whether a particular claim arises out of forumrelated activities, asking the question, but for the defendant’s contacts with the forum

state, would the claim at issue have arisen? Ballard v. Savage, 65 F.3d 1495, 1500

(9th Cir. 1995). One district court within this circuit has used this test to determine

whether a claim arises out of forum-related activities in order to establish personal

jurisdiction. See, e.g., National Union Fire Insurance Company of Pittsburgh, PA v.

American Pipe Fabricators, Inc., No. Civ. A. 04-2755, 2005 WL 1155858, *4 (E.D. La.

May 10, 2005). 

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at the forum state and the litigation arises out of or relates to those activities. Alpine

View, 205 F.3d at 215. This test does not specifically require that the activities be

directed to the plaintiff in the forum state but considers any activities from which the

litigation arises.*

 Accordingly, minimum contacts are established if PrivateBank

directed its activities at Open Systems in Texas, and the litigation at issue arises from

those activities.

The existence of two types of contact between PrivateBank and the state of

Texas indicates that this court has specific personal jurisdiction over PrivateBank. 

First, by lending money to Open Systems, a Texas corporation, PrivateBank

purposefully directed its activities at Texas. Second, PrivateBank communicated with

Open Systems in Texas at various times regarding the loan. PrivateBank purposefully

made contact, through its attorneys, with Open Systems in Texas by sending a

demand letter to Open Systems’ Irving, Texas office. PrivateBank’s Appendix at 30-

31. Further, Eric Ewen, the Vice President of Client Services of Open Systems and its

former President, who does business from Open Systems’ office in Irving, Texas, was

 

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contacted by PrivateBank on numerous occasions concerning Open Systems’

indebtedness to PrivateBank. Appendix in Support of Plaintiff Commerce Capital,

L.P.’s Brief in Response to Defendant’s Motion to Dismiss at 5-10, 12-24. Such

remote communication, as opposed to actual physical contact, has previously been

held sufficient to establish minimum contacts. In Lewis v. Fresne, 252 F.3d 352 (5th

Cir. 2001), the Fifth Circuit held that phone calls made by a non-resident defendant

to a party in Texas were sufficient to establish minimum contacts with Texas. Lewis,

252 F.3d at 358. Together, these activities represent PrivateBank’s purposeful

availment of doing business in Texas. This case arises out of these activities, as any

claim PrivateBank has in the collateral and equipment at issue arises from its loan to

Open Systems and Open Systems’ subsequent default. 

b. Fair Play and Substantial Justice

The due process inquiry limits the court’s power to exercise personal

jurisdiction over a nonresident if the exercise of jurisdiction under the circumstances

would offend “traditional notions of fair play and substantial justice.” International

Shoe, 326 U.S. at 316 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). In

determining whether the exercise of jurisdiction violates traditional notions of fair

play and substantial justice, the court evaluates the following factors: (1) the burden

on the defendant by having to litigate in the forum; (2) the forum state’s interests in

the lawsuit; (3) the plaintiff’s interests in convenient and effective relief; (4) the

 

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judicial system’s interest in efficient resolution of controversies; and (5) the shared

interest of states in furthering fundamental social policies. Wien Air Alaska, Inc. v.

Brandt, 195 F.3d 208, 215 (5th Cir. 1999) (citing Ruston Gas, 9 F.3d at 421); WorldWide Volkswagen, 444 U.S. at 292. It is PrivateBank’s burden to show that, in light of

these factors, conducting litigation in this court would be “so gravely difficult and

inconvenient” that it would be at a “severe disadvantage” in comparison to

Commerce Capital. Burger King, 471 U.S. at 478 (citations omitted). 

Although PrivateBank alleges that subjecting it to personal jurisdiction in

Texas would not comport with traditional notions of fair play and substantial justice,

its only support for this contention is that it lacks minimum contacts with the State

of Texas. PrivateBank’s Motion to Dismiss at 7. The burdens PrivateBank would

potentially face in this court are no more onerous than those that every nonresident

defendant faces when litigating outside its home state, and there is no indication that

litigating this dispute in Texas would place PrivateBank at a “severe disadvantage”

relative to Commerce Capital. Accordingly, conducting the litigation in this court

does not offend traditional notions of fair play and substantial justice. PrivateBank’s

Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction is denied.

 

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B. Failure to Join Necessary Parties

PrivateBank also moves to dismiss Commerce Capital’s suit for failure to join a

party under Rule 19 of the Federal Rules of Civil Procedure. PrivateBank’s Motion to

Dismiss at 8-10. 

Rule 19(a) provides for the joinder of all persons whose presence is required for

the fair and complete resolution of the lawsuit. A person’s presence is required if:

(1) in the person’s absence complete relief cannot be

accorded among those already parties, or (2) the person

claims an interest relating to the subject of the action and

is so situated that the disposition of the action in the

person’s absence may (i) as a practical matter impair or

impede the person’s ability to protect that interest or (ii)

leave any of the persons already parties subject to a

substantial risk of incurring double, multiple, or otherwise

inconsistent obligations by reason of the claimed interest.

FED. R. CIV. P. 19(a). Rule 19(b) provides for the dismissal of litigation that should

not proceed in the absence of parties that cannot be joined, stating that “the court

shall determine whether in equity and good conscience the action should proceed

among the parties before it, or should be dismissed, the absent party being thus

regarded as indispensable.” FED. R. CIV. P. 19(b). In making this determination, the

court should consider the following factors:

[F]irst, to what extent a judgment rendered in the person’s

absence would be prejudicial to the person or those already

parties; second, the extent to which, by protective

provisions in the judgment, by the shaping of relief, or

other measures, the prejudice can be lessened or avoided;

third, whether a judgment rendered in the person’s absence

 

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will be adequate; fourth, whether the plaintiff will have an

adequate remedy if the action is dismissed for nonjoinder.

Id. Thus analyzing a motion to dismiss under Rule 12(b)(7) entails two sequential

inquiries under Rule 19: 

The court must first determine under Rule 19(a) whether a

person should be joined to the lawsuit. If joinder is

warranted, then the person will be brought into the

lawsuit. But if such joinder would destroy the court’s

jurisdiction, then the court must determine under Rule

19(b) whether to press forward without the person or to

dismiss the litigation.

HS Resources, Inc. v. Wingate, 327 F.3d 432, 439 (5th Cir. 2003).

PrivateBank seeks to dismiss Commerce Capital’s complaint for failure to join

Open Systems and Para-Docs, both of which PrivateBank claims should be joined for

two reasons. First, Open Systems and Para-Docs own the collateral that is the subject

of Commerce Capital’s request for declaratory relief, so they have interests relating to

the subject of the action, and their ability to protect those interests would be

impaired in their absence. PrivateBank’s Motion to Dismiss at 9-10. Second,

separate lawsuits would leave the parties subject to a substantial risk of inconsistent

obligations. Id. at 10.

These claims are unfounded, as Commerce Capital requests that the court

make declarations about the priority of its security interest in Open Systems’

collateral and equipment over any security interest that PrivateBank holds. Petition

¶¶ 18, 19. The requested declarations concern only the relative, and not absolute,

 

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rights of Commerce Capital and PrivateBank, so complete relief can be accorded to

the parties in the absence of any other persons. FED. R. CIV. P. 19(a)(1). 

Furthermore, although Open Systems and Para-Docs may have interests in the

collateral and equipment, a ruling on the relative security interests between

Commerce Capital and PrivateBank would not affect the ability of the excluded

parties to protect their own interests in them. FED. R. CIV. P. 19(a)(2)(i); see HS

Resources, 327 F.3d at 439 (citing Hilton v. Atlantic Refining Company, 327 F.2d 217,

219 (5th Cir. 1964)) (holding that joinder is “not required unless the judgment

‘effectively precludes [the excluded parties] from enforcing their rights and they are

injuriously affected by the judgment.’”). Finally, Commerce Capital and PrivateBank

would not be subject to inconsistent obligations if the suit proceeds without Open

Systems and Para-Docs because a ruling on this suit would affect neither the rights of

the excluded parties to the collateral nor the relative rights between these parties and

Commerce Capital or PrivateBank. FED. R. CIV. P. 19(a)(2)(ii). Accordingly, joinder

of Open Systems and Para-Docs is not required, and PrivateBank’s motion to dismiss

for failure to join a party under Rule 12(b)(7) is denied.

C. Improper Venue

Lastly, PrivateBank moves to dismiss for improper venue. FED. R. CIV. P.

12(b)(3). For purposes of venue, “a defendant that is a corporation shall be deemed

to reside in any judicial district in which it is subject to personal jurisdiction at the

 

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time the action is commenced.” 28 U.S.C.A. § 1391(c). As set forth above, this

court has personal jurisdiction over PrivateBank, which makes venue in this district

proper. Consequently, PrivateBank’s motion to dismiss for improper venue under

Rule 12(b)(3) is denied. 

III. CONCLUSION

For the reasons discussed above, PrivateBank’s motion to dismiss is DENIED.

SO ORDERED.

June 30, 2005.

 

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