UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

CHARLES D. KENNARD, M.D., ET AL.,

Plaintiffs,

VS.

INDIANAPOLIS LIFE INSURANCE

COMPANY, ET AL.,

Defendants.

)

)

)

) CIVIL ACTION NO.

)

) 3:05-CV-1247-G

)

) ECF

)

)

MEMORANDUM OPINION AND ORDER

Before the court is a motion to dismiss filed by the defendant Silas I.

Harrington (“Harrington” or “the defendant”) for lack of personal jurisdiction and for

insufficient service of process. For the reasons stated below, the motion is denied.

I. BACKGROUND

This case arises from the creation, solicitation and sale of a pension benefits

policy that was subsequently categorized by the Internal Revenue Service as an

abusive tax shelter. First Amended Complaint (“Complaint”) ¶ 27. The plaintiffs,

Charles D. Kennard, M.D., Charles D. Kennard M.D., P.A., and Charles D. Kennard,

M.D., P.A. Defined Benefit Plan (collectively, “Kennard” or “the plaintiff”), named

several individuals and entities as defendants and alleged various causes of action in

connection with purchase of the benefits plan in question. The plaintiff’s claims

 

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against Harrington allege violations of the Texas Deceptive Trade Practices Act,

negligent misrepresentation, common law fraud, aiding and abetting common law

fraud, and civil conspiracy. These claims are based on a letter sent by Harrington

from his office in California to Kennard, who was located in Texas. See Complaint

¶¶ 24, 51 & 64. It appears that, aside from this letter, Harrington has no other

contacts with the state of Texas. On August 4, 2006, Harrington filed the instant

motion to dismiss. Docket Sheet.

II. ANALYSIS

The defendant moves to dismiss pursuant to Federal Rule of Civil Procedure

12(b)(2) and (5). Specifically, Harrington argues that the court does not have

personal jurisdiction over him because he does not have sufficient minimum contacts

with Texas and for him to be haled into court in Texas would offend traditional

notions of fair play and substantial justice. Additionally, the defendant avers that the

plaintiff did not effectuate sufficient service of process on Harrington because the

plaintiff failed to comply with the Texas long-arm statute’s provision for substitute

service on a nonresident.

A. Motion to Dismiss for Lack of 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

 

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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 his 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 &

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). A defendant is amenable to the

personal jurisdiction of a federal court sitting in diversity to the same extent that he

would be amenable to the jurisdiction of a state court in the same forum. Pedelahore v.

 

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Astropark, Inc., 745 F.2d 346, 347 (5th Cir. 1984). Applying state law, this court

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

jurisdiction. Id. 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); Wilson,

20 F.3d at 647 n.1; see also TEX. CIV. PRAC. & REM. CODE ANN. § 17.041 et seq.

(Vernon 1997) (Texas long-arm statute).

3. Due Process Requirements

Due process requires the satisfaction of two elements to exercise personal

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

minimum contact with the forum that results from an affirmative act on his 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,

474-78 (1985); Gulf Consolidated Services, Inc. v. Corinth Pipeworks, S.A., 898 F.2d

1071, 1073 (5th Cir.), cert. denied, 498 U.S. 900 (1990). The Due Process Clause

ensures that persons have a “fair warning that a particular activity may subject [them]

 

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to the jurisdiction of a foreign sovereign.” Burger King, 471 U.S. at 472 (quoting

Shaffer v. Heitner, 433 U.S. 186, 218 (1977) (Stevens, J., concurring)).

a. Minimum Contacts

To establish minimum contacts with the forum, a nonresident defendant must

do some act by which he “purposefully avails [him]self of the privilege of conducting

activities within the forum State, thus invoking the benefits and protections of its

laws.” Burger King, 471 U.S. at 474-75 (quoting Hanson v. Denckla, 357 U.S. 235,

253 (1958)). However, the unilateral activity of one asserting a relationship with the

nonresident defendant does not satisfy this requirement. Burger King, 471 U.S. at

474 (quoting Hanson, 357 U.S. at 253); Helicopteros Nacionales de Colombia, S.A. v.

Hall, 466 U.S. 408, 417 (1984) (citing Kulko v. California Superior Court, 436 U.S. 84

(1978); Hanson, 357 U.S. at 253). In determining whether the exercise of

jurisdiction is appropriate, the Supreme Court has focused less on presence in the

forum state as a means to establish jurisdiction and looked increasingly to whether a

defendant’s contacts with the forum state make it reasonable to require the defendant

to defend the particular suit in that forum. Quill Corporation v. North Dakota, 504

U.S. 298, 307 (1992).

Two types of in personam jurisdiction may be exercised 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 defendant’s contacts with the

 

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forum state and those contacts meet the due process standard. J.R. Stripling v. Jordan

Production Company, LLC, 234 F.3d 863, 871 (5th Cir. 2000) (quotations and

citations omitted). “When a court exercises personal jurisdiction over a defendant

based on contacts with the forum related to the particular controversy, the court is

exercising ‘specific jurisdiction.’” Holt Oil & Gas Corporation v. Harvey, 801 F.2d 773,

777 (5th Cir. 1986) (citations omitted), cert. denied, 481 U.S. 1015 (1987). General

jurisdiction, on the other hand, may be found when the nonresident’s contacts with

the forum are “continuous and systematic,” even though the claim is unrelated to

those contacts. Helicopteros Nacionales, 466 U.S. at 415-16.

Under either a specific or general jurisdiction analysis, however, “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 Company v. Washington, 326 U.S. 310, 316 (1945)). 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); Bearry v. Beech Aircraft Corporation, 818 F.2d 370, 374

 

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(5th Cir. 1987) (citing Burger King, 471 U.S. at 475 n.18; McGee v. International Life

Insurance Company, 355 U.S. 220, 223 (1957)).

A court must consider all factors when making the purposeful availment

inquiry -- “no single factor, particularly the number of contacts, is determinative.” 

Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985). “[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);

see also Coats v. Penrod Drilling Corporation, 5 F.3d 877, 884 (5th Cir. 1993), cert.

denied, 510 U.S. 1195 (1994). When the underlying cause of action is based on an

intentional tort, a single act by the defendant can be sufficient to establish personal

jurisdiction if that act gives rise to the claim being asserted. Lewis v. Fresne, 252 F.3d

352, 358-59 (5th Cir. 2001); see also FCA Investments Company v. Baycorp Holdings,

Ltd., 48 Fed. App’x 480 (5th Cir. 2002) (finding that in a claim for the intentional

tort of fraud, a single phone call into the forum state is sufficient to establish personal

jurisdiction where the content of that phone call was the subject matter of the fraud

claim). 

Because the plaintiff alleges only specific jurisdiction over Harrington, the

court will examine the issue of personal jurisdiction only in relation to that allegation. 

 

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The factual basis for Kennard’s claims against Harrington stem from a letter

Harrington allegedly sent to Kennard containing certain representations regarding the

pension benefit plan. Complaint ¶¶ 24, 51, 64. The record indicates that the

plaintiff’s underlying causes of action for violation of the Texas Deceptive Trade

Practices Act and common law fraud stem from the contents of this single letter from

Harrington to Kennard. The court finds that this letter containing the alleged

misrepresentations is sufficient to satisfy the minimum contacts requirement for

specific personal jurisdiction. See Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 213

(5th Cir. 1999) (“[w]hen the actual content of communications with a forum gives

rise to intentional tort causes of action, this alone constitutes purposeful availment”). 

The defendant argues that Kennard has not met his burden of establishing a

prima facie case for personal jurisdiction. Specifically, Harrington avers that his

affidavit, attached to the motion to dismiss, controverts the allegations in the

plaintiff’s complaint. See Defendant Silas I. Harrington’s Reply to Plaintiff’s

Response to Defendant Silas I. Harrington’s Motion to Dismiss for Lack of Personal

Jurisdiction and Motion to Dismiss for Insufficient Service and Brief in Support

Thereof (“Defendant’s Reply”) ¶¶ 3-5. According to the defendant, because Kennard

did not submit an affidavit to rebut the statements in Harrington’s affidavit, the

plaintiff cannot rely on the allegations in his complaint to establish personal

jurisdiction. Id. However, this argument appears to misconstrue the information

 

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Harrington included in his affidavit. He admits in his affidavit that he drafted the

letter in question and that the letter was sent under his signature. Affidavit of Silas I.

Harrington ¶ 7, attached to Defendant Silas I. Harrington’s Motion to Dismiss for

Lack of Personal Jurisdiction and Motion to Dismiss for Insufficient Service and Brief

in Support Thereof (“Motion to Dismiss”) at Appendix 2. To this extent,

Harrington’s affidavit is consistent with the plaintiff’s allegations included in the

complaint. The only statement in Harrington’s affidavit tending to controvert

information in the complaint is Harrington’s statement that he has “not committed

any tort, in whole or in part, within the State of Texas.” Id. ¶ 17. However, this is a

conclusory statement of law and is insufficient to controvert the plaintiff’s prima facie

case as alleged in the complaint. See In re Terrorist Attacks on September 11, 2001, 349

F. Supp. 2d 765, 804 (S.D.N.Y. 2005) (noting that when considering documents on

a motion to dismiss the court will not “accept legally conclusory assertions”).

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

 

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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

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., 195

F.3d at 215 (citing Ruston Gas Turbines, Inc. v. Donaldson Company, Inc., 9 F.3d 415,

421 (5th Cir. 1993)); World-Wide Volkswagen Corporation v. Woodson, 444 U.S. 286,

292 (1980). It is Harrington’s burden to show that, in light of these factors,

conducting litigation in this court would be “so gravely difficult and inconvenient”

that he would be at a “severe disadvantage” in comparison to the plaintiff. Burger

King, 471 U.S. at 478 (citations omitted). Harrington’s sole claim as to why the

exercise of personal jurisdiction over him would violate traditional notions of fair play

and substantial justice is the financial burden of litigating this case in Texas.

The court concludes that the monetary burden alone is not enough to defeat

personal jurisdiction. See Burger King, 471 U.S. at 477 (“where a defendant who

purposefully has directed his activities at forum residents seeks to defeat jurisdiction,

he must present a compelling case that the presence of some other considerations

would render jurisdiction unreasonable”). While recognizing the cost of litigating this

matter, which is inherent in Harrington being a nonresident, the court is of the

opinion that the inconvenience to the defendant does not outweigh the plaintiff’s

interest in obtaining relief and the judicial system’s interest in economy of time and

 

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resources. No evidence has been presented to the court indicating that Harrington’s

burden of litigating in Texas will be any greater than Kennard’s burden of litigating in

Harrington’s forum state. However, to deny personal jurisdiction in this case would

force Kennard to litigate the same matter in two separate states and would subject the

federal judiciary to duplicative proceedings. Additionally, there is the competing

interest of the state of Texas in being able to protect its citizens from fraud and

deceptive trade practices. See Paz v. Brush Engineered Materials, Inc., 445 F.3d 809,

814 (5th Cir. 2006) (weighing the forum state’s interest in protecting its citizens

from a tort as a factor in favor of finding personal jurisdiction).

Accordingly, the court finds that the plaintiff has met his burden in

establishing specific personal jurisdiction over Harrington. 

B. Motion to Dismiss for Insufficient Process

Federal Rule of Civil Procedure 4(e)(1) grants plaintiffs the ability to effectuate

service of process in any manner permissible within the forum state. One such form

of process provided by the Texas long-arm statute permits plaintiffs to sue persons

who are not residents of Texas using substitute service through the Texas Secretary of

State. See TEX. CIV. PRAC. & REM. CODE ANN. § 17.026(a) (Vernon 1997). To avail

oneself of the benefits of substitute service, the plaintiff must allege: (1) the

Secretary of State is the agent for service on the nonresident; (2) the nonresident

engaged in business in Texas; (3) the nonresident does not maintain a regular place of

 

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business in Texas; (4) the nonresident does not have a designated agent for service of

process; and (5) the lawsuit arises out of the nonresident’s business in Texas. See

TEX. CIV. PRAC. & REM. CODE ANN. § 17.044(b). In federal courts applying the

Texas service of process laws, the court is not restricted to the pleadings alone to

determine if the prerequisites have been met. Eyerly Aircraft Company v. Killian, 414

F.2d 591, 603 (5th Cir. 1969) (rejecting the argument that McKanna v. Edgar, 388

S.W.2d 927 (Tex. 1965), restricts the federal court’s inquiry on service of process to

the face of the complaint). Instead, federal courts can look beyond the pleadings to

the record as a whole to determine if the state requirements for service have been

met. Id. (“a necessary prerequisite [to the applicability of the Texas long-arm statute]

is that the record affirmatively show that the corporation being sued ‘does not

maintain a place of regular business in this State or a designated agent upon whom

service may be made,’ but . . . Erie does not require us to say that this information

must appear on the face of the pleadings”). Harrington challenges the plaintiff’s use

of substitute service, claiming that Kennard failed to show that Harrington was

engaged in business within the state of Texas, that Harrington does not maintain a

regular place of business in Texas, or that Harrington does not have a designated

agent for service of process. Motion to Dismiss ¶ 23. The defendant also alleges that

Kennard failed to demonstrate that the plaintiff’s claim arises out of the defendant’s

business in Texas. Id. 

 

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While Harrington is correct that the complaint does not -- on its face --

demonstrate all of the elements necessary to effectuate substitute service through the

Secretary of State, the record as a whole indicates that these prerequisites have been

satisfied. With regard to Kennard’s failure to aver that Harrington does not maintain

a place of business in the State of Texas and that he does not have a designated agent

for service of process, Harrington’s affidavit supplies the required information. See

Harrington Affidavit ¶¶ 9, 10. Furthermore, both the complaint and Harrington’s

own affidavit confirm that he performed at least some business in the state of Texas

by directing the letter in question to the plaintiff. Thus, the court finds that

requirements for substitute service of process have been satisfied.

III. CONCLUSION

For the reasons stated above, the defendant’s motion to dismiss for lack of

personal jurisdiction and for insufficient service of process is DENIED.

SO ORDERED.

November 13, 2006.

 

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