Opinion ID: 2716180
Heading Depth: 2
Heading Rank: 1

Heading: Zamil and Saudi Pipes

Text: Zamil and Saudi Pipes filed individual Rule 12(b)(2) motions to dismiss. SII, however, responded to their motions jointly and contended they are essentially a single business enterprise for jurisdictional purposes. The district court adopted SII’s treatment of Zamil and Saudi Pipes as one for its jurisdictional analysis without deciding the single business enterprise issue. The district court did so because the court determined the result of the jurisdictional analysis would be the same. The briefing and arguments by the parties to this court have continued to merge facts relevant to the jurisdictional analysis for both entities. We agree with the district court’s determination that the result of the analysis does not depend on whether these two parties are considered together or separately. Accordingly, we will address personal jurisdiction over the two entities in conjunction, referring to them as the “Zamil defendants.” SII contends the Zamil defendants are subject to the court’s specific jurisdiction because their liability relates to SII’s work in Texas and the Zamil defendants’ contacts with Texas in furtherance of and pursuant to the First MOU, Second MOU, and the representation agreement. Basically, SII argues 6 Case: 13-20231 Document: 00512723405 Page: 7 Date Filed: 08/05/2014 No. 13-20231 that Zamil cultivated a relationship with SII for the benefit of SII’s connection to the OCTG industry in Texas, and that Zamil itself also developed extensive contacts with Texas through its long relationship with SII in furtherance of the joint venture for the development of the OCTG plant in Saudi Arabia. SII urges the following contacts justify the exercise of specific jurisdiction over the Zamil defendants: (1) Zamil’s correspondence with SII identified SII’s location as Houston, which it calls the “heart” of the OCTG industry; (2) Zamil consented to SII acting on Zamil’s behalf, presumably to utilize SII’s contacts in the Texas OCTG business; (3) officers of Zamil and Saudi Pipes traveled to Texas on three occasions to study the OCTG industry, attend conferences, and meet with representatives of Texas-based companies in relation to the OCTG plant; (4) the First and Second MOU directed SII to engage in activity in the forum with Texas-based companies; and (5) Zamil itself appealed to experts in the OCTG industry in Texas, forming contracts or doing business with Texas companies like National Oilwell Varco, Hunting Energy Services, and others. SII argues the hub of its performance under the contract with the Zamil defendants occurred in Texas and that, having purposefully contracted with a company located in Texas, the Zamil defendants could reasonably have anticipated the potential for litigation in Texas. In concluding it lacked jurisdiction over the Zamil defendants, the district court relied heavily on two cases: Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700 F.2d 1026 (5th Cir. 1983), and Moncrief Oil International Inc. v. OAO Gazprom, 481 F.3d 309 (5th Cir. 2007). In Moncrief, the foreign defendants negotiated with Moncrief to develop a Russian gas field. They executed several agreements for that purpose. 481 F.3d at 310-11. When Moncrief filed suit in Texas alleging breach of the parties’ agreements, it alleged the following as the defendants’ contacts with Texas: “(1) entering into contracts with Moncrief, (2) knowing from the outset that Moncrief is a Texas resident, 7 Case: 13-20231 Document: 00512723405 Page: 8 Date Filed: 08/05/2014 No. 13-20231 (3) acknowledging and approving of Moncrief’s substantial performance in Texas, and (4) sending an executive to visit Texas . . . in furtherance of that performance.” Id. at 312. We, though, pointed out that all relevant agreements were executed in Russia, concerned a Russian joint venture to develop a Russian gas field, and provided that they would be governed by Russian law. Id. We explained that contracting with a resident of Texas was not enough. Moncrief had engaged in unilateral activities in Texas while the defendants had not performed any of their obligations in Texas. Id. While the defendants may have predicted Moncrief would perform many of its duties in Texas, the contract did not require work in Texas and it was not “clearly the hub of the parties’ activities.” Id. Finally, we gave great weight to the fact that the contracts forming the basis of the parties’ dispute contained choice of law provisions providing for Russian law. Id. at 313. Much as in Moncrief, Zamil’s single act of contracting with SII, while potentially based on knowledge that SII would perform many of its obligations in Texas, is not enough. The First MOU did require SII to engage in some activity in Texas by making SII responsible for negotiating a license to use the threading tools of a Texas-based company, Hunting. It was also foreseeable that the Zamil defendants, through SII, would appeal to other Texas-based experts in the OCTG industry to perform some work on the project. SII highlights the contacts it made with such Texas-based companies as National Oilwell Varco, U.S. Steel, Ellison Technologies, and Texas International Engineering Consultants for work on the OCTG project. Nevertheless, the only work required to be performed in Texas by the First and Second MOUs was the negotiation of a license agreement with Hunting. The contacts with other Texas-based companies were primarily the result of the unilateral activity of SII and not required by the terms of the parties’ agreements. 8 Case: 13-20231 Document: 00512723405 Page: 9 Date Filed: 08/05/2014 No. 13-20231 Importantly, the contracts SII alleges form the basis of this court’s specific jurisdiction were negotiated in Europe and executed in Saudi Arabia, they contained choice of law provisions providing for application of the laws of Saudi Arabia and England, concerned a joint venture to build an OCTG plant in Saudi Arabia, and payments under the contract were made to SII’s bank accounts in New York and Switzerland. Saudi Arabia was the “hub” of the parties’ activity, not Texas. The factors important to the Moncrief court weigh against SII’s argument that the foreseeability of SII’s performing its obligations in Texas is sufficient for specific jurisdiction over the Zamil defendants. SII disputes the district court’s reliance on Moncrief, arguing that the Zamil defendants not only understood that substantial performance under the contracts would occur in Texas but specifically entered into the relationship with SII to gain the benefit of SII’s business connections in Texas. SII argues the assertion of jurisdiction on the basis of a single contract with a forum resident is proper when it is foreseeable that the effect of the contract would be to cause business activity in the forum. The primary case cited by SII to support its jurisdictional argument is Mississippi Interstate Express, Inc. v. Transpo, Inc., 681 F.2d 1003 (5th Cir. 1982). There, the California defendant entered a sustained relationship with a Mississippi trucking company knowing that the company’s only place of business was in that state, their trucks would be garaged and serviced at the Mississippi headquarters, and payment would be tendered to Mississippi. Id. at 1009-11. We concluded that the defendant by its single contract with the Mississippi resident had taken “purposeful and affirmative action, the effect of which [was] to cause business activity, foreseeable by [the defendant], in the forum state.” Id. at 1007 (quotation marks omitted). Quite differently, here the relevant contracts that must serve as the basis for jurisdiction are the First and Second MOUs entered by the Zamil 9 Case: 13-20231 Document: 00512723405 Page: 10 Date Filed: 08/05/2014 No. 13-20231 defendants with SII. SII is not an entity existing only in Texas. In carrying out its responsibilities under the MOUs, SII did not only operate out of Texas. Work was performed from SII’s London office and from the homes of the principal officers in New York, New Jersey, and London. Moreover, while the First MOU directed SII to obtain a license to use the threading tools of a Texas-based company, the First and Second MOUs did not otherwise specifically call for any work to be performed by either party in Texas. Unlike in Transpo, it cannot be said that the Zamil defendants took purposeful action in the context of their contract with SII to develop an OCTG plant in Saudi Arabia, the effect of which would be to cause business activity in Texas. “[T]he determination of whether a foreign corporation should be required to defend itself in a suit in Texas . . . must be decided on its own facts.” Sw. Offset, Inc. v. Hudco Pub. Co., Inc., 622 F.2d 149, 151 (5th Cir. 1980). The facts identify where the contract was formed, where it would be performed, whether the plaintiff’s business is conducted solely in the forum, the hub of the parties’ activity, where payments under the contract were tendered, any choice of law provision in the contract, and the foreseeability that a material part of the obligations under the contract would be performed in the forum. See Moncrief, 481 F.3d at 312-13 (collecting and discussing factors). The foreseeability that SII would perform part of its obligations under the contract in Texas, and that the parties did in fact engage other Texas companies for work on the project, is not enough for a finding of specific jurisdiction over the Zamil defendants. The contracts were formed outside of Texas, did not expressly provide for work to be done in Texas, the SII individuals performing work under the contract did not do so solely from Texas, Texas was not the hub of the parties’ activities, the contracts’ choice of law provisions did not provide for Texas law, and payments under the contract were not made to Texas. 10 Case: 13-20231 Document: 00512723405 Page: 11 Date Filed: 08/05/2014 No. 13-20231 SII also argued that Zamil engaged in business with Texas residents in matters unrelated to the OCTG project in Saudi Arabia. To the extent SII argues those contacts serve as the basis for this court’s jurisdiction, they would have to be sufficient to create general jurisdiction inasmuch as the activities do not relate to the OCTG project. See Helicopteros Nacionales de Colombia, 466 U.S. at 414-15. SII has not alleged the Zamil defendants’ contacts with the forum are sufficiently continuous and systematic for this court’s assertion of general jurisdiction. Id. We conclude it was not error for the court to dismiss the Zamil defendants for lack of personal jurisdiction.