Court Opinion

ID: 4556708
Source: CourtListenerOpinion
Date Created: 2020-08-19 12:11:20.747983+00
Date Added: 2024-06-11T08:44:52.546347
License: Public Domain

Affirm and Opinion Filed August 18, 2020

                                                 In The
                                  Court of Appeals
                           Fifth District of Texas at Dallas
                                        No. 05-20-00021-CV

                               MICHAEL J. PETER, Appellant
                                           V.
                                 JOSHUA STERN, Appellee

                    On Appeal from the 160th Judicial District Court
                                 Dallas County, Texas
                         Trial Court Cause No. DC-18-18146

                          MEMORANDUM OPINION
         Before Chief Justice Burns,1 Justice Pedersen, III, and Justice Evans
                           Opinion by Justice Pedersen, III
        Appellee Joshua Stern filed suit against appellant Michael J. Peter, a Florida

resident, for fraud and breach of contract after a failed business venture. Peter filed

a special appearance denying general and specific jurisdiction in Texas. Stern

argued Peter was subject to Texas jurisdiction because he purposefully availed

himself of the privileges of conducting business within the forum and committing

fraud within the state. The trial court denied Peter’s special appearance.

    1
      The Honorable David L. Bridges, Justice, participated in the submission of this case; however, he did
not participate in the issuance of this opinion due to his death on July 25, 2020. Chief Justice Robert Burns
has substituted for Justice Bridges and has reviewed the briefs and the record before the Court.
       On appeal, Peter first argues the trial court erred by concluding Texas has

jurisdiction over him as a nonresident defendant. In a second issue, he argues his

special appearance and first amended special appearance comply with Texas Rule

of Civil Procedure 120a. We affirm the trial court’s order.

                                   Background

       The underlying pleadings and evidence from the special appearance hearing

establish the following facts regarding the business venture and parties involved in

the litigation.

       In early 2016, Peter and David Sebag collaborated to raise funds to own and

operate a club in Panama. Peter and Sebag lived in Florida. They enlisted Edwin

Maldonado, an Irving resident, to reach out to potential Texas investors.

       Maldonado approached Stern about an investment opportunity and explained

the investment was designed to produce income and create an ownership interest for

Stern. Stern was unsure exactly what Maldonado did for Peter, but Stern understood

Maldonado worked for Peter, and Peter supported Maldonado. Stern thought

Maldonado was “[p]ossibly an investor.”

       Stern knew of Peter because he was well-known in the club management

industry. Stern described Peter as “kind of a legend in the industry.”

       In March 2016, Stern considered buying one of Peter’s clubs called Aladdin’s

Dream Boutique after Maldonado approached him about the deal. Stern ultimately

passed on the opportunity.
                                        –2–
      In May 2016, Stern visited Peter in Florida to discuss another investment

opportunity in a Panamanian club. Documents in the record refer to a company or

investment called Solid Gold International, SA and 4Play.

      During the meeting, Stern met Sebag. Peter told Stern he was in charge of the

project and Sebag was assisting him. Peter also told Stern his investment would

return at least ten times the original investment in two years and promised him five

percent equity in the Panama club.

      Stern returned to Florida in June. He met Peter at Solid Gold, one of Peter’s

clubs. At times, the meeting involved only Stern and Peter. Other times, Maldonado

and Sebag were present. Peter told Stern that Sebag and Maldonado worked and

operated under his direction. Peter described Sebag as “a trusted member of his

inner circle” for over twenty years. Sebag not only worked for Peter but also lived

at his home and received financial support from him.

      Peter told Stern he was looking for someone younger with operating

experience who could occasionally travel to Panama and oversee operations. During

the meeting, which lasted about an hour, Peter told Stern he anticipated a doubling

of the investment within the first couple years.

      Stern did not give any money for the business venture at that time. Instead,

Peter said he would send wiring instructions.

      In addition to Peter’s wiring instructions, Stern also later received a

confidentially-marked Private Placement Memorandum (PPM), which described
                                         –3–
Solid Gold International, SA terms of the offering, and risks of the investment. The

PPM listed Peter as chairman and Sebag as managing partner.

      Shortly thereafter, Stern attempted to wire money to Peter; however, because

of issues with the bank, he could wire only a portion of the funds. Peter said he

would send Sebag to Texas to pick up the remaining money.

      Sebag sent Stern an email on July 29, 2016, from his “solidgoldcasino.com”

account informing Stern he planned to be in Dallas the following Monday through

Wednesday, and he looked forward to getting together because they had a “lot of

good things to talk about.” During Sebag’s Dallas trip, Stern gave Sebag $30,000.

      Stern met Peter again in 2018 at a different Florida club. They discussed the

Panama investment and lack of any progress over the previous two years. Stern

described the investment as “nebulous . . . at this point.” Maldonado, Sebag, and

another investor named Mitty Jayaseelan also attended the meeting. Towards the

end of the meeting, Sebag and Maldonado left. Peter then explained the status of

the Panama investment and offered to refund Stern’s and Jayaseelan’s investments,

but with the caveat that if the venture turned around, they could not get back in the

deal. Stern expected a refund “within a relatively short time frame” because they

were friends. When it did not happen, he was surprised.

      When Peter failed to refund the money, Stern filed suit in Texas for breach of

contract, fraud, and conspiracy. Stern alleged he relied on Maldonado’s and Sebag’s

representations made on Peter’s behalf when he decided to give Sebag the money
                                        –4–
and invest in the Panama project. Stern asserted the representations about the project

were false and he was harmed.

      Peter filed a special appearance challenging jurisdiction in Texas. Stern

argued jurisdiction in Texas was proper based on agency. After a hearing, the trial

court denied Peter’s special appearance without issuing findings of fact or

conclusions of law. This appeal followed.

         Special Appearance Standard of Review and Applicable Law

      Whether a trial court has personal jurisdiction over a nonresident defendant is

a question of law we review de novo. Old Republic Nat’l Title Ins. Co. v. Bell, 549
S.W.3d 550, 558 (Tex. 2018); see also Golden Peanut Co., LLC v. Give & Go

Prepared Foods Corp., No. 05-18-00626-CV, 2019 WL 2098473, at *2 (Tex.

App.—Dallas May 14, 2019, no pet.) (mem. op.). If, as in this case, the trial court

does not issue findings of fact and conclusions of law with its special appearance

ruling, we imply all findings of fact necessary to support its ruling that are supported

by the evidence. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex.

2002). When jurisdictional facts are undisputed, whether those facts establish

jurisdiction is a question of law. Old Republic, 549 S.W.3d at 558.

      Texas courts may exercise personal jurisdiction over a nonresident defendant

if (1) the Texas long-arm statute permits exercising jurisdiction and (2) asserting

jurisdiction satisfies constitutional due process guarantees. Cornerstone Healthcare

Grp. Holding, Inc. v. Nautic Mgmt. VI, L.P., 493 S.W.3d 65, 70 (Tex. 2016). The
                                          –5–
Texas long-arm statute reaches “as far as the federal constitutional requirements that

due process will allow.” Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d
801, 806 (Tex. 2002). Personal jurisdiction over a nonresident defendant satisfies

constitutional due process guarantees when (1) the nonresident defendant has

established minimum contacts with the forum state and (2) exercising jurisdiction

comports with traditional notions of fair play and substantial justice. See M & F

Worldwide Corp. v. Pepsi-Cola Metro. Bottling Co., 512 S.W.3d 878, 885 (Tex.

2017) (citing Walden v. Fiore, 571 U.S. 277, 283 (2014)).

      Minimum contacts are established when the nonresident defendant

purposefully avails itself of the privilege of conducting activities within the forum

state, thus invoking its laws, benefits, and protections. Kelly v. Gen. Interior Constr.,

Inc., 301 S.W.3d 653, 657–58 (Tex. 2010). The purposeful-availment inquiry

includes three parts: (1) only the defendant’s contacts are relevant; (2) the contact

must be purposeful, not random, fortuitous, or attenuated; and (3) the defendant must

seek some advantage, benefit, or profit by availing itself of the forum. Moki Mac

River Expeditions v. Drugg, 221 S.W.3d 569, 575 (Tex. 2007).

      A nonresident defendant’s forum-state contacts may give rise to two types of

personal jurisdiction. Id. Specific jurisdiction, also called case-linked jurisdiction,

is established if the defendant’s alleged liability arises out of or relates to the

defendant’s contacts with the forum state. Id. at 576. A claim arises from or relates

to the forum contacts if there is a “substantial connection between [the] contacts and
                                          –6–
the operative facts of the litigation.” Id. at 585. The specific-jurisdiction analysis

focuses on the relationship between the defendant, the forum, and the litigation. Id.

at 575–76. Specific jurisdiction requires us to analyze jurisdictional contacts on a

claim-by-claim basis unless all claims arise from the same forum contacts. Moncrief

Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 150–51 (Tex. 2013).

      A court has general jurisdiction, also called all-purpose jurisdiction, over a

nonresident defendant whose “affiliations with the State are so continuous and

systematic as to render [it] essentially at home in the forum State.” TV Azteca v.

Ruiz, 490 S.W.3d 29, 37 (Tex. 2016); Golden Peanut, 2019 WL 2098473, at *3. The

“paradigm” forums in which a corporate defendant is “at home” are the corporation’s

place of incorporation and its principal place of business. BNSF Ry. Co. v. Tyrrell,

137 S. Ct. 1549, 1558 (2017). But “[t]he exercise of general jurisdiction is not

limited to these forums; in an ‘exceptional case,’ a corporate defendant’s operations

in another forum ‘may be so substantial and of such a nature as to render the

corporation at home in that State.’” Id. (quoting Daimler AG v. Bauman, 571 U.S.
117, 139 n.19 (2014)). The test for general jurisdiction presents “a more demanding

minimum contacts analysis than for specific jurisdiction.” TV Azteca, 490 S.W.3d

at 37. When a court has general jurisdiction over a nonresident, it may exercise

jurisdiction even if the cause of action did not arise from activities performed in the

forum state. Golden Peanut, 2019 WL 2098473, at *3.

                                         –7–
                                Specific Jurisdiction

      Broadly stated, specific jurisdiction exists when the plaintiff’s claims “arise

out of” or “relate to” the defendant’s contact with the forum. Searcy v. Parex Res.,

Inc., 496 S.W.3d 58, 67 (Tex. 2016) (citing Int’l Shoe Co. v. Wash., 326 U.S. 310,

317 (1945)). The Supreme Court has emphasized that the defendant’s relationship,

not the plaintiff’s relationship, with the forum state is the proper focus of the

specific-jurisdiction analysis. Id. In short, specific jurisdiction “does not turn on

where a plaintiff happens to be, and does not exist where the defendant’s contacts

with the forum state are not substantially connected to the alleged operative facts of

the case.” Id. at 70. Rather, there are three features of the “purposeful availment”

inquiry as applied to specific jurisdiction: (1) the relevant contacts are those of the

defendant; (2) the contacts that establish purposeful availment must not be random,

fortuitous, isolated, or attenuated; and (3) the defendant must seek some benefit,

advantage, or profit by “availing” himself of the jurisdiction. Id. at 67.

      Stern relies on an agency relationship between Sebag, Maldonado, and Peter

to establish specific jurisdiction in Texas over Peter. Contacts of an agent or

corporate representative may be sufficient to confer jurisdiction on the principal. See

MasterGuard L.P. v. Eco Tech. Int’l, LLC, 441 S.W.3d 367, 377 (Tex. App.—Dallas

2013, no pet.); see also Olympia Capital Assocs., L.P. v. Jackson, 247 S.W.3d 399,

412 (Tex. App.—Dallas 2008, no pet.). An agent is one who consents to the control

of another to conduct business or manage some affair for the other, who is the
                                         –8–
principal. Olympia Capital Assocs., 247 S.W.3d at 413. We do not presume an

agency relationship exists, and the burden of proof is on the party asserting the

existence of the relationship. Id.

      An essential element of the principal-agent relationship is the alleged

principal’s right to control the actions of the alleged agent. Id. (citing Exxon Corp.

v. Tidwell, 867 S.W.2d 19, 21 (Tex. 1993)). This right includes not only the right to

assign tasks but also the right to dictate the means and the process by which an agent

will accomplish the task. Id. In contrast, when one has the right to control the end

sought to be accomplished, but not the means and details of how it should be

accomplished, the person employed acts as an independent contractor and not as an

agent. Id. This distinction is critical because an agent’s contacts with the forum are

attributable to the principal, but the contacts of an independent contractor are not.
Id.

      By denying Peter’s special appearance, the trial court impliedly found facts in

support of Stern’s agency theory as a basis for attributing Sebag’s and Maldonado’s

Texas contacts to Peter. Peter argues there is no evidence supporting Stern’s agency

theory.

      Stern had the burden of proof regarding whether an agency relationship

existed. Id. When reviewing for legal sufficiency, we consider the evidence in the

light most favorable to the finding and indulge every reasonable inference that

supports the challenged finding. See City of Keller v. Wilson, 168 S.W.3d 802, 827
                                         –9–
(Tex. 2005). We will conclude that evidence is legally insufficient to support an

implied finding only if (1) there is a complete absence of evidence of a vital fact; (2)

we are barred by rules of evidence or law from giving weight to the only evidence

offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more

than a mere scintilla; or (4) the evidence establishes conclusively the opposite of the

vital fact. Id. at 810. The factfinder is the sole judge of the credibility of the

witnesses and the weight to give their testimony. Id. at 819.

      The record indicates Maldonado, who worked for Peter, approached Stern in

early 2016 about a Panamanian investment opportunity designed to produce income

and create an ownership interest for Stern. In June, Stern traveled to Florida, where

he met Peter and was introduced to Sebag, described as a “trusted member of

[Peter’s] inner circle” for over twenty years. Stern later learned that Sebag lived in

Peter’s home and received financial support from him.

      Once Stern decided to invest, Peter told him he would send him wiring

instructions. The June 15, 2016 confirmation for wiring funds to purchase shares in

the 4Play Panama Company was sent on Solid Gold International letterhead. Sebag

sent the confirmation to Stern as “President Solid Gold International, SA” with

directions to “specify the final beneficiary: Solid Gold International, SA/4PLAY

PANAMA.” In addition to wiring instructions, Stern also later received a PPM

marked confidential for Solid Gold International, SA listing Peter as chairman and

                                         –10–
Sebag as managing partner. Peter owned the registered trademark for Solid Gold

and had since December 7, 2010.

      Stern also received a letter on July 27, 2016, from Sebag, signed in his

capacity as “President.” Sebag addressed the letter to “all participants” regarding

preferential investment terms for those investing in the “4Play project in Panama.”

The letter further provided that “David S. Sebag and Michael J. Peter” had agreed

unanimously to the preferential terms. One such term for participants included “a

preferred investment position into the Solid Gold project at the Hard Rock Hotel

Panama Megapolis or any other project in Panama.”

      When Stern was unable to wire all the money for his portion of the investment

because of bank issues, Peter said he would send Sebag to Texas to pick up the

remaining money. The July 29, 2016 email from Sebag’s “solidgoldcasino.com”

account confirmed his plans to come to Texas to get the money. During Sebag’s

Dallas trip, Stern gave him $30,000. Stern believed the money he gave to Sebag,

and through the wire transfer, went to Peter.

      While the record is unclear concerning the full extent of the investment in

Solid Gold International, SA/4Play and Stern testified as much when he testified that

“it seemed like a nebulous investment,” there is more than a scintilla of evidence for

the trial court to have impliedly found an agency relationship existed based on Peter

telling Stern both Maldonado and Sebag worked for him, the paper trail of

documents referring to Solid Gold, a trademark owned by Peter, and Stern’s
                                        –11–
testimony that Peter sent Sebag to Texas to get the remaining money and such

exchange occurred.      This evidence indicates Peter controlled the actions of

Maldonado and Sebag by assigning tasks and dictating how such tasks were

accomplished to ultimately convince Stern to invest in Peter’s Panama entity. See

Olympia Capital Assocs., 247 S.W.3d at 412 (recognizing essential element of

agency is principal’s right to control actions of agents).

      The recruitment of Stern to invest partly took place in Texas and is the basis

for his fraud claim. As explained, Maldonado’s and Sebag’s activities in Texas, on

behalf of Peter, were “purposeful rather than random, fortuitous, or attenuated.” See,

e.g., Cornerstone Healthcare Grp. Holding, Inc., 493 S.W.3d at 73 (concluding

contacts in Texas were purposeful because respondent sought both a Texas seller

and Texas assets); see also MasterGuard LP, 441 S.W.3d at 381 (concluding

contacts of agent were purposeful when recruitment of dealers occurred in Texas

and provided basis for tortious interference claim) (citing Moki Mac, 221 S.W.3d at

575). We acknowledge the PPM states any dispute would be subject to arbitration

in Florida and governed by Panamanian law; however, a foreign choice-of-law

provision does not prevent Texas courts from exercising personal jurisdiction. See

IRA Res., Inc. v. Griego, 221 S.W.3d 592, 598 (Tex. 2007) (choice-of-law provision

does not prevent Texas courts from exercising jurisdiction but cannot be ignored in

considering purposeful availment). Here, unlike the defendant in Griego, Peter’s

agents solicited a Texas resident in Texas for an investment. Contra id. (concluding
                                         –12–
nature and quality of contacts were random, isolated, and fortuitous because IRA

Resources did not advertise, solicit Griego’s investment, or negotiate terms of

contract in Texas).

      Peter sought a “benefit, advantage or profit by availing [him]self of the

jurisdiction” by receiving money from a Texas resident to invest in his Panama

entity. Moki Mac, 221 S.W.3d at 575; see also MasterGuard LP, 441 S.W.3d at 381

(establishing contractual relationship with independent dealers in Texas would result

in increased sales and a benefit, advantage, or profit to defendant). Because the facts

surrounding the transaction will be the focus of the claims against Peter at trial, the

claims arise out of his contacts with Texas.

      Considering the evidence in the light most favorable to the judgment and

indulging every reasonable inference supporting the trial court’s implied findings,

we conclude the evidence is legally sufficient to support the trial court’s implied

finding and conclusion that an agency relationship existed between Peter,

Maldonado, and Sebag such that sufficient minimum contacts with Texas exist to

subject Peter to the specific, personal jurisdiction of Texas’s courts. See Olympia

Capital Assocs., 247 S.W.3d at 408 (“A legal sufficiency challenge to a finding of

fact fails if there is more than a scintilla of evidence to support the finding.”).

      The final test for legal sufficiency must always be whether the evidence at

trial would enable reasonable and fair-minded people to reach the verdict under

review. City of Keller, 168 S.W.3d at 827. A reviewing court cannot substitute its
                                          –13–
judgment for that of the trier-of-fact so long as the evidence falls within this zone of

reasonable disagreement. Id. at 822. The evidence here, though not strong, falls

within the zone of reasonable disagreement, and therefore, we must uphold the

court’s implied agency finding supporting minimum contacts.

      Although we have concluded minimum contacts exist, we must now consider

whether the exercise of personal jurisdiction satisfies the traditional notions of fair

play and substantial justice. Moncrief Oil Int’l Inc., 414 S.W.3d at 154. Determining

this issue involves consideration of the burden on the nonresident defendant, the

forum state’s interest in adjudicating the dispute, the plaintiff’s interest in obtaining

convenient and effective relief, the interstate judicial system’s interest in obtaining

the most efficient resolution of controversies, and the shared interest of several states

in furthering substantive social policies. Id. at 155.

      When a nonresident has purposefully established minimum contacts with the

forum state, it will be only a rare case when the exercise of jurisdiction over that

defendant does not comport with traditional notions of fair play and substantial

justice. Id. at 154. This is not one of the rare cases.

      Subjecting Peter to suit in Texas may impose some burden, but the same can

be said of all nonresidents. Distance alone cannot ordinarily defeat jurisdiction. Id.

at 155. Given that Maldonado lives in Texas and Sebag has traveled to Texas in the

past, we cannot say the burden of litigating in Texas is so severe as to defeat

jurisdiction. Further, this burden is somewhat mitigated by the convenience of Stern,
                                         –14–
a Texas resident, litigating in the forum where he originally met Maldonado, who

initiated the investment talks, and where he paid Sebag the remaining $30,000.

Moreover, the allegations that Peter committed a tort in Texas against a Texas

resident through his agents implicates a serious state interest in adjudicating the

dispute. See id. Balancing the factors, the burden on Peter of litigating in a foreign

jurisdiction is minimal and outweighed by Texas’s interests in adjudicating the

dispute.

      We overrule Peter’s specific-jurisdiction challenge. Having overruled this

issue, we need not consider general jurisdiction or whether his special appearance

and amended special appearance complied with Texas Rule of Civil Procedure 120a.

See TEX. R. APP. P. 47.1. We likewise need not consider Stern’s cross-issue

challenging the trial court’s refusal to admit Maldonado’s deposition testimony at

the special appearance hearing. Id.

                                      Conclusion

      We conclude the Texas long-arm statute permits the exercise of jurisdiction

over Peter and the assertion of jurisdiction is consistent with the traditional notions

of fair play and substantial justice. The trial court did not err by denying Peter’s

special appearance. Accordingly, we affirm the trial court’s order.

                                        –15–
                         /Bill Pedersen, III//
                         BILL PEDERSEN, III
                         JUSTICE

200021f.p05

Evans, J. dissenting

                       –16–
                            Court of Appeals
                     Fifth District of Texas at Dallas
                                   JUDGMENT

MICHAEL J. PETER, Appellant                    On Appeal from the 160th Judicial
                                               District Court, Dallas County, Texas
No. 05-20-00021-CV           V.                Trial Court Cause No. DC-18-18146.
                                               Opinion delivered by Justice
JOSHUA STERN, Appellee                         Pedersen, III. Chief Justice Burns
                                               and Justice Evans participating.

       In accordance with this Court’s opinion of this date, the judgment of the trial
court is AFFIRMED.

      It is ORDERED that appellee JOSHUA STERN recover his costs of this
appeal from appellant MICHAEL J. PETER.

Judgment entered this 18th day of August, 2020.

                                        –17–