Court Opinion

ID: 4052894
Source: CourtListenerOpinion
Date Created: 2016-09-29 02:29:01.000554+00
Date Added: 2024-06-11T14:31:26.948301
License: Public Domain

ACCEPTED
                                                                                          01-14-00904-CV
                                                                                FIRST COURT OF APPEALS
                                                                                        HOUSTON, TEXAS
                                                                                     3/5/2015 11:42:14 AM
                                                                                      CHRISTOPHER PRINE
                                                                                                   CLERK

                        NO. 01-14-00904-CV
__________________________________________________________________
                                                            FILED IN -
                                                   1st COURT OF--APPEALS
                IN THE FIRST COURT OF APPEALS HOUSTON,                       - ----
                                                                           -
                                                                        --- TEXAS
                        HOUSTON, TEXAS                        - - ----ID K ------
                                                   3/5/2015- 11:42:14
                                                            -                  -- AM
                                                       ---- VO ------
__________________________________________________________________
                                                   CHRISTOPHER         --       A. PRINE
                                                                ----
                                                          ----Clerk
     GRAMERCY ADVISORS LLC, GRAMERCY ASSET
    MANAGEMENT LLC, GRAMERCY LOCAL MARKETS
RECOVERY FUND LLC, AND GRAMERCY FINANCIAL FILED
                                            SERVICES
                                                IN
                    LLC, Appellants  1st COURT OF APPEALS
                                                                     HOUSTON, TEXAS
                                                                 3/5/2015 11:42:14 AM
                                          v.                     CHRISTOPHER A. PRINE
                                                                         Clerk

                    R.K. LOWRY, JR., ET AL., Appellees.
__________________________________________________________________

 Interlocutory Appeal from the 80th Judicial District Court, Harris County, Texas
                             Cause No. 2008-74262
 _________________________________________________________________

                        APPELLEES’ BRIEF
 _________________________________________________________________

David R. Deary, State Bar No. 05624900
W. Ralph Canada, Jr., State Bar No. 03733800
Wilson E. Wray, State Bar No. 00797700
Tyl. M. Simpson, State Bar No. 24066091
LOEWINSOHN FLEGLE DEARY LLP
12377 Merit Drive, Suite 900
Dallas, Texas 75251
Telephone: (214) 572-1700
Facsimile: (214) 572-1717
davidd@lfdlaw.com
ralphc@lfdlaw.com
wilsonw@lfdlaw.com
tylers@lfdlaw.com
                 IDENTITIES OF PARTIES AND COUNSEL

Appellants – Gramercy Advisors LLC, Gramercy Asset Management LLC,
Gramercy Local Markets Recovery Fund LLC, Gramercy Financial Services LLC

                                          Sean O’Shea (pro hav vice)
David C. Mattka (lead attorney)           Michael E. Petrella (pro hav vice)
MUNSCH HARDT KOPF & HARR, P.C.            Daniel M. Hibshoosh (pro hav vice)
401 Congress Avenue, Suite 3050           O’SHEA PARTNERS LLP
Austin, Texas 78701                       521 Fifth Avenue, 25th Floor
(512) 391-6100 (telephone)                New York, New York 10175
(512) 391-6149 (fax)                      (212) 682-4426 (telephone)
dmattka@munsch.com                        (212) 682-4437 (fax)

Appellees - R.K. Lowry, Jr.; L-Falling Creek LLC; Russell A. Chabaud; R-RAC
Wimbledon LLC; John P. Moffitt; J-Jason LLC; Russell A. Chabaud, Trustee of the
Russell G. Chabaud 1999 Investment Trust, R-Russell Wimbledon LLC; Russell A.
Chabaud, Trustee of the Ashley Chabaud 1999 Investment Trust, R-Ashley
Wimbledon LLC; Russell A. Chabaud, Trustee of the Audrey Chabaud 1999
Investment Trust, R-Audrey Wimbledon LLC; LMC Recovery Fund LLC, Union
Gas Funding I, L.P.; RanA Holdings LLC, Westy I LLC, MOGI LLC

W. Ralph Canada, Jr. (lead counsel)
David R. Deary
Wilson E. Wray
Tyler M. Simpson
Jim L. Flegle (trial counsel)
Jeven R. Sloan (trial counsel)
LOEWINSOHN FLEGLE DEARY, LLP
12377 Merit Drive, Suite 900
Dallas, Texas 75251
(214) 572-1700 (telephone)

TRIAL COURT

Hon. Larry Weiman
80th Judicial District Court
Harris County, Texas
                                          TABLE OF CONTENTS

TABLE OF CONTENTS ........................................................................................... i

TABLE OF AUTHORITIES ................................................................................... iv
STATEMENT REGARDING ORAL ARGUMENT ............................................ vii

RECORD REFERENCES ..................................................................................... viii

ISSUES PRESENTED............................................................................................. ix

STATEMENT OF FACTS ........................................................................................1

I.       Overview of the tax shelter scheme to defraud Texas Appellees ...................1

II.      Gramercy marketed the Investment Strategies to Appellees a meeting
         in Texas ............................................................................................................4

III.     Gramercy entered into investment management agreements with
         Appellees to act as Appellees’ attorney-in-fact ...............................................8

IV.      Gramercy’s contacts regarding the 2000 Digital Options Strategy .................9

V.       Gramercy’s contacts regarding the 2001-2003 Distressed Debt
         Strategies........................................................................................................14

         A.       The 2001 Distressed Debt Strategy .....................................................14
         B.       The 2002 Distressed Debt Strategy .....................................................17

         C.       The 2003 Distressed Debt Strategy .....................................................19

VI.      At a meeting in Texas, Gramercy marketed a new distressed debt
         strategy to Appellees in 2003 ........................................................................21

VII. Gramercy’s contacts regarding the 2004-2005 Distressed Debt
     Strategy ..........................................................................................................24

         A.       The 2004 Distressed Debt Strategy .....................................................24
         B.       The 2005 Distressed Debt Strategy .....................................................26

                                                              i
VIII. Gramercy marketed related investments to Appellees in Texas, sent
      monthly account statements and emails to Appellees in Texas, and
      invited Appellees to participate in regular conference calls..........................26

IX.      Gramercy aided Appellees in responding to the IRS audit by
         forwarding IRS audit notices to Texas and wiring payments to Texas
         law firms from Gramercy-managed bank accounts ......................................28

X.       The trial court denied Gramercy’s special appearance .................................29
SUMMARY OF THE ARGUMENT ......................................................................29

STANDARD OF REVIEW .....................................................................................30

ARGUMENT ...........................................................................................................31

I.       Law governing Gramercy’s Special Appearance ..........................................31
II.      Gramercy purposefully directed actions at Texas that are substantially
         connected to the allegations in this case ........................................................33
         A.       Gramercy crossed a “bright line” by marketing the Investment
                  Strategies and making misrepresentations to Appellees at
                  meetings in Texas ................................................................................33
         B.       Gramercy’s meeting in Texas are substantially connected to the
                  Investment Strategies ..........................................................................40
         C.       Gramercy drafted, negotiated, and entered into numerous
                  contracts with Texas-resident Appellees contemplating a
                  long-term relationship with performance occurring at least in part
                  in Texas ...............................................................................................44
         D.       Gramercy directed preparation of tax documents related to the
                  Investment Strategies and delivered the documents to Texas ............48

         E.       Gramercy made millions of dollars from its Texas contacts
                  through fees generated by the investment management
                  agreements and undisclosed kick-backs from BDO ...........................50

         F.       Gramercy communicated regularly with Appellees in sent
                  monthly account statements to Appellees in Texas, set up a
                  secure website for Appellees to view account information, and

                                                            ii
                invited Appellees to participate in quarterly conference calls
                from Texas ...........................................................................................51

        G.      Gramercy managed entities—majority owned by Texans—
                involved in the Investment Strategies .................................................53

III.    The cases cited by Gramercy do not apply to this case involving
        numerous face-to-face meetings in Texas initiated by Gramercy .................55

IV.     Exercising personal jurisdiction over Gramercy will not offend
        traditional notions of fair play and substantial justice ...................................57

CONCLUSION AND PRAYER .............................................................................58

CERTIFICATE OF COMPLIANCE .......................................................................60

CERTIFICATE OF SERVICE ................................................................................61

                                                         iii
                                       TABLE OF AUTHORITIES

                                                                                                                 Page(s)
Cases
Am. Preferred Servs., Inc. v. Harrison,
  No. 07-11-0065-CV, 2011 WL 4485463 (Tex. App.—Amarillo
  Sept. 28, 2011, no pet.) ...........................................................................45, 49, 55

BMC Software Belgium, N.V. v. Marchand,
  83 S.W.3d 789 (Tex. 2002).....................................................................30, 31, 36
Bozell Grp., Inc. v. Carpet Co-op of Am. Ass’n, Inc.,
  No. 00 CIV. 1248, 2000 WL 1523282 (S.D.N.Y. Oct. 11, 2000) ................55, 56

Cartlidge v. Hernandez,
  9 S.W.3d 341 (Tex. App.—Houston [14th Dist.] 1999, no pet.) ....................... 52
Citrin Holdings v. Minnis,
   305 S.W.3d 269 (Tex. App.—Houston [14th Dist.] 2009, no pet.) ............passim

Crithfield v. Boothe,
   343 S.W.3d 274 (Tex. App.—Dallas 2011, no pet.) .......................................... 33

Daimler-Benz A.G. v. Olson,
  21 S.W.3d 707 (Tex. App.—Austin 2000, pet dism’d) ................................52, 53

Farwah v. Prosperous Mar. Corp.,
  220 S.W.3d 585 (Tex. App.—Beaumont 2007, no pet.) ..............................55, 56

GE v. Brown & Ross Int’l Distribs., Inc.,
  804 S.W.2d 527 (Tex. App—Houston [1st Dist.] 1990, writ
  denied)................................................................................................................. 31

Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C.,
  815 S.W.2d 223 (Tex. 1991) .............................................................................. 33
Gustafson v. Provider HealthNet Servs., Inc.,
  118 S.W.3d 479 (Tex. App.—Dallas 2003, no pet.) ....................................55, 56

                                                             iv
Horizon Shipbuilding, Inc. v. Blyn II Holding, LLC,
  324 S.W.3d 840 (Tex. App.—Houston [14th Dist.] 2010, no pet.) ............passim

Hotel Partners v. Craig,
  993 S.W.2d 116 (Tex. App.—Dallas 1998, pet. denied)..............................55, 56

IRA Res., Inc. v. Griego,
   221 S.W.3d 592 (Tex. 2007) .............................................................................. 55

Johns Hopkins Univ. v. Nath,
   238 S.W.3d 492 (Tex. App.—Houston [14th Dist.] 2007, pet.
   denied)................................................................................................................. 30

Kelly v. Gen. Interior Const., Inc.,
   301 S.W.3d 653 (Tex. 2010) ........................................................................32, 33
Lang v. Capital Res. Investments, I, LLC,
  102 S.W.3d 861 (Tex. App.—Dallas 2003, no pet.) ....................................55, 56
Magnolia Gas Co. v. Knight Equip. & Mfg. Corp.,
  994 S.W.2d 684 (Tex. App.—San Antonio 1998) .......................................55, 57

Marathon Oil v. A.G. Ruhrgas,
  182 F.3d 291 (5th Cir. 1999) ........................................................................55, 56

In re Martinez,
    564 F.3d 719 (5th Cir. 2009) .............................................................................. 21
Max Protetch v. Herrin,
  340 S.W.3d 878 (Tex. App.—Houston [14th Dist.] 2010, no pet.) ............passim

Michiana Easy Livin’ Country, Inc. v. Holten,
  168 S.W.3d 777 (Tex. 2005) .......................................................................passim

Moki Mac River Expeditions v. Drugg,
  221 S.W.3d 569 (Tex. 2007) ........................................................................31, 40
Moncrief Oil Int’l v. OAO Gazprom,
  414 S.W.3d 142 (Tex. 2013) .......................................................................passim

Peters v. Top Gun Executive Group,
   396 S.W.3d 57 (Tex. App.—Houston [14th Dist.] 2013, no pet.) ..................... 52

                                                              v
Proskauer Rose LLP v. Pelican Trading, Inc.,
   2009 WL 242993 (Tex. App.—Houston [14th Dist] Feb. 3, 2009,
   no pet.) ..........................................................................................................55, 56

Retamco Operating, Inc. v. Republic Drilling Co.,
   278 S.W.3d 333 (Tex. 2009) .............................................................................. 33
Smart Call, L.L.C. v. Genio Mobile,
  349 S.W.3d 755 (Tex. App.—Houston [14th Dist.] 2011, no pet.) ................... 44
TexVa, Inc. v. Boone,
   300 S.W.3d 879 (Tex. App.—Dallas 2009, pet. denied).................................... 53

Turan v. Universal Plan Inv. Ltd.,
   70 F. Supp. 2d 671 (E.D. La. 1999) ..............................................................55, 56
Xenos Yuen v. Fisher,
  227 S.W.3d 193 (Tex. App.—Houston [1st Dist.] 2007, no pet.) ...................... 31

Statutes
TEX. CIV. PRAC. & REM. CODE § 17.041-.042 ......................................................... 31

Other Authorities
TEXAS RULE OF APPELLATE PROCEDURE 6.3 and 9.5(b), (d), (e) ............................. 61

TEXAS RULE OF APPELLATE PROCEDURE 9.4(i)(1) ................................................... 60
TEXAS RULE OF APPELLATE PROCEDURE 9.4(e) ....................................................... 60

TEXAS RULES OF APPELLATE PROCEDURE 38, 39 .................................................... vii

                                                            vi
              STATEMENT REGARDING ORAL ARGUMENT

      Under Rules 38 and 39 of the Texas Rules of Appellate Procedure, Appellees

believe there are no complicated questions of fact or of law, and the parties have

thoroughly briefed the issues, so that oral argument should be unnecessary.

                                        vii
                         RECORD REFERENCES

CR – Clerk’s Record

RR – Reporter’s Record

                                viii
                              ISSUES PRESENTED

      1.     Did the trial court err in denying Gramercy’s special appearance when

the record establishes that Gramercy marketed tax-reducing investment strategies to

Appellees at meetings in Texas, at which Gramercy made misrepresentations

regarding those strategies and the underlying investments, and made numerous other

contacts with Texas substantially related to the investment strategies?

                                         ix
                          STATEMENT OF FACTS

I.    Overview of the tax shelter scheme to defraud Texas Appellees
      This lawsuit involves complex, tax-reducing investment strategies

(sometimes referred to as “Investment Strategies”) designed, developed, promoted,

sold, and implemented in a scheme to defraud Appellees—all of whom are Texas

residents. CR 95-96. Contrary to Gramercy’s position that it acted purely as an

investment advisor without regard to the tax consequences of the Investment

Strategies, the facts show that Gramercy actively participated in the design,

development, marketing, sale, and implementation of all aspects of the Investment

Strategies. See, e.g., CR 95-96, 2086-2106. Together, Defendant BDO Seidman

(“BDO”) and Gramercy designed the Investment Strategies to provide tax benefits

through investments in (1) digital option contracts on foreign currency purchased

and coordinated by Gramercy and (2) distressed debt funds established, managed,

and coordinated by Gramercy. CR 122-23, 141-42.

      Through undisclosed and illegal business arrangements, BDO and Gramercy

systematically identified wealthy potential or existing clients facing substantial

capital gains or income taxes.     CR 97.    Appellees—successful oil and gas

businessmen but inexperienced and unsophisticated with respect to tax law and

investments outside of oil and gas—were among these clients. CR 117-22; 426,

1107, 1123, 2085.

                                        1
      During meetings in Texas, BDO and Gramercy marketed the Investment

Strategies to Appellees as smart investments that would provide the potential of high

returns and at the same time would, regardless of the investment outcome, minimize

capital gains and income tax obligations. CR 97-98; 427-28, 1109, 1124, 2087. In

reality, the Investment Strategies were purely a means to unlawfully exact millions

of dollars in fees and commissions from Appellees. CR 96. BDO and Gramercy

knew or should have known that the Investment Strategies would not and could not

yield the investment returns or tax treatments claimed and were, in fact, illegal tax

shelters. CR 96-97, 99, 100, 104-19. At the time they promoted and sold the

Investment Strategies to Appellees, BDO and Gramercy knew that federal

authorities were investigating the legality of similar abusive tax shelters. CR 96-97.

Nevertheless BDO and Gramercy told Appellees the Investment Strategies were

sound investments and a legal means of reducing their tax liability. CR 96, 98, 107,

118-20, 428-29, 1109-10, 1125, 2087-88.

      The federal government successfully prosecuted many of the players in this

tax shelter scheme:

    In June 2012, BDO entered into a Deferred Prosecution Agreement with the
     United States Attorney’s Office in which it admitted that its personnel had
     engaged in unlawful and fraudulent conduct involving tax shelters like the
     ones sold to Appellees. CR 454-96. BDO paid a $34.4 million fine in
     connection with its Deferred Prosecution Agreement. CR 455, 496.

                                          2
    Four former BDO partners pled guilty to conspiracy to defraud the United
     States and tax evasion concerning abusive tax shelters similar to the
     Investments Strategies. CR 97-98, 498-678.

    Defendant Sidley Austin settled with the IRS for $39.4 million for its role in
     promoting and implementing abusive tax shelters like the Investment
     Strategies. CR 99-100, 841.

    R.J. Ruble, a former Sidley Austin lawyer, pled guilty to conspiracy to defraud
     the United States and tax evasion concerning abusive tax shelters similar to
     the Investments Strategies. CR 99-100, 761-839.

      Once Appellees were “hooked” into the scheme by Gramercy and BDO,

Gramercy implemented the investment portion of the scheme. See, e.g., CR 119-20,

141-45.     To accomplish this, Gramercy sent numerous contracts and

communications to Appellees in Texas and, in some cases, brought and discussed

contracts at meetings in Texas. See, e.g., CR 2086-2106. Sidley Austin and De

Castro West, acting as co-conspirators, issued legal opinion letters attesting to the

legality of the Investment Strategies. See, e.g., CR 99-102, 121, 134-38. These law

firms, as well as Gramercy and BDO, knew their legal opinion letters were false

when written and were written with the intent to defraud Appellees. Id.

      Gramercy directed and oversaw the preparation of tax returns and Schedule

K-1s for the entities owned by Appellees involved in the Investment Strategies and

delivered those tax documents to Appellees in Texas. CR 100-01, 138, 149, 156,

165, 175, 2092-93, 2096-2100, 2103-04, 2325-45, 2688-2785, 2786-2837, 3004-76,

3465-3530. Ultimately, the IRS audited the tax returns prepared at the request of

                                         3
Gramercy, resulting in the imposition of penalties, interest, and back taxes on

Appellees. CR 158, 167.

II.   Gramercy marketed the Investment Strategies to Appellees a meeting in
      Texas
      In June 2000, the individual Appellees—Lowry, Chabaud, and Moffitt—

received substantial proceeds from the sale of certain oil and gas properties. CR

117, 426, 1107, 1123, 2085. Following the sale, Lowry, Chabaud, and Moffitt asked

their business advisors to look for reputable investment advisors who could help find

investments to diversify their holdings and increase their returns. Id. A friend of

Chabaud recommended that Appellees meet with BDO. CR 117, 426. In September

2000, Defendant Randy Moorman, a tax partner in BDO’s Houston office, contacted

Appellees’ personal accountant, Newt Vannaman, to set up a meeting with

Appellees. CR 117, 2086.

      Subsequent to this initial meeting—but before Appellees agreed to the

Investment Strategy—Appellees and their advisors met with Gramercy’s

representative, Defendant Jay Johnston, and BDO’s Paul Shanbrom and Randy

Moorman at Appellees’ offices in Houston to discuss the Investment Strategies in

detail. CR 120-22, 320, 427, 1108, 1124, 2086-87. Johnston does not dispute that

this meeting took place in Texas or that he attended. CR 320. Neither Appellees

nor Vannaman initiated the meeting. CR 427, 1108, 1124, 2086-87.

                                         4
      Johnston and Shanbrom worked together equally to market the Investment

Strategies to Appellees. Id. Shanbrom advised Appellees and Vannaman that BDO

and Gramercy’s tax and investment professionals had designed proprietary, tax-

reducing investment plans that would provide Appellees with the potential of high

returns and at the same time would, regardless of the investment outcome, legally

minimize Appellees’ capital gains and ordinary income obligations. Id. Johnston

“was the consummate sales guy.” CR 1109. Johnston said that Gramercy had other

clients in Texas who had done distressed debt deals. CR 428, 1109, 1124, 2087.

      During the pitch, Shanbrom and Gramercy’s Johnston discussed the steps of

the distressed debt strategy in detail. Id. Shanbrom led the discussion about how

the tax savings were derived from the strategy, with Johnston confirming the details

of the distressed debt investments. Id. Johnston discussed how Gramercy designed

and implemented the distressed debt investments and the types of distressed debt

assets involved. Id. Shanbrom and Johnston told Appellees that BDO and Gramercy

would work closely together in designing and implementing the distressed debt

strategy. CR 122, 429, 1110, 1125-26, 2088.        Shanbrom       made      specific

recommendations about the amount of money Appellees should invest to maximize

their legal tax savings. CR 428, 1109, 1124, 2087. During this discussion, Johnston

was interested in the amount of tax saving involved because he needed to know

whether Gramercy had sufficient distressed debt assets to meet BDO’s

                                         5
recommendation. Id. Shanbrom made it clear that Gramercy’s distressed debt

transactions were intended to take advantage of purportedly-legal tax loopholes to

offset Appellees’ anticipated tax liability. CR 428, 1109-10, 1125, 2087-88.

      Both Johnston and Shanbrom stressed that if Appellees wanted to implement

a distressed debt strategy for the 2000 tax year, Appellees needed to make an

investment with Gramercy in November 2000. CR 121, 428, 1109-10, 1125, 2087-

88. Shanbrom recommended that Appellees undertake a distressed debt strategy to

be spread over a four-year period, beginning in the 2000 tax year. CR 122, 429,

1110, 1125-26, 2088.

      In addition to discussing the nuts and bolts of the distressed debt transaction,

Shanbrom repeatedly told Appellees that the distressed debt transactions were legal.

CR 121, 428, 1109-10, 1125, 2088. Shanbrom said that if the IRS challenged the

validity of the distressed debt strategy, Appellees would prevail. Id. Further,

Shanbrom told Appellees that Sidley Austin, a reputable law firm, would issue

“independent” opinion letters confirming that propriety of the distressed debt

strategy. Id. Shanbrom touted R.J. Ruble, a partner at Sidley Austin, as the

recognized expert on distressed debt strategies. Id. According to Shanbrom, Ruble

would draft the legal opinion letters that would provide the required legal support to

convince the IRS or a court that the transaction was legal in the event of an IRS

challenge, provide the required legal support to prevail in any IRS challenge, and,

                                          6
most importantly, provide absolute penalty protection from the IRS or a court

assessing a penalty. See id. Johnston reiterated and confirmed what Shanbrom said

about Sidley Austin and Ruble, including that Ruble was an expert in this area,

Sidley Austin was a qualified and reputable law firm, and Gramercy had experienced

good results from Sidley Austin on these types of transactions in the past. CR 428,

1109-10, 1125, 2088. Unbeknownst to Appellees, BDO and Gramercy had a

preexisting arrangement with Sidley Austin to create “canned” legal opinion letters

with significant input from BDO and Gramercy. CR 99-101, 121, 134-38. Sidley

Austin, BDO, and Gramercy knew the legal opinion letters were dubious prior to

and at the time they made these representations to Appellees. Id.

      Johnston recommended that Appellees invest millions of dollars with

Gramercy in addition to the investment made for the tax-reducing investment

strategies. CR 120, 429, 1110, 1125-26, 2088. Doing so would, according to

Shanbrom, provide Appellees with a diversified portfolio that allowed Appellees to

achieve higher rates of return and, at the same time, strengthen Appellees’ position

in the event the IRS audited Appellees’ tax returns with respect to the Investment

Strategies. Id. Johnston reiterated and confirmed these points. CR 429, 1110, 1125-

26, 2088.

      Johnston and Shanbrom brought letter agreements for the Investment

Strategies to the November meeting.      CR 429-30, 1111, 1126, 2089, 2126-32.

                                         7
Gramercy knew when it presented the letter agreements that (1) the Investment

Strategies had a purely tax-related purpose, (2) it had already pitched the Investment

Strategies as a legal way to reduce tax liability, and (3) it would continue to provide

tax advice about the Investment Strategies prior to, during, and after the

implementation of the transactions. CR 120-22. During the November meeting,

Appellees discussed the substance of the letter agreements with Johnston and

Shanbrom; however, both Johnston and Shanbrom assured Appellees that the

Investment Strategies were legal and that the letters were simply part of documents

needed for the transaction.     CR 429-30, 1111, 1126, 2089.         Based on these

representations and assurances, Appellees later signed the letter agreements. CR

2126-32. Gramercy also presented draft investment management agreements at the

November meeting. CR 430, 1111, 1126, 2089, 2136-2201.

III.   Gramercy entered into investment management agreements with
       Appellees to act as Appellees’ attorney-in-fact
       In reliance on BDO and Gramercy’s advice at the November 7, 2000 meeting,

Appellees entered into investment management agreements (“2000 IMAs”) with

Gramercy. CR 430, 1111, 1126, 2089, 2136-2201. On November 15, 2000,

Gramercy sent the 2000 IMAs to Moorman in Texas and instructed him to “have the

clients sign two copies of the IMA.” CR 2089, 2133-35. Moorman then faxed the

final agreements to Vannaman in Texas for Appellees’ signatures. Id. Appellees

signed the agreements, and Vannaman returned them to Gramercy. CR 2089.

                                          8
      Pursuant to the terms of the 2000 IMAs, Gramercy Advisors, LLC became

Appellees’ “attorney-in-fact” with regards to actions taken as their investment

manager. CR 2137, 2148, 2159, 2170, 2181, 2192.            Collectively, Appellees

initially invested $4,000,000 under the 2000 IMAs. CR 2090. Gramercy accepted

this payment drawn from various Texas bank accounts owned by Appellees. CR

2090, 2202-07. The 2000 IMAs called for a monthly management fee and an annual

incentive fee. CR 2138, 2149, 2160, 2171, 2182, 2193. Under the 2000 IMAs,

Gramercy was required to send any required notices to the applicable individual

Plaintiff in Texas. CR 2143, 2154, 2165, 2176, 2187, 2198. Appellees and

Vannaman received hundreds of mailings, faxes, and phone calls in Texas from

Gramercy related to the Investment Strategies and other investments connected with

the Investment Strategies. CR 2101. Gramercy admits that it mailed documents and

sent emails and faxes in connection with the investments to Appellees in Texas. CR

279, 3641, 3642.        Gramercy also invited Appellees to participate in periodic

conference calls. Id.

IV.   Gramercy’s contacts regarding the 2000 Digital Options Strategy
      Based on the statements made during Gramercy and BDO’s joint marketing

pitch in Texas, Lowry, Chabaud, and Moffitt entered into tax-advantaged

investments in 2000 involving the purchase and sale of digital options on foreign

currency (the “Digital Options Strategy”). CR 122-23, 430, 1111, 1126, 2090.

                                          9
Gramercy and BDO had marketed investments in foreign distressed debt

transactions to Appellees at the November 2000 meeting. CR 120-22, 427-29, 1108-

10, 1124-25, 2086-88. But, unbeknownst to Appellees, Gramercy and BDO did not

have time to implement a distressed debt transaction for the 2000 tax year. CR 123,

2091-92. Gramercy, instead, engaged in the Digital Options Strategy on behalf of

Appellees. CR 123, 430, 1111-12, 1127, 2091-92. BDO and Gramercy did not

inform Appellees about the change in investment strategy until January 2001, after

the Digital Options Strategy had been executed. Id.

      BDO and Gramercy set up various LLCs through which Appellees

participated in the Investment Strategies (“Investment LLCs”).1 CR 126-27, 2090-

91. Each Investment LLC had its principal place of business in Texas and was a

single-member, pass-through entity such that the entity was disregarded for tax

purposes. CR 83-84, 430, 1111, 1126, 2090-91.

      Gramercy acted as more than just an investment advisor to Appellees. See

CR 122-23, 128-31. Gramercy’s involvement in the design and implementation of

the Digital Options Strategy was instrumental. Id. For instance, in April 2001,

Johnston sent an email to Defendant Larry Cohen of BDO in which Johnston

1
 Each individual Appellee owned one or more of the Investment LLCs. Lowry’s LLC was called
L-Falling Creek (CR 1111); Chabaud had multiple LLCs (R-Ashley Wimbledon, R-Audrey
Wimbledon, R-Russell Wimbledon, and R-RAC Wimbledon) for himself and trusts established
for the benefit of his children (CR 430); and Moffitt’s LLC was called J-Jason (CR 1126).

                                           10
described “how I see” the Digital Options Strategy working for L-Falling Creek,

J-Jason, R-RAC, and the Chabaud children’s trusts (R-Russell, R-Audrey, and

R-Ashley). CR 1267-74.2 Johnston specifically referenced the “good leg” and “bad

leg” of the binary options and showed the expected “net loss.” Id. Gramercy no

doubt knew that the main purpose of the Digital Options Strategy was to generate a

tax loss. See id.

       Gramercy played a key role in implementing the Digital Options Strategy. CR

122-23, 128-31. Gramercy created and managed LMC Recovery Fund LLC, the

entity used to generate the losses associated with the Digital Options Strategy, and

later the Distressed Debt Strategies. CR 130, 2091, 2208-99. In December 2000,

Gramercy sent various agreements to Appellees in Texas to facilitate the purchase

and sale of digital options on foreign currency. CR 122-23, 130, 2208-2318. The

options contracts expired according to their terms in late December 2000, which

generated the purportedly-legal partnership losses. CR 131.

       Gramercy’s Johnston and BDO’s Moorman and Shanbrom again met with

Appellees in Houston on January 11, 2001 to discuss the Digital Options Strategy

and other investments with Gramercy. CR 431, 1112, 1127, 2092. At that meeting,

2
  The Affidavit of Todd Simmens signed on May 22, 2014 attaches and proves up this exhibit. It
appears, however, that the district court clerk inadvertently included a duplicate of another
Affidavit of Todd Simmens instead of the May 22, 2014 Affidavit. Compare CR 1136-38, with
CR 2074-76. Rather than seeking additional extension time to correct the record, Appellees have
simply cited to the Affidavit exhibits. Appellees have alerted the district court to this error and
will have the May 22, 2014 Affidavit filed as a supplemental record.

                                                11
Johnston and Shanbrom discussed tax issues, including the timing of the tax returns

and legal opinion letters, as well as LMC, the partnership vehicle for generating the

purported tax losses. CR 431, 1112, 1127, 2092, 2319-22. In or around March 2001,

Randy Moorman of BDO relayed Gramercy’s schedule of actions leading up to the

receipt of the tax returns and K-1s related to the Digital Options Strategy. CR 2092.

According to Gramercy, Appellees would receive legal opinion letter drafts and

invoices from Sidley Austin—the firm selected by Gramercy based on the

preexisting scheme between Sidley Austin, Gramercy, and BDO.              Id.    Next,

Appellees would pay Sidley Austin. Id. After payment, Appellees would receive

the final legal opinion letters. Finally, BDO would issue the tax returns. Id.

      As manager of LMC, Gramercy directed BDO to prepare the federal tax return

for LMC. See CR 138, 2092-93. Gramercy provided significant guidance to BDO

on how to prepare the return, going so far as to tell BDO what tax forms to fill out

and what numbers to put on certain lines of the return. CR 1275-80. In April 2001,

Robert Lanava of Gramercy sent a memo to Larry Cohen of BDO outlining exactly

how the Digital Options Strategy had worked. Id. The memo described how the

“losses” were to be allocated. Id. The memo also included detailed advice about

how the losses were to be reported on tax returns. Id. Ultimately, when BDO

prepared LMC’s 2000 tax return, BDO followed Lanava’s instructions regarding

                                         12
Form 4797 and included the exact language and figures used in Lanava’s memo.

Compare id., with CR 2330.

        Johnston, Moorman, and Shanbrom again met with Appellees and Vannaman,

in Houston on May 8, 2001. CR 431, 1112, 1127, 2093. The parties discussed the

legal opinion letter drafted by Sidley Austin and Appellees’ tax losses for 2001. Id.

The parties also discussed non-tax advantaged investments with Gramercy. CR

2093. Once again, Gramercy and BDO initiated the meeting, not Appellees. CR

431, 1112, 1127, 2093, 2359-50. Appellees filed their individual tax returns using

the K-1s prepared by BDO at Gramercy’s direction. CR 138, 431, 1112, 1127-28,

2093.

    In addition to the fees from the IMAs and unbeknownst to Appellees, Gramercy

also received millions of dollars in kick-backs from BDO derived from the

consulting fees Appellees paid to BDO. CR 103-04, 2074-75, 2077-83. Gramercy

and BDO never told Appellees about these kick-backs. Id. In total, BDO paid

Gramercy $2,985,400 related to Appellees’ Investment Strategies, plus millions

more from other Texas residents. CR 2074-83. Before receiving payments from

BDO, Gramercy sent BDO invoices that conspicuously referenced Appellees. Id.

For instance, Gramercy invoiced BDO for a $680,000 kick-back related to the

Digital Options Strategy on or about April 19, 2001. CR 2078. The invoice

specifically referenced “Union Gas (Lowry, Moffit, Chabaud).” Id.

                                         13
V.    Gramercy’s contacts regarding the 2001-2003 Distressed Debt Strategies
      Based on Gramercy and BDO’s recommendations, Appellees Lowry,

Chabaud, and Moffitt entered into tax-reducing investments in 2001, 2002, and 2003

involving investments in Gramercy-managed distressed debt funds (“2001

Distressed Debt Strategy,” “2002 Distressed Debt Strategy,” “2003 Distressed Debt

Strategy”). CR 141-67, 431, 1112, 1128, 2093.

      A.    The 2001 Distressed Debt Strategy
      Prior to engaging in the 2001 Distressed Debt Strategy, Johnston discussed

the details of the Investment Strategies with Appellees and Vannaman on several

occasions, including at the November 2000 meeting in Houston. CR 427-29, 1108-

12, 1124-26, 2086-89. In order to determine the amount of tax losses needed in

2001, BDO and Gramercy requested Appellees’ income projections in a number of

communications directed to Vannaman in Texas and during at least one in-person

meeting in Texas. CR 2094-95, 2367-69. On September 27, 2001, Johnston,

Moorman, and Shanbrom met with Lowry, Chabaud, and Vannaman in Houston.

CR 432, 1113, 2094-95.      At that meeting, Shanbrom and Johnston discussed

Appellees’ income projections for 2001 as well as the three-year outlook (2000-

2002) in order to determine the losses to be generated by the Investment Strategies.

Id.   Additionally, Gramercy highlighted the performance of its other non-tax

advantaged investments. CR 432, 1113.

                                        14
      Gramercy then began coordinating and implementing the 2001 Distressed

Debt Strategy.    CR 144-49.      Gramercy had already sought out and acquired

distressed debt assets specifically “targeted” for Appellees. CR 1284-95. In a May

2001 email from Johnston to Michael Kerekes, Larry Cohen, and Paul Shanbrom of

BDO, Johnston attached a model agreement drafted by Gramercy’s lawyers for the

acquisition of distressed debt assets from a bank in Bulgaria and said, “[t]he position

is targeted for Paul’s client Union Gas of Houston Texas.” Id. Union Gas refers to

the oil and gas company owned by Appellees. See CR 2094-95.

      On August 2, 2001, Gramercy’s Robert Lanava faxed to Vannaman in Texas

interest purchase agreements (“2000 IPAs”) and requested that Appellees sign and

return them to Gramercy. CR 2095, 2370-71. The next day, Robert Lanava called

Vannaman to discuss the 2001 Distressed Debt Strategy. CR 2095. Lanava referred

Vannaman to Johnston to discuss the details of the 2000 IPAs. Id. Vannaman then

called Johnston. Id. During that phone call, Johnston told Vannaman that “the

interest purchase agreement is how the loss gets generated . . . offshore members

contribute assets with built in loss; LMC group buys interest at x cash value; gets

the benefit of the loss.” CR 2095, 2372-73 (emphasis added). In practice, the 2000

IPAs worked just as Johnston described—the Investment LLCs acquired interests in

distressed debt assets when the original owners of the debt instruments contributed

those assets to LMC for a small membership interest in LMC. CR 144-45.

                                          15
      On October 11, 2001, Defendant Marc Helie of Gramercy mailed another set

of IPAs to Moorman in BDO’s Houston office and instructed Moorman to “arrange

for their execution and return to my attention.” CR 2096, 2374-75. Vannaman

received the Helie letter and IPAs from Moorman. Id. In total, Gramercy sent

Appellees in Texas three sets of IPAs, each concerning a separate distressed debt-

owning entity (Gramercy Local Markets Recovery Fund, LLC, Lojas Americanas

S.A., BANK DSK, AD). CR 2096, 1300-1590. Appellees signed the 2000 IPAs and

returned them to Gramercy. CR 2096. Under the terms of the 2000 IPAs, any time

Gramercy was required to give notice of any kind to Appellees, it was required to

send the notices to the applicable Investment LLC in Texas. See, e.g., CR 1313.

      Acting on Appellees’ behalf, Gramercy caused LMC to sell a portion of

LMC’s distressed debt assets to Defendant Gramercy Financial Services for

considerably less than the assets’ alleged tax basis. CR 145, 1591-94. This sale

created the losses that Appellees ultimately claimed on their 2001 tax returns. CR

145-48.

      Based on their preplanned scheme with Gramercy and BDO, Sidley Austin

drafted the legal opinion letters for the 2001 Distressed Debt Strategy. Id. Gramercy

guided Sidley Austin in this endeavor. Id. For example, in September 2000, Sidley

Austin sent a draft opinion letter to Johnston for Gramercy’s “Distressed Debt Fund”

seeking his input in the substance of the opinion and copying Gramercy’s lawyers—

                                         16
McDermott Will & Emery—to ensure that they were comfortable with the

description of Gramercy’s role. CR 1139-1225.

      As manager of LMC, Gramercy directed BDO to prepare the federal tax return

for LMC for the tax year 2001. CR 149. Prior to receiving the tax returns and K-

1s, Johnston, possibly Scott Seaman, and at least one representative of BDO met

with Appellees in Houston on June 20, 2002 to discuss, among other things, the

timing of the returns. CR 432, 1113, 2096-97, 2683-87. Appellees filed their

individual tax returns in or about October 2002 using the K-1s prepared by BDO at

Gramercy’s direction. CR 149, 433, 1113, 1128, 2096-97.

      B.    The 2002 Distressed Debt Strategy
      Gramercy developed, marketed, sold, coordinated, and implemented the 2002

Distressed Debt Strategy. CR 150-51. The 2002 Distressed Debt Strategy was a

continuation of the 2001 Strategy. CR 150.

      In mid-2001, BDO requested income projections for Appellees to help

determine the amount of tax loss that needed to be generated by the 2002 Distressed

Debt Strategy. CR 2097. On June 20, 2002, Johnston, possibly Scott Seaman, and

at least one representative of BDO met with Appellees in Houston to discuss 2002

income expectations for Appellees. CR 432, 1113, 1128-29, 2097. During that

meeting, Johnston also highlighted the performance of its other non-tax advantaged

investments. CR 2097. Gramercy used the information gathered during this meeting

                                        17
and the September 2001 meeting in Houston to determine the amount of losses that

it needed to generate for Appellees. CR 432, 1113, 1128-29, 2097. Acting on

Appellees’ behalf, Gramercy caused LMC to sell a portion of the distressed debt

assets to Gramercy Financial Services for considerably less than the assets’ basis.

CR 1595-96. This created the losses that Appellees claimed on their 2002 tax

returns. CR 152-56.

      BDO recommended that Appellees engage De Castro West, a different law

firm from the one previously used, to issue a legal opinion letter about the 2002

Distressed Debt Strategy. CR 152-56, 432-33, 1114, 1128-29, 2097. Appellees and

Vannaman asked Johnston his opinion of De Castro West. CR 432-33, 1114, 1128-

29, 2097. Johnston confirmed that De Castro West was a good law firm and said

that other Gramercy clients had been pleased with De Castro West. Id. Gramercy

had previously helped craft the language contained in the Sidley Austin legal opinion

letters. CR 1139-1225. From the beginning, Gramercy and BDO had intended to

use the same Sidley Austin legal opinion letter as a “building block” for De Castro

West to use. See CR 1139-1125, 1903-92, 2097.

      Gramercy hired Financial Strategy Group (“FSG”) to prepare the LMC tax

return and K-1s. CR 138, 861-71. Gramercy played a key role in directing and

overseeing FSG’s preparation of the tax documents. CR 856-60, 872-73, 842-43,

846-47, 851-52. Emails between Gramercy’s employee, John DelVirginia, and FSG

                                         18
show that DelVirginia guided FSG in preparing the returns, even to the point of

telling FSG specific information to include on the returns. CR 856-60, 872-73.

FSG’s corporate representative, Andy Shaul, admitted in his deposition that FSG

“did whatever John DelVirginia wanted us to do.” CR 851-52. FSG completed the

LMC tax returns and delivered them to Gramercy. CR 853, 2786-2837. Gramercy

then delivered the returns and K-1s to Vannaman in Texas. CR 2098, 2786-2837.

Appellees filed their individual tax returns using the K-1s that Gramercy delivered.

CR 156, 433, 1114, 1129, 2098.

      C.    The 2003 Distressed Debt Strategy
      Gramercy developed, marketed, sold, coordinated, and implemented the 2003

Distressed Debt Strategy. CR 158-59. The 2003 Distressed Debt Strategy was a

continuation of the 2001 and 2002 Strategies. CR 160. In addition to the distressed

debt assets acquired on Appellees’ behalf by Gramercy in 2001, LMC acquired

additional distressed debt assets. CR 160, 1601-1718.

      Gramercy drafted interest transfer agreements (“ITAs”) for the new distressed

debt assets and brought the agreements to a meeting with Appellees and Vannaman

in Houston on April 9, 2003. CR 433, 1114, 1129, 2098-99. Robert Koenigsberger

and Scott Seaman attended the meeting for Gramercy. Id. The ITAs contained

notice sections requiring Gramercy to send all notices to Texas. See, e.g., CR 1611.

                                        19
      Acting on Appellees’ behalf, Gramercy caused LMC to sell a portion of

LMC’s distressed debt assets to Gramercy Financial Services for considerably less

than the assets’ basis. CR 1597-1600. This sale created the losses that Appellees

claimed on their 2003 tax returns. CR 165.

      Appellees engaged De Castro West to issue an opinion letter attesting to the

legality of the transaction. CR 161-65, 433, 1114, 1129, 2098-99. Gramercy again

confirmed its positive impression of and experience with De Castro West. CR 433,

1114, 1129, 2098-99. Gramercy also utilized FSG to prepare the 2003 federal tax

return for LMC and K-1s for the Investment LLCs. CR 165, 864-65. Once again,

Gramercy communicated with FSG regularly and had extensive input into how the

tax return was prepared. CR 846-47, 851-52, 856-60, 872-73. LMC had to file for

an extension on its 2003 tax return. CR 2098-99, 2924-26. To do so, Gramercy

emailed Vannaman about the extension and then faxed a copy of the tax form to

Vannaman in Texas. Id.

      LMC’s principal place of business changed in 2003 from an address in

Connecticut (connected to Gramercy) to an address in Spring, Texas (connected to

Lowry). CR 2099. In an email from John DelVirginia of Gramercy to Andy Shaul

and Steve Burford of FSG, DelVirginia instructed FSG to make the address change.

CR 872-73. Thus, Gramercy knew it was having a tax return prepared for the benefit

of a Texas partnership. See id. Moreover, Gramercy instructed FSG to change the

                                       20
tax matters partner3 on the 2003 tax return from a Gramercy-controlled entity, as it

had been in the 2002 returns, to “Randall K. Lowry, Jr.” at an address in Spring,

Texas. CR 872-73.

       On February 3, 2004, Gramercy’s Johnston and Seaman came to Houston to

personally deliver a preliminary version of the tax return and K-1s to Vannaman and

Lowry. CR 856-60, 2099-2100, 2927-3000. Those tax documents were not filed by

Appellees or LMC; instead, Gramercy recommended that LMC request an

extension. CR 2098-2100. Once the return was completed in October 2004, Seaman

mailed to Vannaman in Texas (1) a filing copy of the tax return, (2) a copy of the

return for Vannaman’s records, and (3) K-1s for distribution to the Investment LLCs.

2099-2100, 3001-03. Appellees filed their individual tax returns using the K-1s

delivered by Gramercy. CR 165, 433, 1114, 1129.

VI.    At a meeting in Texas, Gramercy marketed a new distressed debt
       strategy to Appellees in 2003
       Appellees expected to receive significant proceeds from the sale of oil and gas

properties in tax year 2004. CR 168, 433, 1115, 2100. Appellees anticipated that

all of the tax savings generated by the first phase of the Investment Strategies would

3
 The tax matters partner plays a significant role for the partnership. In re Martinez, 564 F.3d 719,
729 (5th Cir. 2009). The tax matters partner is “the central figure of partnership proceedings” and
“serves as the focal point for service of all notices, documents and orders of the partnership.” Id.
at 729. A tax matters partner owes a fiduciary duty to the partnership and partners. Id. at 728-29.

                                                21
be used by the end of 2003. CR 2100. BDO and Gramercy instructed and advised

Appellees to enter into a second phase of distressed debt strategies. CR 168.

      Gramercy’s Johnston and representatives from BDO met with Lowry and

Vannaman in Houston on May 26, 2003 to market the second phase, which would

begin starting with the 2004 tax year. CR 1115, 2100. During the meeting,

Shanbrom and Johnston discussed the structure of the transactions, the nature of the

distressed debt, the agreements that would be required, the funding requirements

necessary to generate the losses, and the continuing necessity of the legal opinion

letters associated with the strategies. Id.

      Lowry asked Johnston specific questions during this meeting about the

distressed debt assets associated with this second phase of the Investment Strategy.

Id. Johnston said that the assets were Russian utility receivables and that he had

personally been to Russia to investigate the investment and had the collection

program under control. Id. Johnston repeatedly assured Lowry and Vannaman that

Gramercy’s debt collection efforts were genuine and that the assets could produce a

positive return beyond the tax savings. Id. Following the May meeting, Gramercy’s

in-house attorney, David Metzman, began emailing preliminary investment

management agreements and draft transaction documents to Vannaman in Houston

for Appellees to review. CR 2100, 3077-82.

                                              22
        Based on Gramercy and BDO’s recommendations, Appellees undertook the

second phase of the Investment Strategy in which they expected $40 million in tax

losses to be spread over the tax years 2004 and 2005. CR 433-34, 1115, 1130, 2101.

Gramercy employees and Vannaman communicated regularly during this time

period to finalize the investment management agreements (“2003 IMAs”), which

were signed by Defendant Gramercy Asset Management LLC. CR 2101, 3085-

3204.

        Pursuant to the terms of the 2003 IMAs, Gramercy Asset Management

became Appellees’ “attorney-in-fact” with regards their investments. CR 3085-

3204. Collectively, Appellees initially invested nearly $750,000 with Gramercy

Asset Management under the 2003 IMAs. CR 3085-3204. Robert Lanava requested

this money in an email with Vannaman in May 2003, which Appellees paid using

Texas bank accounts. CR 2101, 3205-06. The 2003 IMAs allowed Gramercy Asset

Management to collect “a management fee and incentive allocations . . .” CR 3085-

3204. Under the 2003 IMAs, Gramercy Asset Management was required send any

notices to the applicable individual Plaintiff in Texas. CR 3085-3204.

        Gramercy Asset Management also sent a letter agreement to Appellees in

Texas regarding the tax-reducing investments. CR 2102, 3209-20. This letter

agreement was similar to the one drafted by Gramercy Advisors. CR 3209-20.

                                        23
VII. Gramercy’s contacts regarding the 2004-2005 Distressed Debt Strategy
        Based on Gramercy and BDO’s joint marketing efforts, Lowry, Chabaud, and

Moffitt entered into Investment Strategies in 2004 and 2005 (“2004 Distressed Debt

Strategy” and “2005 Distressed Debt Strategy”). CR 167-237, 434, 1115-16, 1130,

2102.

        A.    The 2004 Distressed Debt Strategy
        Appellees received the distressed debt assets related to the 2004 Distressed

Debt Strategy through EROSE LLC, a company owned in part by Gramercy

Advisors. CR 170. On Appellee’s behalf, Gramercy organized and used various

LLCs to accomplish the 2004 Distressed Debt Strategy. CR 170, 1719-28, 1771-

80, 1823-32, 2102-03. Gramercy drafted interest transfer agreements (“2003 ITAs”)

to effectuate the Strategy and sent them to Appellees in Texas. CR 2102-03, 3347-

3436. The 2003 ITAs required Gramercy Asset Management to send all notices to

the applicable individual Plaintiff in Texas. See, e.g., CR 3357. Gramercy sent other

agreements to Appellees in Texas as part of the 2004 Distressed Debt Strategy. CR

1729-70, 1781-1822, 1833-74, 2102-03, 3221-3346, 3437-3464.              Acting on

Appellees’ behalf, Gramercy caused entities owned by Appellees to transfer their

distressed debt assets to Defendant Gramercy Financial Services for considerably

less than the assets’ basis. CR 1875-89. This sale created the losses that Appellees

claimed on their 2004 tax returns. CR 174.

                                         24
      In December 2004, Appellees and Gramercy converted some of the entities

involved in the 2004 Distressed Debt Strategy to Texas LLCs. CR 2103. Gramercy,

BDO, and Appellees discussed the decision to change domicile and entity names on

a number of occasions via telephone and email. Id. Gramercy’s in-house counsel,

David Metzman, and Appellees’ outside counsel in Texas, Gary Alletag, worked

together to develop the documents necessary to effectuate those changes. Id.

      Gramercy again recommended that Appellees engage De Castro West to issue

a legal opinion letter concerning the transactions. See CR 171-74. Gramercy

Advisors hired FSG to prepare the 2004 federal tax returns and K-1s for the entities

involved in the 2004 Distressed Debt Strategy. CR 866-67, 2103-04, 3465-3530.

Gramercy Asset Management mailed the completed K-1s to the Appellees in Texas.

CR 434, 1116, 1130, 2103-04, 3531-36. Importantly, the cover letter from Gramercy

attaching the K-1s contained multiple paragraphs advising Appellees about federal

tax shelter laws, including the new tax form regarding “Reportable Transaction

Disclosures.” CR 3531-36. The tax returns and K-1s contained Form 8886s

disclosing that entities owned by Appellees had participated in reportable

transactions. See, e.g., CR 3474-75. The Form 8886s also disclosed that Gramercy

Advisors had “promoted, solicited, or recommended [Appellees’ participation] in

the transaction, or provided tax advice related to the transaction.” Id. Appellees

                                        25
filed their individual tax returns using the K-1s sent to Appellees by Gramercy

Advisors. CR 175, 434, 1116, 1130.

      B.     The 2005 Distressed Debt Strategy
      Gramercy developed, marketed, sold, coordinated, and implemented the 2005

Distressed Debt Strategy. CR 167-75. The 2005 Distressed Debt Strategy worked

as a continuation of the 2004 Distressed Debt Strategy. CR 175. In reliance of

Gramercy’s advice, Appellees carried over losses purportedly created by the 2004

Distressed Debt Strategy to their federal tax returns for 2005. CR 175, 2102.

Appellees filed their individual tax returns using the K-1s mailed to Appellees by

Gramercy. CR 175, 434, 1116, 1130.

VIII. Gramercy marketed related investments to Appellees in Texas, sent
      monthly account statements and emails to Appellees in Texas, and invited
      Appellees to participate in regular conference calls
      During the November 2000 meeting in Texas, Gramercy’s Jay Johnston

recommended that Appellees invest significant sums of money with Gramercy in

funds not directly involved in the tax losses generated by the Investment Strategies.

CR 120, 429, 1110, 1125-26, 2088. According to Shanbrom and as confirmed by

Johnston, doing so would allegedly strengthen Appellees’ position with respect to

the tax-advantaged transactions. CR 120, 429, 1110, 1125-26, 2088. Based on this

advice, Appellees invested around $15 million with Gramercy in addition to the

money for the Investment Strategies. Id.

                                         26
      Shortly after the November 2000 meeting, Gramercy requested wire transfers

from Appellees in Texas related to the non-tax advantaged investments. CR 2094,

2353-54. In March 2001, Gramercy’s Young sent wiring instructions to Texas for a

$1 million contribution. CR 2094. Young sent wiring instructions to Vannaman for

an additional $5.4 million over the next several months. Id. By the end of 2001,

Gramercy had requested and Appellees had contributed a total of $10.4 million to

Gramercy for non-tax advantaged investments. Id.

      Utilizing the same Plaintiff-owned entities used in the Investment Strategies,

Gramercy made investments in emerging markets on Appellees’ behalf as their

investment advisor and attorney-in-fact. CR 2104. Gramercy employees and

representatives discussed these investments with Lowry and Vannaman at meetings

in Texas, including at some of the meetings mentioned previously in this brief. CR

1116, 2104-05.    In addition to the previously-mentioned meetings in Texas,

Gramercy also came to Texas to discuss non-tax advantaged investments on

February 3, 2004 and July 12, 2004. Id. Scott Seaman, Jay Johnston, and Robert

Koenigsberger of Gramercy attended the February meeting. Id. Scott Seaman, Jay

Johnston, and Robert Rauch of Gramercy attended the July meeting. Id.

      As the record reflects and as Gramercy admits in its Brief, Gramercy regularly

sent written communications to Appellees in Texas related to these non-tax

advantaged investments, including monthly account statements and email “flash”

                                        27
previews of those statements. Appellant Br. at 30; CR 279, 434-45, 1116, 1118-21,

1130-35, 2105, 3542-55, 3641, 3642. Appellees’ representative received dozens if

not hundreds of email “flash” previews.4 CR 2105. Later, Gramercy set up a secure

website and provided Vannaman with a user name and password to access account

statements and other information related to the investments. Id. Gramercy also

invited Appellees to participate in quarterly conference calls related to the non-tax

advantaged investments. Id. Seaman sent Vannaman the conference call number

via email for each quarterly call. Id. From Texas, Vannaman participated in many

of these conference calls. Id.

IX.    Gramercy aided Appellees in responding to the IRS audit by forwarding
       IRS audit notices to Texas and wiring payments to Texas law firms from
       Gramercy-managed bank accounts
       In February 2004, Gramercy received an audit notice from the IRS related to

LMC’s 2000 tax return. See CR 2105, 3556-60. Gramercy faxed this notice and,

later, a copy of LMC’s 2000 tax return to Vannaman in Texas. CR 2105, 3556-82.

       Appellees hired a Texas-based law firm, Chamberlain Hrdlicka, to handle the

audit. CR 2106. Gramercy wired payments from LMC’s Gramercy-managed bank

account to Chamberlain to pay the audit-related legal bills. See CR 929-31. As

4
  Gramercy takes issue with Vannaman’s testimony that he received “hundreds of mailings from
Gramercy” because he did not attach all of these communications to his affidavit. See Appellant
Br. at 33 n. 18. Simply because Vannaman chose to provide examples rather than every written
communication he received from Gramercy does not make his testimony any less credible.
Gramercy has also not pointed to any evidence in the record to rebut Vannaman’s testimony on
this issue.

                                              28
manager of LMC Gramercy also paid thousands of dollars to the Texas law firm,

Baker Hostetler, for work related to the Investment Strategies. CR 2106, 3583-84.

X.    The trial court denied Gramercy’s special appearance
      The trial court denied Gramercy’s Special Appearance on October 17, 2014.

CR 3762. The trial court did not issue findings of fact and conclusions of law.

                       SUMMARY OF THE ARGUMENT

      Because the trial court did not err in denying Gramercy’s Special Appearance,

this Court should affirm. There is no dispute that Gramercy made jurisdictional

contacts with Texas—including attending numerous meetings in Texas with

Appellees. The narrow issue on appeal focuses on the substantial connection

between those contacts and the operative facts of the litigation.

      There is legally and factually sufficient evidence to support a substantial

connection. Gramercy met face-to-face with Appellees in Texas on numerous

occasions to market, sell, and implement the Investment Strategies at issue in this

case. The record shows that Gramercy made misrepresentations concerning the

Investment Strategies at those meetings. Gramercy’s role was much broader than

merely executing BDO’s play calls. Instead, Gramercy was involved from the

beginning in every aspect of the Investment Strategies, including discussing the

allege tax benefits with Appellees as part of the sales pitches in 2000 and 2003.

Those meetings alone should subject Gramercy to jurisdiction in Texas. Gramercy’s

                                         29
other Texas contacts are also substantially connected to the Investment Strategies

and further support affirming the trial court’s order.

                            STANDARD OF REVIEW

      The existence of personal jurisdiction is a question of law necessitating a de

novo review. Moncrief Oil Int’l v. OAO Gazprom, 414 S.W.3d 142, 150 (Tex. 2013).

Trial courts, however, must frequently resolve factual disputes before deciding

jurisdictional questions. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789,

794 (Tex. 2002). When the trial court does not issue findings of fact and conclusions

of law (which is the case here), “all facts necessary to support the judgment and

supported by the evidence are implied.” BMC Software, 83 S.W.3d at 795. If the

appellate record includes the reporter’s and clerks records, this Court must accept

the trial court’s implied resolution of any factual issues so long as the trial court’s

decision is supported by legally and factually sufficient evidence.            See id.

Sufficiency review is highly deferential. Id. “The amount of evidence necessary to

affirm a [special appearance] judgment is far less than that necessary to reverse a

judgment.” Johns Hopkins Univ. v. Nath, 238 S.W.3d 492, 497 (Tex. App.—

Houston [14th Dist.] 2007, pet. denied). For both legal and factual sufficiency

purposes, “[t]he factfinder is the sole judge of the credibility of the witnesses and

the weight of their testimony.” Id. A court of appeals may not substitute its own

judgment for that of the fact finder, even if it would reach a different answer on the

                                          30
evidence. Xenos Yuen v. Fisher, 227 S.W.3d 193, 204 (Tex. App.—Houston [1st

Dist.] 2007, no pet.).

                                    ARGUMENT

I.    Law governing Gramercy’s Special Appearance
      The Texas long-arm statute permits Texas courts to exercise jurisdiction over

nonresident defendants. TEX. CIV. PRAC. & REM. CODE § 17.041-.042; GE v. Brown

& Ross Int’l Distribs., Inc., 804 S.W.2d 527, 530 (Tex. App—Houston [1st Dist.]

1990, writ denied). The Texas long-arm statute extends Texas courts’ personal

jurisdiction as far as the federal constitutional requirements of due process will

permit. BMC Software, 83 S.W.3d at 795. Personal jurisdiction over nonresident

defendants is constitutional whenever: (1) the defendants have established minimum

contacts with the forum state, and (2) the exercise of jurisdiction comports with

traditional notions of fair play and substantial justice. Id.

      The minimum contacts of a nonresident can give rise to either general or

specific jurisdiction (Appellees do not argue that Gramercy is subject to general

jurisdiction.) Id. at 795-96. Specific jurisdiction requires: (1) purposeful contact

by the defendants with Texas, and (2) a relationship between those purposeful

contacts and the plaintiff’s causes of action. See Moki Mac River Expeditions v.

Drugg, 221 S.W.3d 569, 576 (Tex. 2007). If a nonresident defendant purposefully

avails itself of the privileges and benefits of conducting business in Texas, then it

                                           31
has sufficient minimum contacts with the state to be subject to personal jurisdiction.

See Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 784 (Tex. 2005).

The following three factors are relevant to purposeful contact analysis:

      First, only the defendant’s contacts with the forum are relevant, not the
      unilateral activity of another party or third person. Second, the contacts
      must be purposeful, not just random, fortuitous, or attenuated. Thus,
      sellers who reach out beyond one state and create continuing
      relationships and obligations with citizens of another state are subject
      to the jurisdiction of the latter in suits based on their activities. Finally,
      the defendant must seek some benefit, advantage, or profit by availing
      itself of the jurisdiction.

Moncrief, 414 S.W.3d at 151 (emphasis added).

      The Texas Supreme Court recently reiterated that it is not the number but

rather the quality and nature of the contacts with the forum state that are important.

Id. Even a single act can be sufficient as long as it creates a substantial connection

to the forum. Id. Although the extent of a defendant’s contacts with the forum state

may be minimal, the quality and nature of those contacts may be substantial. Id. It

is also not necessary that the nonresident defendant’s conduct actually occur in

Texas or that the defendant even enter Texas. Id. At 152. “At its core, the purposeful

availment analysis seeks to determine whether a nonresident’s conduct and

connection to a forum are such that it could reasonably anticipate being haled into

court there.” Id. at 152.

      The parties to a special appearance bear shifting burdens of proof. Kelly v.

Gen. Interior Const., Inc., 301 S.W.3d 653, 658 (Tex. 2010). The plaintiff bears the

                                           32
initial burden of pleading facts sufficient to confer jurisdiction. Id. Both the petition

and plaintiff’s response to the special appearance can be considered in determining

whether plaintiff met this burden. Crithfield v. Boothe, 343 S.W.3d 274, 282 (Tex.

App.—Dallas 2011, no pet.). The defendant then shoulders the burden of negating

all the bases of jurisdiction. Moncrief, 414 S.W.3d at 150.

      If minimum contacts with Texas exist, the court must then consider whether

the exercise of personal jurisdiction would nevertheless offend traditional notions of

fair play and substantial justice. Retamco Operating, Inc. v. Republic Drilling Co.,

278 S.W.3d 333, 341-42 (Tex. 2009). Defendants must present a “compelling case

that the presence of some other considerations renders the exercise of jurisdiction

unreasonable.” Guardian Royal Exch. Assurance, Ltd. v. English China Clays,

P.L.C., 815 S.W.2d 223, 231 (Tex. 1991). “Only in rare cases, however, will the

exercise of jurisdiction not comport with fair play and substantial justice when the

nonresident defendant has purposefully established minimum contacts with the

forum state.” Id.

II.   Gramercy purposefully directed actions at Texas that are substantially
      connected to the allegations in this case

      A.     Gramercy crossed a “bright line” by marketing the Investment
             Strategies and making misrepresentations to Appellees at meetings
             in Texas
      This is not a case involving unilateral actions by Appellees or third parties;

rather, Gramercy marketed and made misrepresentations about the Investment

                                           33
Strategies to Appellees at numerous meetings in Texas. Courts uniformly exercise

specific jurisdiction where a nonresident defendant attended meetings in Texas

concerning the facts of the lawsuit. See, e.g., Moncrief, 414 S.W.3d at 153; Max

Protetch v. Herrin, 340 S.W.3d 878, 887-88 (Tex. App.—Houston [14th Dist.] 2010,

no pet.); Horizon Shipbuilding, Inc. v. Blyn II Holding, LLC, 324 S.W.3d 840, 849

(Tex. App.—Houston [14th Dist.] 2010, no pet.); Citrin Holdings v. Minnis, 305
S.W.3d 269, 284 (Tex. App.—Houston [14th Dist.] 2009, no pet.). For example, in

Moncrief, the Supreme Court of Texas held that a Russian oil and gas company’s

contacts with Texas supported the exercise of personal jurisdiction with regard to a

misappropriation of trade secret claim where the Russian company accepted the

trade secrets at a meeting in Texas. 414 S.W.3d at 153, 156-58. The court rejected

Gazprom’s argument that its “intent in attending the [Texas] meetings was to discuss

an unrelated matter and that they informed the plaintiff of that intent at the

meetings.” Id. at 147. The court reasoned that “courts at the jurisdictional phase

examine business contacts, not what the parties thought or intended.” Id. at 154.

      The Moncrief holding is important for several reasons. First, the Supreme

Court of Texas reinforced the legal principle that “physical presence in the state is

not required but frequently will enhance a potential defendant’s affiliation with a

State and reinforce the reasonable foreseeability of suit there.” Id. at 152 (internal

quotations omitted). Thus, nonresident defendants are more likely to be subject to

                                         34
personal jurisdiction in cases where they have attended meetings in Texas regarding

the subject-matter of the lawsuit. Id. at 152-54. Second, the court distinguished

Michiana and called into question Michiana’s applicability to cases where

jurisdiction is predicated on more than just “an out-of state phone call” initiated by

the plaintiff and shipment of a single product to Texas. See id. at 152-53. Third, the

court held that a nonresident’s contacts with Texas are not unilateral nor random and

fortuitous when the nonresident “had a say in the matter.” Id. at 153 (internal

quotations omitted).

      Likewise in Max Protetch, the court held that voluntarily traveling to Texas

to conduct business with a Texas resident and allegedly making misrepresentations

at that meeting crosses a “bright line” sufficient to establish jurisdiction. 340 S.W.3d

at 887 (emphasis added). Other cases in this appellate district have held similarly.

See Citrin, 305 S.W.3d at 280-89; Horizon, 324 S.W.3d at 850. For instance, in

Citrin several face-to-face meetings in Texas as well as numerous phone calls, faxes,

and emails with Texas residents concerning the real estate partnership at issue met

the minimum contacts standard. Id. at 280-89. The misrepresentations at issue in

the lawsuit allegedly were made during those meetings and in the phone calls, faxes,

and email directed at Texas. Id. at 284. Likewise, in Horizon the court exercised

specific jurisdiction over an out-of-state defendant where the defendant had made

                                          35
alleged misrepresentations to the plaintiff at two face-to-face meetings in Houston.

Horizon, 324 S.W.3d at 850.

       Similarly, in this case, Gramercy crossed this “bright line” by repeatedly

meeting with Appellees in Texas to discuss the Investment Strategies. CR 120-22,

320-21, 427-29, 431-33, 1108-10, 1112-16, 1124-25, 1127-29, 2086-88, 2092-2100,

2104-05, 3701-02. As in Citrin and Horizon, Gramercy directly marketed the

Investment Strategies to Appellees at meetings in Texas on at least two occasions.

CR 427-29, 1108-10, 1115, 1124-25, 2086-88, 2100. Similar to Moncrief, Gramercy

admits that at least the first meeting occurred in Texas. See Appellant Br. at 15; CR

320-21, 3701-02. Gramercy and BDO initiated the meeting.5 CR 427, 1108, 1124,

2086-87. Thus, Gramercy “had a say” in when and where the meeting would take

place. See Moncrief, 414 S.W.3d at 153.

       As in Moncrief, Appellees claim and the record reflects that Gramercy,

through its employee Jay Johnston, made material misrepresentations at the

November 2000 meeting in Texas.                 CR 427-30, 1108-11, 1124-26, 2086-90.

Johnston confirmed many details about the tax-reducing nature of the Investment

Strategies. Id. Johnston touted Sidley Austin and R.J. Ruble’s positive reputations

immediately after BDO’s Shanbrom told Appellees that:

     the Investment Strategies were a legal way to reduce tax liability;

5
 Gramercy disputes this fact but all fact issues must be resolved in Appellees’ favor at this point.
BMC Software, 83 S.W.3d at 795.

                                                36
    if the IRS challenged the validity of the Investment Strategies, Appellees
     would prevail;

    Sidley Austin would issue an “independent” opinion letter concerning
     confirming the propriety of the Strategies; and

    Sidley Austin’s opinion letter would overcome any IRS challenge and would
     provide absolute penalty protection.

CR 121, 428-29, 1110, 1125, 2088. Johnston misrepresented the type of Investment

Strategy that Gramercy would pursue for Appellees in 2000—Gramercy undertook

a digital options strategy, instead of the distressed debt strategy it sold to Appellees,

without informing Appellees of the change until after the transactions were

completed.    CR 123, 430, 1111-12, 1127, 2091-92. Johnston also materially

misrepresented the effect and purpose of the letter agreements that it brought to the

meeting. CR 429-30, 1111, 1126, 2090. Gramercy knew that these statements were

false when made during the Texas meeting with Appellees. CR 120-22.

      Gramercy pitched a second round of Investment Strategies to Appellees at a

meeting in Texas in 2003. CR 168, 1115, 2100. Johnston’s pitch was similar to his

pitch in 2000. CR 1115, 2100. Similar to Moncrief, Johnston once again made

misrepresentations about the legality of the Investment Strategies at this meeting.

Id. When pressed by Lowry, Johnston said that Gramercy had a genuine system set

up to collect on the Russian utility receivables to be used in the Investment Strategy.

Id. Johnston also assured Lowry that the assets could produce a positive return on

                                           37
investment above and beyond the tax savings—a fact Gramercy does not rebut. Id.

In reality, these investments had no economic substance and were merely a sham.

See CR 175-76. Appellees do not argue that BDO’s statements at these marketing

meetings are attributable to Gramercy through the “conspiracy theory of

jurisdiction,” as Gramercy claims. Appellant Br. at 20. Rather, the record shows

that Johnston himself made affirmative misrepresentations and verbally confirmed

statements made by BDO. CR 427-30, 1108-11, 1115, 1124-26, 2086-90, 2100.

      Johnston pitched other investments to Appellees and confirmed that these

investments would allegedly strengthen Appellees’ position in the event of an IRS

audit. CR 120, 429, 1110-11, 1126, 2088-89. Johnston and Shanbrom’s pitch

regarding other investments was centered on linking these other investments to the

tax-advantaged investments. Id. Appellees aver that Gramercy used these other

investments to induce Appellees to participate in the tax-advantaged investments.

Id. Thus, to the extent Gramercy discussed those non-tax advantaged investments

in connection with the tax-advantaged ones, those Texas contacts are relevant for

jurisdictional purposes. See id.

      Gramercy attended more meetings in Texas related to the Investment

Strategies than in Moncrief (2 meetings), Horizon (2 meetings), Citrin (2 meetings),

and Max Protetch (1 meeting). CR 120-22, 320-21, 427-29, 431-33, 1108-10, 1112-

16, 1124-25, 1127-29, 2086-88, 2092-2100, 2104-05, 3701-02. In addition to

                                        38
marketing meetings in 2000 and 2003, Gramercy met with Appellees in Texas on

seven other occasions to discuss the Investment Strategies. Id. The following chart

shows the date, location, and attendees of each of the nine meetings:

 Date                 Location        Attendees
 November 7, 2000     Houston         Lowry,     Moffitt,   Chabaud,     Vannaman,
                                      Appellees’ oil and gas transactional attorney,
                                      Moorman (BDO), Shanbrom (BDO), and
                                      Johnston (Gramercy). CR 120-22, 320-21, 427-
                                      29, 1108-10, 1124-25, 2086-88, 3701-02.

 January 11, 2001     Houston         Lowry, Moffitt, Chabaud, Vannaman, Moorman
                                      (BDO), Shanbrom (BDO), and Johnston
                                      (Gramercy). CR 431, 1112, 1127, 2092.
 May 8, 2001          Houston         Vannaman, Lowry, Chabaud, Moffitt, Shanbrom
                                      (BDO), Moorman (BDO), and Johnston
                                      (Gramercy). CR 431, 1112, 1127, 2093.

 September 27,        Houston         Lowry, Chabaud, Vannaman, Moorman (BDO),
 2001                                 Shanbrom (BDO), and Johnston (Gramercy).
                                      CR 432, 1113, 2094-95.

 June 20, 2002        Houston         Lowry, Chabaud, Moffitt, Vannaman, at least
                                      one representative from BDO, Johnston
                                      (Gramercy), and possibly Scott Seaman
                                      (Gramercy). CR 432, 1113-14, 1128-29, 2096-
                                      97.

 April 9, 2003        Houston         Lowry, Moffitt, Chabaud, Vannaman, at least
                                      one representative from BDO, and Robert
                                      Koenigsberger (Gramercy), Scott Seaman
                                      (Gramercy). CR 433, 1114, 1129, 2098.

 May 26, 2003         Houston         Lowry, Vannaman, Shanbrom (BDO), Moorman
                                      (BDO), and Johnston (Gramercy). CR 168,
                                      1115, 2100.

                                        39
 Date                     Location    Attendees
 February 3, 2004         Houston     Lowry, Vannaman, Johnston (Gramercy),
                                      Seaman (Gramercy), and Koenigsberger
                                      (Gramercy). CR 857, 1116, 2099-2100, 2104-
                                      05.

 July 12, 2004            Houston     Lowry, Vannaman, Johnston (Gramercy),
                                      Seaman (Gramercy), and Robert Rauch
                                      (Gramercy). CR 1116, 2104-05.

      During all except for the July 12, 2004 meeting, Gramercy discussed the tax-

advantaged nature of the Investment Strategies. See Chart above. At many of the

meetings, Gramercy also discussed the legal opinion letters and tax return documents

needed for the Strategies. See Chart above. At the July 12, 2004 meeting, Gramercy

discussed non-tax-reducing investments that Gramercy had previously pitched as

beneficial to the tax-reducing investments. CR 1116, 2104-05. These numerous

meetings in Texas between Gramercy and Appellees are more than sufficient to

establish jurisdiction.

      B.     Gramercy’s meeting in Texas are substantially connected to the
             Investment Strategies
      For specific jurisdiction to arise, “there must be a substantial connection

between [the nonresident’s forum contacts] and the operative facts of the litigation.”

Moki Mac, 221 S.W.3d at 585. A connection between the forum contacts and the

facts of the litigation is substantial where the forum contacts “will be the focus of

the trial.” Id. Courts, including the Supreme Court of Texas, have found a

                                         40
substantial connection where the plaintiff’s claims related to misrepresentations

made at meetings in Texas. Moncrief, 414 S.W.3d at 153; Max Protetch, 340 S.W.3d

at 888; Horizon, 324 S.W.3d at 849-50.

       Here, Gramercy’s numerous, purposeful contacts are substantially connected

to the Investment Strategies at the center of this case. The trial against Gramercy

will focus largely on Gramercy’s development, marketing, sale, and implementation

of the Investment Strategies. Appellees allege, among other things, fraud, negligent

misrepresentation, and breach of fiduciary duty against Gramercy. CR 189-95, 201-

208.   Statements made by Gramercy about the Investment Strategies will be

critically important at trial.   As in Max Protetch, Gramercy employees and

representatives made many of the misrepresentations to Appellees at face-to-face

meetings in Texas and in phone calls, mailings, faxes, and emails directed to

Appellees and Appellees’ representative in Texas. See, e.g., CR 120-22, 320-21,

427-29, 431-33, 1108-10, 1112-16, 1124-25, 1127-29, 2086-88, 2092-2100, 2104-

05, 3701-02. Gramercy states that Appellees “do not claim Mr. Johnston made any

of the tax-related statements that form the basis for their claims at the November

2000 Texas meeting.”      Appellant Br. at 17.    But the record is teeming with

allegations, testimony, and documentary evidence concerning Johnston’s statements

at the November 2000 meeting about the tax advantages and legality of the

Investment Strategies. See, e.g., CR 120-22, 2086-89, 2100.

                                         41
      Gramercy seeks to sever the connection between its numerous contacts with

Texas and the underlying facts of Appellees’ lawsuit by arguing that the IMAs and

letter agreements contain reliance disclaimer provisions that purportedly disclaim

Gramercy’s role in providing tax advice. See Appellant Br. at 19-20. But, as the

Supreme Court of Texas teaches, for jurisdictional purposes, courts must focus on

the physical contacts of the parties and not on the merits of underlying claims or

defenses. Michiana, 168 S.W.3d at 788-91. These contractual provisions do not

diminish the fact that Gramercy did, in fact, discuss the tax advantages and legality

of the Investment Strategies with Appellees in Texas. E.g., CR 427-29, 1108-1111,

1115, 1124-26, 2086-90, 2100. Moreover, if the IMAs and letter agreements are

going to be a focus at trial (as Gramercy contends), the fact that Gramercy brought

the agreements to Texas and discussed them with Appellees is a jurisdictional

contact substantially related to the operative facts of the litigation. CR 429-30, 1111,

1126, 2089-90. Additionally, Appellees have a claim to rescind these agreements,

thus, the agreements will be substantially involved at trial. CR 196-97.

      A substantial connection exists between the Gramercy’s statements at Texas

meetings and the claims in this case even if Gramercy had never discussed or been

involved in the technical “tax code” aspects of the transaction (although, the

previously-discussed facts show that it did). See e.g., CR 427-29, 1108-1111, 1115,

1124-26, 2086-2090, 2100. For example, Gramercy misrepresented the potential

                                          42
profitability of the distressed debt assets used in the Investment Strategies, which

was part and parcel of convincing Appellees that the transactions had the necessary

“economic substance” to support the claimed tax treatment. See CR 1115, 2100.

According to De Castro West—one of the law firms that Gramercy and BDO touted

to Appellees —in order for the Investment Strategies to have been viable, they had

to have “economic substance,” or a reasonable possibility of profit without regard to

tax avoidance. CR 1008-1105 (at VANN0004659-68). Gramercy represented to

Appellees that the Investment Strategies had such economic substance, both at

meetings in Texas and in statements to the law firms who authored legal opinion

letters concerning the Investment Strategies.            See CR 1008-1105 (at

VANN0004620), 1115, 2100. Indeed, Lowry and Vannaman specifically asked

Gramercy’s Johnston about the profit potential of some of the distressed debt assets

at a meeting in Houston in 2003. CR 1115, 2100. According to Lowry and

Vannaman,

      Johnston said that the assets were Russian utility receivables and that he had
      personally been to Russian to investigate the investment and had the collection
      program under control . . . [and] . . . repeatedly assured [Vannaman and
      Lowry] that Gramercy’s debt collection efforts on these utility receivables
      were genuine and that the assets could produce a positive return on
      investment above and beyond the tax savings.

Id. (emphasis added). Similarly, one of De Castro West’s legal opinion letters for

the 2004 Distressed Debt Strategy states,

                                         43
      [b]ased on the investment information provided by [Gramercy Asset
      Management LLC] as to the profitability of the Notes reaching certain price
      levels at which they would be profitable, [L-Falling Creek LLC] believed, and
      continues to believe, that [L-Falling Creek LLC] has, and will continue to
      have, a reasonable opportunity to earn a significant economic profit from the
      Transactions in excess of all fees and transaction costs and without regard to
      tax benefits.

1008-1105 (at VANN0004620). Thus, even if Gramercy never uttered the magic

word “tax” in communications with Appellees (which it did numerous times)

Gramercy’s contacts with Texas still substantially relate to Appellees’ claims.

      C.     Gramercy drafted, negotiated, and entered into numerous
             contracts with Texas-resident Appellees contemplating a long-term
             relationship with performance occurring at least in part in Texas
      Through face-to-face meetings and other communications, Gramercy drafted,

negotiated, and entered into numerous contracts with Texas-resident Appellees

contemplating a long-term relationship with performance occurring at least in part

in Texas. See, e.g., CR 2089-91, 2096, 2098, 2100-2103, 2126-2201, 2208-2318,

2370-72, 2374-75, 2378-2682, 2841-2923, 3077-3204, 3207-3464. A nonresident

can be subject to personal jurisdiction when a contract formed between the resident

and nonresident “contemplates a long-term agreement.” Smart Call, L.L.C. v. Genio

Mobile, 349 S.W.3d 755, 762 (Tex. App.—Houston [14th Dist.] 2011, no pet.).

Likewise, a contract “may establish sufficient minimum contacts when considered

against the backdrop of prior negotiations and contemplated future consequences,

along with the terms of the contract and the parties’ actual course of dealing.” Citrin,

                                          44
305 S.W.3d at 281 (citing Burger King v. Rudzewicz, 471 U.S. at 478-79) (internal

quotations omitted). Contrary to Gramercy’s contention, accepting payments from

a Texas resident under the terms of a contract, while not determinative, is a factor

for personal jurisdiction purposes. Am. Preferred Servs., Inc. v. Harrison, No. 07-

11-0065-CV, 2011 WL 4485463, at *1-2 (Tex. App.—Amarillo Sept. 28, 2011, no

pet.). And a choice of law clause is not dispositive in determining whether a forum

state has personal jurisdiction over a nonresident. Citrin, 305 S.W.3d at 282.

      This case is significantly different from the single, out-of-state sale situation

presented by Michiana. 168 S.W.3d at 786-88. Here, Gramercy drafted, negotiated,

and entered into numerous contracts with Appellees over a multi-year period. See,

e.g., CR 2089-91, 2096, 2098, 2100-2103, 2126-2201, 2208-2318, 2370-72, 2374-

75, 2378-2682, 2841-2923, 3077-3204, 3207-3464. Gramercy presented some of

the draft contracts—including the 2000 IMAs, letter agreements, and ITAs—at face-

to-face meetings in Texas. See, e.g., CR 429-30, 1111-12, 1114, 1126, 2089-90,

2098. Gramercy presented other draft agreements, such as the 2000 IPAs and 2003

IMAs, to Appellees’ representative in Texas via fax or email. CR 2090-91, 2095-

96, 2100-03. Just as in Citrin, Gramercy also negotiated and discussed the various

agreements in phone calls and emails directed to Appellees’ representative in Texas.

Id. Gramercy sent final versions of the agreements to Texas intending for Appellees

to sign and return them. CR 2090-91, 2095-96, 2100-03.

                                         45
      The terms of the agreements contemplated a long-term relationship between

the parties with performance occurring at least in part in Texas. See, e.g., CR 2089-

91, 2096, 2098, 2100-2103, 2126-2201, 2208-2318, 2370-72, 2374-75, 2378-2682,

2841-2923, 3077-3204, 3207-3464. For instance, the 2000 and 2003 IMAs required

Gramercy to provide periodic account updates. CR 2136-2201, 3085-3204. The

IMAs also contained notice requirements that obligated Gramercy to make all

necessary communications directly to Appellees in Texas. E.g., CR 2143. The

course of conduct between Gramercy and Appellees indicates that required notices

from Gramercy were, in fact, sent to Appellees or Appellees’ representative in

Texas. CR 434, 1116, 1130, 2098, 2099-2101, 2103-04. Gramercy communicated

with Appellees and Appellees’ representative in Texas over a long period of time to

structure and implement the Investment Strategies. See, e.g., CR 2090-2104. The

IMAs appointed Gramercy Advisors (in the 2000 IMAs) and Gramercy Asset

Management (in the 2003 IMAs) as attorneys-in-fact for Investment LLCs. See,

e.g., CR 2137, 3086. As attorneys-in-face for Texas-resident Appellees, Gramercy

drafted, negotiated, and entered into transactional agreements necessary to carry out

the Investment Strategies, including subscription agreements, assignment and

assumption agreements, 2000 IPAs, ITAs, 2003 ITAs, contribution agreements, and

operating agreements. See, e.g., CR 2089-91, 2096, 2098, 2100-2103, 2126-2201,

2208-2318, 2370-72, 2374-75, 2378-2682, 2841-2923, 3077-3204, 3207-3464.

                                         46
Many of these agreements contained similar notice requirements. See, e.g., 2391,

2851, 3357.

      Other contractual terms as well as the parties’ course of conduct similarly

illustrate a long-term, Texas-connected relationship between Appellees and

Gramercy. See CR 2136-2201, 3085-3204. The 2000 and 2003 IMAs required the

Investment LLCs to contribute large sums of money to Gramercy or Gramercy-run

entities. CR 2090, 2101; see also, e.g., CR 2137, 3086. Gramercy sent requests for

these payments to Appellees in Texas and accepted payments from Texas bank

accounts. CR 2089-90, 2101. Gramercy helped convert some of the entities

involved in the 2004 Distressed Debt Strategy to Texas LLCs. CR 2103.

      When the IRS began audit proceedings against Appellees, Gramercy received

an audit notice concerning LMC. CR 2105, 3556-60. Gramercy faxed this audit

notice to Appellees in Texas. Id. Gramercy aided Appellees in the audit by wiring

payments from LMC’s Gramercy-controlled bank accounts to Chamberlain

Hrdlicka to pay the legal bill associated with the audit. CR 929-31, 2106. Gramercy,

as manager of LMC, also paid Baker Hostetler, a Texas law firm, for work related

to the Investment Strategies. CR 2106, 3583-84.

      Gramercy touts the fact that the IMAs contained New York choice of law

provisions. Appellant Br. at 5. But choice of law provisions are “not dispositive”

and can be outweighed by other Texas-centered contacts. Citrin, 305 S.W.3d at 282-

                                        47
84. For example, in Citrin the exercise of personal jurisdiction was proper, despite

the existence of a New York choice of law provision, because (1) the contract was

negotiated and consummated in Texas, (2) the contract contemplated an “ongoing

business relationship to be performed at least in part in Texas,” and (3) the

nonresident made misrepresentations concerning the business relationship during

meetings in Texas and in faxes, emails, and mail sent to Texas. Id. As in Citrin,

Gramercy’s purposeful contacts with Texas outweigh the New York choice of law

provision contained in the IMAs. Id. Moreover, Appellees seek to rescind those

agreements. CR 196-97.

      D.    Gramercy directed preparation of tax documents related to the
            Investment Strategies and delivered the documents to Texas
      As the manager of Appellee-owned LMC, Gramercy retained BDO and FSG

to prepare LMC’s tax returns and corresponding K-1s containing the tax losses

generated by the Investment Strategies for tax years 2000-2005. CR 138, 149, 156,

165, 861-71, 2092-93, 2096-2100, 2103-04. This accounting work was essential to

the Investment Strategies and, importantly, contained fraudulent misrepresentations

by Gramercy, BDO, and FSG concerning the proper tax treatment of the tax losses

generated by the Investment Strategies. See id. The K-1s prepared by FSG and

BDO, with Gramercy’s input, directed Appellees to claim the purported losses on

their individual tax returns. Id. Without the partnership returns establishing the

                                        48
losses and the K-1s reflecting those losses, the Investment Strategies would have had

no tax impact. Id.

      Gramercy provided significant guidance to BDO on how to prepare the tax

returns and K-1s, even telling BDO what tax forms to fill out. CR 1275-80.

Gramercy similarly directed FSG’s preparation on tax documents related to the

Investment Strategies. CR 846-47, 851-52, 856-60, 872-73. The level of guidance

that Gramercy provided the accountants went well beyond “transmit[ting] raw

financial information,” as Gramercy claims. Appellant Br. at 27-28.

      Gramercy mailed many of these tax returns and K-1s to Appellees in Texas,

and on at least one occasion hand-delivered the tax returns and K-1s to Texas:

    For the 2000 and 2001 tax years, Gramercy communicated with Appellees at
     a meeting in Texas about the timing of the tax returns and then had BDO
     deliver the returns and K-1s to Appellees from BDO’s Houston office. CR
     2092-93, 2096-97. This constitutes a jurisdictional contact even though
     Gramercy used BDO as an intermediary to deliver the tax documents.
     Harrison, 2011 WL 4485463, at *2 (acts of intermediary attributable to
     nonresident defendant for jurisdictional purposes).

    For the 2002 tax year, Gramercy delivered the FSG-prepared tax return and
     K-1s directly to Appellees’ representative in Texas. CR 2098.

    For the 2003, Gramercy hand-delivered the preliminary K-1s to Appellees at
     a meeting in Texas. CR 2099-2100. It later mailed the final return and K-1s
     to Appellees’ representative in Texas. CR 2099-2100, 2103.

    For the 2004 tax year, Gramercy mailed the final K-1s directly to Appellees
     in Texas. CR 434, 1116, 1130, 2103-04, 3465-3536. Gramercy included a
     cover letter with the 2004 tax documents containing multiple paragraphs
     about tax shelter laws. CR 3531-36. The actual tax returns and K-1s for 2004
     included a disclosure that Gramercy Advisors LLC had “promoted, solicited,

                                         49
      or recommended [Appellees’ participation] in the transaction, or provided tax
      advice related to the transaction.” See, e.g., CR 3474.

      E.    Gramercy made millions of dollars from its Texas contacts through
            fees generated by the investment management agreements and
            undisclosed kick-backs from BDO
      Gramercy profited from its purposeful actions in Texas through the 2000 and

2003 IMAs and through undisclosed kick-backs derived from consulting fees paid

by Appellees to BDO. CR 103-04. In analyzing purposeful availment, courts

consider whether the nonresident defendant sought a “benefit, advantage, or profit

by availing itself of Texas.” Max Protetch, 340 S.W.3d at 887 (asserting personal

jurisdiction over nonresident where the nonresident received $65,000 in payments

from the Texas-resident plaintiff under a contract); Moncrief, 414 S.W.3d at 151.

      Gramercy profited from the management fees and incentive fees it received

from the Texas-resident Appellees under the 2000 and 2003 IMAs. See CR 2138,

2149, 2160, 2171, 2182, 2193, 3085-3204. Gramercy took its management and

incentive fees from the $4,000,000 related to the first phase of the Investment

Strategy and $750,000 related to the second phase as well as millions of dollars

invested in the non-tax advantaged investments. See CR 2090, 2094, 2101.

      Gramercy also profited significantly from Texas through the undisclosed

kick-backs it received from BDO related to Appellees’ Investment Strategies. CR

103-04, 1281-1283, 1890-1902, 2077-82.        Gramercy received these kick-back

payments from a portion of the consulting fees that Appellees had paid BDO. See

                                        50
id.   In total, Gramercy was paid $2,985,000 by BDO related to Appellees’

Investment Strategies. CR 2074-75, 2077-82. Gramercy did not receive these

payments based on a mere “collateral relation to the forum state,” as was the case in

Michiana. 168 S.W.3d at 788.      Rather, Gramercy received these kick-back

payments for successfully marketing and selling the Investment Strategies to

Appellees in Texas. In this way, the money is directly related to Gramercy’s

constitutionally cognizable contacts with Texas.

      Gramercy tries to obscure the relevance of the kick-backs payments by

claiming that BDO paid the money to Gramercy Financial Products LLC—an entity

not party to this lawsuit. Appellant Br. at 29 n.16. Gramercy fails to mention,

however, that the invoices to BDO for the kick-backs were sent by Defendant Jay

Johnston on Gramercy Advisor’s letterhead.      CR 2077-82. Regardless of which

Gramercy entity eventually ended up with the kick-back money, it was Gramercy

Advisors and Johnston that invoiced the money. See id. Thus, those Defendants

benefitted from the kick-backs.

      F.     Gramercy communicated regularly with Appellees in sent monthly
             account statements to Appellees in Texas, set up a secure website
             for Appellees to view account information, and invited Appellees to
             participate in quarterly conference calls from Texas
      Gramercy sent regular, monthly account statements to Appellees in Texas, set

up a secure website for Appellees to view account information, and invited

Appellees to participate in quarterly conference calls from Texas. CR 43, 279, 1116,

                                         51
1130, 2105, 3638-39, 3641. Regular mailings and phone calls by a nonresident into

a forum state are relevant for jurisdictional purposes. Cartlidge v. Hernandez, 9
S.W.3d 341, 348 (Tex. App.—Houston [14th Dist.] 1999, no pet.); Peters v. Top

Gun Executive Group, 396 S.W.3d 57, 69-71 (Tex. App.—Houston [14th Dist.]

2013, no pet.) Additionally, maintaining an interactive website accessible by forum

residents is a factor for jurisdictional purposes. Daimler-Benz A.G. v. Olson, 21
S.W.3d 707, 725 (Tex. App.—Austin 2000, pet dism’d). In Texas, the quality and

nature of website contacts are evaluated on a sliding scale. Id.

      Although the account statements and email “flash” previews do not, on their

face, mention the Investment Strategies, the statements and previews are connected

to the Investment Strategies in two ways. First, the investment returns shown on the

statements are related to non-tax advantaged investments that Gramercy told

Appellees would help strengthen the position of their tax-advantaged investments.

CR 2088-89, 2104-05.       Second, the statements concern the very entities that

Gramercy used to implement the Investment Strategies—including LMC, MPICS,

SGASSI, DSAMP, WAINKR, STKEE, and RDICTD. CR 434-45, 1116, 1118-21,

1130-35, 2105, 3542-55.      In addition to the mail and email communications,

Gramercy used a secure website to communicate account activity to Appellees. CR

2105. In this way, Gramercy’s website went beyond a purely passive website meant

                                         52
to advertise to the general public and is thus relevant for jurisdictional purposes.

Olson, 21 S.W.3d at 725.

      Gramercy, usually through its employee Scott Seaman, also invited Appellees

to participate in quarterly conference calls related to the non-tax advantaged

investments that were used to strengthen the position of Appellees’ tax-advantaged

investments. CR 2105. Appellees’ representative, Newt Vannaman, participated in

many of these conference calls from Texas. Id.

      G.    Gramercy managed entities—majority owned by Texans—
            involved in the Investment Strategies
      Gramercy managed many of the entities—majority owned by Texans—that

were involved in the Investment Strategies. Participating as a manager, officer, or

director of a Texas-based entity can subject a nonresident to jurisdiction in Texas.

TexVa, Inc. v. Boone, 300 S.W.3d 879, 888 (Tex. App.—Dallas 2009, pet. denied).

For the years 2000 to 2004, Gramercy was “sole manager” and a member of LMC—

a partnership majority-owned by Appellees. CR 1226-66. Gramercy was also “sole

manager” of MPICS, RDICTD, and SGASSI—the entities involved in the 2004 and

2005 Investment Strategies and majority-owned by Appellees. CR 1729-70, 1781-

1822, 1833-74. Gramercy-controlled entities owned membership interests in other

entities involved in the 2004 and 2005 Investment Strategies. CR 1729-70, 1781-

1822, 1833-74, 3221-3346. For example, EROSE and Defendant Gramercy Asset

Management collectively owned over 10% of DSAMP (CR 3304), WAINKR (CR

                                        53
3262), and STKEE (CR 3346). Gramercy Asset Management also owned 1.1% of

MPICS (CR 1770), SGASSI (CR 1822), and RDICTD (CR 1874).

      Gramercy reached out to Texas by selling Texas-resident Appellees various

partnership interests and distressed debt assets that were involved in the Investment

Strategies. Gramercy sold interests in LMC to Appellees through subscription

agreements in 2000. CR 130, 2091, 2208-2299. Gramercy sent these subscription

agreements to Texas for Appellees’ signatures.        CR 2091.     The subscription

agreements included Texas addresses for the Investment LLCs and also included

home addresses for the individual Appellees. See, e.g, CR 2215-16. Gramercy knew

it was selling part of LMC to Texas residents. See id. Gramercy sold Appellees

distressed debt assets through interest purchase agreements and interest transfer

agreements, which agreements Gramercy drafted and sent to Appellees in Texas for

their signatures. CR 1300-90, 1488-1590, 1601-1718, 2378-2682, 2841-2923, 3347-

3436. These agreements, likewise, listed Texas addresses for the Investment LLCs.

See, e,g., CR 1313.

                                         54
III.   The cases cited by Gramercy do not apply to this case involving numerous
       face-to-face meetings in Texas initiated by Gramercy
       Gramercy cites several cases in its Appellant’s Brief.6 But these cases do not

apply to the present lawsuit involving numerous Texas meetings initiated by

Gramercy at which Gramercy made material misrepresentations Appellees.

       Gramercy cites Griego to argue that contracting with a Texas resident,

accepting fees from a Texas resident, and sending periodic account statements to

Texas are insufficient to confer jurisdiction. See Appellant Br. at 22, 24, 28-29. The

facts here significantly differ from Griego for two reasons. First, unlike here, the

nonresident defendant in Griego did not conduct meetings in Texas to market and

implement the transactions at issue in the case. 221 S.W.3d at 596-99. Second,

unlike here, in Griego the nonresident defendant was not involved in the formation

of the business transaction at issue in the dispute. Harrison, 2011 WL 4485463 at

*3-5 (Pirtle J. concurring) (distinguishing Griego). Here, as cited extensively above,

Gramercy co-directed the deal from start to finish.

6
 Gramercy relies heavily on IRA Res., Inc. v. Griego, 221 S.W.3d 592 (Tex. 2007) and Proskauer
Rose LLP v. Pelican Trading, Inc., 2009 WL 242993 (Tex. App.—Houston [14th Dist] Feb. 3,
2009, no pet.)). Gramercy also cites Farwah v. Prosperous Mar. Corp., 220 S.W.3d 585, 597
(Tex. App.—Beaumont 2007, no pet.), Gustafson v. Provider HealthNet Servs., Inc., 118 S.W.3d
479 (Tex. App.—Dallas 2003, no pet.), Marathon Oil v. A.G. Ruhrgas, 182 F.3d 291, 295 (5th Cir.
1999), Turan v. Universal Plan Inv. Ltd., 70 F. Supp. 2d 671, 674 (E.D. La. 1999), Bozell Grp.,
Inc. v. Carpet Co-op of Am. Ass’n, Inc., No. 00 CIV. 1248, 2000 WL 1523282, at *7 (S.D.N.Y.
Oct. 11, 2000), Hotel Partners v. Craig, 993 S.W.2d 116 (Tex. App.—Dallas 1998, pet. denied),
Lang v. Capital Res. Investments, I, LLC, 102 S.W.3d 861, 866 (Tex. App.—Dallas 2003, no pet.),
and Magnolia Gas Co. v. Knight Equip. & Mfg. Corp., 994 S.W.2d 684, 688, 691 (Tex. App.—
San Antonio 1998).

                                              55
      Gramercy cites Proskauer and argues that the facts and reasoning apply

equally here. See Appellant Br. at 22, 33. Although Proskauer concerns a similar

abusive tax shelter, Gramercy’s contacts with Texas here are much more substantial

than the law firm’s jurisdictional contacts in Proskauer. 2009 WL 242993 at *1-3.

In Proskauer, the nonresident law firm did not conduct meetings in Texas to market

its services. Id. In fact, the law firm never met with plaintiffs in Texas. Id. The

law firm’s contacts with Texas were limited to five emails and a letter to the

plaintiffs. Id. at *3. And as mentioned above, Gramercy met with Plaintiffs in Texas

nine times and was involved in all stages of the Investment Strategies; it didn’t just

merely issue a legal opinion.

      Finally, Gramercy cites Farwah, Gustafson, Marathon Oil, Turan, Bozell,

Hotel Partners, and Lang to argue that meetings in Texas unrelated to the subject

matter of the case are not sufficient for personal jurisdiction purposes. Appellant

Br. at 17-21. These cases, however, are a straw man because, as alleged in the

Petition and supported by the record, Gramercy voluntarily came to Texas to discuss

the Investment Strategies and made numerous misrepresentations at those meetings.

CR 120-22, 320-21, 427-29, 431-33, 1108-10, 1112-16, 1124-25, 1127-29, 2086-88,

2092-2100, 2104-05, 3701-02. The subject matter of those meetings is directly

related to this lawsuit. Id.

                                         56
      Additionally, Gramercy cites Magnolia Gas to argue that an in-state meeting

initiated by someone other than the nonresident defendant is not sufficient to confer

jurisdiction. Appellant Br. at 21. Gramercy’s argument is contrary to the Texas

Supreme Court’s more-recent holding in Moncrief, where the court found it

sufficient that Gazprom simply “agreed to attend Texas meetings.” 414 S.W.3d at

153. In any event, here, Appellees have abundant testimony and evidence showing

that Gramercy initiated at least some of the Texas meetings and agreed to conduct

the other meetings in Texas. See, e.g., CR 2086-87, 2093, 2349-52, 2361-62.

IV.   Exercising personal jurisdiction over Gramercy will not offend
      traditional notions of fair play and substantial justice
      Exercising personal jurisdiction over Gramercy will not offend traditional

notions of fair play and substantial justice. First, the burden on Gramercy to defend

against Appellees’ claims in Texas is slight compared to the millions of dollars it

made from the Investment Strategies and other Texas clients. CR 103-04, 1281-83,

1890-1902, 2074-76. “Distance to travel is generally not a significant consideration

due to modern transportation.” Citrin, 305 S.W.3d at 288. The Texas Supreme

Court recently held that subjecting a Russian company to jurisdiction in Texas did

not offend traditional notions of fair play and substantial justice. Moncrief, 414
S.W.3d at 154-56. Based on the numerous visits Gramercy made to Texas and the

millions of dollars Gramercy made from the Investment Strategies, Gramercy should

not be surprised to be haled into a Texas court.

                                         57
      Second, Texas has a significant interest in providing a convenient forum to its

citizens to redress torts allegedly committed in whole or in part in Texas. Moncrief,
414 S.W.3d at 155.         Third, Appellees have an equally important interest in

adjudicating the dispute where the injuries occurred and in a forum where all parties

to the scheme can be joined together. Id. Fourth, the interstate judicial system will

benefit from a trial in Texas. Id. If the Court severs Gramercy from this lawsuit,

Appellees will be forced to sue Gramercy in another forum without the benefits of

efficient party-discovery from the other Defendants. It is far more efficient to try

this lawsuit with all Defendants in one forum and in a location where many of the

witnesses—including Appellees, Vannaman, and Moorman—are located.

                           CONCLUSION AND PRAYER

      There is legally and factually sufficient evidencing showing a substantial

connection between Gramercy’s numerous contacts with Texas and the operative

facts of the litigation.    Gramercy met with Appellees in Texas on numerous

occasions to market, sell, and implement the Investment Strategies at issue in this

case. The record shows that Gramercy made misrepresentations concerning the

Investment Strategies at those meetings. Those meetings alone should subject

Gramercy to jurisdiction in Texas. Gramercy’s other numerous contacts with Texas

are also substantially connected to the Investment Strategies.

                                         58
      As a result, this Court should affirm the order denying Gramercy’s Special

Appearance. Appellees also ask for all other relief to which they are entitled.

                                       Respectfully submitted,

                                       LOEWINSOHN FLEGLE DEARY, LLP

                                       /s/ Tyler M. Simpson
                                       DAVID R. DEARY
                                       Texas Bar No. 05624900
                                       W. RALPH CANADA, JR.
                                       Texas Bar No. 03733800
                                       WILSON E. WRAY
                                       Texas Bar No. 00797700
                                       TYLER M. SIMPSON
                                       Texas Bar No. 24066061
                                       12377 Merit Drive, Suite 900
                                       Dallas, Texas 75251
                                       (214) 572-1700 - Telephone
                                       (214) 572-1717 – Facsimile

                                       ATTORNEYS FOR APPELLEES

                                         59
                       CERTIFICATE OF COMPLIANCE

      I certify that this document was produced on a computer using Microsoft

Word 2013 and contains 13,548 words, as determined by the computer software’s

word-count function, excluding the sections of the document listed in Texas Rule of

Appellate Procedure 9.4(i)(1).

      This brief complies with the typeface requirements of Texas Rule of Appellate

Procedure 9.4(e) because it contains Times New Roman typeface in 14 point (12

point in footnotes).

                                             /s/ Tyler M. Simpson
                                             Tyler M. Simpson

                                        60
                         CERTIFICATE OF SERVICE

      As required by Texas Rule of Appellate Procedure 6.3 and 9.5(b), (d), (e), I

certify that I have served this document on all parties, which are listed below, on

March 5, 2015 as follows:

David C. Mattka (lead attorney)                    via e-filing and email
MUNSCH HARDT KOPF & HARR, P.C.
401 Congress Avenue, Suite 3050
Austin, Texas 78701
(512) 391-6100 (telephone)
(512) 391-6149 (fax)
dmattka@munsch.com

Sean O’Shea (pro hav vice)                         via e-filing and email
Michael E. Petrella (pro hav vice)
Daniel M. Hibshoosh (pro hav vice)
O’SHEA PARTNERS LLP
521 Fifth Avenue, 25th Floor
New York, New York 10175
(212) 682-4426 (telephone)
(212) 682-4437 (fax)

                                             /s/ Tyler M. Simpson
                                             Tyler M. Simpson

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