Court Opinion

ID: 4556709
Source: CourtListenerOpinion
Date Created: 2020-08-19 12:11:21.05951+00
Date Added: 2024-06-11T08:44:52.558232
License: Public Domain

Dissenting Opinion Filed August 18, 2020

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

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

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

                            DISSENTING OPINION
           Before Chief Justice Burns1 and Justices Pedersen, III, and Evans
                         Dissenting Opinion by Justice Evans

        Appellant Michael J. Peter, a Florida resident, appeals the trial court’s denial

of his special appearance contesting personal jurisdiction regarding appellee Joshua

Stern’s claims for fraud and breach of contract pertaining to a failed business venture

in the Republic of Panama. Stern has no evidence of any intentional contact by Peter

with Texas or evidence this transaction has any connection to Texas. Although it is

uncontested Texas has jurisdiction over others connected with Stern’s claims, Texas

    1
     The Honorable David L. Bridges, Justice, participated in the submission of this case, however, he did
not participate in the issuance of this opinion due to his death on July 25, 2020. Chief Justice Robert Burns
has substituted for Justice Bridges and has reviewed the briefs and the record before the Court.
does not have jurisdiction over Peter. Because Peter challenges the legal and factual

sufficiency of the evidence supporting the trial court’s denial of his special

appearance and because I agree there is no evidence in this record to support the trial

court’s ruling, I would reverse the trial court’s order and render judgment granting

Peter’s special appearance. Because the majority concludes otherwise, I respectfully

dissent.

      We review de novo the trial court’s determination of a special appearance.

Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007). Where,

as here, the trial court did not issue findings of fact and conclusions of law with its

ruling, we imply all facts that are supported by the evidence to uphold the trial

court’s determination. Moki Mac, 221 S.W.3d at 574.

      The defendant bears the burden of negating all bases of personal jurisdiction

alleged by the plaintiff. See Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653,

658 (Tex. 2010). Once the defendant negates the bases alleged, the plaintiff must

show, as a matter of law, that the court has personal jurisdiction over the nonresident

defendant. Alliance Royalties, LLC v. Boothe, 329 S.W.3d 117, 120 (Tex. App.—

Dallas 2010, no pet.); Assurances Generales Banque Nationale v. Dhalla, 282
S.W.3d 688, 695–96 (Tex. App.—Dallas 2009, no pet.).

      Jurisdiction may be negated on either factual or legal grounds. Kelly, 301
S.W.3d at 659. One factual ground that may be challenged in the jurisdictional

inquiry is an agency relationship by which the contacts of an agent are sought to be
                                         –2–
attributed to the principal. Novamerican Steel, Inc. v. Delta Brands, Inc., 231
S.W.3d 499, 511 (Tex. App.—Dallas 2007, no pet.); see Davis v. Asano Bussan Co.,

212 F.2d 558, 563–64 (5th Cir. 1954).

      A principal must be shown to control another person’s conduct of business or

to have delegated to that other person management of some matter for the other to

be the principal’s agent. See Schott Glas v. Adame, 178 S.W.3d 307, 315 (Tex.

App.—Houston [14th Dist.] 2005, pet. denied), disapproved of on other grounds by

PHC–Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 169 (Tex. 2007);

Walker Ins. Servs. v. Bottle Rock Power Corp., 108 S.W.3d 538, 549 (Tex. App.—

Houston [14th Dist.] 2003, no pet.). Courts do not presume an agency relationship

exists, rather the party asserting an agency relationship exists has the burden of

proof. See Schott Glas, 178 S.W.3d at 315; Bottle Rock, 108 S.W.3d at 549.

      Discharging the burden of proof requires proving an essential element of the

principal–agent relationship that the alleged principal had the right to control the

actions of the alleged agent. See Exxon Corp. v. Tidwell, 867 S.W.2d 19, 21 (Tex.

1993). To prove the right to control more must be proven than merely the right to

assign tasks; there must be proof of the right to dictate the means and details of the

process by which an agent will accomplish the task. See Ross v. Tex. One P’ship,

796 S.W.2d 206, 210 (Tex. App.—Dallas 1990), writ denied, 806 S.W.2d 222 (Tex.

1991) (per curiam). If there is proof only of the right to control the end sought to be

accomplished, but not the means and details of how it should be accomplished, then
                                         –3–
what has been proven is that the alleged agent is merely employed as an independent

contractor and not as an agent. Schott Glas, 178 S.W.3d at 315; First Nat’l Bank v.

Bullock, 584 S.W.2d 548, 551–52 (Tex. App.—Austin 1979, writ ref’d n.r.e.). These

concepts are distilled in the pattern jury charge as follows:

       An “employee” is a person in the service of another with the
       understanding, express or implied, that such other person has the right
       to direct the details of the work and not merely the result to be
       accomplished.

Agency and Special Relationships, ¶ 10.1, TEX. PATTERN JURY CHARGE (2018).

       A person is not acting as an employee if he is acting as an “independent
       contractor.” An independent contractor is a person who, in pursuit of
       an independent business, undertakes to do specific work for another
       person, using his own means and methods without submitting himself
       to the control of such other person with respect to the details of the
       work, and who represents the will of such other person only as to the
       result of his work and not as to the means by which it is accomplished.
Id. at ¶ 10.8.

       In the context of personal jurisdiction, this distinction between agent and

independent contractor is outcome determinative because only an agent’s contacts

with the forum are attributable to the principal, not the contacts of an independent

contractor. See Schott Glas, 178 S.W.3d at 315; Bottle Rock, 108 S.W.3d at 549 n.4

(citing Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42,

55 (1st Cir. 2002)).

       I focus on specific jurisdiction because Stern limited his pleading and

arguments to specific jurisdiction. We analyze specific jurisdiction on a claim-by-

claim basis. See Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 150
                                         –4–
(Tex. 2013). But when the parties provide no pleading, argument, or analysis

regarding the claims arising from different forum contacts, we analyze all the claims

together on the same jurisdictional facts. Id. at 150–51 (“[A] court need not assess

contacts on a claim-by-claim basis if all claims arise from the same forum

contacts.”).

      Specific jurisdiction exists only when the nonresident defendant’s alleged

liability arises out of or is related to his activity conducted within the forum. See

Moki Mac, 221 S.W.3d at 576. The contacts with the forum that we are to analyze

for jurisdictional purposes are those where the contacts proximately result from

actions by the defendant himself that create a substantial connection with the forum

State. See Moncrief Oil, 414 S.W.3d at 151 (citing Burger King Corp. v. Rudzewicz,

471 U.S. 462, 473, 475 (1985)). A substantial connection can result from even a

single act. See id. (citing McGee v. Int’l Life Ins. Co., 355 U.S. 220, 223 (1957)).

But there must be a substantial connection between those contacts and the operative

facts of the litigation. See id. at 156 (quoting Moki Mac, 221 S.W.3d at 585). The

operative facts are those on which the trial will focus to prove the liability of the

defendant who is challenging jurisdiction. See id. at 156, 157 (citing Moki Mac, 221
S.W.3d at 585).

      Important to this case is the Texas Supreme Court’s application of these

principles in Moncrief Oil. There the court declined to exercise specific jurisdiction

over a foreign company on the tortious interference claims against it. See id. at 156–
                                         –5–
57. The supreme court reasoned that when the alleged communications on which

liability was based occurred at a meeting in California, even though individuals from

Texas participated in the meeting and the alleged result of the meeting was the

decision to breach a contract performable in Texas, those operative facts were not

substantially connected to Texas for the jurisdictional analysis. Id.

      So, I begin by pointing out Stern’s three trips to Florida—similar to the

California trip in Moncrief Oil—his conversations in Florida with Peter, Peter’s

allegedly fraudulent statements in Florida to Stern, and the club in Panama are not

jurisdictional facts connecting Peter to Texas. See id.

      Stern appears to recognize this because he claims, “Peter carried out his

scheme through two agents – Edwin (“Eddy”) Maldonado and David Sebag.” Stern

relies on the following evidence to prove Maldonado and Sebag were agents, as

opposed to independent contractors, of Peter:

    Maldonado lived in Texas;

    Sebag lived on Peter’s yacht in Florida;

    “Both agents were financially supported by Peter”;

    “Seeking prospective investors in Texas, Peter told Maldonado that

      Maldonado would be rewarded 5% of any investments he obtained from

      Texas investors”;

    “Sebag helped carry out the scheme by writing Stern emails”;

                                         –6–
       “Eventually, Sebag acted as Peter’s bagman by coming to Texas and

          personally collecting cash for Peter's scheme.”

       Stern alleged Sebag and Peter were in the “Panama Project” or one or more

          related entities and that Sebag’s actions on behalf of the entity were, therefore,

          on behalf of Peter.2

          Even if Stern proved all of these matters with competent evidence, which it is

doubtful he did on this record, none of these amount to evidence that Peter had the

right to control the means and details of how Maldonado or Sebag should work

towards the goal sought to be accomplished. See Ross, 796 S.W.2d at 210. What

Stern’s proof does show is Peter offered 5% compensation for acquiring investors,

and then Maldonado or Sebag worked to acquire investors. Stern’s proof further

shows that Peter was involved when Stern visited him in Florida three times and

there made statements on which Stern predicates his claims. Instead, Stern proved

at most Maldonado and Sebag were merely employed as independent contractors

and not as agents. See Schott Glas, 178 S.W.3d at 315; Bullock, 584 S.W.2d at 551–

52.

      There is a significant dispute between Peter and Stern about different entities and their relationship to
      2

each of them, Sebag, and the project to develop the club in Panama. We need not resolve these tangential
matters because even if Sebag acted on behalf of an entity in which Peter owned an interest, Stern still must
show Peter had the right to control Sebag’s manner and means of his activities for Sebag’s jurisdictional
contacts to be attributable to Peter. See, e.g., Olympia Capital Assocs., L.P. v. Jackson, 247 S.W.3d 399,
412–13 (Tex. App.—Dallas 2008, no pet.) (agency not shown, just independent contractor relationship, so
jurisdictional contacts of independent contractor not attributable to non-resident defendant).
                                                     –7–
      Stern was obligated to do more than simply label Maldonado and Sebag as

Peter’s agents. For Stern to be able to attribute the jurisdictional acts of Maldonado

or Sebag to Peter, Stern had to prove Peter had the right to control the actions of

Maldonado or Sebag. See Tidwell, 867 S.W.2d at 21. This required Stern to prove

more than Peter’s right merely to assign tasks; Stern had to prove Peter had the right

to dictate the means and details of the process by which Maldonado or Sebag would

accomplish the task. See Ross, 796 S.W.2d at 210. Instead, Stern proved at most

Maldonado or Sebag were independent contractors and not agents. Schott Glas, 178
S.W.3d at 315; Bullock, 584 S.W.2d at 551–52. Stern’s lack of any evidence of the

critical aspect of agency is outcome determinative because only an agent’s contacts

with the forum are attributable to the principal, not the contacts of an independent

contractor. See Schott Glas, 178 S.W.3d at 315; Bottle Rock, 108 S.W.3d at 549 n.

4. Courts do not presume an agency relationship exists; rather the party asserting an

agency relationship exists has the burden of proof. See Schott Glas, 178 S.W.3d at

315; Bottle Rock, 108 S.W.3d at 549. This is longstanding precedent:

           “Texas law does not presume agency, and the party who alleges it has
            the burden of proving it. . . . Nothing in this record shows that IRA
            Resources even had knowledge, much less control, over Martinez or
            his employer, whose independent actions cannot subject IRA
            Resources to specific jurisdiction in Texas. Griego’s jurisdictional
            argument fails at the most threshold level.” IRA Res., Inc. v. Griego,
            221 S.W.3d 592, 596–97 (Tex. 2007) (citing Buchoz v. Klein, 184
S.W.2d 271, 271 (1944));

           “Seeking to establish the purposeful availment prong of the specific
            jurisdiction inquiry, O’Quinn first contends that personal jurisdiction
                                         –8–
   over World is proper in Texas because a principal-agent relationship
   existed between World and Merit when Merit established recruiting
   offices and performed recruiting services in Texas. According to well-
   established law, a defendant may be found subject to personal
   jurisdiction as a result of the actions of an agent. Davis v. Asano
   Bussan Co., 212 F.2d 558, 563 (5th Cir. 1954); Sher v. Johnson, 911
F.2d 1357, 1362 (9th Cir. 1990). Under Texas law, in order for a
   principal-agent relationship to be established, the principal must have
   the right to control both the means and the details of the process by
   which the agent accomplishes the actions at issue. First Nat’l Bank of
   Fort Worth v. Bullock, 584 S.W.2d 548, 551-52 (Tex. App.-–Dallas
   1979, writ ref’d n.r.e.). Although the World-Merit contract specifies
   that Merit is to provide the labor and local facilities necessary to
   process applications, World simply does not have contractual authority
   to determine where such facilities are to be located. When Merit
   established its office in Texas City, Merit purposefully availed itself of
   the laws and protections of Texas. However, World did not have
   sufficient control over the means or details of Merit’s actions to
   establish an agency relationship.”          O’Quinn v. World Indus.
   Constructors, No. 95-40258, 1995 WL 581830, at *2 (5th Cir. Sept.
   19, 1995);

 “Shareholder status is not ipso facto proof of agency. Instead, the
  ‘essential feature’ of agency is the ‘right of control.’ . . . Here, the
  evidence presented by Stocksy shows that it did not have a right to
  control Curette when she photographed Morris, edited the
  photographs, and uploaded them onto her Stocksy profile.” Stocksy
  United v. Morris, 592 S.W.3d 538, 548 (Tex. App.—Houston [1st
  Dist.] 2019, no pet.) (quoting Capital Fin. & Commerce AG v. Sinopec
  Overseas Oil & Gas, Ltd., 260 S.W.3d 67, 85 (Tex. App.—Houston
  [1st Dist.] 2008, no pet.));

 “The requirement that Blue Endo keep Trokamed informed of its
  activities and the market conditions of the territory, and that Blue Endo
  advise Trokamed if approval, permits, or consents are lacking, is not
  evidence that Trokamed had an actual right of control over Blue Endo
  sufficient to attribute Blue Endo’s contacts with Texas to Trokamed.
  See Greenfield Energy, Inc. v. Duprey, 252 S.W.3d 721, 733 (Tex.
  App.—Houston [14th Dist.] 2008, no pet.) (concluding that in
  assessing whether one party’s contacts can be imputed upon another,
  critical test focuses on right and/or exercise of control). To the
                               –9–
              contrary, the distribution agreement reflects the parties’ express
              agreement that Blue Endo would preserve its independent status . . . .”
              Trokamed GmbH v. Vieira, No. 01-17-00485-CV, 2018 WL 2436610,
              at *8 (Tex. App.—Houston [1st Dist.] May 31, 2018, no pet.) (mem.
              op.);

           “Bluesky alleges that Edge was an agent of 21st Century and Georgas.
            Bluesky provides no support for his position, however . . . .
            Furthermore, the Edge Solutions Marketing Agreement (‘Agreement’)
            between Edge and 21st Century . . . expressly states that Edge is an
            ‘independent contractor.’ . . . Indeed, the Agreement displays no
            direction as to when, where, or how Edge was to perform its work for
            21st Century and Georgas, which implies an independent contractor
            relationship.” Blueskygreenland Envtl. Sols., LLC v. Rentar Envtl.
            Sols., Inc., No. 4:11-CV-01745, 2011 WL 5553706, at *5 (S.D. Tex.
            Nov. 14, 2011).

      Requiring Stern to prove Peter’s right to control the manner and details of

Maldonado and Sebag’s work in order to prove an agency relationship is neither

trivial nor a mere hyper-technicality. It in fact relates to the foundational structure

of our United States and determines the negligence liability of employers.

      In the absence of any evidence of agency, the majority opinion authorizes the

extension of the jurisdictional power of Texas to hale into a Texas court a Floridian

who never came to Texas and dealt with the Texan when the Texan traveled to

Florida three times. This violates the Floridian’s due process rights when Texas

exercises sovereignty over conduct that occurred in Florida. See Burger King Corp.

v. Rudzewicz, 471 U.S. 462, 472 n.13 (1985) (“Although this protection operates to

restrict state power, it must be seen as ultimately a function of the individual liberty

interest preserved by the Due Process Clause rather than as a function of federalism

                                         –10–
concerns.”) (internal quotation deleted). And even if Peter structured his effort to

raise investment funds in the Panama club by using independent contractors to avoid

jurisdiction outside of Florida, he is allowed to do so thereby conforming his conduct

to the rule of law. A nonresident is entitled to rely on the constitutional limit of

Texas’s personal jurisdiction imposed by the requirement that the nonresident must

purposefully avail himself of the benefits of Texas law and structure his transactions

so as to not profit from Texas’s laws nor subject himself to Texas’s jurisdiction. See

Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex. 2005)

(“[A] nonresident may purposefully avoid a particular jurisdiction by structuring its

transactions so as neither to profit from the forum’s laws nor be subject to its

jurisdiction.” (citing Burger King, 471 U.S. at 463)). There is nothing sinister about

doing so just as when individuals and businesses structure their conduct to minimize

or avoid tax liability. See Ratzlaf v. United States, 510 U.S. 135, 145–46 (1994)

(absent anti-structuring law such as money-laundering statute, “Courts have noted

many occasions on which persons, without violating any law, may structure

transactions in order to avoid the impact of some regulation or tax.” (internal

quotation deleted), providing example regarding Stamp Act of 1862 and citing

United States v. Isham, 84 U.S. (17 Wall.) 496, 506 (1873)). This is, in fact, the

purpose of the rule of law, to enable everyone to conform their conduct to the law

with the expectation the law will be upheld in court. So, when a court decides the

reach of one state’s jurisdictional power crosses state boundaries to govern conduct
                                        –11–
that occurred in another state it should only do so carefully, in compliance with the

constitutional constraints, and when supported by the facts in the record, which are

lacking here.

      Additionally, failing to require proof of the right to control the manner and

details of how work is accomplished in order to prove agency will result in holding

principals liable for the negligence of the independent contractors they hire. There

is a reason the pattern jury charge places the jury submissions of agency and

independent contractor—both quoted above—among the general negligence

sections. See Agency and Special Relationships, ¶¶ 10.1, 10.8, TEX. PATTERN JURY

CHARGE (2018). That is because the issue arises frequently in the context of

negligence cases. And just as in the jurisdictional context where the absence of

evidence of the right to control the manner and details of how work is done can be

dispositive, the difference between agency and independent contractor status is

liability determinative in negligence cases. That is, if the tortfeasor is the agent of a

principal, the principal is liable for the negligence of the agent; but if the tortfeasor

is an independent contractor, the putative principal is not liable for his negligence.

As this Court summarized,

      Under the doctrine of respondeat superior, an employer is vicariously
      liable for the negligence of an agent or employee acting within the
      scope of his or her agency or employment, although the principal or
      employer has not personally committed a wrong. Baptist Mem’l Hosp.
      Sys. v. Sampson, 969 S.W.2d 945, 947 (Tex. 1998); DeWitt v. Harris
      County, 904 S.W.2d 650, 654 (Tex. 1995). The justification for
      imposing such liability is that the principal or employer has the right
                                          –12–
      to control the means and methods of the agent or employee’s work.
      Baptist Mem’l Hosp. Sys., 969 S.W.2d at 947; see Newspapers, Inc. v.
      Love, 380 S.W.2d 582, 585–86 (Tex. 1964). In contrast, an individual
      or entity that hires an independent contractor is generally not
      vicariously liable for the tortious acts or negligence of that person
      because the independent contractor has sole control over the means and
      methods of the work to be accomplished. See Baptist Mem’l Hosp. Sys.,
969 S.W.2d at 947; Enserch Corp. v. Parker, 794 S.W.2d 2, 6 (Tex.
      1990); Redinger v. Living, Inc., 689 S.W.2d 415, 418 (Tex. 1985).

Espalin v. Children’s Med. Ctr. of Dallas, 27 S.W.3d 675, 683 (Tex. App.—Dallas

2000, no pet.) (emphasis added). So, if we water down the requirement that there

be proof that Peter had the right to control the means and details of how Maldonado

or Sebag should accomplish their goal of acquiring investors to nothing more than

Peter had the right to control the goal or end sought to be accomplished, that results

in making principals liable for the negligent acts of the independent contractors they

hire. This is not some hyper-technical requirement; it’s the whole basis for a

principal’s respondeat superior liability for the negligent acts of his agent: because

the principal has the right to control how an agent performs the manner and details

of the work and should exercise that right to control in a reasonably prudent manner

towards others. See id. (citing Baptist Mem’l Hosp. Sys., 969 S.W.2d at 947 and

Love, 380 S.W.2d at 585–86). Reducing proof of agency to nothing more than

independent contractor status, as the majority does, results in a massive expansion

of liability for every individual (here, Peter) and every business alleged to be the

principal when its independent contractor is alleged to be its agent.

                                        –13–
      On this record, I conclude Stern failed to bring forward any evidence Peter

had the right to control the manner and details of how Maldonado and Sebag were

to go about their work to acquire investors. We should not assume an agency

relationship by which Maldonado and Sebag’s jurisdictional conduct (and their

negligent conduct, too, if any) are imputed to Peter. On this record, we should not

denigrate Peter’s due process rights by aggrandizing the jurisdictional power of

Texas, we should not expand the liability of every alleged principal in negligence

cases beyond the common law respondeat superior liability for agents, and we

should reverse the trial court’s order and render judgment granting Peter’s special

appearance.   Because the majority opinion concludes otherwise, I respectfully

dissent.

                                          /David Evans/
                                          DAVID EVANS
                                          JUSTICE

200021DF.P05

                                       –14–