Court Opinion

ID: 5102543
Source: CourtListenerOpinion
Date Created: 2021-10-01 22:49:36.381315+00
Date Added: 2024-06-11T08:21:05.517515
License: Public Domain

HUDSON, Justice,
dissenting.
BMC Software, Inc. (BMC), a Texas corporation, is in the business of developing, selling, and supporting computer software products. It also has many subsidiaries who are responsible for specific geographical sales and support around the world. One of those subsidiaries is BMC Software Belgium N.V. (BMCB). BMCB is a Belgian corporation, incorporated under Belgian law, which has at all times been based in Belgium. Because I do not believe BMCB’s business relationship with BMC established the minimum contacts necessary to permit a Texas court to exercise general and/or specific personal jurisdiction over BMCB, I respectfully dissent.
The record reflects that in early 1996, Gerd Ordelheide, BMC’s senior vice president of European operations, was searching for someone to manage the day-to-day operations of BMCB. In March, Ordel-heide and Adri Kok, a director of BMCB, began negotiating with Michel Marchand, a Belgian citizen and an employee of Platinum Technology, a competing software company. Ordelheide and Kok represented to Marchand that one of the inducements for accepting employment with BMCB is that he would receive 20,000 share options of BMC stock. The offer of share options, however, was apparently conditioned upon the approval BMC’s chairman and chief executive officer, Max Watson.
When Watson learned of the offer, he was concerned. Watson told Ordelheide that employees hired away from Platinum in the past had not proven to be very productive. Watson suggested that Ordel-heide should be wary of hiring Marchand, but told Ordelheide that he must make the ultimate decision on whether to hire Mar-chand. Ordelheide ultimately offered the position to Marchand.
Rather than accepting the position in his individual capacity, Marchand proposed that BMCB contract directly with his management company, Procurement N.V. To obtain certain tax advantages, Marchand explained that he preferred to work as an independent contractor of Procurement. However, BMC’s stock option plan was designed only for employees of BMC and its subsidiaries. Thus, Watson told Ordel-heide that in order to qualify for the stock options, Marchand would have to be employed by BMCB, rather than as an independent contractor of Procurement.
Nevertheless, on June 13, 1996, a written agreement was executed between BMCB and Procurement. A little more than a year later, BMCB terminated the employment agreement due allegedly to poor performance. Marchand never received his stock options and he subsequently sued BMC and BMCB for breach of contract, fraud, and negligent misrepresentation.
When analyzing whether a defendant is subject to the general jurisdiction of the trial court, we are to view the evidence in the light most favorable to the trial court’s decision. Here, the proof before the trial court showed that BMC’s subsidiaries were responsible for the sales and support of the parent’s software. Watson testified that the employees of BMC’s subsidiaries were considered part of the parent’s sales force. The proof also shows the subsidiaries gave BMC stock options to their employees as part of their compensation. Moreover, BMC’s 1997 annual report includes the financial performance of its subsidiaries. Finally, Ordelheide had conversations with Watson, either in person or by telephone, regarding the hiring of Mar-chand.
BMCB obviously had a continuous and systematic business relationship with its *62parent corporation. However, in my opinion, this fact does not necessarily establish the minimum contacts necessary to allow a Texas court to exercise general and/or specific personal jurisdiction over the subsidiary.
A parent corporation and its wholly owned subsidiary will necessarily have a business relationship. In some circumstances, a close relationship between a parent and its subsidiary may even justify a finding that one of the entities “does business” in a particular jurisdiction through the local activities of its parent or subsidiary. See Jones v. Beech Aircraft Corp., 995 S.W.2d 767, 771 (Tex.App.—San Antonio 1999, pet. dism’d w.o.j.). However, courts must examine all relevant circumstances to determine whether the parent and subsidiary should be considered separate or joined. See Daimler-Benz Ak-tiengesellschaft v. Olson, 21 S.W.3d 707, 720-21 (Tex.App.—Austin 2000, no pet. h.).
[A] variety of factors have guided courts in making this determination: whether distinct and adequately capitalized financial units are incorporated and maintained; whether daily operations of the two corporations are separate; whether formal barriers between the management of the two entities are erected, with each functioning in its own best interest; whether the two file consolidated tax returns; whether operating capital is financed by the parent or borrowed from other sources; whether the subsidiary’s stock is owned by the parent; whether the two share common officers and directors; the extent to which separate books and accounts are kept; whether both have common departments of businesses; whether they have separate meetings of shareholders and directors; whether an officer or director of the one corporation is permitted to determine the policies of the other; whether those with whom the corporation comes into contact are apprised of their separate identity; and the extent to which contracts between the parent and subsidiary favor one over the other.
Id. Thus, the mere fact that a court may have jurisdiction over the parent corporation does not automatically establish jurisdiction over its subsidiaries. Cf. Aktienge-sellschaft v. Coleman, 16 S.W.3d 110, 125 (Tex.App.—Houston [1st Dist.] 2000, no pet. h.) (holding that normal business contacts between foreign parent and Texas-based subsidiary did not establish jurisdiction over the parent); Jones, 995 S.W.2d at 771 (holding the mere existence of a parent-subsidiary relationship is not sufficient to warrant the assertion of jurisdiction over the foreign parent).
When deciding whether a forum parent is “doing business” through its foreign subsidiary or a forum subsidiary is “doing business” through its foreign parent, the analysis is akin to the same factors considered in determining whether one corporation is the alter ego of another — there must be something more than mere unity of financial interest, ownership and control. In other words, there must be a showing of control by the parent which is greater than normal or that the subsidiary acted as the alter ego of the parent. See Garner v. Furmanite Australia Pty., Ltd., 966 S.W.2d 798, 803 (Tex.App.—Houston [1st Dist.] 1998, pet. denied). Merely showing a blending of activities between the parent and subsidiary, such that they may have had some or all of the same directors or officers, filed consolidated income tax returns, shared the same corporate logo, conducted inter-corporate business, or officed in the same building, is not alone sufficient to establish alter ego. See Trailways, Inc. v. Clark, 794 S.W.2d 479, 489-90 (Tex.App.—Corpus Christi 1990, writ denied). Before alter ego jurisdiction *63may attach, the court must determine that the parent so controls or dominates the subsidiary as to disregard corporate formalities. See Conner v. ContiCamers and Terminals, 944 S.W.2d 405, 419 (Tex. App.—Houston [14th Dist.] 1997, no writ). Moreover, the Texas Supreme Court has cautioned that great care and reserve should be exercised when extending our notions of personal jurisdiction into the international field. See Guardian Royal Exchange Assur., Ltd. v. English China Clays, P.L.C., 815 S.W.2d 228, 229 (Tex.1991).
While the record demonstrates that BMCB had a business relationship with its Texas-based parent, there is little, if any, evidence to show that these business relations were greater than those normally occurring between a parent and its subsidiary or that corporate formalities were disregarded. The record shows that BMCB, a Belgian corporation, incorporated under Belgium law, contracted with Procurement, a Belgian company, to manage its Belgian operations via an independent contractor who was, himself, a Belgian citizen. The contract expressly states that disputes are to be resolved according to Belgian law in a Belgian court. BMCB’s tangential “contacts” with Texas appear to arise only through the familial business relationship that a subsidiary would normally be expected to have with its parent.
I would sustain BMCB’s first and second points of error. Thus, I must respectfully dissent.