Court Opinion

ID: 8484082
Source: CourtListenerOpinion
Date Created: 2022-11-16 07:10:07.831896+00
Date Added: 2024-06-11T16:49:50.726417
License: Public Domain

AFFIRMED in part, REVERSED and RENDERED in part, and
REMANDED; and Opinion Filed November 8, 2022

                                  S  In The
                            Court of Appeals
                     Fifth District of Texas at Dallas
                              No. 05-19-01551-CV

          WARREN CHEN AND DYNACOLOR, INC., Appellants
                               V.
        RAZBERI TECHNOLOGIES, INC., THOMAS J. GALVIN,
     LIVEOAK VENTURE PARTNERS I, L.P., LIVEOAK VENTURE
    PARTNERS 1A, L.P., KENNETH L. AND VIRGINIA T. BOYDA, AS
  TRUSTEES OF THE BOYDA FAMILY REVOCABLE TRUST DATED
10/12/1990, AND JIRI AND ROSEMARY MODRY, AS TRUSTEES OF THE
                 JRAM TRUST UDT 8/21/1996, Appellees

               On Appeal from the 193rd Judicial District Court
                            Dallas County, Texas
                    Trial Court Cause No. DC-18-16568

               MEMORANDUM OPINION ON REMAND
                 Before Justices Schenck, Smith, and Garcia
                          Opinion by Justice Smith

      This case returns to us on remand from the Supreme Court of Texas.

Appellants Warren Chen and DynaColor, Inc. appeal the trial court’s denial of their

special appearances.   Because we conclude that the trial court has personal

jurisdiction over all of appellees’ claims against appellants, except their claim

asserted in Count II, we affirm the trial court’s order denying appellants’ special
appearances as to appellees’ causes of action in Counts I, III, IV, V, VI, and VII;

reverse and render an order granting appellants’ special appearances as to Count II;

and remand this case to the trial court to conform the judgment according to and

consistent with this opinion.

                              Factual and Procedural History

        The underlying facts and procedural history are well-known to the parties and

have been set out in our prior opinions as well as the supreme court’s opinion; thus,

we will limit our discussion of the facts and procedural history to those relevant to

determine whether the trial court had personal jurisdiction over appellants.

        On April 28, 2021, this Court reinstated its prior opinion concluding that the

special appearance order merged into the final judgment and that, because appellants

failed to file a timely notice of appeal from the final judgment, the interlocutory

appeal1 became moot. Chen v. Razberi Techs., Inc., 639 S.W.3d 105, 107 (Tex.

App.—Dallas 2020), rev’d, 645 S.W.3d 773, 775 (Tex. 2022). We, therefore,

dismissed the interlocutory appeal. Id. The supreme court disagreed that the

jurisdictional issue presented in the interlocutory appeal became moot and explained

that, under Rule 27.3 of the Texas Rules of Appellate Procedure, this Court should

have treated the interlocutory appeal as a premature notice of appeal when the

interlocutory order merged into the final judgment. Chen v. Razberi Techs., Inc.,

    1
     See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(7) (permitting an appeal from an interlocutory
order that grants or denies a special appearance under TEX. R. CIV. P. 120a, which allows a defendant to
specially appear and object to the court’s personal jurisdiction over the defendant).
                                                 –2–
645 S.W.3d 773, 783 (Tex. 2022). The supreme court further explained that this

Court should have addressed the personal-jurisdiction issue and, thus, reversed and

remanded the case to this Court “to consider only the merits of the personal-

jurisdiction issue.” Id.

                                              Issues Raised

        In their opening brief, appellants listed eight issues2 for our review and

generally argued that the trial court erred by denying their special appearances. In

their supplemental brief filed in conjunction with their response to appellees’

motions for rehearing and en banc reconsideration, appellants more concisely

framed their issue as whether the trial court incorrectly denied their special

appearances when: (a) the forum selection clause relied on by appellees is in a

contract appellants did not sign, and appellees have presented no cognizable legal

theory or sufficient evidence supporting enforcement of the clause against appellants

as nonparties; (b) there is no evidence appellants’ contacts with Texas are continuous

and systematic as to establish general jurisdiction; (c) there is no evidence that a

substantial connection exists between appellants’ contacts with Texas and the facts

    2
      The eight issues appellants listed in their “Issues Presented” section are as follows: (1) Did the Court
err in finding that appellees sufficiently pleaded and proved jurisdictional facts?; (2) Did the Court err in
finding that appellants failed to disprove all jurisdictional facts alleged by appellees?; (3) Did the Court err
in considering appellees’ alter ego argument?; (4) Did the Court err in finding that jurisdiction over
appellants in Texas is consistent with fair play or substantial justice?; (5) Did the Court err, as the evidence
was legally insufficient to support any presumed findings that would support specific or general jurisdiction
over DynaColor?; (6) Did the Court err, as the evidence was factually insufficient to support any presumed
findings that would support specific or general jurisdiction over DynaColor?; (7) Did the Court err, as the
evidence was legally insufficient to support any presumed findings that would support specific or general
jurisdiction over Chen?; and (8) Did the Court err, as the evidence was factually insufficient to support any
presumed findings that would support specific or general jurisdiction over Chen?
                                                     –3–
underlying appellees’ claims; and (d) exercising jurisdiction over appellants would

offend the notions of fair play and substantial justice.

      We treat appellants’ appeal as one global issue of whether the trial court erred

by denying their special appearances and include the four sub-issues listed above in

our analysis. Because this Court invited further briefing on the merits in conjunction

with the motions for rehearing and en banc reconsideration, we decline to conclude,

as appellees suggest, that appellants waived certain issues in their opening brief by

failing to adhere to the briefing rules or that it was inappropriate for appellants to

submit a new, substantive brief. See TEX. R. APP. P. 38.1(i) (“The brief must contain

a clear and concise argument for the contentions made, with appropriate citations to

authorities and to the record.”); TEX. R. APP. P. 38.7 (“A brief may be amended or

supplemented whenever justice requires, on whatever reasonable terms the court

may prescribe.”).

                               Personal Jurisdiction

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

a question of law that appellate courts review de novo. Old Republic Nat’l Title Ins.

Co. v. Bell, 549 S.W.3d 550, 558 (Tex. 2018). Often, however, a trial court must

resolve questions of fact before deciding the question of jurisdiction. BMC Software

Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). When a trial court does

not issue findings of fact and conclusions of law in conjunction with its special

                                         –4–
appearance ruling such as in the case here,3 all facts necessary to support the

judgment that are supported by the evidence are implied. Id. at 795. These implied

findings may be challenged for legal and factual sufficiency when the appellate

record includes the reporter’s and clerk’s records. Id. If the relevant facts are

undisputed, the appellate court need not consider any implied findings of fact and

considers only the legal question of whether the undisputed facts establish personal

jurisdiction. Old Republic, 549 S.W.3d at 558.

        Texas courts may assert personal jurisdiction over a nonresident defendant if

(1) the Texas long-arm statute authorizes the exercise of jurisdiction and (2) the

exercise of jurisdiction is consistent with federal and state constitutional due process

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

2007). The Texas long-arm statute is satisfied when a nonresident defendant does

business in Texas, which includes “commit[ing] a tort in whole or in part” in Texas.

TEX.     CIV.      PRAC.      &      REM.      CODE       ANN.       §     17.042(2);        Luciano       v.

SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 8 (Tex. 2021); Moki Mac, 221

S.W.3d at 574.           The exercise of personal jurisdiction over such nonresident

defendant is constitutional when (1) the nonresident defendant has established

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

    3
     Although appellants filed a request for findings of fact and conclusions of law, the record does not
contain a notice of past due findings or reflect that the trial court made findings of fact and conclusions of
law.

                                                    –5–
with traditional notions of fair play and substantial justice. BMC Software, 83

S.W.3d at 795.

      A nonresident defendant’s contacts with the forum state can give rise to

general or specific jurisdiction. Luciano, 625 S.W.3d at 8. General jurisdiction is

established when the defendant has continuous and systematic contacts with the

forum, rendering it essentially at home in the forum state, regardless of whether the

defendant’s alleged liability arises from those contacts. TV Azteca v. Ruiz, 490

S.W.3d 29, 37 (Tex. 2016). Specific jurisdiction is established when the nonresident

defendant’s alleged liability arises from or is related to the defendant’s activity

conducted within the forum state. BMC Software, 83 S.W.3d at 796.

      A party may also expressly consent to personal jurisdiction or waive the right

to challenge personal jurisdiction in a specific forum by agreeing to submit to that

forum through a forum selection clause. Burger King Corp. v. Rudzewicz, 471 U.S.

462, 472 n.14 (1985). When parties freely negotiate in an arms-length transaction

to include a forum selection clause in a written agreement, the clause is valid and

enforceable unless the opponent establishes a compelling reason not to enforce it,

such that enforcement would be unreasonable or unjust or that the clause was

procured by fraud. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10–15 (1972).

Thus, when a party contractually consents to jurisdiction in the forum state, it is not

necessary to analyze whether the party established minimum contacts with the forum

                                         –6–
state thereby conferring personal jurisdiction. In re Fisher, 433 S.W.3d 523, 532

(Tex. 2014) (orig. proceeding).

      The plaintiff bears the initial burden to plead sufficient allegations to bring a

nonresident defendant within the provisions of the Texas long-arm statute. Kelly v.

Gen. Interior Constr., Inc., 301 S.W.3d 653, 658 (Tex. 2010). Once the plaintiff has

met the initial burden of pleading sufficient jurisdictional allegations, the defendant

bears the burden to negate all bases of personal jurisdiction alleged by the plaintiff.

Id. “Because the plaintiff defines the scope and nature of the lawsuit, the defendant’s

corresponding burden to negate jurisdiction is tied to the allegations in the plaintiff’s

pleading.”   Id.   If the defendant presents evidence in its special appearance

disproving the plaintiff’s jurisdictional allegations, the burden shifts back to the

plaintiff to establish the court has personal jurisdiction. Id. at 659. The plaintiff

should amend the petition if it lacks sufficient allegations to bring the defendant

under the long-arm statute or if the plaintiff presents evidence that supports a

different basis for jurisdiction in the special appearance response. Id. at 659, 659

n.6. Raising jurisdictional allegations for the first time in a response to the special

appearance is not sufficient. Steward Health Care Sys. LLC v. Saidara, 633 S.W.3d

120, 128–29 (Tex. App.—Dallas 2021, no pet.) (en banc); see also Kelly, 301

S.W.3d at 658 n.4 (“additional evidence merely supports or undermines the

allegations in the pleadings”).

                                          –7–
                     Jurisdictional Allegations in Original Petition

       Appellees Razberi Technologies, Inc., Thomas J. Galvin, LiveOak Venture

Partners I, L.P., LiveOak Ventures Partners 1A, L.P., Kenneth L. and Virginia T.

Boyda, as Trustees of the Boyda Family Revocable Trust Dated 10/12/1990, and Jiri

and Rosemary Modry, as Trustees of the JRAM Trust UDT 8/21/1996 brought suit

against Chen and DynaColor alleging fraud, fraudulent inducement, and breach of

fiduciary duty in relation to a stock purchase agreement between Razberi, of which

Galvin was president, and the remaining appellees.4 Appellees further alleged that

DynaColor was a non-resident corporation that had conducted business in Texas,

that Chen was a Taiwanese national who resided in Taiwan and had conducted

business in Texas, and that this lawsuit arose out of, and is related to, DynaColor

and Chen’s activities in Texas. “Each of the Defendants purposefully availed

themselves of the privileges and protections of Texas law in the matters related to

the claims stated in this lawsuit, and it would not be fundamentally unfair to hale

them into Court into Texas.”

       The appellees also alleged that Razberi’s principal place of business was in

Dallas County; Razberi was “formed as the joint-venture vehicle between Galvin

and DynaColor”; DynaColor was its majority shareholder; Chen was the CEO of

DynaColor and one of two of Razberi’s directors; DynaColor sold components of

   4
     Appellees also brought suit against Avigilon Corporation and Avigilon USA Corporation, which are
not parties to this appeal.
                                                –8–
network video recorder (NVR) systems to Razberi to use in manufacturing and

selling the Razberi systems; Razberi sold systems to Avigilon; and DynaColor

guaranteed certain aspects of Razberi’s contract with Avigilon.          When Chen

informed Galvin that DynaColor would no longer be investing in Razberi, Razberi

sought investors elsewhere.      The business relationship between Razberi and

Avigilon was critical to the investors’ decision to invest in Razberi through a Stock

Purchase Agreement. Ultimately, the investors (the LiveOak entities, the Boydas,

and the Modrys) contributed approximately $3,500,000 to Razberi.

      DynaColor and Chen were not parties to the Stock Purchase Agreement.

However, in connection with the Stock Purchase Agreement, Razberi and

DynaColor entered into a Purchase Agreement under which Razberi would continue

to order parts from DynaColor and DynaColor would provide product repair services

to Razberi.   Razberi also agreed to immediately pay certain amounts due to

DynaColor from the invested funds.

      Avigilon subsequently reduced its order forecast and then completely stopped

ordering from Razberi and instead began ordering from DynaColor directly.

Generally, appellees allege that appellants secretly decided to cut Razberi out by

moving forward with a plan for DynaColor to usurp Razberi’s corporate

opportunities to wrongfully compete against Razberi despite Chen’s fiduciary duties

to Razberi and its shareholders and that appellants failed to disclose such information

during the stock purchase negotiations.

                                          –9–
        Appellees met their initial pleading burden to bring appellants within the

provisions of the Texas long-arm statute by alleging that appellants conducted

business in Texas and that the claims asserted in the lawsuit arose out of and were

related to their activities in Texas. See Far East Machinery Co. v. Aranzamendi, No.

05-21-00267-CV, 2022 WL 4180472, at *4 (Tex. App.—Dallas Sept. 13, 2022, no

pet. h.) (mem. op.) (plaintiff met initial burden of pleading sufficient allegations to

permit court’s exercise of personal jurisdiction by pleading defendant “is engaged

in business in the State of Texas”); Saidara, 633 S.W.3d at 129 (“A plaintiff’s

petition satisfies the long-arm statute when it alleges the defendant did business,

which includes committing a tort in whole or in part in Texas.”).

        However, appellees did not allege in their original petition that the trial court

had general jurisdiction over appellants5 or that appellants consented to jurisdiction

through a forum-selection clause in an agreement entered into by the parties. Nor

did appellees allege generally that appellants entered into agreements with appellees6

or incorporate or attach such agreements to their original petition. See Tri-State

Bldg. Specialties, Inc. v. NCI Bldg. Sys., L.P., 184 S.W.3d 242, 247 (Tex. App.—

    5
       Furthermore, appellees did not argue that the trial court had general jurisdiction over appellants in
their response to appellants’ special appearances or at the hearing on appellants’ special appearances, and
appellees acknowledge in their supplemental brief in this Court that they never argued the trial court had
general jurisdiction over appellants.
    6
      The original petition does reference “related agreements” to the Stock Purchase Agreement,
specifically the Purchase Agreement between Razberi and DynaColor, which provided that Razberi would
continue to order parts from DynaColor and DynaColor would provide product repair services to Razberi.
However, besides the Purchase Agreement, the petition does not name the other “related agreements,” set
out who the agreements were between, or explain their content.
                                                  –10–
Houston [1st Dist.] 2005, no pet.) (concluding it was appropriate for trial court to

consider agreement containing forum selection clause when ruling on special

appearance because agreement was incorporated into and attached to original

petition); see also Leary v. Coinmint, LLC, No. 14-20-00375-CV, 2022 WL

1498197, at *1, 3 (Tex. App.—Houston [14th Dist.] May 12, 2022, no pet.) (mem.

op.) (plaintiffs satisfied initial burden by asserting in their amended petition that their

claims fell under a valid forum selection clause). Appellees also failed to amend

their original petition to include such allegations. See Kelly, 301 S.W.3d at 659, 659

n.6.

       Because general jurisdiction and consent to jurisdiction by forum selection

clauses were not alleged in appellees’ petition as a basis for personal jurisdiction,

the trial court could not rely on either theory to support a finding of personal

jurisdiction over appellants. We now turn to whether appellees carried their burden

in response to appellants’ special appearances, other pleadings, affidavits, and

evidence presented at the hearing to establish that the trial court did have specific

jurisdiction over appellants as pleaded. See TEX. R. CIV. P. 120a(3) (“The court shall

determine the special appearance on the basis of the pleadings, any stipulations made

by and between the parties, such affidavits and attachments as may be filed by the

parties, the results of discovery processes, and any oral testimony.”).

                                          –11–
                          Minimum Contacts with Texas

      To exercise specific jurisdiction over a nonresident defendant, the defendant’s

contacts with the forum state must be purposeful and the cause of action must arise

from or relate to those contacts. Moki Mac, 221 S.W.3d at 575–76. We therefore

focus on the relationship among the forum, the defendant, and the litigation. Id. To

determine whether a defendant’s contacts are purposeful, the court should consider

only the defendant’s contacts with the forum state, not the unilateral activity of a

third party. Id. at 575. The contacts cannot be random, fortuitous, or attenuated, and

the defendant must seek some benefit, advantage, or profit by availing himself of the

jurisdiction. Id. “A defendant establishes minimum contacts with a state when it

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

state, thus invoking the benefits and protections of its laws.’” Retamco Operating,

Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex. 2009) (quoting Hanson v.

Denckla, 357 U.S. 235, 253 (1958)). “The defendant’s activities, whether they

consist of direct acts within Texas or conduct outside Texas, must justify a

conclusion that the defendant could reasonably anticipate being called into a Texas

court.” Id. (quoting Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801,

806 (Tex. 2002)).

      For a cause of action to arise from or relate to the nonresident defendant’s

contacts, there must be a substantial connection between those contacts and the

operative facts of the litigation. Moki Mac, 221 S.W.3d at 585. Plaintiff’s claim

                                        –12–
does not have to arise “but for” the defendant’s contacts, and the defendant’s

contacts are not required to be the “proximate cause” of liability. TV Azteca, 490

S.W.3d 53. “Instead, we consider what the claim is ‘principally concerned with,’

Moncrief Oil [Int’l Inc. v. OAO Gazprom], 414 S.W.3d [142,] 157 [Tex. 2013],

whether the contacts will be the ‘focus of the trial’ and ‘consume most if not all of

the litigation’s attention,’ and whether the contacts are ‘related to the operative facts’

of the claim, Moki Mac, 221 S.W.3d at 585.” Id. “[I]f the actionable conduct occurs

in Texas, we have never required that the lawsuit also arise directly from the

nonresident defendant’s additional conduct.” Luciano, 625 S.W.3d at 18. “The

relevance of the additional conduct . . . is not to establish that those contacts

constitute [defendant’s] minimum contacts with Texas, but to establish that the

actionable conduct in Texas itself constitutes minimum contacts” by showing that

the defendant purposefully availed itself of Texas. TV Azteca, 490 S.W.3d at 54.

      We must analyze jurisdictional contacts on a claim-by-claim basis, unless all

claims arise from the same forum contacts. Moncrief Oil, 414 S.W.3d at 150. Here,

appellees brought seven causes of action against appellants; not all claims involve

the same appellees and same appellants:

      (1) Count I (Fraud and Fraudulent Inducement): the investors alleged that

            appellants committed fraud by making material misrepresentations and

            omissions that they knew were false, or that they recklessly made as

            positive assertions without any knowledge of their truth, and fraudulently

                                          –13–
    induced the investors to enter into the Stock Purchase Agreement and

    related agreements by making such misrepresentations and omissions.

(2) Count II (Fraud by Nondisclosure): the investors alleged that appellants

    concealed from, or failed to disclose to, the investors that DynaColor

    planned to, and did, usurp the opportunity to sell the NVR systems to

    Avigilon in competition with Razberi.

(3) Count III (Statutory Fraud under TEX. BUS. & COM. CODE ANN. § 27.01):

    the investors alleged that appellants made a false representation to them

    for the purpose of inducing them to enter into the Stock Purchase

    Agreement and that they relied upon the false representation in entering

    into the agreement.

(4) Count IV (Violation of Texas Securities Act): the investors alleged that

    Razberi offered or sold securities to the investors by means of an untrue

    statement of a material fact or omission; that Chen, as Razberi’s director,

    knew the untruth or omission; that his knowledge may be imputed to

    Razberi; that appellants directly or indirectly controlled Razberi and

    knew of the untruth or omission; and that appellants, with intent to

    deceive the investors, materially aided Razberi in its actions.

(5) Count V (Negligent Misrepresentation): in the alternative, the investors

    and Galvin alleged that appellants negligently made material

    misrepresentations and omissions and intended for the investors and

                                 –14–
           Galvin to rely upon their misrepresentations and omissions by investing

           in Razberi.

      (6) Count VI (Breach of Fiduciary Duty): Galvin alleged that Chen owed

           him a fiduciary duty as a shareholder of Razberi because Chen was a

           director of Razberi and that Chen breached his fiduciary duties of candor,

           loyalty, and honesty. Galvin also alleged that DynaColor owed him a

           fiduciary duty because it was the majority shareholder of Razberi and

           DynaColor also breached its fiduciary duties of candor, loyalty, and

           honesty to Galvin. Razberi alleged that, as director, Chen breached his

           fiduciary duties of candor, loyalty, and honesty to Razberi.

      (7) Count VII (Breach of Fiduciary Duty): the investors alleged that Chen

           owed a fiduciary duty to them because he was a director and they were

           shareholders of Razberi and that he breached his fiduciary duties of

           candor, loyalty, and care by usurping and diverting to DynaColor

           corporate opportunities that belonged to Razberi. Chen further breached

           his duties through dishonesty and deception regarding his and

           DynaColor’s acts and plans with respect to Avigilon.

      The operative facts of Counts I, III, IV, and V, are that appellants made

misrepresentations or omissions to the investors, which the investors relied upon in

deciding to enter into the Stock Purchase Agreement with Razberi. Some of the

                                       –15–
alleged misrepresentations, according to the affidavits of Galvin and the investors,

are contained in the Stock Purchase Agreement:

            3.6 Changes. Since the date of the most recent unaudited
      balance sheet included in the Financial Statements, there has not been:

                   (a) any change in the assets, liabilities, financial
      condition or operating results of the Company from that reflected in the
      Financial Statements, except changes in the ordinary course of
      business, that has had a Material Adverse Effect; [or]

      ....

                  (m) to its knowledge, any other event or condition of
      any character that has had a Material Adverse Effect.”

      ....

              5.1 Representations and Warranties. Except as set forth in
      or modified by the Schedule of Exceptions, the representations and
      warranties made by the Company in Section 3 shall be true and correct
      in all respects as of the date of such Closing.

      The investors allege that other misrepresentations occurred during Galvin’s

presentations to them regarding Razberi’s business, specifically its business

relationship with Avigilon. But, there is no evidence in the record that appellants

were parties to these presentations, assisted Galvin in preparing the documents for

the presentations, or approved the presentations.

      The record also shows that DynaColor and Chen were not signatories to the

Stock Purchase Agreement. However, according to the investors’ affidavits, they

“required the Razberi Board of Directors and the existing Razberi shareholders to

approve the transaction and the specific agreements” “[a]s a condition for entering

                                       –16–
into the Stock Purchase Agreement and the other contracts.” The record supports

this contention. The term sheet, which is signed by Chen on behalf of DynaColor,

provides in relevant part: “The business, assets, financial condition, operations,

results of operations and prospects of the Company are substantially as have been

represented to LiveOak and no change will have occurred which, in LiveOak’s sole

judgment, is or may be materially adverse to the Company.” Furthermore, although

appellants deny that they negotiated the term sheet in Texas, August 2014 emails

between Galvin and Chen show that Chen sent James Chan7 to Razberi’s office, on

behalf of DynaColor, to negotiate the terms of the Stock Purchase Agreement and

its related agreements. Specifically, Chen wrote:

        After the first glance at the term sheet of Live Oak, and to save time, I
        think DynaColor also needs someone to help communicate and reflect
        our concerns effectively and efficiently to Live Oak. So I would assign
        my legal counsel James Chan to get in touch with you and to work with
        [Razberi’s] attorney to consolidate the case negotiation, he stays in
        Dallas area and can reach [Razberi] conveniently.

After the meeting, Galvin wrote to Chen memorializing that he met with Chan at the

Razberi office and that he believed he understood DynaColor’s concerns. He said

he would address those concerns in a revised term sheet and then listed the changes

including that DynaColor would be placed on equal footing with the new investor

so that dividends were shared equally and liquidation priorities were identical,

    7
     According to his affidavit, James Chan is an attorney licensed to practice in Arizona and Florida, who
has handled some legal matters for Chen.
                                                  –17–
DynaColor would receive $500,000 immediately upon closing toward the past due

amount Razberi owed DynaColor, and the remaining balance would then be paid on

a schedule. Thus, Chen and DynaColor, through their agent, negotiated the terms of

the Stock Purchase Agreement and its related agreements in Texas, on at least one

occasion. See Searcy v. Parex Res., Inc., 496 S.W.3d 58, 77–78 (Tex. 2016) (owner

company’s executive had actual and apparent authority to sell owned company

shares and actively negotiated their sale in Texas).

       Chen executed the Action by Unanimous Written Consent of the Board of

Directors on behalf of himself as a director of Razberi and the Action by Written

Consent of the Stockholders on behalf of DynaColor as its CEO. The Consent of

the Board of Directors authorized Galvin to execute the Stock Purchase Agreement

as well as the other related agreements.8                The Actions of the Board and the

Stockholders acknowledge that Razberi is a Delaware Corporation and that the

actions are being taken in accordance with Delaware Law and the by-laws of

Razberi. Neither expressly references any action to be taken in Texas. However,

the Memorandum of Closing provides that the closing took place on November 5,

2014, in Austin, Texas and that “[a]ll of the transactions at the Closing were deemed

to take place simultaneously and no delivery or payment was considered made until

   8
     The agreements executed along with the Stock Purchase Agreement, and approved with written
consent by Chen, consisted of the following: Amended and Restated Certificate of Incorporation, Exchange
Agreement, Investors Rights Agreement, Rights of First Refusal and Co-Sale Agreement, Voting
Agreement, Purchase Agreement with DynaColor, and Promissory Note Payable to DynaColor.

                                                –18–
all deliveries and payments were completed.” Thus, here, unlike in Rapaglia v.

Lugo, 372 S.W.3d 286, 291 (Tex. App.—Dallas 2012, no pet.), in which this Court

concluded that there was no evidence the nonresident shareholder “had any

knowledge of, consented to, or ratified the actions allegedly taken in Texas by her

husband” and upon which plaintiff’s causes of action were based, Chen and

DynaColor knew the agreement was being negotiated and executed in Texas and the

alleged      misrepresentations          in    the    approved        agreement        are     the     very

misrepresentations upon which the investors’ claims against appellants are based.9

        Brumback v. Steele, No. 03-09-00439-CV, 2010 WL 1633155 (Tex. App.—

Austin Apr. 21, 2010, no pet.) (mem. op.), is also instructive. In Brumback, the

Austin Court of Appeals concluded that three nonresident directors purposefully

availed themselves of jurisdiction in Texas when they approved of a deferred

compensation plan offered to an independent contractor who they knew worked at

the company located in Texas, was offered the plan in Texas, and agreed to the plan

in Texas. 2010 WL 1633155, at *1, 4. Similarly, here, Chen, as a director of

Razberi, specifically approved the Stock Purchase Agreement.                              He knew the

agreement was being negotiated in Texas and executed in Texas with mostly Texas

investors. Likewise, DynaColor, as a shareholder, approved Razberi’s issuance of

    9
      In Rapaglia, the focus of plaintiff’s suit was a 2003 meeting in Dallas in which plaintiff alleged that
the defendants attended and conspired against him for the purpose of defrauding him and other
shareholders. 372 S.W.3d at 289. The nonresident wife denied participating in the 2003 meeting and
asserted that her sole act as a shareholder was signing, in Florida, a Notice of Action by the Shareholders.
Id.
                                                   –19–
Series A Preferred Stock pursuant to the agreement, knew it was being negotiated

and executed in Texas, and enjoyed the benefits of the parties entering into the Stock

Purchase Agreement.

      We recognize that “[t]here is a subtle yet crucial difference between directing

a tort at an individual who happens to live in a particular state and directing a tort at

that state.” TV Azteca, 490 S.W.3d at 43. The mere fact that a nonresident defendant

directed a tort at a plaintiff who lives in Texas and allegedly suffered injuries in

Texas, without more, does not establish jurisdiction over the nonresident defendant.

Id. The “‘effects’ of the alleged tort must connect the defendant to the forum state

itself, not just to a plaintiff who lives there.” Old Republic, 549 S.W.3d at 564 (citing

Walden v. Fiore, 571 U.S. 277, 287–88 (2014)).

      In Old Republic, the supreme court distinguished the transfer of Texas-based

assets to a nonresident defendant from the transfer of money, a fungible asset, and

explained that the transfer of Texas-based business operations and real property

derived profit from Texas and created a continuing connection with Texas. 549

S.W.3d at 563–64. Here, in conjunction with the execution of the Stock Purchase

Agreement, which the investors allege they were induced into by appellants’

misrepresentations and omissions, DynaColor received Preferred Stock in exchange

for its common stock, it acquired a new purchase contract with Razberi in which it

would continue to sell parts to Razberi in Texas, and it was immediately paid

$500,000 out of the sale of the stock. It also received a promissory note, for the

                                         –20–
remaining $595,706 that Razberi owed DynaColor under previous purchase

agreements, which was enforceable in Texas.

      Appellants’ control over Razberi and its sale of stock to outside investors was

not random, fortuitous, or attenuated. DynaColor willingly invested over two-

million dollars into Razberi as a start-up company and became an eighty-five percent

shareholder; Razberi was a controlled subsidiary of DynaColor. Chen willingly

became a director of Razberi and was involved in regular oversight of Razberi

through email communications, including approving Razberi’s business plans, being

involved in sales strategy and generating leads, obtaining and reviewing financial

statements and budgets, and transferring funds for Razberi’s operations. Thus,

appellants purposefully availed themselves of jurisdiction in Texas.

      Although neither party addresses the fact that the Modrys, two of the

investors, are California residents, we note that there is not a separate requirement,

when exercising personal jurisdiction over a defendant, for the plaintiff to reside in

the forum State. TV Azteca, 490 S.W.3d at 40–41 (relying on Keeton v. Hustler

Mag., Inc., 465 U.S. 770 (1984)). While it is often relevant to the inquiry, the focus

is on the relationship between the defendant, the forum, and the litigation, not the

plaintiff, the forum, and the litigation. Id. The connection between the Modrys’

causes of action and Texas is not weak because, like the other investors, they claim

to have suffered harm in Texas when they entered into the Stock Purchase

Agreement in Texas with a Texas-based company as a result of its director’s and

                                        –21–
majority shareholder’s misrepresentations and omissions. Cf. Bristol-Myers Squibb

Co. v. Superior Ct. of Cal., S.F. Cty., --- U.S. ---, 137 S. Ct. 1773, 1782 (2017)

(holding that the connection between the nonresidents’ claims and the forum was

weak because the relevant plaintiffs were not California residents, did not claim to

have suffered harm in California, and the conduct giving rise to their claims occurred

elsewhere).

      We conclude that the investors’ claims as alleged in Counts I, III, IV, and V

arise from or relate to appellants’ contacts with Texas and that appellants

purposefully availed themselves of Texas. Therefore, the trial court did not err in

denying appellants’ special appearances as to these four causes of action.

      The operative facts of Count II are that appellants failed to disclose to the

investors that DynaColor planned to usurp Razberi’s contract with Avigilon and, as

such, induced the investors into purchasing stock in Razberi.          Although we

concluded that appellants’ approval of the alleged misrepresentations and omissions

in the Stock Purchase Agreement arises from or relates to its contacts with Texas,

we cannot conclude the same as to the allegation that they failed to disclosure

information to the investors before the execution of the Stock Purchase Agreement.

There is no evidence that appellants ever met with the investors in Texas. Even

when Chan negotiated terms, it was with Galvin, not the investors. The evidence

concerning Chen’s direct discussions with the investors shows that Chen was in

Taiwan and that the investors either reached out to him in Taiwan or visited him in

                                        –22–
Taiwan as part of their due diligence in deciding to invest in Razberi. The record

otherwise indicates that the investors negotiated directly with Razberi, not

appellants. Thus, without more, such as a specific duty to disclose, we cannot

conclude that appellants’ conduct of sitting mute in Taiwan constitutes directing a

tort at Texas or arises from or relates to their contacts with Texas. Therefore, we

conclude the trial court did not have personal jurisdiction over appellants as to Count

II and erred in denying their special appearances as to that count.

      However, we do not reach the same conclusion as to appellees’ claims for

breach of fiduciary in Counts VI and VII. Although the causes of action concern

similar operative facts in that they involve appellants failure to disclose DynaColor’s

business with Avigilon, they also involve allegations of an ongoing duty and

relationship between appellants and various appellees as shareholders and the

company itself, not just potential investors to the company as alleged in Count II.

There are four fiduciary relationships alleged in Counts VI and VII: (1) between

Galvin, as a shareholder of Razberi, and Chen, as a director of Razberi; (2) between

Galvin, as shareholder, and DynaColor, as majority shareholder; (3) between

Razberi and Chen, as its director; and (4) between the investors, as shareholders, and

Chen, as director. In their opening brief, appellants argue that shareholders do not

owe fiduciary duties to each other. Appellees argue that, under Delaware law,

shareholders do owe fiduciary duties to one another. Whether DynaColor owes a

fiduciary duty to Galvin and the other investors is a question regarding the merits of

                                        –23–
the allegations and, thus, not one that we decide when faced solely with the question

of whether the trial court has personal jurisdiction over the parties. See, e.g.,

Cornerstone Healthcare Grp. Holdings, Inc. v. Nautic Mgmt. VI, L.P., 493 S.W.3d

65, 73 (Tex. 2016) (“whether the respondents’ conduct was ultimately tortious is not

before us and is not relevant to the minimum-contacts analysis”).

      “[W]hen the claim arises from a breach of fiduciary duty based on a failure to

disclose material information, the fact that the [defendant] continually

communicated with the forum while steadfastly failing to disclose material

information shows the purposeful direction of material omissions to the forum state.”

Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 213 (5th Cir. 1999). Appellees allege

that Chen, as director, failed to disclose DynaColor’s intentions of contracting with

Avigilon, Chen’s knowledge that Avigilon would eventually cease doing business

with Razberi, and Chen’s knowledge that DynaColor entered into a non-disclosure

agreement with Avigilon regarding their future business relationship. According to

the record, these ongoing negotiations occurred before, during, and after the

timeframe of when Razberi was seeking investors and the investors executed the

Stock Purchase Agreement. After the potential investors became shareholders in

Razberi, the record shows that Avigilon began decreasing its orders with Razberi

and ultimately ceased ordering from Razberi.

      Galvin reached out to DynaColor on several occasions to see if it knew why

and specifically asked whether DynaColor was involved. In March 2015, Blake

                                       –24–
Yeh, DynaColor’s Sales Manager for North America, represented to Galvin via

email that DynaColor was not doing business with Avigilon and suggested it might

be a different company: “We have not received any call or email from Avigilon

regarding to sales or quality issues since you finalized the contract with them.” On

May 1, 2015, Yeh again represented via email to Galvin that DynaColor was not

doing business with Avigilon directly.

        To be sure, and because Razberi’s board of directors10 wanted further

assurance, Galvin asked Chen directly. On May 28, 2015, Galvin emailed Chen to

confirm that DynaColor was not providing NVR technology to Avigilon directly or

through another DynaColor partner. Chen responded on May 29, 2015: “We didn’t

provide NVR technology to Avigilon nor through other third parties.” Chen then

asked if there was a way Galvin could renegotiate and restore business with

Avigilon.

        Chen’s alleged failure to disclose material information he knew about

DynaColor (of which he was CEO) to Razberi (of which he was director) and to its

shareholders (Galvin and the investors) while continually communicating to Razberi

in Texas about Razberi’s business shows that Chen purposefully directed material

omissions to Texas. Likewise, DynaColor’s failure to disclose its business with

Avigilon to Razberi, of which it was a shareholder, when asked and when continuing

   10
      The investors, or their representatives—Ben Scott, Krishna Srinivasan, Kenneth Boyda, and Jiri
Modry—became members of the board of directors when the Stock Purchase Agreement was executed.
Galvin and Chen were the original two directors.
                                               –25–
to do business in Texas with Razberi shows it purposefully directed material

omissions to Texas.

      Furthermore, our earlier analysis of whether appellants’ additional conduct

showed that they purposefully availed themselves of jurisdiction in Texas as to

Counts I, III, IV, and V is equally applicable to Counts VI and VII. Appellants chose

to form Razberi with Galvin and, although it was formed as a Delaware corporation,

they chose for it to be headquartered in Texas. Razberi did business in Texas and

many of the contracts between Razberi and DynaColor were governed by Texas law.

Additionally, Chen chose to sit on Razberi’s board of directors subjecting himself to

fiduciary duties, and DynaColor chose to invest in and help manage Razberi as its

controlled subsidiary. Therefore, appellants’ contacts with Texas were not the result

of the unilateral activity of another person. They were purposeful and direct, and

appellees’ allegations in Counts VI and VII arise from or relate to those contacts.

                        Fair Play and Substantial Justice

      To be consistent with federal and state constitutional due process guarantees,

the exercise of personal jurisdiction over a nonresident defendant must also comply

with traditional notions of fair play and substantial justice. Moncrief Oil, 414

S.W.3d at 154. Rarely will the exercise of personal jurisdiction over a nonresident

defendant not comport with due process guarantees when the nonresident defendant

has purposefully availed itself of the forum state and, thus, established minimum

contacts with the forum. Id. at 154–55. This is because “[r]equiring nonresidents to

                                        –26–
comply with the laws of the jurisdictions in which they choose to do business is not

unreasonable, burdensome, or unique.” TV Azteca, 490 S.W.3d at 56.

      To determine whether exercising personal jurisdiction over a nonresident

defendant comports with traditional notions of fair play and substantial justice we

examine the following factors, if applicable: (1) the burden on the defendant; (2) the

interests of the forum state in adjudicating the dispute; (3) the plaintiff’s interest in

obtaining convenient and effective relief; (4) the international judicial system’s

interest in obtaining the most efficient resolution of controversies; and (5) the shared

interest of the several nations in furthering fundamental substantive social policies.

Moncrief Oil, 414 S.W.3d at 155. For a resident of another country, not just another

state, we also consider the burdens placed on the defendant in defending itself in a

foreign legal system, the state’s regulatory interests, the procedural and substantive

policies of other nations whose interests are affected, and the federal government’s

interest in its foreign relations policy. TV Azteca, 490 S.W.3d at 55.

      Although subjecting Chen and DynaColor to suit in Texas may be

burdensome to them because the distance between Taiwan and Texas is great,

distance alone cannot defeat personal jurisdiction. Moncrief Oil, 414 S.W.3d at 155.

Chen also asserts that traveling to Texas for litigation would be expensive and an

undue hardship for him because he would be away from DynaColor and, as CEO,

he needs to be present in Taiwan to run his company. However, DynaColor has

already participated in arbitration and litigation with Razberi in Texas due to

                                         –27–
Razberi’s failure to pay DynaColor amounts owed under the November 2014

contract and promissory note associated with the Stock Purchase Agreement. See

DynaColor, Inc. v. Razberi Techs., Inc., 795 F. App’x 261 (5th Cir. Jan. 9, 2020)

(unpublished per curiam opinion). Therefore, “[a]ny added burden on [appellants to

litigate this case in Texas] is relatively minimal and does not outweigh Texas’s

interest in adjudicating a dispute involving the alleged usurpation of a corporate

opportunity in Texas involving Texas assets.” Cornerstone, 493 S.W.3d at 74.

Moreover, DynaColor consented to suit in Texas in various agreements it entered

into with Razberi and the investors, and as CEO of DynaColor, Chen should have

anticipated traveling to Texas to participate in DynaColor’s litigation should such

arise. See Cap. Tech. Info. Servs., Inc. v. Arias & Arias Consultores, 270 S.W.3d

741, 752 (Tex. App.—Dallas 2008, pet. denied).

      Additionally, the interests of Texas in adjudicating the tort claims that

appellants allegedly committed against appellees in Texas is high. See Moncrief Oil,

414 S.W.3d at 155. Appellees’ interest in obtaining relief in Texas is also high as

the Stock Purchase Agreement and related documents were executed in Texas,

Razberi is located in Texas, and all but one appellee is a Texas resident.

Furthermore, although Taiwan may also have an interest in resolving controversies

regarding whether its residents committed tortious acts, Taiwan’s interest is not as

high as Texas’s interest because Texas is where the alleged torts were committed or,

at the very least, directed. And, appellees’ suit against Avigilon, which did not

                                       –28–
challenge the trial court’s jurisdiction, would proceed in Texas regardless of

appellants’ presence. The most efficient way to resolve disputes is in one proceeding

instead of splitting litigation into multiple proceedings across multiple jurisdictions.

TV Azteca, 490 S.W.3d at 55. We conclude that this is not one of those rare

occasions where exercising jurisdiction over a nonresident defendant, who has

minimum contacts with Texas, offends traditional notions of fair play and substantial

justice. See Moncrief Oil, 414 S.W.3d at 156.

                                     Conclusion

      We conclude that the trial court had personal jurisdiction over appellants as to

Counts I, III, IV, V, VI, and VII and did not err in denying their special appearances

as to those counts. We further conclude that the trial court did not have personal

jurisdiction over appellants as to Count II. Therefore, we affirm the order of the trial

court as to Counts I, III, IV, V, VI, and VII and reverse and render an order granting

appellants’ special appearances as to Count II. We remand this case to the trial court

to conform its judgment with the opinion of this Court.

                                            /Craig Smith/
                                            CRAIG SMITH
                                            JUSTICE

Schenck, J., concurring and dissenting.

191551F.P05

                                          –29–
                                    S
                             Court of Appeals
                      Fifth District of Texas at Dallas
                                   JUDGMENT

 WARREN CHEN AND                               On Appeal from the 193rd Judicial
 DYNACOLOR, INC., Appellants                   District Court, Dallas County, Texas
                                               Trial Court Cause No. DC-18-16568.
 No. 05-19-01551-CV           V.               Opinion delivered by Justice Smith.
                                               Justices Schenck and Garcia
 RAZBERI TECHNOLOGIES, INC.,                   participating.
 THOMAS J. GALVIN, LIVEOAK
 VENTURE PARTNERS I, L.P.,
 LIVEOAK VENTURE PARTNERS
 1A, L.P., KENNETH L. AND
 VIRGINIA T. BOYDA, AS
 TRUSTEES OF THE BOYDA
 FAMILY REVOCABLE TRUST
 DATED 10/12/1990, AND JIRI
 AND ROSEMARY MODRY, AS
 TRUSTEES OF THE JRAM TRUST
 UDT 8/21/1996, Appellees

      In accordance with this Court’s opinion of this date, the order of the trial court
denying appellants WARREN CHEN AND DYNACOLOR, INC.’s special
appearances is AFFIRMED as to appellees’ causes of action in Counts I, III, IV, V,
VI, and VII, and REVERSED as to appellees’ causes of action in Count II. We
RENDER an order granting appellants’ special appearances as to Count II. We
REMAND this cause to the trial court to conform its judgment with this Court’s
opinion.

    It is ORDERED that appellees RAZBERI TECHNOLOGIES, INC.,
THOMAS J. GALVIN, LIVEOAK VENTURE PARTNERS I, L.P., LIVEOAK
                             –30–
VENTURE PARTNERS 1A, L.P., KENNETH L. AND VIRGINIA T. BOYDA, AS
TRUSTEES OF THE BOYDA FAMILY REVOCABLE TRUST DATED
10/12/1990, AND JIRI AND ROSEMARY MODRY, AS TRUSTEES OF THE
JRAM TRUST UDT 8/21/1996 recover their costs of this appeal from appellants
WARREN CHEN AND DYNACOLOR, INC.

Judgment entered this 8th day of November 2022.

                                    –31–