Court Opinion

ID: 2772531
Source: CourtListenerOpinion
Date Created: 2015-01-23 07:46:54.057319+00
Date Added: 2024-06-11T11:47:54.297081
License: Public Domain

COURT OF APPEALS
                          SECOND DISTRICT OF TEXAS
                               FORT WORTH

                              NO. 02-14-00035-CV

ACT TRADING F.Z.E.                                                   APPELLANT

                                        V.

TRIPLE CANOPY, INC.                                                    APPELLEE

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          FROM THE 355TH DISTRICT COURT OF HOOD COUNTY
                     TRIAL COURT NO. C2013135

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                         MEMORANDUM OPINION 1

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      This is an accelerated interlocutory appeal from the trial court’s denial of

ACT Trading F.Z.E.’s special appearance. ACT brings two issues challenging

the trial court’s findings supporting the exercise of personal jurisdiction over it

under a reverse veil-piercing theory. We affirm.

      1
       See Tex. R. App. P. 47.4.
                                  Background

      The underlying suit arises from a transaction between ACT and Triple

Canopy, Inc., through a third party dealer, for the manufacture and delivery of

several armored vehicles. At the time of the transaction, ACT had a principal

office located in Ajman, a United Arab Emirates free zone, and it manufactured

the vehicles for Triple Canopy there. For a time, ACT stored the vehicles in

Ajman; it then shipped them to Turkey and, later, to Iraq. ACT does business in

the Middle East, particularly Iraq, Afghanistan, and North Africa.    ACT’s sole

owner and employee is Dennis Mark, a Granbury, Texas resident. Mark is also

the sole owner of other companies operating overseas (sometimes referred to as

the ACT group of companies).        Triple Canopy sought to invoke personal

jurisdiction over ACT under a reverse veil-piercing theory, that is, Triple Canopy

alleged that ACT is an alter ego of Mark and that personal jurisdiction over Mark

can be imputed to ACT. 2

                   Standard of Review and Applicable Law

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

question of law, which we review de novo. Moki Mac River Expeditions v. Drugg,

221 S.W.3d 569, 574 (Tex. 2007); TravelJungle v. Am. Airlines, Inc., 212 S.W.3d
2
       Although Triple Canopy used the term “fusion” in the trial court––with
respect to Mark and the ACT group of companies––it was arguing that Mark’s
contacts with Texas should be imputed to ACT, which is commonly referred to as
reverse veil piercing. See, e.g., Cappuccitti v. Gulf Indus. Prods., Inc., 222
S.W.3d 468, 482 (Tex. App.––Houston [1st Dist.] 2007, no pet.).

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841, 845 (Tex. App.––Fort Worth 2006, no pet.). The plaintiff bears the initial

burden of pleading sufficient allegations to bring a nonresident defendant within

the provisions of the long-arm statute.                  Moki Mac, 221 S.W.3d at 574;

TravelJungle, 212 S.W.3d at 845. Once the plaintiff does so, the burden shifts to

the nonresident defendant to negate all alleged jurisdictional bases. Moki Mac,
221 S.W.3d at 574; TravelJungle, 212 S.W.3d at 845. We review all of the

evidence in making this determination. TravelJungle, 212 S.W.3d at 845. We

may review the trial court’s resolution of disputed fact issues for legal and factual

sufficiency under the same standards of review that we apply in reviewing a

jury’s or trial court’s findings of fact at trial. Id.

                                          Analysis

       The following trial court finding is primarily at issue in this appeal:

       [T]he totality of the evidence demonstrates that Mark, ACT Trading,
       Armored and the other entities that make or made up the ACT
       Group of Companies are integrated to achieve a common business
       purpose and are so indistinct from one another that the entities,
       including Mark, are fused into one entity and cannot be found to be
       separate and distinct from one another for jurisdictional purposes.
       The Court further finds that the corporate fiction should be
       disregarded to prevent fraud or injustice.

Applicable Law

       Under Texas law, a corporation is presumed to be a separate entity from

its officers and shareholders. See Grain Dealers Mut. Ins. Co. v. McKee, 943
S.W.2d 455, 458 (Tex. 1997); Washington DC Party Shuttle, LLC v. IGuide

Tours, 406 S.W.3d 723, 738–39 (Tex. App.––Houston [14th Dist.] 2013, pet.

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denied) (en banc). As a result, a plaintiff who relies on the existence of an alter-

ego relationship to ascribe one defendant’s contacts with Texas to a distinct

foreign corporation must prove that such a relationship exists. Washington DC

Party Shuttle, 406 S.W.3d at 738–39; Cappuccitti v. Gulf Indus. Prods., Inc., 222
S.W.3d 468, 482 (Tex. App.––Houston [1st Dist.] 2007, no pet.).

      When the primary party is an individual owner or shareholder, “[t]he

corporate fiction is disregarded . . . when a corporation is organized and operated

as a mere tool or business conduit” of that individual. Schlueter v. Carey, 112
S.W.3d 164, 169 (Tex. App.—Fort Worth 2003, pet. denied) (quoting Castleberry

v. Branscum, 721 S.W.2d 270, 272 (Tex. 1986)). In other words, “[a]lter ego

applies when there is such unity between a corporation and an individual that the

separateness of the corporation has ceased and holding only the corporation

liable would result in an injustice.” Nichols v. Tseng Hsiang Lin, 282 S.W.3d 743,

747 (Tex. App.—Dallas 2009, no pet.) (quoting Mancorp, Inc. v. Culpepper, 802
S.W.2d 226, 228 (Tex. 1990)).

      Triple Canopy argued that ACT, along with Mark’s other companies,

should be considered a single entity for jurisdictional purposes. The doctrine of

jurisdictional veil piercing is similar to the alter ego concept in substantive liability,

though jurisdictional veil piercing sometimes “involve[s] different elements of

proof.” PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 174 (Tex.

2007). To show jurisdictional veil piercing, a plaintiff must show that the primary

party “exerts such domination and control over” the defendant “that they do not in

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reality constitute separate and distinct corporate entities but are one and the

same corporation for purposes of jurisdiction.” Id. at 173. A factor that courts

have considered for jurisdictional veil piercing purposes––and that primarily

relied upon by Triple Canopy––is whether the parties have observed corporate

formalities. Id. at 175; see, e.g., Crithfield v. Boothe, 343 S.W.3d 274, 284–85

(Tex. App.––Dallas 2011, no pet.); Cappuccitti, 222 S.W.3d at 481–82.

Jurisdictional Facts

      Mark organized ACT in a UAE free zone for convenience and personal tax

advantages. He charged all of his expenses when travelling to ACT’s credit card

for convenience. Additionally, he and his wife had made significant personal

purchases on the card––for food, medical and dental expenses, and marina

fees––although Mark said that they had paid the company back for those

purchases.

      Mark testified that ACT advertises on an internationally available website

along with the other ACT group of companies. 3 The website was set up so that

persons in different geographical areas were directed to different telephone

numbers based on their geographical area. 4 However, Mark also testified that

the number for ACT is now his personal cell phone number, and that he does all

of his business via that number no matter where he is personally located so that

      3
       According to Mark, one company—Armored Cars and Trucks LLC––had
been “dormant” for three years.
      4
      ACT pays for the website.

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he is immediately available to his clients. Mark said that he sometimes pays the

phone bill from a personal account, and other times he pays it from ACT’s

account. Mark also used ACT’s credit card “a couple of times” to buy truck parts

in Texas for ACT because he could not buy them in the UAE; he shipped the

parts to ACT in either the UAE or Dubai.

Application

      We conclude and hold that the trial court did not err by finding that its

general jurisdiction over Mark should be imputed to ACT. See Cappucitti, 222
S.W.3d at 484; cf. Gonzalez v. Lehtinen, No. 13-06-441-CV, 2008 WL 668600, at

*5 (Tex. App.––Corpus Christi Mar. 13, 2008, pet. denied) (mem. op.) (“The court

also heard Lehtinen testify that Cárdenas was so closely involved with Hidalgo

Truck that he used its mailing address as his own and could almost always be

reached by telephone when calling Hidalgo Truck’s phone number.”).           The

evidence shows that Mark operated all three companies for similar purposes and

marketed them jointly, controlling them from wherever he happened to be

located. It also shows that Mark and his wife treated ACT’s credit as their own

for their personal benefit. That they may have eventually paid back ACT for their

purposes does not change the fact that they used the credit card for significant

personal expenses. Much of ACT’s argument pertains to the alleged lack of

contacts between ACT and Texas; however, our analysis, in keeping with the trial

court’s findings, is focused on the reverse veil piercing theory argued by Triple

Canopy in the trial court. We overrule ACT’s first issue.

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                 Traditional Notions of Fair Play and Justice

      In its second issue, ACT argues that exercising jurisdiction over it would be

unfair because Mark is the only defendant with any Texas contacts.            See

Waterman S.S. Corp. v. Ruiz, 355 S.W.3d 387, 426 (Tex. App.––Houston [1st

Dist.] 2011, pet. denied) (op. on reh’g) (“Generally, Texas has no interest in

adjudicating a case between nonresidents concerning occurrences that took

place outside of Texas.”).

      Even when the contacts of the parent are imputed to the subsidiary based

on the theory of alter ego, the trial court’s exercise of general, personal

jurisdiction over the subsidiary must comport with traditional notions of fair play

and substantial justice. Cappuccitti, 222 S.W.3d at 484, 486–87. Here, Mark

alleged no facts that would support a finding of unfairness: Mark testified that

ACT’s UAE office had been closed since October 2013, and he did not testify

about the location of witnesses or files related to the litigation. In light of his

testimony that he is present in Granbury at least one third of every year and that

his business dealings are structured so that he can direct them at any time of day

from anywhere in the world––and in light of the lack of testimony that ACT would

be burdened by defending the suit in Texas––we conclude and hold that the trial

court did not err by determining that exercising jurisdiction over ACT would not

offend traditional notions of fair play and substantial justice. See, e.g., Capital

Tech. Info. Servs., Inc. v. Arias & Arias Consultores, 270 S.W.3d 741, 755–56

                                        7
(Tex. App.––Dallas 2008, pet. denied); Cappucitti, 222 S.W.3d at 486.   We

overrule ACT’s second issue.

                                Conclusion

     Having overruled ACT’s two issues, we affirm the trial court’s order

denying ACT’s special appearance.

                                             /s/ Terrie Livingston

                                             TERRIE LIVINGSTON
                                             CHIEF JUSTICE

PANEL: LIVINGSTON, C.J.; WALKER and GABRIEL, JJ.

DELIVERED: January 22, 2015

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