Court Opinion

ID: 2817649
Source: CourtListenerOpinion
Date Created: 2015-07-16 07:23:33.529547+00
Date Added: 2024-06-11T12:14:39.592021
License: Public Domain

Opinion issued July 14, 2015.

                                      In The

                              Court of Appeals
                                     For The

                          First District of Texas
                             ————————————
                              NO. 01-14-00863-CV
                            ———————————
     WEATHERFORD ARTIFICAL LIFT SYSTEMS, INC., Appellant
                                        V.
                     A&E SYSTEMS SDN BHD, Appellee

                    On Appeal from the 295th District Court
                             Harris County, Texas
                       Trial Court Case No. 2012-62091

                                  OPINION

      In this interlocutory appeal, Weatherford Artificial Lift Systems, Inc.

[hereafter, “Weatherford”] appeals the trial court’s granting the special appearance

of A&E Systems SDN BHD [hereafter, “A&E Malaysia”]. See TEX. CIV. PRAC. &

REM CODE ANN. § 51.014(a)(7) (West Supp. 2012). Weatherford contends that the
trial court erred by granting the special appearance because A&E Malaysia is

subject to specific personal jurisdiction in Texas. We affirm.

                                 BACKGROUND

      Appellant, Weatherford Artificial Lift Systems, Inc., is a subsidiary of

Weatherford International, Ltd. Weatherford is a Texas corporation that maintains

a principal office and headquarters in Houston, Texas.

      A&E Systems SDN BHD is a Malaysian corporation that specializes in the

manufacturing and provision of anti-corrosion coatings and paints typically used in

oil and gas activities. Its trademark products are Alocit and Enviropeel, two kinds

of anti-corrosion coatings designed for asset protection in the oil and gas industry.

A&E Malaysia’s principal office and headquarters are in Malaysia.

      A&E Anti-Corrosion Systems, L.L.C. [hereafter, A&E USA] is a Florida

limited liability company with its sole office and headquarters in Ponte Vedra,

Florida. It was established as a Florida company in November 2009; prior to that

A&E USA was a Delaware limited liability company, but the Delaware company

was merged into the Florida company in December 2009. A&E USA is a wholly

owned subsidiary of A&E Malaysia.         The two companies have separate, but

somewhat overlapping, management. A&E Maylasia’s management consists of

the following: Arthur Haycox, CEO; David Lee, CFO; Simon Haycox, Technical

Director; and Mazlan Abdul Majid, Chairman. A&E USA’s management consists

                                          2
of the following:       Richard Hoyland, Manager; Arthur Haycox, Manager; and

Mazlan Abdul Majid, Manager. Of significance to this case, Arthur Haycox serves

in management positions in both companies; he is the CEO of A&E Malaysia and

a manager of A&E USA. A&E Malaysia often uses the name “A&E Group” to

collectively refer to itself and its subsidiaries, though “A&E Group” is not a legal

entity.

          There is evidence that whenever A&E USA would receive a purchase order

from a United States-based company, A&E USA would place an order with A&E

Malaysia for the manufacture of the equipment or product specified. Once the

United States customer paid A&E USA, A&E USA would then pay A&E Malaysia

a portion of the payment it received for the product.

          In the summer of 2009, a Weatherford employee brought the Enviropeel and

Alocit products to the attention of Todd Travis, Weatherford’s Global Business

Manager.       Shortly thereafter, Travis initiated contact with “A&E Group” by

clicking on a link through its global website, which generated an email to an

officer at A&E Malaysia. Arthur Haycox eventually responded to Travis’s inquiry

about Enviropeel and Alocit.

          Shortly thereafter, in August 2009, Travis wrote Arthur Haycox, stating that

Weatherford was interested in pursuing a joint venture with “A&E Systems, USA.”

The letter, addressed to Mr. Arthur Haycox at “A&E Systems,” stated:

                                            3
        This letter is to confirm Weatherford’s (WFT) interest in forming a
        joint venture (JV) with A&E Systems, USA for the exclusive
        distribution and application of coating Enviropeel and Alocit, here
        after termed “the coatings”, within North and South America regions.
        The JV will include licensing agreement for sales and application of
        the coatings for all wellheads globally.

(Emphasis added). Also in August 2009, Haycox invited Travis to attend a “grand

opening” of A&E Malaysia’s warehouse in Malaysia, which Travis did in August

2009.

        Around the same time that Travis visited the Malaysian warehouse,

Weatherford began to purchase Alocit and Enviropeel units for potential marketing

to Weatherford customers. The purchase orders list the supplier as “A&E Anti

Corrosion Systems, LLC,” or A&E USA, as the supplier. The record contains

seven such purchase orders, the earliest dated August 3, 2009, and the last one

dated February 11, 2010.      While there is evidence that Arthur Haycox told

Weatherford it could issue purchase orders to A&E Malaysia, Weatherford did not.

Weatherford’s purchases were all from A&E USA. Travis testified by affidavit

that Arthur Haycox told him that “if Weatherford and A&E Group’s relationship

did not work out at any point during the first year, that A&E Group would

repurchase the products from Weatherford.” Only two of the units purchased were

actually shipped to Weatherford; the rest remained at the warehouse in Malaysia

while the parties worked toward establishing the joint venture.

                                         4
      During negotiations to work out the joint venture with A&E USA, draft

contracts prepared by Weatherford provided that Harris County, Texas, would be

the site of any arbitration in the event of a dispute. The draft “Product Supply and

Distribution Agreement” also stated that title to the goods would transfer to

Weatherford “at the port in Malaysia.”

      Also during negotiations for the joint venture, in October 2009, Arthur

Haycox sent marketing tools to Weatherford for use in showing the products to

Weatherford’s clients. And, in the fall of 2009, Richard Hoyland, of A&E USA,

and Simon Haycox, of A&E Malaysia, went to Houston to train Weatherford

employees about the use of the Alocit and Enviropeel products at Weatherford’s

facilities in Houston.

      By March 2010, the parties had still not agreed to terms regarding the joint

venture. On March 2, 2010, Arthur Haycox traveled to Houston and, along with

A&E USA’s Richard Hoyland, met with Weatherford’s Vice President, David

Colley about moving forward with the parties’ relationship. Haycox swore by

affidavit that he attended this meeting in his capacity at a manager of A&E USA.

According to Weatherford’s second amended petition, during the next few months,

the parties “struggled to communicate about or agree upon how to proceed

forward,” and “it became clear” that the relationship “required termination.” It is

undisputed that no joint venture was ever reached, and Weatherford’s second

                                         5
amended petition contains no claim or causes of action relating to the aborted

attempts to form a joint venture with A&E USA.

      On June 16, 2010, Weatherford manager Travis traveled to Kuala Lumpur,

Malaysia, to meet with Arthur Haycox and negotiate a return of the products.

After the meetings, Haycox emailed Travis their agreed negotiated terms, which

the parties refer to as the Exit Agreement.1 The Exit Agreement is the contract

giving rise to the underlying lawsuit. The term of the Exit Agreement giving rise

to the present dispute provides:

      A&E will purchase all unused Enviropeel Units from [Weatherford]
      on or before 31st Dec 2010 (a list of the numbered units is attached),
      at the original purchase price from [A&E USA].

After the Exit Agreement was reached, Weatherford returned the products it had

received to A&E USA in Florida.         The items purchased, but never shipped,

remained in the warehouse in Malaysia.

      On March 24, 2011, A&E USA, via its manager Richard Hoyland, issued a

series of credit notes to Weatherford, which stated that “Credits can be taken

against all orders placed by the Weatherford organizations with [A&E USA] on a

Global basis[.]” The credit notes also discounted the original purchase price of

some of the products based on their age and color.

1
      For purposes of examining jurisdiction, we will assume without deciding that this
      is a valid and enforceable contract. We express no opinion as to the validity or
      enforceability of this contract, or whether it was breached by either party.
                                          6
      A dispute soon arose over compliance with the Exit Agreement.             In

particular, Weatherford objected to not being reimbursed in cash rather than credit

and to the discounted values reflected in the credit notes. In 2012, Weatherford

sued A&E USA for breach of contract and unjust enrichment. In sum, Weatherford

alleged that A&E USA breached the Exit Agreement “by refusing to either 1) remit

payment to Weatherford for the Products that Weatherford has paid for; or 2)

deliver the Products which Weatherford has already purchased.”

      In 2014, Weatherford filed a Second Amended Petition, and, for the first

time, asserted claims against A&E Malaysia.       Weatherford pleaded the same

causes   of   action—breach     of   contract,   unjust   enrichment,   fraudulent

misrepresentation, and negligent misrepresentation—against both A&E USA and

A&E Malaysia, claiming that “the entities were so intermingled that A&E USA

was nothing more than the ‘alter ego’ of A&E Malaysia,” and that “A&E Malaysia

is jointly and severally liable for the wrongful conduct of A&E USA.”

      A&E Malaysia filed a Special Appearance, and Weatherford responded,

claiming that A&E Malaysia’s contacts with Texas were sufficient to establish

specific jurisdiction, and that “A&E USA is the Alter Ego of A&E, and the Two

Must Be ‘Fused’ For Jurisdictional Purposes.”       The trial court granted A&E

Malaysia’s special appearance, and Weatherford then filed this accelerated appeal.

                                         7
                            SPECIFIC JURISDICTION

      In two related issues on appeal, Weatherford contends the trial court erred in

granting A&E Malaysia’s special appearance because (1) A&E Malaysia has

sufficient minimum contacts with Texas to establish specific personal jurisdiction,

and (2) exercising jurisdiction over A&E Malaysia would not offend traditional

notions of fair play and substantial justice.

Standard of Review

      Whether a trial court has personal jurisdiction over a nonresident defendant

is a question of law. Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d
777, 790–91 (Tex. 2005); BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d
789, 794 (Tex. 2002). Because the trial court’s exercise of personal jurisdiction

over a nonresident defendant involves a question of law, an appellate court reviews

the trial court’s determination of a special appearance de novo. Moki Mac River

Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007); BMC Software, 83
S.W.3d at 794. However, the trial court must frequently resolve fact questions

before deciding the jurisdictional question. BMC Software, 83 S.W.3d at 794;

Capital Tech. Info. Servs., Inc. v. Arias & Arias, Consultores, 270 SW.3d 741, 748

(Tex. App.—Dallas 2008, pet. denied) (en banc). In a special appearance, the trial

court is the sole judge of the witnesses’ credibility and the weight to be given their

testimony. Leesboro Corp. v. Hendrickson, 322 S.W.3d 922, 926 (Tex. App.—

                                           8
Austin 2010, no pet.). We do not “disturb a trial court’s resolution of conflicting

evidence that turns on the credibility or weight of the evidence.” Ennis v. Loiseau,

164 S.W.3d 698, 706 (Tex. App.—Austin 2005, no pet.). When a trial court does

not issue findings of fact or conclusions of law, “all facts necessary to support the

judgment and supported by the evidence are implied.” BMC Software, 83 S.W.3d

at 795. We will affirm the trial court’s ruling on any legal theory that finds support

in the record. Dukatt v. Dukatt, 355 S.W.3d 231, 237 (Tex. App.—Dallas 2011,

pet. denied).

Applicable Principles of Law

      A Texas court 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, 221 S.W.3d at 574. “Because the Texas long-arm

statute reaches ‘as far as the federal constitutional requirements of due process will

allow,’ the statute is satisfied if the exercise of personal jurisdiction comports with

federal due process.” Preussag Aktiengesellschaft v. Coleman, 16 S.W.3d 110, 113

(Tex. App.—Houston [1st Dist.] 2000, pet. dism’d w.o.j.) (quoting CSR, Ltd. v.

Link, 925 S.W.2d 591, 594 (Tex. 1996)).

      Personal jurisdiction is proper when the nonresident defendant has

established minimum contacts with the forum state, and the exercise of jurisdiction

                                          9
comports with “traditional notions of fair play and substantial justice.” Moki Mac,
221 S.W.3d at 575 (citing Int’l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.

Ct. 154, 158 (1945)). Minimum contacts are sufficient for personal jurisdiction

when the nonresident defendant has purposefully availed himself of the privileges

of conducting activities within the forum state, thus invoking the benefits and

protections of its laws. Id . (citing Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct.
1228, 1240 (1958)).

      A nonresident defendant’s forum-state contacts may give rise to two types of

personal jurisdiction: specific and general. Id. When specific jurisdiction is alleged,

the inquiry focuses on the relationship among the defendant, the forum, and the

litigation. Id. at 575–76. Purposeful availment alone will not support an exercise of

specific jurisdiction. Id. at 579. Rather, specific jurisdiction has “two co-equal

components,” and “purposeful availment has no jurisdictional relevance unless the

defendant’s liability arises from or relates to the forum contacts.” Id. For a

nonresident defendant’s forum contacts to support an exercise of specific

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

operative facts of the litigation.” Moki Mac, 221 S.W.3d at 585; see Rush v.

Savchuk, 444 U.S. 320, 329, 100 S. Ct. 571, 578 (1980)). The operative facts of the

litigation are those facts that would be the focus of the trial. Pulmosan Safety

                                          10
Equip. Corp. v. Lamb, 273 S.W.3d 829, 839 (Tex. App.—Houston [14th Dist.]

2008, pet. denied) (citing Moki Mac, 221 S.W.3d at 585).

      A general jurisdiction inquiry is very different from a specific jurisdiction

inquiry. It requires a “more demanding minimum contacts analysis,” PHC–

Minden, L.P. v. Kimberly–Clark Corp., 235 S.W.3d 163, 168 (Tex. 2007) (quoting

CSR, Ltd., 925 S.W.2d at 595), with a “substantially higher” threshold. Id. (quoting

4 WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE § 1067.5 (2007)). Usually,

“the defendant must be engaged in longstanding business in the forum state, such

as marketing or shipping products, or performing services or maintaining one or

more offices there; activities that are less extensive than that will not qualify for

general in personam jurisdiction.” Id. General jurisdiction is “dispute-blind,”

meaning that it is an exercise of the court’s jurisdiction made without regard to the

nature of the claim presented or whether the defendant’s alleged liability arises

from those contacts. Id. The central question is whether the defendant’s contacts

are “continuous and systematic” such that the relationship between the nonresident

and the state approaches the relationship between the state and its own residents.

Id. (citing Helicopteros Nacionales de Columbia, S.A. v. Hall, 638 S.W.2d 870,

882 (Tex. 1982) (Pope, J., dissenting), rev’d, 466 U.S. 408, 104 S. Ct. 1868

(1984)).

                                         11
Jurisdictional Alter Ego

      In the trial court, both in its Second Amended Petition and its Response in

Opposition to Defendant [A&E Malaysia’s] Special Appearance, Weatherford

argued that A&E USA was the alter ego of A&E Malaysia and that their

jurisdictional contacts must be “fused.” Before this Court can determine which

jurisdictional contacts are imputable to A&E Malaysia, we must first address the

issue of jurisdictional alter ego.

      This Court has explained the notion of jurisdictional alter ego as follows:

      A parent company and its subsidiary may be “fused” for jurisdictional
      purposes if the plaintiff proves that “the parent controls the internal
      business operations and affairs of the subsidiary.” [BMC Software
      Belgium, N.V. v. Marchand, 83 S.W.3d 789, 799 (Tex. 2002)].“But
      the degree of control the parent exercises must be greater than that
      normally associated with common ownership and directorship; the
      evidence must show that the two entities cease to be separate so that
      the corporate fiction should be disregarded to prevent fraud or
      injustice.” Id. (citing Hargrove v. Fibreboard Corp., 710 F.2d 1154,
      1159 (5th Cir. 1983)). A parent company cannot be subjected to
      personal jurisdiction based on the local activities of its subsidiary
      when “the subsidiary’s presence in the state is primarily for the
      purpose of carrying on its own business and the subsidiary has
      preserved some semblance of independence from the parent and is not
      acting as merely one of its departments. . . .” 4A CHARLES ALAN
      WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE
      § 1069.4 (3d ed. 2002).“[T]he party seeking to ascribe one
      corporation’s actions to another by disregarding their distinct
      corporate entities [must] prove this allegation, because Texas law
      presumes that two separate corporations are distinct entities.” PHC–
      Minden, L.P. v.. Kimberly–Clark Corp., 235 S.W.3d 163, 173 (Tex.
      2007).“[V]eil-piercing for purposes of liability (‘substantive veil-
      piercing’) is distinct from imputing one entity’s contacts to another for
      jurisdictional purposes (‘jurisdictional veil-piercing’).” Id. at 174.
                                         12
      Our Supreme Court has identified four relevant factors in the
      jurisdictional veil-piercing analysis: (1) the amount of the subsidiary’s
      stock owned by the parent corporation; (2) the existence of separate
      headquarters; (3) the observance of corporate formalities; and (4) the
      degree of the parent’s control over the general policy and
      administration of the subsidiary. Id. at 175 (citing 4A WRIGHT &
      MILLER, supra, § 1069.4). Parent companies normally exercise at least
      some control over their subsidiaries, and “[a] subsidiary corporation
      will not be regarded as the alter ego of its parent merely because of
      stock ownership, a duplication of some or all of the directors or
      officers, or an exercise of the control that stock ownership gives to
      stockholders.” Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d
571, 573 (Tex. 1975).

Mikuni Corp. v. Foster, No. 01-11-00383-CV, 2012 WL 170603, at *4–5 (Tex.

App.—Houston [1st Dist.] Jan. 19, 2012, no pet.) (mem. op.).

      When the trial court granted A&E Malaysia’s Special Appearance, it

necessarily found against Weatherford on its jurisdictional alter-ego argument.

And, while Weatherford at times refers to A&E USA and A&E Malaysia

interchangeably as “A&E Group” and seeks to impute the A&E USA’s contacts to

A&E Malaysia in its arguments, Weatherford does not bring an appellate issue

challenging the trial court’s implied finding against alter ego.             Indeed,

Weatherford’s appellate brief does not mention jurisdictional alter ego at all, nor

does it analyze the alter ego issue using the test set forth by the supreme court in

PHC-Minden. Thus, even if appellant’s brief could be construed as attacking the

negative alter ego finding, it is nonetheless deficient. When an appellate issue is

unsupported by argument or contains an argument lacking citation to the record or
                                         13
legal authority, nothing is presented for review. Republic Underwriters Ins. Co. v.

Mex. Tex., Inc., 150 S.W.3d 423, 427 (Tex. 2004); see also TEX. R. APP. P. 38.1(i).

Because Weatherford has not challenged the implied negative alter ego finding, we

will not attribute A&E USA’s contacts to A&E Malaysia, and, to the extent there is

a fact issue regarding to whom a contact is attributable, we will not disturb the trial

court’s resolution of that issue and will imply all facts necessary to support the

judgment. See BMC Software, 83 S.W.3d at 795.

The Contacts Relied Upon by Weatherford and to Whom Attributable

      Before determining whether the contacts are sufficient to establish personal

jurisdiction, the Court must first determine to whom they are attributable—A&E

USA or A&E Malaysia. Weatherford relies on the following contacts to establish

personal jurisdiction over A&E Malaysia.

      1. A draft Confidentiality and Non-Disclosure Agreement between
         “A&E Group, having an address at 37B, Jalan USJ 21/11, UEP
         Subang Jaya, 47600 Subang Jaya, Selangor [Malaysia] and
         Weatherford International Ltd. (Weatherford), having an address at
         515 Post Oak Blvd., Houston, Texas 77027, USA.” This
         document is dated July 15, 2009, and was sent from Malaysia to
         Texas shortly before Weatherford’s manager, Travis, traveled to
         A&E Malaysia to visit the grand opening of its warehouse. It was
         never signed by any party. Because it was sent by “A&E Group”
         from Malaysia and references a Malaysia address, this will be
         attributed to A&E Malaysia, not A&E USA.

      2. A draft Product Supply and Distribution Agreement between
         Weatherford and “A&E Group” that was drafted by Weatherford
         and sent by email to Arthur Haycox, which provided that
         “Arbitration proceedings shall be held in Harris County, Texas,
                                          14
   USA.”       The document was never signed by any party.
   Furthermore, the proposed joint venture was to have been between
   Weatherford and A&E USA, thus the contract drafted in
   furtherance of that proposed joint venture is necessarily
   attributable to A&E USA, not A&E Malaysia.

3. An email from A&E Malaysia to Weatherford in Texas with an
   attached powerpoint for Weatherford to use in explaining the
   Enviropeel and Alocit products that it had purchased from A&E
   USA to its customers. This is attributable to A&E Malaysia.

4. A trip to Houston by A&E USA employee, Richard Hoyland, and
   A&E Malaysia employee, Simon Haycox, to provide training to
   Weatherford employees regarding the Enviropeel products that
   Weatherford had purchased from A&E USA. The trip by Simon
   Haycox is attributable to A&E Malaysia, but the trip by Hoyland is
   attributable to A&E USA.

5. A “few” meetings between Arthur Haycox and Todd Travis in
   Houston. Because Arthur Haycox is employed by both A&E USA
   and A&E Malaysia, we resolve the dispute as to which company
   he was representing at the time in the light most favorable to the
   trial court’s ruling. Thus, we consider Haycox’s meetings in
   Houston to be attributable to A&E USA.

6. A meeting in Texas on March 2, 2010, between Arthur Haycox,
   Richard Hoyland, and Weatherford Vice President David Colley to
   discuss the parties’ relationship. Again, we consider Haycox’s
   participation in this meeting in the light most favorable to the trial
   court’s ruling, i.e., attributable to A&E USA.

7. The “Exit Agreement,” which is memorialized in a June 18, 2010
   email from Arthur Haycox to Todd Travis, was sent from Malaysia
   to Texas, and provided that “A&E will purchase all unused
   Enviropeel Units from WEP on or before 31st Dec 2010 . . . at the
   original purchase price from A&E Anti Corrosion LLC [A&E
   USA].” The Exit Agreement was negotiated in Malaysia after
   Travis traveled to Malaysia and sent by email from Malaysia.
   Although Haycox’s email does not indicate whether he is acting
   for A&E USA or A&E Malaysia, the fact that the email
                                   15
           distinguishes “A&E” from “A&E Anti Corrosion LLC” is some
           evidence that in this instance, Haycox was acting on behalf of
           A&E Malaysia in offering to purchase the products back from
           Weatherford. The Exit Agreement is, therefore, attributable to
           A&E Malaysia for purposes of a jurisdictional analysis.

Thus, the only contacts that we consider attributable to A&E Malaysia are (1) the

draft Confidentiality and Non-Disclosure Agreement that was never executed; (2)

an email containing a powerpoint presentation that Weatherford could use to

market the products it had already purchased from A&E USA to its customers; (3)

a single visit to Texas by an A&E Malaysia employee to demonstrate how to use

the products that Weatherford had already purchased from A&E USA; and (4) the

Exit Agreement itself.

“Substantial Connection” to Operative Facts of the Litigation

      For Texas to exercise specific jurisdiction in this case, (1) A&E Malaysia

must have made minimum contacts with Texas by “purposefully availing” itself of

the privilege of conducting activities here, and (2) its liability must have arisen

from or be related to those contacts. See Moki Mac, 221 S.W.3d at 576. Even if

there is “purposeful availment” in Texas, minimum contacts will not exist, and

jurisdiction will not attach, if there is not a “substantial connection” between the

alleged contacts and the operative facts of the litigation. Info. Servs. Grp., Inc. v.

Rawlinson, 302 S.W.3d 392, 404 (Tex. App.—Houston [14th Dist.] 2009, pet.

denied).

                                         16
      A&E Malaysia argues on appeal, as it did in the trial court, that the contacts

attributable to it, as opposed to those of A&E USA, do not have a substantial

connection to the operative facts of the litigation.

      In Moki Mac, the court analyzed whether there was a substantial connection

between the alleged contact and the operative facts of the suit. 221 S.W.3d at 569.

In doing so, the court considered whether the alleged contact would “be the focus

of the trial,” or “[would] consume most if not all of the litigation’s attention[.]” Id.

at 585. In sum, the court instructed us to consider whether the alleged contact was

“the subject matter of the case,” or was “related to the operative facts” of the cause

of action asserted. Id. The court concluded that the alleged contact—a

misrepresentation in a sales brochure—was not substantially related to the cause of

action asserted—negligence of tour guides in leading a hike of the Grand Canyon

that resulted in the plaintiffs’ son’s death. Id. “Whatever connection there may be

between Moki Mac’s promotional materials sent to Texas and the operative facts

that led to Andy’s death, we do not believe it is sufficiently direct to meet due

process concerns.” Id.

      The causes of action asserted by Weatherford in its Second Amended

Petition   are   breach    of    contract,        unjust   enrichment,   and   fraudulent

misrepresentation. Specifically, Weatherford pleaded that “A&E has breached the

terms and conditions of the Exit Agreement by failing to perform as required

                                             17
thereunder, namely by refusing to remit any payment to Weatherford for the

Products that Weatherford paid for and either returned or that were never even

received by Weatherford.” Similarly, the unjust enrichment claim is based on

A&E Malaysia’s alleged failure to “remit[] the payments it owes to

Weatherford[,]” and the fraudulent misrepresentation claim is based on its alleged

“representation to Weatherford that it would buy back the Products from

Weatherford and refund monies paid if the forecasted business relationship

between the Parties’ did not work out.” Thus, the operative facts in this case will

involve evidence regarding the rights and obligations arising out of the Exit

Agreement, i.e., whether A&E Malaysia promised, but did not, pay Weatherford

for the products returned.

      Of the four contacts with Texas attributable to A&E Malaysia, three do not

have the necessary connection to the operative facts of the lawsuit.              The

Confidentiality and Non-Disclosure Agreement that A&E Malaysia sent to

Weatherford before its manager, Travis, traveled to Malaysia to visit A&E

Malaysia’s warehouse was never executed by either party, and evidence regarding

its existence will have little, if anything to do with the evidence presented at trial

regarding the Exit Agreement.       Similarly, the fact that A&E Malaysia sent

marketing materials and an employee who conducted product training to Texas

will also have little relevance to the contract issues that will dominate the trial.

                                         18
Weatherford’s pleadings make no complaint about the marketing material or

training, and it is unlikely that either party will devote significant time to

presenting evidence about them at trial.      See Rawlinson, 302 S.W.3d at 401

(“[V]isits to Texas that are unrelated to the claims asserted are insufficient to

establish specific jurisdiction.”). Therefore, we conclude that, just as the marketing

misrepresentation was not the subject matter of or related to the operative facts of

the negligence action asserted in Moki Mac, the Confidentiality and Non-

Disclosure Agreement, marketing materials, and single training visit to Texas by

A&E Malaysia’s employee are not the subject matter of or related to the operative

facts of the causes of action asserted by Weatherford, which all related to the

allegation that A&E Malaysia failed to purchase the equipment that Weatherford

had purchased from A&E USA.

      Weatherford contends that

      the “operative facts” that will be the focus at trial include A&E’s
      continued efforts to create and benefit from a business relationship
      with Weatherford that would largely be executed in Texas, the
      representations and communications exchanged between the Parties
      regarding what they each expected from each other with regard to that
      business relations, A&E’s promises to refund the money that
      Weatherford paid for the Products, the “falling out” that eventually
      occurred between the Parties, the instructions given to Richard
      Hoyland from Arthur Haycox in Malaysia regarding the issuance of
      the Credit Notes, and A&E’s inspections and re-sale, from Malaysia,
      of the Products first paid for by Weatherford.

                                         19
However, as stated earlier, the trial court could have determined that all of the

negotiations in furtherance of the failed joint venture, and contacts made during

those negotiations, were attributable to A&E USA rather than A&E Malaysia, and

Weatherford has not challenged the trial court’s implied finding on that issue.

Thus, we conclude that the sole contact that is attributable to A&E Malaysia, and

which involves the operative facts of the lawsuit, is the Exit Agreement itself.

Purposeful Availment through “Exit Agreement”

      Having determined that the Exit Agreement is A&E Malaysia’s sole contact

that is substantially connected to the operative facts of the lawsuit, we must next

determine whether that contact is sufficient to show that A&E Malaysia

purposefully availed itself of doing business in Texas because “purposeful

availment” and a “substantial connection” to operative facts are both required

before Texas may assert specific jurisdiction. See Moki Mac, 221 S.W.3d at 576;

Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002).

      An individual’s contract with an out-of-state party alone cannot

automatically establish sufficient minimum contacts in the other party’s home

forum.” Burger King v. Rudzewicz, 471 U.S. 462, 478, 105 S. Ct. 2174, 2185

(1985). “Merely contracting with a Texas resident does not satisfy the minimum

contacts requirement[;] [n]or is jurisdiction justified by the single fact that a

contract is payable in Texas.” Blair Commc’ns, Inc. v. SES Survey Equip. Servs.,

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Inc., 80 S.W.3d 723, 729 (Tex. App.—Houston [1st Dist.] 2002, no pet.). A

contract is “ordinarily but an intermediate step serving to tie up prior business

negotiations with future consequences which themselves are the real object of the

business transaction.” Burger King, 471 U.S. at 479, 105 S. Ct. at 2185. However,

a single purposeful act may suffice to establish minimum contacts providing the

basis for jurisdiction. 471 U.S. at 475 n.18, 105 S. Ct. at 1284 n.18.      But,

purposeful availment requires a defendant to seek some benefit, advantage, or

profit by availing itself of the jurisdiction. Michiana Easy Livin’ Country, Inc. v.

Holten, 168 S.W.3d 777, 784 (Tex. 2005).

      Here, the trial court could have found that all the prior negotiations were

between A&E USA and Weatherford in seeking to establish a joint venture, and

that when those efforts came to naught, A&E Malaysia stepped in to extricate its

subsidiary by offering to directly repurchase the products A&E USA had sold to

Weatherford. Thus, A&E USA’s negotiations cannot be “purposeful availment”

by A&E Malaysia and those prior negotiations are not properly part of the

jurisdictional analysis.

      In Michiana, the court stated that the contacts of parties “who reach out

beyond one state and create continuing relationships and obligations with citizens

of another state” are purposeful rather than fortuitous. Id. at 785. The court in

Michiana concluded that a single sale of a motorhome to a Texas resident was not

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a purposeful availment because the relationship between the parties would end

once the sale was consummated. Id. at 786–86.

      In contrast, the Court in Burger King found that a franchise agreement

between a Michigan franchisee, Rudzewicz, and a Florida franchisor, Burger King,

resulted in personal jurisdiction over the Rudzewicz in Florida because he

voluntarily accepted the “long-term and exacting regulation” of his franchise from

Burger King’s Florida headquarters, and his relationship to Florida could not be

considered fortuitous. Burger King, 471 U.S. at 480, 105 S. Ct. at 2186.

      Here, the Exit Agreement is more like the single RV sale in Michiana than

the continuing franchise agreement in Burger King. The very nature of the Exit

Agreement is to terminate, rather than create, an ongoing relationship with

Weatherford in Texas.      And, the ongoing relationship being terminated was

between A&E USA and Weatherford.               A&E Malaysia’s offer to purchase

equipment that Weatherford had bought from A&E USA created, at best, a one-

time obligation to pay a Texas resident. That contract, if any, was negotiated

entirely in Malaysia and the payment required would have been made from

Malaysia. Thus, we cannot conclude that the Exit Agreement itself is a sufficient

purposeful contact to satisfy jurisdictional due process.

                                  CONCLUSION

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      Based on the above, we conclude that the trial court did not err in granting

A&E Malaysia’s special appearance and dismissing it from the lawsuit because it

lacks the minimum contacts due process requires for the trial court to exercise

personal jurisdiction over it.

      We affirm the trial court’s order.

                                                Sherry Radack
                                                Chief Justice

Panel consists of Chief Justice Radack and Justices Higley and Massengale

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