Court Opinion

ID: 4433017
Source: CourtListenerOpinion
Date Created: 2019-08-24 06:10:17.671672+00
Date Added: 2024-06-11T14:25:35.676684
License: Public Domain

In the
                             Court of Appeals
                     Second Appellate District of Texas
                              at Fort Worth
                             ___________________________
                                  No. 02-18-00171-CV
                             ___________________________

                 REX PERFORMANCE PRODUCTS, LLC, Appellant
                                   V.

   MANU BETTEGOWDA AND PREGIS PERFORMANCE PRODUCTS, LLC,
                        Appellees

                         On Appeal from the 141st District Court
                                  Tarrant County, Texas
                             Trial Court No. 141-298129-18

              Before Gabriel and Kerr, JJ., and Gonzalez, J.1
  Memorandum Opinion by Visiting Judge Ruben Gonzalez, Sitting by Assignment

       1
         The Honorable Ruben Gonzalez, Judge of the 432nd District Court of Tarrant County,
sitting by assignment of the Chief Justice of the Texas Supreme Court pursuant to section 74.003(h)
of the government code. See Tex. Gov’t Code Ann. § 74.003(h).
                           MEMORANDUM OPINION

                                   I. Introduction

      In two issues in this accelerated interlocutory appeal,2 Appellant Rex

Performance Products, LLC, a Michigan limited liability company, appeals the trial

court’s order granting the special appearance filed by Appellees Pregis Performance

Products, LLC, a Delaware limited liability company, and Manu Bettegowda, a

Connecticut resident and Pregis’s agent, asking us to find that Bettegowda’s email

communications with a Texas resident provided sufficient minimum contacts to

establish personal jurisdiction. We affirm.

                                   II. Background

      Rex sued James Donald Tate, Olympus Partners, LP,3 and Appellees, alleging

that Tate, a Texas resident and Rex’s president, CEO, and minority share owner, had

secretly negotiated a side deal for himself when he negotiated the February 23, 2018

sale of Rex’s assets to Pregis. The “side deal,” which Rex claimed was discovered by

reviewing Tate’s emails before the sale closed, involved a $1.5 million “Super Bonus”

      2
        See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7) (providing for
interlocutory appeal of the grant or denial of a defendant’s special appearance under
rule of civil procedure 120a); Tex. R. App. P. 28.1(a).
      3
        At the special appearance hearing, Appellees’ lawyer informed the court that
Olympus Partners, LP did not exist and that the special appearance was filed on
behalf of Olympus Growth Fund V, L.P., the entity that they thought Rex had
intended to sue. Bettegowda is a partner in Olympus Growth Fund V, L.P. The trial
court lined out “Olympus Growth Fund V, L.P.” in the order granting the special
appearance, and no Olympus entity is a party to this appeal.

                                              2
payable to Tate in exchange for driving the sale price down by $3 million. Rex sought

to enjoin the $1.5 million payment and brought a claim for breach of fiduciary duty

against Tate and a claim for conspiracy against all of the defendants. Rex also alleged

that Tate’s co-defendants were joint tortfeasors for knowingly inducing and

participating in Tate’s breach of fiduciary duty and alleged personal jurisdiction under

the Texas long-arm statute on the basis of business torts committed in whole or in

part in Texas and under its joint tortfeasor theory. See Tex. Civ. Prac. & Rem. Code

Ann. § 17.042(2).

      Appellees filed a special appearance, arguing that there was no nexus between

them, Rex’s allegations, and the forum; that Rex could not establish either specific or

general jurisdiction over them;4 and that Rex’s Texas lawsuit was “pure

gamesmanship” because Rex had also filed a lawsuit against Tate in Michigan on the

same day that it filed the instant lawsuit. They contended that none of Rex’s alleged

injuries occurred in Texas, that the sale did not occur in Texas, and that the asset-

purchase agreement at issue contained a Delaware forum selection clause.

      The only witness to testify during the April 27, 2018 special appearance hearing

was Rex Hansen, who had been Rex’s administrative manager and who testified that

Tate had been authorized to negotiate the sale of assets to Pregis and had negotiated

with Bettegowda.     Tate lived in Keller, Texas, managed Rex’s sales around the

      4
       The parties addressed only specific jurisdiction during the special appearance
hearing and in this appeal.

                                           3
country, and traveled to Michigan once a month in 2017 and 2018 but primarily

worked in Texas.

      Hansen identified in Plaintiff’s Exhibits 9 and 10 photographs he had taken of

a building that he said was “the Pregis location in Corsicana[,] Texas.” The trial court

admitted the photographs into evidence over Appellees’ objections. Hansen testified

that he was familiar with Pregis’s logo and that the logo on the building was the same

logo of the company that had purchased Rex’s assets. The trial court also admitted

into evidence Plaintiff’s Exhibit 12, a print-out from a Pregis website that announced,

“Pregis Acquires Rex Performance Products.” During cross-examination, Hansen

said that he took the photographs in Plaintiff’s Exhibits 9 and 10 a week before the

hearing but had not been inside that Pregis location and did not know if it was

operational or an empty building. He also admitted that he did not know which legal

entity owned or operated the building and did not dispute that the Pregis entity sued

in the instant lawsuit was formed in February 2018.

      With regard to Plaintiff’s Exhibit 11, Rex’s counsel asked Hansen if he was

familiar with how Rex’s email was managed, and Hansen explained that Rex had a

server in Michigan that ran Microsoft Exchange and that “everybody use[d] their

phone and/or Outlook to get and receive emails.” Hansen said that he was familiar

with the January and February 2018 email exchanges between Bettegowda and Tate

that were contained in Plaintiff’s Exhibit 11. The following recitation ensued:

                                           4
           Q. Are these emails business records for Rex Performance
      Products?

             A. They are.

             Q. And were these records made and kept in the course of a
      regular conducted business activity?

             A. They are.

            Q. Are these records routinely made and kept in the course of
      Rex’s business?

             A. Yes, they are.

            Q. And were they made at or near the time of the event that they
      record?

             A. They were.

             Q. And were they made by people with knowledge of events, in
      particular Don Tate, as it relates to the events depicted there?[5]

      5
        Under the business records exception to the hearsay rule, a record of an act,
event, condition, opinion, or diagnosis is not excluded if:

            (A) the record was made at or near the time by—or from
      information transmitted by—someone with knowledge;

            (B) the record was kept in the course of a regularly conducted
      business activity;

             (C) making the record was a regular practice of that activity;

             (D) all these conditions are shown by the testimony of the
      custodian or another qualified witness, or by an affidavit or unsworn
      declaration that complies with Rule 902(10); and

            (E) the opponent fails to demonstrate that the source of
      information or the method or circumstances of preparation indicate a
      lack of trustworthiness. “Business” as used in this paragraph includes
                                        5
Appellees’ counsel then objected to speculation, and the trial court agreed, stating,

“Yeah, how does he know that?” with regard to whether the emails were made at or

near the time of the event they recorded.

      Hansen replied that the emails “were sent under Don Tate’s email account,”

that they had time stamps, and that the email system accurately recorded those time

stamps as emails were sent back and forth. The trial court then challenged Hansen’s

knowledge of how the email exchange system accurately recorded time. Hansen

testified that he used the email system, that in the process of going through the server

exchange, an email was given a time and date stamp recorded within the server

exchange, that he had not found there to be errors at any time with the time-and-date-

stamp system, and that the server exchange system accurately recorded the “to and

from” and “CC and BCC.”          The trial court sustained Appellees’ objections to

speculation and lack of foundation, stating, “I don’t think he’s qualified to tell how

the time stamp works, how it goes through the server[,] and how it puts a time stamp

on there.”

      The trial court also asked how an email was a business record, and Rex’s

counsel replied, “Well, it’s an email that is prepared by the person that’s an employee

      every kind of regular organized activity whether conducted for profit or
      not.

Tex. R. Evid. 803(6).

                                            6
of the company.” The trial court observed that an email could be, but not necessarily

was, a business record, depending on its content, and sustained Appellees’ objections

to hearsay and relevance.

      After the trial court sustained Appellees’ hearsay and relevance objections,

Hansen testified that there were more than fifty emails, that he had reviewed the

emails’ subject matter, and that the emails evidenced a systematic conversation

between Bettegowda and Tate regarding the asset purchase negotiation. Rex also

offered, and the trial court admitted over Appellees’ objection, Plaintiff’s Exhibit 7, a

February 23, 2018 agreement between Tate and Pregis, signed by Bettegowda as

Pregis’s vice president, in which Pregis promised Tate a bonus of $832,041, to be paid

in three equal installments, as long as he remained employed with Pregis by February

22, 2019.

      The trial court granted the special appearance.

                                   III. Discussion

A. Plaintiff’s Exhibit 11

      In its second issue, Rex argues that the trial court abused its discretion by

excluding Plaintiff’s Exhibit 11 when “[t]he evidence contained in . . . Exhibit 11 was

properly admissible as evidence as a business record.”6 However, Rex does not

      6
        Rex also argues that the emails contained in Plaintiff’s Exhibit 11 were
admissible as statements against interest made by party opponents, but it did not make
this argument in the trial court. See Tex. R. App. P. 33.1.

                                           7
complain about the trial court’s having sustained Appellees’ relevance objection to

Plaintiff’s Exhibit 11. When an appellee objects to evidence on several independent

grounds and, on appeal, the appellant complains of the exclusion of the evidence on

only one of those grounds, the appellant waives any error by failing to challenge all

possible grounds for the trial court’s ruling that sustained the objection. Idniarti v. Bell

Helicopter Textron, Inc., No. 02-12-00045-CV, 2013 WL 1908291, at *1 (Tex. App.—

Fort Worth May 9, 2013, pet. denied) (mem. op.); In re Blankenship, 392 S.W.3d 249,

259 (Tex. App.—San Antonio 2012, no pet.); see Spa Castle, Inc. v. Miura N. Am., Inc.,

No. 02-16-00024-CV, 2017 WL 817149, at *1 (Tex. App.—Fort Worth Mar. 2, 2017,

no pet.) (per curiam) (mem. op.) (holding that Spa Castle waived error complaining

about exclusion of its evidence “[b]ecause Spa Castle has not challenged any, much

less all, possible grounds supporting the trial court’s rulings sustaining Appellees’

objections”); see also Ex parte L.S., No. 02-18-00096-CV, 2019 WL 622587, at *2 (Tex.

App.—Fort Worth Feb. 14, 2019, no pet.) (mem. op.) (“If an independent ground

fully supports the complained-of ruling, but the appellant assigns no error to that

ground, we must accept the validity of that unchallenged independent ground, and

thus any error in the grounds challenged on appeal is harmless.”); Britton v. Tex. Dep’t

of Criminal Justice, 95 S.W.3d 676, 681 (Tex. App.—Houston [1st Dist.] 2002, no pet.)

(“Generally speaking, an appellant must attack all independent bases or grounds that

fully support a complained-of ruling or judgment.”). Accordingly, we overrule Rex’s

                                             8
second issue without reaching the merits of the hearsay issue. See Tex. R. App. P.

47.1.

B. Special Appearance

        In its first issue, Rex argues that the trial court erred by granting the special

appearance because it presented sufficient evidence that the non-Texas-resident

Appellees were joint tortfeasors who knowingly induced, encouraged, and participated

in Tate’s breach of fiduciary duty. Appellees respond that Rex neither alleged nor

established purposeful contacts with the forum, that Texas precedent rejects Rex’s co-

conspirator and joint liability theories of personal jurisdiction, and that Rex failed to

show that the exercise of jurisdiction comports with due process requirements of fair

play and substantial justice.

        Whether a court has personal jurisdiction over a defendant is a question of law.

BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). When, as

here, a trial court does not issue findings of fact and conclusions of law with its

special appearance ruling, all facts necessary to support the judgment and supported

by the evidence are implied. Id. at 795. But when the appellate record includes both

the reporter’s and clerk’s records, these implied findings are not conclusive and may

be challenged for legal and factual sufficiency. Id. Further, when jurisdictional facts

are undisputed, it is a question of law as to whether those facts establish jurisdiction;

the reviewing court “need not consider any implied findings of fact” and will consider

                                            9
only the legal question of whether the undisputed facts establish Texas jurisdiction.

Old Republic Nat’l Title Ins. Co. v. Bell, 549 S.W.3d 550, 558 (Tex. 2018).

       Texas courts may exercise personal jurisdiction over a nonresident 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.”

Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 149 (Tex. 2013) (quoting Moki

Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007)); see also Tex. Civ. Prac.

& Rem. Code Ann. § 17.042. The plaintiff bears the initial burden of pleading

allegations sufficient to permit a court’s exercise of personal jurisdiction over the

nonresident defendant, and once the plaintiff meets this burden, the defendant then

assumes the burden to negate all potential bases for personal jurisdiction that exist in

the plaintiff’s pleadings. Searcy v. Parex Res., Inc., 496 S.W.3d 58, 66 (Tex. 2016) (citing

Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 337 (Tex. 2009)). The

defendant can meet this burden to negate jurisdiction by showing that “even if the

plaintiff’s alleged facts are true, the evidence is legally insufficient to establish

jurisdiction” or that “the defendant’s contacts with Texas fall short of purposeful

availment.” Bell, 549 S.W.3d at 559 (quoting Kelly v. Gen. Interior Constr., Inc., 301
S.W.3d 653, 659 (Tex. 2010)). If the defendant presents evidence that effectively

disproves the plaintiff’s allegations, the plaintiff may then provide evidence to prove

its jurisdictional allegations. Kelly, 301 S.W.3d at 659.

                                             10
       To establish personal jurisdiction over a nonresident, federal due process

requires that the nonresident have certain minimum contacts with the forum state

“such that the maintenance of the suit does not offend ‘traditional notions of fair play

and substantial justice.’” Bell, 549 S.W.3d at 559 (quoting Int’l Shoe Co. v. State of Wash.,

Office of Unemployment Comp. & Placement, 326 U.S. 310, 316, 66 S. Ct. 154, 158 (1945)).

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’” and thus justifying “‘a conclusion that the

defendant could reasonably anticipate being called into a Texas court.’” Id. (quoting

Retamco, 278 S.W.3d at 338). Only the defendant’s contacts with the forum are

relevant; the contacts relied upon must be purposeful rather than random, fortuitous,

or attenuated; and the defendant must have sought some benefit, advantage, or profit

by availing itself of the jurisdiction. Id. (quoting Moncrief Oil, 414 S.W.3d at 151).

       Further, with regard to specific jurisdiction, the cause of action must arise from

the defendant’s contacts with the forum, and we must focus on the relationship

between the forum, the defendant, and the litigation. Id. (citing Moncrief Oil, 414
S.W.3d at 150; Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 795 (Tex.

2005)). When communications between a nonresident and a resident are alleged as

the basis for jurisdiction, we look to the quality and nature of the communications to

establish purposeful availment. Id. at 560 (noting that changes in technology may

render reliance on phone calls obsolete as proof of purposeful availment); see Riverside
                                             11
Exports, Inc. v. B.R. Crane & Equip., LLC, 362 S.W.3d 649, 655 (Tex. App.—Houston

[14th Dist.] 2011, pet. denied) (“Like telephone calls, emails do not necessarily

indicate anything to the recipient about the sender’s location. The physical address

where one may send or retrieve an email is no more fixed to a particular location than

the address where one may send or receive a telephone call.”). This court has already

questioned whether an email can be sent to a particular state when email is not sent to

a designated computer or electronic device located in a particular place. EnerQuest Oil

& Gas, L.L.C. v. Antero Res. Corp., No. 02-18-00178-CV, 2019 WL 1583921, at *7

(Tex. App.—Fort Worth Apr. 11, 2019, pet. filed) (mem. op. on reh’g) (noting that

email is sent into cyberspace, saved onto one or more servers, and retrieved “by the

recipient wherever that person may happen to be at the given time, whether in Texas,

Tennessee, or Tibet”).

      Furthermore, a proper minimum contacts analysis must look to the defendant’s

contacts with the forum state itself, not the defendant’s contacts with persons who

reside there. Bell, 549 S.W.3d at 561 (citing Walden v. Fiore, 571 U.S. 277, 285, 134 S.

Ct. 1115, 1122 (2014)). In Bell, the court stated that it would not determine in the

special appearance context whether a transaction was fraudulent because that

determination involved the lawsuit’s merits; instead, the jurisdictional focus was on

the nonresident defendant’s contacts with the forum, including whether the

nonresident defendant had transferred an interest in Texas real property or merely a

fungible good, e.g., money. Id. at 563–64 (holding that the trial court did not err by
                                          12
granting special appearance when nonresident defendant did not purposefully avail

herself of Texas by speaking to her Texas resident co-defendant by phone on a weekly

basis, by holding a lien on three Texas vehicles, and by sending transfers of money to

the Texas resident).

      Rex argues that the trial court had specific personal jurisdiction over Appellees

because it made a prima facie showing that they committed a tort in Texas. Rex

alleged conspiracy and breach of a fiduciary duty. See Miles v. Barton, No. 01-16-

00288-CV, 2017 WL 711745, at *6 n.8 (Tex. App.—Houston [1st Dist.] Feb. 23,

2017, no pet.) (mem. op.) (focusing on minimum contacts for tortious interference

with contract when same alleged underlying conduct gave rise to claim for breach of

fiduciary duty). However, the mere existence of a cause of action against a defendant

is not enough; the plaintiff is required to plead—and when challenged by the

defendant, present evidence—that the defendant’s relevant acts connected to the

plaintiff’s claims occurred, at least in part, in Texas. See id. at *6 (citing Kelly, 301
S.W.3d at 660–61). And the supreme court has declined to recognize the assertion of

personal jurisdiction over a nonresident defendant based solely on the effects or

consequences of an alleged conspiracy with a resident in the forum state. Nat’l Indus.

Sand Ass’n v. Gibson, 897 S.W.2d 769, 773 (Tex. 1995) (orig. proceeding);7 see also Bell,

      7
        In Gibson, the court restricted its inquiry to whether National Industrial Sand
Association (NISA) “itself purposefully established minimum contacts such as would
satisfy due process” and concluded that it had not, under either specific or general
jurisdiction theories, when the undisputed evidence showed that NISA was not and
                                             13
549 S.W.3d at 560 (“The mere existence or allegation of a conspiracy directed at

Texas is not sufficient to confer jurisdiction.”).

       Rex’s pleadings alleged that after the collapse of the initial negotiations between

Rex, a Michigan LLC, and Pregis, a Delaware LLC with its principal place of business

in Illinois, Pregis directly approached Tate, a Texas resident and Rex’s president and

CEO, and in January 2018, Tate flew to Chicago to meet with Pregis personnel. Rex

alleged that Tate then secretly negotiated the “super bonus” side deal via email in

January 2018 with Bettegowda, a Connecticut resident who acted on behalf of Pregis.

Hansen’s affidavit, attached to Rex’s petition, attempted to sponsor eleven pages of

emails, many of which were duplicated in Plaintiff’s Exhibit 11, which the trial court

did not admit into evidence at the hearing.8 In his affidavit, Hansen stated that Tate

never had been a Texas resident; was not required to and had never maintained a
registered agent for service in Texas; did not maintain and had never maintained a
place of business in Texas; did not have and had never had any employees or agents in
Texas; had never maintained an office, mailing address, or phone number in Texas;
had never owned any assets in Texas or paid any taxes in Texas; had never maintained
a bank account in Texas; had never owned, leased, rented, or controlled any real or
personal property in Texas; had never purchased any tangible items or other personal
property in Texas or from a Texas business, citizen, or resident; had never entered
into a contract with any Texas business, citizen, or resident; had never held a board of
directors, officers, or other official meeting in Texas; and NISA’s only contacts with
Texas were limited to various correspondence with a Texas defendant that failed to
demonstrate sufficient contact with the state for personal jurisdiction. 897 S.W.2d at
772–73, 776.

       Unduplicated emails attached to Rex’s original petition include a January 15,
       8

2018 exchange between Hansen and Tate regarding ownership shares of Rex and a
January 21, 2018 exchange about the super bonus between Tate and another Rex
employee, using the Rex email system.
                                            14
had total control over negotiating the asset purchase agreement.                Hansen

acknowledged on cross-examination that the Pregis entity that Rex had sued was not

formed until February 2018.

      Nothing in the record reflects that Bettegowda’s alleged January 2018

communications with Tate did anything to purposefully avail Bettegowda—or the

entity he represented before Pregis was formed—of Texas as a forum, that Appellees’

acts caused Rex, a Michigan LLC, to suffer harm in Texas, or that Appellees had any

contacts with Texas that would have given rise to the causes of action here. See

Gibson, 897 S.W.2d at 771–73, 776. To the contrary, per Hansen’s testimony, the

Pregis entity that Rex sued did not exist during most of Bettegowda’s negotiations

with Tate, and although Rex offered and the trial court admitted into evidence two

photographs of a Pregis location in Corsicana, Hansen admitted that he took the

photos a week before the April 27, 2018 hearing and that he lacked any personal

knowledge of what legal entity owned or operated the facility.9          None of the

undisputed facts establish specific jurisdiction in Texas, and the trial court’s implied

findings likewise support the order granting the special appearance. See BMC, 83
S.W.3d at 794–95; see also Bell, 549 S.W.3d at 558. Accordingly, because the record

does not reflect that Appellees had sufficient minimum contacts with Texas for the

      9
       During the hearing, the trial judge stated, “I’m actually pretty shocked that
[Rex’s counsel] would put on evidence that that’s the Pregis, and he doesn’t even
know. I mean, that’s a little disingenuous, I think to the Court, other than - - I mean,
you ought to do a little research before you put that on.”

                                          15
trial court to exercise personal jurisdiction over them, the trial court did not err by

granting the special appearance, and we overrule Rex’s first issue.

                                   IV. Conclusion

      Having overruled both of Rex’s issues, we affirm the trial court’s order.

                                                      /s/ Ruben Gonzalez
                                                      Ruben Gonzalez
                                                      Visiting Judge
Delivered: August 22, 2019

                                           16