Court Opinion

ID: 9389710
Source: CourtListenerOpinion
Date Created: 2023-04-26 06:07:44.771911+00
Date Added: 2024-06-11T17:18:29.087898
License: Public Domain

REVERSE and RENDER and Opinion Filed April 19, 2023

                                   S  In The
                            Court of Appeals
                     Fifth District of Texas at Dallas
                               No. 05-22-00096-CV

SEVENLY OUTFITTERS, LLC, JAMES VAN EERDEN AND MATTHEW
                     FINK, Appellants
                           V.
                MONKEDIA, LLC, Appellee

               On Appeal from the 471st Judicial District Court
                            Collin County, Texas
                   Trial Court Cause No. 471-05779-2021

                        MEMORANDUM OPINION
              Before Justices Molberg, Partida-Kipness, and Carlyle
                           Opinion by Justice Molberg
      Appellants Sevenly Outfitters, LLC (Sevenly), James Van Eerden, and

Matthew Fink appeal the trial court’s denial of their special appearances, arguing

the court erred in finding they had minimum contacts with the State of Texas.

Appellee Monkedia, LLC (Monkedia), concedes the trial court lacked personal

jurisdiction over Van Eerden and Fink, but argues the court correctly determined it

had personal jurisdiction over Sevenly. We reverse the trial court’s order as to all

three appellants and render judgment dismissing the cause for want of jurisdiction.

See TEX. R. APP. P. 47.4.
                                I.     Background

      Monkedia alleged in its October 20, 2021 original petition that it was the

owner and holder of a promissory note under which appellants were obligated to

make monthly $1,000 payments from July 2020 through December 2020, and to

make monthly $1,500 payments from January 2021 through December 2021.

Monkedia alleged appellants made four payments—in September, October,

December, and January, totaling $4,000—and then failed to make any more

payments on the note. Monkedia alleged appellants were in default under the note,

having failed to make any payments since January 2021, and therefore “all

remaining amounts under the note [were] immediately due and payable.”

Monkedia alleged that amount, including principal and twelve percent interest, was

$39,456, and it alleged a cause of action for breach of promissory note.

      Monkedia alleged the trial court had personal jurisdiction over appellants

“because [they] have engaged in acts which constitute doing business in the State

of Texas, including but not limited to, conducting business in the State, and

entering into a contract with Plaintiff, a Texas resident, which is performable in

whole or in part in the State of Texas.”

                                           –2–
       According to the promissory note, attached as an exhibit to the original

petition, Sevenly was a North Carolina entity,1 and Monkedia was a Texas LLC

based in Irving. Sevenly promised to pay Monkedia, “at [Monkedia’s] offices” in

Irving, the principal amount of $40,000, plus interest, according to the schedule

described above, and then the “entire outstanding principal balance of [the] note,

together with all accrued but unpaid interest, [would] be due and payable on

January 31, 2022.” In the event of default, Monkedia could at its option declare

the entire unpaid principal and accrued interest immediately due and payable

without additional notice, demand, or presentment. The note was to be “construed

in accordance with and governed by the laws of the State of Texas, without regard

to principles of conflicts of laws.”              Van Eerden, as “managing member” of

Sevenly, signed the note.

       Each appellant filed a special appearance. Van Eerden alleged he had lived

in North Carolina for the previous 25 years; he never interacted with Monkedia in

his individual capacity—only as a representative of Sevenly; Sevenly was a North

Carolina LLC with principal office in Rockingham County, North Carolina and no

office or registered agent in Texas; all communications between himself and

Monkedia were by telephone or email when Van Eerden was in North Carolina; he

   1
      Monkedia alleged in its petition that Sevenly was a former limited liability company that had been
“administratively dissolved on February 6, 2020.” However, evidence presented to the trial court
indicates Sevenly’s corporate status was reinstated by the North Carolina Secretary of State effective
November 21, 2021. The parties on appeal agree “that North Carolina law provides reinstatement is
effective retroactively to the date of dissolution.”

                                                 –3–
never traveled to Texas to meet with Monkedia representatives; he did not own any

property in Texas and did not have an office or agent in Texas; he signed the

promissory note in his capacity as manager for Sevenly. Van Eerden alleged the

relationship between Monkedia and Sevenly began in 2016 when Monkedia started

providing Facebook marketing services for Sevenly, which manufactured and sold

fashion apparel for nonprofits. Van Eerden stated there was, to his knowledge “no

written contract for the Facebook marketing services provided” by Monkedia. He

stated the balance of the promissory note represented a “contested past due balance

[Monkedia] claim[ed] it was due for marketing services”; he signed the promissory

note under duress after Monkedia representatives threatened to defame him,

Sevenly, and others if it was not signed.

      Fink’s special appearance allegations were similar to Van Eerden’s. Fink

alleged he lived in Middlesex County, Massachusetts from 2014 through 2018, and

Palm Beach County, Florida after that; he had never lived in Texas; he interacted

with Monkedia only in a representative capacity for Sevenly; all communications

between himself and Monkedia were made by email when Fink was in Florida; he

never went to Texas to meet with Monkedia representatives; and he did not own

property in Texas and did not have an office or an agent in Texas.          Fink’s

allegations relating to Sevenly and Monkedia’s relationship were the same as Van

Eerden’s.

                                            –4–
      Sevenly alleged in its special appearance that it was a North Carolina LLC

with principal office in Rockingham County, North Carolina; it had no office or

registered agent in Texas; all communications between Sevenly’s managers or

members and Monkedia occurred by telephone call or email exchange when

Sevenly representatives were in North Carolina; Sevenly did not own property in

Texas; the relationship between Monkedia and Sevenly began in 2016 when

Monkedia began providing Facebook marketing services for what was then a

California corporation, Sevenly, Inc.; it did not possess a written contract with

Monkedia for the Facebook marketing allegedly provided by Monkedia; the

balance of the note was a “disputed past due balance [Monkedia] claim[ed] it was

due for marketing services”; Sevenly’s record books were kept by a North Carolina

resident; and after a miscommunication internal to Sevenly, it lost its corporate

charter, but effective November 21, 2021, Sevenly was reinstated by the North

Carolina Secretary of State.

      Monkedia filed a response to the three special appearances on January 19,

2022. Monkedia alleged that the parties “engaged in negotiations related to terms

and conditions” in the note and then executed the note with a Texas choice of law

provision.   Monkedia alleged Sevenly was “an e-commerce retailer that sells

apparel and accessories for nonprofit organizations through its online platform”

and does business “across the United States, including Texas.” Monkedia argued it

                                      –5–
was “clear that the parties are bound by Texas law and Sevenly engaged in doing

business in Texas,” and Sevenly’s special appearance should therefore be denied.

      Monkedia included with its response a declaration from the vice president of

Monkedia, Brandon Roberts. Roberts stated he was aware of the relationship

between Monkedia and Sevenly. Among other things, Roberts declared that the

business relationship between Monkedia and Sevenly “extends back to

approximately the beginning of 2016” and continued into 2020.          Monkedia’s

marketing services for Sevenly “were conducted in Texas,” all payments between

the two parties “were transmitted to Texas,” and all communications between them

“were conducted to and from Texas.”        Monkedia also attached several email

exchanges to their response. Generally, those emails related to late or missed

payments from Sevenly to Monkedia, and in one email, Van Eerden attached the

executed promissory note “with the changes requested from [Monkedia’s]

counsel.” Van Eerden stated in the email that he was unable to enter into a

personal guaranty.

      On January 26, 2022, after a hearing, the trial court denied the three special

appearances. This appeal followed.

                                II.    Discussion

      Appellants argue in their first issue that, because Van Eerden and Fink had

no individual contacts with Texas apart from their work for Sevenly, jurisdiction

over them is improper. Monkedia concedes this issue. Second, appellants argue

                                       –6–
Sevenly conducted no purposeful activity in Texas and thus did not have minimum

contacts with the state. Third, appellants argue the court could not have had

general jurisdiction over Sevenly because it did not have continuous and

systematic contacts with Texas.2 Fourth, they argue jurisdiction over Sevenly

would offend traditional notions of fair play and substantial justice.

                                           Applicable law

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

2018). The long-arm statute is satisfied by a defendant who “contracts by mail or

otherwise with a Texas resident and either party is to perform the contract in whole

or in part in this state” or “commits a tort in whole or in part in this state.” TEX.

CIV. PRAC. & REM. CODE § 17.042. Under this statute, the plaintiff has the initial

burden to plead allegations sufficient to confer jurisdiction. Am. Type Culture

Collection, Inc. v. Coleman, 83 S.W.3d 801, 807 (Tex. 2002). Upon filing a

special appearance, the nonresident defendant assumes the burden to negate all the

bases of personal jurisdiction alleged by the plaintiff. Id. The defendant can

    2
      Monkedia relied only on specific jurisdiction in its argument in the trial court and now on appeal;
accordingly, we address only specific jurisdiction in this opinion, and we do not reach appellants’ third
issue. See Luciano v. SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 9 (Tex. 2021) (considering only
specific jurisdiction when no party argued that general jurisdiction existed).

                                                  –7–
negate jurisdiction on either a factual or legal basis. Kelly v. Gen. Interior Const.,

Inc., 301 S.W.3d 653, 659 (Tex. 2010). “Factually, the defendant can present

evidence that it has no contacts with Texas, effectively disproving the plaintiff’s

allegations[,]” which the plaintiff can then respond to with its own evidence

affirming its allegations. Id. “Legally, the defendant can show that even if the

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

jurisdiction[.]” Id.

      A court must decide a 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.”    TEX. R. CIV. P. 120a(3).      “The text of a response to a special

appearance (as opposed to evidentiary attachments to a response) does not fall into

any of these categories. It is not a pleading.” Steward Health Care Sys. LLC v.

Saidara, 633 S.W.3d 120, 128 (Tex. App.—Dallas 2021, no pet.) (en banc). Thus,

“the plaintiff must meet its initial burden on a special appearance by pleading, in

its petition, sufficient allegations to invoke jurisdiction under the Texas long-arm

statute.” Id. at 129. The plaintiff’s response to the special appearance may contain

evidence supporting the petition’s jurisdictional allegations, but that evidence must

be consistent with the allegations in the petition. Id.

      Whether a trial court has personal jurisdiction over a nonresident defendant

is a question of law that we review de novo. Bell, 549 S.W.3d at 558. When, as

                                         –8–
here, the trial court did not issue findings of fact and conclusions of law, all

relevant facts that are necessary to support the judgment and supported by

evidence are implied. Id.

      Federal due process requirements limit a state’s power to assert personal

jurisdiction over a nonresident defendant: personal jurisdiction is proper only when

(1) the nonresident defendant has established minimum contacts with the forum

state, and (2) the exercise of jurisdiction comports with traditional notions of fair

play and substantial justice. Moki Mac River Expeditions v. Drugg, 221 S.W.3d

569, 575 (Tex. 2007). “Under the minimum contacts analysis, we must determine

whether the nonresident defendant has purposefully availed itself of the privilege

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

protections of its laws.” Guardian Royal Exch. Assur., Ltd. v. Eng. China Clays,

P.L.C., 815 S.W.2d 223, 226 (Tex. 1991). This “purposeful availment” inquiry has

three parts: (1) only the defendant’s contacts with the forum are relevant; (2) the

contacts must be purposeful—not random, fortuitous, or attenuated; and (3) the

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

jurisdiction. Moki Mac River Expeditions, 221 S.W.3d at 575.

      A nonresident’s contacts with a forum may give rise to two types of personal

jurisdiction. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex.

2002). General jurisdiction, which is not raised here, is present when a defendant’s

affiliations with the forum are so continuous and systemic as to render it

                                        –9–
“essentially at home in the forum State.” Luciano v. SprayFoamPolymers.com,

LLC, 625 S.W.3d 1, 8 (Tex. 2021). Specific jurisdiction arises when (1) the

defendant purposefully avails itself of conducting activities in the forum state, and

(2) the cause of action arises from or is related to those contacts or activities. Kelly

v. Gen. Interior Const., Inc., 301 S.W.3d 653, 658 (Tex. 2010). If a defendant has

deliberately engaged in significant activities within a forum, it has availed itself of

the privilege of conducting business there. Luciano, 625 S.W.3d at 9 (citing

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475–76 (1985)). Because such

activities enjoy the benefits and protections of the forum’s laws, it is reasonable to

require the defendant to submit to the burdens of litigation in that forum. Id.

      Minimum contacts are not necessarily established merely by contracting

with a Texas company and submitting payments to its office in Texas. See U–

Anchor Adver., Inc. v. Burt, 553 S.W.2d 760, 763 (Tex. 1977). 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 Corp., 471 U.S. at 479 (quoting Hoopeston Canning

Co. v. Cullen, 318 U.S. 313, 317 (1943)). Therefore, we must evaluate “prior

negotiations and contemplated future consequences, along with the terms of the

contract and the parties’ actual course of dealing[,]” in determining whether a

defendant has minimum contacts with the forum. Id. “[I]t is essential in each case

that there be some act by which the defendant purposefully avails itself of the

                                         –10–
privilege of conducting activities within the forum State, thus invoking the benefits

and protections of its laws.” Hanson v. Denckla, 357 U.S. 235, 253 (1958).

      In applying the above principles, the courts of appeals of this state have

generally found a nonresident defendant purposefully avails itself of this forum

when it contracts with a Texas resident as a result of its solicitation of the Texas

resident. In Mungas v. Rishikof, No. 01-16-00809-CV, 2017 WL 1488137, at *1

(Tex. App.—Houston [1st Dist.] Apr. 25, 2017, no pet.), a California resident

solicited a resident of Texas for a $75,000 loan in order to secure funds to continue

operating his business in California.      The two parties agreed and prepared a

promissory note, which stated the defendant promised to pay the plaintiff the

amount loaned “from time to time outstanding until paid in full.” Id. The note did

not provide where payment was to be made, nor did it specify the governing law or

any forum choice. Id. The plaintiff wired the loan proceeds from his bank in

Texas to the defendant’s bank in California. Id. Subsequently, the defendant did

not make any payments under the promissory note, and the plaintiff filed suit. Id.

      The court of appeals concluded the trial court correctly denied the

defendant’s special appearance because the defendant “purposefully availed

himself of the privilege of conducting activities in Texas by soliciting [the

plaintiff] for the loan.” Id. at *4. The solicitation was the defendant’s “own

action,” he reached out to the plaintiff purposefully, and in doing so he sought

some benefit, advantage, or profit. Id.

                                          –11–
      The court of appeals rejected the defendant’s argument that he “merely”

contracted with a Texas resident—which, he argued, was not sufficient—because

the contacts “[did] not merely show that he contracted with a Texas resident;

instead, they show that he contracted with a Texas resident as a result of his

solicitation of the Texas resident.” Id. at *4; see also N. Coast Commercial

Roofing Sys., Inc. v. RMAX, Inc., 130 S.W.3d 491, 495 (Tex. App.—Dallas 2004,

no pet.) (observing that neither “contracting with a Texas company and requiring

payment in Texas” nor a Texas choice of law provision alone necessarily

establishes sufficient minimum contacts, but concluding those facts “combined

with evidence that [the nonresident defendant] purchased the goods by soliciting

and obtaining credit from [the plaintiff’s] Texas office” were sufficient to show

purposeful availment); Bissbort v. Wright Printing & Pub. Co., 801 S.W.2d 588,

589 (Tex. App.—Fort Worth 1990, no writ) (in suit for nonpayment under a

contract, defendant “purposefully acted or consummated a transaction in Texas in

initiating negotiations with its telephone call to [plaintiff], by executing and

returning to Texas a contract requiring it to make payment in Texas and by wiring

the $51,230.00 to [plaintiff’s] account with a bank in Texas”); but see KC Smash

01, LLC v. Gerdes, Hendrichson, Ltd., L.L.P., 384 S.W.3d 389, 392 (Tex. App.—

Dallas 2012, no pet.) (finding no purposeful availment, despite the fact that

“[nonresident defendant] intentionally sought out [plaintiff] in Texas,” in suit for

                                       –12–
defendant’s failure to pay for architectural services performed by plaintiff in Texas

for the benefit of defendant’s businesses in Kansas).

      When the solicitation runs the other way and the plaintiff solicits business

with the nonresident defendant, we have concluded there was no specific

jurisdiction over the nonresident defendant, even though the defendant made

payments to Texas under a contract that includes a Texas choice of law provision.

See Internet Advert. Group, Inc. v. Accudata, Inc., 301 S.W.3d 383, 387 (Tex.

App.—Dallas 2009, no pet.). Similarly, when the record is silent as to which party

solicited the other’s business, courts have found the defendant did not purposefully

avail itself of the forum. See Pillai v. Pillai, No. 07-14-00379-CV, 2015 WL

1221394, at *1–3 (Tex. App.—Amarillo Mar. 16, 2015, no pet.) (mem. op.)

(finding no specific jurisdiction when plaintiff loaned nonresident defendant

$200,000, the record was silent as to which party solicited the transaction, and the

parties executed a promissory note, including a Texas choice of law provision,

under which defendant was to make repayments in Amarillo).

                                      Analysis

      On the record before us, we cannot conclude Sevenly has purposefully

availed itself of conducting activities in Texas.       In sum, Sevenly’s possible

contacts with Texas include a business relationship with a Texas company,

Monkedia, in which the latter provided Sevenly with Facebook marketing services;

an obligation under a promissory note to pay Monkedia in monthly installments at

                                       –13–
Monkedia’s offices in Irving for money owed to Monkedia for its past services; a

Texas choice of law provision in the promissory note; and phone and email

communications between Sevenly’s agents in North Carolina and Monkedia in

Texas.

      Although Monkedia contends it performed its marketing services for

Sevenly from Texas, Monkedia’s activities do not count as Sevenly’s contacts. See

KC Smash 01, LLC, 384 S.W.3d at 394 (observing that plaintiff performing its end

of a contract in Texas is a “unilateral action by [plaintiff], not [nonresident

defendant], and it cannot be considered a contact by [defendant] with Texas”).

Sevenly’s side of the relationship consisted solely of submitting payments to

Monkedia in Texas under a contract that included a Texas choice of law provision.

We have previously concluded that such contacts without more are not enough to

constitute purposeful availment. See Internet Advert. Group, Inc., 301 S.W.3d at

387; Pillai, No. 07-14-00379-CV, 2015 WL 1221394, at *1–3; see also Klug v.

Wickert, No. 05-14-00080-CV, 2015 WL 4338424, at *4 (Tex. App.—Dallas July

16, 2015, no pet.) (mem. op.) (concluding that an agreement to make payments in

the forum state does not weigh heavily in the “calculus of contacts”). Moreover,

Sevenly’s communications from North Carolina with Monkedia’s agents in Texas

are not significant in our analysis. See KC Smash 01, LLC, 384 S.W.3d at 393

(concluding “telephone and email communications and the sending of payments to

[Texas plaintiff]” do not constitute contacts demonstrating purposeful availment).

                                       –14–
       Absent in the record before us is any allegation or evidence showing that

Sevenly solicited Monkedia’s business or that Monkedia was engaged by Sevenly

to market Sevenly’s products to Texas customers. All that is before us is Sevenly’s

allegation that Monkedia demanded that Sevenly execute the promissory note.

Given this, we cannot conclude Sevenly purposefully availed itself of the privilege

of conducting activities within Texas, invoking the benefits and protections of its

laws. Instead, considering these contacts in their totality, Monkedia could have

“been based anywhere in the world,” and Sevenly “would presumably have

interacted with it in the same way as [Sevenly] did with” it here. See Searcy v.

Parex Res., Inc., 496 S.W.3d 58, 74–75 (Tex. 2016). Accordingly, we conclude

the trial court erred by denying Sevenly’s special appearance.         We sustain

appellants’ second issue, and we need not reach their fourth issue relating to fair

play and substantial justice, given that we conclude specific jurisdiction does not

exist in this case.

       As noted above, Monkedia concedes the trial court erred by denying Van

Eerden’s and Fink’s special appearances. We have independently reviewed the

record, and we agree. Monkedia made no allegations Van Eerden or Fink had

contacts with this forum beyond those alleged through their work at Sevenly, and it

made no allegations that Van Eerden or Fink committed any torts in Texas.

Roberts alleged in his affidavit that Van Eerden “represented himself as a

managing member of Sevenly when he executed the Note on Sevenly’s behalf,”

                                       –15–
and Fink was “also a managing member of Sevenly and was involved in

negotiating and approving the terms and conditions of the Note.” Roberts alleged

that “Fink was involved in the making of the Note, ultimately approved the terms

and conditions prior to execution by Van Eerden, and held the responsibility of

confirming payments had been made to Monkedia under the Note.” Setting aside

the question of the application of the fiduciary shield doctrine, these contacts do

not constitute purposeful availment for the same reason they do not as applied to

Sevenly. Cf. Olympia Cap. Assocs., L.P. v. Jackson, 247 S.W.3d 399, 418 (Tex.

App.—Dallas 2008, no pet.) (“The existence of a contract between the nonresident

defendant and a resident of the forum and engaging in communications related to

the execution and performance of that contract are insufficient to establish the

minimum contacts necessary to support the exercise of specific personal

jurisdiction over the nonresident defendant.”). We sustain appellants’ first issue.

                                    Conclusion

      We reverse the trial court’s order and render judgment dismissing

Monkedia’s claims against Sevenly, Van Eerden, and Fink for lack of jurisdiction.

                                            /Ken Molberg/
                                            KEN MOLBERG
                                            JUSTICE
220096F.P05

                                        –16–
                                   S
                            Court of Appeals
                     Fifth District of Texas at Dallas
                                  JUDGMENT

SEVENLY OUTFITTERS, LLC,                      On Appeal from the 471st Judicial
JAMES VAN EERDEN AND                          District Court, Collin County, Texas
MATTHEW FINK, Appellants                      Trial Court Cause No. 471-05779-
                                              2021.
No. 05-22-00096-CV          V.                Opinion delivered by Justice Molberg.
                                              Justices Partida-Kipness and Carlyle
MONKEDIA, LLC, Appellee                       participating.

       In accordance with this Court’s opinion of this date, the order of the trial
court denying appellants’ special appearances is REVERSED and judgment is
RENDERED granting appellants’ special appearances and dismissing Monkedia,
LLC’s claims against Sevenly Outfitters, LLC, James Van Eerden, and Matthew
Fink.

      It is ORDERED that appellants SEVENLY OUTFITTERS, LLC, JAMES
VAN EERDEN AND MATTHEW FINK recover their costs of this appeal from
appellee MONKEDIA, LLC.

Judgment entered this 19th day of April 2023.

                                       –17–