David L. Shuman v. Sean P. Tracey & Sean P. Tracey Esq., P.C. D/B/A Tracey Fox King & Walters

Court of Appeals of Texas·Decided October 12, 2023·No. 01-22-00561-CV·Published

Opinion

Opinion issued October 12, 2023

In The

Court of Appeals

For The

First District of Texas

the same date, and substitute this opinion and judgment in their stead. Ganley’s motion for en banc reconsideration of our prior opinion is moot.1 In this interlocutory appeal,2 appellant David Shuman challenges the trial court’s order denying his special appearance in the case brought by appellees Declan Ganley, Sean Tracey, and Sean P. Tracey Esq., P.C. d/b/a/ Tracey Fox King & Walters. Shuman contends that the trial court erred in denying his special appearance because the court lacks specific jurisdiction over him and in denying his motion to transfer venue.

We reverse and remand with instructions to the trial court to dismiss Shuman from the suit for lack of personal jurisdiction.

Background

Declan Ganley, an Irish citizen living in Ireland, sued Sean Tracey, a Texas resident, who also has a home and office in Michigan, and Shuman, a New York

1 Because we issue a new opinion, the Motion for En Banc Reconsideration is moot.

In re Wagner, 560 S.W.3d 311, 312 (Tex. App.—Houston [1st Dist.] 2018, orig.

proceeding) (“Because we issue a new opinion in connection with denial of rehearing, the motion for en banc reconsideration is rendered moot.”); see also Poland v. Ott, 278 S.W.3d 39, 41 (Tex. App.—Houston [1st Dist.] 2008, pet.

denied) (noting that motion for en banc reconsideration rendered moot by withdrawal and reissuance of opinion and judgment); Brookshire Bros., Inc. v.

Smith, 176 S.W.3d 30, 40 n.4 (Tex. App.—Houston [1st Dist.] 2004, pet. denied)

(supp. op. on reh’g) (noting that motion for en banc reconsideration moot when motion for rehearing granted and new opinion and judgment issue).

2 TEX. CIV. PRAC. & REM. CODE § 51.014(a)(7).

resident. Ganley sued Tracey in Texas and alleged claims for breach of contract, fraud, and breach of fiduciary duty. Tracey, in turn, filed a third-party petition against Shuman for the same claims. The underlying controversy revolves around a debt owed by Ganley and guaranteed by Shuman. A. Shuman guarantees a loan between Ganley and Worth.

Ganley owned 235,000 shares in Rivada Networks, Inc., a Delaware corporation with its principal place of business in Virginia. Ganley used his shares as collateral for a $3 million loan from Worth Capital Holdings (“Worth”). Worth is a Delaware entity that, at the time, had its principal place of business in New York.

A few months after the original loan agreement was executed, Ganley and Worth entered into an amended agreement that increased the principal by $1.5 million. On the same day, Shuman, who was Ganley’s friend and occasional business partner, personally guaranteed Ganley’s $4.5 million loan obligation. Ganley and Worth modified the loan agreement several times, including extending the maturity date and increasing the amount of the initial obligation in return for extension fees. The modifications included a list of various payoff amounts and dates whereby Worth would acquire Rivada stock at certain prices. After all modifications, Ganley owed Worth $9 million.

Ganley never repaid Worth. Worth foreclosed on Ganley’s debt, including the Rivada stock that Ganley had used to secure the loan. Worth obtained Rivada common stock for $100,000. Worth sued Shuman in federal court in New York on Shuman’s personal guarantee of Ganley’s loan. B. Ganley attempts to settle the lawsuit between Worth and Shuman.

While Worth’s suit against Shuman was pending, Ganley contacted Shuman and told him that Tracey was an investor in Rivada and a close acquaintance. Ganley told Shuman that he had been working with Tracey to obtain funding to resolve Worth’s claims against Shuman so that the Rivada shares Worth had acquired could be recouped.

Ganley suggested that Shuman speak by phone with Tracey about his efforts to obtain settlement funding. Shuman and Tracey spoke by phone and email periodically for a few months regarding Shuman’s efforts to negotiate a settlement with Worth and Tracey’s efforts to obtain investment funds in Rivada for a settlement. The men never met in person.

Tracey found two investors, one of whom was in Texas. Ultimately, Shuman and Worth entered into a settlement agreement. In his capacity as Chairman and CEO of Rivada, Ganley approved the transfer of Rivada stock from Worth to Shuman, pursuant to the settlement agreement, and from Shuman to the two investors in return for their settlement funding.

Following the settlement, Shuman assigned his rights under the loan agreement, which he acquired from Worth through the settlement, to a third party, Astrea NYNY LLC, which sued Ganley in state court in New York. The New York court rendered a default judgment against Ganley. C. Ganley and Tracey sue Shuman.

Ganley and Tracey argue that Shuman did not follow through on their agreement regarding Rivada shares after the settlement. They argue that Shuman retained Rivada shares that the three men had agreed would be dispersed to each of them. A few weeks after the settlement agreement, Ganley sued Tracey in Texas alleging that he breached various duties by failing to secure the return of the Rivada stock collateral. Tracey filed a third-party claim against Shuman. Tracey asserted that Shuman was subject to personal jurisdiction in Texas because “the acts and omissions giving rise to this cause of action occurred in Texas and/or Shuman engaged the services of Tracey in Houston, Texas.” Shuman filed a special appearance and motion to dismiss or transfer venue pursuant to the contractual forum-selection clauses in the underlying loan and settlement documents.

Ganley amended his petition to add claims against Shuman. Ganley alleged that Shuman was subject to personal jurisdiction in Texas because Shuman “engaged and purposefully availed himself of services by and through Defendant

Tracey in Houston, Texas. A substantial portion of the acts and omission complained of occurred in Harris County, Texas.” Shuman filed an additional special appearance and motion to dismiss or transfer venue as to Ganley’s claims.

Both Ganley’s and Tracey’s claims against Shuman allege that Shuman improperly retained 46,000 shares of 253,000 shares of Rivada stock that Worth assigned to Shuman through the settlement. Ganley and Tracey argue that Shuman previously agreed not to retain any of the stock. The trial court denied Shuman’s special appearance and motion to dismiss or transfer. The trial court did not make any findings of fact or conclusions of law. Shuman appeals.

Personal Jurisdiction

In his first issue, Shuman argues that the trial court erred in denying his special appearance because he did not have the minimum contacts with Texas necessary for Texas to assert jurisdiction over him.

The existence of personal jurisdiction is a question of law, which must sometimes be preceded by the resolution of underlying factual disputes. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002); Paul Gillrie Inst., Inc. v. Universal Comput. Consulting, Ltd., 183 S.W.3d 755, 759 (Tex. App.—Houston [1st Dist.] 2005, no pet.). When the underlying facts are undisputed or otherwise established, we review a trial court’s denial of a special appearance de novo. Paul Gillrie Inst., 183 S.W.3d at 759. Where, as here, a trial

court does not issue findings of fact or conclusions of law with its special-appearance ruling, all fact findings necessary to support the judgment and that are supported by the evidence are implied. Marchand, 83 S.W.3d at 795; Paul Gillrie Inst., 183 S.W.3d at 759.

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David L. Shuman v. Sean P. Tracey & Sean P. Tracey Esq., P.C. D/B/A Tracey Fox King & Walters, (Tex. Ct. App. 2023).

David L. Shuman v. Sean P. Tracey & Sean P. Tracey Esq., P.C. D/B/A Tracey Fox King & Walters (David L. Shuman v. Sean P. Tracey & Sean P. Tracey Esq., P.C. D/B/A Tracey Fox King & Walters) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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