GEM Southwest LLC v. Dowa International Corporation

District Court, N.D. Texas·Decided October 8, 2024·No. 3:24-cv-01899·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION GEM SOUTHWEST LLC, § § Plaintiff, § § VS. § Civil Action No. 3:24-CV-1899-D § TOPY ENTERPRISES, LIMITED, et al., § § Defendants. § MEMORANDUM OPINION AND ORDER In this removed action, plaintiff Gem Southwest LLC (“Gem”) asserts various state- law claims against defendants Topy Enterprises, Limited (“Topy Enterprises”), Topy America, Inc. (“Topy America”), Dowa Eco-Systems Co. Ltd. (“Dowa Eco-Systems”), and Dowa International Corporation (“Dowa International”). Three of the four defendants— Topy Enterprises, Topy America, and Dowa International—move, in pertinent part, to dismiss under Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction.1 For the reasons that follow, the court grants their motions and dismisses this action without prejudice as to Topy Enterprises, Topy America, and Dowa International by Rule 54(b) final judgment filed today.2 1With the court’s permission, Dowa International filed its reply brief on October 7, 2024. 2The petition refers to Topy Enterprises and Topy America, collectively, as “Topy,” and to Dowa Eco-Systems and Dowa International, collectively, as “Dowa.” The court sometimes does so as well in this memorandum opinion and order. I This lawsuit arises from a business arrangement among Gem, Topy, and Dowa.3 Through three contracts, the companies agreed that: Gem would send metal scraps to Dowa;

Dowa, after sampling and testing the scraps, would pay Topy a sum based on the precious metal recovered; and Topy would remit that sum to Gem, less Topy’s commission. Under this arrangement, between February 2, 2021 and December 13, 2022, Gem sent Dowa ten shipments of laptop bases. The last two of these shipments give rise to this dispute.

Whereas for the first eight shipments “the results of the sampling of the laptop bases were relatively consistent with respect to the amount of gold (Au), e.g., between 94 and 110 Au[,]” for the last two shipments the assay results were a materially different “60 and 63 Au.” Pet. ¶ 17. This difference was unexpected, because “Gem sent the same type of laptop bases for all ten shipments.” Id. ¶ 17.

Dissatisfied with the results, Gem turned to Topy. After some communications with Gem, Topy contacted Dowa and “explained that Gem is not satisfied with the results and formally requested the detailed sampling procedures for the shipments.” Id. ¶ 20. In response, Dowa sent some of the requested materials, but it “never provided the entire specific assay procedure for the Disputed Shipments, all the underlying calculations for the

3The court recounts the background facts favorably to Gem as the nonmovant. “When a court rules on a motion to dismiss for lack of personal jurisdiction without holding an evidentiary hearing, as in the present case[] . . . the court must accept as true the nonmover’s allegations and resolve all factual disputes in its favor.” Guidry v. U.S. Tobacco Co., 188 F.3d 619, 625 (5th Cir. 1999). - 2 - Disputed Shipments, and all the underlying resulting figures for the Disputed Shipments.” Id. ¶ 20 (bold font and underlining omitted). Still dissatisfied, “Gem followed up and asked for additional information, including

videos and signed confirmation for the person in charge of the shredding process, protocols of the sampling methods, and other verification methods to validate the material was fully shredded and samples properly taken.” Id. ¶ 21. Dowa once again complied only partially with Gem’s request, which led Gem to insist that Dowa “[s]ettle the first two loads as [the]

same assay as [the] third load[, at] $2.95/lb,” or Gem would “have to file legal process to request validation of Dowa’s sampling and assaying process for [its] shipment.” Id. ¶ 24. Gem also turned to Topy for assistance. “Gem repeatedly asked Topy to pursue remedies against Dowa, including conducting an arbitration proceeding.” Id. ¶ 26. Topy, however, “declined to conduct arbitration with Dowa despite Gem’s repeated requests. Topy

has consistently failed to pursue the interests of Gem by not pursuing Dowa to adequately substantiate its sampling and properly compensate Gem for the laptop bases.” Id. ¶ 28. Instead, on or about March 14, 2024, Topy sent to Gem a payment of $82,905.20. “[T]he outstanding amount owed to Gem is still over $93,000.” Id. ¶ 29. Gem sued Topy Enterprises, Topy America, Dowa Eco-Systems, and Dowa

International in county court. Gem’s county-court petition asserts claims against all four defendants for fraudulent inducement, negligent misrepresentation, and breach of contract; against the Topy defendants for breach of fiduciary duty; and against the Dowa defendants for unjust enrichment, quantum meruit, and promissory estoppel. Defendants removed the - 3 - case to this court based on diversity of citizenship. Topy Enterprises, Topy America, and Dowa International now move, in pertinent part, to dismiss under Rule 12(b)(2) for lack of personal jurisdiction. The court is deciding the motion on the briefs, without an evidentiary

hearing or oral argument.4 II A The determination whether a federal district court has in personam jurisdiction over

a nonresident defendant is bipartite. The court first decides whether the long-arm statute of the state in which it sits confers personal jurisdiction over the defendant. If it does, the court then resolves whether the exercise of jurisdiction is consistent with due process under the United States Constitution. See Mink v. AAAA Dev. LLC, 190 F.3d 333, 335 (5th Cir. 1999). Because the Texas long-arm statute extends to the limits of due process, the court need only

consider whether exercising jurisdiction over Topy Enterprises, Topy America, and Dowa International would be consistent with the Due Process Clause of the Fourteenth Amendment. See id.; Alpine View Co. v. Atlas Copco AB, 205 F.3d 208, 214 (5th Cir. 2000).

4Because the court is dismissing this action as to these defendants for lack of personal jurisdiction, it need not reach Gem’s request for leave to perfect service on Topy Enterprises, or the contentions of Topy Enterprises, Topy America, and Dowa International that Gem has failed to state a claim on which relief can be granted. See Read v. Ulmer, 308 F.2d 915, 917 (5th Cir. 1962) (“It would seem elementary that if the court has no jurisdiction over a defendant, the defendant has an unqualified right to have an order entered granting its motion to dismiss.”). - 4 - The Due Process Clause of the Fourteenth Amendment permits the exercise of personal jurisdiction over a nonresident defendant when (1) that defendant has purposefully availed himself of the benefits and protections of the forum state by establishing “minimum contacts” with the forum state; and (2) the exercise of jurisdiction over that defendant does not offend “traditional notions of fair play and substantial justice.” To comport with due process, the defendant’s conduct in connection with the forum state must be such that he “should reasonably anticipate being haled into court” in the forum state. Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999) (footnotes omitted) (first quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945); then quoting World-Wide Volkswagen Corp. v.

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