Affirm and Opinion Filed August 18, 2020
In The Court of Appeals Fifth District of Texas at Dallas No. 05-20-00021-CV
MICHAEL J. PETER, Appellant V. JOSHUA STERN, Appellee
On Appeal from the 160th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-18-18146
MEMORANDUM OPINION Before Chief Justice Burns,1 Justice Pedersen, III, and Justice Evans Opinion by Justice Pedersen, III Appellee Joshua Stern filed suit against appellant Michael J. Peter, a Florida
resident, for fraud and breach of contract after a failed business venture. Peter filed
a special appearance denying general and specific jurisdiction in Texas. Stern
argued Peter was subject to Texas jurisdiction because he purposefully availed
himself of the privileges of conducting business within the forum and committing
fraud within the state. The trial court denied Peter’s special appearance.
1 The Honorable David L. Bridges, Justice, participated in the submission of this case; however, he did not participate in the issuance of this opinion due to his death on July 25, 2020. Chief Justice Robert Burns has substituted for Justice Bridges and has reviewed the briefs and the record before the Court. On appeal, Peter first argues the trial court erred by concluding Texas has
jurisdiction over him as a nonresident defendant. In a second issue, he argues his
special appearance and first amended special appearance comply with Texas Rule
of Civil Procedure 120a. We affirm the trial court’s order.
Background
The underlying pleadings and evidence from the special appearance hearing
establish the following facts regarding the business venture and parties involved in
the litigation.
In early 2016, Peter and David Sebag collaborated to raise funds to own and
operate a club in Panama. Peter and Sebag lived in Florida. They enlisted Edwin
Maldonado, an Irving resident, to reach out to potential Texas investors.
Maldonado approached Stern about an investment opportunity and explained
the investment was designed to produce income and create an ownership interest for
Stern. Stern was unsure exactly what Maldonado did for Peter, but Stern understood
Maldonado worked for Peter, and Peter supported Maldonado. Stern thought
Maldonado was “[p]ossibly an investor.”
Stern knew of Peter because he was well-known in the club management
industry. Stern described Peter as “kind of a legend in the industry.”
In March 2016, Stern considered buying one of Peter’s clubs called Aladdin’s
Dream Boutique after Maldonado approached him about the deal. Stern ultimately
passed on the opportunity. –2– In May 2016, Stern visited Peter in Florida to discuss another investment
opportunity in a Panamanian club. Documents in the record refer to a company or
investment called Solid Gold International, SA and 4Play.
During the meeting, Stern met Sebag. Peter told Stern he was in charge of the
project and Sebag was assisting him. Peter also told Stern his investment would
return at least ten times the original investment in two years and promised him five
percent equity in the Panama club.
Stern returned to Florida in June. He met Peter at Solid Gold, one of Peter’s
clubs. At times, the meeting involved only Stern and Peter. Other times, Maldonado
and Sebag were present. Peter told Stern that Sebag and Maldonado worked and
operated under his direction. Peter described Sebag as “a trusted member of his
inner circle” for over twenty years. Sebag not only worked for Peter but also lived
at his home and received financial support from him.
Peter told Stern he was looking for someone younger with operating
experience who could occasionally travel to Panama and oversee operations. During
the meeting, which lasted about an hour, Peter told Stern he anticipated a doubling
of the investment within the first couple years.
Stern did not give any money for the business venture at that time. Instead,
Peter said he would send wiring instructions.
In addition to Peter’s wiring instructions, Stern also later received a
confidentially-marked Private Placement Memorandum (PPM), which described –3– Solid Gold International, SA terms of the offering, and risks of the investment. The
PPM listed Peter as chairman and Sebag as managing partner.
Shortly thereafter, Stern attempted to wire money to Peter; however, because
of issues with the bank, he could wire only a portion of the funds. Peter said he
would send Sebag to Texas to pick up the remaining money.
Sebag sent Stern an email on July 29, 2016, from his “solidgoldcasino.com”
account informing Stern he planned to be in Dallas the following Monday through
Wednesday, and he looked forward to getting together because they had a “lot of
good things to talk about.” During Sebag’s Dallas trip, Stern gave Sebag $30,000.
Stern met Peter again in 2018 at a different Florida club. They discussed the
Panama investment and lack of any progress over the previous two years. Stern
described the investment as “nebulous . . . at this point.” Maldonado, Sebag, and
another investor named Mitty Jayaseelan also attended the meeting. Towards the
end of the meeting, Sebag and Maldonado left. Peter then explained the status of
the Panama investment and offered to refund Stern’s and Jayaseelan’s investments,
but with the caveat that if the venture turned around, they could not get back in the
deal. Stern expected a refund “within a relatively short time frame” because they
were friends. When it did not happen, he was surprised.
When Peter failed to refund the money, Stern filed suit in Texas for breach of
contract, fraud, and conspiracy. Stern alleged he relied on Maldonado’s and Sebag’s
representations made on Peter’s behalf when he decided to give Sebag the money –4– and invest in the Panama project. Stern asserted the representations about the project
were false and he was harmed.
Peter filed a special appearance challenging jurisdiction in Texas. Stern
argued jurisdiction in Texas was proper based on agency. After a hearing, the trial
court denied Peter’s special appearance without issuing findings of fact or
conclusions of law. This appeal followed.
Special Appearance Standard of Review and Applicable Law
Whether a trial court has personal jurisdiction over a nonresident defendant is
a question of law we review de novo. Old Republic Nat’l Title Ins. Co. v. Bell, 549
S.W.3d 550, 558 (Tex. 2018); see also Golden Peanut Co., LLC v. Give & Go
Prepared Foods Corp., No. 05-18-00626-CV, 2019 WL 2098473, at *2 (Tex.
App.—Dallas May 14, 2019, no pet.) (mem. op.). If, as in this case, the trial court
does not issue findings of fact and conclusions of law with its special appearance
ruling, we imply all findings of fact necessary to support its ruling that are supported
by the evidence. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex.
2002). When jurisdictional facts are undisputed, whether those facts establish
jurisdiction is a question of law. Old Republic, 549 S.W.3d at 558.
Texas courts may exercise personal jurisdiction over a nonresident defendant
if (1) the Texas long-arm statute permits exercising jurisdiction and (2) asserting
jurisdiction satisfies constitutional due process guarantees. Cornerstone Healthcare
Grp. Holding, Inc. v. Nautic Mgmt. VI, L.P., 493 S.W.3d 65, 70 (Tex. 2016). The –5– Texas long-arm statute reaches “as far as the federal constitutional requirements that
due process will allow.” Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d
801, 806 (Tex. 2002). Personal jurisdiction over a nonresident defendant satisfies
constitutional due process guarantees when (1) the nonresident defendant has
established minimum contacts with the forum state and (2) exercising jurisdiction
comports with traditional notions of fair play and substantial justice. See M & F
Worldwide Corp. v. Pepsi-Cola Metro. Bottling Co., 512 S.W.3d 878, 885 (Tex.
2017) (citing Walden v. Fiore, 571 U.S. 277, 283 (2014)).
Minimum contacts are established when the nonresident defendant
purposefully avails itself of the privilege of conducting activities within the forum
state, thus invoking its laws, benefits, and protections. Kelly v. Gen. Interior Constr.,
Inc., 301 S.W.3d 653, 657–58 (Tex. 2010). The purposeful-availment inquiry
includes three parts: (1) only the defendant’s contacts are relevant; (2) the contact
must be purposeful, not random, fortuitous, or attenuated; and (3) the defendant must
seek some advantage, benefit, or profit by availing itself of the forum. Moki Mac
River Expeditions v. Drugg, 221 S.W.3d 569, 575 (Tex. 2007).
A nonresident defendant’s forum-state contacts may give rise to two types of
personal jurisdiction. Id. Specific jurisdiction, also called case-linked jurisdiction,
is established if the defendant’s alleged liability arises out of or relates to the
defendant’s contacts with the forum state. Id. at 576. A claim arises from or relates
to the forum contacts if there is a “substantial connection between [the] contacts and –6– the operative facts of the litigation.” Id. at 585. The specific-jurisdiction analysis
focuses on the relationship between the defendant, the forum, and the litigation. Id.
at 575–76. Specific jurisdiction requires us to analyze jurisdictional contacts on a
claim-by-claim basis unless all claims arise from the same forum contacts. Moncrief
Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 150–51 (Tex. 2013).
A court has general jurisdiction, also called all-purpose jurisdiction, over a
nonresident defendant whose “affiliations with the State are so continuous and
systematic as to render [it] essentially at home in the forum State.” TV Azteca v.
Ruiz, 490 S.W.3d 29, 37 (Tex. 2016); Golden Peanut, 2019 WL 2098473, at *3. The
“paradigm” forums in which a corporate defendant is “at home” are the corporation’s
place of incorporation and its principal place of business. BNSF Ry. Co. v. Tyrrell,
137 S. Ct. 1549, 1558 (2017). But “[t]he exercise of general jurisdiction is not
limited to these forums; in an ‘exceptional case,’ a corporate defendant’s operations
in another forum ‘may be so substantial and of such a nature as to render the
corporation at home in that State.’” Id. (quoting Daimler AG v. Bauman, 571 U.S.
117, 139 n.19 (2014)). The test for general jurisdiction presents “a more demanding
minimum contacts analysis than for specific jurisdiction.” TV Azteca, 490 S.W.3d
at 37. When a court has general jurisdiction over a nonresident, it may exercise
jurisdiction even if the cause of action did not arise from activities performed in the
forum state. Golden Peanut, 2019 WL 2098473, at *3.
–7– Specific Jurisdiction
Broadly stated, specific jurisdiction exists when the plaintiff’s claims “arise
out of” or “relate to” the defendant’s contact with the forum. Searcy v. Parex Res.,
Inc., 496 S.W.3d 58, 67 (Tex. 2016) (citing Int’l Shoe Co. v. Wash., 326 U.S. 310,
317 (1945)). The Supreme Court has emphasized that the defendant’s relationship,
not the plaintiff’s relationship, with the forum state is the proper focus of the
specific-jurisdiction analysis. Id. In short, specific jurisdiction “does not turn on
where a plaintiff happens to be, and does not exist where the defendant’s contacts
with the forum state are not substantially connected to the alleged operative facts of
the case.” Id. at 70. Rather, there are three features of the “purposeful availment”
inquiry as applied to specific jurisdiction: (1) the relevant contacts are those of the
defendant; (2) the contacts that establish purposeful availment must not be random,
fortuitous, isolated, or attenuated; and (3) the defendant must seek some benefit,
advantage, or profit by “availing” himself of the jurisdiction. Id. at 67.
Stern relies on an agency relationship between Sebag, Maldonado, and Peter
to establish specific jurisdiction in Texas over Peter. Contacts of an agent or
corporate representative may be sufficient to confer jurisdiction on the principal. See
MasterGuard L.P. v. Eco Tech. Int’l, LLC, 441 S.W.3d 367, 377 (Tex. App.—Dallas
2013, no pet.); see also Olympia Capital Assocs., L.P. v. Jackson, 247 S.W.3d 399,
412 (Tex. App.—Dallas 2008, no pet.). An agent is one who consents to the control
of another to conduct business or manage some affair for the other, who is the –8– principal. Olympia Capital Assocs., 247 S.W.3d at 413. We do not presume an
agency relationship exists, and the burden of proof is on the party asserting the
existence of the relationship. Id.
An essential element of the principal-agent relationship is the alleged
principal’s right to control the actions of the alleged agent. Id. (citing Exxon Corp.
v. Tidwell, 867 S.W.2d 19, 21 (Tex. 1993)). This right includes not only the right to
assign tasks but also the right to dictate the means and the process by which an agent
will accomplish the task. Id. In contrast, when one has the right to control the end
sought to be accomplished, but not the means and details of how it should be
accomplished, the person employed acts as an independent contractor and not as an
agent. Id. This distinction is critical because an agent’s contacts with the forum are
attributable to the principal, but the contacts of an independent contractor are not.
Id.
By denying Peter’s special appearance, the trial court impliedly found facts in
support of Stern’s agency theory as a basis for attributing Sebag’s and Maldonado’s
Texas contacts to Peter. Peter argues there is no evidence supporting Stern’s agency
theory.
Stern had the burden of proof regarding whether an agency relationship
existed. Id. When reviewing for legal sufficiency, we consider the evidence in the
light most favorable to the finding and indulge every reasonable inference that
supports the challenged finding. See City of Keller v. Wilson, 168 S.W.3d 802, 827 –9– (Tex. 2005). We will conclude that evidence is legally insufficient to support an
implied finding only if (1) there is a complete absence of evidence of a vital fact; (2)
we are barred by rules of evidence or law from giving weight to the only evidence
offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more
than a mere scintilla; or (4) the evidence establishes conclusively the opposite of the
vital fact. Id. at 810. The factfinder is the sole judge of the credibility of the
witnesses and the weight to give their testimony. Id. at 819.
The record indicates Maldonado, who worked for Peter, approached Stern in
early 2016 about a Panamanian investment opportunity designed to produce income
and create an ownership interest for Stern. In June, Stern traveled to Florida, where
he met Peter and was introduced to Sebag, described as a “trusted member of
[Peter’s] inner circle” for over twenty years. Stern later learned that Sebag lived in
Peter’s home and received financial support from him.
Once Stern decided to invest, Peter told him he would send him wiring
instructions. The June 15, 2016 confirmation for wiring funds to purchase shares in
the 4Play Panama Company was sent on Solid Gold International letterhead. Sebag
sent the confirmation to Stern as “President Solid Gold International, SA” with
directions to “specify the final beneficiary: Solid Gold International, SA/4PLAY
PANAMA.” In addition to wiring instructions, Stern also later received a PPM
marked confidential for Solid Gold International, SA listing Peter as chairman and
–10– Sebag as managing partner. Peter owned the registered trademark for Solid Gold
and had since December 7, 2010.
Stern also received a letter on July 27, 2016, from Sebag, signed in his
capacity as “President.” Sebag addressed the letter to “all participants” regarding
preferential investment terms for those investing in the “4Play project in Panama.”
The letter further provided that “David S. Sebag and Michael J. Peter” had agreed
unanimously to the preferential terms. One such term for participants included “a
preferred investment position into the Solid Gold project at the Hard Rock Hotel
Panama Megapolis or any other project in Panama.”
When Stern was unable to wire all the money for his portion of the investment
because of bank issues, Peter said he would send Sebag to Texas to pick up the
remaining money. The July 29, 2016 email from Sebag’s “solidgoldcasino.com”
account confirmed his plans to come to Texas to get the money. During Sebag’s
Dallas trip, Stern gave him $30,000. Stern believed the money he gave to Sebag,
and through the wire transfer, went to Peter.
While the record is unclear concerning the full extent of the investment in
Solid Gold International, SA/4Play and Stern testified as much when he testified that
“it seemed like a nebulous investment,” there is more than a scintilla of evidence for
the trial court to have impliedly found an agency relationship existed based on Peter
telling Stern both Maldonado and Sebag worked for him, the paper trail of
documents referring to Solid Gold, a trademark owned by Peter, and Stern’s –11– testimony that Peter sent Sebag to Texas to get the remaining money and such
exchange occurred. This evidence indicates Peter controlled the actions of
Maldonado and Sebag by assigning tasks and dictating how such tasks were
accomplished to ultimately convince Stern to invest in Peter’s Panama entity. See
Olympia Capital Assocs., 247 S.W.3d at 412 (recognizing essential element of
agency is principal’s right to control actions of agents).
The recruitment of Stern to invest partly took place in Texas and is the basis
for his fraud claim. As explained, Maldonado’s and Sebag’s activities in Texas, on
behalf of Peter, were “purposeful rather than random, fortuitous, or attenuated.” See,
e.g., Cornerstone Healthcare Grp. Holding, Inc., 493 S.W.3d at 73 (concluding
contacts in Texas were purposeful because respondent sought both a Texas seller
and Texas assets); see also MasterGuard LP, 441 S.W.3d at 381 (concluding
contacts of agent were purposeful when recruitment of dealers occurred in Texas
and provided basis for tortious interference claim) (citing Moki Mac, 221 S.W.3d at
575). We acknowledge the PPM states any dispute would be subject to arbitration
in Florida and governed by Panamanian law; however, a foreign choice-of-law
provision does not prevent Texas courts from exercising personal jurisdiction. See
IRA Res., Inc. v. Griego, 221 S.W.3d 592, 598 (Tex. 2007) (choice-of-law provision
does not prevent Texas courts from exercising jurisdiction but cannot be ignored in
considering purposeful availment). Here, unlike the defendant in Griego, Peter’s
agents solicited a Texas resident in Texas for an investment. Contra id. (concluding –12– nature and quality of contacts were random, isolated, and fortuitous because IRA
Resources did not advertise, solicit Griego’s investment, or negotiate terms of
contract in Texas).
Peter sought a “benefit, advantage or profit by availing [him]self of the
jurisdiction” by receiving money from a Texas resident to invest in his Panama
entity. Moki Mac, 221 S.W.3d at 575; see also MasterGuard LP, 441 S.W.3d at 381
(establishing contractual relationship with independent dealers in Texas would result
in increased sales and a benefit, advantage, or profit to defendant). Because the facts
surrounding the transaction will be the focus of the claims against Peter at trial, the
claims arise out of his contacts with Texas.
Considering the evidence in the light most favorable to the judgment and
indulging every reasonable inference supporting the trial court’s implied findings,
we conclude the evidence is legally sufficient to support the trial court’s implied
finding and conclusion that an agency relationship existed between Peter,
Maldonado, and Sebag such that sufficient minimum contacts with Texas exist to
subject Peter to the specific, personal jurisdiction of Texas’s courts. See Olympia
Capital Assocs., 247 S.W.3d at 408 (“A legal sufficiency challenge to a finding of
fact fails if there is more than a scintilla of evidence to support the finding.”).
The final test for legal sufficiency must always be whether the evidence at
trial would enable reasonable and fair-minded people to reach the verdict under
review. City of Keller, 168 S.W.3d at 827. A reviewing court cannot substitute its –13– judgment for that of the trier-of-fact so long as the evidence falls within this zone of
reasonable disagreement. Id. at 822. The evidence here, though not strong, falls
within the zone of reasonable disagreement, and therefore, we must uphold the
court’s implied agency finding supporting minimum contacts.
Although we have concluded minimum contacts exist, we must now consider
whether the exercise of personal jurisdiction satisfies the traditional notions of fair
play and substantial justice. Moncrief Oil Int’l Inc., 414 S.W.3d at 154. Determining
this issue involves consideration of the burden on the nonresident defendant, the
forum state’s interest in adjudicating the dispute, the plaintiff’s interest in obtaining
convenient and effective relief, the interstate judicial system’s interest in obtaining
the most efficient resolution of controversies, and the shared interest of several states
in furthering substantive social policies. Id. at 155.
When a nonresident has purposefully established minimum contacts with the
forum state, it will be only a rare case when the exercise of jurisdiction over that
defendant does not comport with traditional notions of fair play and substantial
justice. Id. at 154. This is not one of the rare cases.
Subjecting Peter to suit in Texas may impose some burden, but the same can
be said of all nonresidents. Distance alone cannot ordinarily defeat jurisdiction. Id.
at 155. Given that Maldonado lives in Texas and Sebag has traveled to Texas in the
past, we cannot say the burden of litigating in Texas is so severe as to defeat
jurisdiction. Further, this burden is somewhat mitigated by the convenience of Stern, –14– a Texas resident, litigating in the forum where he originally met Maldonado, who
initiated the investment talks, and where he paid Sebag the remaining $30,000.
Moreover, the allegations that Peter committed a tort in Texas against a Texas
resident through his agents implicates a serious state interest in adjudicating the
dispute. See id. Balancing the factors, the burden on Peter of litigating in a foreign
jurisdiction is minimal and outweighed by Texas’s interests in adjudicating the
dispute.
We overrule Peter’s specific-jurisdiction challenge. Having overruled this
issue, we need not consider general jurisdiction or whether his special appearance
and amended special appearance complied with Texas Rule of Civil Procedure 120a.
See TEX. R. APP. P. 47.1. We likewise need not consider Stern’s cross-issue
challenging the trial court’s refusal to admit Maldonado’s deposition testimony at
the special appearance hearing. Id.
Conclusion
We conclude the Texas long-arm statute permits the exercise of jurisdiction
over Peter and the assertion of jurisdiction is consistent with the traditional notions
of fair play and substantial justice. The trial court did not err by denying Peter’s
special appearance. Accordingly, we affirm the trial court’s order.
–15– /Bill Pedersen, III// BILL PEDERSEN, III JUSTICE
200021f.p05
Evans, J. dissenting
–16– Court of Appeals Fifth District of Texas at Dallas JUDGMENT
MICHAEL J. PETER, Appellant On Appeal from the 160th Judicial District Court, Dallas County, Texas No. 05-20-00021-CV V. Trial Court Cause No. DC-18-18146. Opinion delivered by Justice JOSHUA STERN, Appellee Pedersen, III. Chief Justice Burns and Justice Evans participating.
In accordance with this Court’s opinion of this date, the judgment of the trial court is AFFIRMED.
It is ORDERED that appellee JOSHUA STERN recover his costs of this appeal from appellant MICHAEL J. PETER.
Judgment entered this 18th day of August, 2020.
–17–