Nerium International, LLC v. Sunny Kum Sun and Rium, LLC

Opinion

AFFIRM; and Opinion Filed May 2, 2014.

S In The Court of Appeals Fifth District of Texas at Dallas No. 05-13-00427-CV

NERIUM INTERNATIONAL, LLC, Appellant V. SUNNY KUM SUN AND RIUM, LLC, Appellee

On Appeal from the 116th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-12-02357-F

MEMORANDUM OPINION Before Justices O’Neill, Lang-Miers, and Evans Opinion by Justice O'Neill Appellant Nerium International, LLC appeals the trial court’s order granting appellees’

Sunny Kum Sun and Rium, LLC’s special appearance. In three issues, Nerium contends the trial

court erred in concluding it lacked jurisdiction over appellees because (1) appellees entered into

a contract with a Texas resident that was performable in whole or in part in Texas, (2) the

contract contained a forum selection clause, and (3) the evidence is legally and factually

insufficient to support the trial court’s fact findings. For the following reasons, we affirm the

trial court’s order.

Nerium is a direct selling skin care company that sells its products through independent

contractors they refer to as “Brand Partners.” Appellee Sun, a California resident, registered

from a computer in California to be a “Brand Partner” on Nerium’s website. To register, Sun

was required to click a box agreeing to be bound by Nerium’s “Terms of Agreement” and its “Policies and Procedures Manual” (Policy Manual or Manual). The Policy Manual prohibited

Brand Partners from using or disclosing Nerium’s confidential information and from soliciting

other Brand Partners. Sun subsequently executed documents to allow Rium, LLC to operate her

Brand Partner position.

Nerium sued Sun and Rium in Texas state court alleging they breached the Policy

Manual by using Nerium’s confidential information and by soliciting other Brand Partners for a

competitor. To support jurisdiction over the California residents, Nerium asserted (1) appellees

did business in Texas by entering into the contracts with Nerium, a Texas resident, that were

performable, in whole or in part, in Texas and (2) the Policy Manual contained a forum selection

clause.

Appellees filed a special appearance asserting they did not have sufficient contacts with

Texas to permit the court to exercise personal jurisdiction over them. To support the special

appearance, they presented evidence that they had no contacts with Texas that were related to the

contract, that Sun executed the contract while in California, and that Sun had only ever been to

Texas twice for a meeting involving a different company. Finally, appellees asserted they did

not agree to the forum selection clause and, even if they did, the clause was illusory and

unenforceable.

The trial court granted appellees’ special appearance. In its findings of fact and

conclusions of law, the trial court found that appellees did not conduct any business in Texas in

connection with Nerium’s claims, did not enter into the contract in Texas, did not perform any

part of the contract in Texas, and that Sun had only been to Texas twice, both times to attend

sales events prior to her involvement with Nerium. The trial court concluded appellees were not

subject to personal jurisdiction in Texas courts because they did not have sufficient contacts with

Texas such that they purposefully availed themselves of the benefits and protections of Texas

–2– law. Regarding the forum selection clause, the trial court found that appellees did not agree to be

bound by the clause, and that the clause was illusory because Nerium could change the clause at

any time without prior notice or appellees’ consent. Nerium appeals.

In its first point of error, Nerium contends the trial court erred in granting appellees’

special appearance because “[a]ppellees entered into a contract with [Nerium] that was

performable, in whole or in part, by either party, in the [S]tate of Texas.”

The plaintiff bears the initial burden of pleading sufficient allegations to invoke

jurisdiction under the Texas long-arm statute. Moki Mac River Expeditions v. Drugg, 221

S.W.3d 569, 574 (Tex. 2007); Am. Type Culture Collection v. Coleman, 83 S.W.3d 801, 807

(Tex. 2002). The nonresident defendant then assumes the burden of negating all bases of

jurisdiction alleged. Moki Mac, 221 S.W.3d at 574; BMC Software Belgium, N.V. v. Marchand,

83 S.W.3d 789, 793 (Tex. 2002). Because the question of a court’s exercise of personal

jurisdiction over a nonresident defendant is one of law, we review a trial court’s determination of

a special appearance de novo. Moki Mac, 221 S.W.3d at 574.

Texas courts may assert 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. Schlobohm v. Schapiro, 784

S.W.2d 355, 356 (Tex. 1990). The long-arm statute provides that a nonresident “does business”

in Texas if it “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.” TEX. CIV. PRAC. & REM. CODE § 17.042(1) (West

2008). The long-arm statute’s broad doing-business language allows the statute to “reach as far

as the federal constitutional requirements of due process will allow.” Guardian Royal Exch.

Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex. 1991).

–3– Federal due-process requirements limit a state’s power to assert personal jurisdiction over

a nonresident defendant. See Guardian Royal, 815 S.W.2d at 226. Personal jurisdiction is

proper when the nonresident defendant has established minimum contacts with the forum state,

and the exercise of jurisdiction comports with “‘traditional notions of fair play and substantial

justice.’” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer,

311 U.S. 457, 463 (1940)).

Minimum contacts are sufficient for personal jurisdiction when the nonresident defendant

“purposefully avails itself of the 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)

(quoting Int’l Shoe Co., 326 U.S. at 319); Michiana Easy Livin’ Country, Inc. v. Holten, 168

S.W.3d 777, 784 (Tex. 2005). There are three parts to a “purposeful availment” inquiry. Moki

Mac, 221 S.W.3d at 245; Michiana, 168 S.W.3d at 784–85. First, only the defendant’s contacts

with the forum are relevant, not the unilateral activity of another party or a third person. Moki

Mac, 221 S.W.3d at 245; Michiana, 168 S.W.3d at 785. Second, the contacts relied upon must

be purposeful rather than random, fortuitous, or attenuated. Moki Mac, 221 S.W.3d at 245;

Michiana, 168 S.W.3d at 784–85; see also Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476

n. 18 (1985). Finally, the “defendant must seek some benefit, advantage or profit by ‘availing’

itself of the jurisdiction.” Michiana, 168 S.W.3d at 785.

A nonresident defendant’s forum-state contacts may give rise to two types of personal

jurisdiction. Moki Mac, 221 S.W.3d at 245; BMC Software, 83 S.W.3d at 795–96. If the

defendant has made continuous and systematic contacts with the forum, general jurisdiction is

established whether or not the defendant’s alleged liability arises from those contacts. BMC

Software, 83 S.W.3d.at 796; CSR Ltd., 925 S.W.2d at 595. In contrast, when specific jurisdiction

is alleged, we focus the minimum-contacts analysis on the “relationship among the defendant,

–4– the forum [,] and the litigation.” Guardian Royal, 815 S.W.2d at 228 (citing Helicopteros

Nacionales de Colombia v. Hall, 466 U.S. 408, 414 (1984)). Specific jurisdiction is established

if the defendant’s alleged liability “aris[es] out of or [is] related to” an activity conducted within

the forum. Helicopteros, 466 U.S. at 414 n. 8; see also CSR Ltd. v. Link, 925 S.W.2d 591, 595

(1996).

The evidence showed Nerium’s breach of contract allegations concerned appellees’

conduct in the States of California and Arizona. Nerium nevertheless contends jurisdiction was

proper because it met the “black letter” requirements of the long-arm statute, and therefore

appellees’ necessarily purposefully availed themselves of the benefits of Texas law. Nerium

further contends it is improper to further evaluate appellees’ minimum contacts with the State of

Texas because such an evaluation applies only to tort cases, not contract cases. We disagree.

An evaluation of a defendant’s contacts directed toward the forum state is neither a “tort

standard” nor a “contract standard,” but a due process requirement. In Burger King Corp. v.

Rudzewicz, one of the leading Supreme Court cases involving personal jurisdiction in a contract

dispute, the Court stated clearly and unequivocally that an individual’s contract with an out-of

state party cannot alone establish the minimum contacts due process requires. Burger King, 471

U.S. at 478. Rather, factors such as prior negotiations and contemplated future consequences,

the terms of the parties contract and their actual course of dealings must be evaluated to

determine whether the defendant purposefully established minimum contacts within the forum.

Id. at 479. Indeed, these “minimum contacts” are the “constitutional touchstone” that due

process requires. See id. at 474.

–5– Nerium agrees that contracting with a Texas resident is alone insufficient to show

purposeful availment. But, relying entirely on the Texas long-arm statute, and Nerium’s own

performance of the contract in Texas, it asserts jurisdiction is proper. 1

Here, the only evidence of any contact appellees had with Texas was entering into a

contract with Nerium, a Texas resident. Although Nerium performs its contractual obligations in

Texas, Nerium does not contend the location of its own performance was either contractually

required or germane to the contract. Further, evidence that Nerium performed its contractual

obligations in Texas improperly focuses on its own activities, not appellees’, and is not sufficient

to establish appellees’ contacts with Texas. Turner Schilling, L.L.P. v. Gaunce Mgmt., Inc., 247

S.W.3d 447, 456 (Tex. App.—Dallas 2008, no pet.); TM Prod., Inc. v. Blue Mountain

Broadcasting, 623 S.W.2d 427, 432 (Tex. Civ. App.—Dallas 1981), writ ref’d n.r.e. per curium,

639 S.W.2d 450 (Tex. 1982); see also Moncrief Oil Inter., Inc. v. OAO Gazprom, 481 F.3d 309,

312-13 (5th Cir. 2007). Nor can we agree with Nerium that the presence of the forum selection

clause, regardless of its enforceability, is sufficient to show appellees’ purposeful availment. See

TM Prod., Inc., 623 S.W.2d at 429, 432. We conclude Nerium has failed to show the trial court

erred in granting the special appearance on this basis.

Nerium next asserts that the trial court erred in granting appellees’ special appearance

because it is “undisputed” the contract contained a forum selection clause. In its findings of fact

and conclusions of law, the trial court found that appellees did not agree to the forum selection

clause and, even if they did, the forum selection clause was illusory and unenforceable. In its

original brief, Nerium has failed to properly attack these bases for the trial court’s ruling.

Instead, it cites only to authority that forum selection clauses are generally enforceable and that a

1 In essence, Nerium alleges the “purposeful availment” requirement has been legislatively determined. Of course, the Texas legislature cannot, by statute, change the requirements of the due process clause of the United States Constitution.

–6– defendant seeking to avoid such a clause bears a heavy burden. See In re Int’l Profit Assoc., Inc.,

247 S.W.3d 672, 673 (Tex. 2009). Nerium makes no effort to apply this law to the facts of the

case or, more importantly, to address the trial court’s finding that appellees did not agree to the

clause in the first instance. We conclude this issue is inadequately briefed. See Tex. R. App. P.

38.1(i); Sink v. Sink, 364 S.W.3d 340, 346 (Tex. App.—Dallas 2012, no pet.).

Nerium likewise, in its original brief at least, fails to address the trial court’s

determination the forum selection clause was illusory. Instead, it addresses this basis for the trial

court’s ruling for the first time in its reply to appellees’ brief. The Texas Rules of Appellate

Procedure do not allow an appellant to include in a reply brief a new issue in response to some

matter pointed out in the appellee’s briefs but not raised by the appellant’s original brief. Dallas

County v. Gonzalez, 183 S.W.3d 94, 104 (Tex. App.—Dallas 2006, pet. denied). A reply brief

may not be used to raise new issues. Accordingly, we conclude this issue is not properly before

us.

Further, in their reply brief, Nerium has failed to show the trial court erred in concluding

the forum selection clause was unenforceable. The introduction to the Policies Manual provided,

“[T]he Company reserves the right to amend this Policy Manual by publishing or transmitting

amendments as it deems appropriate.” Section 11.07 of the Policy Manual, the specific

provision concerning amendments, provided Nerium could amend the Manual “at any time

without prior notice” and that such amendments were to be effective and binding on the Brand

Partner as of the date of issuance.

Generally, if a party can unilaterally modify or terminate a purported agreement, without

prior notice, the agreement is based upon an illusory promise and is unenforceable. Weekly

Homes, L.P. v. Rao, 336 S.W.3d 413, 419 (Tex. App.—Dallas 2011, pet. denied). A promise is

illusory when it fails to bind the promisor, who retains the option of discontinuing performance.

–7– See id.; In re H.E. Butt Grocery Co., 17 S.W.3d 360, 370 (Tex. App.—Houston [14th Dist.]

2000, orig. proceeding).

According to Nerium, the forum selection clause is not illusory because any amendments

were not effective “retroactively,” but only as of the date of issuance. We disagree. Section

11.07, which allows all amendments to be effective immediately, does not limit any amendments

to future conduct or future disputes. Cf. In re Halliburton Co., 80 S.W.3d 566, 56-70 (Tex.

2002) (arbitration provision that could be terminated by employer was not illusory because

termination not effective until ten days after notice of termination or to disputes arising before

date of termination). We conclude Nerium has failed to show the trial court erred in granting the

special appearance on this ground. We resolve the second issue against Nerium.

In its third issue, Nerium contends the evidence is legally and factually insufficient to

support various findings of fact. However, it wholly fails to discuss the findings, the evidence

the trial court considered, or the relevance of any such findings to this appeal. Nor does Nerium

cite any legal authority in support of this issue. Instead, it generally asserts the trial court’s fact

findings “conclusively demonstrates” the trial court applied the “tort standard” for jurisdictional

contacts instead of the “contract standard.” We conclude this issue presents nothing to review.

See TEX. R. APP. P. 38.1(i). We resolve the third issue against Nerium.

We affirm the trial court’s order.

/Michael J. O'Neill/ MICHAEL J. O'NEILL JUSTICE

130427F.P05

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

NERIUM INTERNATIONAL, LLC, On Appeal from the 116th Judicial District Appellant Court, Dallas County, Texas Trial Court Cause No. DC-12-02357-F. No. 05-13-00427-CV V. Opinion delivered by Justice O'Neill. Justices Lang-Miers and Evans participating. SUNNY KUM SUN AND RIUM, LLC, Appellee

In accordance with this Court’s opinion of this date, the trial court’s order is AFFIRMED.

It is ORDERED that appellee SUNNY KUM SUN AND RIUM, LLC recover their costs of this appeal from appellant NERIUM INTERNATIONAL, LLC.

Judgment entered this 2nd day of May, 2014.

–9–