Rose Trading, LLC v. Wei Wei and Brian Hunter

Opinion

AFFIRMED and Opinion Filed December 3, 2021

In the Court of Appeals Fifth District of Texas at Dallas No. 05-21-00232-CV

ROSE TRADING, LLC, Appellant V. WEI WEI AND BRIAN HUNTER, Appellees

On Appeal from the 192nd Judicial District Court Dallas County, Texas Trial Court Cause No. DC-13-12859

MEMORANDUM OPINION Before Justices Myers, Partida-Kipness, and Carlyle Opinion by Justice Carlyle Rose Trading, LLC appeals the trial court’s order sustaining Brian Hunter’s

special appearance and dismissing all claims against Mr. Hunter for lack of

jurisdiction. We affirm in this memorandum opinion. See TEX. R. APP. P. 47.4.

Rose is a Texas-based entity that acquired shares in foreign entity Acapella

Holdings, Ltd., in exchange for brokering Acapella’s financing. According to Rose,

Texas attorney Wei Wei partnered with and represented Rose in its dealings with

Acapella.

Mr. Hunter, Acapella’s majority shareholder and manager, sent Acapella’s

shareholders a letter in December 2018 notifying them of a contingent tender to purchase all of the company’s outstanding shares at a price that would ensure

shareholders received a minimum $500 profit per share. Mr. Hunter requested that

all shareholders sign a declaration agreeing to tender their shares to facilitate the

transaction, and Rose complied.

In April 2019, Mr. Hunter sent another letter informing shareholders that he

expected the sale to close within the next thirty to sixty days. And, according to Rose,

Mr. Hunter represented in a separate email that the transaction would close on June

20. In July, Mr. Hunter sent another update stating that the “transaction was

finalized,” that he was “working on the final closing details,” and that “it may take

up to two weeks” to finish the closing documentation, after which funds could be

dispersed. When funds were not disbursed within that time frame, Rose began

questioning the legitimacy of the transaction.

On September 12, Mr. Hunter sent Rose a letter, ostensibly in response to

“disparaging remarks” Rose had made to Mr. Hunter’s business associates. He stated

that, under the Acapella shareholder agreement, he intended to levy Rose’s shares to

cover the costs “associated with reputational harm, legal proceedings, [and] actual

interference with” Acapella’s business. He also said he did not intend to respond to

any further communications from Rose.

Meanwhile, according to Rose, Mr. Hunter had covertly engaged Mr. Wei to

act as a broker in the sale of Acapella, as well as in other collateral transactions. Rose

–2– sued Mr. Wei on September 17, alleging he violated fiduciary duties to Rose by

usurping its corporate opportunities with Acapella, by refusing to disclose

information he learned about the Acapella sale, and by taking an interest adverse to

Rose.

On October 8, Mr. Hunter sent another update stating that, despite delays

caused by “the escalated violence in Hong Kong and Chinese Autumn holidays,” he

anticipated making distributions to shareholders later that week. Mr. Hunter referred

vaguely to the dispute between Rose and Mr. Wei as “an ongoing issue between the

brokers on the transaction - where former partners of the brokers for the sale of

Acapella are suing the brokers themselves for part of the closing fee.” He explained

that, while he did not consider it “an Acapella issue,” the closing could be

jeopardized if “sensitive information” surrounding the transaction were released as

a result of the litigation.

On October 14, Rose sent Acapella board members a letter alleging that Mr.

Hunter had told other investors the sale proceeds could be distributed within a “day

or two” if Rose settled its lawsuit against Mr. Wei. Thus, Rose deduced, the sale had

already closed, and Mr. Hunter was holding the shareholder distribution hostage to

force Rose to drop its claims against Mr. Wei. A few days later, Rose filed its First

Amended Petition, adding Mr. Hunter as a defendant and asserting claims for breach

of fiduciary duty, economic duress, money had and received, and conversion.

–3– Although Rose alleged Mr. Hunter made false statements in his various updates

about the status of the sale, the premise of each of its claims against Mr. Hunter was

that he, as part of a conspiracy with Mr. Wei, wrongfully withheld Rose’s share of

the proceeds following the sale.

Mr. Hunter filed a verified special appearance challenging jurisdiction, stating

that he was a Canadian resident at all relevant times, that he never conducted

individual business or entered into a contract in an individual capacity in Texas, and

that he never traveled to Texas for purposes of conducting individual business in

connection with the events at issue in Rose’s First Amended Petition. Rose

responded with an affidavit alleging for the first time that Mr. Hunter affirmed the

truth of his shareholder updates, and thus their alleged misrepresentations, while at

a meeting with Rose in Dallas. Mr. Hunter replied that Rose’s new jurisdictional

allegation, in addition to being untrue, did not support jurisdiction, because Rose’s

claims were not connected to any alleged misrepresentations leading up to the

Acapella sale.

The trial court held a hearing on the special appearance, at which an associate

judge presided. At the end of the hearing, the associate judge invited Rose to file a

letter brief explaining how its new allegation of misrepresentations at the Dallas

meeting established jurisdiction, given the specific claims asserted in the First

Amended Petition. Rather than filing the additional brief as requested, however,

–4– Rose filed a Second Amended Petition asserting a fraud claim based on the alleged

misrepresentations.

Mr. Hunter moved to strike the Second Amended Petition as untimely, given

that it was filed without leave two days after the special appearance hearing. But the

associate judge denied that motion and deferred ruling on the special appearance:

What I want to do is discover really and truly whether or not this Court has jurisdiction over Mr. Hunter and not -- not to make a decision based on the failings of a petition. And I know that if I do allow the second amended petition to come in, that it would be a surprise and prejudicial to Mr. Hunter. But, like I said, I just want to discover what the truth is, in fact. And so what I’m going to do is, I’m going to deny the motion to strike, but I am going to allow Mr. Hunter to respond to it as they did to the first amended petition.

Mr. Hunter appealed the associate judge’s ruling for de novo review by the

district judge. See TEX. GOV’T CODE § 54A.111(e); 54A.115. After conducting a

hearing on the appeal, the trial court struck the Second Amended Petition, granted

Mr. Hunter’s special appearance, and dismissed Rose’s claims against Mr. Hunter

for lack of jurisdiction.

THE TRIAL COURT DID NOT ABUSE ITS DISCRETION BY STRIKING THE SECOND AMENDED PETITION

Rose first contends the trial court erred by striking its Second Amended

Petition. We review the issue for abuse of discretion, determining whether the trial

court acted arbitrarily or unreasonably, without reference to any guiding rules or

–5– principles. See Strange v. HRsmart, Inc., 400 S.W.3d 125, 131 (Tex. App.—Dallas

2013, no pet.).

With regard to timeliness, a plaintiff may freely amend its petition up to seven

days before a special appearance hearing. See TEX. R. CIV. P. 63. If a plaintiff wishes

to amend its petition within seven days of the hearing, it must obtain leave of court,

which shall be given “unless there is a showing that such filing will operate as a

surprise to the opposite party.” Id. An amended petition filed without leave after a

special appearance hearing is untimely, and it may not be considered when ruling on

the special appearance. See Invasix, Inc. v. James, No. 05-19-00494-CV, 2020 WL

897243, at *5 (Tex. App.—Dallas Feb. 25, 2020, no pet.) (mem. op.), overruled on

other grounds by Steward Health Care Sys. LLC v. Saidara, No. 05-19-00274-CV,

2021 WL 3707995, at *4 & n.8 (Tex. App.—Dallas Aug. 20, 2021, no pet.); Botter

v. Am. Dental Ass’n, 124 S.W.3d 856, 860 n.1 (Tex. App.—Austin 2003, no pet.);

see also Frank A. Smith Sales, Inc. v. Atlantic Aero, Inc., 31 S.W.3d 742, 747 (Tex.

App.—Corpus Christi 2000, no pet.) (“The meaning of the term ‘pleadings’ must be

limited at least so as to exclude matters not filed prior to the special appearance

hearing.”).

Rose contends the trial court’s hearing on Mr. Hunter’s appeal qualifies as a

special appearance hearing, because the trial court reviewed the associate judge’s

rulings de novo and heard arguments concerning the special appearance. From that

–6– premise, Rose argues that, because it filed its Second Amended Petition more than

seven days before the de novo hearing, its petition was timely, and the trial court

lacked discretion to strike it. We disagree.

The trial court did not receive any additional evidence at the de novo hearing

on Mr. Hunter’s appeal, and Mr. Hunter’s arguments on the special appearance at

that hearing were tied to his argument that the associate judge erred by denying his

motion to strike and refusing to rule on the special appearance. Under these

circumstances, the special appearance hearing conducted by the associate judge, and

not the trial court’s de novo hearing on Mr. Hunter’s appeal, is the relevant hearing

or “trial” for purposes of Rule 63’s amendment deadlines. To conclude otherwise

would make it practically impossible for a specially appearing defendant to appeal

an associate judge’s decision to allow an untimely amendment—contravening the

defendant’s rights under government code sections 54A.111(e) and 54A.115.

Rose also contends that, even if it did not timely file its Second Amended

Petition, the trial court abused its discretion by refusing to allow the amendment,

because Mr. Hunter could not show he was surprised by Rose’s allegations of fraud.

Rose correctly points out that a trial court generally must grant a timely request for

leave to amend, barring a showing of surprise or prejudice. See TEX. R. CIV. P. 63,

66. But Rose filed its petition two days after the special appearance hearing and

without seeking leave to amend. Thus, the trial court did not abuse its discretion by

–7– striking the petition. See Invasix, 2020 WL 897243, at *5; see also Esty v. Beal Bank

S.S.B., 298 S.W.3d 280, 297 (Tex. App.—Dallas 2009, no pet.) (trial court did not

abuse its discretion by striking amended petition filed without leave); Harmon v.

Bank of West, No. 2-02-00056-CV, 2003 WL 1564826, at *2 (Tex. App.—Fort Worth

March 27, 2003, no pet.) (“Rule 63 . . . requires a party desiring to file an amended

pleading within seven days of trial to first request and obtain leave from the trial

court. It does not appear, based upon the record before us, that Harmon requested

leave from the trial court to file his first amended petition. Thus, he failed to comply

with rule 63, and the trial court was within its discretion to strike the amended

petition.”).

ROSE DID NOT ALLEGE SUFFICIENT FACTS TO ESTABLISH PERSONAL JURISDICTION

Rose next contends that, even if the trial court properly struck its Second

Amended Petition, the allegations in its First Amended Petition sufficiently

established personal jurisdiction. We review that issue de novo. See Old Republic

Nat’l Title Ins. Co. v. Bell, 549 S.W.3d 550, 558 (Tex. 2018). Because the trial court

did not issue findings of fact and conclusions of law, we imply all relevant facts

necessary to support the judgment, as long as they are supported by the evidence. Id.

Texas courts may exercise personal jurisdiction over a nonresident only if:

(1) the Texas long-arm statute permits, which is not at issue here; and (2) it is

consistent with constitutional due process. Retamco Operating, Inc. v. Republic

–8– Drilling Co., 278 S.W.3d 333, 337 (Tex. 2009). Due process requires both that the

defendant have sufficient minimum contacts in the state and that exercising

jurisdiction would not offend traditional notions of fair play and substantial justice.

Id. at 337–38.

To establish sufficient minimum contacts, a nonresident must purposefully

avail itself of the privilege of conducting activities in Texas, thus invoking the

benefits and protections of Texas law. Id. at 338. Whether the defendant’s activities

take place in or out of Texas, they must “justify a conclusion that the defendant could

reasonably anticipate being called into a Texas court.” Id. Three principles guide our

purposeful availment inquiry: (1) only the defendant’s contacts with Texas are

relevant, not the unilateral activities of others; (2) the defendant’s contacts “must be

purposeful rather than random, fortuitous, or attenuated”; and (3) the defendant must

seek some advantage, benefit, or profit through its Texas contacts. Id. (quoting Moki

Mac River Expeditions v. Drugg, 221 S.W.3d 569, 575 (Tex. 2007)).

Sufficient minimum contacts may establish either general or specific personal

jurisdiction. TV Azteca v. Ruiz, 490 S.W.3d 29, 37 (Tex. 2016). General jurisdiction

exists when a nonresident defendant’s “affiliations with the State are ‘so continuous

and sytematic’ as to render it essentially at home in the forum State.” Id. (quoting

Daimler v. Bauman, 571 U.S. 117, 127 (2014)). General jurisdiction may exist “even

–9– if the cause of action did not arise from activities performed in the forum state.” Id.

(quoting Spir Star AG v. Kimich, 310 S.W.3d 868, 871 (Tex. 2010)).

Specific jurisdiction, in contrast, exists only if “the defendant’s liability arises

from or relates to the forum contacts,” meaning there must be a substantial

connection between the defendant’s purposeful Texas contacts and the operative

facts of the litigation. See id. at 52. “The operative facts are those on which the trial

will focus to prove the liability of the defendant who is challenging jurisdiction.”

Leonard v. Salinas Concrete, LP, 470 S.W.3d 178, 188 (Tex. App.—Dallas 2015,

no pet.). Thus, we consider what each of the plaintiff’s claims “is principally

concerned with, whether the contacts will be the focus of the trial and consume most

if not all of the ligation’s attention, and whether the contacts are related to the

operative facts of the claim.” TV Azteca, 490 S.W.3d at 52 (quotations and citations

omitted).

Rose contends personal jurisdiction is established here because: (1) Mr.

Hunter traveled to Texas at least seven times in the past six years; (2) in a meeting

with Rose during one of those trips, he affirmed the truth of misrepresentations he

made in investor updates sent to Rose in Texas; and (3) he conspired with Mr. Wei,

a Texas resident, to defraud Rose in Texas. Although Rose does not specify whether

it believes the trial court had general or personal jurisdiction over Mr. Hunter, we

note that the seven trips Mr. Hunter made to Texas within six years do not establish

–10– he is “essentially at home” in the state. Id. at 37. And Rose points to no other

evidence suggesting Mr. Hunter had continuous or systematic contacts with Texas.

We conclude the trial court correctly determined it lacked general personal

jurisdiction over Mr. Hunter. See id.

As for specific jurisdiction, the Texas contacts Rose alleges are not

sufficiently connected to the operative facts underlying its claims. See id. at 52. Rose

did not assert a fraud claim in its First Amended Petition; instead, each of its claims

sought to hold Mr. Hunter liable for wrongfully withholding Rose’s share of the

proceeds following the Acapella sale. Those claims have little, if anything, to do

with whether Mr. Hunter misrepresented the status of the sale’s closing at some point

before then. Thus, the alleged misrepresentations did not confer specific jurisdiction

over Mr. Hunter. See id.

Likewise, the alleged conspiracy with Mr. Wei did not confer specific

jurisdiction over Mr. Hunter. “The mere existence or allegation of a conspiracy

directed at Texas is not sufficient to confer jurisdiction.” Old Republic Nat’l Title

Ins., 549 S.W.3d at 560; accord Nat’l Indus. Sand Ass’n v. Gibson, 897 S.W.2d 769,

773 (Tex. 1995) (“[W]e decline to recognize the assertion of personal jurisdiction

over a nonresident defendant based solely upon the effects or consequences of an

alleged conspiracy with a resident in the forum state.”). Rose provides no record

–11– evidence of any actions Mr. Hunter took while in Texas to further the alleged

conspiracy to withhold Rose’s share of the sale proceeds.

Based on this record, the trial court did not err by sustaining Mr. Hunter’s

special appearance. We therefore affirm the trial court’s order dismissing Rose’s

claims against Mr. Hunter for lack of jurisdiction.

/Cory L. Carlyle/ 210232f.p05 CORY L. CARLYLE JUSTICE

–12– Court of Appeals Fifth District of Texas at Dallas JUDGMENT

ROSE TRADING, LLC, Appellant On Appeal from the 192nd Judicial District Court, Dallas County, Texas No. 05-21-00232-CV V. Trial Court Cause No. DC-13-12859. Opinion delivered by Justice Carlyle. WEI WEI AND BRIAN HUNTER, Justices Myers and Partida-Kipness Appellee participating.

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

It is ORDERED that appellees Wei Wei and Brian Hunter recover their costs of this appeal from appellant Rose Trading, LLC.

Judgment entered this 3rd day of December, 2021.

–13–