the Phia Group, LLC and Michael Sweeney, as Agent, Representative, Servant, Employee and/or Officer of the Phia Group, LLC v. Nelda Gomez, Duly Appointed Legal Guardian of the Estate of Kayla Deanne Lazo (Minor)

• Court: Court of Appeals of Texas
• Decided: July 21, 2010
• Docket: 04-10-00127-CV
• Status: Published

Opinion

MEMORANDUM OPINION No. 04-10-00127-CV

THE PHIA GROUP, LLC and Michael Sweeney, as Agent, Representative, Servant, Employee and/or Officer of the Phia Group, LLC, Appellants

v.

Nelda GOMEZ, Duly Appointed Legal Guardian of the Estate of Kayla Deanne Lazo (Minor), Amador Lazo, and Brittany Lazo, Appellees

From the 229th Judicial District Court, Duval County, Texas Trial Court No. DC-09-74 Honorable Alex William Gabert, Judge Presiding

Opinion by: Rebecca Simmons, Justice

Sitting: Catherine Stone, Chief Justice Karen Angelini, Justice Rebecca Simmons, Justice

Delivered and Filed: July 21, 2010

REVERSED AND RENDERED

This is an interlocutory appeal of the trial court’s order denying special appearances filed

by The Phia Group, LLC (“Phia”) and Michael Sweeney, as agent, representative, servant,

employee and/or officer of The Phia Group, LLC (Sweeney). Phia and Sweeney contend the

trial court erred in denying their special appearances and also challenge the sufficiency of the 04-10-00127-CV

evidence to support the trial court’s findings of fact. We reverse the trial court’s order and

render judgment dismissing the underlying cause against Phia and Sweeney.

BACKGROUND

Kayla DeAnne Lazo was seriously injured as a result of an XBOX game system catching

fire. Kayla’s father, Amador Lazo, had medical coverage for Kayla through his employer, Basic

Energy Services GP, LLC and Basic Energy Services, LP (“Basic Energy”). As a result, Kayla’s

medical expenses were paid by the Basic Energy Services, LP Employee Health Plan (“Plan”).

Phia is a third party administrator of the Plan, and Sweeney is an employee of Phia.

A lawsuit was brought in Duval County against GameStop, Microsoft, and others for the

injuries sustained by Kayla, Amador, and Kayla’s sister, Brittany Lazo, and a guardian was

appointed for Kayla’s estate. After a settlement was negotiated with GameStop, an agreement

was reached regarding the reimbursement of the Plan’s outstanding subrogation lien between

Amador and Phia “acting on behalf of [the Plan] and its plan administrator, Group & Pension

Administrators, Inc.” The agreement (referred to herein as the “Agreement”) is in the form of a

letter dated February 25, 2008, which Sweeney signed on behalf of Phia as accepting the terms

and conditions of the Agreement. The Agreement stated that the total and complete amount of

the outstanding subrogation lien was $542,671.13. The Agreement also stated that a payment for

fifty-five percent of the outstanding lien, or $289,469.13, would be submitted to Phia on or

before March 15, 2008, presumably from the settlement with GameStop. The Agreement further

provided, “The Phia Group, LLC will carry over and negotiate a reduction on the remaining

amount of the Lien ($244,202.00), IF, AND WHEN, a settlement is reached or funding is

tendered after a Verdict, between our client and Microsoft.”

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After the lawsuit against Microsoft and the other defendants was removed to federal

court, Microsoft settled, and the claims against the other defendants were dismissed. A dispute

arose regarding the reimbursement of the balance of the subrogation lien from the Microsoft

settlement. Kayla’s guardian filed a lawsuit in Duval County against Amador, Brittany, Phia,

and Basic Energy, seeking the following declarations: (1) “Plaintiff does not have to pay monies

from any settlement monies in favor of Kayla towards a reimbursement of a lien that is the

responsibility of” Amador; (2) Phia, Basic Energy, and Brittany “do not have a legal right to seek

any re-apportionment or re-allocation of any of the settlement monies from the underlying

litigation;” and (3) “[n]either Plaintiff on behalf of [Kayla], nor [Kayla] (a minor), have entered

into any contract or other legal obligation that obligates either to reimburse or pay” Phia or Basic

Energy “any sums of money (for reimbursement of their asserted lien).” Amador and Brittany

filed a third party petition against Phia, Basic Energy, and Sweeney, alleging they had breached

the Agreement by seeking “to recover full balances claimed without any negotiation” not only

from Amador, but also from Brittany. The third party petition alleged that the third party

defendants agreed to “negotiate” and limit any additional recovery to “our client,” which under

the terms of the Agreement would be Amador. The third party petition also alleged that the third

party defendants had refused to “negotiate, limit their claim” against Amador, thereby

obstructing funding of the Microsoft settlement. The third party petition further alleged that the

maximum amount the third party defendants could recover under the Agreement was $50,000,

which presumably is the amount of the Microsoft settlement that was apportioned to Amador.

Finally, the third party petition alleged, “The aforementioned conduct amounts not only to

breach of contract but tortuous [sic] interference, intentional infliction of emotional distress,

fraud, fraud in the inducement and Bad Faith on the part of Defendants.”

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Phia and Sweeney filed special appearances. Although the original special appearances

were not sworn, Phia and Sweeney filed verified amended special appearances prior to the trial

court’s hearing. The trial court took the special appearances under advisement at the conclusion

of a hearing and subsequently signed an order denying the special appearances. In response to a

request, the trial court signed findings of fact and conclusions of law and supplemental findings

of fact and conclusions of law.

STANDARD OF REVIEW

Personal jurisdiction is a question of law which we review de novo. Kelly v. Gen.

Interior Const., Inc., 301 S.W.3d 653, 657 (Tex. 2010). However, the trial court frequently must

resolve questions of fact before deciding the jurisdiction question. BMC Software Belgium, N.V.

v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). If a trial court enters an order denying a special

appearance, and the trial court issues findings of fact and conclusions of law, the appellant may

challenge the fact findings on legal and factual sufficiency grounds. Id. In conducting a legal

sufficiency analysis, we review the evidence in the light most favorable to the challenged finding

and indulge every reasonable inference that would support it. Rattner v. Contos, 293 S.W.3d

655, 658 (Tex. App.—San Antonio 2009, no pet.). We credit favorable evidence if a reasonable

fact finder could, and disregard contrary evidence unless a reasonable fact finder could not. Id.

at 657-58. If there is more than a scintilla of evidence to support the finding, the legal

sufficiency challenge fails. Id. at 658. In reviewing for factual sufficiency, we examine all

evidence in the record and reverse only if the finding is so against the great weight and

preponderance of the evidence as to be manifestly wrong or unjust. Id. We review the trial

court’s conclusions of law drawn from the findings of fact de novo. Id.

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JURISDICTION

A. Applicable Law

“A nonresident defendant is subject to the personal jurisdiction of Texas courts if (1) the

Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the exercise of jurisdiction

does not violate federal and state constitutional due process guarantees.” Kelly, 301 S.W.3d at

657. “The broad ‘doing business’ language in Texas’s long-arm statute allows the trial court’s

jurisdiction to ‘reach as far as the federal constitutional requirements of due process will allow.’”

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

“Personal jurisdiction is consistent with due process ‘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.’” Id. (quoting Moki Mac River

Expeditions, 221 S.W.3d at 575).

A nonresident’s contacts in the forum state can give rise to either specific or general

jurisdiction. BMC Software, 83 S.W.3d at 795. General jurisdiction arises when the defendant’s

contacts within the forum are continuous and systematic. Id. at 796. Specific jurisdiction arises

when: (1) the defendant purposefully avails itself of conducting activities in the forum state; and

(2) the cause of action arises from or is related to those contacts or activities. Retamco

Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex. 2009).

“Our special-appearance jurisprudence dictates that the plaintiff and the defendant bear

shifting burdens of proof in a challenge to personal jurisdiction.” Kelly, 301 S.W.3d at 658.

“[T]he plaintiff bears the initial burden to plead sufficient allegations to bring the nonresident

defendant within the reach of Texas’s long-arm statute.” Id. “Once the plaintiff has pleaded

sufficient jurisdictional allegations, the defendant filing a special appearance bears the burden to

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negate all bases of personal jurisdiction alleged by the plaintiff.” Id. “Because the plaintiff

defines the scope and nature of the lawsuit, the defendant’s corresponding burden to negate

jurisdiction is tied to the allegations in the plaintiff’s pleading.” Id. A nonresident defendant is

not required to negate every possible ground in the universe, but rather the acts in Texas alleged

by the plaintiff to support personal jurisdiction. Walker Ins. Servs. v. Bottle Rock Power Corp.,

108 S.W.3d 538, 548 (Tex. App.—Houston [14th Dist.] 2003, no pet.).

B. General Jurisdiction

Kayla’s petition alleges that all the defendants, which includes Phia, were companies

which reside and/or conduct business principally or substantially in Texas. In their third party

petition, however, Amador and Brittany did not allege any facts in support of general

jurisdiction. Unlike the allegation that Basic Energy was doing business in Texas, there are no

allegations in the third party petition that Phia and Sweeney were doing business in the State of

Texas. Instead, the only jurisdictional allegations in the pleading relate to specific jurisdiction

arising out of the Agreement. Accordingly, although Phia was required to negate general

jurisdiction, Sweeney was not. See Kelly, 301 S.W.3d at 658; Walker Ins. Servs., 108 S.W.3d at

548.

When general jurisdiction is asserted, the minimum contacts analysis is more demanding

and requires a showing of substantial activities in the forum state. Guardian Royal Exchange

Assur., Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 228 (Tex. 1991). Phia’s sworn

special appearance states: (1) Phia is not a resident of Texas and has not conducted business in

Texas; instead, its principal place of business is in Massachusetts; (2) Phia does not maintain any

offices in Texas and does not have a registered agent for service in Texas; (3) Phia has no

employees in Texas; (4) Phia has never maintained a suit in Texas; and (5) Phia does not own

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any property in Texas. See TEX. R. CIV. P. 120a(3) (providing trial court shall determine special

appearance based on pleadings, stipulations, affidavits, discovery, and oral testimony). The only

contact alleged in Kayla’s petition to support jurisdiction is that Phia was possibly the company

providing medical insurance payments on behalf of Kayla and sought reimbursement for those

payments. Kayla’s petition does not allege any activities that Phia undertook in Texas relating to

the payments or its efforts in seeking reimbursement. Based on the record presented, the only

specific contact alleged with regard to Phia was its execution of the Agreement. This contact,

however, does not satisfy the requirement of showing that Phia engaged in continuous and

systematic contacts with Texas. See BMC Software, 83 S.W.3d at 796. Accordingly, the record

does not support a finding of general jurisdiction.

C. Specific Jurisdiction

The issue then becomes whether the actions taken by Phia and Sweeney gave rise to

specific jurisdiction. In his supplemental affidavit, Sweeney states that Amador’s attorney sent

the Agreement to Phia’s office in Massachusetts. Pursuant to the instructions received from

Amador’s attorney, Sweeney executed the Agreement and returned it to Amador’s attorney by

facsimile transmission. Sweeney states that all of his actions were exclusively in Massachusetts,

and he initiated no contacts. In response, Amador states in his affidavit that funds were

transferred from the initial settlement pursuant to the Agreement. Amador further states that

Phia and Sweeney refused to honor the Agreement and sought 100% “of the proceeds being

tendered” as to both Amador and Brittany.

As previously noted, specific jurisdiction requires a showing of purposeful availment. In

determining whether a defendant purposefully availed itself of the privilege of conducting

activities in Texas: (1) only the defendant’s contacts with the forum are relevant, not the

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unilateral activity of another party or a third person; (2) the contacts relied upon must be

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

benefit, advantage, or profit by availing itself of the jurisdiction. Moki Mac River Expeditions,

221 S.W.3d at 575. In this case, the only contact Phia or Sweeney are alleged to have had with

Texas is the Agreement which the evidence shows was faxed by Amador’s attorney to Phia’s

office in Massachusetts.

“[T]he United States Supreme Court has emphatically answered the question whether a

single contract with a Texas resident can automatically establish jurisdiction — ‘the answer

clearly is that it cannot.’” Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 786

(Tex. 2005) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 n. 18, 478 (1985)).

Although a single contract with a Texas resident cannot automatically establish jurisdiction, it

may, in some circumstances, meet the purposeful availment standard, “but not when it involves a

single contact taking place outside the forum state.” Id. at 787; see also Cerbone v. Farb, 225

S.W.3d 764, 770 (Tex. App.—Houston [14th Dist.] 2007, no pet.) (reversing order denying

special appearance where execution of promissory note in a different state in fulfillment of a

settlement agreement was only contact). The Agreement was signed in Massachusetts, does not

specify where Phia would negotiate in the future, and does not contain a choice of law provision.

See Ashdon, Inc. v. Gary Brown & Assocs., Inc., 260 S.W.3d 101, 113 (Tex. App.—Houston [1st

Dist.] 2008, no pet.) (asserting contract with Texas company calling for performance outside of

Texas does not subject a party to jurisdiction in Texas); Turner Schilling, L.L.P. v. Gaunce

Mgmt., Inc., 247 S.W.3d 447, 456 (Tex. App.—Dallas 2008, no pet.) (holding specific

jurisdiction not shown where contract with Texas resident did not specify place of performance

and did not contain choice of law provision). Moreover, neither Phia nor Sweeney personally

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benefitted or profited from the Agreement. Instead, Sweeney executed the agreement on behalf

of Phia which executed the Agreement on behalf of the Plan which paid Kayla’s medical bills.

The settlement proceeds were paid to the Plan which held the subrogation lien. Therefore, the

Agreement exclusively benefitted the Plan and Benefit Energy, which does not dispute

jurisdiction.

D. Conclusion

Based on the record presented, the execution of the Agreement by Sweeney on behalf of

Phia was not sufficient to show the minimum contacts necessary to establish either general or

specific jurisdiction. Accordingly, based on the foregoing, we conclude that the trial court’s

findings relating to jurisdiction were unsupported by the evidence, and the trial court erred in

finding that it had jurisdiction over Phia and Sweeney.

WAIVER

We must separately address the trial court’s finding that Phia and Sweeney waived their

jurisdictional complaint. Based on the record, it appears that the trial court found waiver because

Phia’s and Sweeney’s initial special appearances were not verified. 1 The record, however,

contains amended verified special appearances. The Texas Supreme Court has held that an

unverified special appearance does not constitute a general appearance and may be amended any

time before the defendant makes a general appearance. Dawson-Austin v. Austin, 968 S.W.2d

319, 322 (Tex.1998). Because the amended verified special appearances were filed before the

trial court conducted its hearing, the trial court erred in finding the special appearances were

waived.

1 At the hearing, Amador’s attorney also referred to an order on a motion to quash Sweeney’s deposition. The Texas Supreme Court has held, however, that a nonresident defendant does not waive its special appearance by participating in the resolution of discovery matters related to the special appearance. Exito Electronics Co., Ltd. v. Trejo, 142 S.W.3d 302, 307 (Tex. 2004).

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CONCLUSION

The trial court’s order is reversed, and judgment is rendered dismissing the underlying

cause against Phia and Sweeney for lack of personal jurisdiction.

Rebecca Simmons, Justice

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