Willow Tree Consulting Group, LLC, Liquidating Trustee of the TH Liquidating Trust v. Christopher Grottenthaler

• Court: Court of Appeals of Texas
• Decided: June 1, 2023
• Docket: 05-22-00176-CV
• Status: Published

Opinion

Affirmed and Opinion Filed June 1, 2023

S In The Court of Appeals Fifth District of Texas at Dallas No. 05-22-00176-CV

WILLOW TREE CONSULTING GROUP, LLC, AS LIQUIDATING TRUSTEE OF THE TH LIQUIDATING TRUST, Appellant V. SOUTH DAKOTA TRUST COMPANY LLC, AS TRUSTEE OF THE GROTTENTHALER 22017 IRREVOCABLE TRUST, THE JENNFIER GROTTENHALER 2019 IRREVOCABLE TRUST, AND THE JBG IRREVOCABLE TRUST, Appellee

On Appeal from the 192nd Judicial District Court Dallas County, Texas Trial Court Cause No. DC-21-01060

MEMORANDUM OPINION Before Justices Partida-Kipness, Nowell, and Rosenberg1 Opinion by Justice Partida-Kipness Appellant Willow Tree Consulting Group, LLC (WTCG) as Liquidating

Trustee of the TH Liquidating Trust challenges the trial court’s order granting

appellee South Dakota Trust Company, LLC’s special appearance. Finding no error,

we affirm.

1 The Hon. Barbara Rosenberg, Justice, Assigned BACKGROUND

Christopher Grottenthaler (Christopher) was the founder and Chief Executive

Officer of seven affiliated healthcare companies, referred collectively below as True

Health. Christopher is a Texas resident and True Health was a Delaware limited

liability company headquartered in Frisco, Texas. According to WTCG, True Health

underwent a corporate restructuring in early 2016, and management recapitalized

True Health in January 2017. In the underlying proceeding, WTCG alleged True

Health insiders, including Christopher, received more than $130 million in

distributions from the recapitalization, and those distributions “financially gutted”

True Health and led to its bankruptcy. WTCG further contended that Christopher

hired Texas law firm Wick Phillips Gould & Martin, LLP (Wick Phillips) to assist

him in secreting his assets after the recapitalization. Part of his alleged plan to protect

his True Health interests began on December 31, 2016, with the formation of CLG

Investments. WTCG maintains Christopher formed CLG Investments to “hold all”

of his True Health interests, and later formed CLG Capital as a vehicle to hold assets

that would be contributed to an asset protection trust.

WTCG’s pleadings asserted that Christopher realized a liquidity event when

True Health was recapitalized, which resulted in a distribution of $35 million from

True Health to CLG Investments. Christopher’s wife, Jennifer, obtained a

community property interest in the distribution. After the distribution, Christopher’s

attorneys began efforts to form a trust for the Grottenthalers. In May 2017,

–2– Christopher’s Texas attorney, Dan McCarthy, reached out to South Dakota Trust

Company’s South Dakota office on behalf of the Grottenthalers and inquired as to

whether South Dakota Trust Company would be willing to serve as trustee of a new

trust that would hold an interest in the Delaware limited liability company, CLG

Capital. South Dakota Trust Company agreed to serve as trustee of the trust in South

Dakota. The Grottenthaler 2017 Irrevocable Trust (the “Grottenthaler Trust”) was

thereafter established in South Dakota pursuant to and governed by South Dakota

law.

Pursuant to the terms of the Grottenthaler Trust, Texas residents Christopher

and Jennifer Grottenthaler were the primary beneficiaries. But the Grottenthaler

Trust was administered by South Dakota Trust Company exclusively in South

Dakota in compliance with South Dakota law. The property contributed to the

Grottenthaler Trust (i.e., CLG Capital interests) was located in South Dakota by

virtue of being held in accounts maintained by South Dakota Trust Company. A

Trust Agreement was subsequently drafted reflecting the same. South Dakota Trust

Company executed the Trust Agreement in South Dakota.

In 2019, the Grottenthalers divorced. The Grottenthaler Trust was then split

and a portion of the Grottenthaler Trust was used to form the JBG Irrevocable Trust

on behalf of Jennifer Grottenthaler. Like the Grottenthaler Trust, the JBG

Irrevocable Trust was established in South Dakota pursuant to South Dakota law and

administered by South Dakota Trust Company exclusively in South Dakota. All

–3– documents and agreements related to the JBG Irrevocable Trust were executed by

South Dakota Trust Company in South Dakota. South Dakota Trust Company

continued to administer and serve as trustee of the Grottenthaler Trust (Christopher’s

share) and the JBG Irrevocable Trust (Jennifer’s share) (collectively, the Trusts)

solely in South Dakota in compliance with South Dakota law.

True Health filed for bankruptcy on July 31, 2019. According to WTCG, the

managers/directors, officers, and executive management of various True Health

entities (the True Health Officers) breached their fiduciary duties and received

distributions by way of fraudulent transfers. WTCG also contends South Dakota

Trust Company received a portion of the alleged distributions while serving in its

capacity as trustee of the Trusts. In 2021, WTCG filed the underlying lawsuit against

the Grottenthalers, the True Health Officers, and South Dakota Trust Company.

WTCG sought “to recover losses caused to True Health and True Health’s creditors”

by the actions of the defendants.

South Dakota Trust Company filed a special appearance and requested the

trial court dismiss the claims against it for lack of personal jurisdiction. In support

of the special appearance, South Dakota Trust Company submitted the affidavit of

Matthew Tobin, who is the Chief Operating Officer and Managing Director of South

Dakota Trust Company. Tobin provided the following testimony concerning the

South Dakota Trust Company’s lack of minimum contacts with Texas:

–4–  South Dakota Trust Company is a South Dakota limited liability corporation with its principal place of business in Sioux Falls, South Dakota and one additional office located in Rapid City, South Dakota.

 South Dakota Trust Company does not maintain an office in Texas, does not conduct any business in Texas, and has no managers or executives based in Texas.

 No management decisions regarding South Dakota Trust Company’s business operations are made in Dallas County, Texas, or anywhere else in Texas.

 All trust operations of South Dakota Trust Company take place in South Dakota.

 All trust paperwork of South Dakota Trust Company is created and mailed from South Dakota.

 South Dakota Trust Company is a state-chartered trust company authorized by the South Dakota Division of Banking pursuant to SDCL ch. 51A-6A.

 All trust banking activity South Dakota Trust Company is initiated from South Dakota.

 All trust management decisions of South Dakota Trust Company are made in South Dakota.

 South Dakota Trust Company has never:

o Maintained any place of business in Texas;

o Employed any employee to work in Texas;

o Owned real estate in Texas;

o Leased real estate in Texas;

o Opened a bank account in Texas;

o Performed any services on behalf of South Dakota Trust Company while located in Texas;

–5– o Maintained a registered agent for service of process in Texas; or

o Held licenses, charters, or permits in Texas.

 South Dakota Trust Company formerly served as trustee of the Grottenthaler 2017 Irrevocable Trust, which was subsequently split into the Chris Grottenthaler 2019 Irrevocable Trust and the Jennifer Grottenthaler 2019 Irrevocable Trust (collectively, the Trusts). South Dakota Trust Company currently serves as trustee of the Trusts.

 The Trusts are South Dakota trusts established pursuant to, and governed by, South Dakota law.

 The situs and administration of the Trusts is, and has always been, in South Dakota.

 All trust administration decisions regarding the trusts that South Dakota Trust Company administers, including the Trusts, are made from South Dakota.

 To the best of his knowledge, no one affiliated with South Dakota Trust Company traveled to Texas to meet with Plaintiff or any other Texas-named defendants.

 South Dakota Trust Company has administered the Trusts exclusively from its principal office located in Sioux Falls, South Dakota. All trust books and records have been maintained in South Dakota Trust Company’s principal office located in Sioux Falls, South Dakota. All trust administration activities occur in that office, and all dealings with the trust settlor and beneficiaries occur from that office.

In its response to the special appearance, WTCG maintained that South

Dakota Trust Company was subject to general and specific jurisdiction in Texas.

WTCG presented evidence showing the lawyer-client relationship between the

Grottenthalers and their Texas counsel, including their engagement letter and

correspondence between them concerning the Trust. WTCG also presented –6– correspondence between South Dakota Trust Company and the Grottenthalers’

Texas counsel and between South Dakota Trust Company and the Grottenthalers

concerning the Trusts. Such correspondence included discussions related to drafting

and revising the Trust Agreements and wiring instructions for funding the Trusts.

WTCG also included the Trust Agreements and related documents, the Limited

Liability Company Agreements for CLG Capital, CLG Real Estate, and PC Device

Management, and flow charts showing the relationships between the Trusts and the

Grottenthaler entities. WTCG’s evidence also included bank records showing

payments by the Grottenthalers to South Dakota Trust Company that were deposited

into a South Dakota bank account. WTCG included South Dakota Trust Company’s

answer to Interrogatory No. 3 of WTCG’s first set of interrogatories.2 WTCG cited

2 INTERROGATORY NO.: 3 Describe in detail the relationship between You and any individual named as a Defendant in this suit, including any Grottenthaler Persons. This description should include, but is not limited to, how and when You and any other Defendant became introduced; negotiations between You and such Person, all agreements You entered with such Person, and the nature of the ongoing business relationship with such Person. Include dates and locations for the above.

ANSWER: See attached as related to Grottenthaler Trusts. Additionally, in February 2017, an Attorney from Wick Phillips, Dan McCarthy, contacted SDTC informing one of its Trust Officers that a husband and wife (Chris and Jennifer Grottenthaler) were interested in setting up South Dakota Trusts that would be funded with an LLC interest. In July 2017, SDTC opened the Grottenthaler 2017 Irrevocable Trust. When Chris and Jennifer divorced in 2019, pursuant to an Exercise of Power to Divide, provided under the Trust, SDTC was directed by the Trust Protector to set aside and fund one share for each grantor. Thereafter, the Trust Protector, pursuant to the powers granted under Section 12.6 of Grottenthaler 2017 Irrevocable Trust, directed SDTC to consolidate/decant Jennifer Grottenthaler 2019 Trust, which was accomplished by an Agreement for Assignment and Consolidation of Trusts, which thereby created JBG Irrevocable Trust.

Currently, SDTC administers the Grottenthaler 2017 Irrevocable Trust (Chris’ share) and the JBG Irrevocable Trust (Jennifer’s Share). A Christopher Grottenthaler 2019 Irrevocable Trust has never existed.

–7– to that interrogatory answer for the proposition that South Dakota Trust Company

admitted that Lawrence Barry, a Texas resident and Trust Protector for the Trust

signed and “entered into at least two contracts with SDTC.” Those contracts

included (1) a December 20, 2019 “Exercise of Power to Divide” directing South

Dakota Trust Company to set aside and fund one share for each grantor, and (2) an

“Agreement for Assignment and Consolidation of Trusts.” Directing South Dakota

Trust Company “to consolidate/decant Jennifer Grottenthaler 2019 Trust.” Finally,

WTCG included an October 27, 2020 consent order entered in a proceeding before

the Banking Commissioner of Texas in which South Dakota Trust Company was

ordered to pay the Texas Department of Banking an administrative penalty under

Texas Finance Code § 151.707 for engaging in the unauthorized business of money

transmission in Texas. See TEX. FIN. CODE § 151.707 (availability of administrative

penalty); see also TEX. FIN. CODE § 151.301(b)(4) (“ ‘Money transmission’ means

the receipt of money or monetary value by any means in exchange for a promise to

make the money or monetary value available at a later time or different location.”).

The Texas proceeding before the Banking Commissioner was unrelated to the parties

and issues involved in the Grottenthaler litigation at issue here.

At the hearing on the special appearance, the trial court stated its decision to

grant the special appearance. The trial court signed an order granting the special

appearance and dismissing the claims against South Dakota Trust Company for lack

of personal jurisdiction. This appeal followed.

–8– STANDARD OF REVIEW

Whether a trial court has personal jurisdiction over a nonresident defendant is

a question of law that appellate courts review de novo. E.g., Old Republic Nat’l Title

Ins. Co. v. Bell, 549 S.W.3d 550, 558 (Tex. 2018). When a trial court does not issue

findings of fact and conclusions of law with its special appearance ruling, we imply

all facts necessary to support the judgment and supported by the evidence. Id. When

the relevant facts in a case are undisputed, an appellate court need not consider any

implied findings of fact and considers only the legal question of whether the

undisputed facts establish Texas jurisdiction. Id.

BURDENS OF PROOF

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

a nonresident defendant within the provisions of the Texas long-arm statute. E.g.,

Old Republic Nat’l Title, 549 S.W.3d at 559; Moncrief Oil Int’l, Inc. v. OAO

Gazprom, 414 S.W.3d 142, 149 (Tex. 2013). To meet this burden, a plaintiff must

show the act on which jurisdiction is predicated, not a prima facie demonstration of

the existence of a cause of action. Steward Health Care Sys. LLC v. Saidara, 633

S.W.3d 120, 126 (Tex. App.—Dallas 2021, no pet.) (en banc) (internal citations

omitted). This minimal pleading requirement is satisfied by an allegation that the

nonresident defendant is doing business in Texas or committed tortious acts in

Texas. Id. (citing Alencar v. Shaw, 323 S.W.3d 548, 553 (Tex. App.—Dallas 2010,

no pet.)). If the plaintiff does not meet this burden, the defendant need prove only

–9– that it does not reside in Texas to negate jurisdiction. Id. (citing Siskind v. Villa

Found. for Educ., Inc., 642 S.W.2d 434, 438 (Tex. 1982); Jani-King Franchising,

Inc. v. Falco Franchising, S.A., No. 05-15-00335-CV, 2016 WL 2609314, at *4,

(Tex. App.—Dallas May 5, 2016, no pet.) (mem. op.)). The defendant’s burden to

negate all bases of personal jurisdiction alleged by the plaintiff is not triggered unless

plaintiff pleads sufficient allegations to bring the nonresident defendant within the

reach of Texas’s long-arm statute. Steward Health Care, 633 S.W.3d at 129 (citing

Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 658 (Tex. 2010)).

If the defendant, in its special appearance, presents evidence that disproves

the plaintiff’s jurisdictional allegations, then the plaintiff should present evidence in

support of the petition’s allegations. Id. (citing Kelly, 301 S.W.3d at 659). If the

plaintiff’s evidence differs from the allegations in the petition, “then the plaintiff

should amend the petition for consistency.” Id. (citing Kelly, 301 S.W.3d at 659 n.6).

Thus, the allegations on which the plaintiff bases the exercise of jurisdiction over

the defendant must be in the petition. Id. The plaintiff’s response to the special

appearance may contain evidence supporting the petition’s jurisdictional allegations,

but that evidence must be consistent with the allegations in the petition. Id.

APPLICABLE LAW

Texas courts may exercise 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

–10– guarantees. Old Republic Nat’l Title, 549 S.W.3d at 558. Federal due process

requirements limit a state’s power to assert personal jurisdiction over a nonresident

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

Personal jurisdiction over a nonresident is proper only when (1) the nonresident

defendant has established minimum contacts with the forum state, and (2) the

exercise of jurisdiction comports with traditional notions of fair play and substantial

justice. Id.

A nonresident’s contacts with a forum may give rise to two types of personal

jurisdiction. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex.

2002). General jurisdiction, which is not raised by WTCG on appeal, is present when

a defendant’s affiliations with the forum are so continuous and systemic as to render

it “essentially at home in the forum State.” Luciano v. SprayFoamPolymers.com,

LLC, 625 S.W.3d 1, 8 (Tex. 2021). 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. Kelly

v. Gen. Interior Const., Inc., 301 S.W.3d 653, 658 (Tex. 2010). If a defendant has

deliberately engaged in significant activities within a forum, it has availed itself of

the privilege of conducting business there. Luciano, 625 S.W.3d at 9 (citing Burger

King Corp. v. Rudzewicz, 471 U.S. 462, 475–76 (1985)). Because such activities

enjoy the benefits and protections of the forum’s laws, it is reasonable to require the

defendant to submit to the burdens of litigation in that forum. Id.

–11– Minimum contacts are not necessarily established merely by contracting with

a Texas company and submitting payments to its office in Texas. See U–Anchor

Adver., Inc. v. Burt, 553 S.W.2d 760, 763 (Tex. 1977). A contract is “ordinarily but

an intermediate step serving to tie up prior business negotiations with future

consequences which themselves are the real object of the business transaction.”

Burger King Corp., 471 U.S. at 479 (quoting Hoopeston Canning Co. v. Cullen, 318

U.S. 313, 317 (1943)). Therefore, we must evaluate “prior negotiations and

contemplated future consequences, along with the terms of the contract and the

parties’ actual course of dealing[,]” in determining whether a defendant has

minimum contacts with the forum. Id. “[I]t is essential in each case that there be

some act by which the 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).

ANALYSIS

On appeal, WTCG challenges the trial court’s order granting the special

appearance. WTCG maintains South Dakota Trust Company established minimum

contacts with Texas and purposefully availed itself of the privilege of conducting

business in Texas by agreeing to serve as Trustee of trusts with Texas trustors and

Texas beneficiaries. Applying the well-established law to the facts of this case, we

conclude South Dakota Trust Company disproved WTCG’s jurisdictional

allegations and affirm the trial court’s order granting the special appearance.

–12– I. WTCG’s Threshold Pleading Requirement

As a preliminary matter, we must determine if WTCG met its initial burden

of pleading a basis for asserting personal jurisdiction over South Dakota Trust

Company. WTCG’s live pleading at the time the special appearance was heard

alleged the following with respect to personal jurisdiction over South Dakota Trust

Company:

Defendant South Dakota Trust Company LLC (“SD Trust Co.”) is named in its capacity as the Trustee of the Grottenthaler 2017 Irrevocable Trust, the Jennifer Grottenthaler 2019 Irrevocable Trust, and the JBG Irrevocable Trust. At all times relevant to the causes of action set forth in this lawsuit, SD Trust Co. conducted, and contracted to conduct, business in Texas. SD Trust Co. may therefore be served with process through the Texas Secretary of State. TEX. CIV. PRAC. & REM. CODE § 17.044. The Grottenthaler 2017 Irrevocable Trust was formed to receive distribution proceeds and was an immediate or mediate transferee of one or more distributions from True Health. The Grottenthaler 2017 Irrevocable Trust’s trust agreement, which was prepared by the Texas-based law firm of Wick Phillips Gould & Martin, LLP, provided for:

(1) Two initial beneficiaries total, Christopher and Jennifer Barry Grottenthaler, both of whom were specified to be Texas residents;

(2) a duty owed by the trustee to monitor “Distribution Matters” (which in this case would entail monitoring the “Best Interests” of Texas residents) in the event there was ever no “Distribution Advisor,” with Osterhoff “of Dallas, Texas” being named as the initial Distribution Advisor;

(3) a duty to invest and reinvest the trust’s principal and income in the event there was ever no “Investment Advisor” or there was an emergency preventing such individual from acting, with Christopher Grottenthaler being named as the initial Investment Advisor;

–13– (4) obligations to comply with Texas law specifically with respect to various matters; and

(5) the ability of the trustee to divide the Grottenthaler 2017 Irrevocable Trust into two or more trusts subject to the terms of the original trust.

On June 22, 2017, the Grottenthaler 2017 Irrevocable Trust was settled by Christopher Grottenthaler in Virginia and by Jennifer Barry Grottenthaler in Collin County, Texas. Thereafter, on July 6, 2017, and with full knowledge of the foregoing facts, the SD Trust Co. signed the trust agreement and became the trustee of the Grottenthaler 2017 Irrevocable Trust. SD Trust Co. communicated with Grottenthaler, a Texas resident, and Osterhoff, at least a part-time Texas resident, including whenever a distribution was required or to provide annual statements. Further, the Grottenthaler 2017 Irrevocable Trust was the sole owner of CLG Capital, LLC and CLG Real Estate, LLC, both of which acquired interests in Texas and had Texas addresses at 3662 Hickory Grove Lane Flower Mound, TX 75033. Indeed, SD Trust Co. was required to and did sign documents as the sole owner of these entities, including with an investment banker located in Dallas, Texas. Eventually, Christopher Grottenthaler and Jennifer Barry Grottenthaler divorced one another, after which the Grottenthaler 2017 Irrevocable Trust was divided into two shares, with Grottenthaler’s share remaining in the Grottenthaler 2017 Irrevocable Trust and Jennifer Barry Grottenthaler’s share going into the newly created Jennifer Grottenthaler 2019 Irrevocable Trust, of which SD Trust Co. was the trustee. Thereafter, SD Trust Co. consolidated the Jennifer Grottenthaler 2019 Irrevocable Trust, which was accomplished by an Agreement for Assignment and Consolidation of Trusts and thereby created the JBG Irrevocable Trust, with SD Trust Co. as its trustee.

We conclude WTCG met its threshold pleading requirement and the burden shifted

to South Dakota Trust Company to negate the alleged basis for exercising

jurisdiction. See Alencar, 323 S.W.3d at 553 (minimal pleading requirement

satisfied by allegation nonresident defendant is doing business in Texas or

–14– committed tortious acts in Texas) (overruled on other grounds by Steward Health

Care, 633 S.W.3d at 127–28). Here, that basis is specific jurisdiction.3

II. Specific Jurisdiction

Texas has specific jurisdiction over a nonresident defendant if (1) the

nonresident defendant has established minimum contacts with the forum state, and

(2) the exercise of jurisdiction comports with traditional notions of fair play and

substantial justice. Moki Mac River Expeditions, 221 S.W.3d at 575. “Under the

minimum contacts analysis, we must determine whether the nonresident defendant

has purposefully availed itself of the privilege of conducting activities within the

forum state, thus invoking the benefits and protections of its laws.” Guardian Royal

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

This “purposeful availment” inquiry has three parts: (1) only the defendant’s

contacts with the forum are relevant; (2) the contacts must be purposeful—not

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.

Here, South Dakota Trust Company maintains it lacks minimum contacts with

Texas, did not purposefully avail itself of the benefits of doing business in Texas and

the protections of Texas law, and exercising jurisdiction over South Dakota Trust

3 WTCG argued in the trial court that South Dakota Trust Company was subject to general and specific jurisdiction in Texas. On appeal, WTCG only argues that specific jurisdiction applies here. –15– Company does not comport with traditional notions of fair play and substantial

justice. We agree.

To begin, the evidence established that South Dakota Trust Company did not

seek out any Texas contacts in this case. On the contrary, Christopher’s attorneys

reached outside of Texas to contact South Dakota Trust Company in South Dakota

about serving as trustee of a South Dakota trust. Texas cannot exercise personal

jurisdiction over South Dakota Trust Company simply because it accepted the

position of trustee of a South Dakota trust after being contacted by Texas residents

requesting it do so. See M&F Worldwide Corp., 512 S.W.3d at 886, 890; see also

Loya v. Taylor, No. 01-14-01014-CV, 2016 WL 6962312, at *8 (Tex. App.—

Houston [1st Dist.] Nov. 29, 2016, pet. denied) (mem. op.).

This is consistent with the undisputed facts that South Dakota Trust Company

(1) is a South Dakota limited liability corporation with its principal place of business

in Sioux Falls, South Dakota, (2) does not maintain an office in Texas, does not

conduct any business in Texas, and has no managers or executives based in Texas,

(3) makes no management decisions regarding its business operations in Dallas

County, Texas, or anywhere else in Texas, (4) conducts all trust operations in South

Dakota, (5) creates and mails all trust paperwork from South Dakota, (6) initiates all

trust banking activity from South Dakota, (7) makes all trust management decisions

in South Dakota, and (8) has never maintained any place of business in Texas,

employed any employee to work in Texas, owned or leased real estate in Texas,

–16– opened a bank account in Texas, performed any services on behalf of South Dakota

Trust Company while located in Texas, maintained a registered agent for service of

process in Texas, or held licenses, charters, or permits in Texas.

Moreover, the only connection the Trusts and administration of the Trusts

have to Texas is the existence of Texas beneficiaries. It is undisputed that (1) the

Trusts were created under, established pursuant to, and governed by South Dakota

law, (2) the situs and administration of the Trusts is, and has always been, in South

Dakota, (3) all trust administration decisions regarding the Trusts are made from

South Dakota, and (4) South Dakota Trust Company has administered the Trusts

exclusively from its principal office located in Sioux Falls, South Dakota. Further,

all trust books and records have been maintained in South Dakota Trust Company’s

principal office located in Sioux Falls, South Dakota, all trust administration

activities occur in that office, and all dealings with the trust settlor and beneficiaries

occur from that office.

Despite these undisputed facts, WTCG contends South Dakota Trust

Company is subject to personal jurisdiction in Texas because it is the Trustee of

trusts with Texas beneficiaries and received a portion of allegedly fraudulent

distributions by those Texas beneficiaries in its capacity as Trustee of the Trusts.

Neither allegation supports exercising personal jurisdiction over South Dakota Trust

Company.

–17– Merely acting as Trustee for a trust with Texas beneficiaries or managing such

a trust does not establish personal jurisdiction over the Trustee in Texas as a matter

of law. See JPMorgan Chase Bank, N.A. v. Campbell, No. 09-20-00161-CV, 2021

WL 2583574, *6–7 (Tex. App.—Beaumont June 24, 2021, no pet. h.) (mem. op.)

(the presence of a beneficiary in the state does not in itself confer jurisdiction over a

trustee); Loya, 2016 WL 6962312, at *8 (“[t]he mere existence of a trust beneficiary

in Texas does not confer jurisdiction over a [nonresident] trustee.”); see also Dowdy

v. Miller, 122 S.W.3d 816, 823 (Tex. App.—Amarillo 2003, no pet.) (“Moreover,

Miller cites us to no authority holding that the presence of a trust beneficiary in

Texas, standing alone, confers personal jurisdiction here on the purported trustee.”).

For example, in Loya and Campbell, the courts concluded that nonresident

trustees that were merely passive in their presence and participation were not subject

to specific jurisdiction in Texas. The same is true here. South Dakota Trust Company

is a trustee in a passive role in that its roles and duties are limited and there is no

evidence it sought to conduct business in Texas. Indeed, the Trusts are managed

completely in South Dakota. Similarly, the fact that the Trusts’ beneficiaries are

Texas residents is insufficient to assert jurisdiction over South Dakota Trust

Company. Loya, 2016 WL 6962312, at *8.

WTCG’s reliance on Dugas Ltd. Partnership v. Dugas, 341 S.W.3d 504 (Tex.

App.—Fort Worth 2011, pet. granted, jdgm’t vacated w.r.m.), and Alexander v.

Marshall, No. 14-18-00425-CV, 2021 WL 970760, *6 (Tex. App.—Houston [14th

–18– Dist.] March 16, 2021, pet. denied) (mem. op.) is misplaced. For example, the trust

in Alexander was settled in Texas, had all of its property in Texas, and was run

administratively in Texas. 2021 WL 970760 at *6. Here, the Trusts are administered

solely in South Dakota and the corpus of the Trusts is held in South Dakota. Further,

in Dugas and Alexander, the trust beneficiary was the plaintiff pursuing claims

against the nonresident defendant trustee and, thus, had direct relationships with the

nonresident trustees. Dugas, 341 S.W.3d at 508–09; Alexander, 2021 WL 970760 at

*2. Here, however, a beneficiary is not suing South Dakota Trust Company. WTCG

is a third-party creditor attempting to reach allegedly improper transfers to a

Delaware limited liability company owned by South Dakota Trust Company in its

capacity as trustee of the Trusts. The existence of Texas beneficiaries is irrelevant to

the jurisdictional analysis here. South Dakota Trust Company’s receipt of funds from

the Grottenthalers is also insufficient to constitute purposeful availment in Texas.

See CIBanco, S.A., Institucion de Banca Multiple v. Quezada, 656 S.W.3d 749, 763–

64 (Tex. App.—El Paso 2022, no pet.).

South Dakota Trust Company established that it did not purposefully avail

itself of the privilege of doing business in Texas. WTCG presented no evidence that

discredited or contradicted the evidence presented by South Dakota Trust Company.

We conclude the record does not establish minimum contacts sufficient to support

jurisdiction over South Dakota Trust Company.

–19– Having found that South Dakota Trust Company established a lack of

minimum contacts and purposeful availment, we need not address the question of

whether exercising jurisdiction over South Dakota Trust Company would offend

traditional notions of fair play and substantial justice. See Brady v. Kane, No. 05-18-

01105-CV, 2020 WL 2029245, at *14 (Tex. App.—Dallas Apr. 28, 2020, no pet.)

(mem. op.); see also BMC Software Belgium, 83 S.W.3d at 795.

CONCLUSION

Because South Dakota Trust Company’s contacts with Texas are insufficient

to establish specific jurisdiction, we overrule WTCG’s sole appellate issue. Under

this record, we conclude the trial court did not err by granting South Dakota Trust

Company’s special appearance. Accordingly, we overrule WTCG’s sole appellate

issue and affirm the trial court’s order granting South Dakota Trust Company’s

special appearance and dismissing the claims against South Dakota Trust Company

for lack of personal jurisdiction.

/Robbie Partida-Kipness/ ROBBIE PARTIDA-KIPNESS JUSTICE

220176F.P05

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

WILLOW TREE CONSULTING On Appeal from the 192nd Judicial GROUP, LLC, LIQUIDATING District Court, Dallas County, Texas TRUSTEE OF THE TH Trial Court Cause No. DC-21-01060. LIQUIDATING TRUST, Appellant Opinion delivered by Justice Partida- Kipness. Justices Nowell and No. 05-22-00176-CV V. Rosenberg participating.

SOUTH DAKOTA TRUST COMPANY LLC, AS TRUSTEE OF THE GROTTENTHALER 22017 IRREVOCABLE TRUST, THE JENNFIER GROTTENHALER 2019 IRREVOCABLE TRUST, AND THE JBG IRREVOCABLE TRUST, Appellee

In accordance with this Court’s opinion of this date, the trial court’s order granting South Dakota Trust Company’s special appearance and dismissing the claims against South Dakota Trust Company for lack of personal jurisdiction is AFFIRMED.

It is ORDERED that appellee SOUTH DAKOTA TRUST COMPANY LLC, AS TRUSTEE OF THE GROTTENTHALER 22017 IRREVOCABLE TRUST, THE JENNFIER GROTTENHALER 2019 IRREVOCABLE TRUST, AND THE JBG IRREVOCABLE TRUST recover its costs of this appeal from appellant WILLOW TREE CONSULTING GROUP, LLC, LIQUIDATING TRUSTEE OF THE TH LIQUIDATING TRUST.

–21– Judgment entered this 1st day of June 2023.

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