Obtaining Jurisdiction Over Nonresident Business Defendants
by Alex Beard
Texas courts may exercise personal jurisdiction over a non-resident defendant 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. The Texas long-arm statute allows the exercise of personal jurisdiction over a non-resident defendant who “commits a tort in whole or in part in this state.” Although allegations that a tort was committed in Texas satisfy the long-arm statute, they do not necessarily satisfy the due process requirements of the United States Constitution.
In Moncrief Oil International, Inc. v. OAO Gazprom, 414 S.W.3d 142 (Tex. 2013), the Texas Supreme Court engaged in minimum contacts analysis to decide whether specific jurisdiction existed over out-of-state defendants. These defendants had beensued for trade-secret misappropriation and tortious interference. Since the Court was addressing specific or “case-linked” jurisdiction as opposed to general jurisdiction, the Court began by noting that jurisdiction could exist over the defendants with regard to some claims but not others.
Since the minimum contacts supporting each claim in Moncrief Oil were different, the Court analyzed each claim separately. The Court ultimately held that jurisdiction existed over the defendants as to the trade-secrets claim, but not the tortious interference claim. As to the trade-secrets claim, although the Court recognized that a defendant’s physical presence within the state was not required, it nevertheless relied heavily on the fact that the alleged trade secrets were obtained by the defendants at meetings they voluntarily attended in Texas. By contrast, none of the conduct giving rise to the tortious interference claim occurred in Texas, and therefore jurisdiction did not exist over the defendants as to that claim. In reaching this conclusion, the Court made clear that “directing a tort from afar” is insufficient to confer specific jurisdiction. Further, the Court emphasized that a court’s focus must always be on the extent of the defendant’s activities in the forum, not the residence of the plaintiff.
Earlier this year, the U.S. Supreme Court further refined the minimum contacts analysis required for specific jurisdiction. In Walden v. Fiore, 134 S.Ct. 1115 (2014), the Court held that specific jurisdiction did not exist over a Georgia police officer who was sued in Nevada by Nevada residents after he seized cash from them at a Georgia airport. In reaching its decision, the Court made clear that for a state to exercise jurisdiction consistent with due process, the defendant’s suit-related conduct must create a “substantial connection” with the forum state. This relationship must arise out of contacts that the “defendant himself” creates with the forum state. Moreover, the analysis looks to the defendant’s contacts with the forum state itself, and not the defendant’s contacts with persons who reside there.
In reaching its decision, the Court in Walden declined an invitation by the plaintiff to consider what impact its decision would have on cases involving intentional torts committed via the Internet or by other electronic means. The Court chose not to address “the very different questions whether and how a defendant’s virtual ‘presence’ and conduct translate into ‘contacts’ with a particular State,” and left “questions about virtual contacts for another day.”
With more business being transacted over the Internet and by other electronic means, the number of Texas lawsuits alleging tortious conduct originating outside Texas will inevitably rise. It remains to be seen, though, whether on-line contacts that give rise to tort claims will alter the current analytical framework. When the next case is decided, it could usher in a new era of specific jurisdiction analysis.
Until the U.S. Supreme Court provides the necessary guidance, the best way to obtain jurisdiction over an out-of-state defendant conducting business with a Texas resident may be through the use of a contractual forum selection clause. Even with the use of such a clause, however, caution must be exercised to ensure that the language of the clause encompasses all claims that might be filed. Care must also be taken to ensure that the defendant assents to the clause. In Bob Montgomery Chevrolet, Inc. v. Dent Zone Companies, 409 S.W.3d 181 (Tex. App. – Dallas 2013, no. pet.), the Dallas Court of Appeals held that a written contract did not sufficiently incorporate a forum selection clause found only on the plaintiff’s website. Accordingly, the out-of-state defendant was not found to have waived or consented to jurisdiction in Texas and was dismissed from the litigation.
Alex Beard is a partner with Saunders, Walsh & Beard. He can be reached at email@example.com.