Charly Publishing Limited and Charly Acquisitions Limited v. Evelyn Kynard Erickson in Her Capacities as Attorney-In-Fact for Roky Erickson and as Trustee of the Roky Erickson Trust

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-00-00004-CV

Charly Publishing Limited and Charly Acquisitions Limited, Appellants

v.

Evelyn Kynard Erickson, in her Capacities as Attorney-in-Fact for Roky Erickson and
Trustee of the Roky Erickson Trust, Appellee

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 250TH JUDICIAL DISTRICT
NO. 93-07292, HONORABLE CHARLES F. CAMPBELL JR., JUDGE PRESIDING

Appellants, Charly Publishing Limited and Charly Acquisitions Limited, appeal a

discovery sanction order and the denial of appellants’ special appearances. We will affirm both

orders.

BACKGROUND

In the 1960s, Austin musician Roky Erickson and his band, the 13th Floor Elevators,

entered into a recording contract in Texas with Texas-based International Artists Producing

Corporation (“International Artists”) and a songwriter’s contract with Texas-based Tapier Music

Corporation (“Tapier”). The contracts granted International Artists the exclusive right to produce

and distribute records and tapes of music performed by Erickson and the other band members and

granted Tapier the exclusive right to license, exploit, and collect royalties in connection with songs

composed by Erickson. The contracts obligated both companies to account to and pay royalties to
Erickson and the other band members. In 1978, Lelan Rogers (“Rogers”), a former employee of

International Artists, bought all the outstanding shares of stock of both International Artists and

Tapier, acquiring both the publishing interests and master recordings of certain 13th Floor Elevators’

songs.

In 1993, Evelyn Kynard Erickson (“Erickson”), in her capacity as Attorney-in-Fact

for Roky Erickson and as Trustee of the Roky Erickson Trust, filed suit in Austin, Texas, against

Rogers and others seeking both damages for alleged unpaid royalties and rescission of the recording

and songwriter’s contracts previously entered into with International Artists and Tapier.

On April 1, 1995, with Erickson’s suit proceeding, Rogers entered into a contract in

California with Charly Publishing Limited (“Charly Publishing”), an English company, whereby Charly

Publishing purchased the songwriter’s contracts from Rogers. In the purchase agreement, Charly

Publishing expressly acknowledged that it was aware of Erickson’s suit against Rogers in Austin,

Texas. On the same day, Charly Holdings, Inc. (“Charly Holdings”), a Panamanian company, entered

into a substantially similar purchase contract with Rogers in which Charly Holdings purchased the

recording contracts from Rogers.

Charly Holdings subsequently sold its interest in the 13th Floor Elevators’ music to

Etablissement Anfra (“Anfra”) of Liechtenstein on June 1, 1995. On January 11, 1996, Anfra sold

its interest in the music to Charly Acquisitions Limited (“Charly Acquisitions”), an Irish company.

Erickson accordingly joined both Charly Publishing and Charly Acquisitions (“the Charly companies”)

in the original suit.

2
 Erickson served process and requests for disclosures on Charly Publishing on January

27, 1999 and on Charly Acquisitions on February 4, 1999. The Charly companies filed special

appearances on March 1, 1999. Erickson served both companies with requests for production on

March 31, 1999 and with interrogatories on April 2, 1999. On April 29, 1999, the Charly companies

requested additional time to respond to discovery. Counsel for both parties entered into a written

agreement whereby the Charly companies would have until May 6, 1999 to file objections to

discovery and until May 13, 1999 to produce responses to discovery.

On May 6, 1999, the Charly companies filed objections to Erickson’s requests for

production and interrogatories. The trial court overruled these objections at a hearing on May 17,

1999. Pursuant to Rule 193.4 of the Texas Rules of Civil Procedure, the Charly companies were

required to produce responsive documents and answer all interrogatories within thirty days after the

court’s ruling. See Tex. R. Civ. P. 193.4. Erickson wrote to the Charly companies after the May

17th hearing requesting that they respond to the discovery requests. After receiving no responses,

Erickson filed, on July 15, 1999, a motion to compel and a motion for sanctions. A hearing was set

for August 3, 1999. On August 2, 1999, the Charly companies responded to the requests for

disclosure. On August 3, the day of the hearing, the Charly companies responded to the requests for

production for the first time. The companies did not respond to any of the interrogatories.

At the August 3rd hearing, the trial court ordered the Charly companies to fully and

completely respond to Erickson’s discovery requests, sanctioned the companies by assigning

attorney’s fees against them, and warned the companies that if they failed to deliver full and complete

answers within ten days, the following fact would be established as true: “Defendant Charly

3
Publishing Limited and Defendant Charly Acquisitions Limited have engaged in business contacts in

Texas sufficient to confer this Court with in personam jurisdiction over both Defendants in this

action.”

The Charly companies tendered responses to Erickson’s discovery requests on August

13, 1999. Dissatisfied with the responses, Erickson filed a second motion to compel and a motion

for sanctions on August 27, 1999. The second motion to compel was heard on September 21, 1999.

Immediately before the hearing, counsel for both parties entered into a written agreement wherein

the Charly companies agreed to answer certain discovery requests within a specified time. At the

hearing, the trial court determined that the responses previously filed by the Charly companies were

not full and complete as required by the previous court order. As warned, the trial court sanctioned

the companies by finding as fact that both companies engaged in business contacts in Texas sufficient

to confer the court with in personam jurisdiction. The trial court signed the order on October 6,

1999. This order formed the basis of the Charly companies’ initial appeal.

On December 13, 1999, another hearing was held in which the Charly companies’

special appearances were overruled. From the evidence presented at the hearing, separate from its

earlier sanction, the trial court made the same factual determination: that Charly Acquisitions and

Charly Publishing have business contacts in Texas sufficient to confer the court with in personam

jurisdiction over both companies. The Charly companies now appeal the trial court’s imposition of

the discovery sanction, the court’s denial of their special appearances, and the factual determination

resulting from both actions, arguing that Charly Publishing and Charly Acquisitions do not have

4
business contacts in Texas sufficient to confer the court with in personam jurisdiction over the

companies.

DISCUSSION

Discovery sanctions are not appealable until the trial court renders a final judgment.

Bodnow Corporation v. City of Hondo, 721 S.W.2d 839, 840 (Tex. 1986). However, when the trial

court overruled the Charly companies’ special appearances, it rendered an appealable interlocutory

order. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7) (West Supp. 2000). The trial court’s

factual determination underlying the denial of the special appearance is identical to that of the earlier

discovery sanction: that the Charly companies engaged in business contacts in Texas sufficient to

confer the court with in personam jurisdiction over the companies. Had the trial court chosen a

different sanction or had the sanction encompassed another subject matter, the sanction order would

not yet be appealable to this Court absent specific authorization. Further, the record makes clear that

the trial court based its special appearance ruling on the evidence presented at the hearing and not on

its earlier sanction. Because the factual bases of the two court orders are identical and because the

court can entertain an interlocutory appeal of the special appearance order, this Court will review that

portion of the discovery sanction resulting in the factual determination alongside the denial of the

companies’ special appearances.1

Standard of Review

1
We need not decide whether determining a jurisdictional fact adverse to a litigant is an
appropriate sanction in light of the trial court’s finding based on an evidentiary hearing on the matter.

5
 A defendant who challenges a court’s exercise of personal jurisdiction through a

special appearance carries the burden of negating all bases of personal jurisdiction. Kawasaki Steel

Corp. v. Middleton, 699 S.W.2d 199, 203 (Tex. 1985); Siskind v. Villa Found. for Educ., Inc., 642

S.W.2d 434, 438 (Tex. 1982). When a trial court overrules a special appearance, the defendant

should request the court to make findings of fact according to Texas Rule of Civil Procedure 296.

See Tex. R. Civ. P. 296; Runnells v. Firestone, 746 S.W.2d 845, 848 (Tex. App.—Houston [14th

Dist.] 1988, writ denied). Absent such findings, we view the trial court’s judgment as impliedly

finding all the necessary facts to support its ruling. See Worford v. Stamper, 801 S.W.2d 108, 109

(Tex. 1990). The Charly companies made no request for findings of fact from the trial court, and

none were filed. We therefore presume that the trial court made all necessary findings to support its

order. See id. If evidence supports the implied findings of fact, we must uphold the trial court’s

judgment on any legal theory supported by the evidence. See id.

When in personam jurisdiction is challenged, we review all the evidence. See Smith

v. Lanier, 998 S.W.2d 324, 330 (Tex. App.—Austin 1999, pet. denied). We apply a factual

sufficiency standard in reviewing the evidence, not a de novo review. See id. We may reverse the

decision of the trial court only if its ruling is so against the overwhelming weight and preponderance

of the evidence as to be clearly erroneous and manifestly unjust. See Cain v. Bain, 709 S.W.2d 175,

176 (Tex. 1986).

In Personam Jurisdiction

6
 A Texas court may exercise jurisdiction over a nonresident defendant when the Texas

long-arm statute authorizes the exercise of jurisdiction and the exercise of jurisdiction comports with

due process. Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d

223, 226 (Tex. 1991); see also Tex. Civ. Prac. & Rem. Code Ann. § 17.042 (West 1997). Our long-

arm statute authorizes the exercise of jurisdiction over those who do business in Texas. Guardian

Royal, 815 S.W.2d at 226. The supreme court has determined that the broad language of the long-

arm statute permits an expansive reach of jurisdiction, limited only by the federal constitutional

requirements of due process. Id. As a result, we consider whether it is consistent with federal

constitutional requirements of due process for Texas courts to assert in personam jurisdiction over

the Charly companies. See id.

Under the federal constitutional test of due process, a state may assert personal

jurisdiction over nonresident defendants where (1) the defendants have purposefully established

“minimum contacts” with the forum state and (2) the exercise of jurisdiction comports with “fair play

and substantial justice.” Burger King Corp. v. Rudzewicz , 471 U.S. 462, 475-76 (1985).

Minimum Contacts

The ultimate test of minimum contacts is whether the defendants purposefully availed

themselves of the privilege of conducting activities in Texas, thereby invoking the benefit and

protection of Texas laws. Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990). Those

activities, whether they consist of direct acts within the forum or conduct outside the forum, must

justify a conclusion that the defendants should reasonably anticipate being called into Texas. Id.

7
Foreseeability is thus an important consideration in deciding whether the nonresident defendants have

purposely established minimum contacts with the forum state. Guardian Royal, 815 S.W.2d at 227.

The minimum contacts analysis has further been refined into two types of jurisdiction,

specific and general. Specific jurisdiction exists when the cause of action arises out of or relates to

the nonresident defendants’ contacts with the forum state. Id. The nonresident defendants’ activities

must have been purposefully directed toward the forum state. Id. at 228. Under specific jurisdiction,

the minimum contacts analysis focuses on the relationship among the defendants, the forum, and the

litigation. Id. General jurisdiction exists when the defendants’ contacts with the forum state are

continuous and systematic, even if the cause of action does not arise from or relate to activities

conducted within Texas. Id. Generally, the effort to establish general jurisdiction is more demanding,

requiring a showing of the defendants’ substantial activities within the forum state. Schlobohm, 784

S.W.2d at 357. We analyze the present case under both types of jurisdiction.

The Charly companies argue that they do not have minimum contacts with Texas

sufficient to subject them to in personam jurisdiction within the state, emphasizing that they are

foreign corporations based in Ireland and the Channel Islands, and that they are not registered to do

business in Texas, do not own property in Texas, have no employees, assets, or offices in Texas, and

have not sought to avail themselves of the protections afforded under the laws of Texas. However,

minimum contacts with a state for personal jurisdiction purposes need not always arise from actual

physical activity of the defendant in the forum state. Activities taking place in other states or

countries which entail foreseeable effects in the forum state may be sufficient to satisfy the minimum

contacts requirement. See Western Desert, Inc. v. Chase Resources Corp., 460 F. Supp. 63, 65

8
(N.D. Tex. 1978). The record establishes that the Charly companies engaged in numerous activities,

the foreseeable effects of which satisfy the minimum contacts requirement.

Pursuant to the original recording and songwriter’s contracts, International Artists and

Tapier were obligated to provide notices, twice-yearly written accountings, and royalties to Erickson

and other band members at their addresses in Texas. By purchasing the outstanding shares of

International Artists and Tapier, Rogers assumed these obligations. When Rogers entered into the

agreements with Charly Publishing and Charly Holdings, both companies signed identical contracts

with Rogers. Article 6.2 of the contracts states that both Charly Publishing and Charly Holdings

undertook “to fulfil all [Rogers’] obligations first arising after the date hereof pursuant to the

Acquisition Agreements as if [Charly Publishing and Charly Holdings] [were] a direct party to such

agreements.” Under the agreement, the companies expressly assumed all responsibilities under the

former contracts, including the obligation to pay royalties and make accountings. The contracts

between Rogers on the one hand, and Charly Publishing and Charly Holdings on the other, also

contained identical provisions obligating the companies “to pay any and all royalties due to the

Assignors and all other third parties participating pursuant to the Acquisition Agreements in respect

of phonograph records sold and/or any and all other exploitation of the Compan[ies] and or [their]

licenses.” When Charly Acquisitions subsequently assumed the contract Charly Holdings originally

entered into, Charly Acquisitions became subject to the common law maxim that “an assignee stands

in the shoes of his assignor.” Jackson v. Thweatt, 883 S.W.2d 171, 174 (Tex. 1994). Charly

Acquisitions thus became responsible for Charly Holdings’ contractual obligations. The record also

9
reveals that the Charly companies have, in fact, sent accountings to band members located throughout

Texas.

The Charly companies rely on U-Anchor Adver., Inc. v. Burt, 553 S.W.2d 760 (Tex.

1977), cert. denied, 434 U.S. 1063 (1978), to argue that minimum contacts may not be satisfied by

a party merely making payments or sending royalties to the forum state. In that case, a Texas

business, U-Anchor, installed highway signs in Oklahoma and the Oklahoma customer sent monthly

payments to U-Anchor’s office in Texas. U-Anchor Adver., Inc., 553 S.W.2d at 761. The Texas

Supreme Court held that the Oklahoma customer’s single act of mailing payments to Texas was not

enough to satisfy the due process requirement of minimum contacts. Id. at 763. If the only contact

the Charly companies had with Erickson was sending royalty payments to Erickson in Texas, the

present case might be more analogous to U-Anchor Advertising. However, the Charly companies

had other contacts, in addition to the obligation to send royalties and accountings, that collectively

satisfy the minimum contacts requirement.

Where nonresident defendants have only a single contact or activity tying them to the

forum state, minimum contacts may be absent. But with each additional contact, the analysis changes.

This Court has sustained a finding of sufficient minimum contacts with Texas where the nonresident

defendant had two purposeful contacts. See Rowland & Rowland, P.C. v. Texas Employers Indem.

Co., 973 S.W.2d 432, 436 (Tex. App.—Austin 1998, no pet.). In Rowland & Rowland, in addition

to sending a payment from a wrongful death judgment to Texas residents, the nonresident law firm

sent a letter to the Texas Employers Indemnity Company confirming that the firm would protect the

company’s interest in continuing litigation, eliminating the necessity of the company being added to

10
the suit. Id. at 435-36. This Court found that the nonresident defendant’s promise to protect the

company’s interest in Texas and the distribution of proceeds in Texas were sufficient purposeful

minimum contacts with this state to satisfy due process. Id. at 436. As in Rowland & Rowland, the

record here contains evidence of contacts of substantial quality to establish minimum contacts.

In addition to obligating themselves to make royalty payments and accountings to

Texas residents, the Charly companies acquired the recording and songwriter’s contracts knowing

they were the subject matter of litigation in Texas. As successors to Rogers’ interest, the Charly

companies acquired that interest knowing it was subject to disputed litigation. Section 3.6 of the

assignment contracts drafted by the Charly companies for Rogers states, in part:

Company [Charly companies] is aware that proceedings have been issued against you
[Rogers] by Roky Erickson and others in Austin, Texas (“the Proceedings”) claiming
that you do not own and/or control any rights . . . . You hereby undertake to defend
the Proceedings to the best of your ability and not to settle or compromise the
Proceedings without the prior written consent of Company.

The Charly companies argue that this section absolved the companies of any

involvement in the lawsuit. Yet, as the parties recognize, the provision does not prohibit or protect

the Charly companies from involvement in the lawsuit. Rather, it merely requires Rogers to continue

defense of the action. In fact, the provision clearly states that while Rogers would remain primarily

responsible for the defense, the Charly companies would nevertheless take at least an indirect interest

in the lawsuit by requiring Rogers to seek the Charly companies’ approval before settling or

compromising the proceedings. Even if the Charly companies chose not to become directly involved

in the proceedings, which the contracts did not prohibit them from doing, they nevertheless required

11
Rogers, a party involved in a lawsuit in Texas courts, to gain the approval of the Charly companies

before resolving the Texas proceedings, thereby implicating the Charly companies in availing

themselves of the benefits and protections of the laws and judicial system of the state.

The Charly companies have also initiated contact in Texas with Texas residents, in

addition to Erickson, in attempts to settle and renegotiate the terms of the original recording and

songwriter’s contracts. The Charly companies hired a Houston law firm to represent them and

contact former 13th Floor Elevators band members to renegotiate and confirm contract terms.

Letters sent by the Houston firm offered advances against future royalties for confirmation of the

Charly companies’ purchase and ownership of the 13th Floor Elevators’ recordings. The Charly

companies also sent a solicitor representing them from Europe to Texas to enter into an agreement

with Noble Ginther, a former owner of International Artists and Tapier, confirming that Ginther no

longer claimed any interest in the musical rights of Erickson or the 13th Floor Elevators. In business

unrelated to either Erickson or the 13th Floor Elevators, the Charly companies also have entered into

contracts with other Texas musicians obligating the companies to deliver accountings and payments

on a regular basis to such musicians in Texas.

The nature and quality of the Charly companies’ contacts with Texas support the trial

court’s finding of in personam jurisdiction. The Charly companies knew they were assuming

contracts negotiated in Texas that obligated them to send regular accountings and royalties to Texas

residents. The companies were likewise aware of the litigation in Texas before they took assignment

of such contracts, making it foreseeable that the companies would in some manner be involved in the

ongoing litigation. The Charly companies also utilized the benefits and protections of Texas laws in

12
soliciting, negotiating, and entering into agreements in Texas. We find it difficult to understand how,

given the evidence of such contacts, the Charly companies can assert they have taken no action

directed toward the forum state. We therefore hold that the Charly companies’ contacts with Texas

satisfy the minimum contacts test of due process. Having determined that the trial court’s exercise

of jurisdiction in these circumstances withstands a minimum contacts analysis, we next determine

whether this exercise comports with fair play and substantial justice.

Fair Play and Substantial Justice

Because the minimum contacts analysis includes many considerations of fairness, once

sufficient contacts are established the likelihood that the exercise of jurisdiction violates a fair play

analysis lessens. See Schlobohm, 784 S.W.2d at 357-58. We nevertheless consider the fair play

analysis because case law makes clear that it constitutes a separate and distinct issue from minimum

contacts. See id. at 358. In determining whether the assertion of personal jurisdiction comports with

fair play and substantial justice, we evaluate the nonresident defendants’ contacts in light of other

factors, including (1) the burden on the defendants, (2) the interest of the forum state in adjudicating

the dispute, (3) the plaintiff’s interest in obtaining convenient and effective relief, (4) the interstate

judicial system’s interest in obtaining the most efficient resolution of controversies, and (5) the shared

interest of the several states in furthering fundamental substantive social policies. See Guardian

Royal, 815 S.W.2d at 228 (citing Burger King, 471 U.S. at 477). The defendant assumes the burden

to show “a compelling case that the presence of some consideration would render jurisdiction

unreasonable.” Id. at 231.

13
 Evidence relating to the factors for determining whether assertion of personal

jurisdiction over a nonresident defendant is fair and reasonable weighs against the Charly companies.

First, nothing in the record indicates that defending an action in Texas will unduly burden the Charly

companies. Distance alone is not ordinarily sufficient to defeat jurisdiction. Id. Over time, the

Charly companies have sent at least one representative from England to Texas and hired a Texas

lawyer to engage in other contract negotiations; they have not demonstrated that defending this action

would be unduly more burdensome. Second, Texas has an interest in adjudicating the dispute

because the original contracts were executed here, the action was originally filed here, and the laws

of Texas will apply to the contracts’ interpretation. Third, as Texas residents, Roky Erickson and his

mother, as Attorney-in-Fact, can obtain the most convenient and efficient relief in Texas. Considering

all of the above factors, we conclude that requiring the Charly companies to submit to the jurisdiction

of Texas courts does not offend traditional notions of fair play and substantial justice.

CONCLUSION

Having determined that the Charly companies established minimum contacts with

Texas and that the assertion of jurisdiction comports with fair play and substantial justice, we overrule

the Charly companies’ points of error and affirm the trial court’s discovery sanction and denial of the

Charly companies’ special appearances.

Marilyn Aboussie, Chief Justice

14
Before Chief Justice Aboussie, Justices B. A. Smith and Patterson

Affirmed

Filed: October 5, 2000

Do Not Publish

15