Hedaya Home Fashions, Inc. v. Garden Ridge, L.P.

Opinion issued March 28, 2013

In The

Court of Appeals
For The

First District of Texas
————————————
NO. 01-12-00911-CV
———————————
HEDAYA HOME FASHIONS, INC., Appellant
V.
GARDEN RIDGE, L.P., Appellee

On Appeal from the 215th Judicial District Court
Harris County, Texas
Trial Court Case No. 2011-32526

MEMORANDUM OPINION

Appellant Hedaya Home Fashions, Inc., appeals the trial court’s

interlocutory order denying Hedaya’s special appearance. See TEX. CIV. PRAC. &

REM. CODE ANN. § 51.014(a)(7) (West Supp. 2012). Hedaya argues that the trial
court erred in determining that it had purposefully availed itself of the privilege of

conducting business in Texas, and thus is subject to jurisdiction here, based on the

evidence that Hedaya had sold thousands of quilts to Garden Ridge, L.P., a Texas

company. The test for purposeful availment focuses not merely on the volume of

goods shipped to Texas, but requires some “additional conduct” on the part of the

defendant beyond merely delivering the product to the market of the forum state.

See Spir Star AG v. Kimich, 310 S.W.3d 868, 873 (Tex. 2010). When title passes

outside the state for the goods ultimately sold in Texas, a large volume of Texas

sales is not itself sufficient to support a conclusion that Texas has jurisdiction over

a nonresident defendant. See Am. Type Culture Collection, Inc. v. Coleman, 83

S.W.3d 801, 808 (Tex. 2002).

Because the contract under which this suit arises was initiated by Garden

Ridge, and title to the goods in question passed outside of Texas, we reverse the

trial court’s denial of Hedaya’s special appearance and render judgment dismissing

the case against Hedaya for lack of personal jurisdiction.

Background

Hedaya Home Fashions is a New York corporation that sells quilts and

bedding materials. Garden Ridge is a Texas company that sells home and garden

goods to retail consumers. After Garden Ridge buyers visited Hedaya’s showroom

in New York, Hedaya agreed to become a vendor for Garden Ridge.

2
 Hedaya signed a contract with Garden Ridge, agreeing to abide by all terms

and conditions specified by Garden Ridge for its purchase orders. Garden Ridge

sent purchase orders to Hedaya’s offices in New York and New Jersey, marked

with billing and shipping addresses in Texas. Garden Ridge reserved the right to

designate and approve any freight carriers for its shipments.

Between December 2008 and May 2010, Garden Ridge submitted six

purchase orders to Hedaya for approximately 19,000 quilts at a price of around

$270,000. The bills of lading prepared by Hedaya for five of the quilt shipments

showed that the goods were shipped free on board (“FOB”) at Hedaya’s warehouse

in New Jersey, meaning that ownership of the goods transferred in New Jersey.

See Am. Type Culture, 83 S.W.3d at 807 (free on board means that title transfers at

the FOB point). The bills of lading had three address boxes: one labeled “Ship

From,” indicating Hedaya’s warehouse address in New Jersey; one labeled “Ship

To,” indicating the address of Garden Ridge’s Dallas distribution center; and one

labeled “Bill To,” indicating Garden Ridge’s Houston office address. Inside the

“Ship From” box, a smaller FOB box was checked, indicating that the goods were

shipped FOB in New Jersey. A small FOB box inside the “Ship To” box was left

unmarked. In accordance with Garden Ridge’s shipping guidelines, a third-party

carrier transported the shipments from New Jersey to Garden Ridge in Dallas.

Hedaya filled five of the purchase orders and shipped approximately 16,000 quilts,

3
for which Garden Ridge paid almost $220,000. But Hedaya did not fulfill the sixth

purchase order for 3,500 quilts.

Garden Ridge withheld the $50,000 purchase price of the 3,500 quilts, and it

brought this breach of contract suit against Hedaya, seeking to recover $100,000 in

lost profits. Hedaya filed a special appearance, claiming that Texas courts lacked

jurisdiction over it. In connection with the special appearance, the parties

submitted affidavits and the transcript of the deposition of Nathan Hedaya, the

company’s president and sole owner. See TEX. R. CIV. P. 120a.

To meet its burden of alleging sufficient jurisdictional facts to bring Hedaya

within reach of the Texas long-arm statute, Garden Ridge initially alleged that

Hedaya had purposefully availed itself of the privileges and benefits of Texas law

by engaging in business in Texas. According to Garden Ridge’s allegations,

Hedaya contracted in Texas with Garden Ridge and the contract was to be partially

performed in Texas. To negate these allegations, Hedaya presented evidence

showing that its interactions with Garden Ridge took place outside of Texas. In his

affidavit, Nathan Hedaya stated that his company did not conduct business in

Texas, did not advertise in Texas, had no employees in Texas, and signed all

agreements with Garden Ridge outside of Texas. No one in his company had

traveled to Texas in at least ten years.

4
 In response to the special appearance, Garden Ridge presented its purchase

orders that listed shipping and billing addresses in Texas and showed that Hedaya

had sold close to 16,000 quilts to Garden Ridge over the course of a year and a

half. In an affidavit, Garden Ridge’s chief executive officer stated that Hedaya had

delivered these goods to Garden Ridge in Texas, and all of them were sold to

customers in Texas. Garden Ridge’s vendor agreement required that it be signed

by the vendor and returned to Garden Ridge in Texas. To support specific

jurisdiction with respect to the alleged breach of contract, Garden Ridge noted that

the remaining 3,500 quilts in the purchase order giving rise to the claim were to be

delivered and sold in Texas. Garden Ridge attached its vendor contract, domestic

shipping and packing manual, and copies of the six purchase orders it sent to

Hedaya.

Finally, in reply, Hedaya introduced the transcript of Nathan Hedaya’s

deposition, in which he denied any contacts with Texas. In attached affidavits,

buyers for Garden Ridge stated that Garden Ridge initially contacted Hedaya in its

New York showroom. Hedaya also presented its bills of lading for the five

fulfilled Garden Ridge purchase orders, which showed that the shipments were

marked free on board in New Jersey and that a third-party carrier transported the

goods to Texas.

5
 After a hearing, the trial court denied the special appearance, finding that it

had personal jurisdiction over Hedaya. Hedaya then brought this interlocutory

appeal. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(7).

Analysis

Texas courts may assert personal jurisdiction over a nonresident defendant if

the Texas long-arm statute authorizes it and the exercise is consistent with federal

and state constitutional due process guarantees. Moki Mac River Expeditions v.

Drugg, 221 S.W.3d 569, 574 (Tex. 2007). The long-arm statute authorizes

jurisdiction over a nonresident company that does business in this state, including

activities such as “contract[ing] by mail or otherwise with a Texas resident” when

“either party is to perform the contract in whole or in part in this state.” TEX. CIV.

PRAC. & REM. CODE ANN. § 17.042 (West 2008). Because the long-arm statute’s

broad doing-business language allows the statute to reach as far as federal

constitutional requirements of due process will allow, the requirements of the long-

arm statute are satisfied if an assertion of jurisdiction comports with federal due

process guarantees. Moki Mac, 221 S.W.3d at 575. Personal jurisdiction is

constitutional when two conditions are met: (1) the defendant has established

minimum contacts with the state, and (2) the exercise of jurisdiction comports with

traditional notions of fair play and substantial justice. BMC Software Belg., N.V. v.

6
Marchand, 83 S.W.3d 789, 795 (Tex. 2002) (citing Int’l Shoe Co. v. Washington,

326 U.S. 310, 316, 66 S. Ct. 154 (1945)).

The touchstone of jurisdictional due process is purposeful availment. Spir

Star, 310 S.W.3d at 873. “[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, 78 S. Ct. 1228, 1240 (1958). There

are three aspects to purposeful availment. First, it is only the defendant’s contacts

with the forum that count, rather than the unilateral activity of another party or a

third person. Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 785

(Tex. 2005) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.

Ct. 2174, 2183 (1985)). Second, the contacts must have been purposeful rather

than random, fortuitous, or attenuated. Id. (citing Burger King, 471 U.S. at 475,

105 S. Ct. at 2183, and Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774, 104

S. Ct. 1473, 1478 (1984)). Third, the nonresident defendant must have sought

some benefit, advantage, or profit by “availing” itself of the jurisdiction, because

personal jurisdiction is premised on notions of implied consent. Id. When a

nonresident defendant structures its transactions to avoid the benefits and

protections of a forum’s laws, such as by ensuring that title passes outside the

7
forum, this legal fiction of consent no longer applies. Am. Type Culture, 83

S.W.3d at 808.

Minimum contacts analysis is further divided into specific jurisdiction and

general jurisdiction. See, e.g., CSR Ltd. v. Link, 925 S.W.2d 591, 595 (Tex. 1996).

In either case, the defendant’s contacts must be such that it should “reasonably

anticipate” being haled into a court of the forum state. World-Wide Volkswagen

Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567 (1980).

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

mixed question of fact and law. See BMC Software, 83 S.W.3d at 794; Glattly v.

CMS Viron Corp., 177 S.W.3d 438, 445 (Tex. App.—Houston [1st Dist.] 2005, no

pet.). The trial court’s factual findings concerning the existence of personal

jurisdiction may be reviewed for legal and factual sufficiency, while the legal

conclusions based on those findings constitute a question of law subject to de novo

review. See BMC Software, 83 S.W.3d at 794; Glattly, 177 S.W.3d at 445. When,

as in this case, the trial court does not make findings of fact and conclusions of law

to support its special appearance determination, “all facts necessary to support the

judgment and supported by the evidence are implied.” BMC Software, 83 S.W.3d

at 795.

In a special appearance, “the plaintiff bears the initial burden to plead

sufficient allegations to bring the nonresident defendant within reach of Texas’s

8
long-arm statute.” See Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 658

(Tex. 2010). Then the defendant bears the burden to negate all bases of personal

jurisdiction alleged by the plaintiff. Id. The defendant can negate jurisdiction on a

factual basis by presenting evidence that it has no contacts with Texas. Id. at 659.

The defendant can also negate jurisdiction on a legal basis by showing that even if

the plaintiff’s alleged facts are true, (1) the evidence is legally insufficient to

establish jurisdiction, (2) the defendant’s contacts with Texas fall short of

purposeful availment, (3) the claims do not arise from the contacts supporting

specific jurisdiction, or (4) traditional notions of fair play and substantial justice

are offended by the exercise of jurisdiction. Id.

I. General jurisdiction

For general in personam jurisdiction to apply, a defendant must have

“continuous and systematic” contacts with the state, which is a more demanding

level of contact than what is required for specific jurisdiction. Am. Type Culture,

83 S.W.3d at 806. To support general jurisdiction, the defendant’s forum activities

must have been “substantial.” CSR, 925 S.W.2d at 595; Preussag

Aktiengesellschaft v. Coleman, 16 S.W.3d 110, 114 (Tex. App.—Houston [1st

Dist.] 2000, pet. dism’d w.o.j.). “Usually, ‘the defendant must be engaged in

longstanding business in the forum state, such as marketing or shipping products,

or performing services or maintaining one or more offices there; activities that are

9
less extensive than that will not qualify for general in personam jurisdiction.’”

PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 168 (Tex. 2007)

(quoting 4 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE &

PROCEDURE § 1067.5 (2007)).

Hedaya lacks the substantial contacts with Texas that would support general

jurisdiction. The company is incorporated under New York law, and its principal

office and place of business are in New York and New Jersey. Hedaya does not

have officers, distributors, employees, real property, or advertising contacts in

Texas. No one from Hedaya has traveled to Texas for business in the past ten

years. The affidavits of Garden Ridge buyers show that Garden Ridge contacted

Hedaya in New York and sought out its products, rather than Hedaya initiating

contact with Garden Ridge in Texas or otherwise soliciting business in Texas.

The primary evidence Garden Ridge presented to justify establishing general

jurisdiction over Hedaya was the volume of goods that Hedaya shipped to Texas—

approximately 16,000 quilts, for which Garden Ridge paid around $220,000. In

response, Hedaya introduced copies of the bills of lading for those shipments,

showing that the orders were marked free on board at Hedaya’s New Jersey

warehouse. The bills of lading also identified third-party carriers which

transported the goods to Garden Ridge in Texas, in accord with Garden Ridge’s

shipment guidelines.

10
 Unless it is unambiguous that the parties came to another agreement, the

seller presumptively completes performance of a shipping contract by delivering

the goods to a common carrier. See TEX. BUS. & COM. CODE ANN. § 2.504 (when

a contract does not require delivery “at a particular destination,” the seller’s

obligation is to put the goods in the possession of a carrier). Requiring “shipment

to” a named destination, as Garden Ridge did in its purchase orders, does not

demonstrate that the parties came to another agreement. See generally TEX. BUS.

& COM. CODE ANN. § 2.503 cmt. 5 (West 2009) (“The seller is not obligated to

deliver at a named destination and bear the concurrent risk of loss until arrival,

unless he has specifically agreed so to deliver or the commercial understanding of

the terms used by the parties contemplates such delivery.”); RICHARD A. LORD,

WILLISTON ON CONTRACTS § 52:10 (4th ed. 2007) (noting that requiring “shipment

to” a destination does not change the presumption that a seller’s responsibility ends

with delivery to the carrier, while requiring delivery “at” a destination specified by

the buyer may have that effect).

The undisputed evidence is that for each of Hedaya’s five completed quilt

shipments to Garden Ridge, Hedaya delivered the quilts by placing them with a

third-party carrier FOB New Jersey, and Garden Ridge has presented no evidence

to suggest this was inconsistent with the parties’ agreement. Unless “otherwise

expressly agreed,” the seller’s performance was complete and title to the goods

11
passed to the buyer when the goods were placed in the possession of the common

carrier at the FOB point. See TEX. BUS. & COM. CODE ANN. § 2.319(a)(1) (seller

bears the expense and risk of putting goods into possession of the carrier under an

FOB shipment term); id. § 2.401(b) (title passes “at the time and place of

shipment” under contracts that do not require delivery “at destination”); Polythane

Sys., Inc. v. Marina Ventures Intern., Ltd., 993 F.2d 1201, 1205 n.6 (5th Cir. 1993)

(applying Texas law). Thus, title to the goods passed to Garden Ridge in New

Jersey, not in Texas where the goods ultimately arrived. Because it completed the

purchase order contracts and title transferred outside of Texas, Hedaya never

purposefully availed itself of Texas law during the course of its completed

transactions with Garden Ridge.

In American Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801 (Tex.

2002), the Supreme Court of Texas determined that more substantial contacts than

shown in this case failed to support general jurisdiction over a nonresident

defendant. A biological research materials company, incorporated in the District

of Columbia with its principal place of business in Maryland, shipped all of its

sales free on board in Maryland. Am. Type Culture, 83 S.W.3d at 807. Like

Hedaya, the company was not authorized to do business in Texas and did not have

offices, distributors, employees, real property, or a registered agent in Texas. Id.

The company did make sales in Texas that annually generated approximately

12
$350,000 in revenue. It also stored patent material from Texas residents

amounting to almost three percent of its total repository, purchased almost

$378,000 worth of supplies from Texas vendors over a five-year period, and had its

representatives attend five scientific conferences in Texas over a seven-year

period. Id. at 807–08. The Court concluded these contacts were not continuous

and systematic, and therefore they were insufficient to support general jurisdiction

in Texas. Id. at 810.

The American Type Culture Court found dispositive the facts that the

company did not advertise in Texas, had no physical presence in Texas, performed

all its business services outside Texas, and constructed its contracts to ensure it did

not benefit from Texas laws by shipping its sales free on board and entering into its

contracts in Maryland. See id. at 810 (citing CSR, 925 S.W.2d at 595). Hedaya

also does not advertise in Texas, has no physical presence here, enters into its

contracts outside Texas, and sent its goods free on board such that title passed

outside of Texas. Thus, like the business in American Type Culture, Hedaya’s

contacts with Texas are not continuous and systematic, and Hedaya is not subject

to general jurisdiction in Texas.

The fact that Hedaya filled several purchase orders, rather than just one,

does not change our conclusion that Hedaya is not subject to general jurisdiction in

Texas. See id. at 806 (“It is the quality and nature of the defendant’s contacts,

13
rather than their number, that is important to the minimum-contacts analysis.”).

“[E]ven occasional acts are not sufficient to support jurisdiction if, as here, their

nature and quality and the circumstances of their commission create only an

attenuated affiliation with the forum.” CMMC v. Salinas, 929 S.W.2d 435, 439

(Tex. 1996) (internal quotation marks omitted, citing Burger King, 471 U.S. at 475

n.18, 105 S. Ct. at 2184 n.18, and Int’l Shoe, 326 U.S. at 318, 66 S. Ct. at 159); see

also Michiana, 168 S.W.3d at 786 (“[S]tream-of-commerce jurisdiction requires a

stream, not a dribble.”).

Garden Ridge also relies on a provision of its undated standard terms and

conditions, incorporated by reference into its agreement with Hedaya, which

specifies that the parties’ agreement will be governed by Texas law. These terms

and conditions were appended to Garden Ridge’s appellate brief though the

document was not authenticated, offered into evidence in the trial court, or

otherwise properly incorporated in the appellate record. See generally TEX. R.

EVID. 901; TEX. R. APP. P. 34.5(c). The applicability of these terms was not

conceded. When the document was presented to him at his deposition, Hedaya

testified that he had never seen it. We thus cannot presume this document

accurately reflects Garden Ridge’s applicable terms and conditions at the time of

the purchase order at issue, and the argument has not been appropriately preserved

in the trial court or presented on appeal.

14
II. Specific jurisdiction

For a court to exercise specific jurisdiction over a nonresident defendant, the

defendant must have purposefully directed its activities toward the forum state or

purposely availed itself of the privileges and benefits of the forum’s laws, and the

cause of action must arise from or relate to those contacts. Touradji v. Beach

Capital P’ship, L.P., 316 S.W.3d 15, 24 (Tex. App.—Houston [1st Dist.] 2010, no

pet.) (citing Freudensprung v. Offshore Tech. Servs., Inc., 379 F.3d 327, 343 (5th

Cir. 2004)); see also Am. Type Culture, 83 S.W.3d at 806. To establish that a

defendant purposefully availed itself of the forum’s jurisdiction, it is not enough

that a seller be aware that the stream of commerce will sweep the product into the

forum state. Spir Star, 310 S.W.3d at 873. Instead, some “additional conduct” on

the part of the seller must indicate “an intent or purpose to serve the market in the

forum State.” Id. (quoting Asahi Metal Indus. Co., Ltd. v. Superior Court of Cal.,

480 U.S. 102, 112, 107 S. Ct. 1026, 1032 (1987)). Examples of the kinds of

additional conduct that are contemplated by this standard include: (1) designing the

product for the market in the forum state, (2) advertising there, (3) establishing

channels for providing regular advice to customers in the forum state, and (4)

marketing the product through a distributor who has agreed to serve as the sales

agent in the forum state. Id.; see also Moki Mac, 221 S.W.3d at 579.

15
 Because its cause of action arises from a dispute over the specific purchase

orders that gave rise to Hedaya’s contacts with Texas, Garden Ridge argues that

Hedaya is subject to specific jurisdiction in Texas for this suit. Garden Ridge

presented the purchase orders as evidence that Hedaya knew it was purposefully

availing itself of the Texas market because all of the purchase orders had shipping

and billing addresses in Texas. In an affidavit, Garden Ridge’s chief executive

officer stated that all of the goods identified by the purchase order in question were

“to be delivered by Hedaya to Garden Ridge in Texas.” Furthermore, Hedaya had

signed a vendor agreement and contract accepting Garden Ridge’s terms and

conditions, and Hedaya transmitted this contract to Texas. Finally, Hedaya

shipped around 16,000 quilts to Texas for sale in the Texas market. Garden Ridge

argues that these shipments represent Hedaya’s purposeful availment of the Texas

market, not random or fortuitous contact.

None of these allegations, even taken as true, establish that Hedaya

purposefully availed itself of the Texas market or the protections of its laws in

regard to the unfulfilled purchase order. Instead, it was Garden Ridge that initiated

contacts between itself and Hedaya, rather than any activity on the part of Hedaya

purposefully directed towards the Texas forum. Garden Ridge reached out to

Hedaya in New York and New Jersey, as shown by the affidavits of the Garden

Ridge buyers. Garden Ridge sent buyers to Hedaya’s New York showroom.

16
Garden Ridge sent its vendor agreement to Hedaya in New York. The document

was executed on behalf of Hedaya and returned to Garden Ridge. Garden Ridge

sent all of its purchase orders to Hedaya in New York and New Jersey. Garden

Ridge’s unfulfilled purchase order required that the quilts be shipped and billed to

Texas, but those facts are not enough to establish specific jurisdiction in Texas. As

the bills of lading for the other shipments show, Hedaya could still complete

performance of that order without purposefully availing itself of Texas law by

delivering the shipment FOB New Jersey.

As the Supreme Court of Texas has explained, “[s]ellers who reach out

beyond one state and create continuing relationships and obligations with citizens

of another state are subject to the jurisdiction of the latter in suits based on their

activities.” Michiana, 168 S.W.3d at 785 (quoting Burger King, 471 U.S. at 473,

105 S. Ct. at 2182) (internal quotation marks omitted). But a defendant will not be

haled into a jurisdiction solely based on the isolated or attenuated sales contacts

initiated by the Texas resident. Compare id. at 787 (unilateral activity on part of

Texas resident who made single purchase cannot satisfy the requirement of contact

with the forum state), with Moki Mak, 221 S.W.3d at 577–78 (nonresident

defendant regularly advertised and solicited business in Texas through mass and

targeted e-mail marketing). “[I]t is well-settled . . . that there can be no purposeful

availment in cases involving isolated sales solicited by consumers who proposed to

17
use the product in a state where the defendant does not conduct business.” Smart

Call, L.L.C. v. Genio Mobile, 349 S.W.3d 755, 761–62 (Tex. App.—Houston [14th

Dist.] 2011, no pet.); see also C-Loc, 993 S.W.2d at 479 (non-resident defendant

entering into a sales agreement with Texas buyer does not establish purposeful

availment in itself). Isolated contacts or single contracts may meet the purposeful-

availment standard, but not when the relevant contacts take place outside of the

forum state. See Michiana, 168 S.W.3d at 787.

The fact that the purchase orders informed Hedaya that its products would

end up in Texas does not establish that Hedaya purposefully availed itself of

Texas’s jurisdiction. See Spir Star, 310 S.W.3d at 873. A nonresident defendant’s

mere knowledge that its sales will be delivered in Texas and be sold in the Texas

market is insufficient to subject a defendant to the jurisdiction of Texas courts.

CMMC, 929 S.W.2d at 439. “Merely contracting with a Texas resident does not

satisfy the minimum contacts requirement.” Blair Communications, Inc. v. SES

Survey Equip. Servs., Inc., 80 S.W.3d 723, 729 (Tex. App.—Houston [1st Dist.]

2002, no pet.) (citing Am. Type Culture, 26 S.W.3d at 43–44). Likewise, “the

single fact that a contract is payable in Texas” does not justify the finding of

jurisdiction. Id. (citing J.D. Fields & Co. v. W.H. Streit, Inc., 21 S.W.3d 599, 604

(Tex. App.—Houston [1st Dist.] 2000, no pet.)).

18
 Accordingly, we conclude that Hedaya is not subject to specific jurisdiction

in Texas.

Conclusion

We reverse the trial court’s denial of Hedaya’s special appearance and we

render judgment dismissing the claims against Hedaya for want of jurisdiction.

Michael Massengale
Justice

Panel consists of Justices Jennings, Bland, and Massengale.

19