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
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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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