Gramercy Advisor LLC, Gramercy Asset Management LLC, Gramercy Local Markets Recovery Fund LLC and Gramercy Financial Services LLC v. R. K. Lowery, Jr. L-Falling Creek LLC, Russell A. Chabaud, R-Rac Wimbledon, LLC, John P. Moffitt, J-Jason LLC, Russell A. Chabaud, Trustee of the Russell G. Chabaud 1999 Investment Trust, R- Russell Wimbledon, LLC

ACCEPTED
01-14-00904-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
2/2/2015 3:16:12 PM
CHRISTOPHER PRINE
CLERK

NO. 01-14-00904-CV
__________________________________________________________________
FILED IN
FIRST DISTRICT OF TEXAS AT HOUSTON 1st COURT OF APPEALS
HOUSTON, TEXAS
__________________________________________________________________
2/2/2015 3:16:12 PM
CHRISTOPHER A. PRINE
GRAMERCY ADVISORS LLC, GRAMERCY ASSET MANAGEMENT Clerk LLC,
GRAMERCY LOCAL MARKETS RECOVERY FUND LLC, AND
GRAMERCY FINANCIAL SERVICES LLC,
Defendants-Appellants,
v.
R.K. LOWRY, JR., ET AL.,
Plaintiffs-Appellees.
__________________________________________________________________

DEFENDANTS-APPELLANTS’ BRIEF
__________________________________________________________________

From the District Court of Harris County, Texas,
80th Judicial District; Trial Court Case No. 2008-74262

David C. Mattka (TSB No. 13231500) Sean F. O’Shea (pro hac vice)
MUNSCH HARDT KOPF & HARR, P.C. Michael E. Petrella (pro hac vice)
401 Congress Avenue, Suite 3050 Daniel M. Hibshoosh (pro hac vice)
Austin, Texas 78701 O’SHEA PARTNERS LLP
(512) 391-6100 (telephone) 521 Fifth Avenue, 25th Floor
(512) 391-6149 (facsimile) New York, NY 10175
Email: dmattka@munsch.com Tel: (212) 682-4426
Fax: (212) 682-4437
soshea@osheapartners.com
mpetrella@osheapartners.com
dhibshoosh@osheapartners.com

ORAL ARGUMENT REQUESTED
 REQUEST FOR ORAL ARGUMENT
Pursuant to Texas Rules of Appellate Procedure 38.1(e), 39.7, and

52.8(b)(4), Defendants-Appellants respectfully request oral argument because it

will materially aid the Court in determination of an important question of law

requiring careful consideration, particularly in light of the voluminous and

complex factual record below.

ii

 IDENTITIES OF PARTIES AND COUNSEL
Defendants-Appellants:

GRAMERCY ADVISORS LLC; GRAMERCY ASSET MANAGEMENT LLC;
GRAMERCY LOCAL MARKETS RECOVERY FUND LLC; AND
GRAMERCY FINANCIAL SERVICES LLC.
David C. Mattka (TSB No. 13231500) Sean F. O’Shea (pro hac vice)
MUNSCH HARDT KOPF & HARR, P.C. Michael E. Petrella (pro hac vice)
401 Congress Avenue, Suite 3050 Daniel M. Hibshoosh (pro hac vice)
Austin, Texas 78701 O’SHEA PARTNERS LLP
Tel: (512) 391-6100 521 Fifth Avenue, 25th Floor
Fax: (512) 391-6149 New York, NY 10175
Tel: (212) 682-4426
Fax: (212) 682-4437

Plaintiffs-Appellees:

R. K. LOWRY, JR; L-FALLING CREEK, LLC; RUSSELL A. CHABAUD; R-
RAC WIMBLEDON LLC; JOHN P. MOFFITT; J-JASON LLC; RUSSELL A.
CHABAUD, TRUSTEE OF THE RUSSELL G. CHABAUD 1999
INVESTMENT TRUST; R-RUSSELL WIMBLEDON, LLC; RUSSELL A.
CHABAUD, TRUSTEE OF THE ASHLEY CHABAUD 1999 INVESTMENT
TRUST; R-ASHLEY WIMBLEDON, LLC; RUSSELL A. CHABAUD,
TRUSTEE OF THE AUDREY CHABAUD 1999 INVESTMENT TRUST; R-
AUDREY WIMBLEDON, LLC; LMC RECOVERY FUND, LLC; UNION GAS
FUNDING I, L.P.; RANA HOLDINGS, LLC; WESTY I LLC; AND MOGI, LLC.

W. Ralph Canada, Jr. (Lead Counsel)
David R. Deary, Wilson E. Wray and Tyler M. Simpson (Additional Counsel)
LOEWINSOHN FLEGLE DEARY, LLP
12377 MERIT DRIVE, SUITE 900
Dallas, Texas 75251
Tel: (214) 572-1700
Fax: (214) 572-1717

iii

 TABLE OF CONTENTS
REQUEST FOR ORAL ARGUMENT .................................................................... ii
IDENTITIES OF PARTIES AND COUNSEL ....................................................... iii
TABLE OF AUTHORITIES ................................................................................... vi
RECORD REFERENCES ....................................................................................... ix
STATEMENT OF THE CASE ..................................................................................x
ISSUE PRESENTED ............................................................................................... xi
STATEMENT OF FACTS ........................................................................................1
I.  APPELLEES AND BDO DEVISE THE TAX TRANSACTIONS ..... 1 
II.  GRAMERCY AGREES TO SOURCE EMERGING MARKET
ASSETS FOR APPELLEES’ TAX TRANSACTION, AND TO
ARRANGE SEPARATE INVESTMENT FUND INVESTMENTS ... 2 
III.  APPELLEES ACKNOWLEDGE THEY RECEIVED NO TAX
ADVICE FROM GRAMERCY ........................................................................... 5 
IV.  THE IRS DISALLOWS ANY BENEFIT FROM THE TAX
TRANSACTION ........................................................................................................ 6 
V.  APPELLEES COMMENCE LITIGATION IN A FORUM TO
WHICH GRAMERCY HAS VIRTUALLY NO CONNECTION ........ 7 
VI.  GRAMERCY SEEKS DISMISSAL FOR LACK OF
PERSONAL JURISDICTION ............................................................................. 9 
VII.  THE COURT BELOW REJECTS GRAMERCY’S AMENDED
SPECIAL APPEARANCE .................................................................................. 11 
SUMMARY OF THE ARGUMENT ......................................................................12
ARGUMENTS AND AUTHORITIES ...................................................................14
I.  GRAMERCY DOES NOT HAVE THE MINIMUM CONTACTS
WITH TEXAS NECESSARY TO ESTABLISH SPECIFIC
JURISDICTION. ...................................................................................................... 14 
A.  Gramercy’s Attendance at Meetings in Texas Does Not
Give Rise to Jurisdiction. ......................................................................... 15 
1.  The Pre-Investment Meeting. .................................................... 15 
2.  The Post-Investment Meetings. ................................................ 21 

iv

 B.  Gramercy’s Contractual Performance Outside Texas
Cannot Establish Personal Jurisdiction. ............................................. 22 
C.  Appellees’ Performance Of Contractual Obligations In
Texas Cannot Give Rise to Jurisdiction Over Gramercy. .......... 24 
D.  Gramercy’s Activities Concerning Appellees’ Tax
Strategy And Fund Investments Cannot Give Rise To
Specific Jurisdiction. ................................................................................. 25 
1.  Gramercy’s Ministerial Execution of Transactions
Necessary To Effectuate The Tax Transactions, And
Its Management Of Entities Involved In The Tax
Transactions, Do Not Give Rise To
Specific Jurisdiction. .................................................................... 25 
2.  Preparation Of Appellants’ Tax Returns Is Irrelevant
To Personal Jurisdiction Over Gramercy. ............................ 27 
3.  The Gramercy Defendants Earned No Fees
From Appellees, And Their Earnings From Other
Texas Residents Are Jurisdictionally Irrelevant................ 28 
4.  Gramercy’s Transmission of Account Statements
To Appellees Does Not Support A Finding of
Specific Jurisdiction. .................................................................... 30 
5.  Gramercy’s Limited Communications with Appellees
Do Not Give Rise to Jurisdiction. ........................................... 32 
E.  Gramercy’s Work on Behalf of Other Texas Clients is
Irrelevant. ....................................................................................................... 33 
II.  THE EXERCISE OF JURISDICTION OVER GRAMERCY
WOULD BE INCONSISTENT WITH DUE PROCESS. ...................... 34 
PRAYER ..................................................................................................................37
CERTIFICATE OF COMPLIANCE .......................................................................38
CERTIFICATE OF SERVICE ................................................................................39

v

 TABLE OF AUTHORITIES

Cases Page(s)
Asshauer v. Farallon Capital Partners, L.P.,
319 S.W.3d 1 (Tex. App. 2008)............................................................................20

BMC Software Belgium, N.V. v. Marchand,
83 S.W.3d 789 (Tex. 2002)...................................................................................22

Bozell Grp., Inc. v. Carpet Co-op of Am. Ass’n, Inc.,
00 CIV. 1248 (RWS), 2000 WL 1523282 (S.D.N.Y. Oct. 11, 2000) ..................18

Bryan v. Gordon,
384 S.W.3d 908 (Tex. App. 2012)........................................................................24

Cornerstone Healthcare Group Holding, Inc. v. Reliant Splitter, L.P.,
2014 WL 2538881 (Tex. App. 2014) ...................................................................29

Farwah v. Prosperous Mar. Corp.,
220 S.W.3d 585 (Tex. App. 2007)........................................................................17

Financial Strategy Group, PLC v. R.K. Lowry, Jr. et al.,
No. 01-14-00273 (Tex. App. 2015) ......................................................................11

Grand Aerie Fraternal Order of Eagles v. Haygood,
402 S.W.3d 766 (Tex. App. 2013)........................................................................34

Guardian Royal Exch. Assurance Ltd. v. English China Clays, P.L.C.,
815 S.W.2d 223 (Tex. 1991).................................................................................35

Gustafson v. Provider HealthNet Servs., Inc.,
118 S.W.3d 479 (Tex. App. 2003)........................................................................18

Hotel Partners v. Craig,
993 S.W.2d 116 (Tex. App. 1994)........................................................................19

In re Stern,
321 S.W.3d 828 (Tex. App. 2010)........................................................................20

vi

IRA Resources, Inc. v. Griego,
221 S.W.3d 592 (Tex. 2007).............................................................. 22, 24, 28, 29

Johnson v. Pounds,
2008 WL 3845450 (Tex. App. 2008) ...................................................................28

KC Smash 01, LLC v. Gerdes, Hendrichson, Ltd., L.L.P.,
384 S.W.3d 389 (Tex. App. 2012)................................................................. 24, 33

Lang v. Capital Res. Investments, I, LLC,
102 S.W.3d 861 (Tex. App. 2003)........................................................................21

Magnolia Gas Co. v. Knight Equip. & Mfg. Corp.,
994 S.W.2d 684 (Tex. App. 1998)........................................................................21

Marathon Oil v. A.G. Ruhrgas,
182 F.3d 291 (5th Cir. 1999) ............................................................. 18, 23, 29, 30

Markette v. X-Ray X-Press Corp.,
240 S.W.3d 464 (Tex. App. 2007)........................................................... 22, 25, 27

McElroy Machine & Mfg. Co., Inc. v. Flores,
2010 WL 466901 (Tex. App. 2010) .....................................................................34

Michiana Easy Livin’ Country, Inc. v. Holten,
168 S.W.3d 777 (Tex. 2005).................................................................................14

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

Nat’l Indus. Sand Ass’n v. Gibson,
897 S.W.2d 769 (Tex. 1995).................................................................................20

Olympia Capital Associates L.P. v. Jackson,
247 S.W.3d 399 (Tex. App. 2008)................................................................. 30, 33

Proskauer Rose LLP v. Pelican Trading, Inc.,
2009 WL 242993 (Tex. App. 2009) .............................................................. 22, 33

vii

Riverside Exports, Inc. v. B.R. Crane & Equip., LLC,
362 S.W.3d 649 (Tex. App. 2011)........................................................................31

Thomas v. UBS AG,
706 F.3d 846 (7th Cir. 2013) ..................................................................................7

Turan v. Universal Plan Inv. Ltd.,
70 F. Supp. 2d 671 (E.D. La. 1999),
aff'd in rel. part sub nom., 248 F.3d 1139 (5th Cir. 2001) ...................................18

Turan v. Universal Plan Inv. Ltd.,
No. 99-31379, 2001 WL 85902 (5th Cir. 2001)……………………… ..............21

Walden v. Fiore,
134 S. Ct. 1115 (2014) ..........................................................................................24

Statutes Page

Tex. Rev. Civ. Stat. Ann. art. 1528n § 7.01 ...............................................................8

Rules Page

Tex. R. App. P. 38.1(e) ............................................................................................. ii

Tex. R. App. P. 38.7...................................................................................................1

Tex. R. App. P. 39.7.................................................................................................. ii

Tex. R. App. P. 52.8(b)(4) ........................................................................................ ii

Other Authorities Page

Larson, Erik, Record $8 Billion Tax Fraud Gets Ex-Lawyer 15 Years, Bloomberg
Businessweek, June 25, 2014, http://www.businessweek.com/news/2014-06-
25/ex-lawyer- sentenced-to-15-years-over-8-billion-tax-fraud ..............................7

viii

 RECORD REFERENCES

Citations in this Appellant’s Brief to the parties are as follows:

Appellants Gramercy Advisors LLC, Gramercy Asset Management LLC,
Gramercy Local Markets Recovery Fund LLC, and Gramercy Financial Services
LLC will be referred to collectively as “Gramercy.”

Appellees R. K. Lowry, Jr.; L-Falling Creek, LLC; Russell A. Chabaud; R-RAC
Wimbledon LLC; John P. Moffitt; J-Jason LLC; Russell A. Chabaud, Trustee of
the Russell G. Chabaud 1999 Investment Trust; R-Russell Wimbledon, LLC;
Russell A. Chabaud, Trustee of the Ashley Chabaud 1999 Investment Trust; R-
Ashley Wimbledon, LLC; Russell A. Chabaud, Trustee of the Audrey Chabaud
1999 Investment Trust; R-Audrey Wimbledon, LLC; LMC Recovery Fund, LLC;
Union Gas Funding I, L.P.; RanA Holdings, LLC, Westy I LLC, and MOGI, LLC
will be referred to as “Appellees.”

Citations in this Appellant’s Brief to the record are as follows:

CR – Clerk’s Record (i.e. CR [page]; e.g. CR 1)

Supp. CR – Supplemental Clerk’s Record (i.e. Supp. CR [page]; e.g.
Supp. CR 1)

App. – Appendix (i.e. App. [tab]; e.g. App. 1)

ix

 STATEMENT OF THE CASE
Nature of the Case: This appeal arises from the district court’s Order denying
Gramercy’s Amended Special Appearance.

Course of
Proceedings: Appellees filed an action against numerous defendants,
including Gramercy, regarding an alleged scheme to
defraud Appellees by inducing them to enter into certain
tax shelter transactions. Gramercy filed a Special
Appearance, and later an Amended Special Appearance,
contesting the court’s personal jurisdiction.

Trial Court: District Court of Harris County, Texas, 80th
Judicial District, Judge Larry Weiman
presiding; Case No. 2008-74262

Trial Court’s
Disposition: On May 30, 2014, Gramercy filed an Amended Special
Appearance. On October 17, 2014, the district court
entered an Order denying Gramercy’s Amended Special
Appearance.

x

 ISSUE PRESENTED
1. Did the district court err in denying Gramercy’s Amended Special

Appearance and exercising personal jurisdiction over Gramercy when Appellees

conceded Gramercy was not subject to general jurisdiction, and when there was

virtually no connection between Gramercy’s Texas contacts and the misconduct

forming the basis of Appellees’ claims?

xi

 STATEMENT OF FACTS1

I. APPELLEES AND BDO DEVISE THE TAX TRANSACTIONS
Appellees are ultra-wealthy businessmen who enjoyed large capital gains in

2000. CR___(Fifth Amended Petition (“FAP”) ¶ 83). Seeking to reduce their tax

liability on their multimillion-dollar earnings, Appellees approached defendant

below BDO USA, LLP (formerly known as BDO Seidman LLP) (“BDO”).

CR___(FAP ¶ 84). At a September 26, 2000 meeting in Texas that Gramercy did

not attend, BDO suggested that Appellees execute a specific tax strategy it had

designed. CR___(FAP ¶ 86). Two well-known law firms that allegedly did not

attend the September 26, 2000 meeting, Sidley Austin, LLP (“Sidley Austin”) and

De Castro, West, Chodorow, Glickfeld & Nass, Inc. (“De Castro”), also advised

Appellees that they would benefit from the BDO-designed strategy. See, e.g.,

CR___(FAP ¶¶ 43-44). Based on BDO’s representations at the September 26,

1
The record citations in this brief are blank because Gramercy did not have
access to a copy of the record at the time of filing. This Court denied Gramercy’s
request for a copy of the record because the underlying documents were originally
filed under seal in the 80th District Court and no order authorized their release. On
discovery of this issue on January 15, 2015, Gramercy immediately filed an agreed
request for access to the record in the 80th District Court, but the resulting order
was not signed until January 27, 2015, and was not made available until January
29, 2015. At that time, Gramercy immediately requested the Harris County
District Clerk to supplement his record, but the Clerk was unable to complete that
process in time to meet Gramercy’s February 2, 2015 briefing deadline. Gramercy
cannot obtain a copy of the record until the Clerk provides this Court with a copy
of the 80th District Court’s signed order. As such, Gramercy still does not have a
copy of the record. Pursuant to Tex. R. App. P. 38.7, Gramercy will amend this
brief with proper citations once it receives a copy of the record.
1

2000 meeting, Appellees decided to execute the tax transaction (the “Tax

Transaction”) designed by BDO.

II. GRAMERCY AGREES TO SOURCE EMERGING MARKET
ASSETS FOR APPELLEES’ TAX TRANSACTION, AND TO
ARRANGE SEPARATE INVESTMENT FUND INVESTMENTS
Gramercy’s role in the Tax Transaction was extremely limited and

peripheral because it is not an accounting or tax advisory firm. Gramercy is a

Connecticut-based asset management firm with particular expertise in emerging

markets. CR___(Affidavit of Robert Lanava dated Sept. 18. 2014 (“Lanava Aff.”)

¶ 4). Gramercy’s reputation was known to BDO, which contacted Gramercy and

requested that it source emerging market and other assets for the Tax Transaction.

CR___(Lanava Aff. ¶ 20). Gramercy agreed to do so, but only on the explicit

condition that Appellees acknowledge Gramercy was not opining on, or making

representations as to, the effectiveness or legitimacy of the Tax Transaction.

CR___(Lanava Aff. Exs. 1-2).

Gramercy was introduced to Appellees at a November 2000 meeting in

Texas attended by Appellees, a Gramercy representative, Jay Johnston, and certain

BDO personnel. CR___(Affidavit of Jay Johnston dated July 18, 2014 (“Johnston

Aff.”) ¶ 6). Mr. Johnston discussed Gramercy’s investment funds and provided a

description of the types of assets Gramercy would source for Appellees. Id. Mr.

Johnston did not discuss the tax aspects of the Tax Transaction or speculate as to

2

how the IRS might view the transaction. Id. Subsequent to the November 2000

meeting, Appellees hired Gramercy to perform two separate tasks: (1) acquire

certain assets as directed by BDO for use in the Tax Transaction, and (2) manage

investments in some of Gramercy’s investment funds (the “Fund Investments”).

CR___(Lanava Aff. ¶ 21). This action arises from the IRS’s ultimate decision to

disallow Appellees any tax benefits from the Tax Transaction; the litigation has

nothing to do with the Fund Investments. CR___(FAP at 39).

After the November 2000 meeting, Gramercy performed separate and

distinct tasks related to the two prongs of its engagement by Appellees:

 Tax Transactions: In connection with the Tax Transactions (which

Appellees decided to engage in for the 2001-2005 tax years), Gramercy

acquired assets with characteristics determined by BDO. CR___(Lanava

Aff. ¶¶ 21-22). Gramercy acquired these assets from either its New York

office (Gramercy was based in New York City from its inception through

mid-2001) or its Connecticut office (Gramercy has been based in

Connecticut since mid-2001). CR___(Lanava Aff. ¶¶ 25-26). Gramercy

reported the results of these transactions to Appellees’ independent

accountants—BDO and Financial Strategy Group, PLC (“FSG”)—who

3

 then prepared Appellees’ tax returns.2 CR___(Lanava Aff. ¶ 30).

Gramercy did not execute any transactions related to the Tax

Transactions from Texas and all of the Tax Transaction trades were

processed through investment exchanges and banks located outside of

Texas. CR___(Lanava Aff. ¶ 22).

 Fund Investments: In connection with the Fund Investments, Gramercy

managed Appellees’ investments; sent periodic account statements to

Appellees and/or their advisors; and had occasional telephone calls with

Appellees and/or their advisors. CR___(Lanava Aff. ¶¶ 21, 24). All of

these activities, which are unrelated to the Tax Transactions underlying

this lawsuit, were undertaken from Gramercy’s offices in New York or

Connecticut. CR___(Lanava Aff. ¶¶ 25-26). Gramercy personnel also

attended a limited number of meetings in Texas with Appellees and/or

their advisors at Appellees’ request in order to update them on the

performance of their Fund Investments or to discuss certain investment

opportunities unrelated to the Tax Transaction. CR___(Lanava Aff. ¶ 24,

Johnston Aff. ¶ 8).

2
BDO prepared Appellees’ tax returns in its Chicago, Illinois headquarters.
CR___(Lanava Aff. ¶ 18). FSG prepared Appellees’ tax returns in its Memphis,
Tennessee office. CR___(Lanava Aff. ¶ 30).
4

III. APPELLEES ACKNOWLEDGE THEY RECEIVED NO TAX
ADVICE FROM GRAMERCY
Gramercy’s performed its services for the Tax Transaction pursuant to an

Investment Management Agreement (“IMA”). Each of the investing Appellees

executed an IMA with Gramercy in it acknowledged in the plainest terms that

Gramercy had not rendered any advice concerning the tax implications of the

transactions in question:

[Gramercy] is not required to inquire into or take into
account the effect of any tax laws or the tax position of
[Appellee] in connection with managing the Account. To
the fullest extent permitted by law, neither [Gramercy],
its members or any of their respective affiliates and
their respective partners, members, officers, directors,
employees, shareholders and agents shall be liable in
any manner to [Appellee] with respect to the effect of
any U.S. federal, state, local or any other taxes of any
nature whatsoever on the Account of [Appellee] in
connection with managing the Account or in
connection with this Agreement or otherwise.
[Appellee] agrees that [it] has consulted [its] own tax
advisor regarding the possible tax consequences of
establishing the Account or entering into any investment
made under or in connection with this Agreement.

CR___(Lanava Aff. ¶¶ 30, 32 and Ex. 1, ¶ 7(c) (emphasis added)). Each of the

IMAs has an integration clause and a New York choice-of-law provision.

CR___(Lanava Aff. Ex. 1, ¶¶ 14(a), 14(d)).

Similarly, in side “Belief Letters,” each investing Appellee explicitly

represented to Gramercy that

5

 it has consulted with its own financial, tax and legal
advisors with respect to the Transactions and, in
particular, the effect of the tax laws and regulations
and the impact of any notices or announcements issued
by the IRS, (b) it has not relied on [Gramercy] for any
financial, tax or legal advice with respect to the
Transactions, and (c) it shall not have any claim against
[Gramercy] in the event that any tax liability, problem
or issue should arise in connection with the
Transactions other than as a direct result of any
negligence of [Gramercy] in effecting the investments
pursuant to the [IMA].

CR___(Lanava Aff. ¶¶ 30, 33 and Ex. 2 (emphasis added)).

Additionally, each investing Appellee also executed an Interest Transfer

Agreement containing both a New York choice-of-law provision and a forum

selection clause in which the parties agreed to the non-exclusive jurisdiction of

courts located in New York City. CR___(Lanava Aff. ¶ 34 and Ex. 3 § 9.5).

IV. THE IRS DISALLOWS ANY BENEFIT FROM THE TAX
TRANSACTION
Appellees’ tax returns for the 2001-05 tax years were prepared by BDO

and/or FSG. Gramercy had no role whatsoever in the preparation of those returns

other than supplying limited factual information to the relevant accounting

professional(s). CR___(Lanava Aff ¶ 30). After Appellees filed their tax returns

for the 2001-05 tax years, the IRS audited them. CR___(FAP ¶ 253). Appellees

claim the IRS has represented that they will be required to pay the taxes they

6

attempted to avoid through use of the Tax Transaction, and will also be assessed

penalties and interest. CR___(FAP ¶ 254).

V. APPELLEES COMMENCE LITIGATION IN A FORUM TO WHICH
GRAMERCY HAS VIRTUALLY NO CONNECTION
On December 18, 2008, Appellees initiated this lawsuit in Harris County,

Texas, seeking to make Gramercy the unwilling insurer of their inherently risky

Tax Transaction.3 Yet Gramercy has effectively no ties to Texas. Each Gramercy

Defendant is a limited liability company organized under the laws of the State of

Delaware. CR___(Lanava Aff. ¶¶ 3, 4, 8; FAP ¶¶ 30-34). Prior to 2001, each

Gramercy Defendant had its principal place of business in New York, New York.

CR___(Lanava Aff. ¶ 3). Since 2001, each Gramercy Defendant has had its

principal place of business in Greenwich, Connecticut. CR___(Lanava Aff. ¶ 3,

3
The frivolousness of claims such as those Appellees assert in this case was
recently addressed by Judge Richard Posner of the United States Court of Appeals
for the Seventh Circuit, who labeled similarly situated persons “tax cheats” whose
sole aim was to avoid millions of dollars in federal income taxes. Thomas v. UBS
AG, 706 F.3d 846, 850 (7th Cir. 2013). Judge Posner referred to the lawsuit such
plaintiffs brought against the bank that maintained certain accounts for them
outside the United States as a “travesty” and expressed surprise the defendant had
not asked for the imposition of sanctions. Id. at 854. Similarly, U.S. District Judge
William Pauley recently referred to tax shelter litigants such as Appellees as “real
estate tycoons, tire magnates and software developers” who refused to contribute
to the country that “made their achievements possible,” and further criticized “the
incredible greed of [these] super wealthy” individuals. Larson, Erik, Record $8
Billion Tax Fraud Gets Ex-Lawyer 15 Years, Bloomberg Businessweek, June 25,
2014, http://www.businessweek.com/news/2014-06-25/ex-lawyer- sentenced-to-
15-years-over-8-billion-tax-fraud.
7

FAP ¶¶ 30-34). None of the Gramercy Defendants, nor any of their members, has

ever resided in Texas. CR___(Lanava Aff. ¶¶ 4, 8; Johnston Aff. ¶¶ 3-4).

Gramercy does not transact business in Texas; does not maintain licensing

under the Texas foreign limited liability company laws to transact business here,

see Tex. Rev. Civ. Stat. Ann. art. 1528n § 7.01; is not required to, and thus does

not pay income or sales taxes in Texas; does not own or lease real or personal

property in Texas; does not maintain offices, bank accounts, telephone listings,

employees, or representatives in Texas; and does not advertise or affirmatively

solicit business in Texas by means of “cold calling” or other similar sales tactics.

CR___(Lanava Aff. ¶¶ 5-7, 9-12, 14; Johnston Aff. ¶¶ 4-5). Additionally, none of

Gramercy’s employees are professionally licensed in the State of Texas. Id.

Gramercy operates a passive website which is not specifically directed to

persons in Texas. CR___(Lanava Aff. ¶¶ 14, 16-17). Gramercy’s website merely

provides information about Gramercy and general contact information for its

offices, none of which are located in Texas. Id. Gramercy’s website does not

allow for the direct purchase of any goods or services through the website. Id.

Gramercy has had a small number of Texas-based clients, but they comprise

a miniscule part of its business. From 2000 through 2008 (when Appellees filed

their initial complaint), Gramercy Advisors and Gramercy Financial Services were

the only Gramercy Appellants to have income derived from Texas clients.

8

Gramercy Advisors earned $150,000 from Texas-based clients in 2002 (the only

year it received income from Texas clients), representing seven-tenths of one

percent (.70%) of Gramercy Advisors’ income for that year. CR___(Lanava Aff. ¶

18. Gramercy Financial Services earned $13,803 from Texas based clients in 2004

(the only year it received income from Texas clients), representing five-

hundredths of one percent (.05%) of Gramercy Financial Services’ income for

that year. Id. Gramercy did not have substantive conversations with BDO

personnel in Texas concerning the Tax Transactions. CR___(Lanava Aff. ¶ 23).

VI. GRAMERCY SEEKS DISMISSAL FOR LACK OF PERSONAL
JURISDICTION
On May 6, 2009, Gramercy submitted a special appearance seeking

dismissal of all claims against it for lack of personal jurisdiction. CR___(Special

Appearance dated May 6, 2009). On November 11, 2011, Appellees filed a Fifth

Amended Petition, which is the operative pleading for purposes of this appeal.

CR___(FAP dated Nov. 11, 2011). Although the FAP consists of 133 pages and

334 paragraphs and was filed after Gramercy gave notice of its intent to challenge

personal jurisdiction, it contains only the following boilerplate allegations as to

why jurisdiction over Gramercy is proper in Harris County, Texas:

This Court has personal jurisdiction over [Defendant]
pursuant to the constitution and laws of the United States
and the State of Texas. At all relevant times, [Defendant]
has done and is doing business in the State of Texas, but
does not maintain a regular place of business or current

9

 designated agent upon whom service may be made in this
civil action. As described hereafter, [Defendant] has
contracted with a corporation through its Texas office,
and either party was to perform the contract in whole or
in part in the State of Texas. Additionally, [Defendant]
has committed torts, in whole or in part, in the State of
Texas, including intentional tortious acts directed at a
resident of the State of Texas where the brunt of the harm
was felt. [Defendant’s] conduct in the State of Texas has
been committed by officers, directors, employees, and/or
agents of [Defendant] acting within the scope of their
employment or agency. [Defendant] has purposefully
availed itself of the benefits and protections of the laws
of the State of Texas and could reasonably anticipate
being subject to the jurisdiction of courts of the State of
Texas. This suit against [Defendant] will not offend
traditional notions of fair play and substantial justice and
is consistent with due process of law. CR___(FAP ¶ 30).

On May 30, 2014, in response to the FAP, Gramercy filed an Amended

Special Appearance, seeking dismissal of all claims against it for lack of personal

jurisdiction. CR___(Amended Special Appearance dated May 30, 2014). On June

19, 2014, Appellees filed a Response to Gramercy’s Amended Special

Appearance, conceding that the court could not exercise general jurisdiction over

Gramercy, but nonetheless claiming it could exercise specific jurisdiction.

CR___(Response dated June 19, 2014 at 43). Appellees’ Response sought to

buffer the conclusory and bare-bones jurisdictional allegations in the FAP with a

half dozen affidavits purporting to set forth jurisdictionally relevant facts.4 In

4
See CR___: Affidavit of David R. Deary dated June 16, 2014 (“Deary
Aff.”); CR___: Affidavit of Russell A. Chabaud dated Feb. 28, 2014 (“Chabaud
10

reality, however, Appellees’ affidavits concerned jurisdictional contacts other

Defendants, not Gramercy, had with Texas. Id. On July 22, 2014, Gramercy filed

a Reply scrutinizing the evidence submitted by Appellees and noting that it was

insufficient to give rise to personal jurisdiction. CR___(Reply).

VII. THE COURT BELOW REJECTS GRAMERCY’S AMENDED
SPECIAL APPEARANCE
On October 17, 2014, the district court held oral argument on Gramercy’s

Amended Special Appearance. CR___(Tr. at 5). Following that hearing, the

district court stated that it would exercise jurisdiction. CR___(Tr. at 46). The

district court later issued a written summary order denying Gramercy’s Amended

Special Appearance. App. A (Order dated Oct. 17, 2014). The district court did

not offer any explanation for its reasoning, nor any analysis of the record. On

November 5, 2014, Gramercy filed a Request for Proposed Findings of Fact and

Conclusions of Law. CR___. To date, the district court has not acted on that

request, and has never explained its reasons for denying Gramercy’s Amended

Special Appearance.5

Aff.”); CR___: Affidavit of R.K. Lowry, Jr. dated Feb. 17, 2014 (“Lowry Aff.”);
CR___: Affidavit of John P. Moffitt dated Feb. 10, 2014 (“Moffitt Aff.”); CR___:
Affidavit of Todd Simmens dated May 22, 2014 (“Simmens Aff.”); and CR___:
Affidavit of Newt Vannaman dated Feb. 18, 2014 (“Vannaman Aff.”).
5
On January 27, 2015, this Court reversed the district court’s denial of a
special appearance by defendant FSG, finding its Texas contacts insufficient to
support a finding of personal jurisdiction. See Financial Strategy Group, PLC v.
R.K. Lowry, Jr. et al., No. 01-14-00273 (Tex. App. Houston—Jan. 27, 2015)
(unpublished), App. B.
11

 SUMMARY OF THE ARGUMENT
The record below affords no basis for Texas courts to exercise personal

jurisdiction over Gramercy in this matter. Appellees have conceded that there is

no general jurisdiction over Gramercy, and accordingly bear the burden of showing

that their claims arise out of activities that Gramercy engaged in within Texas.

Appellees failed to make such a showing in the district court, and indeed cannot do

so.

Gramercy does not have the minimum contacts with Texas necessary to

establish specific jurisdiction, and each and every argument that Appellees asserted

to the contrary below is infirm. By Appellees’ own account, Gramercy attended

just a single meeting with them prior to their decision to engage in the Tax

Transaction, and gave no tax advice at that meeting. Following the meeting,

Appellees signed written, integrated agreements acknowledging and promising that

Gramercy had given them no tax advice, and that they were not relying on

Gramercy for any such advice. Moreover, although Gramercy attended several

meetings with Appellees after the Tax Transaction, each involved Appellees’ Fund

Investments, which have nothing to do with this lawsuit, and in any case were held

at Appellees’ request. These facts preclude any finding that Gramercy duped

Appellees into engaging in the Tax Transaction, and establish that the district court

had no basis to exercise specific jurisdiction over Gramercy.

12

 The Appellees note that Gramercy engaged in various activities and

communications related to the performance of its contractual

obligations. However, all that Appellees have established is that Gramercy

communicated with and rendered contractual performance to Texas residents from

outside of Texas. As a matter of law, that is insufficient to support specific

jurisdiction. Moreover, Appellees’ own contractual performance and

communications from Texas are irrelevant to whether Gramercy is subject to

specific jurisdiction here. Further, Gramercy’s transmission of information to

Appellees in Texas concerning their fund investments (as distinct from their Tax

Transaction investments) is unrelated to Appellees’ claims, and therefore

immaterial to specific jurisdiction. In addition, work Gramercy performed for, and

fees it received from, Texas clients other than Appellees are wholly irrelevant to

specific jurisdiction over Gramercy.

Finally, given the sparseness of Gramercy’s contacts with Texas, subjecting

it to personal jurisdiction would offend traditional notions of fair play and

substantial justice. The district court lacks personal jurisdiction over Gramercy

and erred in denying its Amended Special Appearance.

13

 ARGUMENTS AND AUTHORITIES

I. GRAMERCY DOES NOT HAVE THE MINIMUM CONTACTS
WITH TEXAS NECESSARY TO ESTABLISH SPECIFIC
JURISDICTION.
To establish specific jurisdiction over Gramercy, Appellees must show that

it purposefully availed itself of the privilege of conducting activities within Texas,

and that their claims resulted from injuries that are alleged to arise from or relate to

Gramercy’s contacts with Texas. Moki Mac River Expeditions v. Drugg 221

S.W.3d 569, 575 (Tex. 2007). The nexus between the Texas contacts and the

operative facts of the litigation must be “substantial,” such that the defendant’s

forum contacts “will be the focus of the trial.” Id. Moreover, there are three

elements to the purposeful availment inquiry: (1) only the defendant’s contacts

with the forum are relevant, not the unilateral activity of another party or third

person; (2) the contacts must be purposeful instead of merely fortuitous; and (3)

through the contacts the defendant must be seeking some benefit, advantage, or

profit. Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex.

2005). “[A] nonresident may purposefully avoid a particular jurisdiction by

structuring its transactions so as neither to profit from the forum’s laws nor be

subject to its jurisdiction.” Id.

Appellees argued below that Gramercy had various types of contact with

Texas that were sufficient to give rise to specific jurisdiction. Yet the district court

made no specific finding of any connection between any of Gramercy’s alleged
14

Texas contacts and Appellees’ claims in the FAP. Moreover, the record is devoid

of evidence or allegations sufficient to establish such a connection.

A. Gramercy’s Attendance at Meetings in Texas Does Not Give
Rise to Jurisdiction.
Appellees argued below that Gramercy’s attendance at various meetings in

Texas, at which the Tax Transaction was purportedly discussed, was sufficient to

give rise to jurisdiction. Close examination of Appellees’ own accounts of the

meetings, however, contradicts their position.6

1. The Pre-Investment Meeting.

Appellees argued below that one Gramercy representative, Jay Johnston,

attended a single pre-investment meeting in Texas in November 2000 related to

their Tax Transaction, thus giving rise to specific jurisdiction. Yet Appellees’ own

account of that meeting in the record below reveals that Mr. Johnston made no

representations about the Tax Transaction.7 Specifically, Appellees’ affidavits

show that Paul Shanbrom of BDO led the meeting and made every single tax-

related representation:

6
Any Gramercy personnel who attended meetings in Texas with Appellees or
their representatives did so solely in their capacity as employees of Gramercy
Advisors LLC. CR___(Lanava Aff. ¶ 24; Johnston Aff. ¶ 10). Accordingly, to the
extent this Court finds such meetings relevant, that relevance is limited to the
Court’s ability to assert personal jurisdiction over Defendant-Appellant Gramercy
Advisors LLC alone.
7
Gramercy attended the meeting at the request of BDO and/or Appellees.
CR___(Johnton Aff. ¶ 8).
15

  “Shanbrom also made specific recommendations about the amount of
money [Appellees] should invest to maximize [their] tax savings.”
Vannaman Aff. ¶ 11; Chabaud Aff. ¶ 11; Lowry Aff. ¶ 11; Moffitt
Aff. ¶ 10 (emphasis added).

 “Shanbrom made it clear that the distressed debt transactions
implemented by Gramercy were intended to take advantage of
purportedly legal tax loopholes to offset [Appellees’] anticipated tax
liability.” Vannaman Aff. ¶ 12; Chabaud Aff. ¶ 12; Lowry Aff. ¶ 12
(emphasis added).

 “Shanbrom led the discussion about how the tax savings were derived
. . . .” Vannaman Aff. ¶ 11; Chabaud Aff. ¶ 11; Lowry Aff. ¶ 11;
Moffitt Aff. ¶ 10 (emphasis added).

 “Shanbrom repeatedly told [Appellees] that the distressed debt
transactions were legal.” Vannaman Aff. ¶ 13; Chabaud Aff. ¶ 13;
Lowry Aff. ¶ 13; Moffitt Aff. ¶ 12 (emphasis added).

 Shanbrom said that if the IRS challenged the validity of the distressed
debt strategy, [Appellees] would prevail.” Vannaman Aff. ¶ 13;
Chabaud Aff. ¶ 13; Lowry Aff. ¶ 13; Moffitt Aff. ¶ 12 (emphasis
added).

 “Shanbrom told [Appellees] that Sidley Austin, a reputable law firm,
would issue ‘independent’ opinion letters confirming the propriety of
the distressed debt strategy. Shanbrom touted R.J. Ruble, a partner at
Sidley Austin, as the recognized expert on distressed debt strategies.”
Vannaman Aff. ¶ 13; Chabaud Aff. ¶ 13; Lowry Aff. ¶ 13; Moffitt
Aff. ¶ 12 (emphasis added).

 “According to Shanbrom, Ruble would draft the opinion letters that
would overcome any IRS challenge and would provide absolute
penalty protection.” Vannaman Aff. ¶ 13; Chabaud Aff. ¶ 13; Lowry
Aff. ¶ 13; Moffitt Aff. ¶ 12 (emphasis added).

These unequivocal, considered statements by Appellees Lowry, Chabaud,

and Moffitt, as well as their accountant Vannaman, establish that Shanbrom alone

16

made any tax-related representations at the November 2000 meeting. Mr. Johnston

is alleged merely to have “confirm[ed] the details” and “discussed how Gramercy

made the distressed debt investment and the types of distressed debt assets

involved.” CR___(Vannaman Aff. ¶ 11; Chabaud Aff. ¶ 11; Lowry Aff. ¶ 11;

Moffitt Aff. ¶ 10). Appellees’ affidavits even concede that Gramercy was only

involved in discussions concerning the amount of taxes Appellees sought to avoid

to ensure that “Gramercy had enough distressed debt assets to meet BDO’s

recommendations and [Appellees’] needs.” CR___(Vannaman Aff. ¶ 11;

Chabaud Aff. ¶ 11; Lowry Aff. ¶ 11; Moffitt Aff. ¶ 10) (emphasis added); see also

CR___(Johnston Aff. ¶ 6).

To give rise to specific jurisdiction, a defendant’s contacts with the forum

must be specifically actionable in themselves. The crux of the Fifth Amended

Petition is that Gramercy sold Appellees faulty tax advice, yet they do not claim

Mr. Johnston made any of the tax-related statements that form the basis for their

claims at the November 2000 Texas meeting. Accordingly, any other statements

Mr. Johnston did make at that meeting are irrelevant to specific jurisdiction.8 See,

8
Even if Gramercy’s statements at the pre-investment meeting played some
role in Appellees’ decision to pursue the Tax Transaction, those statements are not
substantially related to Appellees’ claims that they were sold an inherently faulty
tax strategy, as Gramercy never made any representations regarding that strategy.
See Farwah v. Prosperous Mar. Corp., 220 S.W.3d 585, 597 (Tex. App.—
Beaumont 2007, no pet.) (that plaintiff’s claimed “injuries would not have
17

e.g., Gustafson v. Provider HealthNet Servs., Inc., 118 S.W.3d 479, 484 (Tex.

App.—Dallas 2003, no pet.) (several Texas meetings involving defendant’s

representative insufficient to give rise to specific jurisdiction where plaintiff did

not allege representative “breached any duties to it or committed any torts during

these meetings”); Marathon Oil v. A.G. Ruhrgas, 182 F.3d 291, 295 (5th Cir.

1999) (no specific jurisdiction over non-resident defendant that attended three

meetings in Texas relating to gas sales contract over which plaintiff sued where

there was no evidence defendant made false statements at meetings); Moki Mac,

221 S.W.3d at 585 (in-state representations insufficient to give rise to specific

jurisdiction unless actionable in themselves, even where generally related to the

subject matter of the case); Turan v. Universal Plan Inv. Ltd., 70 F. Supp. 2d 671,

674 (E.D. La. 1999) aff’d in rel. part sub nom. 248 F.3d 1139 (5th Cir. 2001)

(“Travels to business meetings [in the forum], conversations on the telephone, and

correspondences by mail are not sufficient to establish minimum contacts unless

there is evidence that the plaintiffs’ claims directly arise from those specific

activities.”); Bozell Grp., Inc. v. Carpet Co-op of Am. Ass’n, Inc., 00 CIV. 1248

(RWS), 2000 WL 1523282, at *7 (S.D.N.Y. Oct. 11, 2000) (declining to exercise

specific jurisdiction over defendant who attended meetings in forum with plaintiff;

occurred ‘but for’ [defendant’s] presence in Texas” held insufficient to create
substantial connection between wrongful conduct and forum contacts).
18

although meetings were related to plaintiff’s claims, court deemed them “mere

links in the chain of events leading to the claims for which relief is sought”).9

Crucially, even if Mr. Johnston did make tax-related statements at the

November 26, 2000 meeting with Appellees, that still would not be sufficient to

establish specific jurisdiction, because Appellees repeatedly acknowledged in

writing after that meeting that (i) Gramercy had not rendered any opinion or

advice on the tax implications of the transactions effectuated for Appellees; and (ii)

Appellees were relying on their tax and legal advisors—not Gramercy—

concerning the tax aspects of their investments. CR___(Lanava Aff. Ex. 1, ¶ 7(c);

Lanava Aff. Ex. 2); see also Facts § III, supra. Those acknowledgements were

contained in IMAs that included integration clauses. CR___(Lanava Aff. Ex. 1, ¶

14(a)). Those acknowledgements establish that no prior tax-related representations

by Gramercy can give rise to their claims, and thus that they are insufficient to

establish specific jurisdiction. See, e.g., Moki Mac, 221 S.W.3d at 585

9
Moreover, because the conspiracy alleged by Appellees was, even according
to them, formed outside of Texas and well before the November 2000 meeting,
Mr. Johnston’s single pre-investment trip to Texas cannot give rise to specific
jurisdiction. See Hotel Partners v. Craig, 993 S.W.2d 116, 122 (Tex. App.—
Dallas 1994, pet. denied) (no jurisdiction over defendant attorney who visited
Texas for meetings with plaintiffs concerning resort manager with whom he
allegedly conspired, where allegations demonstrated that purported conspiracy
arose and was conducted outside Texas and not purposefully directed at Texas).
The pre-investment meeting in Texas was not even decisive in forming the parties’
relationship, because Appellees subsequently traveled to New York to meet with
Gramercy before deciding to invest with it. CR___(Lanava Aff. ¶ 27).
19

(representations insufficient to give rise to specific jurisdiction unless actionable in

themselves, even where generally related to the subject matter of the case).

To the extent Appellees seek to conflate BDO’s actions and statements at

the November 26, 2000 meeting (or at any other time) with Gramercy’s on the

grounds that they conspired together, those efforts are unavailing. Texas courts

reject attempts to blur the jurisdictional contacts of separate defendants on the

basis that they are engaged in a conspiracy. See Nat’l Indus. Sand Ass’n v. Gibson,

897 S.W.2d 769, 773 (Tex. 1995) (rejecting conspiracy theory of jurisdiction); In

re Stern, 321 S.W.3d 828, 841 (Tex. App.—Houston [1st Dist.] 2010, no pet.)

(personal jurisdiction inquiry limited to whether “the defendant itself purposefully

established minimum contacts such as would satisfy due process”); Asshauer v.

Farallon Capital Partners, L.P., 319 S.W.3d 1, 17 (Tex. App.—Dallas 2008, no

pet.) (“the supreme court has declined to recognize the assertion of personal

jurisdiction over a nonresident defendant based solely on the effects or

consequences of an alleged conspiracy [even] with a resident of the forum state”)

(citations omitted). Accordingly, the only question before this Court is whether

Gramercy itself has sufficient contacts with Texas to be subject to jurisdiction, not

whether any other Defendant below had such contacts, regardless of any alleged

“conspiracy.”

20

 2. The Post-Investment Meetings.

Appellees also argued below that Gramercy attended several post-

investment meetings in Texas, and that those were sufficient to give rise to specific

jurisdiction. The meetings at issue, however, were held for the sole purpose of

updating them on their separate Fund Investments with Gramercy.

CR___(Johnston Aff. ¶ 8). The meetings thus have nothing to do with this case,

and cannot form the basis for specific jurisdiction. See, e.g., Turan v. Universal

Plan Investments Ltd., No. 99-31379, 2001 WL 85902, at *2 (5th Cir. Jan. 24,

2001) (“Business meetings in the forum state and related communications … are

not sufficient to establish the requisite ‘minimum contacts’ unless Appellants’

claims arose from those activities”); Lang v. Capital Res. Investments, I, LLC, 102

S.W.3d 861, 866 (Tex. App.—Dallas 2003, no pet.) (meeting with defendant in

Texas to discuss business plan did not confer specific jurisdiction where plaintiff’s

claims concerned defendant’s mismanagement of company, not business plan or

any statements made by defendant at meeting).

The meetings were also requested by Appellees, not Gramercy, and are

insufficient to give rise to specific jurisdiction for that reason as well. Magnolia

Gas Co. v. Knight Equip. & Mfg. Corp., 994 S.W.2d 684, 688, 691 (Tex. App.—

San Antonio 1998) (defendants’ travel to Texas for meetings they did not instigate

21

insufficient to give rise to specific jurisdiction), abrogated on other grounds, BMC

Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (Tex. 2002).

B. Gramercy’s Contractual Performance Outside Texas
Cannot Establish Personal Jurisdiction.
Appellees argued below that Gramercy is subject to personal jurisdiction

because it entered into contracts with Texas residents. As a matter of law, such

contacts are irrelevant. A non-resident’s out-of-state contractual performance

pursuant to a contract entered into with Texas residents does not subject the out-of-

state defendant to personal jurisdiction. See IRA Resources, Inc. v. Griego, 221

S.W.3d 592, 595 (Tex. 2007) (reversing denial of special appearance by California

investment advisor who performed work for Texas residents from its California

office); Proskauer Rose LLP v. Pelican Trading, Inc., 14-08-00283-CV, 2009 WL

242993, at *5 (Tex. App.—Houston [14th Dist.] Feb. 3, 2009, no pet.) (New York

law firm not subject to personal jurisdiction where law firm drafted opinion letter

for Texas tax shelter client because preparation of letter was done in New York,

not Texas); Markette v. X-Ray X-Press Corp., 240 S.W.3d 464, 468 (Tex. App.—

Houston [14th Dist.] 2007, no pet.) (affirming special appearance of Indiana law

firm where advisory work allegedly giving rise to lawsuit was performed in

Indiana, not Texas, despite communication of results of work to plaintiffs in

Texas). Gramercy performed its contractual obligations outside of Texas, and

22

therefore its performance cannot form a basis for personal jurisdiction.10

CR___(Lanava Aff. ¶¶ 25, 26).

Appellees’ argument to the district court that Gramercy is subject to personal

jurisdiction because the relevant contracts contemplated a long-term agreement

between the parties is likewise without merit. Appellees executed new

transactional documents with Gramercy for each tax year in which they pursued

their BDO-designed tax strategy. See, e.g., CR___(Vannaman Aff. Exs. 3, 5-10,

14-19, 20-24, 42, 47, 54-59, 62-79; Simmens Aff. Exs. 12-14, 18-20). That fact

utterly belies their argument that the parties intended to enter into a long-term

agreement.11 In any event, even a long-term agreement is insufficient to give rise

to specific jurisdiction where, as here, the defendant’s forum contacts were not

actionable in themselves. Marathon Oil v. A.G. Ruhrgas, 182 F.3d at 295

(requiring specifically actionable misconduct to exercise specific jurisdiction);

Moki Mac, 221 S.W.3d at 585 (same).

10
Moreover, Gramercy executed the contracts at issue in New York or
Connecticut. CR___(Lanava Aff. ¶¶ 32, 34-35). And all transactions executed by
Gramercy concerning the Tax Transaction were executed from New York or
Connecticut and processed through exchanges in New York or overseas.
CR___(Lanava Aff. ¶¶ 22, 26). Gramercy did not execute a single trade or
transaction with regard to the Tax Transaction from Texas or that was processed or
cleared through Texas. Id.
11
Moreover, Gramercy executed the transactions Appellees requested to
implement their tax strategy in a short period of time near the end of each calendar
year. CR___(Lanava Aff. ¶ 22).
23

 C. Appellees’ Performance Of Contractual Obligations In
Texas Cannot Give Rise to Jurisdiction Over Gramercy.
Appellees argued that their performance under their contracts with

Gramercy—which amounted to wiring money from Texas to accounts in New

York and elsewhere—is sufficient to give rise to specific jurisdiction. That is

incorrect; only Gramercy’s contacts with Texas are relevant to a determination of

whether it is subject to personal jurisdiction. See Walden v. Fiore, 134 S. Ct.

1115, 1125-26 (2014) (contacts relevant to jurisdictional analysis are those

between defendant and forum state, not those that may exist between plaintiff and

forum state); KC Smash 01, LLC v. Gerdes, Hendrichson, Ltd., L.L.P., 384

S.W.3d 389, 394 (Tex. App.—Dallas 2012, no pet.) (plaintiffs’ performance in

Texas cannot be considered factor in determining whether defendant subject to

personal jurisdiction); Griego, 221 S.W.3d at 597 (accepting money from Texas

resident to open financial account insufficient to confer jurisdiction). That certain

agreements were signed by Appellees in Texas is also jurisdictionally irrelevant.

See Bryan v. Gordon, 384 S.W.3d 908, 917 (Tex. App.—Houston [14th Dist.]

2012, no pet.) (“disposition of the jurisdictional question should not turn on”

where a plaintiff signed a contract).

24

 D. Gramercy’s Activities Concerning Appellees’ Tax Strategy
And Fund Investments Cannot Give Rise To Specific
Jurisdiction.
1. Gramercy’s Ministerial Execution of Transactions
Necessary To Effectuate The Tax Transactions,
And Its Management Of Entities Involved In The
Tax Transactions, Do Not Give Rise To Specific
Jurisdiction.
Appellees argued below that Gramercy’s execution of transactions pursuant

to certain Subscription Agreements gives rise to jurisdiction. This argument is

without merit. The Subscription Agreements, see, e.g., CR___(Vannaman Exs. 14-

19), facilitated the transfer of assets as part of Appellees’ Tax Transaction.

CR___(Lanava Aff. ¶ 35). Yet the agreements and related transactions had

nothing to do with Texas. Pursuant to the agreements, assets were moved from

one New York investment account to another New York investment account.

CR___(Vannaman Exs. 14-19 at Appendix A). The Subscription Agreements also

arranged for funds to be wired through a bank account outside of Texas for the

benefit of the New York investment accounts. CR___(Vannaman Exs. 14-19 at

Appendix A, at 2-3). The Subscription Agreements were sent to Gramercy’s New

York City office, where Gramercy’s performance pursuant to the agreements took

place. (Vannaman Exs. 14-19 at Appendix A, at 2; Lanava Aff. ¶¶ 25, 35). The

Subscription Agreements therefore fail to provide a basis for the exercise of

jurisdiction over Gramercy in Texas. See, e.g., Markette, 240 S.W.3d at 468 (out-

25

of-state contractual performance insufficient to establish personal jurisdiction,

despite communication of results of work to plaintiffs in Texas).

Appellees argued that Gramercy played a role in various limited liability

companies that implemented the Tax Transaction, thus giving rise to specific

jurisdiction. That argument is baseless. First, Appellees alleged that Gramercy

played a role in managing four of the entities that implemented the Tax

Transaction (LMC, MPICS, RDICTD, and SGASSI). Even taking that allegation

as true, all four companies were formed in Delaware, not Texas.12 Similarly,

Appellees argued that Gramercy held a 10% interest in several entities involved in

the Tax Transaction (STKEE, DSAMP, and WAINKR). Yet those were Delaware

limited liability companies.13 Accordingly, Gramercy’s involvement with these

entities is irrelevant to the jurisdictional analysis.

12
See CR___(Simmons Aff. Ex. 2 at BDO Lowry Court 0000399 (LMC a
“Delaware limited liability company”); Simmons Aff. Ex. 22 at BDO Lowry Court
0004662 (MPICS a “Delaware limited liability company”); Simmons Aff. Ex. 24
at BDO Lowry Court 0004811 (SGASSI a “Delaware limited liability company”);
Simmons Aff. Ex. 26 at BDO Lowry Court 0005002 (RDICTD a “Delaware
limited liability company”)).
13
See CR___(Vannaman Aff. Ex. 68 at VANN0007253 (STKEE a “Delaware
limited liability company); Vannaman Aff. Ex. 69 at VANN0007592 (DSAMP a
“Delaware limited liability company); Vannaman Aff. Ex. 70 at VANN0007910
(WAINKR a “Delaware limited liability company)).

26

 2. Preparation Of Appellants’ Tax Returns Is
Irrelevant To Personal Jurisdiction Over
Gramercy.
Appellees argued that Gramercy’s purported role in preparing tax returns

reflecting their tax strategy is sufficient to give rise to specific jurisdiction. In fact,

the record evidence was undisputed that BDO prepared the tax returns reflecting

Appellees tax strategy for 2000 and 2001, while FSG prepared them for 2002

through 2004).14 Gramercy did not prepare the returns. CR___(Lanava Aff. ¶ 30).

Gramercy’s only role with regard to the preparation of Appellees’ taxes was to

transmit raw financial information to either BDO’s New York office or to FSG’s

Memphis, Tennessee office. CR___(Lanava Aff. ¶ 30). The information provided

by Gramercy reflected the results of Gramercy’s ministerial execution of

transactions from either New York or Connecticut and with counterparties in New

York. Id.

As a matter of law, Appellees’ allegations are insufficient to give rise to

specific jurisdiction. Any work performed by Gramercy (or indeed, BDO and

FSG) on the tax returns was performed outside of Texas, thus rendering it

irrelevant to the personal jurisdiction analysis. See Markette, 240 S.W.3d at 468

14
See, e.g., CR___(Vannaman Exs. 28 at VANN0003025 (2000 return
prepared by BDO); 44 at VANN0003107 (2001 return prepared by BDO); 45 at
VANN0003414 (2002 return prepared by FSG); 51 at VANN0003595 (2003 return
prepared by FSG); 80 at GA0328286 (2004 tax return prepared by FSG); 81 at
GA0328307 (2004 tax return prepared by FSG); and 82 at GA0328328 (2004 tax
return prepared by FSG)).
27

(affirming special appearance of Indiana law firm where advisory work allegedly

giving rise to lawsuit was performed in Indiana, not Texas, despite communication

of results of plaintiffs in Texas). Further, Appellees’ claims arise from the content

of the returns (for which BDO and FSG are responsible), not their delivery, see

CR___(FAP ¶¶ 40-41), and Gramercy’s transmission of any returns to Texas is

accordingly irrelevant. See Griego, 221 S.W.3d at 598 (IRA administrator’s acts

of “accepting payment for opening [an] account, and sending [forum plaintiff]

periodic account statements … are too inconsequential to support a claim that it

purposefully directed its activities” at Texas); Johnson v. Pounds, 11-07-00073-

CV, 2008 WL 3845450, at *5 (Tex. App.—Eastland, Aug. 14, 2008, pet. denied)

(affirming special appearance where plaintiff failed to establish that causes of

action arose from defendants’ contacts with Texas). And as noted, Appellees

specifically disclaimed reliance on any tax-related statements Gramercy could have

made, rendering them irrelevant to Appellees’ claims against Gramercy, and to

specific jurisdiction. See § I-A, supra.

3. The Gramercy Defendants Earned No Fees From
Appellees, And Their Earnings From Other Texas
Residents Are Jurisdictionally Irrelevant.
Appellees contended that Gramercy earned millions of dollars in fees from

implementing the Tax Transaction, thus giving rise to personal jurisdiction. That

argument is flat wrong. None of the Gramercy entities that are parties to this case

28

received income from the Appellees.15 CR___(Lanava Aff. ¶ 18). And even if

they had, that would be insufficient to establish jurisdiction. Griego, 221 S.W.3d

at 597 (accepting money from Texas resident to open financial account insufficient

to confer jurisdiction over out-of-state defendant).

Further, with respect to Gramercy’s earnings from Texas residents

unconnected to this case, Plaintiffs have conceded the issue of general jurisdiction,

so any such earnings are irrelevant.16 See generally Marathon Oil, 182 F.3d at 295

15
Appellees paid any fees relating to the Tax Transaction to Gramercy
Financial Products LLC (“GFP”), not to any of the Gramercy Defendants.
CR___(Simmens Aff. re: Payments Ex. 1). GFP is a separate entity from any of
the Defendants and it is not a party to the lawsuit. CR___(Lanava Aff. ¶ 19). Any
payments received by GFP are therefore immaterial in determining whether any of
the Gramercy Defendants are subject to personal jurisdiction. See Cornerstone
Healthcare Group Holding, Inc. v. Reliant Splitter, L.P., 05-11-01730-CV, 2014
WL 2538881, at *3-4 (Tex. App—Dallas Jun. 5, 2014) (granting special
appearance of corporate entity where entity in question did not have
jurisdictionally relevant ties to Texas, despite ties of subsidiary).
16
In any case, two of the Gramercy defendants (Gramercy Asset Management
and Gramercy Local Markets Recovery Fund) received no income from any Texas
clients during the relevant time period. CR___(Lanava Aff. ¶ 18). The two
Gramercy Defendants that did receive income from Texas clients—Gramercy
Advisors and Gramercy Financial Services—received very small amounts and
percentages of their income from any Texas clients (let alone Appellees).
Gramercy Advisors earned $150,000 from Texas based clients in 2002 (the only
year from 2000-2008 in which it received income from Texas clients), representing
seven-tenths of one percent (.70%) of Gramercy Advisors’ income for that year.
Id. Gramercy Financial Services earned $13,803 in 2004 (the only year between
2000 and 2008 it received income from Texas clients), representing five-
hundredths of one percent (.05%) of Gramercy Financial Services’ income for that
year.
29

(requiring specifically actionable misconduct to exercise specific jurisdiction);

Moki Mac, 221 S.W.3d at 585 (same).

4. Gramercy’s Transmission of Account Statements
To Appellees Does Not Support A Finding of
Specific Jurisdiction.
Appellees asserted that Gramercy’s transmission of account statements into

Texas supports a finding of specific jurisdiction. The account statements at issue,

however, solely concerned Appellees’ Fund Investments, not their Tax

Transaction. See, e.g. CR___(Vannaman Aff. ¶ 54 (stating that “these email

‘flash’ previews of investment returns related to the non-tax reducing

investments”) (emphasis added)). Because this information concerned Fund

Investments wholly separate from the Tax Transaction that is the basis of

Appellees’ complaint, it is irrelevant to determining whether Gramercy is subject

to specific jurisdiction. See, e.g., Moki Mac, 221 S.W.3d at 569 (no specific

jurisdiction where subject of meetings distinct from issues in litigation); Marathon

Oil, 182 F.3d at 295 (same).

Moreover, even if the account statements at issue were relevant to

Appellees’ claims (which they are not), mere communication with a Texas resident

does not subject a nonresident defendant to jurisdiction. Olympia Capital

Associates L.P. v. Jackson, 247 S.W.3d 399, 418 (Tex. App.—Dallas 2008, no

pet.) (nonresident defendants’ transmission of investment statements and other

30

contract-related communications to Texas plaintiff “insufficient to establish the

minimum contacts necessary to support the exercise of specific personal

jurisdiction”).

Appellees also contended below that Gramercy’s maintenance of a website

containing certain Fund Investment account information is sufficient to give rise to

specific jurisdiction. In fact, the website merely contained information identical to

records Gramercy had already been providing to Appellees via mail and/or e-mail,

viewable on a password-protected basis. CR___(Lanava Aff., ¶¶ 16-17).

Appellees could take no action via the website. Id. These facts rendered the

website “passive” in nature and irrelevant to the jurisdictional analysis. Riverside

Exports, Inc. v. B.R. Crane & Equip., LLC, 362 S.W.3d 649, 655 (Tex. App.—

Houston [14th Dist.] 2011, pet. denied) (“Absent evidence that a business intends

to serve the Texas market, a website that is merely informational, presenting only

‘passive advertising,’ generally will not support the exercise of personal

jurisdiction.”); Washington DC Party Shuttle, LLC v. IGuide Tours, 406 S.W.3d

723, 737 (Tex. App.—Houston [14th Dist.] 2013), review denied (Aug. 22, 2014)

(passive website is one “in which the foreign defendant has simply posted

information on a website that can be viewed in other jurisdictions” and noting such

websites do not support the exercise of personal jurisdiction.”) (citation omitted).

31

 5. Gramercy’s Limited Communications with
Appellees Do Not Give Rise to Jurisdiction.

Finally, Appellees contended before the district court that Gramercy is

subject to jurisdiction because it communicated consistently with them and their

representatives in Texas about various matters relating to the Tax Transactions.

See, e.g., CR___(Vannaman Aff. ¶¶ 20-21, 23-24, 26-29, 31-39, 41-47, 49-51). As

a general matter, Appellees’ jurisdictional arguments concerning Gramercy’s

purported role in preparing their tax returns, attendance at meetings in Texas, and

performing under the parties’ agreements are without merit for reasons addressed

in §§ I-A, I-B, and I-D, supra. Beyond that, the communications Appellees allege

are insufficient to confer jurisdiction because they are limited to the following:

 Gramercy sent two faxes to Texas, one concerning an interest
purchase agreement and another transmitting a tax return extension.
CR___(Vannaman Aff. ¶¶ 32, 39).

 Gramercy sent ten emails to Texas containing draft transaction
documents and the routine management of various out-of-state
companies. CR___(Vannaman Aff. ¶¶ 43, 45, 50).

 Gramercy participated in two phone calls with Appellees’ advisor
concerning transactions implementing their tax strategy.
CR___(Vannaman Aff. ¶ 32).

In sum, Appellees point only to two faxes, ten emails, and two phone calls in

five years to support their “consistent communications” argument, and even those

limited communications concerned work performed by Gramercy (or others)

32

outside of Texas.17 Such communications do not give rise to jurisdiction. See KC

Smash, 384 S.W.3d at 393 (nonresident defendant’s “telephone and email

communications and the sending of payments to [forum resident] do not

“constitute a contact demonstrating purposeful availment”); Olympia Capital

Associates, L.P. 247 S.W.3d at 418 (“[E]ngaging in communications related to the

execution and performance of [a] contract [between nonresident defendant and

forum resident] are insufficient to establish the minimum contacts necessary to

support the exercise of specific personal jurisdiction over the nonresident

defendant.”); Proskauer, 2009 WL 242993, at *4 (mailing documents to Texas

client and email exchanges with Texas client insufficient to give rise to

jurisdiction).

E. Gramercy’s Work on Behalf of Other Texas Clients is
Irrelevant.
Appellees argued that Gramercy’s involvement with other Texas clients

confers jurisdiction, but that argument is unavailing. As noted above, Appellees do

not allege that Gramercy is subject to general jurisdiction. See Facts § VI, supra.

17
Appellees also alleged vaguely that their accountant, Vannaman, received
“hundreds of mailings from Gramercy.” CR___(Vannaman Aff. ¶ 46). To the
extent such mailings have not been included in the record, this assertion is
conclusory and meaningless. Beyond that, it is impossible to determine whether
the subject matter of the purported communications relates in any way to
Appellees’ claims such that the district court can exercise specific jurisdiction over
Gramercy. Indeed, by Vannaman’s own admission, many of the purported
mailings concerned Appellees’ Fund Investments (which are concededly not at
issue in this case).

33

Accordingly, the only contacts between Gramercy and Texas potentially relevant

to resolution of Gramercy’s Special Appearance are those that relate to the instant

lawsuit. See Grand Aerie Fraternal Order of Eagles v. Haygood, 402 S.W.3d 766,

774 (Tex. App.—Eastland 2013, no pet.) (holding defendant not subject to specific

jurisdiction and stating that “[i]n a specific jurisdiction analysis, the relevant facts

concern the relationship between the nonresident defendant and the forum that are

connected to the lawsuit.”); McElroy Machine & Mfg. Co., Inc. v. Flores, 13-08-

00528-CV, 2010 WL 466901, at *4 (Tex. App.—Corpus Christi Feb. 11, 2010, no

pet.) (specific jurisdiction lacking where defendants’ contacts with the forum state

not connected to operative facts of the litigation). The Fifth Amended Petition

contains no allegations that Gramercy’s work for Texas investors unrelated to

Appellees somehow gave rise to Appellees’ causes of action, and accordingly any

such work is irrelevant.

II. THE EXERCISE OF JURISDICTION OVER GRAMERCY WOULD
BE INCONSISTENT WITH DUE PROCESS.
Exercising personal jurisdiction over Gramercy would offend traditional

notions of fair play and substantial justice and would be inconsistent with the

constitutional requirements of due process. The following five factors should be

considered in evaluating whether the exercise of personal jurisdiction over

Gramercy would comport with due process: (1) the burden on Gramercy; (2) the

interest of Texas in adjudicating this dispute; (3) Appellees’ interest in obtaining

34

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 the fundamental social policies. See Guardian

Royal Exch. Assurance Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 231

(Tex. 1991).

The Guardian factors point towards dismissal of this action against

Gramercy. Gramercy has no business presence in Texas and is headquartered in

Connecticut. CR___(Lanava Aff. ¶¶ 3, 7). Forcing Gramercy to litigate in Texas

would obviously burden it. Gramercy’s operations are and have been based in the

Northeast where its employees reside and where all of its files are kept.

CR___(Lanava Aff. ¶ 6). Moreover, while some Appellees reside in Texas,

Gramercy could not have been expected to believe that work it performed in New

York or Connecticut would somehow subject it to personal jurisdiction in Texas.

The first Guardian factor therefore weighs in favor of dismissal.

The third factor is virtually irrelevant because approximately half of the

Appellees are Delaware entities. CR___(FAP at 4-5) (stating that Appellees L-

Falling Creek LLC, R-RAC Wimbledon LLC, J-Jason LLC, R-Russell Wimbledon

LLC, R-Ashley Wimbledon LLC, R-Audrey Wimbledon LLC, and LMC Recovery

Fund LLC are Delaware entities). And none of Appellants are present in Texas.

35

 The second and fourth factors also do not warrant the exercise of

jurisdiction. As described above, Appellees’ claims against Gramercy are focused

on Gramercy’s work in New York or Connecticut. Additionally, the contracts at

issue have New York choice of law clauses. Accordingly, not only does New

York have a greater interest than Texas in adjudicating this dispute as the location

of the alleged wrongful conduct, but also New York courts are better situated to

apply New York law. A New York forum would therefore better serve the interest

of providing the most efficient resolution of the instant dispute.

As this is a commercial dispute between sophisticated parties, the fifth factor

is not implicated. Thus, the first, second, and fourth factors weigh in favor of

dismissal while the third and fifth factors are neutral, establishing that the exercise

of personal jurisdiction over Gramercy would be inconsistent with due process.

See, e.g., Kaufman et al. v. BDO Seidman L.L.P. et al., No. 12 L 13292, Illinois

Circuit Court, Cook County, Opinion dated Nov. 26, 2014 (unpublished), App. D

at 7 (finding exercise of personal jurisdiction over Gramercy would offend

traditional notions of fair play and substantial justice on facts similar to those

present here); Coe et al. v. BDO Seidman, L.L.P., et al., No. 12 L 13691, Illinois

Circuit Court, Cook County, Opinion dated Nov. 26, 2014 (unpublished), App. C

at 7 (same).

36

 PRAYER
For the foregoing reasons, Gramercy respectfully requests that the trial

court’s order denying Gramercy’s Amended Special Appearance be reversed, and

that this Court grant such other and further relief as it deems just and proper.

Dated: February 2, 2015
Respectfully submitted,
MUNSCH HARDT KOPF & HARR, P.C.

By:__/s/ David C. Mattka______________
David C. Mattka (TSB No. 13231500)
MUNSCH HARDT KOPF & HARR, P.C.
401 Congress Avenue, Suite 3050
Austin, Texas 78701
(512) 391-6100 (telephone)
(512) 391-6149 (facsimile)
Email: dmattka@munsch.com

Lead Counsel for Defendants-Appellants

Additional Counsel:

Sean F. O’Shea (pro hac vice)
Michael E. Petrella (pro hac vice)
Daniel M. Hibshoosh (pro hac vice)
O’Shea Partners LLP
521 Fifth Avenue, 25th Floor
New York, New York 10175
(212) 682-4426 (telephone)
(212) 682-4437 (facsimile)
Email: soshea@osheapartners.com
Email: mpetrella@osheapartners.com
Email: dhibshoosh@osheapartners.com

37

 CERTIFICATE OF COMPLIANCE

Pmsuant to Texas Rule of Appellate Procedure 9.4, I certify that the

foregoing brief of Defendants-Appellants was prepared using Microsoft Word and,

according to the reckoning of that software program, contains 8,6 13 words.

Daniel M. Hibshoosh (pro hac vice)

38
 CERTIFICATE OF SERVICE

As required by Texas rule of Appellate Procedure 6.3 and 9.5, I hereby
certify that on February 2, 2015, I served this document via e-filing and e-mail on
the following:

W. Ralph Canada, Jr.
ralphc@lfdlaw.com
David R. Deary
davidd@lfdlaw.com
Wilson Wray
wilsonw@lfdlaw.com
Tyler Simpson
tylers@lfdlaw.com
Loewinsohn Flegel Deary, LLP
12377 Merit Drive, Suite 900
Dallas, Texas 75251
Attorneys for Appellees

/s/ David C. Mattka
David C. Mattka