IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 98-11141
WIEN AIR ALASKA, INC.
Plaintiff-Appellant
versus
GERALD I. BRANDT
Defendant-Appellee
Appeal from the United States District Court
For the Northern District of Texas
November 5, 1999
Before REAVLEY, HIGGINBOTHAM, and DENNIS, Circuit Judges.
HIGGINBOTHAM, Circuit Judge:
In this diversity case, we consider whether a foreign
defendant’s contacts with Texas are sufficient to confer personal
jurisdiction under the Due Process Clause. Because we find
sufficient minimum contacts exist and the assertion of jurisdiction
would not be unfair or unreasonable, we REVERSE the district
court’s dismissal and REMAND for further proceedings consistent
with this opinion.
I.
Wien Air Alaska, Inc. (Wien Air) is an Alaskan corporation
based in Texas, whose sole shareholder is Thor Tjontveit. Gerald I.
Brandt is a citizen of the Federal Republic of Germany who provided
his services as an attorney for Wien Air from approximately August
1989 to April 1991. Brandt originally visited Texas in 1989 to
help Tjontveit acquire Wien Air, then conducted most of his
business with Wien Air through foreign meetings, correspondence and
communications to Texas, and a final set of meetings in Texas in
April 1991.
Wien Air was in the business of leasing U.S. aircraft and
planned to expand into Eastern Europe. Brandt helped Wien Air
develop this plan. On September 29, 1990, Wien Air authorized
Brandt to form two German companies to maintain airport facilities
in Germany. Late that year, Wien Air learned that Brandt’s law
partner, Hubertus Kestler, represented another airline company, GAC
Trans-Air Carrier Lease GmbH Flugzeugleasing (GAC) and its sole
shareholder Stephan Grzimek. Kestler was developing a plan for GAC
that competed with Wien Air’s plans.
Brandt told Wien Air that he represented only Wien Air’s
interests and suggested that Wien Air might be able to purchase GAC
because of GAC’s financial problems, provided Wien Air sold GAC
some airplanes first. Tjontveit proposed to buy GAC and Brandt
told Tjontveit on January 3, 1991 that GAC would accept Tjontveit’s
offer if Tjontveit would pay $1.3 million earnest money to Brandt,
toward the full price of 5 million deutsche marks (DM). Acceptances
of this offer were exchanged during February and March 1991.
At the same time, Brandt arranged for Wien Air to purchase a
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25% stake in Flugservice Berlin (FSB), a company owned by the
former East German Airlines. On February 25, 1991, in Germany, a
document was prepared, signed, and notarized, which supposedly
created a new company, Neue Flugservice und Development Berlin GmbH
(NFSB), as a holding company for the FSB purchase. Stock in NFSB
was never turned over to Wien Air. Only in October of 1993 was it
discovered by Ms. Long, an employee of Wien Air, that Brandt owned
the FSB stock himself and had acquired the interest March 1, 1991.
Tjontveit met Brandt in Germany on March 11, 1991 to close
Wien Air’s purchase of GAC and Wien Air’s sale of aircraft to GAC,
but GAC stock was not delivered and the transaction did not close.
Brandt’s law partner Kestler, however, allegedly withdrew DM 5
million from Wien Air’s bank in Germany that day without
Tjontveit’s knowledge or permission, using a power of attorney
given to Kestler by Wien Air at Brandt’s request.
Brandt prepared a new document, confirming the GAC deal,
signed by GAC, notarized by Ms. Long, which set a new closing date
for the sale: March 26, 1991. Later, Brandt would tell Wien Air
that this document was unenforceable under German law because it
was not notarized by a German notary. At that time, Brandt told
Tjontveit to go to Iceland on March 25, 1991 to close the GAC
transaction. Tjontveit went there, but neither Brandt nor GAC
appeared. Brandt called and said closing would occur instead in
mid-April 1991. On March 28, 1991 and April 2, 1991, Brandt wrote
Tjontveit in Texas promising that all transactions would be
completed as intended.
3
On April 6, 1991, Tjontveit terminated Brandt’s services for
himself and Wien Air, and on April 10, 1991, Tjontveit told Brandt
that Wien Air had retained another lawyer as counsel and warned
Brandt not to transfer or vote shares of FSB. Tjontveit then asked
Brandt to return Wien Air’s power of attorney and to take no
further actions until instructed. Tjontveit stated, however, that
he was not terminating Brandt as an attorney, but wanted to
continue the relation once the GAC situation was resolved.
The GAC deal did not close on April 15, 1991. The next day,
Brandt called Tjontveit in Texas to again promise that the GAC deal
would close. Brandt said he would come to Texas to close all
outstanding matters on April 21 and 22, 1991.
Meetings in Texas on April 21 and 22 occurred with both Brandt
and Tjontveit present. At these meetings, Brandt stated the
following: (1) Brandt would complete the German registration
process for the two Wien Air subsidiaries; (2) FSB stock belonged
to Wien Air, but Brandt held it in trust for Wien Air; (3) Brandt
would return all of Wien Air’s documents and all valuable personal
property of Tjontveit; (4) Brandt would go back to Germany and
determine the status of FSB and report back to Wien Air; and (5)
Brandt was still acting as Wien Air’s attorney.
Brandt did not disclose that he had appropriated the interest
in FSB to himself or explain what had happened to the DM 5 million
Kestler had taken. Brandt then demanded DM 1.3 million for past
services. Wien Air agreed to pay this based on the above promises
and representations, signing a document in German allowing Brandt
4
to withdraw the money from a Wien Air account in Germany.
Finally, on May 9, 1991, in New York, Brandt announced the GAC
deal would not close and GAC stock would not be delivered. He
explained that the document evidencing that deal was not binding
because it had not been notarized by a German notary. Brandt said
he did not represent Wien Air or Tjontveit, but only represented
GAC.
Wien Air brought suit in Texas state court alleging fraud,
fraudulent inducement, and breach of contract and fiduciary duties.
The case was removed to federal court. Brandt sought dismissal
asserting lack of personal jurisdiction and forum non conveniens.
The district court did not hold an evidentiary hearing but based
its decisions on the affidavits and pleadings of the parties. The
court granted dismissal, holding that Wien Air was unable to make
a prima facie showing that the defendant had the necessary minimum
contacts with Texas to support specific jurisdiction. We REVERSE
the dismissal because we find that the defendant’s contacts with
Texas suffice to show the requisite minimum contacts and that the
assertion would not be unfair or unreasonable. The issue of forum
non conveniens was not raised on appeal and we do not consider it.
II.
Wien Air seeks to establish jurisdiction over Brandt under the
Texas long arm statute, which Texas construes to extend to the
limits of due process. See Schlobohm v. Schapiro, 784 SW.2d 355,
5
357 (Tex. 1990); Wilson v. Belin, 20 F.3d 644, 647 (5th Cir. 1994).
Obtaining personal jurisdiction over a non-resident of a state is
constitutionally permissible if the nonresident “purposefully
availed himself of the benefits and protections” of Texas by
establishing “minimum contacts” with Texas such that the defendant
could “reasonably anticipate[] being haled into court in the forum
state” and the exercise of jurisdiction does not offend
“traditional notions of fair play and substantial justice.” Holt
Oil & Gas Corp. v. Harvey, 801 F.2d 773, 777 (5th Cir. 1987);
Wilson, 20 F.3d at 647.
At issue is whether Brandt’s contacts with Texas are
sufficient to support an assertion of personal jurisdiction.
Because the district court did not hold an evidentiary hearing on
the issue of jurisdiction, Wien Air need only establish a prima
facie case. See Wilson, 20 F.3d at 648. Where the facts are not
in dispute, the review of the district court’s determination of
personal jurisdiction is de novo. Id. at 647-48. Where facts are
disputed, the plaintiff presenting a prima facie case is entitled
to have the conflicts resolved in his favor. See Bullion v.
Gillespie, 895 F.2d 213, 216-17 (5th Cir. 1990); Felch v.
Transportes Lar-Mex SA De CV, 92 F.3d 320, 327 (5th Cir. 1996).
The district court concluded that while Brandt “had contact with
Wien Air in Texas on several occasions, those contacts related to
and developed out of an ongoing relationship between the parties
established in Germany and do not establish that Brandt
purposefully availed himself of the benefits and protections of
6
Texas law.” Even if the parties formed their relationship in
Germany, however, a single act by Brandt directed toward Texas that
gives rise to a cause of action by Wien Air can support a finding
of minimum contacts. See Calder v. Jones, 465 U.S. 783 (1984);
Ruston Gas Turbines, Inc. v. Donaldson Co., 9 F.3d 415, 419 (5th
Cir. 1993).
In Calder minimum contacts were found when a journalist wrote
a defamatory article in Florida which he knew would affect the
plaintiff’s reputation in California. The Court specifically found
that the defendant had “expressly aimed” the tort at California.
Id. at 789. The defendants in Calder analogized themselves to a
welder who works on a boiler in Florida which later explodes in
California. The defendants argued that jurisdiction over the
welder would not be proper (even if allowable over the
manufacturer) because the welder did not control where the
manufacturer sold the boiler and the welder “derive[d] no direct
benefit” from such distant sales. Id. The Court rejected this
analogy based on the fact that the defendants were charged with
intentional, tortious conduct directed toward the forum state. In
those circumstances, the defendants must “‘reasonably anticipate
being haled into court there’ to answer for the truth of the
statements made in their article.” Id. at 790, 789-90.
This test applies outside the context of defamation, see
Allred v. Peterson, 117 F.3d 278, 286-287 (5th Cir. 1997), although
it has been remarked that the effects of defamation are more
obviously felt in a foreign forum than the effects of other
7
intentional torts. Id. at 287 (citing Wallace v. Herron, 778 F.2d
391, 395 (7th Cir. 1985)). The foreseeable effects of a tort “are
to be assessed as part of the analysis of the defendant’s relevant
contacts with the forum.” Id. (quoting Wallace, 778 F.2d at 395
(emphasis added)). Foreseeable injury alone is not sufficient to
confer specific jurisdiction, absent the direction of specific acts
toward the forum. See, e.g., Jobe v. ATR Marketing, Inc., 87 F.3d
751, 753-54 (5th Cir. 1996); Southmark Corp. v. Life Investors,
Inc., 851 F.2d 763 (5th Cir. 1988).
According to the plaintiff’s allegations, however, Brandt
performed several tortious actions outside of Texas directed
towards Wien Air in Texas. These actions had foreseeable effects
in the forum and were directed at the forum. These contacts take
the form of letters, faxes, and phone calls to Texas by Brandt
whose contents contained fraudulent misrepresentations and promises
and whose contents failed to disclose material information.
For example, Wien Air provides a sworn affidavit from its
employee Ms. Long stating that numerous calls, letters and faxes
were made by Brandt to Wien Air in Texas, and she avers that these
calls contained the promises, assurances, and representations that
are at the heart of the lawsuit. In her words, “Mr. Brandt told me
by phone to Texas that the delivery of the GAC stock would occur on
March 11, 1991.” She also stated that
[t]here were several times between late 1990 and late
1991 when Mr. Brandt called me either at my home in Texas
or at the office in Texas, regarding these transactions.
He called many times between late February, 1991 through
April, 1991 and reassured me that a deal had been
consummated, that the GAC would be delivered to Wien Air,
8
and that the aircraft purchases would all close.
Brandt also performed services through these communications.
For example, Long states that Brandt sent by fax a copy of a Notary
Act he prepared, notarized by Kestler, which supposedly
“constituted acceptance of an offer Mr. Tjontveit had made to buy
100 percent of the GAC stock from Mr. Grzimek” according to Brandt.
Another example provided by Wien Air is a letter sent from
Brandt to Texas, dated April 2, 1991, in which Brandt states, with
respect to the GAC deal: “You know, I’m always helping you where I
can. Also in this special matter, we will find a solution, which
will satisfy you. This I promised you.” In another letter to
Texas, dated March 28, 1991, Brandt states: “Mr. Grzimek couldn’t
reach you by phone and so he beg[g]ed me to confirm, that all
pending contracts between you and Wien Air Alaska and him and GAC
are valid and will be fulfil[l]ed by him and GAC, when both parties
fulfil[l] their obligations.”
Brandt disputes the number and content of the communications
between Brandt and Wien Air in Texas. Brandt claims, for example,
that there were few or no calls, and even if there were any, there
is no evidence that their content related to or gave rise to any
cause of action. At this stage, however, any conflict between the
plaintiff and defendant with respect to the content and existence
of these communications must be construed in favor of Wien Air. As
such, the prima facie evidence indicates that Brandt directed
affirmative misrepresentations and omissions to the plaintiff in
Texas.
9
The defendant argues that communications directed into a forum
standing alone are insufficient to support a finding of minimum
contacts. See, e.g., Holt Oil & Gas Corp. v. Harvey, 801 F.2d 773,
778 (5th Cir. 1987); Patterson v. Dietz, Inc., 764 F.2d 1145, 1147
(5th Cir. 1985); Nationwide Mutual Ins. v. Tryg International Ins.,
91 F.3d 790, 796 (6th Cir. 1996); Reynolds v. International Amateur
Athletic Fed., 23 F.3d 1110, 1116 (6th Cir. 1994); FDIC v. Malmo,
939 F.2d 535 (8th Cir. 1991); Austad Co. v. Pennie & Edmonds, 823
F.2d 223 (8th Cir. 1987). Cf. Allred v. Moore & Peterson, 117 F.3d
278 (5th Cir. 1997) (service of process on plaintiff in forum
insufficient to support personal jurisdiction in abuse of
prosecution claim).
In all of these cases, however, the communications with the
forum did not actually give rise to a cause of action. Instead,
the communications merely solicited business from the forum,
negotiated a contract, formed an initial attorney-client
relationship, or involved services not alleged to form the basis of
the complaint. These cases are thus distinguishable from the
present case. When the actual content of communications with a
forum gives rise to intentional tort causes of action, this alone
constitutes purposeful availment. The defendant is purposefully
availing himself of “the privilege of causing a consequence” in
Texas. Cf. Serras v. First Tennessee Bank National Ass’n., 875
F.2d 1212 (6th Cir. 1989). It is of no use to say that the
plaintiff “fortuitously” resided in Texas. See Holt Oil, 801 F.2d
at 778. If this argument were valid in the tort context, the
10
defendant could mail a bomb to a person in Texas but claim Texas
had no jurisdiction because it was fortuitous that the victim’s zip
code was in Texas. It may have been fortuitous, but the tortious
nature of the directed activity constitutes purposeful availment.
Of course, when a lawyer chooses to represent a client in
another forum, that in itself does not confer personal jurisdiction
if the claim does not arise from the lawyer’s contacts with the
forum. See Austad, 823 F.2d at 226. However, when the claim
arises from a breach of fiduciary duty based on a failure to
disclose material information, the fact that the lawyer continually
communicated with the forum while steadfastly failing to disclose
material information shows the purposeful direction of material
omissions to the forum state. Cf. Diamond Mortgage Corp. v. Sugar,
913 F.2d 1233 (7th Cir. 1990). In Diamond Mortgage, attorneys
failed to disclose conflicts of interests at the time in which they
rendered some of their services within the state of Illinois, which
the Seventh Circuit found sufficient for “arising under”
jurisdiction under a state long-arm statute. Id. at 1245-46. The
court also found the assertion of jurisdiction was constitutional
under the Due Process Clause. See id. at 1247. The services were
performed not only by visits to the forum, but also by letters and
phone calls. Furthermore, the court noted that “the precise number
of physical visits to Illinois . . . may be irrelevant,” because
“‘it is an inescapable fact of modern commercial life that a
substantial amount of business is transacted solely by mail and
wire communications across state lines, thus obviating the need for
11
physical presence within a State in which business is conducted.’”
Id. (quoting Burger King, 471 U.S. at 476) (emphasis added). Cf.
Serras, 875 F.2d at 1218 (rejecting in dictum as “feeble” the
defendant’s argument that “if it had a duty to disclose . . . ,
that duty could have been performed anywhere so that any failure to
perform shouldn’t be held to establish a Michigan contact,” at
least when the plaintiff had also alleged affirmative acts of
misrepresentation in Michigan).
In addition to the communications Brandt directed into Texas
from outside of Texas, Brandt also visited Texas during 1989 at
which time he allegedly gained from Tjontveit the confidential
information he would later use against Wien Air. He also met with
Wien Air during April of 1991. During the April meeting, Brandt
allegedly made misrepresentations regarding his continuing legal
representation of Wien Air. Brandt, however, claims he was no
longer Wien Air’s attorney during this time period (and thus under
no duties) because his services as company attorney were terminated
on April 6, 1991, as pleaded in Wien Air’s complaint.
Even if Brandt’s services were terminated on April 6, 1991,
the evidence shows that on April 10, Tjontveit stated that he was
not halting Brandt’s services except with respect to the GAC
dispute. His letter to Brandt dated April 10 reads: “I want to
make it clear that I am not discharging you as my attorney and I
wish to continue our relationship as attorney and client.” It
continues to say “[i]f we can settle the GAC dispute
satisfactor[il]y to both of us it is my wish that I can revoke this
12
letter and we can reestablish our relationship as we did before
this dispute arose.”
Furthermore, at the April 22, 1991 meeting, Brandt demanded
payment for past legal services for dates up to and including the
meeting dates, indicating a continuing attorney relationship with
Wien Air. Brandt also allegedly promised that he was still
functioning as Wien Air’s attorney at that meeting in Texas and
also promised to complete legal work for Wien Air that he
supposedly had already started. This also indicates that an
attorney client relationship continued to exist.
An attorney-client relationship can be limited without
canceling it, and even a terminated relationship can be resumed.
Construing the facts most favorably to the plaintiff, this is what
appears to have occurred. Furthermore, by virtue of his alleged
misrepresentations, Brandt induced the plaintiff to sign a document
allowing Brandt to withdraw nearly $1 million from a trust account
in Germany. Brandt also failed to disclose information regarding
the GAC deal, insofar as Brandt allegedly no longer represented
Wien Air’s interests.
According to the evidence, Wien Air relied to its detriment on
such misrepresentations and omissions when it authorized Brandt to
take even more of Wien Air’s money with the hope that finally the
GAC deal would close. Brandt claims that no material fraud or
misrepresentations could have occurred at the April, 1991 meetings
in Texas because all relevant contracts had already been entered
into. Thus, none of his representations could have been relied
13
upon in relation to the contracts, since they already were formed.
This does little to combat the claims of breach of contract
with respect to fiduciary duty, however. Furthermore, the evidence
shows that the GAC deal had not closed as of April 22, 1991. Given
Brandt’s assertion that the GAC contract was invalid, it does not
behoove him to argue that it was already entered into. Construing
the situation most favorably to the plaintiff, the parties appeared
to have been continually modifying a deal whose terms had yet to
become final until the April meetings. The fact that the
defendant’s partner may have already converted the entire purchase
price of DM 5 million does not mean that Wien Air did not
detrimentally rely on the defendant’s representations in Texas in
April: Wien Air authorized Brandt to receive an additional DM 1.3
million in order to close the GAC deal. Then, during the next
month, Wien Air went to New York in hopes of closing this deal,
only to be thwarted again. All of this shows detrimental
reliance.
This case is most similar to Carteret Savings Bank, F.A. v.
Shushan, 954 F.2d 141 (3rd Cir. 1992). Carteret Savings concerned
misrepresentation and breach of fiduciary duty claims. Minimum
contacts were found when the defendant directed letters and phone
calls to the forum and then went to the forum for a final meeting
in which he failed to advise his client of material facts regarding
conflicts of interest. Id. at 149. Similar to the present case,
the meeting in Carteret Savings was a meeting regarding a business
transaction prior to the closing of the deal. Id. at 146, 149.
14
Not only did the court in Carteret Savings find minimum contacts,
but the court also found it insignificant that the defendant might
have come to the forum at the request of the plaintiff or that the
defendant might not have initially solicited the plaintiff’s
business. Id. 150. We likewise find irrelevant such allegations
by the defendant. For all of these reasons, we find that Wien Air
has established a prima facie case of minimum contacts over Brandt
with respect to its claims for fraud, fraudulent inducement, breach
of contract and breach of fiduciary duty.
Once a plaintiff has established minimum contacts, the burden
shifts to the defendant to show the assertion of jurisdiction would
be unfair. See Akro Corp. v. Luker, 45 F.3d 1541, 1547 (Fed. Cir.
1995). To show that an exercise of jurisdiction is unreasonable
once minimum contacts are established, the defendant must make a
“compelling case” against it. Burger King Corp v. Rudzewicz, 471
U.S. 462, 477 (1985). It is rare to say the assertion is unfair
after minimum contacts have been shown. Akro, 45 F.3d at 1549.
The standards to be used are the “traditional notions of fair play
and substantial justice.” Felch, 92 F.3d at 323 (quoting Wilson 20
F.3d at 647; Asahi Metal Indus. Co. v. Superior Court, 480 U.S.
102, 113 (1987)). The interests to balance in this determination
are the burden on the defendant having to litigate in the forum;
the forum state’s interests in the lawsuit; the plaintiff’s
interests in convenient and effective relief; the judicial system’s
interest in efficient resolution of controversies; and the state’s
shared interest in furthering fundamental social policies. See
15
Ruston Gas Turbines, Inc. v. Donaldson Company, Inc., 9 F.3d 415,
421 (5th Cir. 1993).
If a cause of action for fraud committed against a resident of
the forum is directly related to the tortious activities that give
rise to personal jurisdiction, an exercise of jurisdiction likely
comports with the due process clause, given the obvious interests
of the plaintiff and the forum state. See, e.g., D.J. Investments,
Inc. v. Metzeler Motorcycle Tire Agent Gregg, Inc., 754 F.2d 542,
548 (5th Cir. 1985).
Brandt claims the assertion would be unfair and unreasonable
because he is a German citizen, most of the witnesses are in
Germany, the courts in the U.S. would not be able to subpoena the
German witnesses, German law applies to all of the issues, the
judicial system’s interest in efficiency would dictate Germany
should resolve this dispute, and Texas has no interest in the case.
Wien Air’s prima facie evidence disputes many of these assertions,
especially the issue of where most of the witnesses reside and
whether they would be available to testify.
Admittedly, litigation in the U.S. would place a burden on the
defendant. However, once minimum contacts are established, the
interests of the forum and the plaintiff justify even large burdens
on the defendant. See Asahi, 480 U.S. at 115. Moreover, Texas
clearly has an interest because the dispute involves a corporation
whose principal place of business is in Texas, and the corporation
allegedly was defrauded. This distinguishes Asahi, in which no
California parties remained in the lawsuit by the time the issue of
16
personal jurisdiction in California arose. See id. at 114.
Resolving the conflicts in a light most favorable to the
plaintiff, we find no overwhelming burden to the defendant that
outweighs the legitimate interests of the plaintiff and the forum
state. At most Brandt demonstrates an inconvenience which would be
equally felt by forcing the plaintiff to litigate in Germany. For
all of these reasons, we hold that the assertion of jurisdiction
over the defendant is fair and reasonable.
REVERSED and REMANDED.
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Wien Air Alaska, Inc. v. Brandt
Court: Court of Appeals for the Fifth Circuit
Date filed: 1999-11-05
Citations: 195 F.3d 208
Copy CitationsCombined Opinion