Watamar Holdings SA v. SFM Holdings, S.A., Solly Lawi, & Albert Lawi ( 2019 )

Affirmed and Opinion filed August 1, 2019.
In The
Fourteenth Court of Appeals
NO. 14-17-00850-CV
WATAMAR HOLDING S.A., Appellant
V.
SFM HOLDINGS, S.A., SOLLY LAWI, & ALBERT LAWI, Appellees
On Appeal from the 129th District Court
Harris County, Texas
Trial Court Cause No. 2015-30636
OPINION
This is an interlocutory appeal 1 from an order sustaining nonresident
defendants SFM Holdings, S.A. (“SFM”), Solly Lawi, and Albert Lawi’s
(collectively “nonresident defendants”) objections to jurisdiction and special
appearances and dismissing nonresident defendants for want of jurisdiction. In its
1
See Tex. Civ. Prac. & Rem. Code § 51.014(a)(7) (authorizing appeal from interlocutory
order that “grants or denies the special appearance of a defendant under Rule 120a, Texas Rules
of Civil Procedure[.]”).
sole issue on appeal, appellant Watamar Holding, S.A. (“Watamar”) contends that
the trial court erred in granting the special appearances and in sustaining objections
to an exhibit Watamar submitted in response to the special appearances. We
affirm.
I. Background
Watamar is a company incorporated under the laws of the Republic of
Panama. In 1981, Watamar acquired a 10% interest in the Mirelis group of
companies (known as the “Mirelis Group”) which included Société Financierè
Mirelis, S.A. (founded in 1949 in Geneva, Switzerland) which is presently SFM
Holdings, S.A., (a Swiss company), and Mirelis Investments, Ltd. (established in
1957 in Montreal, Canada) which is presently Mirelis Investment Properties, Inc.
(a Canadian corporation). The Mirelis Group owns numerous real properties and
itself has ownership interests in third party entities that own real properties all over
the world.
None of the appellees are residents of the State of Texas. SFM is organized
under the laws of Switzerland with its principal place of business in Geneva,
Switzerland. Solly Lawi is a Canadian citizen who resides in Geneva. Albert
Lawi is a Canadian citizen who resides in Geneva.
Watamar alleges in its Fourth Amended Petition that around 1997 it decided
to liquidate its ownership interest in the Mirelis Group. As alleged, in 1998,
Watamar entered a contract for the sale of that interest called the “Agreement of
Sale of Financial Interests and Real Estate Call Options” (identified by Watamar as
the “1998 Agreement”). The 1998 Agreement purportedly2 stipulated the sale of
2
Information alleged in Watamar’s Fourth Amended Petition is included for background
purposes. As set forth in greater detail below, the court sustained objections to the use of the
1998 Agreement as an exhibit to Watamar’s response to special exceptions on the grounds that it
it was not properly authenticated as required by Rule 1009 of the Texas Rules of Evidence
2
Watamar’s 10% holding interest in the Mirelis Group covering two elements:
1) the sale of its financial interest held in Mirelis Group Finance companies; and
2) the sale of its interest in Mirelis Group-held participations in real estate
investments (the “Mirelis Group Real Estate Investments”), subject to a buyback or
call option. The 1998 Agreement was signed in Geneva, with a clause choosing
Swiss law, and a clause providing for arbitration in Switzerland, subject to change
of venue only at the discretion of the arbitral tribunal.
A dispute arose regarding the exact value of Watamar’s 10% interest in the
Mirelis Group Real Estate Investments. Watamar exercised its call option in June
2003 and, pursuant to the requirements of the 1998 Agreement, the parties entered
into arbitration in Switzerland in April 2005.3 At the time of the arbitration, only
some of the 29 real properties had been sold. After five years in arbitration, in
2010, Watamar was awarded monetary compensation for 16 properties that had
been sold. In addition, Watamar was awarded a 10% pro rata percentage of
interest in the 13 unsold properties. One of the 13 properties that had not been
sold, the Ashford Willowbrook Property, is located in Houston, Harris County,
Texas, and forms the basis of this lawsuit.
In 2012, the parties entered a second arbitration in Switzerland to resolve
how to transfer the pro rata percentage of the real property interests to Watamar,
because some of the unsold properties were majority-held by third parties, who
would not agree to transfer the awarded percentages or were not directly owned by
(“Translating a Foreign Language Document”).
3
Although Watamar complains in its reply brief that appellees improperly rely on
information outside the record, including “(a) facts relating to the history and course of
performance of the 1998 Agreement . . . (b) facts relating to earlier arbitrations between the
parties . . . and (c) facts pertaining to the inclusion of the Texas properties in the 1998
Agreement,” Watamar does not dispute the facts. To the extent such facts are included in the
background portion of our opinion, they do not form the basis of our decision.
3
the Mirelis Group (i.e., the Mirelis Group only had an ownership interest in the
third-party entities that owned the real property). In 2014, the arbitrator
determined that Watamar could not obtain a direct interest in those properties if the
third-party owners would not agree to the transfer. Thus, Watamar received
monetary compensation for the estimated value of those real estate interests as
opposed to a direct ownership interest in the real properties. Ashford Willowbrook
Property was a property where the Mirelis Group had ownership in a third-party
entity but did not have a direct ownership in the property. In relation to Ashford
Willowbrook Property, Watamar received $27,640.00 for its previously awarded
2.764% interest in the property.
In May 2015, Watamar filed suit allegedly seeking to obtain accurate
financial information pertaining to its real estate investments in Texas and to
enforce its contractual rights to purchase property located in Harris County, Texas.
In its Fourth Amended Petition, Watamar requested the remedy of specific
performance of contract, constructive trust, and injunctive relief. Watamar
asserted claims for breach of contract, breach of fiduciary duty, unjust enrichment,
an accounting, and money had and received. Watamar alleged the vicarious
liability theories of aiding and abetting breach of fiduciary duty, civil conspiracy to
breach fiduciary duty, joint venture, and piercing the corporate veil. Watamar
requested an award of attorney fees pursuant to Chapter 38 of the Texas Civil
Practice & Remedies Code.
While several defendants conceded jurisdiction, others did not.4 On
February 14, 2016, nonresident defendants SFM, Solly Lawi, and Albert Lawi filed
4
Defendants Ashford Willowbrook, Ashford Development, Mirlaw, First Southern
Charter Joint Venture, and First Southern/Ashford Joint Venture (“general appearance
defendants”) conceded that jurisdiction is appropriate and filed general appearances.
4
special appearances with supporting affidavits. 5 Following the filing of the special
appearance, the parties agreed to postpone any hearing on special appearance
issues until Watamar had an opportunity to conduct discovery on jurisdictional
issues.
After the completion of the jurisdictional discovery, on April 28, 2017, the
nonresident defendants filed a brief in support of their special appearances. In
addition, a notice of oral hearing was filed and the hearing set for May 8, 2017.
The hearing was postponed and subsequently reset for June 12, 2017.
On June 9, 2017, Watamar filed its response to the special appearances by
the nonresident defendants. Attached to Watamar’s response as Exhibit A is,
according to Watamar, an English translation of the “1998 Agreement.” The 1998
Agreement is written in a language other than English. Though the parties do not
specify which language, the record indicates that the 1998 Agreement is written in
French.
On June 12, 2017, the nonresident defendants filed their objection to Exhibit
A of Watamar’s response to the special appearances, pursuant to Rule 1009 of the
Texas Rules of Evidence. The nonresident defendants argued that Exhibit A was
inadmissible because it did not comply with Rule 1009(a), based on Watamar’s
failure to serve a copy of the 1998 Agreement (written in French) and failure to
provide an affidavit from a qualified translator certifying the accuracy of the
translation of the 1998 Agreement submitted by Watamar. On June 12, 2017, a
hearing was conducted on the special appearances and the objection to Exhibit A
was raised during the hearing.
5
Nonresident defendants Eva Lawi, Mireille Zilkha, Olga Levy, Joyce Peress, and
Dianne Turcan also filed special appearances. After jurisdictional discovery, Watamar filed its
fourth amended petition, which did not include these individuals as defendants. They are not
parties to this appeal.
5
On October 6, 2017, the trial court sustained the nonresident defendants’
objection to Exhibit A. Additionally, on October 6, 2017, in an Order Sustaining
Objection to Jurisdiction, the trial court granted the special appearances for the
nonresident defendants SFM, Solly Lawi, and Albert Lawi and dismissed all
claims against them for want of personal jurisdiction.
Watamar timely filed this interlocutory appeal.
II. Special Appearance: standard of review and relevant law
A. Standard of review.
Whether a court has personal jurisdiction over a defendant is a question of
law. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 805–06 (Tex.
2002). The trial court’s decision to grant or deny a special appearance is subject to
de novo review on appeal. Id. at 806. However, the trial court’s factual findings
supporting its ruling on the special appearance may be challenged for legal and
factual sufficiency. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795
(Tex. 2002). When, as here, the trial court did not issue findings of fact, all facts
necessary to support the trial court’s ruling and supported by the evidence are
implied in favor of the trial court’s ruling. Id.
When examining a legal-sufficiency challenge, we review the evidence in
the light most favorable to the challenged finding and indulge every reasonable
inference that would support it. City of Keller v. Wilson, 168 S.W.3d 802, 822
(Tex. 2005). We credit favorable evidence if a reasonable fact finder could, and
disregard contrary evidence unless a reasonable fact finder could not. Id. at 827.
The evidence is legally sufficient if it would enable reasonable and fair-minded
people to reach the verdict under review. Id. The fact finder is the sole judge
of witness credibility and the weight to give their testimony. See id. at 819.
6
In a factual-sufficiency review, we consider and weigh all the evidence, both
supporting and contradicting the finding. Mar. Overseas Corp. v. Ellis, 971
S.W.2d 402, 406–07 (Tex. 1998). We set aside the finding only if it is so contrary
to the overwhelming weight of the evidence as to be clearly wrong and unjust. Id.
at 407. We may not substitute our own judgment for that of the trier of fact or pass
upon the credibility of the witnesses. Id. The amount of evidence necessary to
affirm a judgment is far less than that necessary to reverse a judgment. Yeng v.
Zou, 407 S.W.3d 485, 489 (Tex. App.—Houston [14th Dist.] 2013, no pet.).
B. Special appearance law.
Texas courts may exercise personal jurisdiction over a nonresident if “(1) the
Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the exercise
of jurisdiction is consistent with federal and state constitutional due-process
guarantees.” Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex.
2007). Under the Texas long-arm statute, the plaintiff bears the initial burden of
pleading allegations sufficient to confer jurisdiction. Retamco Operating, Inc. v.
Republic Drilling Co., 278 S.W.3d 333, 337 (Tex. 2009). When the plaintiff meets
this initial burden, the burden shifts to the defendant to negate all potential bases
for personal jurisdiction pleaded by the plaintiff. Id. The Texas long-arm statute
extends Texas courts’ personal jurisdiction as far as the federal constitutional
requirements of due process will permit. Marchand, 83 S.W.3d at 795.
Personal jurisdiction over a nonresident defendant is constitutional when two
conditions are satisfied: (1) the defendant has established minimum contacts with
the forum state; and (2) the exercise of jurisdiction comports with traditional
notions of fair play and substantial justice. Marchand, 83 S.W.3d at 795 (citing
Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). Minimum contacts are
sufficient for personal jurisdiction when the nonresident defendant purposefully
7
avails itself of the privilege of conducting activities within the forum state, thus
invoking the benefits and protections of its laws. Moki Mac, 221 S.W.3d at 575.
There are three factors relevant to a purposeful-availment inquiry: (1) only the
defendant’s contacts with the forum are relevant, not the unilateral activity of
another party or a third person; (2) the contacts relied on must be purposeful rather
than random, fortuitous, or attenuated; and (3) the defendant must seek some
benefit, advantage or profit by “availing” itself of the jurisdiction. Id. This three-
part inquiry assesses the quality and nature of the contacts, not the quantity.
Retamco, 278 S.W.3d at 339. A defendant may purposefully avoid a particular
forum by structuring its transactions in such a way as to neither profit from the
forum’s laws nor subject itself to jurisdiction there. Moki Mac, 221 S.W.3d at 575.
At its core, the purposeful-availment analysis seeks to determine whether a
nonresident’s conduct and connection to a forum are such that it could reasonably
anticipate being haled into court there. Moncrief Oil Int’l Inc. v. OAO Gazprom,
414 S.W.3d 142, 152 (Tex. 2013).
Personal jurisdiction exists if the nonresident defendant’s minimum contacts
give rise to either specific jurisdiction or general jurisdiction.6 Marchand, 83
S.W.3d at 795–96. When specific jurisdiction is alleged, as here, we focus the
minimum-contacts analysis on the relationship among the defendant, the forum,
and the litigation. Moki Mac, 221 S.W.3d at 575–76. Specific jurisdiction is
established if the defendant’s alleged liability arises out of or is related to an
activity conducted within the forum. Id. at 576; Marchand, 83 S.W.3d at 796. For
a nonresident defendant’s forum contacts to support an exercise of specific
jurisdiction, there must be a substantial connection between those contacts and the
operative facts of the litigation. Moki Mac, 221 S.W.3d at 585.
6
Watamar does not seek to establish personal jurisdiction based on general jurisdiction.
8
III. Evidentiary Issues
On appeal, we must determine what evidence the trial court considered in
ruling on the special appearances. See Max Protetch, Inc. v. Herrin, 340 S.W.3d
878, 884 (Tex. App.—Houston [14th Dist.] 2011, no pet.) (“[W]e consider all of
the evidence before the trial court on the question of [personal] jurisdiction.”).
A. Exhibit A to Watamar’s response to the special appearances.7
On June 12, 2017, the nonresident defendants filed their objection to Exhibit
A of Watamar’s response to the special appearances pursuant to Rule 1009 of the
Texas Rules of Evidence, because the exhibit offered was a translation of a
document written in a foreign language. The nonresident defendants argued that
Watamar neither served a copy of the 1998 Agreement (written in French) nor
provided an affidavit from a qualified translator certifying the accuracy of the
translation of the 1998 Agreement submitted by Watamar. Thus, the nonresident
defendants asserted that Exhibit A was not in compliance with Rule 1009(a) and
was therefore inadmissible. As set forth above, the trial court sustained the
nonresident defendants’ objection to Exhibit A.
In its notice of appeal, Watamar challenges the trial court’s order granting
the special appearances “(and, to the extent necessary, the Order of the Court
signed October 6, 2017 sustaining objections to Plaintiff’s Exhibit A submitted in
response to the special appearances).” In its appellate brief, Watamar does not
explicitly challenge the trial court's evidentiary ruling on the nonresident
defendants’ objection to Exhibit A. In its sole appellate issue, Watamar asserts that
the trial court erred in granting the nonresident defendants’ special appearances.
An appellant’s brief must concisely state all issues presented for review. Tex. R.
7
Watamar attached the same document to its Fourth Amended petition.
9
App. P. 38.1(f). The statement of an issue will be treated as covering every
subsidiary question that is fairly included. Id.
The Texas Supreme Court has emphasized that we must construe issues
presented liberally to obtain a just, fair, and equitable adjudication of the rights of
the litigants. Perry v. Cohen, 272 S.W.3d 585, 588 (Tex. 2008). In its brief,
Watamar does not assert that the trial court erred in sustaining the objection to
Exhibit A, nor does Watamar attack the basis for this court’s ruling. Even under a
liberal construction of Watamar’s brief, we conclude that Watamar has not
assigned error as to this ruling of the trial court. See id. (holding that court of
appeals erred by concluding appellant failed to assign error as to special-exceptions
order because, under a reasonable yet liberal construction of appellant’s brief,
appellant challenged this order given that appellant presented argument
challenging the basis of this order, though appellant did not expressly challenge the
order); Emerson v. Emerson, 559 S.W.3d 727, 736 (Tex. App.—Houston [14th
Dist.] 2018, no pet.). Accordingly, we need not and do not address the trial court’s
order sustaining the nonresidents’ objection to the nonresident defendants’ Exhibit
A. See Texas Nat’l Bank v. Karnes, 717 S.W.2d 901, 903 (Tex. 1986) (holding
that “the court of appeals may not reverse a trial court’s judgment in the absence of
properly assigned error”). Consequently, we are precluded from considering
Exhibit A in the analysis of this case.
B. Letter dated March 25, 2013.
In regard to special appearances, Rule 120a(3) of the Texas Rules of Civil
Procedure provides, in pertinent part:
The court shall determine the special appearance on the basis of the
pleadings, any stipulations made by and between the parties, such
affidavits and attachments as may be filed by the parties, the results of
discovery processes, and any oral testimony.
10
Tex. R. Civ. P. 120a(3). Here, the reporter’s record contains two volumes of
sealed exhibits that were made part of the special appearance hearing conducted on
June 12, 2017. The sealed exhibits are deposition excerpts from four individuals.
The clerk’s record and supplemental record also contain pleadings, affidavits, and
briefing by the parties.
In its brief, Watamar references a March 25, 2013, letter by attorney Alain
B. Levy as evidence of personal jurisdiction. Watamar’s brief, however, does not
comply with Texas Rule of Appellate Procedure 38.1(i) requiring that an
appellant’s “brief must contain a clear and concise argument for the contentions
made, with appropriate citations to authorities and to the record.” See Tex. R.
App. P. 38.1(i). Rather, the nonresident defendants attach the letter, together with
an authentication of translation, as an exhibit to their brief. With exceptions not
applicable in this case, the rule is that documents attached to an appellate brief
which are not part of the record may not be considered by the appellate court. See
WorldPeace v. Comm’n for Lawyer Discipline, 183 S.W.3d 451, 465 n.23 (Tex.
App.—Houston [14th Dist.] 2005, pet. denied) (“we cannot consider documents
attached as appendices to briefs and must consider a case based solely upon the
record filed”); cf. Dallas Mkt. Ctr. v. The Swing, Inc., 775 S.W.2d 838, 842 (Tex.
App.—Dallas 1989, no writ) (“At the very most, the exhibits that were tendered to
this Court, absent a showing that they were properly offered into evidence and that
the trial court admitted them into evidence during trial, are loose exhibits, forming
no part of the record proper.”). The appellate record consists of the clerk’s record
and, if necessary to the appeal, the reporter’s record. Tex. R. App. P. 34.1. The
letter was not part of the special-appearance evidence, and therefore is not part of
the trial record on appeal. Nguyen v. Intertex, Inc., 93 S.W.3d 288, 293 (Tex.
11
App.—Houston [14th Dist.] 2002, no pet.). Accordingly, we will not consider any
documents attached to appellees’ brief which are not part of the appellate record.
IV. SFM’s, Solly Lawi’s, and Albert Lawi’s special appearances
Watamar contends the “trial court erred in granting Defendants-Appellees’
SFM Holdings, Albert Lawi and Solly Lawi’s special appearances.” Watamar
relies exclusively on specific jurisdiction. Thus, we focus the minimum contacts
analysis on the “relationship among the defendant, the forum[,] and the litigation.”
Moki Mac, 221 S.W.3d at 575–76. In other words, the nonresident defendants
must have purposely availed themselves of the privilege of conducting activities in
Texas, and Watamar’s cause of action must arise from or relate to those activities.
See DENSP Corp. v. Hall, 396 S.W.3d 681, 690 (Tex. App.—Houston [14th Dist.]
2013, no pet.).
A. The trial court lacks specific jurisdiction over SFM.
Watamar argues it was foreseeable that SFM could be made to litigate in
Texas because nonresident defendant SFM purposefully availed itself of the
privileges of conducting business in Texas. We disagree.
First, Watamar argues that personal jurisdiction can be established over SFM
based on its contacts with Texas vis-à-vis the 1998 Agreement. According to
Watamar, SFM was a signatory and guarantor of the 1998 Agreement. Watamar
argues “the Special Appearance Defendants willingly and purposely entered into a
contract with Watamar (“1998 Agreement”) that expressly relates to Texas
properties, including the Ashford Willowbrook Property that is a subject of this
lawsuit.” However, the nonresident defendants’ objection to the 1998 Agreement
was sustained by the trial court, and the 1998 Agreement was not part of the
special-appearance evidence. This document is not before us on appeal.
12
Watamar’s reliance on this exhibit as the basis for specific jurisdiction is
unavailing.
Next, Watamar maintains that the letter dated March 25, 2013, signed by
Alain B. Levy, external counsel for the nonresident defendants, is evidence that the
nonresident defendants were controlling and directing the Ashford Willowbrook
Property. Watamar claims Levy sent the letter confirming the agreement among
the parties for the sale of the Ashford Willowbrook Property to Watamar. As
explained above, this letter is not part of the record before us. Watamar cannot
rely upon its contents to establish specific jurisdiction.
The record evidence does demonstrate that SFM is a corporation, organized
under the laws of Switzerland, with its principal place of business in Geneva,
Switzerland. SFM operates solely as a holding company, which entails supervising
and receiving information on various investments.
The record further reveals that Albert Lawi testified as the corporate
representative for SFM. He is a manager of SFM as are two other managers.
Albert Lawi is also a 14% shareholder of SFM. The board members of SFM are
Solly Lawi, Solly Alain Lawi, Alain Bruno Levy, and Jouri Lawi (recently
deceased). The record evidence does not demonstrate that any of the managers or
members of the board of directors reside in Texas or the United States.
The record evidence shows that there is no direct or even close connection
between SFM and the Texas properties at issue in this case. SFM owns 100% of
Mirelis Investment Properties, Inc. (“Mirelis Investments”), a Canadian entity.
The president of Mirelis Investments is an individual named Solly Karkoukly, who
is not a party to this lawsuit. Mirelis Investments owns 50% of Mirlaw
Investments, Ltd. (“Mirlaw”), which is also a Canadian entity. The remaining 50
percent of Mirlaw is owned by Mayer Lawee and Alfred Lawee, neither of which
13
have been named in this suit. Mirlaw owns 100% of Ashford Development, Inc.
Ashford Development, Inc. owns Ashford Willowbrook, Inc., a Texas corporation.
Ashford Willowbrook, Inc. entered into a joint venture called First Southern
Charter Joint Venture, in which Ashford Willowbrook, Inc. owns 50 percent. First
Southern Charter Joint Venture owns the Ashford Willowbrook Property in Texas.
It is through this extensive chain of parents and partially-owned subsidiaries that
Watamar seeks to confer Texas jurisdiction over SFM. Albert Lawi, in his
capacity as the corporate representative, testified SFM “has not received any
benefit directly or indirectly from the Ashford Willowbrook USA property . . . .”
Eveline Barone is the bookkeeper for SFM. Barone does not have access to
any subsidiary entity’s bank records. SFM does not have a process by which it
approves transactions by its subsidiaries. Albert Lawi further testified, “[e]ach
[subsidiary] entity is run independently, and they make their own decisions.”
Moreover, the evidence before the trial court demonstrates SFM does not
have any loans from a U.S. entity, and has never received loans from a U.S. bank.
SFM does not have any bank accounts in the United States. The record does not
reveal evidence that SFM ever sought business in Texas, marketed in Texas, or
owned property in Texas. As shown by the record, SFM has never had bank
accounts in Texas, paid taxes in Texas, or received any kind of direct benefit from
the ownership of real estate in Texas. Finally, the record does not contain evidence
that SFM ever entered into a contract with any Texas entity.
In short, the evidence before the trial court reveals that the only connection
from SFM to Texas is through its ownership interest in Mirelis Investment
Properties Inc.— a Canadian entity—that is a part of a corporate ownership chain
that includes at least four other entities down the ladder, one of which has a partial
ownership in the property. The record does not contain evidence of contacts with
14
the State of Texas. The record does not contain evidence that any of Watamar’s
claims substantially relate to contacts of SFM with Texas. Based on the record, the
trial court did not err in holding that SFM did not purposefully avail itself of the
privilege of conducting business in Texas.
B. The trial court lacks specific jurisdiction over Solly Lawi and Albert
Lawi.
1. Solly Lawi.
Watamar argues that Solly Lawi’s “direct contacts with Texas—in
particular, his contacts with Texas stemming from the 1998 Agreement and the
2013 agreement to sell the Ashford Willowbrook Property—render him subject to
the jurisdiction of Texas. According to Watamar, Solly Lawi served as the
“architect of the 1998 Agreement” and signed it as a guarantor. Watamar further
alleges that in 2013 Solly Lawi approved the sale of Ashford Willowbrook “as
evidenced by his testimony that he approved the contents of a letter drafted by
Alain Bruno Levy . . . .” As set forth above, neither the 1998 Agreement nor the
2013 letter were part of the special-appearance evidence, thus, Watamar’s reliance
upon these documents to form the basis for specific jurisdiction over Solly Lawi is
misplaced.
The evidence admitted by the trial court demonstrates that Solly Lawi is a
Canadian citizen who resides in Geneva, Switzerland. Solly Lawi has never had a
U.S. bank account, has never had a beneficial interest in a U.S. bank account, and
has never made any guarantees related to the United States. Additionally, Solly
Lawi has never paid taxes to the United States. No entity controlled by Solly has
ever paid U.S. taxes. Solly Lawi has never come to the United States in his own
personal capacity to conduct business or to purchase real estate. In 1997, he
visited Texas for the bar mitzvah of his cousin’s son but did not conduct any
15
business in Texas during that time. In 1982, he visited his cousin, Mimi Levine, in
Texas, and he visited the Texas Medical Center in Houston for a personal health
issue. He did not conduct any business while he was in Houston. See Searcy v.
Parex Res., Inc., 496 S.W.3d 58, 67 (Tex. 2016) (“The contacts that establish
purposeful availment must be purposeful rather than random, fortuitous, isolated,
or attenuated”).
Solly Lawi is a fourteen percent (14%) shareholder of SFM. Solly Lawi is
also one of the three members of the board of directors of SFM, the other two
members being non-defendants. There is no evidence that Solly has personally
benefitted from any alleged contacts with Texas. He does not own a controlling
percentage of the corporation, he is not the sole board member, and he does not
have a role as an executive of the company.
The record does not contain evidence that any of Watamar’s claims
substantially relate to contacts of Solly Lawi with Texas. Based on the record, the
trial court did not err in holding that Solly Lawi did not purposefully avail himself
of the privilege of conducting business in Texas.
2. Albert Lawi.
Watamar maintains that Albert Lawi has been conducting business in Texas
since 1978, when he traveled to Harris County to evaluate the property at issue in
this case. Watamar contends that Albert Lawi was involved in the formation of the
1998 Agreement, including assembling the list of properties attached to the
agreement. According to Watamar, Albert Lawi approved the March 25, 2013
letter from Levy pertaining to the sale of the property at issue to Watamar. As set
forth above, the 1998 Agreement and the 2013 letter were not part of the special-
appearance evidence and, thus, Watamar’s reliance upon these documents to form
the basis for specific jurisdiction over Albert Lawi is misplaced.
16
The evidence shows that Albert Lawi is a Canadian citizen who resides in
Geneva, Switzerland. Albert Lawi has no ownership interests in the United States.
Albert Lawi has never received any income from U.S. investments, directly or
indirectly. Albert Lawi has never paid taxes to the United States. Albert Lawi has
never personally entered into a contract with a U.S. resident or U.S. entity. He has
never owned a bank account in the United States, never made any guarantees
relating to the United States, and never acted in any capacity on behalf of a U.S.
entity.
Albert Lawi acknowledges that—in 1978—he accompanied Alfred Lawee,
(whose role was to oversee properties and investments of Mirlaw), to visit the
Ashford Willowbrook Property. At that time, Albert Lawi was acting in his
capacity as an employee of Mirelis Investments Limited Canada; he did not have
any business in his individual capacity in evaluating the properties. Additionally,
the visit was long before any claim in this case arose and, therefore cannot form
the nexus to support Watamar’s causes of action now. See Searcy, 496 S.W.3d 67.
Albert Lawi last visited Texas in 2003 for his cousin’s daughter’s bat mitzvah. He
did not visit any Texas property the subject of this suit during his 2003 visit to
Texas.
Moreover, the record reflects that Albert Lawi is a fourteen percent (14%)
shareholder and a manager of SFM. He is also a non-executive member of the
board of directors for Mirelis Investment Properties, Inc., a Canadian corporation.
As a non-executive board member (along with two others) of Mirelis Investments,
Albert Lawi testified that he relies on the management of the company to perform
certain tasks, such as determining the payment of tax liabilities. Albert Lawi
testified that the President of Mirelis Investments is an individual named Solly
Karkoukly, and it is Karkoukly that runs, administers, and makes investment
17
decisions on behalf of Mirelis Investments. Albert Lawi has not reviewed any of
the tax liabilities of Mirlaw Investments, Ltd.—the 50%-owned Canadian
subsidiary of Mirelis Investment Properties, Inc.—and therefore does not know
whether Mirlaw has had any U.S. tax liabilities.
The record does not contain evidence that any of Watamar’s claims
substantially relate to contacts of Albert Lawi with Texas. Based on the record, the
trial court did not err in holding that Albert Lawi did not purposefully avail himself
of the privilege of conducting business in Texas.
C. SFM, Albert Lawi, and Solly Lawi are not subject to personal
jurisdiction under the alter ego doctrine.
Finally, Watamar contends that personal jurisdiction over the nonresident
defendants is appropriate pursuant to an alter ego theory. Watamar contends that
the entities and properties at issue in this case are controlled by a select group of
individuals, namely, Solly Lawi and Albert Lawi, through the ultimate parent
entity, SFM. Thus, Watamar argues that these nonresident defendants are subject
to personal jurisdiction in Harris County—not only through their individual
contacts with Texas, but for the additional reason that the “general appearance
defendants” (i.e., other defendants who have not contested personal jurisdiction)
are mere “alter egos” of the special appearance defendants SFM, Albert Lawi, and
Solly Lawi. Watamar also maintains the trial court’s decision must be “reversed
because the court applied an incorrect standard to Plaintiff’s alter ego theory of
personal jurisdiction.”
1. Application of the alter ego doctrine is necessary to establish
personal jurisdiction over the nonresident defendants.
“Under Texas law, a corporation is presumed to be a separate entity from its
officers and shareholders.” Richard Nugent & CAO, Inc. v. Estate of Ellickson,
543 S.W.3d 243, 267 (Tex. App.—Houston [14th Dist.] 2018, no pet.). The alter
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ego doctrine is one basis upon which a court may pierce the corporate veil and
bring a shareholder within its jurisdiction. Cappuccitti v. Gulf Indus. Prods., Inc.,
222 S.W.3d 468, 481 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (citing BMC
Software, 83 S.W.3d at 798). The Supreme Court of Texas has explained that
when a party seeks to prove one corporation is an alter ego of another, the elements
required to pierce the corporate veil for liability purposes differ from those used for
jurisdictional purposes. PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d
163, 174 (Tex. 2007). Courts use different standards because certain elements
necessary to pierce the corporate veil are irrelevant to assessing jurisdictional
contacts. See id. at 175. “To ‘fuse’ a parent company and its subsidiary for
jurisdictional purposes, the plaintiffs must prove the parent controls the internal
business operations and affairs of the subsidiary.” Id. (quotation omitted). “The
rationale for exercising jurisdiction is that the parent corporation exerts such
domination and control over its subsidiary that they do not in reality constitute
separate and distinct corporate entities but are one and the same corporation for
purposes of jurisdiction.” Id. at 173. This court has used the standard for
jurisdictional veil-piercing of the corporate veil between a parent company and a
subsidiary company to assess jurisdictional veil-piercing between an individual and
a corporation. See Greenfield Energy, Inc. v. Duprey, 252 S.W.3d 721, 731 (Tex.
App.—Houston [14th Dist.] 2008, no pet.).
To determine whether an alter ego relationship exists for jurisdictional
purposes, “courts look to the total dealings of the corporation and the individual,
including the degree to which corporate and individual property have been kept
separate, the amount of financial interest, ownership, and control the individual
maintains over the corporation, and whether the corporation has been used for
personal purposes.” Cappuccitti, 222 S.W.3d at 481. Courts also consider the
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following as evidence of alter ego status: payment of alleged corporate debt with
personal checks or other commingling of funds, representations that the individual
will back the corporation financially, the diversion of corporate profits for personal
use, and inadequate capitalization. Id. at 482. An individual’s status as an officer,
director, or shareholder of an entity, standing alone, is not enough to support an
alter ego finding. Id.; see Zamarron v. Shinko Wire Co., Ltd., 125 S.W.3d 132, 142
(Tex. App.—Houston [14th Dist.] 2003, pet. denied).
Watamar, as the party seeking to pierce the corporate veil for jurisdictional
purposes, had the burden to present evidence demonstrating the alter ego
relationship. PHC-Minden, L.P., 235 S.W.3d at 175; BMC Software, 83 S.W.3d at
798. On appeal, we consider whether based on the special-appearance evidence,
the trial court was entitled to find that Watamar did not put on sufficient proof to
impute the jurisdictional contacts of the other defendants to SFM, Solly Lawi, and
Albert Lawi under the alter ego doctrine. Wormald v. Villarina, 543 S.W.3d 315,
322 (Tex. App.—Houston [14th Dist.] 2017, no pet.).
2. Watamar has not established that SFM, Solly Lawi, and Albert
Lawi are subject to jurisdiction under the alter ego doctrine.
As an initial matter, Watamar contends the trial court erred in applying the
wrong alter ego standard. During the hearing on the nonresident defendants’
special appearances, the trial court mentioned fraud:
MR. GRACIA: And just briefly on the piercing of the corporate
veil, Your Honor, Texas law is well established
now. . . the failure to follow corporate formalities,
even though there is no evidence of it, is not
enough to pierce the corporate veil. There are
plenty --
THE COURT: You have to show fraud.
MR. GARCIA: Excuse me?
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THE COURT: You to have [sic] show fraud.
MR. GARCIA: That’s correct. And --
THE COURT: Fraud has -- fraud has become pretty much the
gold standard.
MR. GARCIA: There is no evidence of fraud here, Your Honor.
Watamar correctly observes that while fraud may be relevant to piercing the
corporate veil for liability purposes, it has no place in assessing contacts to
determine jurisdiction. See PHC-Minden, L.P., 235 S.W.3d at 175. Although the
trial court made a comment regarding fraud, the trial court stopped short of
articulating a ruling. The trial court did not say that it would use fraud as part of
the legal standard in determining the jurisdictional alter-ego allegations, and
further, the trial court made these statements before its ruling. Where, as here, the
trial court did not make findings of fact and conclusions of law, we will infer “all
facts necessary to support the judgment supported by evidence.” Moki Mac, 221
S.W.3d at 574. The trial court’s comments do not show any error, and for the
reasons set forth below, applying the applicable legal standards to the evidence in
this case, the trial court’s decision should be affirmed.
Watamar attempts to subject the nonresident defendants to personal
jurisdiction by asserting Cornerstone as controlling law applicable to the facts of
this case. Cornerstone Healthcare Group Holding, Inc. v. Nautic Mgmt. VI, LP,
493 SW.3d 65 (Tex. 2016). This case, however, is distinguishable from
Cornerstone. In Cornerstone, the nonresident defendants created entities for the
specific purpose of purchasing Texas properties. See id. at 72. Here, the entity
that actually owns the Ashford Willowbrook Property—the First Southern Charter
Joint Venture—was not created by the nonresident defendants. The same is true for
Ashford Willowbrook, Ashford Development, Mirlaw, and Mirelis Investment.
None of these entities was newly created by the nonresident defendants to
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consummate any transaction, much less one regarding the Ashford Willowbrook
Property. Additionally, in contrast to Cornerstone, SFM had no control over the
Ashford Willowbrook Property. The nonresident defendants have no means of
controlling or even influencing the sale or purchase of the Ashford Willowbrook
Property.
Next, in an attempt to pull the nonresident defendants into this case,
Watamar looks to defendants Mirelis Investment and Mirlaw, who have generally
appeared, and attempts to show a pattern of engaging in “sham” corporate
proceedings by emphasizing alleged factors such as overlapping board members,
sharing an address for mail, and sharing an accountant. The relevant question,
however, is whether the parent corporation exerts such domination and control
over its subsidiary that they do not in reality constitute separate and distinct
corporate entities but are one and the same corporation for purposes of jurisdiction.
PHC-Minden, L.P., 235 S.W.3d at 173. If the parent exercises such a degree of
control, the corporate fiction should be disregarded for jurisdictional purposes. Id.
In this case, the evidence fails to demonstrate that the nonresident
defendants control the internal business operations and affairs of the subsidiary
Mirelis Investment or Mirlaw to a greater degree than normally associated with
common ownership and directorship.
The evidence shows that SFM does not have a process by which it approves
transactions by its subsidiaries. As Albert Lawi testified, as the corporate
representative of SFM, “Each [subsidiary] entity is run independently, and they
make their own decisions.” There is no evidence of any overlap between the
members of the boards of directors of SFM and Mirelis Investment. While one of
SFM’s managers, Albert Lawi, is on the board of directors of Mirelis Investment,
he is a non-executive member.
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The nonresident defendants argue that SFM is in Switzerland and does not
share a physical or mailing address with Mirelis Investment or Mirlaw, which are
both located in Canada. Eveline Barone is the bookkeeper for SFM, but Barone
does not work for either Mirelis Investment or Mirlaw. Barone does not have
access to any subsidiary entity’s bank records.
Mirelis Investment is located in Canada. The president of Mirelis
Investment was Solly Karkoukly, who is not a party in this case. It was Karkoukly
that ran the day-to-day operations, administered, and made investment decisions on
behalf of Mirelis Investment. There is no evidence that Karkoukly had any role
with SFM. There is no evidence that Karkoukly has an ownership interest in
Mirlaw.
Additionally, Mirlaw is only 50% owned by Mirelis Investment (the other
50% is held by non-parties) and is located in Canada. Although Mirelis
Investment is in the same building as Mirlaw, the two entities do not share offices.
There is no evidence of any overlap between the members of the boards of
directors of SFM and Mirlaw. SFM is not a direct shareholder in Mirlaw.
Lastly, Watamar contends the 1998 Agreement and the March 25, 2013
Levy letter demonstrate inter-relatedness, control, and disregard of separate
identities. The documents relied upon, the 1998 Agreement and the March 25,
2013 letter, were not part of the special-appearance evidence and, thus, are not
before this court.
The evidence before us does not demonstrate that SFM, Solly Lawi, or
Albert Lawi exerts such domination and control over Mirelis Investment or Mirlaw
that they do not in reality constitute separate and distinct entities but are one and
the same legal person for jurisdictional purposes. PHC-Minden, L.P., 235 S.W.3d
at 173; Wormald, 543 S.W.3d at 322. Instead, the evidence shows that there is
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nothing more than typical corporate parental involvement consistent with its
investor status. See PHC-Minden, L.P., 235 S.W.3d at 176. Based on the record
evidence, the trial court was entitled to find that Watamar did not put on sufficient
proof to impute the other defendants’ jurisdictional contacts to any of the
nonresident defendants. See Wormald, 543 S.W.3d at 322. The record contains
evidence supporting the trial court’s conclusion that it lacks personal jurisdiction
over the nonresident defendants, and the trial court did not err in granting
their special appearances.
V. Conclusion
We affirm the trial court’s order sustaining nonresident defendants’
objections to jurisdiction and special appearances and dismissing nonresident
defendants for want of personal jurisdiction.
/s/ Margaret “Meg” Poissant
Justice
Panel consists of Chief Justice Frost and Justices Spain and Poissant.
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