Richard Baldaramos and Rejuvya, LLC v. Metamorphosis Consulting, LLC ( 2019 )

Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-19-00356-CV
Richard BALDARAMOS and Rejuvya, LLC,
Appellants
v.
METAMORPHOSIS CONSULTING, LLC,
Appellee
From the 57th Judicial District Court, Bexar County, Texas
Trial Court No. 2018-CI-16894
Honorable Laura Salinas, Judge Presiding
Opinion by: Irene Rios, Justice
Sitting: Patricia O. Alvarez, Justice
Irene Rios, Justice
Beth Watkins, Justice
Delivered and Filed: December 11, 2019
REVERSED AND RENDERED
Richard Baldaramos and Rejuvya, LLC (“Rejuvya”) appeal the trial court’s order denying
their special appearances asserting the trial court erred because Metamorphosis Consulting, LLC
(“Metamorphosis”) failed to meet its pleading burden and Baldaramos and Rejuvya negated all
bases of jurisdiction pled by Metamorphosis. We reverse the trial court’s order and render
judgment dismissing the claims against Baldaramos and Rejuvya.
04-19-00356-CV
BACKGROUND
Metamorphosis filed the underlying lawsuit on September 5, 2018. The following facts
are alleged in Metamorphosis’s petition.
Baldaramos is a resident of Nevada, and Rejuvya is a Nevada limited liability company.
On or about March 21, 2014, Metamorphosis entered into a contract (“Contract”) with Jill Cole in
which Cole paid Metamorphosis $100,332.00 in exchange for Metamorphosis’s consulting
services and a limited license to access Metamorphosis’s trade secret materials (the “Trade
Secrets”). The Contract provided the Trade Secrets could only be used by Cole in her practice and
the limited license was not assignable to any other party. The Contract further provided Cole could
not disclose the Trade Secrets to any party other than the parties specified in the Contract. When
the Contract was signed, Cole was the sole member of Vitality Health Wellness Center, LLC, an
Arizona limited liability company that operated a wellness center. The Contract provided it would
be governed by Texas law and the sole place of venue for any legal action would be Bexar County,
Texas.
In October of 2014, Baldaramos became a member of Vitality and was active in its
management. As a result, he used the Trade Secrets in the operation of Vitality’s business and
also attended classes provided by Metamorphosis in San Antonio in which the Trade Secrets were
discussed and diagrammed. Cole stored the Trade Secrets on a secure digital server owned by
Dropbox, and Baldaramos had access to Cole’s dropbox on the digital server. Sometime between
October of 2014 and December of 2015, Baldaramos copied the Trade Secrets from Cole’s
dropbox to a thumb drive.
In December of 2015, Baldaramos and Cole ended their business relationship. At that time,
Cole informed Baldaramos both verbally and in writing that he was no longer allowed to use her
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license to access the Trade Secrets. Cole also instructed Baldaramos to destroy any copies of the
Trade Secrets in his possession.
On April 21, 2016, Baldaramos and another defendant who is not an appellant formed a
new Nevada limited liability company named Medela Centers, LLC which was later renamed
Rejuvya, LLC. That entity opened a health center providing health-related goods and services in
California. The health center was known as Health Renewal Centers on the date Metamorphosis
filed its petition. Baldaramos provided an employee of the entity access to Cole’s dropbox and/or
the thumb drive and instructed the employee to familiarize herself with the Trade Secrets which
were then used to facilitate the growth of the health center. In July of 2016, Metamorphosis refused
to sell or license the Trade Secrets to Baldaramos and instructed him to stop using the Trade
Secrets.
In its petition, Metamorphosis alleged claims against Baldaramos for misappropriation of
trade secrets and conversion. Metamorphosis also alleged a claim against Rejuvya for conversion
in retaining the Trade Secrets. Baldaramos and Rejuvya filed special appearances.
In his special appearance, Baldaramos asserted Metamorphosis failed to allege sufficient
contacts to establish general jurisdiction over Baldaramos. In addition, Baldaramos asserted the
alleged tort claims against him arose in December of 2015 when he allegedly used the Trade
Secrets in Nevada and California after his business relationship with Cole ended. Baldaramos
further asserted his attendance at one Metamorphosis training class in Texas in April or May of
2015 is not sufficient to establish specific jurisdiction because his attendance was authorized and
his alleged actions misappropriating or converting the Trade Secrets occurred in December of
2015. Finally, Baldaramos asserted the exercise of personal jurisdiction over him would offend
traditional notions of fair play and substantial justice. Baldaramos attached his affidavit to his
special appearance in which he stated he resided in Nevada, never owned property in Texas, and
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did not rent property or pay taxes in Texas since 1981. He further stated he attended only one
training meeting in Texas in April or May of 2015 and spent two or three nights in San Antonio
for purposes of attending that meeting. Finally, he stated no business entity with which he is
affiliated has ever done or solicited business in Texas.
In its special appearance, Rejuvya asserted it is a Nevada limited liability corporation that
was formed on November 20, 2018; therefore, Rejuvya was not formed until two months after
Metamorphosis filed its petition. Rejuvya also asserted Metamorphosis failed to allege sufficient
contacts to confer general jurisdiction in Texas. Rejuvya further asserted the conversion claim
was based on Rejuvya’s alleged unauthorized retention and use of the Trade Secrets which did not
occur in Texas and could not have occurred before Metamorphosis filed its petition. Finally,
Rejuvya asserted the exercise of personal jurisdiction over it would offend traditional notions of
fair play and substantial justice. Rejuvya attached Baldaramos’s affidavit to its special appearance
stating Rejuvya does not own any property, pay taxes or conduct business in Texas.
Metamorphosis did not file a written response to the special appearances; however, its
CEO, John Linton, was the sole witness who testified at the hearing on the special appearances
held on May 2, 2019. Linton testified he first met Baldaramos at a three-day training conference
Metamorphosis held in Texas. Baldaramos told Linton he was at the training with Cole to
implement the Trade Secrets in Cole’s practice. Baldaramos also asked Linton if he would pay
him a commission to recruit or refer others to Metamorphosis’s program. Linton informed
Baldaramos that Metamorphosis did not pay any such commissions. Linton testified he stayed in
sporadic contact with Baldaramos relating to Cole’s practice. Baldaramos informed Linton when
his business relationship with Cole ended and then approached Linton about using the Trade
Secrets in a different practice with another practitioner. Although Metamorphosis’s petition
alleged the business relationship between Cole and Baldaramos ended on December 31, 2015,
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Linton testified he thought the business relationship ended mid-November. Linton and
Baldaramos had several conversations about the other possible practice resulting in Linton sending
Baldaramos some cease and desist emails or text messages. Linton also had telephone
conversations with Baldaramos’s attorney. Eventually, Linton decided not to contract with
Baldaramos based on his ethics and his continued unauthorized use of the Trade Secrets. Linton
testified he believed Baldaramos had been using the Trade Secrets in an unauthorized manner
before his business relationship with Cole ended in anticipation of starting a competing or similar
practice. Linton further testified that after Baldaramos’s business relationship with Cole ended,
Baldaramos asked Cole’s ex-husband to download some of the Trade Secret information from
Cole’s system and forward it to him. Linton believed from certain emails that Cole’s ex-husband
provided the information to Baldaramos. Linton testified Metamorphosis provided consultation
by telephone from Texas and its Trade Secrets are stored on a server in Texas. Metamorphosis’s
clients access the Trade Secrets by an online secure portal. In addition, Metamorphosis offers
quarterly meetings or conferences in Texas which clients can attend to receive training.
At the conclusion of the hearing, the trial court focused on the Contract being signed by
only Cole and Metamorphosis and questioned Linton regarding Baldaramos’s access to the Trade
Secrets during his business relationship with Cole. In response to the trial court’s question
regarding whether Baldaramos was a shareholder of Vitality when Cole signed the Contract,
Linton responded that he was. The trial court then announced it was denying the special
appearances explaining Baldaramos was using the Trade Secrets he obtained as a shareholder of
Vitality. On May 9, 2019, the trial court signed an order denying the special appearances, and
Baldaramos and Rejuvya appeal.
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PERSONAL JURISDICTION AND STANDARD OF REVIEW
“Whether a trial court has personal jurisdiction over a nonresident defendant is a question
of law that we review de novo.” Old Republic Nat’l Title Ins. Co. v. Bell, 549 S.W.3d 550, 558
(Tex. 2018). “When, as here, the trial court does not issue findings of fact and conclusions of law,
we imply all relevant facts necessary to support the judgment that are supported by evidence.”
Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 150 (Tex. 2013).
“Texas’s long-arm statute extends Texas courts’ personal jurisdiction as far as the federal
constitutional requirements of due process will permit.” M & F Worldwide Corp. v. Pepsi-Cola
Metro. Bottling Co., 512 S.W.3d 878, 885 (Tex. 2017) (internal quotation marks omitted).
“Asserting personal jurisdiction comports with due process when (1) the nonresident defendant
has minimum contacts with the forum state, and (2) asserting jurisdiction complies with traditional
notions of fair play and substantial justice.” Moncrief Oil Int’l Inc., 414 S.W.3d at 150.
“A defendant establishes minimum contacts with a forum when it purposefully avails itself
of the privilege of conducting activities within the forum state, thus invoking the benefits and
protections of its laws.” Id. (internal quotation marks omitted). “Thus, the defendant’s activities
must justify a conclusion that the defendant could reasonably anticipate being called into a Texas
court.” Bell, 549 S.W.3d at 559 (internal quotation marks omitted).
The Texas Supreme Court has “explained that there are three parts to a ‘purposeful
availment’ inquiry.’” Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 575 (Tex. 2007).
“First, only the defendant’s contacts with the forum are relevant, not the unilateral activity of
another party or a third person.” Id. “Second, the contacts relied upon must be purposeful rather
than random, fortuitous, or attenuated.” Id. “Finally, the defendant must seek some benefit,
advantage or profit by ‘availing’ itself of the jurisdiction.” Id. (internal quotation marks omitted).
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“A defendant’s contacts with the forum may give rise to either general or specific
jurisdiction.” M & F Worldwide Corp., 512 S.W.3d at 885. “General jurisdiction is established
by a defendant’s continuous and systematic contacts that render it essentially at home in the forum
State, irrespective of whether the defendant’s alleged liability arises from those contacts.”
Cornerstone Healthcare Grp. Holding, Inc. v. Nautic Mgmt. VI, L.P., 493 S.W.3d 65, 71 (Tex.
2016) (internal quotation marks omitted). “Specific jurisdiction arises when the plaintiff’s cause
of action arises from or relates to the defendant’s contacts.” Id. (internal quotation marks omitted).
“In a challenge to personal jurisdiction, the plaintiff and the defendant bear shifting burdens
of proof.” Bell, 549 S.W.3d at 559. “The plaintiff bears the initial burden to plead sufficient
allegations to bring the nonresident defendant within the reach of Texas’s long-arm statute.” Id.
“Once it has done so, the burden shifts to the defendant to negate all bases of personal jurisdiction
alleged by the plaintiff.” Id. “Because the plaintiff defines the scope and nature of the lawsuit,
the defendant’s corresponding burden to negate jurisdiction is tied to the allegations in the
plaintiff’s pleading.” Kelly v. Gen. Interior Const., Inc., 301 S.W.3d 653, 658 (Tex. 2010).
“The defendant can negate jurisdiction on either a factual or legal basis.” Id. at 659.
“Factually, the defendant can present evidence that it has no contacts with Texas, effectively
disproving the plaintiff’s allegations.” Id. “The plaintiff can then respond with its own evidence
that affirms its allegations, and it risks dismissal of its lawsuit if it cannot present the trial court
with evidence establishing personal jurisdiction.” Id. “Legally, the defendant can show that even
if the plaintiff’s alleged facts are true, the evidence is legally insufficient to establish jurisdiction;
the defendant’s contacts with Texas fall short of purposeful availment; for specific jurisdiction,
that the claims do not arise from the contacts; or that traditional notions of fair play and substantial
justice are offended by the exercise of jurisdiction.” Id.
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GENERAL JURISDICTION 1
“[T]he general jurisdiction analysis entails a high bar.” Searcy v. Parex Res., Inc., 496
S.W.3d 58, 72 (Tex. 2016). “Although the likelihood of specific jurisdiction may increase in step
with any substantial connection between the asserted claims and the forum state, the ties between
the litigation itself and the forum state are irrelevant to the question of whether general jurisdiction
exists.” Id. “Rather, general jurisdiction relies on the defendant itself being tied up—almost
entangled in a web—with the forum state.” Id. “Continuous and systematic contacts that fail to
rise to this relatively high level are insufficient to confer general jurisdiction over a nonresident
defendant.” Id.
Here, Metamorphosis’s petition does not allege any continuous and systematic contacts
between Baldaramos or Rejuvya and Texas to even meet its pleading burden. Even if we assume
the pleading burden was met, the affidavits attached to the special appearances establish neither
Baldaramos, a Nevada resident, nor Rejuvya, a Nevada limited liability company, own any
property, pay any taxes, or conduct any business in Texas. Accordingly, because Metamorphosis
has failed to allege any continuous and systematic contacts between the appellants and Texas, and
the affidavits attached to the special appearances establish the absence of such contacts, the trial
court erred if it denied the special appearances on the basis of general jurisdiction.
SPECIFIC JURISDICTION
“[W]hen analyzing specific jurisdiction, we focus on the relationship between the forum,
the defendant, and the litigation.” Bell, 549 S.W.3d at 559. “For a Texas court to exercise specific
jurisdiction over a defendant, the defendant’s purposeful contacts must be substantially connected
to the operative facts of the litigation or form the basis of the cause of action.” Id. at 559-60.
1
We note Metamorphosis’s brief only addresses specific jurisdiction.
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“Texas’s interest in protecting its citizens against torts is insufficient to automatically exercise
personal jurisdiction upon an allegation that a nonresident directed a tort from outside the forum
against a resident.” Moncrief Oil Int’l Inc., 414 S.W.3d at 152.
Metamorphosis alleged a claim for misappropriation of trade secrets against Baldaramos.
“The elements of misappropriation [of trade secrets] are: (1) existence of a trade secret; (2) breach
of a confidential relationship or improper discovery of a trade secret; (3) use of the trade secret;
and (4) damages.” Trilogy Software, Inc. v. Callidus Software, Inc., 143 S.W.3d 452, 463 (Tex.
App.—Austin 2004, pet. denied); see also Cuidado Casero Home Health of El Paso, Inc. v. Ayuda
Home Health Care Servs., LLC, 404 S.W.3d 737, 744 (Tex. App.—El Paso 2013, no pet.) (same);
Twister B.V. v. Newton Research Partners, LP, 364 S.W.3d 428, 437 (Tex. App.—Dallas 2012,
no pet.) (same). Metamorphosis also alleged a claim for conversion against Baldaramos and
Rejuvya. “To establish liability for conversion a plaintiff must prove [1] it has a sufficient interest
in the property, [2] the defendant exercised dominion and control over the property in an unlawful
and unauthorized manner, [3] to the exclusion of and inconsistent with the plaintiff’s rights, and
[4] the defendant refused plaintiff’s demand for the return of the property.” John Deloach Enters.,
Inc. v. Telhio Credit Union, Inc., 582 S.W.3d 590, 595 (Tex. App.—San Antonio 2019, no pet.);
see also Bandy v. First State Bank, Overton, Tex., 835 S.W.2d 609, 622 (Tex. 1992) (defining
conversation “as the wrongful exercise of dominion and control over another’s property in denial
of or inconsistent with his rights”) (internal quotation marks omitted).
The contacts Metamorphosis’s petition alleges to establish specific jurisdiction are
Baldaramos’s attendance at the three-day training conference in Texas and the conversations
between Baldaramos and Linton attempting to negotiate a contract that would allow Baldaramos
to access and use the Trade Secrets after Baldaramos’s business relationship with Cole ended.
During his testimony, Linton conceded, however, that Baldaramos was authorized to attend the
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training conference; therefore, his discovery of Metamorphosis’s Trade Secrets at that conference
and his subsequent exercise of dominion and control over the Trade Secrets through the use of
Cole’s license prior to the end of their business relationship could not form the basis of
Metamorphosis’s claims. “When communications between a nonresident and a resident are
alleged as the basis for jurisdiction, we look to the quality and nature of the communications to
establish purposeful availment.” Bell, 549 S.W.3d at 560. “On their own, numerous telephone
communications with people in Texas do not establish minimum contacts, and [the Texas Supreme
Court has] noted that changes in technology may render reliance on phone calls obsolete as proof
of purposeful availment.” Id. “Additionally, to support an exercise of specific jurisdiction, there
must be a substantial connection between those contacts and the operative facts of the litigation.”
Id. Here, Linton testified he had telephone conversations with Baldaramos regarding the Trade
Secrets during Baldaramos’s business relationship with Cole. Because Baldaramos was authorized
to access the Trade Secrets at that time, however, those telephone calls could not form the basis of
Metamorphosis’s claims. See Gustafson v. Provider HealthNet Servs., Inc., 118 S.W.3d 479, 484
(Tex. App.—Dallas 2003, no pet.) (“Although Gustafson traveled to Texas twice for management
meetings, PHNS does not assert Gustafson’s [sic] breached any duties to it or committed any torts
during these meetings.”). With regard to the conversations occurring after the business
relationship between Baldaramos and Cole ended, Linton testified he believed Baldaramos already
was improperly using the Trade Secrets before that business relationship ended and further stated
he told Baldaramos in those communications to cease and desist from using the Trade Secrets.
Although no contract resulted from those conversations that would authorize Baldaramos’s
ongoing use of the Trade Secrets, the operative facts of the litigation that formed the basis of
Metamorphosis’s claims occurred in Nevada or California where the Trade Secrets were
improperly used and where the exercise of dominion and control over the Trade Secrets was
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unauthorized. Although the trial court appeared to rely on Baldaramos being a shareholder of
Vitality when Cole entered into the Contract with Metamorphosis, and Linton’s testimony supports
that finding, 2 Baldaramos’s access to the Trade Secrets was authorized while Baldaramos was a
member of Vitality. 3 As a result, that access does not form the basis of Metamorphosis’s claims.
Although Baldaramos and Rejuvya knew “the brunt of the injury [would] be felt by
[Metamophosis], [that] knowledge alone is insufficient to establish purposeful availment.” Vinmar
Overseas Singapore PTE Ltd., 538 S.W.3d at 131; see also Walden v. Fiore, 571 U.S. 277, 290
(2014) (noting “mere injury to a forum resident is not a sufficient connection to the forum”). The
evidence established the allegedly tortious acts forming the basis of Metamorphosis’s claims did
not occur in Texas, but occurred outside the forum. See Raiden Commodities, LP v. De Man, No.
01-17-00181-CV, 2018 WL 3151004, at *7 (Tex. App.—Houston [1st Dist.] June 28, 2018, no
pet.) (mem. op.) (“The alleged conduct underlying each of these claims occurred outside of Texas.
On the facts before us, the majority of the focus of any trial would be directed to [De Man’s]
alleged [actions] outside of Texas.”) (internal quotation marks omitted); Info. Servs. Group, Inc.
v. Rawlinson, 302 S.W.3d 392, 402, 404 (Tex. App.—Houston [14th Dist.] 2009, pet. denied)
2
We note Linton’s testimony is contrary to the allegation in Metamorphosis’s petition that Baldaramos became a
member of Vitality in October of 2014, which was six months after the Contract was executed.
3
In its brief, Metamorphosis argues Texas courts have jurisdiction over Baldaramos under the forum-selection clause
contained in the Contract between it and Cole based on a direct-benefits estoppel theory. As support for this argument,
Metamorphosis cites Carlile Bancshares, Inc. v. Armstrong, No. 02-14-00014-CV, 2014 WL 3891658 (Tex. App.—
Fort Worth Aug. 7, 2014, no pet.) (mem. op.). As the Fort Worth court noted, however, “estoppel is an equitable
theory that may or may not be applied at the trial court’s discretion.” Id. at *9. Here, Metamorphosis did not file a
response or argue at the hearing that the trial court should exercise its discretion to apply the direct-benefits estoppel
theory. Id. at *7 (noting party seeking to bind nonsignatory to forum-selection clause “bore the burden to identify and
prove a theory under which the nonsignatories could be bound”); see also Vinmar Overseas Singapore PTE Ltd. v.
PTT Int’l Trading PTE Ltd., 538 S.W.3d 126, 138 n.6 (Tex. App.—Houston [14th Dist.] 2017, pet. denied)
(questioning direct-benefits estoppel theory analysis in Carlile noting cases cited in support of analysis “involved
contractual consent to jurisdiction — not assertion of personal jurisdiction over a non-contracting party on the basis
of a consent-to-jurisdiction clause signed by another party”); cf. Pinto Tech. Ventures, L.P. v. Sheldon, 526 S.W.3d
428, 444 (Tex. 2017) (“Courts recognizing the validity of [transaction participant] theory [to enforce forum-selection
clause] have done so solely in the context of a nonsignatory defendant attempting to enforce a forum-selection clause
against a signatory plaintiff, who did not want the clause enforced, and not the converse.”) (internal quotation marks
omitted).
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(“Even if we assume that Rawlinson ultimately obtained confidential information from the Texas-
based servers and gave it to EquaTerra in breach of the various restrictive covenants with the
appellants, there is no allegation or evidence that he did so in Texas. . . . On the facts before us,
the majority of the focus of any trial would be directed at Rawlinson’s alleged wrongdoing in the
U.K., not Texas.”). “To hold otherwise would shift the analytical focus from assessing the
defendant’s contacts with the forum to assessing the defendant’s contacts with the plaintiff.”
Vinmar Overseas Singapore PTE Ltd., 538 S.W.3d at 136; see also Raiden Commodities, LP, 2018
WL 3151004, at *5 (“The key question is whether the defendant’s litigation-related actions
connect him to the forum—not whether his contacts connect him with appellants.”). Because
Baldaramos’s purposeful contacts with Texas are not substantially connected to the operative facts
of Metamorphosis’s claims and do not form the basis for Metamorphosis’s causes of action, the
trial court erred in denying Baldaramos’s and Rejuvya’s special appearances.
CONCLUSION
Because Metamorphosis did not plead sufficient allegations to establish general
jurisdiction over Baldaramos and Rejuvya and because the alleged contacts did not establish
specific jurisdiction, we reverse the trial court’s order denying the special appearances and render
judgment dismissing Metamorphosis’s claims against Baldaramos and Rejuvya.
Irene Rios, Justice
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