ACT Trading F.Z.E. v. Triple Canopy, Inc. ( 2015 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-14-00035-CV
ACT TRADING F.Z.E. APPELLANT
V.
TRIPLE CANOPY, INC. APPELLEE
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FROM THE 355TH DISTRICT COURT OF HOOD COUNTY
TRIAL COURT NO. C2013135
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MEMORANDUM OPINION 1
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This is an accelerated interlocutory appeal from the trial court’s denial of
ACT Trading F.Z.E.’s special appearance. ACT brings two issues challenging
the trial court’s findings supporting the exercise of personal jurisdiction over it
under a reverse veil-piercing theory. We affirm.
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See Tex. R. App. P. 47.4.
Background
The underlying suit arises from a transaction between ACT and Triple
Canopy, Inc., through a third party dealer, for the manufacture and delivery of
several armored vehicles. At the time of the transaction, ACT had a principal
office located in Ajman, a United Arab Emirates free zone, and it manufactured
the vehicles for Triple Canopy there. For a time, ACT stored the vehicles in
Ajman; it then shipped them to Turkey and, later, to Iraq. ACT does business in
the Middle East, particularly Iraq, Afghanistan, and North Africa. ACT’s sole
owner and employee is Dennis Mark, a Granbury, Texas resident. Mark is also
the sole owner of other companies operating overseas (sometimes referred to as
the ACT group of companies). Triple Canopy sought to invoke personal
jurisdiction over ACT under a reverse veil-piercing theory, that is, Triple Canopy
alleged that ACT is an alter ego of Mark and that personal jurisdiction over Mark
can be imputed to ACT. 2
Standard of Review and Applicable Law
Whether a trial court has personal jurisdiction over a defendant is a
question of law, which we review de novo. Moki Mac River Expeditions v. Drugg,
221 S.W.3d 569, 574 (Tex. 2007); TravelJungle v. Am. Airlines, Inc., 212 S.W.3d
2
Although Triple Canopy used the term “fusion” in the trial court––with
respect to Mark and the ACT group of companies––it was arguing that Mark’s
contacts with Texas should be imputed to ACT, which is commonly referred to as
reverse veil piercing. See, e.g., Cappuccitti v. Gulf Indus. Prods., Inc., 222
S.W.3d 468, 482 (Tex. App.––Houston [1st Dist.] 2007, no pet.).
2
841, 845 (Tex. App.––Fort Worth 2006, no pet.). The plaintiff bears the initial
burden of pleading sufficient allegations to bring a nonresident defendant within
the provisions of the long-arm statute. Moki Mac, 221 S.W.3d at 574;
TravelJungle, 212 S.W.3d at 845. Once the plaintiff does so, the burden shifts to
the nonresident defendant to negate all alleged jurisdictional bases. Moki Mac,
221 S.W.3d at 574; TravelJungle, 212 S.W.3d at 845. We review all of the
evidence in making this determination. TravelJungle, 212 S.W.3d at 845. We
may review the trial court’s resolution of disputed fact issues for legal and factual
sufficiency under the same standards of review that we apply in reviewing a
jury’s or trial court’s findings of fact at trial. Id.
Analysis
The following trial court finding is primarily at issue in this appeal:
[T]he totality of the evidence demonstrates that Mark, ACT Trading,
Armored and the other entities that make or made up the ACT
Group of Companies are integrated to achieve a common business
purpose and are so indistinct from one another that the entities,
including Mark, are fused into one entity and cannot be found to be
separate and distinct from one another for jurisdictional purposes.
The Court further finds that the corporate fiction should be
disregarded to prevent fraud or injustice.
Applicable Law
Under Texas law, a corporation is presumed to be a separate entity from
its officers and shareholders. See Grain Dealers Mut. Ins. Co. v. McKee, 943
S.W.2d 455, 458 (Tex. 1997); Washington DC Party Shuttle, LLC v. IGuide
Tours, 406 S.W.3d 723, 738–39 (Tex. App.––Houston [14th Dist.] 2013, pet.
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denied) (en banc). As a result, a plaintiff who relies on the existence of an alter-
ego relationship to ascribe one defendant’s contacts with Texas to a distinct
foreign corporation must prove that such a relationship exists. Washington DC
Party Shuttle, 406 S.W.3d at 738–39; Cappuccitti v. Gulf Indus. Prods., Inc., 222
S.W.3d 468, 482 (Tex. App.––Houston [1st Dist.] 2007, no pet.).
When the primary party is an individual owner or shareholder, “[t]he
corporate fiction is disregarded . . . when a corporation is organized and operated
as a mere tool or business conduit” of that individual. Schlueter v. Carey, 112
S.W.3d 164, 169 (Tex. App.—Fort Worth 2003, pet. denied) (quoting Castleberry
v. Branscum, 721 S.W.2d 270, 272 (Tex. 1986)). In other words, “[a]lter ego
applies when there is such unity between a corporation and an individual that the
separateness of the corporation has ceased and holding only the corporation
liable would result in an injustice.” Nichols v. Tseng Hsiang Lin, 282 S.W.3d 743,
747 (Tex. App.—Dallas 2009, no pet.) (quoting Mancorp, Inc. v. Culpepper, 802
S.W.2d 226, 228 (Tex. 1990)).
Triple Canopy argued that ACT, along with Mark’s other companies,
should be considered a single entity for jurisdictional purposes. The doctrine of
jurisdictional veil piercing is similar to the alter ego concept in substantive liability,
though jurisdictional veil piercing sometimes “involve[s] different elements of
proof.” PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 174 (Tex.
2007). To show jurisdictional veil piercing, a plaintiff must show that the primary
party “exerts such domination and control over” the defendant “that they do not in
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reality constitute separate and distinct corporate entities but are one and the
same corporation for purposes of jurisdiction.” Id. at 173. A factor that courts
have considered for jurisdictional veil piercing purposes––and that primarily
relied upon by Triple Canopy––is whether the parties have observed corporate
formalities. Id. at 175; see, e.g., Crithfield v. Boothe, 343 S.W.3d 274, 284–85
(Tex. App.––Dallas 2011, no pet.); Cappuccitti, 222 S.W.3d at 481–82.
Jurisdictional Facts
Mark organized ACT in a UAE free zone for convenience and personal tax
advantages. He charged all of his expenses when travelling to ACT’s credit card
for convenience. Additionally, he and his wife had made significant personal
purchases on the card––for food, medical and dental expenses, and marina
fees––although Mark said that they had paid the company back for those
purchases.
Mark testified that ACT advertises on an internationally available website
along with the other ACT group of companies. 3 The website was set up so that
persons in different geographical areas were directed to different telephone
numbers based on their geographical area. 4 However, Mark also testified that
the number for ACT is now his personal cell phone number, and that he does all
of his business via that number no matter where he is personally located so that
3
According to Mark, one company—Armored Cars and Trucks LLC––had
been “dormant” for three years.
4
ACT pays for the website.
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he is immediately available to his clients. Mark said that he sometimes pays the
phone bill from a personal account, and other times he pays it from ACT’s
account. Mark also used ACT’s credit card “a couple of times” to buy truck parts
in Texas for ACT because he could not buy them in the UAE; he shipped the
parts to ACT in either the UAE or Dubai.
Application
We conclude and hold that the trial court did not err by finding that its
general jurisdiction over Mark should be imputed to ACT. See Cappucitti, 222
S.W.3d at 484; cf. Gonzalez v. Lehtinen, No. 13-06-441-CV, 2008 WL 668600, at
*5 (Tex. App.––Corpus Christi Mar. 13, 2008, pet. denied) (mem. op.) (“The court
also heard Lehtinen testify that Cárdenas was so closely involved with Hidalgo
Truck that he used its mailing address as his own and could almost always be
reached by telephone when calling Hidalgo Truck’s phone number.”). The
evidence shows that Mark operated all three companies for similar purposes and
marketed them jointly, controlling them from wherever he happened to be
located. It also shows that Mark and his wife treated ACT’s credit as their own
for their personal benefit. That they may have eventually paid back ACT for their
purposes does not change the fact that they used the credit card for significant
personal expenses. Much of ACT’s argument pertains to the alleged lack of
contacts between ACT and Texas; however, our analysis, in keeping with the trial
court’s findings, is focused on the reverse veil piercing theory argued by Triple
Canopy in the trial court. We overrule ACT’s first issue.
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Traditional Notions of Fair Play and Justice
In its second issue, ACT argues that exercising jurisdiction over it would be
unfair because Mark is the only defendant with any Texas contacts. See
Waterman S.S. Corp. v. Ruiz, 355 S.W.3d 387, 426 (Tex. App.––Houston [1st
Dist.] 2011, pet. denied) (op. on reh’g) (“Generally, Texas has no interest in
adjudicating a case between nonresidents concerning occurrences that took
place outside of Texas.”).
Even when the contacts of the parent are imputed to the subsidiary based
on the theory of alter ego, the trial court’s exercise of general, personal
jurisdiction over the subsidiary must comport with traditional notions of fair play
and substantial justice. Cappuccitti, 222 S.W.3d at 484, 486–87. Here, Mark
alleged no facts that would support a finding of unfairness: Mark testified that
ACT’s UAE office had been closed since October 2013, and he did not testify
about the location of witnesses or files related to the litigation. In light of his
testimony that he is present in Granbury at least one third of every year and that
his business dealings are structured so that he can direct them at any time of day
from anywhere in the world––and in light of the lack of testimony that ACT would
be burdened by defending the suit in Texas––we conclude and hold that the trial
court did not err by determining that exercising jurisdiction over ACT would not
offend traditional notions of fair play and substantial justice. See, e.g., Capital
Tech. Info. Servs., Inc. v. Arias & Arias Consultores, 270 S.W.3d 741, 755–56
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(Tex. App.––Dallas 2008, pet. denied); Cappucitti, 222 S.W.3d at 486. We
overrule ACT’s second issue.
Conclusion
Having overruled ACT’s two issues, we affirm the trial court’s order
denying ACT’s special appearance.
/s/ Terrie Livingston
TERRIE LIVINGSTON
CHIEF JUSTICE
PANEL: LIVINGSTON, C.J.; WALKER and GABRIEL, JJ.
DELIVERED: January 22, 2015
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