Wadi Petroleum, Inc., Dice Exploration Company, Inc., South Bay Corporation, Lamb Oil & Gas, Inc., and Betaco, LLC v. Ethan Miller ( 2021 )

NUMBER 13-21-00014-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
WADI PETROLEUM, INC.,
DICE EXPLORATION COMPANY, INC.,
SOUTH BAY CORPORATION,
LAMB OIL & GAS, INC., AND
BETACO, LLC, Appellants,
v.
ETHAN MILLER, Appellee.
On appeal from the 459th District Court
of Travis County, Texas.
MEMORANDUM OPINION
Before Chief Justice Contreras and Justices Benavides and Silva
Memorandum Opinion by Justice Benavides
In this oil and gas dispute, appellants Wadi Petroleum, Inc. (Wadi), Dice
Exploration Company, Inc., South Bay Corporation, Lamb Oil & Gas, Inc., and Betaco,
LLC appeal from the trial court’s order granting appellee Ethan Miller’s special
appearance. 1 In what we construe as a single issue, appellants contend that the trial
court may exercise specific jurisdiction over Miller as to appellants’ unintentional and
intentional tort claims against him. We affirm in part and reverse and remand in part.
I. BACKGROUND
In 2004, appellants and other working interest owners acquired leases and began
operations on what would eventually become nine oil and gas wells and saltwater
disposal wells located in southern Louisiana. The wells were operated under five separate
joint operating agreements (JOAs2), which generally require each working interest owner
to contribute a proportional share to the costs of operations in return for a proportional
share of the net revenues. Among the working interest owners, one is designated as the
operator of the wells.
The operator is responsible for the exploration, development, and production of
the wells and must provide an accounting of the costs and revenues to the other working
interest owners. In particular, under the JOAs, the “Operator shall bill Non-Operators on
or before the last day of each month for their proportionate share of the Joint Account for
the preceding month,” and each bill “will be accompanied by statements which identify
the authority for expenditure, lease or facility, and all charges and credits summarized by
appropriate classifications of investment and expense.” Additionally, in the event a
1 This appeal was transferred from the Third Court of Appeals in Austin pursuant to a docket-
equalization order rendered by the Supreme Court of Texas. See TEX. GOV’T CODE ANN. § 74.001.
2 The JOAs were signed in 2004, 2005, 2006, 2007, and 2008, and each one concerns a separate
oil and gas lease.
2
working interest owner does not receive its share of the revenues directly from a
purchaser, the operator is responsible for remitting the proportional shares to each owner.
Under the JOAs, notice “shall be given in writing by mail or telegram, Federal
Express or other courier services, postage or charges prepaid, or by fax or telecopier and
addressed to the parties to whom the notice is given at the addresses listed” in an exhibit
attached to the JOAs. Many of the parties to the JOAs, including appellants, have Texas
addresses and phone and fax numbers listed for purposes of notice.
Operators receive additional compensation. For example, under the 2007 JOA, the
operator, “[a]s compensation for administrative, supervision, office services and
warehousing costs,” was entitled to charge the joint account at the monthly rate of
$12,000 for drilling wells and $1,200 for producing wells. Under the 2008 JOA, the same
monthly rates were set at $10,000 and $1,000, respectively.
The first three JOAs originally designated Wadi, a Texas corporation, as the
operator 3 and “Louisiana Delta Oil Company, LLC” as a non-operating working interest
owner. The final two JOAs, executed in 2007 and 2008, respectively, designated
“Louisiana Delta Oil Company, LLC” as the operator and Wadi as a non-operating working
interest owner. 4
According to Miller, “Louisiana Delta Oil Company, LLC” is a Virginia limited liability
3 Brammer Engineering, Inc. was designated as the agent operator for Wadi under these JOAs.
4 Appellants South Bay Corporation, Lamb Oil & Gas, Inc., and Betaco, LLC are parties to some,
but not all, of the JOAs as minor non-operating working interest owners. Appellant Dice Exploration
Company, Inc. is not a named working interest owner under any of the JOAs in the record.
3
company that he formed with Phil Bryant Jr., a Texas resident. 5 Miller and Bryant elected
to establish the company’s principal place of business in Texas for sixteen years, first in
Houston, and then in Lakeway. Bryant served as the company’s president. Miller, a
licensed attorney residing in Virginia, served as its chief financial officer and chief legal
officer. Bryant, along with the company’s geological and accounting staff, oversaw the
daily operations of the oil and gas wells from the company’s Texas office. Miller traveled
to the company’s corporate office between ten and nineteen times from 2001 until 2015
in his capacity as a manager and owner of the company. Miller maintained the company’s
books concerning revenues at his office in Virginia and was responsible for remitting
revenues to the other working interest owners. In 2016, Bryant resigned as president, and
Miller moved the company’s principal place of business to Virginia.
At this point, the company had become the operator under all five JOAs.
Operations under the first three JOAs were transferred to the company after Miller
traveled to Houston in 2010 to meet with representatives of Wadi at their office. When
Bryant resigned in 2016, the other working interest owners disagreed on whether Miller’s
company should continue to serve as operator. Miller began lobbying the other owners,
culminating in a May 2016 meeting in Houston between the owners.
5 Contrary to Miller’s representations about his company’s place of incorporation, the first four JOAs
were signed by Phil Bryant Jr. and include an acknowledgement by Bryant that “he is the Manager of
LOUISIANA DELTA OIL COMPANY LLC, a Texas limited liability company, and that the forgoing instrument
was signed on behalf of said company by authority of its Managers.” (Emphasis added). The record reflects
that there are two companies with the same name, one incorporated in Texas, and one incorporated in
Virginia. We accept as true Miller’s statements that it was the Virginia company that was a party to the
JOAs.
4
In an affidavit, Kirk Dice, Vice President and co-owner of Wadi and Dice
Exploration Company, Inc., said that Miller organized the May 2016 meeting in Houston
and that “Miller made certain representations about himself and his companies that turned
out to be untrue.” In particular, Kirk said that Miller “told [him] that his companies were
professional oil and gas operations companies[,] and [that] they would operate the wells
strictly in accordance with the law, the [JOA]s in place, and COPAS standards of
performance and conduct.” Kirk contends that Miller’s representations about “professional
experience and acumen” proved untrue and that Kirk’s companies relied on those
representations to their detriment by deciding to do business with Miller’s companies. Kirk
alleged that “[d]uring the course of operations, Mr. Miller and his companies made
charges for operations that did not take place” and overcharged for other operations that
benefited Miller personally. Kirk believes Miller “defrauded [his] companies, and other
working interest owners, by his lack of truthfulness, over-billing, and general
incompetence in operations of the wells at issue.” Kirk’s brother, Kevin, also a principal
owner of Dice Exploration Company, Inc. and Wadi, provided a substantively identical
affidavit.
In 2018, appellants filed suit against Miller, Bryant, “Louisiana Delta Oil Co., LLC
– Texas” (LDOC-Texas), “Louisiana Delta Oil Co., LLC – Virginia” (LDOC-Virginia), and
others. The petition includes the following allegations:
Defendants, including, but not limited to Defendants Bryant and Miller, have
engaged in the following unlawful acts, among others, either while
physically present in Texas or by intentionally directing communications to
Texas residents:
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a. failed to account for and falsely reported natural gas that was produced
by the subject wells and sold by Defendants, then failed to render and
falsely reported to the working interest owners their share of revenues
therefrom;
b. failed to maintain and falsified the books and records of expenditures and
revenues from the wells;
c. acquired interests in the wells beyond their original investments without
offering the other working interest owners their contractual rights to
participate in those acquisitions;
d. allowed interest owners, for instance Combined Resources and Nakoma
Petroleum, to sell their interests but retain rights in the audit and uphole
potential in the sold wells in violation of the terms of the Joint Operating
Agreements (JOAs) and exploration agreements;
e. set up unauthorized escrow accounts in which revenues from the wells
are being improperly “held hostage” from the working interest owners;
f. held funds obtained from paid AFEs, and then failed to account for those
funds or use them for their intended purposes and falsely reported same to
the working interest owners;
g. assigned interests in the wells without notifying the other working interest
owners and without including in the assignments important language
required by the JOAs;
h. failed to account for condensates that were produced by the subject wells
and falsely reported same to the working interest owners;
i. failed to account for or deliver to Plaintiffs their share of revenues from the
subject wells and falsely reported same to the working interest owners;
j. charged unconscionable, far-above-market rates for the rental of
equipment and barges owned by Defendants and others, and falsely
reported same to the working interest owners, and then allowed the barges
to come into disrepair damaging not only the barges but damaging or
causing the loss of equipment located thereon;
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k. sold oil, gas, and other production from the wells without accounting for
it and without providing the net revenues received from its sale to the
working interest owners and falsely reported same to the working interest
owners;
l. operating the wells poorly resulting in prior and current DNR issued civil
penalties for non-compliance; two recent citations issued 12/9/2016 and
1/10/2017;
m. failed to maintain equipment in a workable manner thereby requiring
replacement equipment acquired by Defendants from their own companies
at above-market rates;
n. operated the wells in a substandard manner to negatively impact the fair
market value of the wells, effectively holding Plaintiffs’ interests hostage,
while the asset values depleted, and falsely reported same to the working
interest owners;
o. failed to respond timely to outstanding audit claims exceeding $5 million
and allowed required equipment and NAV lights to stop working, risking
fines from government authorities; and
p. continue to assign interest in wells without including the necessary State
language thereby negating the assignments as null and void.
Miller filed a special appearance, and over the course of the next two years, both
sides conducted jurisdictional discovery, including taking the depositions of Miller and
Bryant, among others. Appellants amended their petition to include the following
jurisdictional allegations against Miller specifically:
Defendant Miller has made at least two in-person visits to Texas in which
he met with representatives of [appellants.] During those visits, and through
other communications made through mail and email, Miller made various
statements to [appellants] that were false, fraudulent, and misleading, or
failed to state facts that he knew and that were relevant to [appellants’]
interests and that he had a fiduciary duty to disclose, in an effort to
encourage [appellants] to stay involved in the ventures, including false
statements or silence relating to accounting for the wells, leasing of
equipment for the wells, and other related topics as described above.
7
On October 1, 2020, the trial court conducted the special appearance hearing and
took the matter under advisement. On November 19, 2020, appellants filed their third
amended petition, alleging for the first time that the corporate defendants were the alter
egos of the individual defendants.
On December 4, 2020, after considering, among others, “the pleadings on file,” the
trial court granted Miller’s special appearance. This interlocutory appeal ensued. See TEX.
CIV. PRAC. & REM. CODE ANN. § 51.014(a)(7).
II. STANDARD OF REVIEW & APPLICABLE LAW
A. Standard of Review
“A court must have both subject matter jurisdiction over a case and personal
jurisdiction over the parties to issue a binding judgment.” Luciano v.
SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 7–8 (Tex. 2021); Spir Star AG v. Kimich,
310 S.W.3d 868, 871 (Tex. 2010). Personal jurisdiction involves a court’s ability to bind a
particular party to that judgment. Luciano, 625 S.W.3d at 8; CSR Ltd. v. Link, 925 S.W.2d
591, 594 (Tex. 1996). A special appearance allows a nonresident to appear in a Texas
court for the limited purpose of challenging the court’s exercise of personal jurisdiction.
See TEX. R. CIV. P. 120a(1).
Whether a trial court may exercise personal jurisdiction over a nonresident
defendant is a question of law we review de novo. Searcy v. Parex Res., Inc., 496 S.W.3d
58, 66 (Tex. 2016) (citing Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801,
805–06 (Tex. 2002)). In resolving this legal question, the trial court may be required to
8
decide questions of fact. Luciano, 625 S.W.3d at 8; Am. Type Culture Collection, 83
S.W.3d at 806. “When, as here, the trial court does not issue findings of fact and
conclusions of law with its judgment, we presume all factual disputes were resolved in
favor of the trial court’s decision unless they are challenged on appeal.” Luciano, 625
S.W.3d at 8; see Old Republic Nat’l Title Ins. v. Bell, 549 S.W.3d 550, 558 (Tex. 2018)
(citing BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002)).
B. Personal Jurisdiction
Under Texas’s long-arm statute, Texas courts may exercise personal jurisdiction
over a nonresident defendant that “does business” in Texas. See TEX. CIV. PRAC. & REM.
CODE ANN. § 17.042; PHC-Minden, L.P., v. Kimberly-Clark Corp., 235 S.W.3d 163, 166
(Tex. 2007). A nonresident “does business” in Texas if, among other things, it contracts
with a Texas resident and either party performs the contract in whole or in part in Texas
or the nonresident commits a tort in whole or in part in Texas. TEX. CIV. PRAC. & REM.
CODE ANN. § 17.042(1), (2). During the special appearance hearing, Miller conceded that
appellants’ pleading alleged facts that satisfied this definition.
However, because the exercise of personal jurisdiction over a nonresident
implicates due process concerns, the Texas long-arm statute reaches only “as far as the
federal constitutional requirements of due process will permit.” PHC-Minden, 235 S.W.3d
at 166 (quoting U-Anchor Adver., Inc. v. Burt, 553 S.W.2d 760, 762 (Tex. 1977)); see
Goodyear Dunlop Tires Operations, S.A., v. Brown, 564 U.S. 915, 918 (2011) (“A state
court’s assertion of jurisdiction exposes defendants to the State’s coercive power, and is
9
therefore subject to review for compatibility with the Fourteenth Amendment’s Due
Process Clause.” (citing Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945))).
Accordingly, in addition to its own decisions, the Supreme Court of Texas relies on
personal jurisdiction precedent from the United States Supreme Court and other federal
courts. PHC-Minden, 235 S.W.3d at 166.
The exercise of personal jurisdiction satisfies due process if (1) the nonresident
defendant established minimum contacts with the forum state and (2) the exercise of
jurisdiction comports with traditional notions of fair play and substantial justice. Id. (citing
Int’l Shoe, 326 U.S. at 316). When a nonresident defendant purposefully avails itself of
the privileges and benefits of conducting business in a foreign jurisdiction, its contacts are
sufficient to confer the forum with personal jurisdiction over the defendant. Moncrief Oil
Int’l, Inc. v. OAO Gazprom, 414 S.W.3d 142, 150 (Tex. 2013) (citing Retamco Operating,
Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex. 2009)). Only the defendant’s
purposeful contacts are relevant to the inquiry; unilateral activity of another party or third
person, as well as random, isolated, or fortuitous contacts by the defendant, are
insufficient to prove the defendant purposefully availed itself of the forum. Cornerstone
Healthcare Grp. Holding, Inc. v. Nautic Mgmt. VI, L.P., 493 S.W.3d 65, 70 (Tex. 2016)
(citing Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex. 2005)).
Once minimum contacts have been established, the exercise of jurisdiction will
typically comport with traditional notions of fair play and substantial justice. Spir Star, 310
S.W.3d at 878 (citing Guardian Royal Exch. Assurance, Ltd. v. English China Clays,
10
P.L.C., 815 S.W.2d 223, 231 (Tex. 1991)). To establish the contrary, the defendant must
present “a compelling case that the presence of some consideration would render
jurisdiction unreasonable.” Id. at 879 (quoting Guardian Royal, 815 S.W.2d at 231). Those
considerations include: (1) the burden on the defendant; (2) the forum state’s interest in
adjudicating the dispute; (3) the plaintiff’s interest in obtaining convenient and effective
relief; (4) the interstate judicial system’s interest in obtaining the most efficient resolution
of controversies; and (5) the shared interest of the several states in furthering
fundamental substantive social policies. Id. at 878 (citing Guardian Royal, 815 S.W.2d at
231).
A defendant’s contacts with the forum can give rise to either general or specific
jurisdiction. Cornerstone Healthcare, 493 S.W.3d at 71. The central inquiry under specific
jurisdiction is the relationship between the defendant, the forum state, and the plaintiff’s
claim. Id. (citing Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 575–76 (Tex.
2007)). General jurisdiction, on the other hand, does not require a nexus between the
defendant’s in-state contacts and the plaintiff’s claim; instead, the focus is solely on the
defendant’s contacts with the forum. Helicopteros Nacionales de Colom., S.A. v. Hall, 466
U.S. 408, 414 (1984) (citing Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952));
PHC-Minden, 235 S.W.3d at 168.
Specific jurisdiction is appropriate when the plaintiff’s claim arises from or relates
to the defendant’s contacts with the forum state. Cornerstone Healthcare, 493 S.W.3d at
71 (citing Spir Star, 310 S.W.3d at 873). To satisfy this requirement, “there must be a
11
substantial connection between those contacts and the operative facts of the litigation.”
Old Republic, 549 S.W.3d at 560 (citing Moki Mac, 221 S.W.3d at 585).
The plaintiff bears the initial burden of alleging facts that establish the trial court’s
jurisdiction. Searcy, 496 S.W.3d at 66 (citing Republic Drilling, 278 S.W.3d at 337). The
burden then shifts to the defendant to negate all bases for personal jurisdiction that exist
in the plaintiff’s pleading. Id. (citing Republic Drilling, 278 S.W.3d at 337). If the defendant
disproves the plaintiff’s jurisdictional allegations, then the plaintiff should present evidence
in support of the petition’s allegations. Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653,
659 (Tex. 2010). In a specific jurisdiction analysis, “we must analyze the defendant’s
contacts ‘on a claim-by-claim basis’ to determine whether each claim arises out of or is
related to the defendant’s minimum contacts.” TV Azteca v. Ruiz, 490 S.W.3d 29, 37 (Tex.
2016) (quoting Moncrief Oil, 414 S.W.3d at 150).
III. ANALYSIS
The sole issue before us is whether Miller’s contacts with Texas are sufficient to
confer the trial court with specific jurisdiction over him as to appellants’ various tort claims.
As a preliminary matter, the parties dispute which contacts, if any, should be considered
in our jurisdictional analysis.
A. Fiduciary Shield Doctrine Does Not Apply
First, Miller contends that all his relevant contacts with Texas were in a
representative capacity, and therefore, under the fiduciary shield doctrine, those contacts
cannot be imputed to him personally. Generally, the fiduciary shield doctrine protects a
12
nonresident corporate officer or employee from the exercise of personal jurisdiction when
all his contacts with Texas were made in a representative capacity. Tabacinic v. Frazier,
372 S.W.3d 658, 668 (Tex. App.—Dallas 2012, no pet.). However, courts applying the
fiduciary shield doctrine “have limited its application to attempts to exercise general
jurisdiction over a nonresident.” Id. (collecting cases).
Conversely, a nonresident corporate officer is not shielded from the exercise of
specific jurisdiction as to torts for which the officer may be held individually liable. Cagle
v. Clark, 401 S.W.3d 379, 390–91 (Tex. App.—Texarkana 2013, no pet.); Tabacinic, 372
S.W.3d at 668; SITQ E.U., Inc. v. Reata Rests., Inc., 111 S.W.3d 638, 651 (Tex. App.—
Fort Worth 2003, pet. denied). “Thus, a corporate officer is not protected from the exercise
of specific jurisdiction, even if all of his contacts were performed in a corporate capacity,
if the officer engaged in tortious or fraudulent conduct directed at the forum state for which
he may be held personally liable.” Cagle, 401 S.W.3d at 391; Tabacinic, 372 S.W.3d at668–69.
Here, appellants have limited their contract claims to the corporate defendants but
alleged torts against Miller for which he can be held individually liable. See Tabacinic, 372
S.W.3d at 668 (“Corporate agents are individually liable for fraudulent or tortious acts
committed while in the service of their corporation.”); Shapolsky v. Brewton, 56 S.W.3d
120, 133 (Tex. App.—Houston [14th Dist.] 2001, pet. denied) (same). Thus, the fiduciary-
shield doctrine does not protect Miller from the exercise of specific jurisdiction in this case
13
if personal jurisdiction is otherwise proper. See Cagle, 401 S.W.3d at 391; Tabacinic, 372
S.W.3d at 668–69; SITQ E.U., 111 S.W.3d at 651.
B. Alter Ego Theory Does Not Apply
Next, appellants argue the corporate defendants are Miller’s alter egos; therefore,
in addition to Miller’s individual contacts, we should impute the contacts of the corporate
defendants—all of which admittedly do business in Texas—to Miller. As previously
mentioned, appellants raised this allegation for the first time in an amended petition that
was filed after the special appearance hearing but before the trial court’s ruling. The
parties dispute whether this amended pleading was the “live pleading” when the trial court
granted the special appearance. Even assuming the alter ego theory was properly
considered by the trial court, we cannot conclude that it applies here.
“[T]he party seeking to ascribe one corporation’s actions to another corporation or
individual for jurisdictional purposes by piercing the corporate veil must prove the alter
ego relationship.” Cappuccitti v. Gulf Indus. Prods., Inc., 222 S.W.3d 468, 482 (Tex.
App.—Houston [1st Dist.] 2007, no pet.) (citing BMC, 83 S.W.3d at 798); Wilmington Tr.,
Nat’l Ass’n v. Hsin-Chi-Su, 573 S.W.3d 845, 855 (Tex. App.—Houston [14th Dist.] 2018,
no pet.). As support for their alter ego allegation, appellants have not pointed us to any
evidence in the jurisdictional record. See TEX. R. APP. P. 38.1(i) (requiring parties to
support their contentions “with appropriate citations to authorities and to the record”).
Instead, appellants only cite to the alter ego allegations in their petition, the entirety of
which are set out below:
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[Appellants] assert that the individual Defendants[ 6 ] used the corporate
structures of the corporate Defendants as shells and false fronts for
operations carried out by, and for the benefit of, the individual Defendants,
and thereby perpetrated frauds and other tortious conduct, ignored
corporate formalities, and otherwise abused the legitimate purpose of
corporate structures such that all actions by the corporate Defendants
should be attributed to the individual Defendants under the doctrine of alter
ego.
These conclusory allegations alone are insufficient to pierce the corporate veil for
jurisdictional purposes. See Booth v. Kontomitras, 485 S.W.3d 461, 483 (Tex. App.—
Beaumont 2016, no pet.) (finding conclusory allegations, without supporting evidence,
insufficient to establish alter ego for jurisdictional purposes). Moreover, although fraud is
necessary to pierce the corporate veil for purposes of liability, it “has no place in assessing
contacts to determine jurisdiction.” PHC-Minden, 235 S.W.3d at 175 (citing TEX. BUS.
ORGS. CODE ANN. § 21.223). Rather, courts consider evidence of (1) commingled funds,
(2) representations that the individual would financially back the companies, (3) the
diversion of company profits to the individual for his personal use, and (4) other failures
to keep company and personal assets separate. Booth, 485 S.W.3d at 483; Nichols v.
Tseng Hsiang Lin, 282 S.W.3d 743, 747 (Tex. App.—Dallas 2009, no pet.) (citing
Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 229 (Tex. 1990)). Having failed to point us
to any such evidence, appellants have not established that all the contacts of Miller’s
companies should be imputed to Miller. Accordingly, we turn to the nature and quality of
Miller’s individual contacts with Texas.
6 We note that there were four “individual Defendants” named in the suit—Miller, Bryant, Bryant’s
wife, and a bookkeeper that worked for LDOC-Virginia at their office in Lakeway, Texas.
15
C. Purposeful Availment
In a similar vein to his argument regarding the fiduciary shield doctrine, Miller
contends that any of his contacts with Texas benefited his companies, not him personally,
and consequently, he did not purposefully avail himself of the privileges of conducting
business within Texas. We disagree.
First, Miller owned an interest in LDOC-Texas, a Texas limited liability company
with its principal office in Texas, for approximately one year. 7 Soon after, he and Bryant,
a Texas resident, formed LDOC–Virginia, with each person owning a 50% interest in the
company. Although the company was incorporated in Virginia, Miller and Bryant elected
to establish its principal place of business in Texas for sixteen years, first in Houston, and
then in Lakeway. This is where the company’s staff worked, Bryant served as the
company’s President, and Miller visited between ten and nineteen times from 2001 until
2015 in his capacity as a manager and owner of the company. These contacts with Texas
were not the unilateral action of some third party, and they cannot be characterized as
random, isolated, or fortuitous. See Touradji v. Beach Cap. P’ship, 316 S.W.3d 15, 30–
31 (Tex. App.—Houston [1st Dist.] 2010, no pet.) (finding a nonresident defendant
“purposefully directed his activities towards Texas” where, among other contacts, he
agreed to serve as a manager of a Texas entity); TexVa, Inc. v. Boone, 300 S.W.3d 879,
888 (Tex. App.—Dallas 2009, pet. denied) (finding nonresident defendants’ contacts with
7 Miller states in an affidavit filed with his special appearance that he has “never been a member
of, nor had any interest in, [LDOC-Texas].” During his deposition, however, Miller admitted that he did own
an interest in the company but disclaimed that he was a founding member or manager. Bryant, on the other
hand, testified that Miller was a founding member and manager of LDOC-Texas.
16
Texas “were a direct result of their voluntary decisions and actions” where they formed a
Texas corporation with a Texas resident who performed some corporate functions in
Texas, even though the corporation was headquartered in California and conducted most
of its operations in California). Additionally, Miller acknowledged that he “often”
communicated with appellants by email and attended meetings with Wadi representatives
in Texas in 2007 and 2016 to discuss his company becoming, and then continuing as, the
operator under the JOAs. See Moki Mac, 221 S.W.3d at 577 (“Examples of additional
conduct that may indicate whether a defendant purposefully availed itself of a particular
forum include . . . establishing channels of regular communication to customers in the
forum state.”).
Further, LDOC-Virginia formed five joint ventures with various Texas corporations.
Each of these Texas corporations made capital contributions that made the joint ventures
possible, culminating in $103 million in net revenues distributed among the working
interest owners, according to Miller. Thus, Miller’s suggestion that he did not personally
benefit from the success of his company through its contacts with Texas is unavailing. 8
See TexVa, 300 S.W.3d at 889 (concluding “[nonresident defendants] clearly sought to
profit from their ongoing business relationship with [a Texas resident] through formation
of a Texas corporation”); Retail Software Servs., Inc. v. Lashlee, 854 F.2d 18, 23 (2d Cir.
1988) (“Fick and Janeski, through SCI, reached into New York to obtain the benefits of
8 Miller is also a member manager of several limited liability companies that received royalty
payments as owners of the leased properties.
17
selling seven franchises to be operated in the state. As officers, directors, and
shareholders, they stood to benefit from this entry into the New York market.”).
Finally, although Miller downplays the significance of his longstanding business
ties to Texas, Miller was actively involved in a company that was domiciled in Texas for
sixteen years, during which it maintained ongoing business relationships with several
Texas corporations. Beyond visiting the corporate office in Texas and regularly
communicating with other working interest owners located in Texas, Miller served as the
company’s chief financial officer and chief legal officer. As chief financial officer, Miller
was the recordkeeper for revenues generated by the wells, and he reported those
revenues to the other working interest owners in Texas, including remitting their
proportional share of the net revenues. Given all these activities purposefully directed at
Texas, Miller had fair warning that disputes arising out of or related to the JOAs may
subject him to the jurisdiction of Texas. See Schlobohm v. Schapiro, 784 S.W.2d 355,
359 (Tex. 1990) (“Schapiro became actively involved in a Texas business and voluntarily
continued his commitment for almost two years. He was investor, stockholder, director,
advisor, lender, and guarantor for Hangers. He visited the state and maintained regular
communications with some of its citizens. When we consider the degree of his
involvement, we regard it difficult to believe that anyone in Schapiro’s position could have
been surprised by the call to litigation in Texas.”).
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We conclude that Miller purposefully availed himself of the privilege of conducting
business in Texas. We must next address whether the claims against Miller arose out of
or were related to his contacts with the state.
D. Substantial Connection
Miller argues that there is no substantial connection between his Texas contacts
and the operative facts of the litigation. See Old Republic, 549 S.W.3d at 560 (citing Moki
Mac, 221 S.W.3d at 585). Rather, Miller submits that all acts and omissions giving rise to
appellants’ claims occurred in either Louisiana or Virginia, and thus, there is not a
sufficient relationship between his forum contacts and appellants’ claims. Because
appellants have alleged two main categories of claims against Miller—unintentional and
intentional torts—that rely on different contacts with Texas, we address each category in
turn. See TV Azteca, 490 S.W.3d at 37.
1. Unintentional Torts
Appellants have brought claims against both Bryant and Miller for negligence and
gross negligence, alleging they “operated the wells in a substandard manner” and “failed
to maintain equipment in a workable manner,” causing appellants’ interests in the wells
and equipment to depreciate. We conclude there is no substantial connection between
these claims and Miller’s contacts with Texas.
In Moki Mac, parents sued a Utah-based river-rafting outfitter for wrongful death
and negligent and intentional misrepresentation after their son died on a river-rafting trip
in Arizona. 221 S.W.3d at 573. The Supreme Court of Texas found that, by advertising in
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Texas, the company purposefully availed itself of the benefit of conducting business in
the state. Id. at 579. However, the court ultimately determined that there was not a
substantial connection between those advertisements, which contained the alleged
misrepresentations, and the operative facts of the litigation:
Certainly on a river rafting trip safety is a paramount concern, and we accept
as true the Druggs’ claim that Andy might not have gone on the trip were it
not for Moki Mac’s representations about safety. However, the operative
facts of the Druggs’ suit concern principally the guides’ conduct of the hiking
expedition and whether they exercised reasonable care in supervising
Andy. The events on the trail and the guides’ supervision of the hike will be
the focus of the trial, will consume most if not all of the litigation’s attention,
and the overwhelming majority of the evidence will be directed to that
question. Only after thoroughly considering the manner in which the hike
was conducted will the jury be able to assess the Druggs’ misrepresentation
claim.
Id. at 585.
Similarly, appellants’ negligence claims are principally concerned with conduct that
occurred in Louisiana, where the wells are located, and whether the operator and its
representatives exercised reasonable care in managing those assets. See id. Events in
Louisiana will consume most if not all of the litigation’s attention, and the overwhelming
majority of the evidence will be directed to what occurred there. See id.
Appellants have failed to identify which of Miller’s Texas contacts they contend are
sufficiently connected to these claims. To the extent they rely on Miller’s two meetings in
Texas where he advocated for his company to become, and then continue as, the
operator, the connection between these meetings and appellants’ claims seems to hinge
on a but-for analysis (i.e., but for his company becoming and continuing as the operator,
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Miller would not have had the opportunity to mismanage the operation), which the
supreme court has rejected in the jurisdictional inquiry. See Old Republic, 549 S.W.3d at
561 (citing Moki Mac, 221 S.W.3d at 581 (deciding that a “but-for test” is “too broad and
judicially unmoored to satisfy due-process concerns”)). To the extent they rely on the fact
that the wells were supervised from the company’s corporate office in Texas until 2016,
the uncontroverted evidence in the record establishes that Bryant was responsible for
overseeing daily operations from Texas before Miller took over and moved the corporate
office to Virginia. Moreover, we have already rejected appellants’ contention that the
Texas contacts of Miller’s companies should be imputed to him personally. Without a
sufficient nexus between Miller’s personal Texas contacts and appellants’ negligence
claims, the trial court did not err when it granted Miller’s special appearance as to these
claims. We overrule appellants’ issue in part.
2. Intentional Torts
But this is not a case where all relevant conduct occurred in Louisiana or Virginia
and merely affected parties with connections to Texas. See Walden v. Fiore, 571 U.S.
277, 291 (2014). As the United States Supreme Court has explained, although certain
claims may be substantially connected to one forum, “[a] different State’s courts may yet
have jurisdiction, because of another ‘activity [or] occurrence’ involving the defendant that
takes place in the State.” Ford Motor Co. v. Mont. Eighth Judicial Dist. Ct., __ U.S. __,
141 S. Ct. 1017, 1026 (2021) (quoting Bristol-Myers Squibb Co. v. Sup. Ct. of Cal., San
Francisco Cnty., 582 U.S. __, __, 137 S.Ct. 1773, 1780–81 (2017)).
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As LDOC-Virginia’s Chief Financial Officer, Miller testified that he maintained the
financial records for the revenues generated by the oil and gas wells at his office in
Virginia, but, consistent with the terms of the JOAs, he mailed statements and revenue
checks to appellants at their offices in Texas beginning in 2007. In 2016, after Bryant
resigned and Miller moved the company’s headquarters to Virginia, Miller also began
accounting for the operation’s expenses by sending monthly billing statements to
appellants at their offices in Texas. Appellants’ intentional tort claims are principally based
on Miller’s alleged overreporting of expenses and underreporting of revenues. Although
the validity of these claims will be tested against what actually occurred in Louisiana, we
conclude the alleged misrepresentations are sufficiently connected to Texas to satisfy
due process.
Miller contends that any alleged misrepresentations occurred in Virginia, but
appellants received and relied on the representations in Texas. See JPMorgan Chase
Bank, N.A. v. Orca Assets G.P., 546 S.W.3d 648, 653 (Tex. 2018) (listing elements of
fraud). To be sure, a false statement cannot support a claim for fraud unless “the plaintiff
actually and justifiably relied upon the representation and suffered injury as a result.” Id.(citing Ernst & Young, L.L.P. v. Pac. Mut. Life Ins., 51 S.W.3d 573, 577 (Tex. 2001)).
Thus, although Miller’s “actionable conduct” may have occurred partly outside of Texas,
it caused harm within the state. See TV Azteca, 490 S.W.3d at 53–54 (noting that, in Moki
Mac, “the actionable conduct occurred and caused harm outside of the forum state, so
the defendant’s liability arose from conduct outside of the forum state”). Regardless,
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appellants’ intentional tort claims arose directly from Miller’s repeated and ongoing
contacts with the State through his reporting and accounting obligations to Texas
residents under the JOAs. Stated differently, Miller’s contacts “form the basis of the
cause[s] of action.” Old Republic, 549 S.W.3d at 560 (citing Moki Mac, 221 S.W.3d at
585). As such, appellants’ intentional tort claims are sufficiently connected to Miller’s
Texas contacts.
E. Traditional Notions of Fair Play and Substantial Justice
Miller has not argued in the trial court or in this Court that exercising personal
jurisdiction over him in Texas would offend traditional notions of fair play and substantial
justice. See Spir Star, 310 S.W.3d at 878 (citing Guardian Royal, 815 S.W.2d at 231).
Because he has failed to present “a compelling case that the presence of some
consideration would render jurisdiction unreasonable,” we conclude that the exercise of
jurisdiction will comport with traditional notions of fair play and substantial justice. Id. at
879 (quoting Guardian Royal, 815 S.W.2d at 231). Accordingly, the trial court erred when
it granted Miller’s special appearance as to appellants’ intentional tort claims. We sustain
appellants’ issue in part.
IV. CONCLUSION
We reverse the trial court’s order granting Miller’s special appearance concerning
appellants’ claims for fraud, breach of fiduciary duty, conversion, and money had and
received. 9 We affirm the trial court’s order in all other respects. We remand this case to
9 Appellants have also alleged a civil conspiracy between all defendants, both corporate and
individual, but “civil conspiracy is a theory of vicarious liability and not an independent tort.” Agar Corp. v.
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the trial court for further proceedings.
GINA M. BENAVIDES
Justice
Delivered and filed on the
30th day of September, 2021.
Electro Cirs. Int’l, LLC, 580 S.W.3d 136, 142 (Tex. 2019).
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