Michael J. Peter v. Joshua Stern ( 2020 )

Dissenting Opinion Filed August 18, 2020
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-20-00021-CV
MICHAEL J. PETER, Appellant
v.
JOSHUA STERN, Appellee
On Appeal from the 160th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-18-18146
DISSENTING OPINION
Before Chief Justice Burns1 and Justices Pedersen, III, and Evans
Dissenting Opinion by Justice Evans
Appellant Michael J. Peter, a Florida resident, appeals the trial court’s denial
of his special appearance contesting personal jurisdiction regarding appellee Joshua
Stern’s claims for fraud and breach of contract pertaining to a failed business venture
in the Republic of Panama. Stern has no evidence of any intentional contact by Peter
with Texas or evidence this transaction has any connection to Texas. Although it is
uncontested Texas has jurisdiction over others connected with Stern’s claims, Texas
1
The Honorable David L. Bridges, Justice, participated in the submission of this case, however, he did
not participate in the issuance of this opinion due to his death on July 25, 2020. Chief Justice Robert Burns
has substituted for Justice Bridges and has reviewed the briefs and the record before the Court.
does not have jurisdiction over Peter. Because Peter challenges the legal and factual
sufficiency of the evidence supporting the trial court’s denial of his special
appearance and because I agree there is no evidence in this record to support the trial
court’s ruling, I would reverse the trial court’s order and render judgment granting
Peter’s special appearance. Because the majority concludes otherwise, I respectfully
dissent.
We review de novo the trial court’s determination of a special appearance.
Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007). Where,
as here, the trial court did not issue findings of fact and conclusions of law with its
ruling, we imply all facts that are supported by the evidence to uphold the trial
court’s determination. Moki Mac, 221 S.W.3d at 574.
The defendant bears the burden of negating all bases of personal jurisdiction
alleged by the plaintiff. See Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653,
658 (Tex. 2010). Once the defendant negates the bases alleged, the plaintiff must
show, as a matter of law, that the court has personal jurisdiction over the nonresident
defendant. Alliance Royalties, LLC v. Boothe, 329 S.W.3d 117, 120 (Tex. App.—
Dallas 2010, no pet.); Assurances Generales Banque Nationale v. Dhalla, 282
S.W.3d 688, 695–96 (Tex. App.—Dallas 2009, no pet.).
Jurisdiction may be negated on either factual or legal grounds. Kelly, 301
S.W.3d at 659. One factual ground that may be challenged in the jurisdictional
inquiry is an agency relationship by which the contacts of an agent are sought to be
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attributed to the principal. Novamerican Steel, Inc. v. Delta Brands, Inc., 231
S.W.3d 499, 511 (Tex. App.—Dallas 2007, no pet.); see Davis v. Asano Bussan Co.,
212 F.2d 558, 563–64 (5th Cir. 1954).
A principal must be shown to control another person’s conduct of business or
to have delegated to that other person management of some matter for the other to
be the principal’s agent. See Schott Glas v. Adame, 178 S.W.3d 307, 315 (Tex.
App.—Houston [14th Dist.] 2005, pet. denied), disapproved of on other grounds by
PHC–Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 169 (Tex. 2007);
Walker Ins. Servs. v. Bottle Rock Power Corp., 108 S.W.3d 538, 549 (Tex. App.—
Houston [14th Dist.] 2003, no pet.). Courts do not presume an agency relationship
exists, rather the party asserting an agency relationship exists has the burden of
proof. See Schott Glas, 178 S.W.3d at 315; Bottle Rock, 108 S.W.3d at 549.
Discharging the burden of proof requires proving an essential element of the
principal–agent relationship that the alleged principal had the right to control the
actions of the alleged agent. See Exxon Corp. v. Tidwell, 867 S.W.2d 19, 21 (Tex.
1993). To prove the right to control more must be proven than merely the right to
assign tasks; there must be proof of the right to dictate the means and details of the
process by which an agent will accomplish the task. See Ross v. Tex. One P’ship,
796 S.W.2d 206, 210 (Tex. App.—Dallas 1990), writ denied, 806 S.W.2d 222 (Tex.
1991) (per curiam). If there is proof only of the right to control the end sought to be
accomplished, but not the means and details of how it should be accomplished, then
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what has been proven is that the alleged agent is merely employed as an independent
contractor and not as an agent. Schott Glas, 178 S.W.3d at 315; First Nat’l Bank v.
Bullock, 584 S.W.2d 548, 551–52 (Tex. App.—Austin 1979, writ ref’d n.r.e.). These
concepts are distilled in the pattern jury charge as follows:
An “employee” is a person in the service of another with the
understanding, express or implied, that such other person has the right
to direct the details of the work and not merely the result to be
accomplished.
Agency and Special Relationships, ¶ 10.1, TEX. PATTERN JURY CHARGE (2018).
A person is not acting as an employee if he is acting as an “independent
contractor.” An independent contractor is a person who, in pursuit of
an independent business, undertakes to do specific work for another
person, using his own means and methods without submitting himself
to the control of such other person with respect to the details of the
work, and who represents the will of such other person only as to the
result of his work and not as to the means by which it is accomplished.
Id. at ¶ 10.8.
In the context of personal jurisdiction, this distinction between agent and
independent contractor is outcome determinative because only an agent’s contacts
with the forum are attributable to the principal, not the contacts of an independent
contractor. See Schott Glas, 178 S.W.3d at 315; Bottle Rock, 108 S.W.3d at 549 n.4
(citing Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42,
55 (1st Cir. 2002)).
I focus on specific jurisdiction because Stern limited his pleading and
arguments to specific jurisdiction. We analyze specific jurisdiction on a claim-by-
claim basis. See Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 150
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(Tex. 2013). But when the parties provide no pleading, argument, or analysis
regarding the claims arising from different forum contacts, we analyze all the claims
together on the same jurisdictional facts. Id. at 150–51 (“[A] court need not assess
contacts on a claim-by-claim basis if all claims arise from the same forum
contacts.”).
Specific jurisdiction exists only when the nonresident defendant’s alleged
liability arises out of or is related to his activity conducted within the forum. See
Moki Mac, 221 S.W.3d at 576. The contacts with the forum that we are to analyze
for jurisdictional purposes are those where the contacts proximately result from
actions by the defendant himself that create a substantial connection with the forum
State. See Moncrief Oil, 414 S.W.3d at 151 (citing Burger King Corp. v. Rudzewicz,
471 U.S. 462, 473, 475 (1985)). A substantial connection can result from even a
single act. See id. (citing McGee v. Int’l Life Ins. Co., 355 U.S. 220, 223 (1957)).
But there must be a substantial connection between those contacts and the operative
facts of the litigation. See id. at 156 (quoting Moki Mac, 221 S.W.3d at 585). The
operative facts are those on which the trial will focus to prove the liability of the
defendant who is challenging jurisdiction. See id. at 156, 157 (citing Moki Mac, 221
S.W.3d at 585).
Important to this case is the Texas Supreme Court’s application of these
principles in Moncrief Oil. There the court declined to exercise specific jurisdiction
over a foreign company on the tortious interference claims against it. See id. at 156–
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57. The supreme court reasoned that when the alleged communications on which
liability was based occurred at a meeting in California, even though individuals from
Texas participated in the meeting and the alleged result of the meeting was the
decision to breach a contract performable in Texas, those operative facts were not
substantially connected to Texas for the jurisdictional analysis. Id.
So, I begin by pointing out Stern’s three trips to Florida—similar to the
California trip in Moncrief Oil—his conversations in Florida with Peter, Peter’s
allegedly fraudulent statements in Florida to Stern, and the club in Panama are not
jurisdictional facts connecting Peter to Texas. See id.
Stern appears to recognize this because he claims, “Peter carried out his
scheme through two agents – Edwin (“Eddy”) Maldonado and David Sebag.” Stern
relies on the following evidence to prove Maldonado and Sebag were agents, as
opposed to independent contractors, of Peter:
 Maldonado lived in Texas;
 Sebag lived on Peter’s yacht in Florida;
 “Both agents were financially supported by Peter”;
 “Seeking prospective investors in Texas, Peter told Maldonado that
Maldonado would be rewarded 5% of any investments he obtained from
Texas investors”;
 “Sebag helped carry out the scheme by writing Stern emails”;
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 “Eventually, Sebag acted as Peter’s bagman by coming to Texas and
personally collecting cash for Peter's scheme.”
 Stern alleged Sebag and Peter were in the “Panama Project” or one or more
related entities and that Sebag’s actions on behalf of the entity were, therefore,
on behalf of Peter.2
Even if Stern proved all of these matters with competent evidence, which it is
doubtful he did on this record, none of these amount to evidence that Peter had the
right to control the means and details of how Maldonado or Sebag should work
towards the goal sought to be accomplished. See Ross, 796 S.W.2d at 210. What
Stern’s proof does show is Peter offered 5% compensation for acquiring investors,
and then Maldonado or Sebag worked to acquire investors. Stern’s proof further
shows that Peter was involved when Stern visited him in Florida three times and
there made statements on which Stern predicates his claims. Instead, Stern proved
at most Maldonado and Sebag were merely employed as independent contractors
and not as agents. See Schott Glas, 178 S.W.3d at 315; Bullock, 584 S.W.2d at 551–
52.
There is a significant dispute between Peter and Stern about different entities and their relationship to
2
each of them, Sebag, and the project to develop the club in Panama. We need not resolve these tangential
matters because even if Sebag acted on behalf of an entity in which Peter owned an interest, Stern still must
show Peter had the right to control Sebag’s manner and means of his activities for Sebag’s jurisdictional
contacts to be attributable to Peter. See, e.g., Olympia Capital Assocs., L.P. v. Jackson, 247 S.W.3d 399,
412–13 (Tex. App.—Dallas 2008, no pet.) (agency not shown, just independent contractor relationship, so
jurisdictional contacts of independent contractor not attributable to non-resident defendant).
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Stern was obligated to do more than simply label Maldonado and Sebag as
Peter’s agents. For Stern to be able to attribute the jurisdictional acts of Maldonado
or Sebag to Peter, Stern had to prove Peter had the right to control the actions of
Maldonado or Sebag. See Tidwell, 867 S.W.2d at 21. This required Stern to prove
more than Peter’s right merely to assign tasks; Stern had to prove Peter had the right
to dictate the means and details of the process by which Maldonado or Sebag would
accomplish the task. See Ross, 796 S.W.2d at 210. Instead, Stern proved at most
Maldonado or Sebag were independent contractors and not agents. Schott Glas, 178
S.W.3d at 315; Bullock, 584 S.W.2d at 551–52. Stern’s lack of any evidence of the
critical aspect of agency is outcome determinative because only an agent’s contacts
with the forum are attributable to the principal, not the contacts of an independent
contractor. See Schott Glas, 178 S.W.3d at 315; Bottle Rock, 108 S.W.3d at 549 n.
4. Courts do not presume an agency relationship exists; rather the party asserting an
agency relationship exists has the burden of proof. See Schott Glas, 178 S.W.3d at
315; Bottle Rock, 108 S.W.3d at 549. This is longstanding precedent:
 “Texas law does not presume agency, and the party who alleges it has
the burden of proving it. . . . Nothing in this record shows that IRA
Resources even had knowledge, much less control, over Martinez or
his employer, whose independent actions cannot subject IRA
Resources to specific jurisdiction in Texas. Griego’s jurisdictional
argument fails at the most threshold level.” IRA Res., Inc. v. Griego,
221 S.W.3d 592, 596–97 (Tex. 2007) (citing Buchoz v. Klein, 184
S.W.2d 271, 271 (1944));
 “Seeking to establish the purposeful availment prong of the specific
jurisdiction inquiry, O’Quinn first contends that personal jurisdiction
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over World is proper in Texas because a principal-agent relationship
existed between World and Merit when Merit established recruiting
offices and performed recruiting services in Texas. According to well-
established law, a defendant may be found subject to personal
jurisdiction as a result of the actions of an agent. Davis v. Asano
Bussan Co., 212 F.2d 558, 563 (5th Cir. 1954); Sher v. Johnson, 911
F.2d 1357, 1362 (9th Cir. 1990). Under Texas law, in order for a
principal-agent relationship to be established, the principal must have
the right to control both the means and the details of the process by
which the agent accomplishes the actions at issue. First Nat’l Bank of
Fort Worth v. Bullock, 584 S.W.2d 548, 551-52 (Tex. App.-–Dallas
1979, writ ref’d n.r.e.). Although the World-Merit contract specifies
that Merit is to provide the labor and local facilities necessary to
process applications, World simply does not have contractual authority
to determine where such facilities are to be located. When Merit
established its office in Texas City, Merit purposefully availed itself of
the laws and protections of Texas. However, World did not have
sufficient control over the means or details of Merit’s actions to
establish an agency relationship.” O’Quinn v. World Indus.
Constructors, No. 95-40258, 1995 WL 581830, at *2 (5th Cir. Sept.
19, 1995);
 “Shareholder status is not ipso facto proof of agency. Instead, the
‘essential feature’ of agency is the ‘right of control.’ . . . Here, the
evidence presented by Stocksy shows that it did not have a right to
control Curette when she photographed Morris, edited the
photographs, and uploaded them onto her Stocksy profile.” Stocksy
United v. Morris, 592 S.W.3d 538, 548 (Tex. App.—Houston [1st
Dist.] 2019, no pet.) (quoting Capital Fin. & Commerce AG v. Sinopec
Overseas Oil & Gas, Ltd., 260 S.W.3d 67, 85 (Tex. App.—Houston
[1st Dist.] 2008, no pet.));
 “The requirement that Blue Endo keep Trokamed informed of its
activities and the market conditions of the territory, and that Blue Endo
advise Trokamed if approval, permits, or consents are lacking, is not
evidence that Trokamed had an actual right of control over Blue Endo
sufficient to attribute Blue Endo’s contacts with Texas to Trokamed.
See Greenfield Energy, Inc. v. Duprey, 252 S.W.3d 721, 733 (Tex.
App.—Houston [14th Dist.] 2008, no pet.) (concluding that in
assessing whether one party’s contacts can be imputed upon another,
critical test focuses on right and/or exercise of control). To the
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contrary, the distribution agreement reflects the parties’ express
agreement that Blue Endo would preserve its independent status . . . .”
Trokamed GmbH v. Vieira, No. 01-17-00485-CV, 2018 WL 2436610,
at *8 (Tex. App.—Houston [1st Dist.] May 31, 2018, no pet.) (mem.
op.);
 “Bluesky alleges that Edge was an agent of 21st Century and Georgas.
Bluesky provides no support for his position, however . . . .
Furthermore, the Edge Solutions Marketing Agreement (‘Agreement’)
between Edge and 21st Century . . . expressly states that Edge is an
‘independent contractor.’ . . . Indeed, the Agreement displays no
direction as to when, where, or how Edge was to perform its work for
21st Century and Georgas, which implies an independent contractor
relationship.” Blueskygreenland Envtl. Sols., LLC v. Rentar Envtl.
Sols., Inc., No. 4:11-CV-01745, 2011 WL 5553706, at *5 (S.D. Tex.
Nov. 14, 2011).
Requiring Stern to prove Peter’s right to control the manner and details of
Maldonado and Sebag’s work in order to prove an agency relationship is neither
trivial nor a mere hyper-technicality. It in fact relates to the foundational structure
of our United States and determines the negligence liability of employers.
In the absence of any evidence of agency, the majority opinion authorizes the
extension of the jurisdictional power of Texas to hale into a Texas court a Floridian
who never came to Texas and dealt with the Texan when the Texan traveled to
Florida three times. This violates the Floridian’s due process rights when Texas
exercises sovereignty over conduct that occurred in Florida. See Burger King Corp.
v. Rudzewicz, 471 U.S. 462, 472 n.13 (1985) (“Although this protection operates to
restrict state power, it must be seen as ultimately a function of the individual liberty
interest preserved by the Due Process Clause rather than as a function of federalism
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concerns.”) (internal quotation deleted). And even if Peter structured his effort to
raise investment funds in the Panama club by using independent contractors to avoid
jurisdiction outside of Florida, he is allowed to do so thereby conforming his conduct
to the rule of law. A nonresident is entitled to rely on the constitutional limit of
Texas’s personal jurisdiction imposed by the requirement that the nonresident must
purposefully avail himself of the benefits of Texas law and structure his transactions
so as to not profit from Texas’s laws nor subject himself to Texas’s jurisdiction. See
Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex. 2005)
(“[A] nonresident may purposefully avoid a particular jurisdiction by structuring its
transactions so as neither to profit from the forum’s laws nor be subject to its
jurisdiction.” (citing Burger King, 471 U.S. at 463)). There is nothing sinister about
doing so just as when individuals and businesses structure their conduct to minimize
or avoid tax liability. See Ratzlaf v. United States, 510 U.S. 135, 145–46 (1994)
(absent anti-structuring law such as money-laundering statute, “Courts have noted
many occasions on which persons, without violating any law, may structure
transactions in order to avoid the impact of some regulation or tax.” (internal
quotation deleted), providing example regarding Stamp Act of 1862 and citing
United States v. Isham, 84 U.S. (17 Wall.) 496, 506 (1873)). This is, in fact, the
purpose of the rule of law, to enable everyone to conform their conduct to the law
with the expectation the law will be upheld in court. So, when a court decides the
reach of one state’s jurisdictional power crosses state boundaries to govern conduct
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that occurred in another state it should only do so carefully, in compliance with the
constitutional constraints, and when supported by the facts in the record, which are
lacking here.
Additionally, failing to require proof of the right to control the manner and
details of how work is accomplished in order to prove agency will result in holding
principals liable for the negligence of the independent contractors they hire. There
is a reason the pattern jury charge places the jury submissions of agency and
independent contractor—both quoted above—among the general negligence
sections. See Agency and Special Relationships, ¶¶ 10.1, 10.8, TEX. PATTERN JURY
CHARGE (2018). That is because the issue arises frequently in the context of
negligence cases. And just as in the jurisdictional context where the absence of
evidence of the right to control the manner and details of how work is done can be
dispositive, the difference between agency and independent contractor status is
liability determinative in negligence cases. That is, if the tortfeasor is the agent of a
principal, the principal is liable for the negligence of the agent; but if the tortfeasor
is an independent contractor, the putative principal is not liable for his negligence.
As this Court summarized,
Under the doctrine of respondeat superior, an employer is vicariously
liable for the negligence of an agent or employee acting within the
scope of his or her agency or employment, although the principal or
employer has not personally committed a wrong. Baptist Mem’l Hosp.
Sys. v. Sampson, 969 S.W.2d 945, 947 (Tex. 1998); DeWitt v. Harris
County, 904 S.W.2d 650, 654 (Tex. 1995). The justification for
imposing such liability is that the principal or employer has the right
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to control the means and methods of the agent or employee’s work.
Baptist Mem’l Hosp. Sys., 969 S.W.2d at 947; see Newspapers, Inc. v.
Love, 380 S.W.2d 582, 585–86 (Tex. 1964). In contrast, an individual
or entity that hires an independent contractor is generally not
vicariously liable for the tortious acts or negligence of that person
because the independent contractor has sole control over the means and
methods of the work to be accomplished. See Baptist Mem’l Hosp. Sys.,
969 S.W.2d at 947; Enserch Corp. v. Parker, 794 S.W.2d 2, 6 (Tex.
1990); Redinger v. Living, Inc., 689 S.W.2d 415, 418 (Tex. 1985).
Espalin v. Children’s Med. Ctr. of Dallas, 27 S.W.3d 675, 683 (Tex. App.—Dallas
2000, no pet.) (emphasis added). So, if we water down the requirement that there
be proof that Peter had the right to control the means and details of how Maldonado
or Sebag should accomplish their goal of acquiring investors to nothing more than
Peter had the right to control the goal or end sought to be accomplished, that results
in making principals liable for the negligent acts of the independent contractors they
hire. This is not some hyper-technical requirement; it’s the whole basis for a
principal’s respondeat superior liability for the negligent acts of his agent: because
the principal has the right to control how an agent performs the manner and details
of the work and should exercise that right to control in a reasonably prudent manner
towards others. See id. (citing Baptist Mem’l Hosp. Sys., 969 S.W.2d at 947 and
Love, 380 S.W.2d at 585–86). Reducing proof of agency to nothing more than
independent contractor status, as the majority does, results in a massive expansion
of liability for every individual (here, Peter) and every business alleged to be the
principal when its independent contractor is alleged to be its agent.
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On this record, I conclude Stern failed to bring forward any evidence Peter
had the right to control the manner and details of how Maldonado and Sebag were
to go about their work to acquire investors. We should not assume an agency
relationship by which Maldonado and Sebag’s jurisdictional conduct (and their
negligent conduct, too, if any) are imputed to Peter. On this record, we should not
denigrate Peter’s due process rights by aggrandizing the jurisdictional power of
Texas, we should not expand the liability of every alleged principal in negligence
cases beyond the common law respondeat superior liability for agents, and we
should reverse the trial court’s order and render judgment granting Peter’s special
appearance. Because the majority opinion concludes otherwise, I respectfully
dissent.
/David Evans/
DAVID EVANS
JUSTICE
200021DF.P05
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