Gonzalez v. AAG-Las Vegas, LLC
(Tex.App.- Houston [1st Dist.] Jun. 4, 2009)(Wilson, Davie)
(interlocutory appeal, special appearance, personal jurisdiction)
REVERSE TC JUDGMENT AND RENDER JUDGMENT: Opinion by Judge Wilson
Before Chief Justice Radack, Judge Wilson, Justice Alcala
01-08-00377-CV David M. Gonzalez v. AAG-Las Vegas, L.L.C., Ascent Automotive Group, L.P.,
KW#1 Acquisition Company, L.L.C.
Appeal from 189th District Court of Harris County
Trial Court Judge:
Hon. William R. Burke. Jr.   

O P I N I O N

In this accelerated, interlocutory appeal, appellant, David M. Gonzalez ("Gonzalez"), challenges
the trial court's order denying his special appearance. (1) In his sole issue on appeal, Gonzales
contends that he is not amenable to service in Texas because he did not have sufficient
minimum contacts with Texas to satisfy the requirements of due process. We reverse and
render.

Background

Gonzalez is a resident of Las Vegas, Nevada. Appellee AAG-Las Vegas, L.L.C. ("AAG-Las
Vegas") is a Delaware limited liability company with its principle place of business in Nevada.
Appellee KW#1 Acquisition Company, L.L.C. ("KW#1") is a Delaware limited liability company
with its principle place of business in Ohio. Appellee Ascent Automotive Group, L.P. ("Ascent") is
a Delaware limited partnership with its principal place of business in Houston, Texas.

While employed in Ohio at an automotive dealership, Gonzalez was approached by David Watts
("Watts"), Chief Operating Officer of Ascent, regarding a possible management position with
Lexus of Akron-Canton, an Ohio Lexus dealership that Watts was considering purchasing with
Kevin Whalen ("Whalen"). In June 2004, Gonzalez traveled to Houston to interview for the
general manager position. At the Houston meeting, Gonzalez interviewed with Watts, Whalen,
and Jerry Pyle ("Pyle"). In addition to evaluating Gonzalez at the meeting, Watts and Whalen
asked Pyle to invest in the Akron dealership as well as a Lexus dealership in Cleveland. During
the interview, the parties discussed a program to permit managers to acquire a partial interest in
the car dealerships. Gonzalez claims that, during these discussions, he was promised the right
to earn a ten percent ownership in the two car dealerships.

The following September, KW#1 hired Gonzalez to be the general manager of the KW#1 Lexus
of Akron-Canton dealership. As general manager of the Canton dealership, Gonzalez reported
to Watts in Texas and received his pay from Texas. Gonzalez also regularly telephoned Houston
to report on the status of the dealership.

In 2005, AAG Las Vegas purchased a Lexus dealership in Las Vegas, Nevada ("Lexus of Las
Vegas"). Shortly after that, AAG Las Vegas hired Gonzalez to be the general manager of Lexus
of Las Vegas.

After accepting the position, Gonzalez moved from Ohio to Las Vegas and began working as
general manager of Lexus of Las Vegas. During his time as general manager, Gonzalez made
another trip to Houston to attend a two-day general manager's meeting. Appellant's duties at
AAG Lexus of Las Vegas were identical to his duties at KW#1's Lexus of Akron-Canton. AAG
Las Vegas was the corporate entity responsible for paying Gonzalez as general manager of
Lexus of Las Vegas.

In Fall 2006, AAG Las Vegas terminated Gonzalez's employment with Lexus of Las Vegas. AAG
Las Vegas asserts that it terminated Gonzalez because, while Gonzalez was employed at Lexus
of Las Vegas, he (1) improperly usurped business opportunities by secretly trying to obtain
other dealerships, (2) actively recruited other Lexus of Las Vegas employees to leave Lexus of
Las Vegas, (3) improperly purchased a car from one of his recruits, (4) did not effectively attend
to inventory management, causing reduced profits, and (5) was late and unprepared for
meetings at the Las Vegas dealership.

On October 19, 2006, appellees sued Gonzalez in Texas in this case. Among other things, they
sought to declare the parties' ownership interests in Lexus of Las Vegas and Lexus of
Akron-Canton. On January 26, 2007, Gonzalez sued appellees in Nevada, also seeking a
declaration of the parties' rights to the two dealerships in addition to various other causes of
action. The two lawsuits are founded on substantially the same issues and facts.

Gonzalez filed a special appearance in this case, challenging the trial court's in personam
jurisdiction over him for the entire proceeding. Gonzalez contended that he lacked the requisite
minimum contacts with Texas to satisfy the requirements of due process and that the trial court's
exercise of personal jurisdiction over him would violate the traditional notions of fair play and
substantial justice. Appellees filed a response. Following a hearing, the trial court denied
Gonzalez's special appearance. This interlocutory appeal followed.

Gonzalez's Special Appearance

In his sole issue, Gonzalez contends that the trial court erred in denying his special appearance.

A. Standard of Review

Special appearances are governed by Rule 120a of the Texas Rules of Civil Procedure, which
provides that "a special appearance may be made by any party . . . for the purpose of objecting
to the jurisdiction of the court over the person or property of the defendant on the ground that
such party or property is not amenable to process by the courts of this State." Tex. R. Civ. P.
120a. The existence of personal jurisdiction is a question of law reviewed de novo by this Court.
BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). However, this question
must sometimes be preceded by resolving underlying factual disputes. Id. When, as here, the
trial court does not issue fact findings, we presume that the trial court resolved all factual
disputes in favor of its ruling. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806
(Tex. 2002).

B. Personal Jurisdiction

"Texas courts may assert personal jurisdiction over a nonresident defendant only if the Texas
long-arm statute authorizes jurisdiction and the exercise of jurisdiction is consistent with federal
and state due process standards." Id. (citing Guardian Royal Exch. Assurance, Ltd. v. English
China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex. 1991)); see Texas Civ. Prac. & Rem. Code
Ann. §§ 17.041-.045 (Vernon 2008) (Texas long-arm statute). The long-arm statute allows
Texas courts to exercise jurisdiction over a nonresident defendant that "does business" in the
state. Tex. Civ. Prac. & Rem. Code Ann. §17.042 (Vernon 2008). The Texas Supreme Court
has held that "section 17.042's broad language extends Texas courts' personal jurisdiction as
far as the federal constitutional requirements of due process will permit." BMC Software, 83
S.W.3d at 795.

Initially, the plaintiff bears the burden of pleading allegations sufficient to bring a nonresident
defendant within the terms of the Texas long-arm statute. Am. Type Culture Collection, 83
S.W.3d at 807. However, a nonresident defendant who files a special appearance assumes the
burden of negating all bases of personal jurisdiction that the plaintiff has alleged. Id. We review
all evidence in the record to determine if the nonresident defendant negated all possible
grounds. N803RA, Inc. v. Hammer, 11 S.W.3d 363, 366 (Tex. App.--Houston [1st Dist.] 2000, no
pet.) (citing Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 203 (Tex. 1985)).

Personal jurisdiction over nonresident defendants is constitutional when two conditions are met:
(1) the defendant has established minimum contacts with the forum state, and (2) the exercise
of jurisdiction comports with traditional notions of fair play and substantial justice. Am. Type
Culture Collection, 83 S.W.3d at 806 (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66
S. Ct. 154, 158 (1940)). A nonresident defendant's minimum contacts must derive from
purposeful availment: a nonresident defendant must have "purposefully availed" itself of the
privileges and benefits of conducting business in the foreign jurisdiction to establish sufficient
contacts with the forum to confer personal jurisdiction. Id. (citing Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 474-76, 105 S. Ct. 2174, 2183-84 (1985)); Xenos Yuen v. Fisher, 227
S.W.3d 193, 200 (Tex. App.--Houston [1st Dist.] 2007, no pet.). An act or acts "by which the
defendant purposefully avails itself of the privilege of conducting activities" in Texas and "thus
invok[es] the benefits and protections" of Texas law, constitutes sufficient contact with Texas to
confer personal jurisdiction. Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 784
(Tex. 2005) (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228, 1240 (1958)).

We consider three elements in assessing purposeful availment. See Michiana Easy Livin'
Country, 168 S.W.3d at 785; First Oil PLC v. ATP Oil & Gas Corp., 264 S.W.3d 767, 782 (Tex
App.--Houston [1st Dist.] 2008, no pet.). First, we consider only the defendant's own actions, not
those of the plaintiff or any other third party. Michiana Easy Livin' Country, 168 S.W.3d at 785;
First Oil PLC, 264 S.W.3d at 782; see also U-Anchor Adver., Inc. v. Burt, 553 S.W.2d 760, 763
(Tex. 1977) (quoting Hanson v. Denckla, 357 U.S. at 253, 78 S. Ct. at 1239-40 (1958)) ("The
unilateral activity of those who claim some relationship with a nonresident defendant cannot
satisfy the requirement of contact with the forum State. The application of that rule will vary with
the quality and nature of the defendant's activity, but it is essential in each case that there be
some act by which the defendant purposefully avails itself of the privilege of conducting activities
within the forum State, thus invoking the benefits and protections of its laws.").

Second, the defendant's activities must be purposeful, not random, isolated, or fortuitous.
Michiana Easy Livin' Country, 168 S.W.3d at 785; First Oil PLC, 264 S.W.3d at 782. "It is the
quality rather than the quantity of contacts that is determinative." First Oil PLC, 264 S.W.3d at
782 (emphasis in original). Third, the defendant must seek some benefit, advantage, or profit by
virtue of its activities in the proposed forum state, because this element is based on the notion
of implied consent. Michiana Easy Livin' Country, 168 S.W.3d at 785; First Oil PLC, 264 S.W.3d
at 782.

Our jurisdictional analysis is further divided into general and specific jurisdiction. CSR, Ltd. v.
Link, 925 S.W.2d 591, 595 (Tex. 1996). General jurisdiction will attach when "a defendant's
contacts in a forum are continuous and systematic permitting the forum to exercise personal
jurisdiction over the defendant even if the cause of action did not arise from or relate to
activities conducted within the forum state." Id. To support general jurisdiction, the defendant's
forum activities must have been "substantial," which requires stronger evidence of contacts than
for specific personal jurisdictions. Preussag Aktiengesellschaft v. Coleman, 16 S.W.3d 110, 114
(Tex. App.--Houston [1st Dist.] 2000, pet. dism'd w.o.j.).

Specific jurisdiction arises when the defendant's alleged liability arises from or is related to an
activity conducted within the forum. BMC Software, 83 S.W.3d at 796. "For a nonresident
defendant's forum contacts to support an exercise of specific jurisdiction, there must be a
substantial connection between those contacts and the operative facts of the litigation." Moki
Mac River Expeditions v. Drugg, 221 S.W.3d 569, 585 (Tex. 2007). This requirement assesses
"the strength of the necessary connection between the defendant, the forum, and the litigation."
Id at 584.

C. Discussion

In his sole issue, Gonzalez asserts that the trial court erred in denying his special appearance
because Gonzalez is not subject to Texas's specific personal jurisdiction and because the
exercise of personal jurisdiction over him does not comport with fair play and substantial justice.
Gonzalez contends he does not have the minimum contacts necessary to subject him to specific
personal jurisdiction in Texas because: (1) he has not purposefully availed himself of the laws
and privileges of doing business in Texas, and (2) his contacts with Texas are not related with
appellee's claims in this litigation. Appellees respond that jurisdiction is proper because there is
a substantial connection between Gonzalez's contacts with Texas and the operative facts of this
litigation. Specifically, appellees assert that the declaratory judgment action concerns the
interpretation of the communications that took place at the Houston meeting regarding
ownership of both the Akron and Las Vegas dealerships.

In addition to relying on the Houston meeting to establish jurisdiction, appellees note several
additional facts that they contend establish that Gonzalez had sufficient minimum contacts with
Texas, i.e., that Gonzalez purposely availed himself of the privilege of conducting activities within
the State of Texas. Specifically, appellees point to the following:

1. Gonzalez sought out employment in Texas, along with related benefits, such as health
insurance and bonuses.

2. Gonzalez was paid from Texas for his employment.

3. Gonzalez traveled to Texas to attend a "forecast and training" meeting, attendance at which
was a requirement of Gonzalez's continued employment in Nevada.

4. Gonzalez regularly reported to executives in Texas.

5. Gonzalez claims entitlement to "Texas property" because he claims a ten percent ownership
interest in KW#1 and AAG-Las Vegas. (2)

Appellees' focus on Gonzalez's contacts with Texas, particularly the Houston meeting at which
Gonzalez's compensation package was discussed, is overly broad. Compare Pelican State
Physical Therapy, L.P. v. Bratton, No. 01-06-00199-CV, 2007 WL 2833303, at *10 (Tex.
App.--Houston [1st Dist.] Sept. 27, 2007) (mem. op.) (holding trial court did not err in refusing to
exercise specific personal jurisdiction over out-of-state defendant when operative facts in
plaintiff's suit concerned acts that happened while defendant was employed at plaintiff's
Louisiana clinic, rather than in Texas).

As applied to this case, the test for specific personal jurisdiction over Gonzalez requires--in
addition to Gonzalez's purposeful direction of activities toward or purposeful availment of the
privileges of doing business in Texas--a substantial connection between his contacts and the
litigation's operative facts. See Moki Mac River Expeditions, 221 S.W.3d at 584. Assuming
without deciding that the contacts to which appellees point show purposeful availment of Texas's
benefits, we hold that there is not a sufficient connection between those contacts and the
litigation to support the exercise of specific personal jurisdiction over Gonzalez. See Pelican
State Physical Therapy, 2007 WL 2833303, at *7.

Appellee's First Amended Original Petition alleges causes of action against Gonzalez for (1)
breach of fiduciary duty of loyalty to Lexus of Las Vegas, (2) usurpation of corporate
opportunities, and (3) a declaratory judgment that Gonzalez is not entitled to an ownership
interest in Lexus of Las Vegas and Lexus of Akron-Canton. (3) The facts that appellees alleged
in support of the breach of loyalty and usurpation claims are that Gonzalez (1) improperly
usurped business opportunities by secretly trying to obtain other dealerships, (2) actively
recruited other Lexus of Las Vegas employees to leave Lexus of Las Vegas, (3) improperly
purchased a car from one of his recruits, (4) did not effectively attend to inventory management,
causing reduced profits, and (5) was late and unprepared for meetings at the Las Vegas
dealership. (4)

Given these pleadings, the operative facts of appellees' breach of loyalty and usurpation claims
concerns Gonzalez's acts while general manager in Las Vegas. These are the facts that are
relevant for a specific personal-jurisdiction analysis, and the allegations and the evidence shows
that these acts happened in Nevada. See id. (holding that test for the "relatedness" portion of
the specific personal-jurisdiction test is that a substantial connection exist between the
litigation's operative facts and the nonresident defendant's contacts with Texas); see also
Gustafson v. Provider Healthnet Servs., Inc., 118 S.W.3d 479, 483 (Tex. App.--Dallas 2003, no
pet.) (holding that none of nonresident's following contacts was sufficiently connected to
execution of confidentiality agreement that nonresident was alleged to have breached or to
dissemination of confidential information so as to allow exercise of specific personal jurisdiction
over him: (1) employment relationship itself, (2) two visits to Texas during employment, (3)
payment from Texas bank, (4) submission of requests for reimbursement to Texas and
subsequent cashing of those checks, (5) employee's communication with employees located in
Texas, (6) employee's health benefits' being administered from Texas offices, (7) provision of
employee's health insurance through Texas company, and (8) Texas location of insurance
agents who administered employee's dental and life insurance).

Moreover, we cannot conclude that Texas may assert specific personal jurisdiction over
Gonzalez merely because the compensation plan that is one facet of the underlying litigation
was discussed initially at a meeting in Houston. Appellees may not selectively rely on one aspect
of the litigation--the declaratory judgment--to the exclusion of all others as the basis for
jurisdiction.

We distinguish Siskind v. Villa Foundation for Education, Inc., 642 S.W.2d 434 (Tex. 1982), on
which appellees rely, in which there were sufficient minimum contacts subjecting the nonresident
defendant, an operator of an Arizona school, to the jurisdiction of the Texas court. Siskind, a
Texas resident, sued the Villa Foundation for Education for numerous causes of action,
including breach of contract, misrepresentation, and violation of the Texas Deceptive Trade
Practices Act. Id. at 435-36. In holding that Villa was amenable to suit in Texas, the court found
significant the existence of a written contract between the parties in which Villa voluntarily
agreed to the omission of a provision limiting litigation to Arizona at the Texas resident's
request. Id. at 435. Further, the court determined that because Villa had a practice of
advertising, mailing informational packets, applications, invitations to re-enroll, and enrollment
contracts in Texas, Villa affirmatively solicited Texas business and therefore purposefully availed
itself of the benefits of contacts with Texas. Id. at 436.

Here, the record does not support the conclusion that Gonzalez directed similar efforts at Texas
to obtain employment with appellees. Gonzalez came to Texas to interview for the position with
Lexus of Akron-Canton at Watts's request while he was employed by another car dealership in
Ohio. Gonzalez's deposition testimony demonstrates that he had conversations with both Watts
and Whalen about the possibility of being the general manager of Lexus of Las Vegas, but
Gonzalez stated that the majority of those conversations were in Akron. Therefore, unlike Villa,
whose contacts with Texas were "substantial," Gonzalez's contacts with Texas were minimal. Id.
at 437.

We also distinguish Tempest Broadcasting Corp. v. Imlay, 150 S.W.3d 861 (Tex. App.--Houston
[14th Dist.] 2004, no pet.) and Silbaugh v. Ramirez, 126 S.W.3d 88 (Tex. App.--Houston [1st
Dist.] 2002, no pet.), similarly relied on by appellees. In Tempest Broadcasting Corp., Tempest
Broadcasting Corporation, a Texas resident, sued Christopher Imlay, a Maryland attorney, and
his law firm, for breach of contract and several intentional torts. Tempest Broadcasting Corp.,
150 S.W.3d at 866. At the center of the dispute was an AM radio station located in Robstown,
Texas and a Federal Communication Commission (FCC) broadcasting license. Id. at 865.

In holding jurisdiction proper in Texas, the court found that Imlay and the law firm conducted
business in Texas and committed the intentional torts in Texas. Id. at 875-76. Specifically, the
court found that Imlay made direct representations in Texas to Tempest upon which it relied to
its detriment and which formed the basis for Tempest's claims against Imlay and the law firm. Id.
at 876. These representations were provided in writing and by telephone to Tempest in Texas.
Id.

In contrast, with regard to the instant case, the vast majority of this litigation's operative facts
took place in Nevada. Specifically, the facts that appellees allege in support of the breach of
loyalty and usurpation claims all took place in Las Vegas. Unlike Tempest, who made numerous
representations in Texas that formed the basis of the underlying litigation, Gonzalez's contacts
with Texas were minimal. Id. at 875-76. Moreover, Tempest involved the sale of a radio station
that was located and broadcasting within the geographical borders of Texas. Id. at 865.

Finally, in Silbaugh, the plaintiff brought suit in Texas against the defendant asserting several
tort and breach of contract claims related to the investment by Ramirez in a leasing program
and loss of his funds from Silbaugh's IOLTA account. Silbaugh, 126 S.W.3d at 91. In upholding
the trial court's denial of Silbaugh's special appearance, the appellate court held that because
Silbaugh had solicited business with Ramirez while he was in Texas through multiple conference
calls and faxes; entered into a written contract with Ramirez, which he signed in Texas; accepted
Ramirez's payment from Texas; and engaged in correspondence regarding entering into and
carrying out the contract in Texas; Silbaugh knew or reasonably should have expected that
Ramirez would perform his part of the contract from Texas. Id. at 96. Therefore, the court found
that Silbaugh had sufficient contacts with Texas to establish specific personal jurisdiction. Id.

There is no such written contract in the instant case. And, again, for the reasons discussed,
Gonzalez's contacts with Texas are not such that the operative facts of the underlying litigation
justify specific personal jurisdiction in Texas. For these reasons, we hold that the trial court
erred in denying Gonzalez's special appearance. We sustain appellant's issue.

Conclusion

Because Gonzalez did not "purposefully avail [himself] of the privilege of conducting activities
within the forum State, thus invoking the benefits and protections of its laws," Moki Mac, 221
S.W.3d at 575 (quoting Int'l Shoe Co., 326 U.S. at 319, 66 S. Ct. at 160), Gonzalez lacks
sufficient minimum contacts to support an assertion of specific jurisdiction in Texas. Accordingly,
we reverse the order of the trial court denying Gonzalez's special appearance and render
judgment sustaining the special appearance.

Davie L. Wilson

Justice


Panel consists of Chief Justice Radack and Justices Alcala and Wilson. (5)

1. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7) (Vernon 2008) (providing that parties
may challenge trial court's orders regarding special appearances by interlocutory appeal).

2. Appellees claim that KW#1 and AAG-Las Vegas are "Texas property" because these
companies are wholly owned subsidiaries of Ascent, whose principal place of business is
Houston, Texas. Moreover, appellees allege, without reference to the record, that the
subsidiaries are administered and supervised from Texas. However, the record reflects that
KW#1 is a Delaware limited liability company with its principle place of business in Ohio and that
AAG-Las Vegas is also a Delaware limited liability company with its principle place of business in
Ohio.

3. For his part, Gonzalez claims he is no longer seeking an ownership interest in Lexus of
Akron-Canton.

4. Appellees represent that at the hearings on Gonzalez's special appearance, which were not
transcribed, appellees agreed to nonsuit their claims of usurpation of corporate opportunity and
breach of duty of loyalty without prejudice, leaving only the declaratory action remaining.
However, Gonzalez disputes that a nonsuit has been filed.

5. The Honorable Davie L. Wilson, retired Justice, First Court of Appeals, sitting by assignment.