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Parex Resources, Inc. v. ERG Resources, LLC

Court of Appeals of Texas, Fourteenth District

January 28, 2014

PAREX RESOURCES, INC. AND RAMSHORN INTERNATIONAL LIMITED, Appellants
v.
ERG RESOURCES, LLC, Appellee ERG RESOURCES, LLC, Appellant
v.
PAREX RESOURCES (BERMUDA), LTD., Appellee

On Appeal from the 61st District Court Harris County, Texas Trial Court Cause No. 2012-16446

OPINION

John Donovan Justice

In trial court cause number 2012-16446, ERG Resources, LLC ("ERG") sued Parex Resources, Inc. ("Parex Canada"), Ramshorn International Limited ("Ramshorn"), and Parex Resources (Bermuda), Ltd. ("Parex Bermuda") (collectively, "the Defendants"). In this opinion, we consider two companion interlocutory appeals stemming from the trial court's disposition of Parex Canada's, Ramshorn's, and Parex Bermuda's respective special appearances. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7) (West Supp. 2013) (authorizing appeal from interlocutory order that "grants or denies the special appearance of a defendant under Rule 120a, Texas Rules of Civil Procedure[.]"). In cause number 14-13-00043-CV, we (1) reverse the trial court's order denying Parex Canada's special appearance and render judgment dismissing for want of jurisdiction ERG's claims against Parex Canada, and (2) affirm the trial court's order denying Ramshorn's special appearance and remand for further proceedings. In cause number 14-13-00073-CV, we affirm the trial court's order granting Parex Bermuda's special appearance, dismissing for want of jurisdiction ERG's claims against Parex Bermuda.

I. BACKGROUND

Parex Canada is a public Canadian company engaged in oil and gas production in South America and the Caribbean. Ken Pinsky is Parex Canada's CFO. Parex Canada has several subsidiaries, including Parex Bermuda and Parex Resources (Colombia) Ltd. ("Parex Colombia").

Ramshorn is an oil and gas company formed under Bermudian law with (1) Class A shares relating to Colombian exploration assets, and (2) Class B shares relating to an oil and gas contract in Peru. This case involves the Class A shares. Claudia Arango was the general manager of Ramshorn in Colombia.

Nabors Global Holdings II, Limited ("Nabors Global") is a Bermudian company that owned 100% of Ramshorn's Class A shares. Nabors Global's parent, Nabors Industries Ltd. ("Nabors Industries"), wanted to sell all of its interests related to the exploration industry, which included Nabors Global's ownership of the Class A shares. During the fall of 2011, the CEO of Nabors Industries, Tony Petrello, publicly announced Nabors Industries's desire to exit the exploration industry. Jordan "Digger" Smith was head of global exploration for the Nabors entities. Smith was heavily involved in selling the Class A shares. Additionally, Scott Peterson, an employee of Nabors Corporate Services, Inc. ("Nabors Corporate") and an attorney for one or more of the Nabors entities, was involved in selling the Class A shares.

In December 2011, Charles Dunne, COO of ERG, a Houston company, discussed the Class A shares with Smith. Dunne and Smith were friends and had previously worked together on transactions. Later that month, Arango emailed a draft presentation to Smith, who in turn forwarded the presentation to Dunne. The presentation contained, among other information, statements regarding Ramshorn's ownership of an exploration block called "the Jag-A block." ERG alleges this information was fraudulent.

In January 2012, [1] Dunne and other ERG personnel traveled with Smith to Colombia for a due-diligence presentation about Ramshorn. During the presentation, Ramshorn allegedly represented it held a 95% working interest in the Jag-A block, but admitted its interest was not yet recognized by the Colombian government (apparently a requirement in Colombia). However, Ramshorn allegedly represented that it had an agreement with Columbus Energy, Ltd. ("Columbus"), an entity which did hold a government-recognized 95% interest in the Jag-A block, and that it controlled Columbus. ERG alleges all these representations were false.

Later in January, ERG personnel, including Dunne, met with Smith and Peterson in Houston. During the meeting, Peterson purportedly stated that Ramshorn had "clean title" to its Colombian interests and Nabors Global controlled Columbus. Over the next few months, ERG continued to conduct due-diligence review of the Class A shares. In mid-March, Nabors[2] provided ERG access to Ramshorn's virtual data room, whereby ERG could remotely view updated information regarding Ramshorn. The actual server housing the information was located in Texas.

In February or March, Smith contacted Royal Bank of Canada to inquire about other potential bidders for the Class A shares. Royal Bank of Canada acted as a facilitator when Nabors previously offered to sell Ramshorn's Class A shares and certain Colombian assets we will refer to as "the Remora assets."[3] Parex Colombia had ultimately acquired the Remora assets, and Parex Canada had been involved in this acquisition. After Smith contacted Royal Bank of Canada in February or March, Bevin Wirzba, a person affiliated with Royal Bank of Canada, contacted Parex Canada concerning the Class A shares. Wirzba thought Parex[4]might be interested because of Parex Colombia's purchase of the Remora assets. Parex was interested and shortly thereafter retained Wirzba and Royal Bank of Canada as advisors regarding acquisition of the Class A shares.

Over the next few days, Parex exchanged several communications pertaining to the Class A shares with Nabors, including non-binding letters of intent ("LOIs") and proposed share-purchase agreements ("SPAs"). By March 7, Parex Colombia had offered to purchase the Class A shares for $50 million. Parex Canada asserts that it had no interest in purchasing the shares but was merely assisting its subsidiary Parex Colombia to make the purchase. Nabors also provided Parex access to Ramshorn's virtual data room.

On March 9, Nabors Global entered into an SPA with ERG ("the ERG SPA"), in which ERG agreed to purchase the Class A shares for $45 million, closing at 9:00 a.m. on March 15. Ramshorn was not a party to the ERG SPA. ERG allegedly made a $3 million escrow deposit toward the purchase price. Ramshorn continued to give due-diligence information to ERG, including allowing ERG access to Ramshorn's virtual data room.

As described in more detail below, on March 9, Nabors informed Parex that Nabors had selected another purchaser. Parex Colombia increased its offer to $55 million, but Nabors did not accept.

ERG and Nabors Global failed to close by March 15. The following day, Parex Canada personnel asked Nabors for a status update. Nabors responded that the closing date had passed but they were negotiating a new closing date. Parex Colombia then increased its offer to $75 million. However, despite the increased offer, Nabors entered into an agreement with ERG to extend the closing deadline until March 19. Nabors informed Parex Canada of this extension and that Nabors would advise Parex Canada if the deal with the counterparty failed to close.

On March 17 and 18, while continuing to conduct due diligence, ERG allegedly learned Ramshorn did not have a valid interest in the Jag-A block, Nabors Global did not control Columbus, and Ramshorn had misrepresented certain financial information. ERG raised these issues with Peterson. According to Dunne, Peterson replied that ERG should take the Class A shares "as is" and waive the other problems. Dunne avers that when ERG tendered performance, Nabors refused to close but directed the escrow agent to release the $3 million deposit to Nabors. On March 19, Peterson sent an email to ERG, indicating that by missing the closing date, ERG ended the negotiations and Nabors Global was terminating the ERG SPA.

On March 19 and 20, Parex Canada emailed Nabors, asking whether they had closed the deal with the counterparty. On March 20, ERG filed suit against Nabors Global, Ramshorn, and Parex Canada, requesting specific performance of the ERG SPA and injunctive relief and asserting tortious-interference claims against Parex Canada and Nabors Global. An ancillary court denied ERG's request for a temporary restraining order enjoining sale of Ramshorn's Class A shares and set a hearing on ERG's request for a temporary injunction for April 13.

On March 21, Parex re-submitted the $75 million proposal to Nabors. On March 23, ERG obtained an ex parte injunction from a Bermuda court, temporarily restricting Nabors from selling the Class A shares. On April 5, the Bermuda court discharged the injunction after a full hearing with all parties.

On April 9, Parex Bermuda was incorporated in Bermuda. On April 12, Nabors and Parex Bermuda executed an SPA ("the Parex SPA") for the Class A shares, containing a New York forum-selection clause. Parex Bermuda executed the Parex SPA in Bermuda. Also on April 12, Parex Canada signed a guarantee in favor of Nabors, guaranteeing payment owed by Parex Bermuda under the Parex SPA. This guarantee also had a New York forum-selection clause. A provision in the Guarantee expressed it was executed to induce Nabors to enter into the Parex SPA.

ERG amended its petition to add a tortious-interference claim against Parex Bermuda and a fraud claim against Ramshorn. Parex Canada, Parex Bermuda, and Ramshorn filed special appearances. After the parties conducted jurisdictional discovery and submitted several rounds of special appearance pleadings, the trial court held an evidentiary hearing on November 19 and 20. On January 3, 2013, the trial court denied Parex Canada's and Ramshorn's special appearances, but granted Parex Bermuda's special appearance. The trial court did not make findings of fact.

II. SPECIAL APPEARANCE: STANDARD OF REVIEW AND RELEVANT LAW

A. Standard of Review

Whether a court has personal jurisdiction over a defendant is a question of law. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 805–06 (Tex. 2002). The trial court's decision to grant or deny a special appearance is subject to de novo review on appeal. Id. at 806. However, the trial court's factual findings supporting its ruling on the special appearance may be challenged for legal and factual sufficiency. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002). Because the trial court did not issue findings of fact, all facts necessary to support the trial court's ruling and supported by the evidence are implied in favor of the trial court's ruling. Id.

When examining a legal-sufficiency challenge, we review the evidence in the light most favorable to the challenged finding and indulge every reasonable inference that would support it. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005). We credit favorable evidence if a reasonable fact finder could and disregard contrary evidence unless a reasonable fact finder could not. Id. at 827. The evidence is legally sufficient if it would enable a reasonable and fair-minded person to find the fact under review. Id. The fact finder is the sole judge of witness credibility and the weight to give their testimony. See id. at 819.

In a factual-sufficiency review, we consider and weigh all the evidence, both supporting and contradicting the finding. Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 406–07 (Tex. 1998). We set aside the finding only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Id. at 407. We may not substitute our own judgment for that of the trier of fact or pass upon the credibility of the witnesses. Id. The amount of evidence necessary to affirm a judgment is far less than that necessary to reverse a judgment. Yeng v. Zou, 407 S.W.3d 485, 489 (Tex. App.—Houston [14th Dist.] 2013, no pet.).

B. Special Appearance Law

Texas courts may exercise personal jurisdiction over a nonresident if "(1) the Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the exercise of jurisdiction is consistent with federal and state constitutional due-process guarantees." Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007). Under the Texas long-arm statute, the plaintiff bears the initial burden of pleading allegations sufficient to confer jurisdiction. Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 337 (Tex. 2009). When the plaintiff meets this initial burden, the burden shifts to the defendant to negate all potential bases for personal jurisdiction pleaded by the plaintiff. Id. The Texas long-arm statute extends Texas courts' personal jurisdiction as far as the federal constitutional requirements of due process will permit. Marchand, 83 S.W.3d at 795. Thus, we rely on precedent from the United States Supreme Court and other federal courts, as well as our own State's decisions, in determining whether a nonresident defendant has met its burden to negate all bases of jurisdiction. Id.

Personal jurisdiction over a nonresident defendant is constitutional when two conditions are satisfied: (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. Id. (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). Minimum contacts are sufficient for personal jurisdiction when the nonresident defendant purposefully avails itself 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. There are three aspects pertinent to a purposeful-availment inquiry: (1) only the defendant's contacts with the forum are relevant, not the unilateral activity of another party or a third person; (2) the contacts relied on must be purposeful rather than random, fortuitous, or attenuated; and (3) the defendant must seek some benefit, advantage or profit by "availing" itself of the jurisdiction. Id. This three-part inquiry assesses the quality and nature of the contacts, not the quantity. Retamco, 278 S.W.3d at 339. A defendant may purposefully avoid a particular forum by structuring its transactions in such a way as to neither profit from the forum's laws nor subject itself to jurisdiction there. Moki Mac, 221 S.W.3d at 575. At its core, the purposeful-availment analysis seeks to determine whether a nonresident's conduct and connection to a forum are such that it could reasonably anticipate being haled into court there. Moncrief Oil Int'l Inc. v. OAO Gazprom, 414 S.W.3d 142, 152 (Tex. 2013).

Personal jurisdiction exists if the nonresident defendant's minimum contacts give rise to either specific jurisdiction or general jurisdiction. Marchand, 83 S.W.3d at 795–96. When specific jurisdiction is alleged, we focus the minimum- contacts analysis on the relationship among the defendant, the forum, and the litigation. Moki Mac, 221 S.W.3d at 575–76. Specific jurisdiction is established if the defendant's alleged liability arises out of or is related to an activity conducted within the forum. Id. at 576; Marchand, 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, 221 S.W.3d at 585.

Conversely, if the defendant has made continuous and systematic contacts with the forum, general jurisdiction is established whether or not the defendant's alleged liability arises from those contacts. Id. at 575; Marchand, 83 S.W.3d at 796. A general-jurisdiction inquiry is very different from a specific-jurisdiction inquiry and involves a more demanding minimum-contacts analysis with a substantially higher threshold. PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 168 (Tex. 2007). Usually, the defendant must be engaged in longstanding business in the forum state, such as marketing or shipping products, or performing services, or maintaining one or more offices there. Id. Activities less extensive than that will not qualify for general jurisdiction. Id. Courts analyze general jurisdiction without regard to the nature of the alleged claims. See id. In conducting a general-jurisdiction analysis, we are concerned with the quality rather than the quantity of the contacts, and the defendant's pre-suit contacts are the only relevant contacts. See id. at 169; Coleman, 83 S.W.3d at 809–10. In assessing the quality of the contacts, we do not view each contact in isolation; rather, we carefully investigate, compile, sort, and analyze all contacts to determine if together they are sufficient to support general jurisdiction. Coleman, 83 S.W.3d at 809.

III. EVIDENTIARY ISSUES

A. What exhibits did the trial court consider?

We begin with a major source of contention in this appeal: which of ERG's exhibits did the trial court consider? See Max Protetch, Inc. v. Herrin, 340 S.W.3d 878, 884 (Tex. App.—Houston [14th Dist.] 2011, no pet.) ("[W]e consider all of the evidence before the trial court on the question of [personal] jurisdiction." (emphasis added)). In the second issues of their respective appeals, Parex Canada and Ramshorn contend we must assume the trial court did not consider any exhibits unless they were specifically admitted during the special appearance hearing. Contrarily, ERG argues we must assume the trial court considered all of ERG's exhibits except the few exhibits to which the court expressly sustained objections.

Prior to the November 19 and 20, 2012 special appearance hearing, ERG filed with the court clerk deposition excerpts, affidavits, and an exhibit list referencing almost 400 exhibits, but did not file the actual exhibits or affidavits authenticating the exhibits. The Defendants filed written objections to most of the exhibits. During the two-day hearing, the parties and the trial court spent substantial time discussing the Defendants' objections to ERG's exhibits. The trial court admitted over ninety of ERG's exhibits and sustained objections to approximately four exhibits. ERG offered into evidence the remaining 300-plus exhibits. The trial court did not formally admit the exhibits. Instead, several times during the hearing, the trial court clearly expressed it was not admitting the remaining exhibits but would consider objections (specifically, the Defendants' relevancy objections) to these exhibits later in chambers and set a future hearing if necessary to resolve any objections. The trial court also expressed that it would inform the parties what exhibits were admitted. The Defendants noted, with apparent agreement from ERG, that ERG's exhibits had not been filed with the court. At the end of the hearing, the following exchange occurred:

[ERG Counsel:] And, your Honor, here I have all of our exhibits on two CDs. Should I give those to the court reporter?
[Trial Court:] No. Those are mine. Those aren't filed as part of this hearing. These are the exhibits so that when I'm going through looking at my list I can pull the exhibit up and resolve the objection.
[The Defendants' Counsel:] The two CDs will become part of the court's record?
[Trial Court:] Yes. I can make them if you need that to be. That's no problem.
[The Defendants' Counsel:] I'm just wondering what if it goes up.
[Trial Court:] Yeah. We'll file them, figure out how the clerk does that. I will make these part of the court's record.
[The Defendants' Counsel:] If you need paper we can, obviously, work that out.

The reporter's record contains a volume of exhibits that, as certified by the court reporter, were "admitted into evidence during the Hearing on Special Appearance." (emphasis added).[5] There are also supplemental reporter's records containing all of ERG's exhibits that, as certified by the court reporter, were "offered into evidence during the Hearing on Special Appearance." (emphasis added).

On December 10, 2012, ERG filed an amended exhibit list, detailing what exhibits ERG believed had been admitted and which remained subject to pending evidentiary objections. On December 26, 2012, the court reporter filed a CD containing ERG's exhibits and the Defendant's objections to the exhibits, noting, "I, . . . Official Court Reporter file with [the district clerk's office] the following exhibits which were admitted or tendered on bill of exception during a hearing, proceeding, or trial . . . on 11/19/12 Special App[.]"

On January 3, 2013, the trial court ruled on the Defendants' special appearances without making any further evidentiary rulings. On January 14, 2013, ERG filed a proposed order overruling the Defendants' objections to ERG's exhibits. Included with the proposed order was a letter from ERG's counsel requesting the trial court to rule on the objections to ERG's exhibits not admitted during the hearing. However, nothing reflects that ERG set this request for a hearing or submission or that the trial court ever entertained this request.[6]

Texas Rule of Civil Procedure 120a governs the evidentiary aspect of special appearance filings and proceedings:

The court shall determine the special appearance on the basis of the pleadings, any stipulations made by and between the parties, such affidavits and attachments as may be filed by the parties, the results of discovery processes, and any oral testimony. The affidavits, if any, shall be served at least seven days before the hearing, shall be made on personal knowledge, shall set forth specific facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify.

Tex. R. Civ. P. 120a(3).

ERG argues we must assume all of its exhibits were considered by the trial court because Rule 120a provides that special appearances are decided by "affidavits and attachments as may be filed by the parties, the results of discovery processes, and any oral testimony, " and the record reflects ERG's exhibits were filed with the court.[7] ERG notes that at the end of the hearing, the trial court agreed to file all of the exhibits, and the court reporter's December 26 filing ...


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