Appeal from the 152nd District Court Harris County, Texas
Trial Court Case No. 2013-33584.
consists of Justices Keyes, Brown, and Huddle.
FROM DENIAL OF REHEARING
V. Keyes Justice
rehearing, I disagree with the majority's holding
reversing the trial court's denial of TMX-Holdings'
special appearance. In my view, the majority misconstrues
controlling law, established by the Texas Supreme Court in
PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d
163 (Tex. 2007), and it misapplies the PHC-Minden
factors used to determine personal jurisdiction over a
corporation on an alter-ego theory. The majority therefore
dismisses the financial center of a single fused corporate
entity from this suit for misappropriation of trade secrets
and tortious interference with contract. It thus countenances
misuse of the corporate form to insulate a corporation from
potential damages in tort. Therefore, I respectfully dissent.
parties in this case are competitors in the automobile title
loan market. Wellshire Financial Services, LLC, Meadowwood
Financial Services, LLC, and Integrity Texas Funding, LP
(collectively, "Wellshire") sued TMX Finance
Holdings, Inc. ("TMX-Holdings") and TMX-Finance,
LLC ("TMX-Finance"), as well as other "TMX
entities" not parties to this appeal, for
misappropriation of trade secrets and tortious interference
with existing contracts and prospective business relations.
Wellshire alleged that the TMX entities collected the license
plate numbers of the customers in Wellshire's parking lot
and used that information to contact and solicit those
filed a special appearance, which the trial court denied. The
court found that TMX-Holdings was the alter ego of its
subsidiary, TMX-Finance, which has consented to personal
jurisdiction in Texas, and that the Texas courts'
exercise of jurisdiction over TMX-Finance comports with
constitutional requirements of fair play and substantial
justice. TMX-Holdings filed this interlocutory appeal.
panel reversed and dismissed TMX-Holdings from the suit. It
concluded that Wellshire did not establish that TMX-Holdings
exerts such an "abnormal" or "atypical"
degree of control over TMX-Finance's internal policies
and practices that the two entities can be fused for
jurisdictional purposes. See TMX Fin. Holdings, Inc. v.
Wellshire Fin. Servs., LLC, __ S.W.3d __, No.
01-16-00044-CV, 2016 WL 5920776, at *8 (Tex. App.-Houston
[1st Dist.] Oct. 11, 2016, no pet. h.). Wellshire moved for
rehearing and en banc reconsideration of the panel opinion.
Wellshire points out, the evidence establishes that Tracy
Young, the President and CEO of both TMX-Holdings and
TMX-Finance, owns 100% of the shares of TMX-Holdings; he
exerts virtually total control over the operations of both
entities; the entities share common ownership, directorship,
and headquarters; and the entities do not observe corporate
formalities. In other words, the evidence shows that
all of the PHC-Minden factors for the
exercise of personal jurisdiction over TMX-Holdings are
hold that the trial court correctly determined that
TMX-Holdings is an alter ego of TMX-Finance. I would also
hold that the Texas courts' exercise of jurisdiction over
TMX-Finance comports with constitutional requirements of fair
play and substantial justice. Therefore, I would grant
rehearing and affirm the trial court's order denying
TMX-Holdings' special appearance.
Standard of Review
a court can exercise personal jurisdiction over a nonresident
defendant is a question of law, and we therefore review de
novo a trial court's determination of a special
appearance. Kelly v. Gen. Interior Constr., Inc.,
301 S.W.3d 653, 657 (Tex. 2010) (citing Moki Mac River
Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007)).
"When [as here] a trial court does not issue findings of
fact and conclusions of law with its special appearance
ruling, all facts necessary to support the judgment and
supported by the evidence are implied." Id.
(quoting BMC Software Belg., N.V. v. Marchand, 83
S.W.3d 789, 795 (Tex. 2002)). When the appellate record
includes both the reporter's record and the clerk's
record, the trial court's implied findings are not
conclusive and may be challenged on appeal for legal and
factual sufficiency. BMC Software, 83 S.W.3d at 795.
Alter Ego Theory of Jurisdiction over a Corporate Entity
law presumes that two separate corporations are distinct
entities. PHC-Minden, 235 S.W.3d at 173. However,
Texas courts may exercise personal jurisdiction over a
nonresident parent corporation if the parent's
relationship with its subsidiary that does business in Texas
is one that would allow the court to impute the
subsidiary's "doing business" in Texas to the
parent. Cappuccitti v. Gulf Indus. Prods., Inc., 222
S.W.3d 468, 482 (Tex. App.-Houston [1st Dist.] 2007, no
pet.). Thus, the party "seeking to ascribe one
corporation's actions to another" must prove that
"the parent corporation exerts such domination and
control over its subsidiary that they do not in reality
constitute separate and distinct corporate entities but are
one and the same corporation for purposes of
jurisdiction." PHC-Minden, 235 S.W.3d at 173
(quoting BMC Software, 83 S.W.3d at 798); Conner
v. ContiCarriers & Terminals, Inc., 944 S.W.2d 405,
418 (Tex. App.-Houston [14th Dist.] 1997, no writ) (stating
that burden is on plaintiffs to prove existence of alter-ego
Texas Supreme Court has outlined the factors relevant for
"jurisdictional veil-piercing" on a "single
business enterprise" theory:
To "fuse" the parent company and its subsidiary for
jurisdictional purposes, the plaintiffs must prove the parent
controls the internal business operations and affairs of the
subsidiary. But the degree of control the parent exercises
must be greater than that normally associated with common
ownership and directorship; the evidence must show that the
two entities cease to be separate so that the corporate
fiction should be disregarded to prevent fraud or injustice.
PHC-Minden, 235 S.W.3d at 175 (quoting BMC
Software, 83 S.W.3d at 799); seealso El
Puerto de Liverpool, S.A. de C.V. v. Servi Mundo Llantero
S.A. de C.V., 82 S.W.3d 622, 634 (Tex. App.-Corpus
Christi 2002, pet. dism'd w.o.j.) (noting that
jurisdictional veil-piercing involves different analysis from
that used when "determining whether separate corporate
entities should be treated as one for liability
purposes"). Courts will not regard a subsidiary
corporation as the alter ego of its parent
"merely because of stock ownership, a
duplication of some or all of the directors or officers, or
an exercise of the control that stock ownership gives to
stockholders." PHC-Minden, 235 S.W.3d at 175
(quoting Gentry v. Credit PlanCorp. of
Houston, 528 S.W.2d 571, 573 (Tex. 1975)) (emphasis
added). Rather, courts should consider all of the
relevant facts and circumstances surrounding the operations
of the parent and subsidiary to determine whether two
separate and distinct corporate entities ...