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Jay Zabel & Associates, Ltd. v. Compass Bank

Court of Appeals of Texas, First District

June 29, 2017

JAY ZABEL & ASSOCIATES, LTD., Appellant
v.
COMPASS BANK, Appellee

         On Appeal from the 270th District Court Harris County, Texas Trial Court Case No. 2016-00672

          Panel consists of Justices Higley, Bland, and Brown.

          OPINION

          Laura Carter Higley Justice

         Jay Zabel & Associates, Ltd., an Illinois law firm, appeals the trial court's denial of its special appearance in a suit brought against it by Compass Bank. Compass asserts that the trial court has specific personal jurisdiction over Zabel because the bank's causes of action arise from Zabel's purposeful contacts with the State of Texas. Zabel disagrees, contending that it did not purposefully avail itself of the privilege of conducting activities in Texas, thus, it does not have the requisite minimum contacts with Texas to be subject to specific personal jurisdiction in this forum. Because we agree with Zabel, we reverse the trial court's order and render judgment dismissing Compass's claims.

         Background [1]

         Zabel is a six-attorney law firm incorporated in Illinois and located in Chicago. The firm specializes in tax law and real estate transactions.

         Around July 2015, one of the firm's younger associates, Jori E., informed the firm's senior managing attorneys that her brother, Brent, an attorney employed by a tort litigation firm, had a legal matter, an international sales transaction, to refer to Zabel. The transaction entailed the sale of a piece of heavy equipment, a dredger, by a Chinese company, Sinochem, to a Chicago construction company, Clune Construction. Sinochem sought to have a law firm represent it to facilitate the sale. Brent told Jori that he had never represented Sinochem, but he was familiar with the company because he had clients who had done business with it.

         Zabel received an email from Shi Dai, a person purporting to be Sinochem's representative. Dai requested Zabel to prepare a purchase agreement for the sale of the dredger to Clune Construction, and Zabel agreed to represent Sinochem in the transaction. Jeff Sanchez, a senior partner with Zabel, began corresponding with Dai by email regarding the firm's representation of Sinochem. Sanchez forwarded an engagement letter for Sinochem to sign to retain the firm. Dai responded to the email, indicating that the firm's rate was acceptable, but Sinochem did not sign the engagement letter.

         Sanchez and Dai continued to exchange emails regarding the sale of the dredger. In one email, Sanchez asked Dai for a number of documents related to the details of the sale, but Dai never sent the requested documents. Dai did, however, inform Sanchez of the purchase price of the dredger. He told Sanchez that Clune Construction would be making a partial payment to show that it was serious about the purchase. Dai informed Sanchez that Sinochem had instructed Clune to send the partial payment to Zabel. Dai told Sanchez that, once it received the partial payment, Zabel should deduct its retainer fee of $2, 500 from the funds received from Clune. Sanchez responded to Dai, informing him that Zabel could not deduct its retainer from the funds sent by Clune without Clune's consent.

         A person purporting to be a representative of Clune Construction then contacted Sanchez by telephone. That person consented to Zabel deducting its retainer from the funds that Clune would send to Zabel. The representative also sent a follow-up letter confirming Clune's consent.

         A check, in the amount of $385, 966.76, was delivered to Zabel by UPS parcel. The return address on the package was Clune's Chicago address. The upper left portion of the face of the check ("the Check") identified the maker of the Check as follows: "M/I Title, LLC, Escrow Account, 10920 West Sam Houston Parkway North, Houston, TX 77064." In the middle of the upper portion of the Check was "BBVA Compass." The lower right hand corner of the Check contained two handwritten signatures. The Check was payable to "Jay Zabel & Associates, Ltd." and gave the law firm's Chicago address. The memo line of the Check had the notation: "Clune Construction Company."

         Later, Sanchez testified in his deposition that he "briefly" looked at the Check. Sanchez stated that he had noted that it was being paid from the account of a title company, but he did not find this unusual given that it was on behalf of a construction company, Clune.

         Zabel indorsed the Check to its Chicago bank, Harris Bank, for deposit into Zabel's client trust fund account. The Check went through the normal banking channels and was presented to and ultimately paid by Compass out of M/I Title's account in Harris County, Texas. The amount of the check, $385, 966.76, was transferred from M/I Title's Compass bank account to Zabel's client trust fund account in Chicago.

         After the funds were deposited into Zabel's account, additional emails were sent by Dai, instructing Zabel to wire the funds to accounts outside the United States. Sanchez also spoke on the phone with Dai, Dai's boss, and Clune's representative, regarding the transfer of the funds. Ultimately, the funds, save Zabel's retainer, were wire transferred from Zabel's client trust fund account to two foreign accounts.

         After the money left Zabel's account, Sanchez received a call from a representative of M/I Title, informing Sanchez that the $385, 966.76 check was counterfeit. Sanchez reported the scam to the FBI and to the Chicago police. M/I Title also reported the fraud to Compass, verifying that the check had not been a genuine check issued by M/I Title. The approximately $2, 900 that Zabel had kept in its account as its retainer fee was returned to Compass. However, the remainder of the funds could not be recovered from the foreign accounts.

         Compass filed suit against Zabel in Harris County District Court, alleging that Zabel "deposited a counterfeit or fraudulent check and was never entitled to receive those proceeds from M/I Title." Compass claimed that, "under various [UCC] transfer and presentment warranties, because the Check was not properly deposited and/or negotiated, [Zabel] is liable to Compass Bank for the full amount of the Check." Compass sued Zabel "for breaches of UCC transfer and presentment warranties, other UCC provisions such as UCC § 3.406, negligence, unjust enrichment, breach of contract, conversion, contribution and indemnification."

         In its petition, Compass identified itself as "an Alabama state bank doing business in Harris County, Texas" and recognized that Zabel "is a corporation organized under the laws of Illinois, whose principal office is located [in] Chicago, IL." Under the heading, "Jurisdiction and Venue, " Compass averred, "The Check itself reflects that it is purportedly issued by a company with an address in Harris County, Texas, so [Zabel] believed that it was doing business with a company located in Harris County." Compass further alleged, "The Check was drawn on a bank account located in Harris County. Thus, when Defendant deposited the Check, Defendant knew or should have known that it would be presented to a bank for payment in Harris County."

         In response to Compass's petition, Zabel filed a special appearance, asserting that the trial court lacked personal jurisdiction over it and requesting dismissal of the suit. Zabel supported the special appearance with Sanchez's affidavit and with his deposition testimony. In his affidavit testimony, Sanchez confirmed that Zabel is an Illinois corporation located in Chicago. With regard to the firm's law practice, Sanchez stated that Zabel has prepared tax returns for "a few Texas clients" and represented clients purchasing real estate in Texas. But Sanchez explained that the legal work performed by Zabel on those matters was performed at its law office in Illinois with communications and transactions related to that work being done remotely ...


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