Court of Appeals of Texas, Fifth District, Dallas
NORTHERN FRAC PROPPANTS, II, LLC, LAMSTEX MATERIAL HANDLING, LLC, AND JEFFRIES ALSTON, Appellants
2011 NF HOLDINGS, LLC F/K/A NF HOLDINGS, LLC AND NORTHERN FRAC PROPPANTS, LLC, AND ITS SERIES SUBSIDIARIES, Appellees BADGER MINING CORPORATION, Appellant
2011 NF HOLDINGS, LLC F/K/A NF HOLDINGS, LLC AND NORTHERN FRAC PROPPANTS, LLC, AND ITS SERIES SUBSIDIARIES, Appellees 2011 NF HOLDINGS, LLC F/K/A NF HOLDINGS, LLC AND NORTHERN FRAC PROPPANTS, LLC, AND ITS SERIES SUBSIDIARIES, Appellants
J & P CAPITAL, LLC AND PATRICK A. TESSON, Appellees
Appeal from the 162nd Judicial District Court Dallas County,
Texas Trial Court Cause No. DC-15-01754
Justices Lang, Brown, and Whitehill
an interlocutory appeal from orders granting and denying
2011 NF Holdings, LLC f/k/a NF Holdings, LLC, and Northern
Frac Proppants, LLC, and its series subsidiaries sued six
defendants on a variety of commercial torts. All defendants
filed special appearances challenging personal jurisdiction.
The trial court granted two defendants' special
appearances and denied the others. The four defendants who
lost their special appearances appealed, and plaintiffs
appealed as to the two defendants whose special appearances
were granted. We thus address six special appearances, all
tied to the same series of transactions.
we address both general and specific personal jurisdiction
over each defendant, this appeal presents this central
specific jurisdiction question: Do non-Texas residents who
acquire and sell Wisconsin sand mines and related rights
purposefully avail themselves of Texas if (i) Texas companies
claim to be the assets' rightful owners and (ii) the
non-residents know that much of the sand produced in
Wisconsin will be sold to customers for use in Texas
fracingoperations? We conclude that the answer is
no based on this case's particular facts.
Texas cannot constitutionally exercise either specific or
general personal jurisdiction over any defendant, we affirm
in part, reverse in part, and render judgment dismissing the
case for lack of personal jurisdiction.
plaintiffs are both appellants and appellees in this appeal,
we will generally refer to the parties as
"plaintiffs" and "defendants" instead of
appellants and appellees.
2011 NF Holdings, LLC f/k/a NF Holdings, LLC (NF Holdings) is
a Delaware limited liability company with its principal
office in Richardson, Texas.
Frac Proppants, LLC (NFP I) is a Delaware series limited
liability company. Plaintiffs allege that NFP I's
principal office is in Richardson, Texas, but NFP I's
limited liability company agreement reflects that its
principal place of business is in Alexandria, Minnesota.
Frac Proppants Series-1, LLC (NFP Series-1) is a limited
liability company with its principal office in Richardson,
Texas. NFP Series-1 is an NFP I series subsidiary.
Frac Proppants Series-2, LLC (NFP Series-2) is a limited
liability company with its principal office in Richardson,
Texas. NFP Series-2 is an NFP I series subsidiary.
are (i) appellees regarding Northern Frac Proppants, II,
LLC's, Lamstex Material Handling, LLC's, Jeffries
Alston's, and Badger Mining Corporation's appeals
from the trial court's orders denying their special
appearances and (ii) appellants regarding the trial
court's orders granting J&P Capital, LLC's and
Patrick A. Tesson's special appearances.
Northern Frac Proppants II, LLC (NFP II), a Delaware limited
liability company. Plaintiffs allege that NFP II's
principal place of business is in Houston, Texas.
Jeffries Alston, a Louisiana resident.
Lamstex Material Handling, LLC, which claims to be a
Louisiana entity with Alston as its sole member.
Badger Mining Corporation, a Wisconsin corporation.
J&P Capital, LLC,  a Louisiana limited liability company.
Patrick A. Tesson, a Florida resident.
these allegations from plaintiffs' live petition and
their trial court brief opposing defendants' special
appearances. See Flanagan v. Royal Body Care, Inc.,
232 S.W.3d 369, 374 (Tex. App.-Dallas 2007, pet. denied) (a
court considers the plaintiff's allegations in both its
pleadings and its special appearance response).
technology advances have increased domestic oil and gas
production through hydraulic fracturing or
"fracing." Fracing involves using pressure to force
proprietary liquids and special sand into the ground through
a well bore to the producing zone. There, the liquids and
sand open fractures in the formation that holds the
hydrocarbons, thereby permitting the hydrocarbons to be
recovered and sold. The sand used in fracing is called frac
sand, and most or all frac quality sand is located in
Wisconsin and Minnesota. This case involves the commercial
exploitation of frac sand.
and 2011, these individuals began to explore entering the
frac sand business: (i) James R. "Rusty" Miller and
Richard E. Payne, who had offices in Richardson, Texas; (ii)
Kenneth Landgaard, a Minnesotan (iii) Eugene E. Noonan, a
Wisconsin land man, and (iv) defendant-appellant Jeffries
Alston, a Louisiana engineer. This group formed limited
liability companies that in turn leased frac sand sites in
Wisconsin and Minnesota.
group unanimously agreed to hire a Dallas, Texas law firm to
formulate a suitable corporate structure. In September 2011,
that firm formed NF Holdings to hold the group's assets,
including trade secrets and confidentiality agreements.
Miller and Payne served as two of NF Holdings' managers
to the initial estimate, the nascent frac sand business
needed $150 million in funding. So, NF Holdings contracted
with Windward Capital, LLC, to help raise that funding.
2012, Landgaard organized and chartered NFP I. NFP I had two
series subsidiaries, NFP Series-1 and NFP Series-2. NFP I was
intended to serve as NF Holdings' successor and to bring
the frac sand business to completion. In 2012-2013, a
detailed business plan was finalized and a marketing website
boundaries between NF Holdings and NFP I, however, blurred as
(i) NFP I began to use the website and (ii) NF Holdings'
principals began to use NFP I business cards and advertising
April 2013, NFP Series-2 acquired rights in a frac sand
quarry in Goose Landing in Alma Center, Wisconsin. That same
month, NFP Series-1 entered into a contract to sell frac
sand, resulting in positive cash flow. NFP Series-2
eventually acquired the Goose Landing quarry outright.
allegedly embarked on a scheme to steal the frac sand
business's assets. In August 2013, without
plaintiffs' knowledge, he used Baker Botts's Houston
office to charter defendant-appellant NFP II. Noonan and
Windward Capital were members of NFP II.
plaintiffs and defendant group entities are shown below:
2013, NFP II obtained $77 million in funding from Deutsche
Bank. At this same time, NFP II also began using the existing
frac sand business's assets and trade secrets. In
plaintiffs' words, those assets and trade secrets
"magically and mysteriously appeared" within NFP
II. NFP II also began using plaintiffs' website and
conducted a frac sand business with many Texas contacts. At
some point, Alston filed a fraudulent certificate of
cancellation for NFP I.
Tesson and J&P got involved in 2014. Tesson and Alston
founded J&P in April of that year. J&P purportedly
invested millions of dollars in NFP II in exchange for
preferred equity, and Tesson became an NFP II manager and
during 2014, the Goose Landing Plant came on line to process
and sell sand.
2014, NFP II began secret negotiations to sell the frac sand
enterprise to defendant-appellant Badger.
February 2015, NF Holdings sued appellants NFP II, Alston,
Lamstex, and others not relevant to this appeal. The original
petition alleged most of the facts recited above, asserted
several claims, and sought to enjoin NFP II from transferring
its assets. NFP II, Lamstex, and Alston filed special
months later, NF Holdings filed a second amended original
petition that added NFP Series-1 as a plaintiff and Tesson,
J&P, and Badger as defendants. This petition alleged that
Tesson had testified in court that NFP II sold the "Frac
Sand Enterprise" to Badger in a transaction that closed
in April 2015. Tesson, J&P, and Badger also filed special
October 2015 third amended petition changed the plaintiffs to
NF Holdings, NFP I, and NFP I's series subsidiaries. It
also dropped some defendants, leaving only NFP II, Lamstex,
Alston, Badger, Tesson, and J&P as defendants.
plaintiffs filed a fourth amended petition against the same
defendants a few days later. That petition, which is the live
pleading, asserts (i) statutory misappropriation of trade
secrets; (ii) common law misappropriation of trade secrets;
(iii) conversion; (iv) fraudulent transfer; and (v)
conspiracy claims against all defendants. It also asserts a
fiduciary breach claim against Alston. The petition further
alleges that general and specific personal jurisdiction apply
to all defendants.
parties filed special appearance briefs, evidence, and
objections to and motions to strike their opponents'
trial court held a hearing at which plaintiffs introduced
deposition excerpts and documents into evidence. The trial
court later granted Tesson's and J&P's special
appearances and denied the rest. The parties requested
findings of fact and conclusions of law, but the trial court
never made any.
NFP II, and Lamstex filed a joint notice of interlocutory
appeal; Badger filed a separate notice of appeal; and
plaintiffs also filed a joint notice of appeal.
trial court later ruled on some of the objections and motions
to strike evidence.
Law of Personal Jurisdiction
the Texas long-arm statute, civil practice and remedies code
§ 17.042, reaches as far as due process allows, Texas
courts may exercise personal jurisdiction over a nonresident
defendant if (i) the defendant has minimum contacts with
Texas and (ii) the exercise of jurisdiction comports with
traditional notions of fair play and substantial justice.
Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569,
575 (Tex. 2007).
minimum contacts test focuses on whether the defendant has
purposefully availed itself of the privilege of conducting
activities in the forum state. See Michiana Easy
Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 784
(Tex. 2005). In making this determination, we consider (i)
only the defendant's own actions and not the unilateral
activity of another, (ii) whether the defendant's actions
were purposeful rather than random, isolated, or fortuitous,
and (iii) whether the defendant sought some benefit,
advantage, or profit by availing itself of the privilege of
doing business in Texas. Id. at 785.
"[J]urisdictional analysis always centers on the
defendant's actions and choices to enter the
forum state and conduct business." Kelly v. Gen.
Interior Constr., Inc., 301 S.W.3d 653, 660 (Tex. 2010)
(emphasis original). The minimum contacts test varies
depending on whether the plaintiff relies on "specific
jurisdiction" or "general jurisdiction."
Lensing v. Card, 417 S.W.3d 152, 156 (Tex.
App.-Dallas 2013, no pet.).
specific jurisdiction, minimum contacts are present if (i)
the defendant purposefully availed itself of the forum state
and (ii) there is a substantial connection between the
defendant's forum contacts and the operative facts of the
litigation. Id. We focus on the relationship among
the defendant, the forum, and the litigation. Moki
Mac, 221 S.W.3d at 575-76.
a nonresident's knowledge that its conduct outside the
forum state will cause harmful effects to a forum resident,
without more, is insufficient to create specific jurisdiction
minimum contacts. See, e.g., Walden v.
Fiore, 134 S.Ct. 1115, 1125 (2014); Searcy v. Parex
Res., Inc., 496 S.W.3d 58, 68-69 (Tex. 2016).
specific jurisdiction requires a claim-by-claim analysis
unless all claims arise from the same forum contacts.
Lensing, 417 S.W.3d at 156.
however, the plaintiff's claims are unrelated to the
defendant's forum contacts, the plaintiff must rely on
general jurisdiction. General jurisdiction is proper only if
the defendant's forum contacts are so continuous and
systematic that the defendant is essentially at home in the
forum state. See TV Azteca v. Ruiz, 490 S.W.3d 29,
37 (Tex. 2016). This "at home" standard means that
the defendant's forum activities must be "comparable
to a domestic enterprise" in the forum state.
Daimler AG v. Bauman, 134 S.Ct. 746, 758 n.11
corporation, its state of incorporation and its principal
place of business are paradigm bases for general
jurisdiction. Id. Daimler, however, left
open the possibility that in an "exceptional case"
a corporation's operations in another state might be so
substantial as to render it "at home" there.
Id. at 761 n.19. But the Court recently explained
that Perkins v. Benguet Consolidated Mining Co., 342
U.S. 437 (1952), in which Ohio was held to have jurisdiction
over a Philippines corporation that had, during World War II,
conducted its limited operations in Ohio, exemplified the
"exceptional case" mentioned in Daimler.
BNSF Ry. Co. v. Tyrrell, 137 S.Ct. 1549, 1558
an individual, the paradigm forum for the exercise of general
jurisdiction is the individual's domicile . . . ."
Goodyear Dunlop Tires Operations, S.A. v. Brown, 564
U.S. 915, 924 (2011).
even if minimum contacts are present, a state may not
exercise personal jurisdiction over a nonresident defendant
if doing so would violate traditional notions of fair play
and substantial justice. Id. at 407. In this
inquiry, relevant factors include (i) the burden on the
defendant, (ii) the forum's interest in adjudicating the
dispute, (iii) the plaintiff's interest in convenient and
effective relief, (iv) the interstate judicial system's
interest in the most efficient resolution of controversies,
and (v) the states' shared interest in furthering
substantive social policies. Id.
Parties' Burdens and the Standard of Review
plaintiff bears the initial burden to plead sufficient facts
to bring a nonresident defendant within the long-arm
statute's reach. Moki Mac, 221 S.W.3d at 574.
"The plaintiff can satisfy this initial burden by
alleging that a nonresident defendant is doing business in
Texas." Proctor v. Buell, 293 S.W.3d 924, 930
(Tex. App.-Dallas 2009, no pet.). Doing business in this
context includes (i) contracting with a Texas resident where
either party is to perform the contract in whole or in part
in Texas or (ii) committing a tort in whole or in part in
Texas. See Tex. Civ. Prac. & Rem. Code §
17.042. We consider the allegations in both the
plaintiff's live pleading and its special appearance
response. Flanagan, 232 S.W.3d at 374.
plaintiff carries its burden, the defendant must then negate
all pled jurisdictional bases. Proctor, 293 S.W.3d at
930. The defendant can do this: (i) factually, by presenting
evidence establishing that its Texas contacts are
insufficient and thus effectively disproving the
plaintiff's allegations, or (ii) legally, by showing that
even if the plaintiff's alleged facts are true they are
legally insufficient to support jurisdiction. Kelly,
301 S.W.3d at 659.
a court can exercise jurisdiction over a nonresident is a
question of law. Id. at 657. We thus review de novo
a trial court's order granting or denying a special
appearance. Moki Mac, 221 S.W.3d at 574.
deciding a special appearance, the trial court must resolve
any factual disputes that arise. Am. Type Culture
Collection, Inc., v. Coleman, 83 S.W.3d 801, 805-06
(Tex. 2002). The court, however, must accept as true the
clear, direct, and positive evidence of an undisputed
affidavit, even one by a party's agent. Nacho
Remodeling Co., Inc. v. Calsherm Partners, L.P., No.
05-14-00048-CV, 2014 WL 3828219, at *4 (Tex. App.-Dallas Aug.
5, 2014, no pet.) (mem. op.).
trial court does not file findings of fact and conclusions of
law, we imply all fact findings necessary to support the
judgment and supported by the evidence. Lensing, 417
S.W.3d at 155. But implied findings are not conclusive and
may be challenged on appeal for legal and factual sufficiency
of the evidence. Id.
The Alston Defendants' Appeal
Alston, Lamstex, and NFP II (the "Alston
defendants") filed a joint appellants' brief. Their
first three issues argue that the trial court erred by
denying their respective special appearances. Their fourth
issue argues that the trial court erred by overruling certain
objections to two affidavits and attachments that plaintiffs
filed and relied on. For the following reasons, we sustain
the Alston defendants' first three issues and conclude
that the trial court erred by denying their special
appearances. Accordingly, we need not address their fourth
Alston Defendants' First Issue: Did the trial court err
by denying Alston's special appearance?
start with Alston because he is at the center of the alleged
conspiracy to steal plaintiffs' assets. We first outline
his Texas contacts and then determine whether they satisfy
the minimum contacts test for general or specific
are Alston's Texas contacts?
allege both that (i) Alston individually has contacts with
Texas and (ii) the Texas contacts of certain business
entities should be imputed to him under the alter ego
doctrine. Accordingly, we first decide whether any other
entity's Texas contacts should be treated as his contacts
for jurisdictional purposes. We conclude that they should not
because plaintiffs adduced no evidence that any of these
entities were his alter ego.
Alter Ego Allegations
plaintiff bears the burden of both pleading and proving a
jurisdictional veil-piercing theory. See PHC-Minden, L.P.
v. Kimberly-Clark Corp., 235 S.W.3d 163, 173 (Tex.
2007). Under an alter ego theory, a plaintiff must prove that
the entity's owner (i) controls the entity's internal
business operations and affairs and (ii) exercises a degree
of control greater than that normally associated with
ownership and directorship. Id. at 175. The control
must be so great that the entity ceases to be a separate
entity. Id. Alter ego cannot be based on mere stock
ownership, duplication of some or all directors or officers,
or exercise of the control that stock ownership gives to
stockholders. Id. Moreover, an entity's owner
may monitor the entity's performance, supervise its
financial and capital budget decisions, and articulate
general policies without becoming fused to the entity for
jurisdictional purposes. Id. at 176.
plaintiffs allege four entities as potentially supporting an
alter ego theory against Alston: NFP I, NFP II, Alston
Equipment Company (AEC), and Lamstex. Alston asserts there is
no evidence to support plaintiffs' alter ego theories for
any such entity. We agree.
do not allege that Alston exercised an unusual degree of
control over NFP I that would justify imputing NFP I's
contacts to him. They instead allege only that Alston filed a
certificate of cancellation with the Delaware secretary of
state to dissolve NFP I. Although this allegation is
supported with evidence, that fact does not show that Alston
exercised an unusual degree of control over NFP I's
operations and affairs for alter ego purposes. Thus, NFP
I's Texas contacts may not be imputed to Alston.
AEC, plaintiffs allege that it is a Louisiana company
authorized to do business in Texas. In an affidavit, Alston
testified that he owns AEC and founded it in 1985 in Amite,
Louisiana. He further said that Amite, Louisiana, has always
been AEC's principal place of business. Although
plaintiffs' appellees' brief asserts that "[f]or
all intents and purposes, Alston is AEC, " they cite no
evidence showing that Alston exerts an unusual degree of
control over AEC, nor have we found any in the record.
Accordingly, plaintiffs adduced no evidence that AEC was
Alston's alter ego.
allege that Lamstex is a Louisiana limited liability company,
but they allege no specific facts to show that Lamstex is
Alston's alter ego. Although their brief argues that
"Alston is . . . Lamstex, " the evidence they cite
is Alston's deposition testimony that Lamstex was not
currently "an ongoing concern" and that based on
his accountant's advice he was going to "[j]ust let
it sit." This evidence does not show that Alston exerted
an unusual degree of control over Lamstex, nor have we found
such evidence elsewhere in the record. Accordingly plaintiffs
adduced no evidence that Lamstex was Alston's alter ego.
we consider whether plaintiffs adduced sufficient evidence
that NFP II was Alston's alter ego. Alston executed an
affidavit on behalf of NFP II in which he said that NFP II is
a limited liability company formed under Delaware law on
August 22, 2013, and that he is its president and CEO.
pled and re-urge on appeal that Alston operated NFP II as if
corporate formalities did not exist, but they offer no
specific facts to support the assertion. Instead, they refer
vaguely to other lawsuits filed against Alston and NFP II by
NFP II's minority members, contending that the pleadings
in those suits contain "additional allegations"
about Alston's disregard of corporate formalities. We
have reviewed those pleadings, which plaintiffs filed in this
case as evidence. Although those pleadings accuse Alston of
wrongdoing against NFP II and its minority members, we see no
specific allegations in them, or any record evidence,
establishing that Alston exercised enough control over NFP II
to permit jurisdictional veil-piercing under
there is no evidence that Alston exercised more than normal
investor and director control over NFP I, NFP II, AEC, or
Lamstex. Accordingly, those entities' Texas contacts are
not imputed to him.
are Alston's non-alter ego based Texas contacts?
allege that the following facts support specific jurisdiction
• Alston "took charge in the theft of" assets
such as leases, options, and other real estate interests by
creating NFP II and transferring the assets into NFP II. The
stolen assets "impacted commerce within Texas, "
and the theft was aimed at Texas companies.
• Alston also stole trade secrets such as customer
lists, business plans, and models. These thefts were also
aimed at a Texas company and "directly impact[ed] Texas
• The fraudulent transfer to Badger was an improper sale
of assets rightfully belonging to Texas companies. It was a
tort aimed at Texas companies that affected Texas commerce
and harmed Texas companies and individuals.
• Alston's fiduciary breaches were directly aimed at
plaintiffs, "both Texas companies."
• Alston conspired with the other defendants to
accomplish the fraudulent transfer to Badger.
allege these additional facts support general jurisdiction
• His principal place of business is his pickup truck,
which is outfitted with state-of-the-art electronics allowing
him to communicate and transact business wherever he is. When
he is not at his home in Louisiana, he is generally in Texas,
• He is the president, sole director, and primary
stockholder of AEC, a Louisiana corporation authorized to do
business in Texas. AEC's website identifies its offices
as being in Houston and Rockwall, Texas. AEC's marketing
materials claim that AEC has four offices that cover
Louisiana, Mississippi, Oklahoma, and Texas.
• He is also the only member and manager of Lamstex, a
Louisiana limited liability company that has done business in
Texas and has a Texas sales tax ID number.
• He "consistently conducts business in Texas,
personally and on behalf of AEC and Lamstex from his
'mobile office.'" And he has marketed himself
and his businesses as having "'extensive business
contacts with companies in Texas.'"
• In connection with the frac sand enterprise, he came
to Texas ten times for meetings with various people and
engaged in other business activities connected to Texas.
These activities included a sales contract; an attempt to
hire an employee; soliciting loans to fund NFP I; and the
hiring of attorneys to (i) represent his interests during the
formation of NF Holdings, (ii) charter NFP II, and (iii)
defend him in two Houston lawsuits arising from NFP II's
asset sale to Badger.
identified Alston's Texas contacts, we turn to whether
those contacts constitute sufficient minimum contacts to
support a Texas court's general or specific jurisdiction
General Jurisdiction: Is Alston essentially at home in Texas?
allege that Alston is subject to general jurisdiction in
Texas. Although he occasionally refers to evidence, Alston
argues primarily that plaintiffs' allegations, even if
true, fail to establish that he has sufficient minimum
contacts with Texas. We consider his argument as a legal
challenge to the sufficiency of plaintiffs'
jurisdictional allegations. See Kelly, 301 S.W.3d at
659 (a defendant can prevail by showing that plaintiffs'
allegations, even if true, are ...