Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

WaterWorks Corral Creek, LLC v. AquaTech Saltwater Disposal LLC

Court of Appeals of Texas, Third District, Austin

February 21, 2018

WaterWorks Corral Creek, LLC and Saltwater Disposal Systems, LLC, Appellants
AquaTech Saltwater Disposal LLC d/b/a Aqua Tech Water & Disposal, LLC and Eric Schmitz, Appellees


          Before Chief Justice Rose, Justices Goodwin and Bourland


          Cindy Olson Bourland, Justice

         In this interlocutory appeal, appellants WaterWorks Corral Creek, LLC and Saltwater Disposal Systems, LLC-both limited liability companies organized pursuant to North Dakota laws and with their principal places of business in Florida-assert that the trial court erred by denying their special appearance. WaterWorks and Saltwater (or collectively, "the WaterWorks entities") entered into a letter of intent with appellee AquaTech Saltwater Disposal LLC d/b/a Aqua Tech Water Disposal, LLC ("AquaTech") concerning AquaTech's contemplated acquisition of their saltwater disposal wells. The acquisition never occurred, and WaterWorks and Saltwater subsequently sold the wells to a different entity, NGL Energy Partners, LP. AquaTech and appellee Eric Schmitz (AquaTech's sole owner and managing member), both Texas residents, sued WaterWorks and Saltwater, alleging claims for breach of contract, tortious interference with existing contract, tortious interference with prospective business relationship, and civil conspiracy.[1]WaterWorks and Saltwater filed a special appearance, which the trial court denied. We will reverse and render judgment granting the special appearance and dismissing WaterWorks and Saltwater from the lawsuit because we hold there is neither specific nor general jurisdiction over the WaterWorks entities for the claims asserted against them.


         Saltwater disposal wells are disposal sites for water collected as a byproduct of oil and gas production. Underground rock formations that are oil and gas reservoirs usually contain significant amounts of saltwater. The saltwater left after the oil and gas production must be carefully disposed of in a manner that will not pollute usable-quality groundwater. One method for disposing of saltwater is to inject it into other underground rock formations that do not produce oil or gas and that are isolated from usable-quality groundwater.

         AquaTech is a business that focuses on owning and operating saltwater disposal wells throughout Texas.[2] Schmitz, AquaTech's sole owner and managing member, resides in Dallas, Texas, and also maintains AquaTech's principal office there. WaterWorks and Saltwater were each formed to develop, own, and operate a single saltwater disposal well. Both wells are located in North Dakota. In his affidavit filed with WaterWorks and Saltwater's special appearance, Reece Lansberg, a manager of the two LLCs, averred that all of the LLCs' assets were located in North Dakota and that all services provided in connection with the wells had been conducted in North Dakota.[3] The sole exception was that some of the books and records of the companies were maintained in Ohio and Florida, in addition to North Dakota.

         The dispute between the parties arose from negotiations of a potential purchase of the WaterWorks and Saltwater wells by AquaTech. According to AquaTech and Schmitz, they learned that WaterWorks and Saltwater had two disposal wells and other assets available for sale for $23.5 million, a price AquaTech and Schmitz considered to be "a steep discount." AquaTech and Schmitz desired to purchase these assets and then in turn planned to resell the WaterWorks and Saltwater assets along with a package of similar assets that they owned in Texas "at the fair market price of $35 million, and would retain the difference of $11.5 million."[4]

         In September 2013, Schmitz contacted Reece about possibly purchasing the two wells, along with the lease and permit for another well and a pending permit, lease, and well bore for a fourth well (the "WaterWorks assets" or "wells"). The initial communications between Schmitz, Reece, Brent, and Steve Liebel (another member of the WaterWorks and Saltwater LLCs) were conducted exclusively by telephone and other electronic means. The initial discussions led to the execution of a letter of intent on October 6, 2013.

         The letter of intent to acquire the WaterWorks assets contained a noncircumvention provision that is the basis for AquaTech and Schmitz's breach-of-contract claim against WaterWorks and Saltwater. The provision contemplated AquaTech's potential sale of the assets to third parties and accordingly provided as follows:

Non-Circumvention. [AquaTech] may elect to sell all or a portion of the Properties upon Closing to its investors, associates, or others ("Third Parties"). To further such transaction, Purchaser may introduce and identify such Third Parties to [WaterWorks and Saltwater]. [WaterWorks and Saltwater], beginning on the date of this LOI and continuing for a period of two (2) years thereafter, agrees not to contact, or initiate contact, or respond to any contact, either directly or indirectly, with any of the Third Parties, or the individuals, companies, or representatives of companies; or contacts, representatives, agents, conduits or facilitators related to any of the Third Parties, with regard to a sale of the Properties excluding persons that [WaterWorks and Saltwater] ha[ve] an existing business relationship with prior to the date of this agreement.

         According to AquaTech and Schmitz, this provision prohibited WaterWorks and Saltwater "from discussing a potential sale of any Available Assets [for the next two years] with any buyer that [AquaTech and Schmitz] introduced or identified."

         Following the execution of the letter of intent, Reece averred that he met in North Dakota with a representative of Central Energy Partners at AquaTech's urging. Central Energy Partners was a potential buyer of the wells from AquaTech, and the Central Energy Partners representative traveled to North Dakota to view the WaterWorks assets. Then, in November 2013, Brent traveled to Dallas at AquaTech's invitation to meet with Central Energy Partners. Brent testified at his deposition that AquaTech or Schmitz purchased his plane ticket to Dallas, that he met with Central Energy Partners one afternoon, and that the meeting was for "us to get to know them; them to get to know us." In his affidavit, Reece averred that the meeting lasted approximately two hours and "was in the nature of an exploratory discussion about the [WaterWorks] and [Saltwater] disposal wells, a general discussion about the state of the Bakken area, and possible opportunities for further saltwater development in North Dakota. The meeting also included a discussion about post-closing management of the wells."

         Reece further averred that all subsequent discussions involving AquaTech and Schmitz's possible purchase of the wells from the WaterWorks entities "were conducted remotely by phone or means of electronic communication." Brent testified regarding the due diligence and various draft agreements circulated between the parties that "our communication was mostly with our attorneys." He could not recall whether there were conference calls with the other parties.

         In fall 2013, while negotiating to buy the wells from the WaterWorks entities, AquaTech and Schmitz had contacted Johan Themaat at NGL Water Solutions DJ, LLC f/k/a High Sierra Water Solutions ("NGL Water") about potentially purchasing the wells from AquaTech and Schmitz once they had acquired them. AquaTech and Schmitz provided NGL Water and NGL Energy Partners, LP ("NGL Energy") with financial and operational information related to the wells, and AquaTech, Schmitz, and NGL Water executed a "Mutual Confidentiality and Nondisclosure Agreement." AquaTech and Schmitz assert in their brief (without citation to the record) that an NGL officer advised them in February 2014 that NGL Water and NGL Energy were no longer interested in acquiring the wells because they did not have the resources to engage in the deal. Reece avers in his affidavit that the only prospective purchasers that were ever identified by AquaTech and Schmitz were "Central Energy Partners, BNN Energy (a Colorado company), and affiliates thereof." Although AquaTech and Schmitz assert that during the course of their negotiations with WaterWorks and Saltwater, WaterWorks and Saltwater learned that AquaTech and Schmitz were negotiating the resale of the wells to the NGL Defendants, AquaTech and Schmitz do not refute Reece's statement and Brent's deposition testimony that AquaTech and Schmitz did not identify NGL Water and NGL Energy to WaterWorks and Saltwater as prospective purchasers.

         The letter of intent between the WaterWorks entities and AquaTech stated that "[t]he Parties will enter into a formal Purchase and Sale Agreements [sic] ('PSAs') for each of the two wells within thirty (30) days of the date of this Letter." The letter was executed on October 6, 2013, making November 5, 2013, the date agreed upon for executing a purchase-and-sale agreement. The term of the letter of intent was for thirty days "or until execution of the [Purchase and Sale Agreements]." The letter of intent further provided that the closing of the deal would be no more than thirty days after the expiration of the sixty-day due-diligence period, which would have been January 4, 2014. Some of the draft agreement documents circulated among the parties in late 2013 and January 2014 contemplated that Central Energy Partners would ultimately purchase the wells from AquaTech. At some point, however, Central Energy Partners dropped out of the deal. WaterWorks and Saltwater never signed a purchase-and-sale agreement with AquaTech and Schmitz, and they never closed a final deal to sell the wells to AquaTech and Schmitz. Brent testified that the WaterWorks entities did not "do the deal with AquaTech . . . [b]ecause AquaTech couldn't perform."

         Brent further testified that after the sale to AquaTech did not close and Central Energy Partners was no longer a potential purchaser from AquaTech, Schmitz had "communicated with Reece and asked Reece if he could have a little bit of time to try to put a Houston group in place of Central, that he had them teed up; and they were ready to go." E-mails between Schmitz, Brent, and Reece in early May 2014 show that Schmitz had sent Brent and Reece a letter of intent between BNN Energy and AquaTech to review. In his response to Schmitz, Brent stated that he thought it made sense to negotiate certain issues at the letter-of-intent phase instead of the contract phase because those issues could be "deal breakers, " further stating, "As I'm sure you appreciate, we don't want to spend more money negotiating another sale that doesn't happen." Reece averred that all discussions about selling the wells to AquaTech and Schmitz ceased in late spring 2014.

         In June 2014, WaterWorks and Saltwater executed a services agreement with Capital Energy Advisors, Inc. ("Capital Advisors"), a Texas corporation. Under the terms of the agreement, WaterWorks engaged Capital Advisors to market and sell the wells. Capital Advisors approached approximately ten entities about selling the wells. In August 2014, Capital Advisors contacted Jim Winter at NGL Water to notify him that the wells were for sale. In November 2014, WaterWorks and Saltwater sold the wells to NGL Energy.

         AquaTech and Schmitz filed suit in Travis County, Texas, against WaterWorks, Saltwater, NGL Water, NGL Energy, and Capital Advisors, alleging claims for breach of contract, promissory estoppel, tortious interference with existing contract, tortious interference with prospective business relationships, and civil conspiracy. In particular, they asserted that the trial court has personal jurisdiction over WaterWorks and Saltwater because they purposefully availed themselves of the privileges and benefits of conducting business in Texas by entering into a contract with Texas residents AquaTech and Schmitz that was performed in whole or in part in Texas or by committing a tort in whole or in part in Texas. See Tex. Civ. Prac. & Rem. Code § 17.042 (long-arm statute listing some activities that constitute doing business in Texas). WaterWorks and Saltwater filed a special appearance challenging the trial court's jurisdiction, and AquaTech and Schmitz filed a response opposing the special appearance. After a hearing, the trial court denied the special appearance. WaterWorks and Saltwater requested that the trial court file findings of fact and conclusions of law, but none were filed. This appeal followed.


         Texas courts may assert jurisdiction over nonresident defendants "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); see Tex. Civ. Prac. & Rem. Code § 17.042 (Texas long-arm statute). The broad language of the Texas long-arm statute allows Texas courts to exercise personal jurisdiction over nonresident defendants to the extent permitted by the federal constitutional requirements of due process. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002). Accordingly, "the requirements of the Texas long-arm statute are satisfied if an assertion of jurisdiction accords with federal due-process limitations." Moki Mac, 221 S.W.3d at 575. Thus, we rely on precedent from the United States Supreme Court as well as our own State's decisions when determining whether a nonresident defendant has met its burden to negate all bases of jurisdiction. BMC Software, 83 S.W.3d at 795.

         A court's exercise of jurisdiction over nonresident defendants comports with federal due-process requirements if the nonresidents have established "minimum contacts" with the forum state and the exercise of jurisdiction "does not offend 'traditional notions of fair play and substantial justice.'" M & F Worldwide Corp. v. Pepsi-Cola Metro. Bottling Co., 512 S.W.3d 878, 885 (Tex. 2017) (quoting Walden v. Fiore, 134 S.Ct. 1115, 1121 (2014) (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945))). We focus on the nonresident defendants' activities and expectations when deciding whether it is proper for a Texas court to exercise jurisdiction over them. Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex. 2009) (citing International Shoe, 326 U.S. at 316). The minimum-contacts analysis requires that nonresident defendants "purposefully avail" themselves of the privilege of conducting activities within Texas, thus invoking the benefits and protections of our laws. American Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). The nonresident defendants' activities, "whether they consist of direct acts within Texas or conduct outside Texas, must justify a conclusion that the defendant[s] could reasonably anticipate being called into a Texas court." Id. What matters for the minimum-contacts analysis is the quality and nature of the defendants' contacts, not their number. Id.

         The "purposeful availment" inquiry has three components. Moki Mac, 221 S.W.3d at 575. First, we must consider only the nonresident defendants' contacts with the forum, not the unilateral activity of another party or a third person. Id. (citing Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex. 2005)). Second, the contacts on which jurisdiction is based must be purposeful-not random, fortuitous, or attenuated. Id.; see also Burger King, 471 U.S. at 475-76 & n.18; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). Third, the nonresident defendants must seek some benefit, advantage, or profit by availing themselves of the jurisdiction and the benefits and protections of the forum's laws. Moki Mac, 221 S.W.3d at 575; see also Michiana, 168 S.W.3d at 785. "By contrast, a nonresident may purposefully avoid a particular jurisdiction by structuring its transactions so as neither to profit from the forum's laws nor be subject to its jurisdiction." Michiana, 168 S.W.3d at 785; see also American Type, 83 S.W.3d at 808 (explaining that legal fiction of implied consent to jurisdiction no longer applies when nonresident purposefully structures transactions to avoid benefits and protections of forum's laws). "The nub of the purposeful availment analysis is whether a nonresident defendant's conduct in and connection with Texas are such that it could reasonably anticipate being haled into court here. Purposeful availment involves contacts that the defendant 'purposefully directed' into the forum state." Searcy v. Parex Res., Inc., 496 S.W.3d 58, 67 (Tex. 2016) (quoting Guardian Royal Exch. Assur., Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 228 (Tex. 1991)).

         Minimum contacts with the forum state may give rise to either general or specific jurisdiction. TV Azteca v. Ruiz, 490 S.W.3d 29, 37 (Tex. 2016). A court may assert general jurisdiction over nonresident defendants whose "affiliations with the State are so 'continuous and systematic' as to render them essentially at home in the forum State." Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919, 924 (2011) (explaining that "[f]or an individual, the paradigm forum for the exercise of general jurisdiction is the individual's domicile; for a corporation, it is an equivalent place, one in which the corporation is fairly regarded as at home"). This test requires "substantial activities within the forum" and presents "a more demanding minimum contacts analysis than for specific jurisdiction." BMC Software, 83 S.W.3d at 797. If continuous and systematic contacts give rise to general jurisdiction, a court may exercise jurisdiction over the nonresident defendants "even if the cause of action did not arise from activities performed in the forum state." TV Azteca, 490 S.W.3d at 37 (quoting Spir Star AG v. Kimich, 310 S.W.3d 868, 872 (Tex. 2010)).

         In contrast, specific jurisdiction exists only if the alleged liability arises out of or is related to the defendants' purposeful activities in the forum. Moncrief Oil Int'l Inc. v. OAO Gazprom, 414 S.W.3d 142, 150 (Tex. 2013). In other words, the "[s]pecific-jurisdiction analysis has two co-equal components. For specific-jurisdiction purposes, purposeful availment has no jurisdictional relevance unless the defendant's liability arises from or relates to the forum contacts." Moki Mac, 221 S.W.3d at 579. When specific jurisdiction is alleged, the minimum-contacts analysis focuses on the relationship among the defendant, Texas, and the litigation to determine whether the claim arises from or is related to Texas activity. Id. at 575-76 (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984)). A claim arises from or relates to nonresident defendants' forum contacts if there is a "substantial connection between those contacts and the operative facts of the litigation." TV Azteca, 490 S.W.3d at 52 (quoting Moki Mac, 221 S.W.3d at 585).


         Whether a court has personal jurisdiction over a defendant is a question of law. BMC Software, 83 S.W.3d at 794. "The trial court frequently must resolve questions of fact before deciding the jurisdiction question." Id. On appeal, we review de novo the trial court's determination to grant or deny a special appearance, but we may also be asked to review the trial court's resolution of a factual dispute. Id. When the trial court does not issue findings of fact and ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.