United States District Court, S.D. Texas, Houston Division
MEMORANDUM AND OPINION
Rosenthal Chief United States District Judge
Biomedical Inc. has sued Glatt Air Techniques, Inc.,
asserting fraudulent inducement, negligent misrepresentation,
contract breach, conversion, and violations of the Texas
Deceptive Trade Practices Act. (Docket Entry No. 9 at 16-34).
In September 2017, Halcyon contracted with Glatt to make
dissolvable tablets for testing for sickle-cell disease.
(Id. at 6-14). Halcyon alleges that Glatt made
misrepresentations about the agreement, its ability to meet
Halcyon's tablet requirements, and payment arrangements;
breached the agreement; and failed to return Halcyon's
“analytical column” or “mini-tab pressing
tooling” after their relationship deteriorated.
moved to dismiss for lack of personal jurisdiction, improper
venue, failure to state a plausible claim, and judgment on
the pleadings. Halcyon filed an amended complaint and
responded, arguing that the court has specific jurisdiction,
venue is proper, and the amendment made the motions to
dismiss for failure to state a plausible claim and for
judgment on the pleadings moot. Glatt replied that the
motions remain in need of decision, there is neither specific
jurisdiction nor proper venue, and the amended complaint
fails to allege sufficient facts to state a plausible claim.
Halcyon surreplied. (Docket Entry Nos. 8-9, 10, 16, 19).
careful review of the original and amended complaints; the
motions, response, reply, and surreply; the properly
considered documents; and the applicable law, the court
denies the motion to dismiss. Halcyon has made a prima facie
showing of specific jurisdiction, venue is proper, and the
amended complaint has made moot the motions to dismiss for
failure to state a claim and judgment on the pleadings. The
reasons are explained in detail below.
facts are drawn from the amended complaint, the documents
attached to it, and the parties' properly considered
submissions. Halcyon, a company headquartered in Houston,
Texas, develops tests to screen for medical conditions.
(Docket Entry No. 9 at 1). Glatt is a New Jersey company that
specializes in developing “solid dosage pharmaceuticals
(tablets).” (Id. at 1-3). Glatt has no
employees, bank accounts, property, service agent, or mailing
addresses in Texas, and does not “advertise or
regularly solicit business in Texas.” (Docket Entry No.
8-1 at 1-2).
work on a test for sickle-cell disease required a tablet made
of certain substances that would “dissolve
completely.” (Docket Entry No. 9 at 3). In May 2017,
Halcyon's president, Sean Gifford, viewed Glatt's
website, which stated that Glatt had experience making
dissolvable tablets. (Id. at 2-3). Gifford contacted
Glatt through the website contact form, asking if Glatt could
make fully dissolvable tablets to screen for sickle-cell
disease. (Id. at 7). Gary Selander, Glatt's
Senior Director of Business Development, responded that Glatt
had “deep” experience making tablets and
suggested a teleconference. (Id.). Halcyon signed a
nondisclosure agreement and Steve Radovanovich, Glatt's
Texas business director, scheduled a call. (Id. at
May and September 2017, Halcyon and Glatt spoke by phone and
exchanged emails about the tablet requirements. (Id.
at 2-11). Glatt assured Halcyon that it could make tablets
that would dissolve down to particles of 2 to 3 micrometers
within a couple minutes. (Id. at 3-4, 9-10). In
September 2017, Glatt sent Halcyon a purchase order and a
sales proposal. (Docket Entry Nos. 9-9, 9-11). Gifford signed
the proposal in Texas. (Docket Entry No. 9 at 11). The sales
proposal described the services that Glatt would provide and
set out the terms governing the parties' relationship.
Glatt had to:
develop a process of combining two individual materials
Sodium Metabisulfite and Saponin in a solid dosage form. The
solid dosage form may be a Mini Tablet or a Drug Coated &
Encapsulated Pellet and will be used as part of a Medical
Entry No. 9-9 at 3). Glatt would deliver the tablets to
“ExWorks, Glatt facility, Ramsey, NJ”; Halcyon
would be billed for shipping costs; New Jersey sales tax
would apply; raw materials would be sent to Glatt's New
Jersey address; and Glatt's work would conform with FDA
and New Jersey standards. (Id. at 11, 15). The sales
proposal warned that:
Glatt does not guarantee the successful outcome of any stage
described in this Proposal. In the event of an error or
omission in performance of services, Glatt's sole
obligation and liability shall be to repeat the Services, or
the affected part thereof, at no additional cost to the
Client and at the earliest date as determined by Glatt.
(Id. at 16).
February 2018, Glatt had made sample tablets and sent some to
Halcyon for testing, along with an invoice for $15, 446.24.
(Docket Entry No. 9-1 at 7). Halcyon found that the tablets
took more than a couple minutes to dissolve and contained an
“enormous amount” of “insoluble
components.” (Docket Entry No. 9-13). Over the next
month, Glatt and Halcyon discussed over phone and by email
how to change the tablets, discussing different formulas.
(Docket Entry Nos. 9-13, 9-14). In April 2018, Glatt sent
Halcyon new sample tablets and a second invoice, this one for
$36, 651.65, for Glatt's work in March. (Docket Entry
Nos. 9-14-9-15). Halcyon found that the samples still failed
its requirements. (Docket Entry No. 9-1 at 7). Halcyon
objected to the February and March invoices because it could
not use the tablets. (Id. at 7-8). Glatt refused to
do more work on the tablets until Halcyon paid the invoices.
On May 2, 2018, Gifford and Selander agreed that Halcyon
would pay $15, 446.24 of the invoices and that Glatt would
try again to make a tablet meeting the requirements.
(Id. at 8; Docket Entry No. 9-16). Halcyon wired the
$15, 446.24 to Glatt on May 4. (Docket Entry No. 9-1 at 8).
17, Glatt “rescind[ed] the offer, ” declining to
work on the tablets until Halcyon paid the $36, 561.65 left
unpaid on the two invoices. (Docket Entry No. 9-19). Glatt
stated that its work had been “reasonable”
because Halcyon learned “important points about the
technical specs required for the [tablets] to properly
support the effectiveness of [the] diagnostic test.”
(Docket Entry No. 9-17).
relationship between Halcyon and Glatt continued to sour.
Gifford sent an email asking Selander to
“confirm” in writing that Glatt would not ask
Halcyon to pay the “potentially fraudulent”
invoices. (Docket Entry No. 9-18 at 2). Glatt did not respond
to that request, but offered to return Halcyon's
“analytical column” and “mini-tab tablet
press tooling” if Halcyon sent a “FedEx or UPS
account number.” (Id.; Docket Entry No. 9-20).
Halcyon provided a FedEx account number, but Glatt did not
return the column or tooling. (Docket Entry No. 9-1 at 9).
sued Glatt, asserting fraudulent inducement, negligent
misrepresentation, contract breach, conversion, and
violations of the Texas Deceptive Trade Practices Act.
(Docket Entry No. 9 at 16-34). Halcyon alleges that Glatt
employees made intentional misrepresentations in emails and
over phone conversations, inducing Halcyon to contract with
Glatt and to partially pay the invoices; failed to disclose
material information about the substances used in the sample