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Creation Technologies Texas, LLC v. AEG Power Solutions B.V.

Court of Appeals of Texas, Fifth District, Dallas

November 12, 2019

CREATION TECHNOLOGIES TEXAS, LLC, Appellant
v.
AEG POWER SOLUTIONS B.V., Appellee

          On Appeal from the 14th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-18-015065

          Before Justices Myers, Osborne, and Nowell

          MEMORANDUM OPINION

          ERIN A. NOWELL JUSTICE

         This is an accelerated interlocutory appeal from an order granting the special appearance filed by AEG Power Solutions B.V. ("AEG B.V."). In four issues, Creation Technologies Texas, LLC ("Creation") asserts the trial court erred by granting AEG B.V.'s special appearance because AEG B.V. is subject to general and specific jurisdiction in Texas. We modify the trial court's order and affirm as modified.

         Background and Procedural History

         In September of 2012, Creation, a Texas company, entered into a Manufacturing Agreement with a Texas-based company, AEG Power Solutions USA, Inc., subsequently known as 3W Power Solutions USA, Inc. ("AEG USA"). In line with the Manufacturing Agreement, AEG USA placed purchase orders with Creation in June of 2013 for the manufacture of solar inverters, which convert the output of a solar panel into a utility frequency. These purchase orders were placed, at least in part, to fulfill an order from another company, Power Max Co., Ltd., which was in the business of, among other things, developing and selling solar electric power plants in Japan to investors. Power Max, however, failed to pay AEG USA, and by January of 2014 AEG USA owed Creation over $2 million under the terms of the Manufacturing Agreement. In February of 2014, AEG USA entered into a Security Agreement with Creation to avoid termination of the Manufacturing Agreement. The Security Agreement, executed in the Netherlands on AEG USA's behalf by Jeffrey Casper, a non-Texas resident, gave Creation a continuing security interest in AEG USA's accounts, equipment, and inventory.

         AEG USA, meanwhile, sued Power Max in a Texas court in June of 2015 for breach of contract, and the case was removed to federal court in October of 2015. AEG USA subsequently settled the case, and the proceeds of the settlement were paid to Creation, which had intervened in the case.[1]

         On October 3, 2018, Creation filed the underlying lawsuit against AEG B.V.; AEG USA; AEG Power Solutions GmbH ("AEG Germany"); AEG Power Solutions Sdn Bhd, AEG Power Solutions' Malaysian subsidiary ("AEG Malaysia"); 3W Power S.A., AEG Power Solutions' Luxembourg-based holding company ("AEG Luxembourg"); and Jeffrey Casper who, at the time of the events that form the basis for this suit, was a director of AEG USA and AEG Power Solutions'[2] chief restructuring officer and chief financial officer (collectively, "the AEG Defendants"). This lawsuit seeks millions of dollars allegedly owed to Creation for the manufacture of commercial solar inverters under theories of alter ego, breach of the written Security Agreement, fraud, fraudulent transfer, and negligent misrepresentation. Creation filed an amended petition on November 5, 2018.[3] AEG B.V. and AEG Germany filed special appearances that argued Creation had not alleged sufficient contacts with Texas to warrant the exercise of personal jurisdiction.

         According to Casper's declaration, AEG Power Solutions is comprised of AEG B.V. and its twenty-three subsidiaries, which include AEG Germany and AEG USA. AEG B.V. is a Dutch company headquartered in Zwanenburg, Netherlands. AEG B.V. is the operational holding company, which primarily provides administrative services to the various AEG subsidiaries; "[a]lthough this entity does some sales and service sales [sic] activities, it does most of the central supporting and administrative activities. The executive management, i.e., CEO and CFO, is centralized within [AEG B.V.]." AEG B.V. provides some oversight to AEG USA and AEG Germany, but those entities are self-governed. Casper's declaration states that at all relevant times, "AEG BV has not 'controlled' AEG Germany or USA as suggested in Creation's Petition." AEG B.V. does not have any bank accounts, property, offices, employees, or agents in Texas. The vast majority of AEG Power Solutions' production and manufacturing is carried out by AEG Germany.

         Casper stated the decision to enter into the Manufacturing Agreement in 2012 was made by AEG USA, which, at that time, was "run at the USA level with some oversight from the parent company, AEG BV. The decision to enter into the Manufacturing Agreement was not subject to oversight from AEG BV or any other AEG entity." Casper's declaration states that while in operation, AEG USA maintained its own board of directors; filed tax returns in the United States; employed individuals in the State of Texas, paid them for their services, and provided them with benefits including health care; and maintained separate and distinct bank accounts from any other defendants. To the extent there were any intra-company transfers of funds, those transfers were documented, and AEG USA was required to repay the transferor. When common positions were used to provide services to different subsidiaries, such as the general counsel position, AEG USA would pay a share of the person's salary.

         Casper averred that AEG B.V. has not contracted by mail or otherwise with a Texas resident or Texas business; has not agreed to perform a contract in whole or in part in the State of Texas; has not recruited directly or through an intermediary a Texas resident for employment; does not own real property or have any other assets in Texas; does not maintain an office or other point of contact in Texas; has not purposefully availed itself of the privilege of conducting activities within the State of Texas, and any contact it might have had with Texas does not give rise to specific or general jurisdiction; has not placed any product in the stream of commerce knowing that some of them would reach Texas and did not otherwise engage in conduct indicating an intent to serve the Texas market; has not solicited business in Texas or with any other person or entity in Texas; has not entered into any agreement with Creation; does not maintain a registered agent in the State of Texas; and has not committed a tort or statutory violation in the State of Texas. He further averred that AEG B.V. never sold any inverters. Additionally, no inverters were sold by AEG Power Solutions in the State of Texas.

         In its response to AEG B.V.'s special appearance, Creation argued that AEG B.V. was subject to general and specific jurisdiction in Texas because there was no distinction between AEG B.V. and its American subsidiary, AEG USA; Creation asserted AEG B.V. was "fused" to AEG USA. Following a hearing, the trial court granted AEG B.V.'s special appearance. Creation appealed.

         Personal Jurisdiction

         Texas courts may exercise personal jurisdiction over a nonresident defendant "when the state's long-arm statute authorizes such jurisdiction and its exercise comports with due process." Cornerstone Healthcare Grp. Holding, Inc. v. Nautic Mgmt. VI, L.P., 493 S.W.3d 65, 70 (Tex. 2016). The Texas long-arm statute provides in relevant part that "[i]n addition to other acts that may constitute doing business," a nonresident does business in Texas if the nonresident contracts by mail or otherwise with a Texas resident and either party is to perform the contract in whole or in part in this state, or if the nonresident commits a tort in whole or in part in this state. Tex. Civ. Prac. & Rem. Code Ann. § 17.042(1), (2). The statute "provides for personal jurisdiction that extends to the limits of the United States Constitution, and so federal due process requirements shape the contours of Texas courts' jurisdictional reach." Searcy v. Parex Res., Inc., 496 S.W.3d 58, 66 (Tex. 2016).

         "[W]hether a trial court's exercise of jurisdiction is consistent with due process requirements turns on two requirements: (1) the defendant must have established minimum contacts with the forum state; and (2) the assertion of jurisdiction cannot offend traditional notions of fair play and substantial justice." Id. (citing Int l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). "[Sufficient minimum contacts exist when the nonresident defendant 'purposefully avails itself of the privilege of conducting activities within the forum [s]tate, thus invoking the benefits and protections of its laws.'" Id. at 66-67 (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)). "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." Id. at 67. The defendant must purposefully direct contacts into the forum state. Id. (citing Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C, 815 S.W.2d 223, 228 (Tex. 1991)).

         When determining whether a nonresident purposefully availed itself of the privilege of conducting activities in Texas, we consider three factors: (1) only the defendant's contacts with the forum are relevant, not the unilateral activity of another party or third person; (2) the contacts relied upon must be purposeful rather than random, isolated, or fortuitous; and (3) the defendant must seek some benefit, advantage, or profit by availing itself of the jurisdiction. Cornerstone, 493 S.W.3d at 70-71. This analysis assesses the quality and nature of the contacts, not the quantity. Moncrief Oil Int'l, Inc. v. OAO Gazprom, 414 S.W.3d 142, 151 (Tex. 2013). A defendant will not be haled into a jurisdiction based solely on contacts that are random, isolated, or fortuitous, or on the unilateral activity of another party or a third person. Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex. 2005); Guardian Royal Exch., 815 S.W.2d at 226.

         In addition to minimum contacts, due process requires the exercise of personal jurisdiction to comply with traditional notions of fair play and substantial justice. Moncrief Oil Int'l, 414 S.W.3d at 154 (citing Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex. 2009)). The evaluation is undertaken in light of these factors, when appropriate:

(1) the burden on the defendant; (2) the interests of the forum state in adjudicating the dispute; (3) the plaintiffs interest in obtaining convenient and effective relief; (4) the interstate or international judicial system's interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the ...

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