The Beaumont Court of Appeals has reversed a trial court order denying a Florida-based storage facility construction company’s special appearance in a suit alleging that it breached a contract and committed fraud in Texas.
Storage Building Company, LLC v. New Century Financial, Inc., Westlety St. Pierre, and Steel Fabrication Systems, LLC (No. 09-24-00113-CV; May 22, 2025) arose from a dispute between a Florida-based storage facility construction company (Storage) and a factoring company (New Century). Storage bought steel from Steel Fabrication Systems, a Louisiana company, which obtained operating funds pending receipt of Storage’s payments for steel from New Century under a factoring agreement. New Century bought Steel’s accounts receivable at a discount and to its money back when Storage paid Steel’s invoices. St. Pierre, a member of Steel, personally guaranteed the factoring contract. The contract included a choice-of-law provision specifying Texas law, as well as a venue and jurisdiction provision specifying Montgomery County district courts and Harris County federal court.
Pursuant to the contract, Steel sent a notice of assignment to Storage, which Storage never acknowledged. Subsequently, Steel allegedly failed to deliver materials for one of Storage’s projects and delivered unusable materials for another. Storage didn’t pay Steel for either one, although, New Century alleges, it approved the invoices. Thinking Storage would pay, New Century bought those accounts. When Storage didn’t pay, New Century sued Steel and St. Pierre in Montgomery County (and later added Storage as a defendant) for breach of contract and negligent misrepresentation. Storage made a special appearance, asserting lack of personal jurisdiction. New Century opposed, arguing that Storage committed an intentional tort (fraud) in Texas. The trial court overruled Storage’s special appearance. Storage sought interlocutory relief.
In an opinion by Justice Wright, the court of appeals reversed. First, the court determined that Texas could not exercise general jurisdiction because Storage had no “continuous and systematic” contacts with Texas (citations omitted). Moving on to whether Texas could exercise personal jurisdiction, the court engaged in the two-part test requiring that (1) Defendant “engage in some act by which it purposely avails itself of the privilege of conducting activities in the forum state; and (2) the plaintiff’s claims arise out of or relate to those forum contacts” (citations omitted). The analysis focuses on the relationships among the defendant, the forum state, and operative facts of the litigation, not unilateral acts by any of the parties (as Storage alleged New Century and Steel did here). At issue was whether Storage’s conduct created a “substantial connection between [its] contacts and the operative facts.
New Century’s live pleading alleged that Storage didn’t pay invoices it was obligated to pay and thus breached the notice of assignment. Storage further committed fraud or negligent misrepresentation in Texas “by intentionally, knowingly, or negligently approving Steel’s invoices, thus ‘induc[ing]’ New Century to purchase those invoices and sustain damages when Storage Building later failed to pay.” Based on these allegations, the court concluded, New Century’s pleadings established sufficient facts to bring Storage within the scope of Texas’ long-arm statute.
The burden shifted to Storage to demonstrate that it lacked the requisite minimum contacts with Texas. Those contacts consisted of five emails to New Century approving Steel’s invoices and paying two of them. But “exchanging emails and sending payments to a Texas plaintiff do not establish specific jurisdiction” (citations omitted). Any contacts Storage had with Texas were “fortuitous since it was Steel’s choice to contract with a factoring company in Texas and not Storage Building’s choice.” Further, New Century’s allegation that by virtue of those contacts Storage committed a tort in Texas does not provide a basis for long-arm jurisdiction. Only Storage’s contacts are relevant to the jurisdictional analysis. Clearly, Storage sought no benefit by availing itself of Texas law, although Steel certainly did. In the absence of purposeful availment, the court didn’t need to consider the second prong of the test.
TCJL Research Intern Satchel Williams provided research for and drafting assistance in the preparation of this article.
