In a case pitting the behemoth news publishing company Gannett and the sprawling Texas-based tax consulting firm Ryan, LLC, the Beaumont Court of Appeals has held that Texas courts have no jurisdiction over a breach of contract claim asserted by Ryan for failing to pay contingency fees on certain refunds paid outside of Texas.
USA Today a/k/a Gannett Co., Inc., Gannett Publishing Services, LLC, and Gannett Satellite Information Network, LLC v. Ryan, LLC (No. 09-22-00322-CV; delivered December 14, 2023) arose from a contract between Gannett and Ryan’s predecessor, S.A.L.T. Payroll Consultants, Inc. for tax consulting work in Kentucky and Indiana. Gannett and its subsidiaries are incorporated in Delaware and have their principal place of business in Virginia. SALT was incorporated in Florida. The contract specified that New York applied. Ryan later acquired SALT and performed tax consulting work for Gannett in Texas, including securing an unemployment tax refund. The dispute, however, stemmed from Gannett’s alleged failure to pay $192,000 in contingency fees on significant tax refunds from Kentucky and Indiana.
Ryan brought suit in Montgomery County, asserting breach of contract and other claims. Most notably, Ryan pleaded a defamation cause of action based on alleged false statements Gannett published in its various media outlets about the nature of Ryan’s services. Gannett filed a special appearance as to the contract claims but not the defamation claim, asserting that Texas had neither general jurisdiction over the company nor specific jurisdiction over the contract claim. After a hearing, the trial court denied the special appearance. Gannett filed an interlocutory appeal.
The court of appeals reversed. First, it determined that Texas courts could not exercise general jurisdiction over Gannett because its contacts with Texas were not “so continuous and systematic ‘as to render [it] essentially at home’” in Texas (citations omitted). Although Gannett’s activities in Texas are certainly continuous and systematic (through its ownership of several Texas newspapers and the publication and distribution of USA Today in the state), the primary basis for jurisdiction is domicile, and Gannett is neither organized under Texas law nor domiciled in the state. Ryan unsuccessfully argued that because Gannett did not contest jurisdiction on the defamation claim, it consented to jurisdiction on the contract claim. Pointing that TRCP Rule 120a provides for bifurcation of a special appearance based on different causes of action, the contract claim was clearly severable from the defamation claim since different forum contacts were involved in the analysis.
Turning to the specific jurisdiction issue, the court found that although Gannett could be said to have purposefully availed itself of Texas law through the ownership and operation of its news business, the breach of contract claim did not arise from those forum contacts. According to SCOTX, “[t]his kind of personal jurisdiction involves a ‘claim-by-claim’ analysis that focuses on the relationship between the defendant, the forum state, and the operative facts of the litigation” (citing Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 579 (Tex. 2007)). Ryan argued that since it acquired SALT and subsequently did tax work for Gannett in Texas, including obtaining a tax refund, Gannett sought to benefit from Texas law and could reasonably be haled into court here. That argument, however, ignored the relatedness part of the test, which requires the claim to “aris[e] outof or relat[e] to the defendant’s contacts with the forum.” Here the disputed parts of the contract involved work allegedly done in Kentucky and Indiana, not Texas. SALT’s unpaid invoices were sent from St. Petersburg, Florida to a Gannett address in Milwaukee. Consequently, the court concluded that “there is ‘no substantial connection’ between [Gannett’s] activities in Texas and the operative facts of the contract claims in this lawsuit.”
There is yet another shoe to fall in this case. Gannett moved to dismiss Ryan’s defamation claim under the TCPA. The trial court denied the motion, and Gannett appealed. We look forward to seeing what the Beaumont court has to say about that as well.
