Based on the number of appellate opinions grappling with the reach of the Texas long-arm statute (§17.042, CPRC) that have been handed down in just the first six weeks of this year, we have begun to wonder whether we are seeing a trend, particularly in commercial litigation between Texas entities and nonresidents, that could become even more prominent in the post-pandemic era of remote employment and business transactions. A recent opinion out of the Eastland Court of Appeals, Ryan Broussard v. IPSCO Tubulars, Inc. d/b/a TMK IPSCO (No. 11-20-00054-CV), is a case in point.
IPSCO, a Texas-based company that designs and makes threaded connections used in to connect pieces of tubular steel in oil and gas wells, hired Broussard, a design engineer, in 2012. In 2017, Broussard moved to Colorado but continued to work for IPSCO and with IPSCO’s Texas-based customers. In 2019, Broussard resigned from IPSCO and began working for a Texas-based competitor, OFSi, in the same product developer role he had at IPSCO. Since entering employment with OFSi, Broussard has designed a threaded connection for OFSi that is being manufactured and sold to Texas-based customers. IPSCO sued Broussard for misappropriation of trade secrets, breach of loyalty, and breach of contract. Broussard filed a special appearance under Rule 120a, alleging that IPSCO’s alleged jurisdictional facts did not have a substantial relation to the operative facts underlying the litigation and that he had not purposefully availed himself of the privileges and benefits of doing business in Texas. The trial court denied the special appearance, and Broussard appealed.
The court of appeals affirmed. With respect to purposeful availment, the court found that Broussard’s continuing employment with IPSCO after his move to Colorado, his unfettered access to IPSCO’s server (which held the trade secrets) in Texas, his frequent travel to Texas for meetings at IPSCO and with customers, “were neither unilateral activities by IPSCO nor random or fortuitous.” It further found that Broussard benefitted from his Texas contacts by travelling to Texas to interview and obtain employment with OFSi in the same position he held with IPSCO. As an employee of OFSi, Broussard continued to travel to Texas and is in frequent communication with OFSi’s Texas-based employees and customers. In view of these facts, the court of appeals held that Broussard purposefully availed himself of the benefits of doing business in Texas and thus met the first prong of the specific-jurisdiction analysis.
Regarding the second prong of the test—whether a substantial connection exists between the nonresident defendant and Texas arising from or relating to the defendant’s contacts and the operative facts of the litigation—the court of appeals that IPSCO’s pleadings established that Broussard’s access to its Texas server, his travel to Texas to interview with OFSi, where he discussed the design of threaded connections, and his continued travel to Texas as an employee of OFSi constituted sufficient nexus to the misappropriation of trade secrets claim. It likewise found that the contacts IPSCO alleged between Broussard and Texas with respect to the breach of the confidentiality agreement and breach of loyalty were substantially connected to those claims.
Texas employers worried about key nonresident employees leaving and taking the trade secrets with them think ahead about the kinds of contacts they might want to have on the record to defeat a special appearance should worst come to worst. Simply having access to a server located in Texas does not by itself confer personal jurisdiction under the test because it is a unilateral choice by the owner. Nor does a Texas choice of law provision in an employment contract or confidentiality agreement necessarily establish minimum contacts. There has to be more, as there was in this case, such as frequent communications with the Texas-based employer and clients and periodic travel to Texas for purposes related to the specific issues that may become the subject of the litigation. But as remote employment becomes ever more common and cost-conscious employers restrict business travel, it will be interesting to how the jurisprudence adapts to a virtual work environment.