Gespa Nicaragua, S.A. v. Recom AG, Flextronics International USA, Inc., Flextronics Automotive USA (Texas), LLC, and Expeditors International of Washington, Inc. (No. 08-22-00244-CV (March 20, 2024) stemmed from a deal to build a solar farm in Nicaragua that went south. Gespa, a Nicaraguan entity, contracted with a European entity, Inabata, to purchase “Black Panther” solar panels manufactured by Recom, a German entity. Inabata turned around and bought solar panels from Flextronics, an Austin-based company, which itself had acquired them in SunEdison’s bankruptcy and stored them in its El Paso warehouse. Once it acquired the solar panels from Flextronics, Inabata shipped them to Nicaragua, where they were installed in the first phase of the project. After they were installed, however, Gespa discovered that the panels were not Recom’s Black Panther model, but inferior SunEdison panels that had been relabeled in Flextronics’ warehouse. Recom had previously finalized a co-listing agreement with SunEdison, while Expeditors likewise took part in the relabeling.
Feeling cheated, Gespa filed suit in federal court, alleging fraudulent misrepresentation, unjust enrichment, and conspiracy to commit fraud. After a lot of back and forth involving various rulings, the federal case was dismissed. Gespa filed again in an El Paso district court, alleging the same causes of action as well as others. When an effort to remove the case to federal court failed, it proceeded in state court in October 2020. Recom filed a special appearance, which after a year the trial court granted (no idea why it took that long). Expeditors, which had been added as a party when the case settled in El Paso, moved to dismiss based on the sales agreement’s forum selection clause, which designated Germany as the dispute resolution forum, on a theory of equitable estoppel and third-party beneficiary. The trial court granted this motion, leaving Flextronics alone in the dock. The case went to trial on the fraud issue alone because the trial court granted a directed verdict on Gespa’s other claims. The jury returned a no liability finding as to Flextronics, and assigned 90% responsibility to Inabata and 10% to Recom. The trial court entered a take nothing judgment. Gespa appealed.
In an opinion by Justice Palafox, the court of appeals affirmed except as to the trial court’s ruling on the forum selection clause. While the court did not address most of Gespa’s issues because it did not adequately brief them, it did reach the special appearance, forum selection, and evidentiary issues. We will concern ourselves with the first two only. First, the court agreed with the trial court that Recom could not be subjected to personal jurisdiction in Texas. Recom was a German corporation based in Düsseldorf, had not offices, employees, or property in Texas, did not execute any agreement in Texas, and no employees relabeled panels or met with Flextronics’ employees in Texas. Further, Recom did not own the solar panels, which Inabata bought from Flextronics. Consequently, Inabata was the customer of Expeditors’ El Paso warehouse, not Recom. All Recom did was authorize Inabata’s use of its trademark on the panels sold to Gespa. Gespa countered that Recom had continuous and systematic contracts with Texas for a year prior to its agreement with Flextronics, a Texas company, and Expeditors, that it received a commission on the sale of the panels, that it “intermediated” the transaction between Inabata and Flextronics, that it negotiated the price for the warehouse and relabeling of the panels, that it coordinated with Expeditors for the shipment of the panels, and that it directly communicated with Expeditors on a daily basis.
The court concluded that Recom did not “purposefully avail itself of the privilege of conducting activities in Texas such that it invoked the benefits and protections” of Texas law (citations omitted). Its contract with Flextronics did not require performance in Texas, nor was it negotiated here. Moreover, Recom never sought to invoke the benefits and protections of Texas law by any other course of conduct. Moreover, taken by themselves, the alleged daily communications between Recom and Expeditors were not themselves evidence of purposeful availment. That the panels happened to be stored and relabeled in an El Paso warehouse did not show purposeful availment either, but were “fortuitous” and irrelevant to Recom’s contacts with the state. The court thus held that the trial court did not err in granting Recom’s special appearance.
Expeditors, however, did not get off so easily. The court determined that although the forum selection clause in Gespa’s contract with Recom might have been enforceable by virtue of equitable estoppel or third party beneficiary, Expeditors waited too long and engaged in extensive litigation before raising the issue and thus waived it. Applying the totality of the circumstances test laid down by SCOTX to determine whether litigation conduct is substantial enough to constitute waiver, the court noted that Expeditors: (1) didn’t move to dismiss under the forum selection clause until 17 months after it was added to the lawsuit; (2) initiated multiple forms of discovery addressing the merits of the litigation (e.g., deposition notices of Gespa’s corporate representatives and discovery relating to Gespa’s fraud claims rather than application of the forum selection clause); and (3) filed a motion to exclude Gespa’s expert (which the court granted), a no-evidence motion for summary judgment and for dismissal of Gespa’s claims (denied), a motion to reconsider (denied), and only then the motion to dismiss based on the forum selection clause. In the court’s mind, this all smacked as a “late game tactical decision” to use the forum selection clause failing in its other attempts to dismiss the lawsuit. Additionally, Expeditors litigation strategy was prejudicial to Gespa because it required a significant expenditure of resources on pursuing the merits of the case, as well as costing the court a lot of time and effort on considering and ruling on motions that the forum selection clause would have made irrelevant. The court thus found that Expeditors waived the issue, reversed the trial court’s ruling, and remanded for further proceedings.
This case is instructive for a number of reasons, particularly in its discussion of the waiver issue. It is also not likely to proceed any further because a jury has already found that parties no longer in the lawsuit were 100% responsible for the alleged fraud. But it also amply demonstrates how inadequately the appellant prepared and argued the appeal. On several of its issues, the court simply threw up its hands because the appellant did not cite any authorities or specific evidence in the record that it relied on in its argument. We see this problem often enough in appellate opinions that we feel justified in stating that one shouldn’t judge a court of appeals or a particular justice on the court of appeals unless one is pretty sure of how the case was lawyered. Even the best legal or factual argument can be undone in the presentation, and the written opinions don’t always tell the whole story.
