The Houston [1st] Court of Appeals has affirmed a trial court order granting a Louisiana law firm’s special appearance in a barratry lawsuit.
Wayne J. Adams, Bonnie Brown, Claude Britton, III, Curtis Davis, Carey D. Yazeed, Dwane Borel, James S. Dartez, Lloyd Cox and Lynda I. Jenkins, v. Tort Network, LLC D/B/A Velawcity (No. 01-24-00169-CV; March 18, 2025) arose from claims asserted by property owners for damage resulting from Hurrican Ida in 2021. Plaintiffs, Louisiana residents, alleged that a Texas law firm, McClenny Moseley & Associates, PLLC (MMA), colluded with Louisiana attorney Richard William Huye, III, and Velawcity, an Arizona marketing company, in an “illegal barratry scheme.” Under the alleged scheme, MMA entered into five contracts with Velawcity, requiring Velawcity to provide marketing for MMA, perform pre-screening services for each potential claimant, and provide these claimants with MMA’s documents. Plaintiffs alleged that Velawcity and MMA executed the contracts in Texas through call centers that “solicited each of the [Plaintiffs] to hire MMA to handle their insurance claims.” Plaintiffs claimed that Louisiana federal courts sanctioned MMA for misconduct in connection with the mass insurance filings. They also stated that the Louisiana Supreme Court suspended Huye while the rest of MMA’s lawyers vanished.
Plaintiffs brough suit in Harris County district court. They asserted that the court had personal jurisdiction over the defendant Velawcity, an Arizona-based entity, because the tort occurred in Texas and that the defendant did business in Texas, thereby establishing sufficient minimum contacts with the state. They argued further that
Velawcity “contracted with the [] Texas lawyers in Texas, and received payments pursuant to those contracts from Texas . . . constitut[ing] overt acts of barratry that violate Texas law.”
Velawcity filed a special appearance, asserting that it lacked the minimum contacts required for personal jurisdiction because Velawcity committed the conduct in question in Louisiana, Plaintiffs were Louisiana residents, Velawcity had no place of business in Texas and no Texas members, and maintained its place of business in Arizona. Velawcity submitted a declaration from its president Chaz Van De Motter corroborating these statements. Plaintiffs responded, arguing that Velawcity had minimum contacts with Texas because it contracted with Texas residents to act as their agent and entered into contracts with MMA, a Texas law firm. Defendants acknowledged that the solicitation occurred in Lousiana, but maintained that minimum contacts had occurred because MMA financed and directed the solicitation from Texas, and “Velawcity’s contacts with the Texas firm form the operative facts of this litigation [, which justifies] specific jurisdiction.” The trial court sustained Velawcity’s special appearance, Appellants’ objections to Van De Motter’s declaration, and allowed Velawcity to amend the declaration. Plaintiffs sought interlocutory relief.
In an opinion by Justice Rivas-Molloy, the court of appeals affirmed. As noted above, Plaintiffs Appellants argued that Velawcity had minimum contacts that give rise to specific jurisdiction over Velawcity in Texas are based on: (1) Velawcity’s contracts with MMA, a Texas firm; (2) Velawcity’s receipt of payments from MMA; and (3) the Velawcity’s solicitation of Plaintiffs in Louisiana occurred in Velawcity’s capacity as MMA’s agent. The court determined that the first two contacts were insufficient to establish specific jurisdiction and the third was not relevant to the jurisdictional analysis. Even when a plaintiff alleges that the nonresident defendant engaged in a civil conspiracy with a forum state resident, courts examine only the contacts of the nonresident defendant who filed the special appearance in determining whether it is subject to the court’s jurisdiction.
As for the first two contacts, the contract with MMA and the subsequent receipt of payments, the court observed, “It is well-settled that a nonresident defendant’s actions in contracting with a Texas entity and receiving payments from Texas under the contract are insufficient in and of themselves to confer personal jurisdiction over the nonresident defendant, especially when as here, the contract calls for performance outside the forum state.” There were thus no purposeful contact with the forum state, nor did Velawcity’s activities “substantially connected to the operative facts of the litigation or form[ed] the basis of their causes of action.”
“With respect to the first three allegations, Appellants acknowledge that none of those activities took place in Texas… Appellants thus have not established any purposeful contacts with Texas giving rise to specific jurisdiction,” (26). “Even if we concluded that the Contracts and related payments to Velawcity were purposeful contacts of Velawcity with Texas, Appellants must also establish that Velawcity’s purposeful contacts with the forum state are substantially connected to the operative facts of the litigation or form the basis of their causes of action. Appellants have not done so,” (27). Instead, the operative facts did not “concern the terms of the Contracts, but rather Velawcity’s alleged solicitation of [Plaintiffs] in Louisiana for MMA to handle their property insurance claims in Louisiana.”
Plaintiffs attempted to keep the lawsuit alive by arguing that the trial court abused its discretion by refusing to grant a continuance of the special appearance hearing in order to conduct additional jurisdictional discovery. The court didn’t buy this argument, concluding that Plaintiffs failed to explain how a proposed deposition of a Velawcity employee could say anything that the contracts at issue did not.
TCJL Research Intern Dilara Muslu researched and substantially drafted this article.
