After SCOTX reversed and remanded its initial decision finding that foreign defendants’ appeal of the denial of its special appearance, the Dallas Court of Appeals has ruled that a Dallas trial court has personal jurisdiction over the defendants based on the extent of their business activities in Texas.
As you may recall, Warren Chen and DynaColor, Inc. v. Razberi Technologies, Inc., et al. (No. 21-0499; No. 05-19-01551-CV) arose from a business deal gone bad, resulting in a lawsuit by Razberi against Chen, the Taiwainese CEO of DynaColor for fraud and misrepresentation. The trial court denied the defendants’ special appearance. The defendants took an accelerated interlocutory appeal to the Dallas Court of Appeals and filed a motion with that court to stay proceedings in the trial court. Without ruling on the jurisdictional issue, the court of appeals denied the stay but proceeded with merits briefing and scheduled oral argument. Meanwhile, the trial court rendered final judgment against Chen that incorporated prior summary judgment orders but not the special appearance rulings. Chen did not file a second notice of appeal of the final judgment. The court of appeals, over a dissent by Justice Schenk, ruled that Chen’s appeal was moot.
In an opinion by Justice Devine, SCOTX reversed and remanded to the court of appeals for consideration of Chen’s appeal, largely following the line of argument in Justice Schenk’s dissenting opinion. In short, SCOTX held that the court of appeals should have treated Chen’s interlocutory appeal of the special appearance denial as a premature notice of appeal when the interlocutory order merged into the final judgment. It then directed the court of appeals to address the personal jurisdiction issues and remanded for that purpose.
The court of appeals affirmed the trial court. In a lengthy analysis of the Texas law of personal jurisdiction, the court found that Chen, a resident of Taiwan and CEO of a Taiwan-based company, nevertheless met the minimum contacts test and purposely availed himself of Texas law. The court cited facts showing that Chen and DynaColor knew that the contract at the heart of the dispute was negotiated and executed in Texas with Texas investors. As a shareholder of Razberi, a Dallas subsidiary of DynaColor, DynaColor received preferred stock in exchange for its common stock, as provided by the contract, acquired a new purchase contract with Razberi in which it agreed to continue to sell parts to Razberi in Texas, and got paid $500,000 out of the sale of the stock. DynaColor also held a note from Razberi, enforceable in Texas, for an additional half million dollars. Chen further became a director of Razberi, was involved in oversight, approved its business plans, reviewed financial statements and budgets, and transferred funds for Razberi’s operations in Texas. Appellees thus established continuous contacts showing the relationship between the foreign defendant, the forum, and the litigation. The court further held that exercising jurisdiction over Chen and DynaColor would not violate traditional notions of substantial justice and fair play because of the nature of their business contacts with Razberi and the fact that they had already engaged in an arbitration with Razberi over a prior note. Justice Schenk concurred in part and dissented in part, disagreeing with the court’s finding of personal jurisdiction with respect to Razberi’s breach of fiduciary duty claims.
