Suing an Out-Of-State Business In Texas
August 2017 Newsletter Article
Typically, the most important aspect of suing an out-of-state business in Texas for a plaintiff is the ability to have a Texas court assert personal jurisdiction over the defendant company so that the lawsuit may be filed "at home" in Texas.
In Texas, personal jurisdiction may be asserted over a nonresident defendant if the Texas long-arm statute authorizes jurisdiction and the exercise of jurisdiction meets federal and state due process standards. Tex. Civ. Prac. & Rem. Code Ann. § 17.042 allows Texas courts to exercise jurisdiction over any nonresident defendant including, but not limited to, a corporation, partnership, or limited liability company (LLC) that "does business" in the state.
The Texas Supreme Court has held that the language of this long arm statute "extends Texas courts' personal jurisdiction as far as the federal constitutional requirements of due process will permit." BMC Software Belgium, N.V. V. Marchand, 83 S.W. 3d 789, 795 (Texas 2002).
Thus, a court may assert personal jurisdiction over a nonresident defendant if the exercise complies with the Fourteenth Amendment's Due Process Clause that mandates personal jurisdiction may be asserted when:
- the defendant has purposefully availed itself of the benefits and protections of the forum state by establishing minimum contacts with the forum state; and
- the exercise of jurisdiction over the defendant does not offend traditional notions of fair play and substantial justice.
Texas-based plaintiffs that have any cause of action against an out-of-state business bear the burden of establishing allegations in the petition sufficient to permit jurisdiction pursuant to the requirements of the Texas long-arm statute. A nonresident defendant business such as a corporation, partnership, or LLC must have "purposefully availed" itself of the privileges and benefits of conducting business in Texas to establish sufficient "minimum contacts" with the state for its courts to assert personal jurisdiction over it.
Specifically, for personal jurisdiction to be asserted in any case in Texas, it is imperative that some act has occurred by which the defendant purposefully avails itself of the privilege of conducting activities within Texas, thus invoking the benefits and protections of its laws. To establish purposeful availment, Texas courts consider three components:
- The defendant's actions and solely the defendant's actions, rather than the actions of the plaintiff or any other third party. The unilateral actions of a plaintiff will not satisfy the requirement of contact with Texas.
- The nonresident defendant's actions must be purposeful, not random, isolated, or fortuitous. Thus, the quality rather than quantity of contacts is the determining factor.
- The defendant must seek some benefit, advantage, or profit by virtue of its activities in the proposed forum state, thus manifesting implied consent.
One example of the satisfaction of the above three requirements is a Texas court finding nonresident defendant subject to personal jurisdiction where a contract was to be performed entirely in Texas and defendant's activities were purposefully directed at Texas residents. Another example is a Texas court holding that an out-of-state corporation was subject to personal jurisdiction where the alleged negligent misrepresentations contained in the plaintiff's petition were transmitted to plaintiff's office in Texas by both phone and fax.
Any case involving a Texas business plaintiff suing an out-of-state business in Texas requires a careful analysis of complex constitutional law issues to ensure that the out-of-state business defendant may be sued in the friendly confines of a Texas court. The Metcalf Adair Law Firm may provide guidance and assistance for all business owners who may have any cause of action against an out-of-state business throughout the entire litigation process.