Solid Systems Cad Services v. Total Risc Technology, Pty. Ltd. et al
MEMORANDUM AND ORDER on 20 MOTION to Dismiss 10 Amended Complaint/Counterclaim/Crossclaim etc., and 32 MOTION to Vacate, Set Aside or Correct Sentence (2255) MOTION To Approve Alternative Service Pursuant to Fed.R.Civ.P. 4(f)(3). (Signed by Judge Ewing Werlein, Jr) Parties notified.(kcarr, )
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
SOLID SYSTEMS CAD SERVICES,
TOTAL RISC TECHNOLOGY, PTY.
LTD., TOTAL RISC TECHNOLOGY
GLOBAL LIMITED, and DOMENIC
CIVIL ACTION NO. H-12-03176
MEMORANDUM AND ORDER
Pending are Defendants’ Motion to Dismiss for Insufficient
Service of Process and Lack of Personal Jurisdiction (Document
No. 20) and Plaintiff’s Motion in the Alternative to Approve
Alternative Service (Document No. 32).
After considering the
motions, responses, additional submissions, and applicable law, the
Court concludes as follows.
This case involves a dispute over amounts allegedly owed to
Solid Systems CAD Services (“Plaintiff”) for the performance of
computer services. In August 2009, Defendant Total Risc Technology
Global Ltd. (“Global”) entered into a Master Services Agreement
with T-Systems Nederland B.V. (“T-Systems”) under which Global
Subsequently, Domenic Romanelli (“Romanelli”), Chief Executive
Officer of Global and Defendant Total Risc Technology, Pty. Ltd.
(“TRT Pty.”),2 engaged Plaintiff, a Texas corporation headquartered
in Houston, to perform work for T-Systems in Texas and throughout
the United States.3
Plaintiff and Global negotiated to attain an
agreement, but the drafted written contract (“the Key Agreement”)
exhibited by Defendants is unsigned by any party.4
Plaintiff began its work performing computer services for
Defendants in late 2009.5
Defendants made payments to Plaintiff
until April 2011, when Global’s contract with T-Systems expired.6
At that time, Defendants stopped making payments to Plaintiff, and
Plaintiff contends that $1,187,271.26 remains due and unpaid on
invoices for work performed by Plaintiff before Global’s Master
Services Agreement with T-Systems expired.7
Global is separately
Document No. 10 ¶ 4.1 (2d Am. Complt.).
Document No. 28 ¶ 3; Document No. 31, ex. 3 (Master Services
Agreement, August 2009). Plaintiff alleges that both TRT Pty. and
Global entered into the Master Services Agreement with T-Systems.
Document No. 10 ¶ 4.1. However, the August 2009 Master Services
Agreement exhibited by Plaintiff states that it is between Global
and T-Systems. Document No. 31, ex. 3 at 1 of 32.
Document No. 10 ¶ 4.2.
Document No. 30-1, ex. C.
Document No. 10 ¶ 4.3.
Id. ¶ 4.6.
Id. ¶ 4.7.
engaged in a dispute with T-Systems regarding payments due under
Germany,8 and Defendants contend that they are not obligated to pay
Plaintiff until after they receive payment from T-Systems.9
Defendants now move to dismiss Plaintiff’s claims against
Global for insufficient service of process and to dismiss all
Plaintiff responds that its service on Global was
alternative service12; and responds that the Court has jurisdiction
over all Defendants.
II. Motion to Dismiss for Insufficient Service of Process
Under Federal Rule of Civil Procedure 12(b)(5), a Defendant
can move to dismiss for insufficient service of process.
establishing its validity.
Document No. 28 ¶ 13, 47.
Id. ¶ 13.
Document No. 20.
Document No. 31.
Aetna Bus. Credit, Inc. v. Universal
Document No. 32.
Decor & Interior Design, Inc., 635 F.2d 434, 435 (5th Cir. 1981).
A district court “enjoys broad discretion in determining whether to
dismiss an action for ineffective service of process.”
U.S. Dep’t of Labor, 788 F.2d 1115, 1116 (5th Cir. 1986).
Federal Rule of Civil Procedure 4(h)(2) provides that service
on a foreign corporation may be made outside the United States “in
any manner prescribed by Rule 4(f)” except personal delivery. FED .
R. CIV. P 4(h)(2).
Rule 4(f) allows service to be effected in a
foreign country “by any internationally agreed means of service
Judicial and Extrajudicial Documents.”
rules contemplate that a corporation can be served by delivering a
copy of the summons and complaint to one of its officers.
The Hague Convention requires each signatory to designate a
Central Authority to which requests for service will be sent.
Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters art. 2, Feb. 10,
1969, 20 U.S.T. 361, T.I.A.S. No. 6338.
The documents will be
forwarded by the Central Authority to the party being served.
art. 5. As a ratified treaty, compliance with the Hague Convention
is mandatory in all cases to which it applies.
Aktiengesellschaft v. Schlunk, 108 S. Ct. 2104, 2108 (1988).
Australia, and India.13
TRT Pty. is an Australian corporation with
offices only in Australia.14
Romanelli, an Australian citizen, is
the Chief Executive Officer of both companies.15
The two companies
also share a Chief Financial Officer, Paul Garufi.16
On November 13, 2012, Plaintiff sent a Request for
Service, Summons, and copies of the Complaint to the Australian
Central Authority for service upon all three defendants.17
documents were to be served on Garufi and Romanelli.18
At the time
that Plaintiff filed its Response, the Australian Central Authority
had not yet informed Plaintiff whether service had been effected.19
Document No. 28 ¶ 2; Document No. 10 ¶ 1.3; Document No. 317. See also Document No. 43-1 at 2 of 9 (Return of Service of
Summons indicating that Global was served through Paul Garufi at
its office in Australia).
Document No. 28 ¶ 1; Document No. 10 ¶ 1.2.
Document No. 28 ¶ 3; Document No. 10 ¶ 1.4. Plaintiff also
alleges that Romanelli is the “major owner and/or sole owner” of
Global and TRT Pty. Document No. 10 ¶ 4.10.
Document No. 31 ¶ 26.
Id. ¶ 26(a).
Id. ¶ 26(b).
Plaintiff has since filed documents demonstrating that service was
made on Global through its Chief Financial Officer Paul Garufi at
Global’s registered office in Australia, and that such service was
effected pursuant to the Hague Convention.20
Constructors, Inc. v. Roediger Vacuum GmbH, 259 F.R.D. 245, 248
corporation and that Germany is a signatory to the Hague Convention
does not necessarily mean that [defendant] is entitled to receive
all service of process at its home office in Germany.”); Trump Taj
Mahal Assoc. v. Hotel Servs., Inc., 183 F.R.D. 173, 180-81 (D.N.J.
1998) (finding Canadian corporation was properly served through its
corporate officer in London); see also Marcantonio v. Primorsk
Document No. 43. In response to the Court’s Order of May
21, 2013, Plaintiff filed a certificate of service from the Supreme
Court of New South Wales stating that service of a “Second amended
original complaint” and “Amended Summons” was made on Paul Garufi,
chief financial officer of Global, in conformity with Article Six
of the Convention.
Document No. 43.
Plaintiff also produced
copies of the summons and Second Amended Original Complaint
referenced in the certificate.
Document No. 43-2.
Global filed a stipulation on June 4 stating “[p]ursuant to
footnote 4 in Judge Werlein’s Order dated May 21, 2013, [Global]
acknowledges that Sheriff’s Officer Martin Keith Noble served
Global with the Plaintiff’s Second Amended Original Complaint on or
about March 11, 2013.” Document No. 44. Accordingly, the Court
finds that service was made on Global pursuant to the request of
the Australian Central Authority in accordance with the Hague
Document No. 36 ¶¶ 12-14.
Shipping Corp., 206 F.Supp.2d 54, 58 (D.Mass. 2002) (“The country
in which service is being made is the country whose laws must be
obeyed, not the country of origin of the person or corporation
being served.”) (finding service in Canada on captain of ship owned
by Russian shipping company was improper because plaintiff did not
Plaintiff has established that it caused Global to be lawfully
Defendants’ Motion to Dismiss for Insufficient Service of Process
is therefore DENIED; and Plaintiff’s Motion in the Alternative to
Approve Alternative Service is DENIED as moot.
Motion to Dismiss for Lack of Personal Jurisdiction
A federal court may exercise personal jurisdiction over a non-
resident defendant if: (1) the long-arm statute of the forum state
confers personal jurisdiction over that defendant; and (2) the
exercise of such jurisdiction comports with due process under the
United States Constitution.
See Electrosource, Inc. v. Horizon
Battery Techs., Ltd., 176 F.3d 867, 871 (5th Cir. 1999).
the Texas long-arm statute has been interpreted to extend as far as
due process permits, the sole inquiry is whether the exercise of
personal jurisdiction over a non-resident defendant comports with
federal constitutional due process requirements.
The due process inquiry focuses upon whether the non-resident
defendant has “certain minimum contacts with [the forum] such that
the maintenance of the suit does not offend ‘traditional notions of
fair play and substantial justice.’” Int’l Shoe Co. v. Washington,
66 S. Ct. 154, 158 (1945).
Two types of personal jurisdiction are
recognized: (1) specific; and (2) general.
exists when the cause of action relates to or arises out of the
defendant’s contacts with the forum.
See Helicopteros Nacionales
de Colombia, S.A. v. Hall, 104 S. Ct. 1868, 1872 n.8 (1984).
defendant who has systematic and continuous contacts with the
See id. at 1872-73.
When an evidentiary hearing on the question of jurisdiction is
not conducted, the party seeking to establish jurisdiction bears
Alpine View Co. Ltd. v. Atlas Copco AB, 205 F.3d
208, 215 (5th Cir. 2000); Wien Air Alaska, Inc. v. Brandt, 195 F.3d
208, 211 (5th Cir. 1999).
is not required.
Proof by a preponderance of the evidence
Kelly v. Syria Shell Petroleum Dev. B.V., 213
F.3d 841, 854 (5th Cir. 2000).
A plaintiff may present a prima
facie case by producing admissible evidence which, if believed,
would suffice to establish the existence of personal jurisdiction.
See WNS, Inc. v. Farrow, 884 F.2d 200, 203-04 (5th Cir. 1989).
Uncontroverted allegations in the plaintiff’s complaint must be
taken as true, and conflicts between the facts contained in the
parties’ affidavits and other documentation must be resolved in the
See Alpine View, 205 F.3d at 215.
jurisdiction over Defendants, but issue is joined on whether it has
specific jurisdiction over each Defendant.
Global’s Minimum Contacts
In analyzing whether a party purposefully availed itself of
a forum in a breach of contract case, the court “must evaluate
‘prior negotiations and contemplated future consequences, along
with the terms of the contract and the parties’ actual course of
dealing.’” Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999).
(quoting Burger King Corp. v. Rudzewicz, 105 S. Ct. 2174, 2185
Entering into a contract with an out-of-state party is
not sufficient on its own to establish minimum contacts.
Instead, a non-resident defendant who chooses to contract with a
resident plaintiff “is considered to have purposefully availed
itself of the privilege of conducting activities within the forum
if it was reasonably foreseeable that [the resident plaintiff]
obligations within the forum state.
Under such circumstances, the
defendant’s contact with the forum cannot be deemed to be merely
Miss. Interstate Express, Inc. v. Transpo, Inc., 681
F.2d 1003, 1008 (5th Cir. 1982) (footnote omitted).22
contracted with the resident Mississippi plaintiff for the carriage
of produce, plants, and nursery stock between various points in
Although the defendant initiated activities under
the contract from California, “Mississippi was clearly the hub of
the parties’ activities, from which the Mississippi plaintiff
directed at the defendant’s order the movement of its trucks
throughout the nation.”
Id. at 2010.
visits to Houston to negotiate an agreement between
Negotiations were also conducted via phone calls and
emails directed at Plaintiff’s Houston office.24
While a fully
See also Moncrief Oil Intern. Inc. v. OAO Gazprom, 481 F.3d
309, 312-13 (5th Cir. 2007) (“[O]ur finding of jurisdiction in
Transpo was supported not only by foreseeability, but also by the
fact that the forum state was ‘clearly the hub of the parties’
activities.’ . . . Mere foreseeability, standing alone, does not
Document No. 31, ex. 1 at ¶ 21.
Id. Defendants assert that the agreement between Global and
Plaintiff was not negotiated in Texas, but rather was negotiated
through Plaintiff’s German lawyer. Document No. 36 ¶¶ 3(A), 7.
Factual conflicts such as this on the present motion must be
resolved in Plaintiff’s favor. See Latshaw, 167 F.3d at 211. The
same rule applies to Defendants’ other attempts to impeach
executed written contract has not been exhibited, it is undisputed
that the parties proceeded under a mutual agreement pursuant to
which Plaintiff performed work in Texas and other parts of the
United States from its Texas location; Global controlled “access to
Until April 2011, Global sent payments to Plaintiff
It was reasonably foreseeable to Global that Plaintiff
would perform computer services from its Texas office and, during
the year or two of Plaintiff’s ongoing work for Global, Texas was
in fact the “hub of the parties’ activities.”
purposefully availed itself to the Texas forum such as to subject
itself to personal jurisdiction.
See Transpo, 681 F.2d at 1011;
Latshaw, 167 F.3d at 213 (finding exercise of personal jurisdiction
relationship with Texas resident and made multiple phone calls and
trip to Texas in furtherance of that relationship).
Defendants contend that these contacts are not sufficient to
contracted with Plaintiff at the direction of T-Systems.27
argument is unavailing.
A non-resident contractor may be subject
See Document No. 36 ¶¶ 3-4.
Document No. 31, ex. 1 ¶ 10.
Document No. 28 ¶ 33; Document No. 36 ¶¶ 7.
to personal jurisdiction by reason of entering an agreement with a
contractor was required by a third party to make the subcontract
with the resident plaintiff.
See Epcon Indus. Systems, L.P. v.
Progressive Design Inc., Civ. A. No. H-06-4123, 2007 WL 1234928, at
*7 & n.48 (S.D. Tex. April 25, 2007) (Johnson, Mag. J.) (finding
exercise of personal jurisdiction proper even though defendant, a
general contractor, presented three potential subcontractors to
Philip Morris, and Philip Morris selected plaintiff, a resident of
Furthermore, Defendants’ reliance on Hydrokinetics Inc. v.
Alaska Mechanical, Inc. is misplaced.
700 F.2d 1026 (5th Cir.
In that case an Alaskan company agreed to purchase from
the Texas plaintiff goods manufactured in Texas.
Id. at 1027.
negotiated the agreement by phone and fax and representatives of
defendant traveled to Texas to inspect plaintiff’s facilities. Id.
The Fifth Circuit found that there was no personal jurisdiction
because the defendant’s contacts related to a single transaction
agreement had an Alaskan choice of law provision, and the plaintiff
delivered the goods produced under the contract to Seattle.
Document No. 28 ¶ 32.
Unlike Hydrokinetics, the agreement between Global and
Plaintiff was not limited to a single transaction, but rather
Plaintiff’s activities to provide services both in Texas and
throughout the United States from Plaintiff’s location in Texas,
the “hub of the parties’ activities.”
See also Electrosource, 176
F.3d at 873 (finding personal jurisdiction where Indian defendant
sought out plaintiff to acquire technology plaintiff developed in
Texas, negotiated for its acquisition in Texas, and agreed that
plaintiff would provide training and advice in Texas to defendant’s
personnel, and distinguishing Hydrokinetics because it involved a
single sale of a product and all foreseeable contacts between the
parties would cease after delivery).29
Defendants also contend that this Court lacks personal
jurisdiction over Global because Plaintiff is subject to the Master
Service Agreement’s forum selection clause, which provides for
dispute resolution in Germany. Document No. 36 at 1-2. To support
this contention, Defendants points to an undated, unsigned copy of
the Key Agreement, which states that Plaintiff “agrees to be bound
by the terms and conditions of the MSA as if it were a party to
it.” Document No. 30, ex. 1C ¶ 2.1. Defendants contend that even
though the Key Agreement is unsigned, it governed the course of
dealings among the parties. Document No. 36 at 1-2. Defendants
also point to an email from an employee of Plaintiff stating that
Plaintiff’s agreement with Global stipulates that Plaintiff will
adhere to the terms of the Master Services Agreement. Document No.
36, ex. 2. Plaintiff produces evidence that it never agreed to all
terms of the Key Agreement and that it was not bound by the Master
Services Agreement. Document No. 31, ex. 1 ¶¶ 6-7. For purposes
of determining whether the exercise of personal jurisdiction is
proper, which is the only issue now under consideration, the Court
must resolve factual conflicts in Plaintiff’s favor.
TRT Pty.’s Minimum Contacts
sufficient minimum contacts with Texas to support the exercise of
personal jurisdiction over it.
Plaintiff’s evidence is that TRT
Pty. was “involved in the early negotiations process” and Romanelli
“initially performed work for T-Systems through TRT Pty., but later
either created or opted to use Global to perform the same type of
It was Global that entered the Master Services Agreement
The fact that the two companies share officers is
not enough to overcome the presumption of corporate separateness.
See Hargrave v. Fibreboard Corp., 710 F.2d 1154, 1160 (5th Cir.
commonality of officers and directors are not alone sufficient to
establish an alter ego relationship between two corporations. . . .
Generally, our cases demand proof of control by the parent over the
internal business operations and affairs of the subsidiary in order
to fuse the two for jurisdictional purposes.”) (citations omitted).
Plaintiff makes no showing that TRT Pty. exercised control over, or
was controlled by, Global. Accordingly, Plaintiff has failed to
prove a prima facie case of personal jurisdiction over TRT Pty. and
TRT Pty. will therefore be dismissed.
Id. ¶ 11.
Id. ¶¶ 3, 10.
Domenic Romanelli’s Minimum Contacts
The Court may disregard the corporate form and exercise
jurisdiction over an officer if: (1) the corporation is the alter
ego of the officer; or (2) the officer allegedly committed an
intentional tort directed at the forum.
Plaintiff does not
argue that Romanelli is the alter ego of Global. Rather, Plaintiff
contends that the Court has personal jurisdiction over Romanelli
because he committed tortious conduct aimed at Texas.32
particularity requirements of Fed. R. Civ. P. 9(b), specifying the
allegedly fraudulent statements, the speaker, when and where the
statements were made, and why the statements were fraudulent.”
Breckenridge Enters., Inc. v. Avio Alts., LLC, No. 3:08-CV-1782-M,
In its Complaint, Plaintiff alleges generally that
Defendants made material misrepresentations and fraudulently failed
to disclose material facts.34
These allegations fail to meet the
pleading standards of Rule 9(b), and therefore cannot support
personal jurisdiction over Romanelli.
See id. (finding fraud
Document No. 31 ¶ 17.
See also FED . R. CIV . P. 9(b) (“In alleging fraud or mistake,
a party must state with particularity the circumstances
constituting fraud or mistake.”).
Document No. 10 ¶¶ 6.7-6.12.
claims could not support exercise of personal jurisdiction over
defendants where Complaint generally alleged that defendants made
false statements, but did not identify which statements were
fraudulent or when the allegedly fraudulent statements were made).
Moreover, Plaintiff produces no evidence to support its contention
that Romanelli made false statements, and ‘bald assertions’ of
fraud are insufficient.35 See Southern Bleacher Co., Inc. v. Husco,
Inc., No. 7:01-CV-009-R, 2001 WL 497772, at *5 (N.D. Tex. May 7,
2001) (declining to exercise personal jurisdiction over defendant
where plaintiff produced no evidence in support of its allegations
of fraud); Burchfield v. Stein, No. Civ. A 3:01-CV-2529, 2002 WL
318341, at *6 (N.D. Tex. Feb. 27, 2002) (“[T]he plaintiff’s bare
allegations of fraud against the defendants in their ‘individual
Plaintiff has failed to establish that the Court
Plaintiff produces evidence that Romanelli made several
representations to Plaintiff, including that Global would pay
Plaintiff in a timely manner for the work performed.
No. 31, ex. 1 ¶ 22. However, Plaintiff does not produce evidence
that these statements were false when made, or even that these
statements were made in communications aimed at Texas.
misrepresentation. Id. at ¶ 6.13. However, a claim for negligent
misrepresentation must allege a misstatement of existing facts.
Moncrief, 481 F.3d at 314. The representations made by Romanelli
pertained to future behavior of Global under the parties’
arrangement, and therefore personal jurisdiction over Romanelli
cannot be premised on Plaintiff’s negligent misrepresentation
See id. (finding plaintiff failed to state a claim of
negligent misrepresentation so as to support personal jurisdiction
where the alleged misrepresentation concerned defendant’s promise
to continue to honor the agreement in the future).
has personal jurisdiction over Defendant Romanelli, and Plaintiff’s
claims against him will be dismissed without prejudice.
Fair Play and Substantial Justice
Although Global had sufficient contacts with Texas in its
jurisdiction, there remains the question of whether it is fair to
force Global to litigate in Texas.
See Electrosource, 176 F.3d at
874 (“The imposition of jurisdiction cannot offend ‘traditional
International Shoe, 66 S. Ct. at 158.).
The Court considers
(1) the burden upon the defendant; (2) the interests of the forum
state; (3) the plaintiff’s interest in securing relief; (4) the
interstate judicial system’s interest in an efficient resolution;
and (5) the shared interest of the states in furthering social
Electrosource, 176 F.3d at 874.
jurisdiction in this Court. Defendants are correct that Global may
face a substantial burden if forced to litigate in Texas.
is not an unfair burden, given that Global reached into Texas to
engage in ongoing business in this State with Plaintiff. See Epcon
Indus. Sys., 2007 WL 1234928, at *8 (burden on Virginia defendant
was not unfair where defendant “voluntarily reached into Texas to
communications and trips during the performance of the contract.”).
Furthermore, the burden on Global to litigate in Texas appears no
greater than the burden on Plaintiff if it were required to
litigate in an overseas forum.
Texas has a strong
interest in litigating breach of contract causes of action brought
by Texas residents.
Additionally, Texas appears to be the
most efficient forum for the resolution of the conflict. Plaintiff
performed its work for Global from its Texas office, Global made
Plaintiff’s performance of services for Global--for which more than
$1 million is claimed--will be located in Houston, which was the
hub of the parties’ activities. See Electrosource, 176 F.3d at 874
(finding Texas was most efficient forum where evidence concerning
the alleged breach was located in Texas).37
In sum, the exercise
of personal jurisdiction over Global does not offend traditional
notions of fair play and substantial justice.
Defendants argue that Germany would be a more efficient
forum because “many of the matters at issue are subsumed in an ADR
procedure that is being conducted in Germany” between Global and
T-Systems, but fails to explain the matters to which it refers, or
how litigation in Germany, where neither party has an office, would
be more efficient than litigating in Texas, the hub of the parties’
activities. See Document No. 28 ¶ 49. Finally, Global argues
that Plaintiff will not be able to obtain convenient and effective
relief in Texas because Global has no assets in Texas, and suggests
that Plaintiff would have to enforce its judgment against Global in
Singapore. Id. ¶ 48. If so, this is a risk Plaintiff evidently
chooses to assume and does not at all deny fair play and
substantial justice to Global.
For the foregoing reasons, it is
ORDERED that Defendants’ Motion to Dismiss for Insufficient
Service of Process and Lack of Personal Jurisdiction (Document
No. 20) is GRANTED as to Defendants Total Risc Technology, Pty.
Ltd. and Domenic Romanelli, and Defendants Total Risc Technology,
Pty. Ltd. and Domenic Romanelli are DISMISSED without prejudice for
lack of personal jurisdiction; and Defendants’ Motion is DENIED as
to Defendant Total Risc Technology Global Ltd.
It is further
ORDERED that Plaintiff’s Motion in the Alternative to Approve
Alternative Service (Document No. 32) is DENIED as moot.
The Clerk will enter this Order, providing a correct copy to
all counsel of record.
SIGNED in Houston, Texas, this 18th day of July, 2013.
EWING WERLEIN, JR.
UNITED STATES DISTRICT JUDGE
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