Retamco Operating, Inc. v. Republic Drilling Co. No. 07-0599 (Tex. Feb. 27, 2009)
(Green) (personal jurisdiction over out-of-state defendant, Texas Longarm Statute, minimum contacts,
UFTA, transfer of real estate interest in Texas, oil and gas law)
RETAMCO OPERATING, INC. v. REPUBLIC DRILLING COMPANY; from Bexar County;
4th district (04-06-00727-CV, ___ SW3d ___, 03-28-07)
The Court reverses the court of appeals' judgment and remands the case to the trial court.
Justice Green delivered the opinion of the Court.
═══════════════════════════════════════════════════════════════════
Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333 (Tex. 2009)
═══════════════════════════════════════════════════════════════════
Argued September 11, 2008
Justice Green delivered the opinion of the Court.
In this case, we decide whether a Texas court has personal jurisdiction over an out-of-state
company accused of violating the Uniform Fraudulent Transfer Act (UFTA) by acting as the
transferee of Texas oil and gas interests. We hold that, under the facts of this case, the defendant
is subject to the jurisdiction of the Texas courts and, therefore, reverse the court of appeals’
judgment and remand for trial.
I
Retamco Operating, Inc. (ROI), a Texas corporation, sued Paradigm Oil, Inc. (Paradigm), another
Texas corporation, in a Texas district court, over unpaid royalties related to oil and gas interests
in several Texas counties. After a finding of discovery abuse, sanctions were assessed against
Paradigm and the trial court entered a $16 million default judgment against Paradigm.[1]
Following this interlocutory judgment, ROI amended its petition to include a claim against
Republic Drilling Company (Republic), a California corporation, for violation of the Uniform
Fraudulent Transfer Act. See Tex. Bus. & Com. Code § 24.001–.013. ROI claimed that during the
pendency of the litigation, Paradigm assigned to Republic[2] a 72% interest in Paradigm’s oil
and gas wells and leases in Fayette County and a 72% interest in an option to acquire an interest
in a lease in Dimmit and Webb Counties.[3] ROI alleged that these transfers were fraudulent, and
that they led to Paradigm’s insolvency, rendering it unable to satisfy ROI’s claims.
In response to the amended petition, Republic filed a special appearance, arguing that it does not
have minimum contacts with Texas, and that even if it did, ROI’s cause of action did not arise from
or relate to those contacts. It also argued that the trial court’s assertion of jurisdiction offended
traditional notions of fair play and substantial justice. Specifically, Republic argued that because
the allegedly fraudulent assignment of the Texas leases occurred entirely outside of Texas—in
California—the Texas court did not have personal jurisdiction over Republic. Following a hearing,
the trial court denied Republic’s special appearance, making no findings of fact or conclusions of
law. Republic then filed an interlocutory appeal with the court of appeals. The court of appeals
reversed, holding that Republic is not subject to personal jurisdiction in Texas. 2007 WL 913206,
*6–7. Because we conclude that by its actions Republic subjected itself to the jurisdiction of
Texas courts, we reverse the court of appeals’ judgment.
II
Under the Texas long-arm statute, the plaintiff has the initial burden to plead sufficient allegations
to confer jurisdiction. American Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 807
(Tex. 2002). The defendant seeking to avoid being sued in Texas then has the burden to negate
all potential bases for jurisdiction pled by the plaintiff. Id. When, as here, the trial court does not
make findings of fact and conclusions of law in support of its ruling, “all facts necessary to support
the judgment and supported by the evidence are implied.” BMC Software Belgium, N.V. v.
Marchand, 83 S.W.3d 789, 795 (Tex. 2002) (citations omitted). Here, ROI has pled that Republic
is subject to personal jurisdiction because it is the fraudulent transferee of Texas real property—
oil and gas interests. Republic does not dispute that the property at issue is located in Texas or
that it was transferred from Paradigm to Republic. However, Republic argues that because the
transaction causing the transfer occurred in California, jurisdiction is negated. For the reasons
discussed below, we disagree.
Personal jurisdiction is a question of law which we review de novo. Id. at 794. “Texas courts may
assert in personam jurisdiction over a nonresident if (1) the Texas long-arm statute authorizes the
exercise of jurisdiction, and (2) the exercise of jurisdiction is consistent with federal and state
constitutional due-process guarantees.” Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569,
574 (Tex. 2007).
(1) The Long Arm Statute
As an initial matter, Republic argues that ROI “never fulfilled its initial pleading burden to bring
Republic within the reach of the long-arm statute,” because ROI alleged no acts that constitute
“doing business” under the long-arm statute. But the Texas long-arm statute’s broad doing-
business language “allows the statute to reach as far as the federal constitutional requirements of
due process will allow.” Id. at 575 (citations omitted); accord Michiana Easy Livin' Country, Inc. v.
Holten, 168 S.W.3d 777, 788 (Tex. 2005).[4] Therefore, we only analyze whether Republic’s acts
would bring Republic within Texas’ jurisdiction consistent with constitutional due process
requirements. See Moki Mac, 221 S.W.3d at 575 (citations omitted); Guardian Royal Exch.
Assur., Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex. 1991).[5]
(2) Due Process Constraints
Under constitutional due-process analysis, personal jurisdiction is achieved when (1) the non-
resident defendant has established minimum contacts with the forum state, and (2) the assertion
of jurisdiction complies with “traditional notions of fair play and substantial justice.” Moki Mac, 221
S.W.3d at 575 (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). We focus on the
defendant’s activities and expectations when deciding whether it is proper to call the defendant
before a Texas court. Int'l Shoe Co., 326 U.S. at 316.
(A) Minimum Contacts
A defendant establishes minimum contacts with a state when it “purposefully avails itself of the
privilege of conducting activities within the forum state, thus invoking the benefits and protections
of its laws.” Hanson v. Denckla, 357 U.S. 235, 253 (1958) (citing Int’l Shoe Co., 326 U.S. at 319).
“The defendant’s activities, whether they consist of direct acts within Texas or conduct outside
Texas, must justify a conclusion that the defendant could reasonably anticipate being called into a
Texas court.” Am. Type Culture Collection, 83 S.W.3d at 806 (citing World-Wide Volkswagen
Corp. v. Woodson, 444 U.S. 286, 297 (1980)). A nonresident’s contacts can give rise to either
specific or general jurisdiction. Am. Type Culture Collection, 83 S.W.3d at 806. General
jurisdiction arises when the defendant’s contacts with the forum are continuous and systematic. Id.
at 807. Specific jurisdiction, which is alleged here, arises when (1) the defendant purposefully
avails itself of conducting activities in the forum state, and (2) the cause of action arises from or is
related to those contacts or activities. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985);
National Indus. Sand Ass'n v. Gibson, 897 S.W.2d 769, 774 (Tex. 1995). In a specific jurisdiction
analysis, “we focus . . . on the ‘relationship among the defendant, the forum [,] and the litigation.’”
Moki Mac, 221 S.W.3d at 575–76 (citing Guardian Royal, 815 S.W.2d at 228).
1. Purposeful Availment
We consider three issues in determining whether a defendant purposefully availed itself of the
privilege of conducting activities in Texas:
First, only the defendant’s contacts with the forum are relevant, not the unilateral activity of another
party or a third person. Second, the contacts relied upon must be purposeful rather than random,
fortuitous, or attenuated. Thus, sellers who reach out beyond one state and create continuing
relationships and obligations with citizens of another state are subject to the jurisdiction of the
latter in suits based on their activities. Finally, the defendant must seek some benefit, advantage
or profit by availing itself of the jurisdiction.
Moki Mac, 221 S.W.3d at 575 (internal citations and quotations omitted). Additionally, the
minimum-contacts analysis is focused on the quality and nature of the defendant's contacts, rather
than their number. Am. Type Culture Collection, 83 S.W.3d at 806. Here, these considerations
lead us to conclude that Republic purposefully availed itself of the privilege of conducting activities
in Texas.
Republic’s contacts with Texas were purposeful, not random, fortuitous, or attenuated. Oil and gas
interests are real property interests. Renwar Oil Corp. v. Lancaster, 276 S.W.2d 774, 776 (Tex.
1955); State v. Quintana Petroleum Co., 133 S.W.2d 112, 115 (Tex. 1939) (citing Sheffield v.
Hogg, 77 S.W.2d 1021, 1030 (Tex. 1934)). Republic was aware that the oil and gas interests it
received were located in Fayette, Dimmit, and Webb Counties, Texas. Thus, Republic
purposefully took assignment of Texas real property. And while Republic may not have actually
entered the state to purchase this real property, “[j]urisdiction . . . may not be avoided merely
because the defendant did not physically enter the forum state.” Burger King, 471 U.S. at 476
(“So long as a commercial actor’s efforts are ‘purposefully directed’ toward residents of another
state, we have consistently rejected the notion that an absence of physical contacts can defeat
personal jurisdiction there.”). Republic, by taking assignment of Texas real property, reached out
and created a continuing relationship in Texas. Under the assignment, it is liable for obligations
and expenses related to the interests. This ownership also allows Republic to “enjoy . . . the
benefits and protection of [Texas laws.]” Michiana, 168 S.W.3d at 787 (citing Int’l Shoe, 326 U.S.
at 319). Unlike personal property, Republic’s real property will always be in Texas, which leaves
no doubt of the continuing relationship that this ownership creates.
We noted in Michiana that “in some circumstances a single contract may meet the purposeful-
availment standard, but not when it involves a single contact taking place outside the forum state.”
Id. at 787. (emphasis in original) (holding that an Indiana RV dealer did not have minimum
contacts with Texas where the dealer’s only contact with Texas was the Texas resident’s decision
to place an order from Texas). But the purchase of real property in Texas does not establish a
single contact like that of the sale of the recreational vehicle in Michiana. See id. Rather, the
purchase and ownership of real property could “involve[] many contacts over a long period of
time,” which would carry with it certain continuing obligations; e.g., valuation and tax issues, and
potential expenses of maintaining the interest. See id. In Michiana, we found it “hard to imagine
what possible benefits and protection Michiana enjoyed from Texas law.” Id. at 787, 794. To the
RV dealer, the destination of the RV was fortuitous. Here, the location of the transferred asset is
not fortuitous; the property’s location is fixed in this state. This case, then, is different from
Michiana, and we have no difficulty imagining just how Republic would benefit from the processes
and protections of Texas law. Should Republic ever wish to enforce rights under its interest in
Texas oil and gas leases and wells, it is this state where those rights can be enforced, not
California.
Republic’s contacts with Texas were also not the result of the unilateral actions of a third party.
Republic was a willing participant in a transaction with an affiliated Texas company to purchase
Texas real property. Unlike in Michiana, where the contacts with Texas and the sale at issue was
“initiated entirely by [the plaintiff],” 168 S.W.3d at 784, Republic here went well beyond answering
a phone call from a Texas resident or shipping goods to Texas. Where a phone call originates or
where a shipment ends up may be random or fortuitous, but when purchasing real property, the
location matters.
Lastly, Republic has sought a “benefit, advantage or profit” in Texas. Id. at 785. The assignment
gave Republic valuable assets in Texas, including the right to enforce warranties and covenants
related to the real property. Republic’s additional conduct since the transfer also indicates that
Republic sought a benefit from the transaction. See Moki Mac, 221 S.W.3d at 577 (“In
determining whether the defendant purposefully directed action towards Texas, we may look to
conduct beyond a particular business transaction at issue . . . .”). Republic has reaped benefits
from the property in the amount of approximately $1.2 million in revenues, and has sold some of
the property.
We have said that “a nonresident may purposefully avoid a particular jurisdiction by structuring its
transactions so as to neither profit from the forum’s laws nor be subject to its jurisdiction.”
Michiana, 168 S.W.3d at 785. Certainly this is true in some transactions, such as the purchase of
personal property or out-of-state services. See, e.g., BMC Software Belgium, 83 S.W.3d at 793
(finding no personal jurisdiction where details of a personal services contract were discussed in
Texas); U-Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760, 763 (Tex. 1977) (finding no personal
jurisdiction over Oklahoma defendant where the contract for installation of highway advertisement
signs by Texas company was signed and performed in Oklahoma). But we have found that, even
in instances where a contract was signed in another state, an out-of-state company with no
physical ties to Texas still has minimum contacts with Texas when it is clear the company
purposefully directed its activities towards Texas. See, e.g., Zac Smith & Co., Inc. v. Otis Elevator
Co., 734 S.W.2d 662, 665–66 (Tex. 1987) (finding personal jurisdiction where out-of-state
contract was formed “for the sole purpose of building a hotel in Texas”); Siskind v. Villa Found. for
Educ., Inc., 642 S.W.2d 434, 437 (Tex. 1982) (finding personal jurisdiction where enrollment for
out-of-state school was “actively and successfully solicited” in Texas even though the defendant
signed the contract in Arizona). Here, we find the same. Republic, by purchasing Texas real
property, has purposefully availed itself of the privilege of conducting activities in Texas. See
Michiana, 168 S.W.3d at 784–85.
2. Arise From or Related to
“[P]urposeful availment alone will not support an exercise of specific jurisdiction . . . unless the
defendant’s liability arises from or relates to the forum contacts.” Moki Mac, 221 S.W.3d at 579.
We look for a “substantial connection between [the defendant’s forum] contacts and the operative
facts of the litigation.” Id. at 585. Thus, we must consider the claims involved in the litigation to
determine the operative facts. ROI alleges that Republic is the transferee of a fraudulent transfer
in violation of the UFTA. The UFTA provides, in part, that “[a] transfer . . . is fraudulent . . . if the
debtor made the transfer . . . with actual intent to hinder, delay, or defraud any creditor of the
debtor; or without receiving a reasonably equivalent value in exchange for the transfer or
obligation.” Tex. Bus. & Com. Code § 24.005(a)(1), (2); Trigeant Holdings, Ltd. v. Jones, 183 S.
W.3d 717, 726 (Tex. App.—Houston [1st Dist.] 2005, pet. denied) (noting that “the UFTA not only
creates liability against ‘the person for whose benefit the transfer was made,’ such as the debtor,
but also against ‘the first transferee of the asset,’ or any ‘subsequent transferee’”).
Republic argues that the focus of the litigation will be on the assignment that took place in
California because the operative facts involved will be whether reasonably equivalent value was
given for the property and whether the leases were taken in good faith. See Tex. Bus. & Com.
Code §§ 24.005(a)(2), .006, .009. We agree that the assignment will be an operative fact, but the
real property itself will also be an operative fact, or at the very least, will have a substantial
connection to the operative facts. Without an asset, no fraudulent transfer can occur under the
UFTA. See id. §24.002(12) (“‘Transfer’ means . . . disposing of or parting with an asset or an
interest in an asset . . . .”) (emphasis added). Here, the Texas oil and gas interests are the assets.
Proof that these assets were transferred and an assessment of their value will be essential to the
UFTA analysis; without that proof, the UFTA claim fails.
Republic is alleged to have received transfer of Texas real property from a Texas resident, during
the pendency of a Texas suit, for the purpose of defrauding a Texas resident. As a result of this
transaction, assets ROI may have recovered from Paradigm are now in the possession of
Republic. These contacts are sufficient to demonstrate that this alleged tort occurred at least, in
part, in Texas. See Tex. Civ. Prac. & Rem. Code §17.042 (“a nonresident does business in this
state if the nonresident . . . commits a tort in whole or in part in this state”); see also In re Tex. Am.
Express, Inc., 190 S.W.3d 720, 725 (Tex. App.—Dallas, no pet.) (noting that a fraudulent transfer
under the UFTA is a tort).
(B) Traditional Notions of Fair Play and Substantial Justice
Having determined that Republic has minimum contacts with Texas sufficient to support specific
jurisdiction, we must determine whether an assertion of jurisdiction over Republic comports with
“traditional notions of fair play and substantial justice.” Guardian Royal, 815 S.W.2d at 228. “Only
in rare cases, however, will the exercise of jurisdiction not comport with fair play and substantial
justice when the nonresident defendant has purposefully established minimum contacts with the
forum state.” Id. at 231 (citing Burger King, 471 U.S. at 477). Nonetheless, we still consider: (1)
the burden on the defendant; (2) the interests of the forum state in adjudicating the dispute; (3) the
plaintiff’s interest in obtaining convenient and effective relief; (4) the interstate judicial system’s
interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of
the several States in furthering fundamental substantive social policies. Guardian Royal, 815 S.W.
2d at 228, 231 (citing Burger King, 471 U.S. at 477–78). These factors weigh heavily in ROI’s
favor. ROI has an interest in resolving this controversy in Texas because that is where the
litigation began. Texas has an interest in resolving controversies involving real property within its
borders and, given that the prior litigation deals with this property, it is most efficient to continue to
use Texas as the forum to resolve the dispute. Moreover, California has much less of an interest
in resolving Texas real property disputes than does Texas. Republic may be burdened by
litigating outside its home state, but these other factors weigh heavily against this burden.
III
Republic has established minimum contacts with Texas, and the trial court’s assertion of
jurisdiction over Republic does not offend traditional notions of fair play and substantial justice.
See Guardian Royal, 815 S.W.2d at 228. Therefore, we reverse the court of appeals’ judgment
and remand to the trial court for further proceeding consistent with this opinion.
___________________________
Paul W. Green
Justice
OPINION DELIVERED: February 27, 2009
--------------------------------------------------------------------------------
[1] Numerous appeals have been spawned by the ROI v. Paradigm litigation. First, the “death penalty”
discovery sanctions against Paradigm were upheld on appeal, but the court of appeals remanded the
case for a determination of unliquidated damages. Paradigm Oil, Inc. v. Retamco Operating, Inc., 161 S.W.
3d 531, 540 (Tex. App.—San Antonio 2004, pet. denied). The trial court then found actual damages of
$5.6 million, as well as, attorney’s fees and exemplary damages. Paradigm Oil, Inc. v. Retamco Operating,
Inc., 242 S.W.3d 67, 70 (Tex. App.—San Antonio 2007, pet. denied). Next, the court of appeals reversed
this finding due to insufficient evidence and remanded for another hearing on unliquidated damages. Id. at
75. ROI also originally sued Finley Oilwell Service, but the claim was severed. The result was the same.
Finley Oilwell Service, Inc. v. Retamco Operating, Inc., 248 S.W.3d 314, 317 (Tex. App.—San Antonio
2007, pet. denied). Following a default judgment, the trial court entered actual damages of $5.6 million,
along with attorney’s fees and exemplary damages. Id. The court of appeals reversed this due to
insufficient evidence. Id. Finally, one other case arising from this litigation involved a severed claim against
the alleged alter ego of Paradigm and Finley. See Carone v. Retamco Operating, Inc., 138 S.W.3d 1, 15
(Tex. App.—San Antonio 2004, no pet.) (dismissing claim against alleged alter ego of companies due to
lack of personal jurisdiction).
[2] Paradigm and Republic are affiliated, but the record is unclear as to the extent and structure of that
affiliation.
[3] ROI also sued Douglas McCallum, LLC (DMLLC), a Colorado limited liability company, alleging
fraudulent transfer. DMLLC was the recipient of the remaining 28% of the assignment of interests and
options. DMLLC also filed a special appearance, which was granted following the court of appeals holding
in this case. DMLLC’s special appearance ruling was then appealed and affirmed. Retamco Operating,
Inc. v. McCallum, 2008 WL 939196, *5 (Tex. App.—San Antonio 2008). ROI has appealed this ruling to the
Court as well. These two cases pose almost identical issues, as DMLLC argues it is not subject to
personal jurisdiction because the contract to assign the oil and gas interests was signed in Colorado. See
Retamco Operating, Inc. v. McCallum, ___ S.W.3d ___ (Tex. 2009) (per curiam).
[4] The Texas long-arm statute provides:
“In addition to other acts that may constitute doing business, a nonresident does business in this state if
the nonresident:
(1) contracts by mail or otherwise with a Texas resident and either party is to perform the contract in whole
or in part in this state;
(2) commits a tort in whole or in part in this state; or
(3) recruits Texas residents, directly or through an intermediary located in this state, for employment
inside or outside this state.”
Tex. Civ. Prac. & Rem. Code §17.042.
[5] Republic also argues that the business certification waiver provision of section 8.01B(13) of the Texas
Business Corporation Act limits jurisdiction. Tex. Bus. Corp. Act § 8.01B(13) (“a foreign corporation shall
not be considered to be transacting business in this state . . . by reason of . . . acquiring, in transactions
outside of Texas, royalties and other non-operating mineral interests”). The certification provisions of the
Business Corporation Act do not limit the scope of the Texas long-arm statute. Moki Mac, 221 S.W.3d at
575 (“the long-arm statute’s broad doing-business language allows the statute to ‘reach as far as the
federal constitutional requirements of due process will allow’”). Thus, the Act has no bearing on
constitutional due-process analysis. See Amer. Type Culture Collection, 83 S.W.3d at 806 (“We rely on
precedent from the United States Supreme Court as well as our own state's decisions in determining
whether a nonresident defendant has met its burden to negate all bases of jurisdiction.”) Further, the
business certification requirements do not act as a definitive list of those out-of-state defendants that
would or would not have a reasonable expectation of being called into a Texas courtroom.
Also see: Texas Causes of Action | 2011 Texas Supreme Court Opinions | 2011 Tex Sup Ct Per Curiams