Cornerstone Healthcare Group Holding, Inc. v. Nautic Partners Vi, L.P., Reliant Splitter, L.P., and Kennedy Plaza Partners Vi, L.P.
493 S.W.3d 65
| Tex. | 2016Background
- Cornerstone, a Texas healthcare company, alleges former executives used its confidential information to divert a Texas hospital-chain acquisition to a buyer they helped form.
- Rhode Island–based Nautic Partners (advisor), three Nautic private-equity funds (Delaware LPs, the Funds), and Nautic Management VI, L.P. (General Partner) organized and funded a new Delaware/Texas subsidiary (New Reliant) that purchased Old Reliant’s Texas hospitals.
- Nautic employees performed due diligence in Texas; the General Partner’s investment committee (in Rhode Island) approved the investment; funds flowed through newly created subsidiaries and a disbursement agent to close the transaction.
- Cornerstone sued the executives, New Reliant, Nautic entities, the Funds, and the General Partner for claims including usurpation of corporate opportunity, misappropriation, aiding-and-abetting, and tortious interference.
- The Funds and General Partner filed special appearances claiming lack of personal jurisdiction; the trial court dismissed the Funds but denied the General Partner’s plea. The court of appeals held no jurisdiction; the Texas Supreme Court granted review.
- The Supreme Court held Texas courts have specific personal jurisdiction over the Funds and the General Partner based on their role in structuring, funding, and directing the transaction that targeted Texas assets.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Texas has specific jurisdiction over out-of-state private-equity funds and their general partner for torts arising from purchase of Texas hospitals | Funds/GP purposefully availed themselves of Texas by creating/funding New Reliant to acquire Texas hospitals and profited from the transaction | Respondents only acted through separate subsidiaries; New Reliant’s Texas contacts cannot be attributed to them absent veil-piercing | Held: Specific jurisdiction exists — respondents directed an integrated transaction targeting Texas assets; their purposeful contacts relate to the claims |
| Whether the funds’ use of intermediary subsidiaries defeats purposeful-availment analysis | The transaction was integrated; funds contractually committed capital for the Texas acquisition, so contacts trace to the funds/GP | Corporate separateness controls; mere funding and indirect ownership are insufficient for jurisdiction | Held: Corporate form cannot be used to evade jurisdiction when the parent/GP spearheaded and profited from an integrated transaction aimed at Texas assets |
| Whether the plaintiffs’ claims arise out of the respondents’ Texas contacts (relationship test for specific jurisdiction) | Claims (usurpation, aiding/abetting, interference) center on the Reliant transaction—the respondents’ Texas-directed contacts | Respondents contend no substantial connection between their out-of-state acts and Texas operative facts | Held: The operative facts of the litigation substantially connect to the respondents’ purposeful contacts with Texas; specific jurisdiction satisfied |
| Whether asserting jurisdiction would offend fair play and substantial justice | Cornerstone: minimal additional burden; Texas has strong interest; judicial economy favors adjudication here | Respondents: significant burden from litigating in Texas | Held: Exercising jurisdiction comports with fair play and substantial justice given Texas’s interests and efficiency of resolving related claims together |
Key Cases Cited
- Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569 (Tex. 2007) (specific-jurisdiction framework; focus on relationship among defendant, forum, and litigation)
- Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777 (Tex. 2005) (purposeful availment factors and limitations)
- Moncrief Oil Int’l, Inc. v. OAO Gazprom, 414 S.W.3d 142 (Tex. 2013) (minimum contacts and when to assess contacts claim-by-claim)
- Spir Star AG v. Kimich, 310 S.W.3d 868 (Tex. 2010) (attributing forum targeting to parent when it directs sales through a forum affiliate)
- PHC–Minden, LP v. Kimberly-Clark Corp., 235 S.W.3d 163 (Tex. 2007) (parent-subsidiary contacts assessed separately unless veil-piercing or similar attribution)
- Walden v. Fiore, 134 S.Ct. 1115 (U.S. 2014) (minimum-contacts analysis focuses on defendant’s contacts with the forum)
- Daimler AG v. Bauman, 134 S.Ct. 746 (U.S. 2014) (general jurisdiction requires defendant to be essentially at home in the forum)