Gramercy Advisor LLC, Gramercy Asset Management LLC, Gramercy Local Markets Recovery Fund LLC and Gramercy Financial Services LLC v. R. K. Lowery, Jr. L-Falling Creek LLC, Russell A. Chabaud, R-Rac Wimbledon, LLC, John P. Moffitt, J-Jason LLC, Russell A. Chabaud, Trustee of the Russell G. Chabaud 1999 Investment Trust, R- Russell Wimbledon, LLC
01-14-00904-CV
| Tex. App. | Feb 13, 2015Background
- Appellees (wealthy taxpayers) implemented a BDO-designed tax strategy for 2001–2005; the IRS later disallowed the claimed tax benefits and assessed taxes, penalties, and interest.
- Gramercy (Connecticut/NY asset manager) was engaged to source emerging-market distressed‑debt assets and to manage separate fund investments; Gramercy is not an accounting or tax‑advice firm.
- Gramercy’s role was limited and ministerial: it executed trades and transmitted factual data to BDO/FSG (who prepared tax returns); Gramercy did not prepare tax returns or render tax advice.
- Appellees executed Investment Management Agreements and Belief Letters acknowledging Gramercy gave no tax advice, disclaiming reliance on Gramercy for tax/legal guidance, and containing New York choice‑of‑law provisions and forum-selection language.
- Gramercy had minimal Texas contacts: one pre‑investment meeting in Texas (Gramercy rep allegedly did not make tax representations), a few post‑investment Texas meetings about unrelated fund investments, limited emails/faxes/calls, and most work was performed from NY or CT. Appellees sued in Harris County, Texas.
- Gramercy filed a special appearance (later amended) to dismiss for lack of personal jurisdiction; the trial court orally and then in writing denied the amended special appearance without explanatory findings. Gramercy appealed, arguing lack of specific jurisdiction and due‑process violations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Gramercy’s attendance at Texas meetings supports specific jurisdiction | Gramercy attended meetings in Texas where the tax transaction was discussed, so its contacts are related to the claims | Gramercy’s representative made no actionable tax representations at the Texas meetings; BDO led tax discussions; any meetings were incidental or concerned separate fund investments | Trial court denied special appearance (no written analysis provided) |
| Whether out‑of‑state contractual performance (contracts with Texas residents) supports jurisdiction | Contracts with Texas residents and ongoing performance give Texas courts authority | Gramercy performed all obligations from NY/CT; out‑of‑state performance and choice‑of‑law/ integration clauses preclude jurisdiction | Trial court denied special appearance |
| Whether plaintiffs’ performance in Texas (wiring funds, signing contracts in Texas) creates jurisdiction | Plaintiffs’ in‑Texas acts connect the dispute to Texas | Only defendant’s contacts with forum matter; plaintiffs’ unilateral in‑state actions are irrelevant to defendant’s purposeful availment | Trial court denied special appearance |
| Whether Gramercy’s communications, account statements, entity management, or minor fees from Texas clients render it amenable to suit in Texas | Regular emails/faxes/calls, account statements, and involvement in entities that implemented the tax strategy justify jurisdiction | Communications were limited, concerned fund investments (not the tax claims), websites were passive, fees from Texas clients were minimal or paid to non‑party entity, and many entities were Delaware; thus contacts are insufficiently related to the claims | Trial court denied special appearance |
Key Cases Cited
- Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569 (Tex. 2007) (specific‑jurisdiction requires substantial nexus between forum contacts and operative facts of the litigation)
- Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777 (Tex. 2005) (purposeful availment requires defendant’s purposeful forum contacts seeking benefit or profit)
- Walden v. Fiore, 134 S. Ct. 1115 (U.S. 2014) (jurisdictional analysis focuses on defendant’s contacts with the forum state, not plaintiff’s contacts)
- IRA Resources, Inc. v. Griego, 221 S.W.3d 592 (Tex. 2007) (out‑of‑state contractual performance for Texas residents insufficient to confer personal jurisdiction)
- Marathon Oil v. A.G. Ruhrgas, 182 F.3d 291 (5th Cir. 1999) (in‑forum meetings and related conduct insufficient unless defendant’s in‑state acts are actionable and directly tied to the suit)
- Guardian Royal Exch. Assurance Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223 (Tex. 1991) (factors for assessing whether jurisdiction comports with traditional notions of fair play and substantial justice)