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. | Mar 5, 2015Background
- Texas-resident plaintiffs (Lowry, Chabaud, Moffitt, and related LLCs) sued Gramercy entities alleging a multi-year scheme selling tax‑reducing investment strategies that were unlawful tax shelters and that induced plaintiffs to invest millions.
- Gramercy employees attended and initiated multiple in-person meetings in Houston (2000–2004) with plaintiffs and their advisors where Gramercy and BDO jointly marketed the strategies, discussed tax benefits, delivered draft agreements, and made alleged misrepresentations about legality and profitability.
- Plaintiffs signed investment management agreements (IMAs) appointing Gramercy as attorney‑in‑fact; Gramercy received management fees and, allegedly, undisclosed kickbacks from BDO tied to the Texas investments.
- Gramercy managed entities (including LMC) used to implement the strategies, directed/prepared partnership tax returns and K‑1s (through BDO and FSG), and delivered those tax documents to plaintiffs in Texas; IRS audits later followed.
- Trial court denied Gramercy’s special appearance (personal jurisdiction) and Gramercy appealed; the central jurisdictional dispute is whether Gramercy’s Texas contacts are sufficiently related to plaintiffs’ claims to support specific jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Texas courts have specific personal jurisdiction over Gramercy | Gramercy purposefully directed communications and in‑person marketing to Texas residents, negotiated and executed IMAs and transactional docs, prepared/delivered tax returns/K‑1s to Texas, received fees and kickbacks tied to Texas investments — these contacts are substantially connected to the claims | Gramercy argues its contacts (emails, account statements, some contracts, payments) are insufficient, rely on Michiana/Griego‑type precedents, and emphasize choice‑of‑law and intermediaries | Trial court found jurisdiction; appellate review examines sufficiency and substantive connection to operative facts (court affirmed denial of special appearance) |
| Whether Gramercy’s face‑to‑face meetings in Texas that discussed tax/legal issues suffice to cross the “bright line” for jurisdiction | Face‑to‑face meetings where actionable misrepresentations were made are decisive; such meetings create foreseeable exposure to suit in Texas | Gramercy contends meetings were peripheral or initiated by others and that substantive tax advice/implementation was done elsewhere | Court relied on cases (e.g., Moncrief) holding that attending/initiating Texas meetings about the subject matter supports specific jurisdiction |
| Relevance of contracts (IMAs, IPAs, ITAs) and ongoing relationship | Contracts were drafted, negotiated, delivered, and discussed in Texas; they contemplated continuing duties (fees, notices, account updates) and were performed in part in Texas | Gramercy points to New York choice‑of‑law clauses and contends contractual disclaimers and intermediary use defeat Texas contacts | Court treats long‑term contracting, performance in Texas, and course of dealing as supporting purposeful availment despite choice‑of‑law clauses |
| Whether exercising jurisdiction would offend fair play and substantial justice | Plaintiffs: burden on Gramercy to litigate in Texas is slight relative to benefits Gramercy obtained; Texas has a significant interest and plaintiffs’ injuries occurred in Texas | Gramercy: burdens of litigating in Texas, and other considerations weigh against reasonableness | Court found traditional notions satisfied given Gramercy’s purposeful contacts and profits from Texas business |
Key Cases Cited
- Moncrief Oil Int’l v. OAO Gazprom, 414 S.W.3d 142 (Tex. 2013) (attendance at and acceptance of documents at Texas meetings can support specific jurisdiction where contacts relate to operative facts)
- Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777 (Tex. 2005) (limits of jurisdictional contact where only unilateral plaintiff conduct and single out‑of‑state sale exist)
- BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (Tex. 2002) (standard for reviewing special appearances and deference to trial court fact findings)
- Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569 (Tex. 2007) (specific jurisdiction requires substantial connection between forum contacts and operative facts)
- Citrin Holdings v. Minnis, 305 S.W.3d 269 (Tex. App.—Houston [14th Dist.] 2009) (face‑to‑face meetings plus related communications and course of dealing can supply minimum contacts)
- Horizon Shipbuilding, Inc. v. Blyn II Holding, LLC, 324 S.W.3d 840 (Tex. App.—Houston [14th Dist.] 2010) (misrepresentations made at Texas meetings can support jurisdiction)