OPINION AND ORDER OF DISMISSAL WITHOUT PREJUDICE
Pending before the Court in the above referenced cause, removed from the 112th Judicial District Court of Harris County, Texas on diversity jurisdiction pursuant to 28 U.S.C. §§ 1332(a),
Background Facts As Alleged in the Original Petition
In its Deception Training Course through slides, live presentations, and discussion, with anecdotes from presenters, developed in part by the Central Intelligence Agency (“CIA”) and the Federal Bureau of Investigation (“FBI”) to train FBI Special Agents, with academic research integrated by TBG, TBG provides programs and training sessions designed to teach attendees to recognize deception by identifying deceptive behaviors. TBG insists that the TBG Course Material is public information, neither confidential nor proprietary to TBG or any other business organization.
Two TBG principals, Robert Bettes (“Bettes”) and Lee Howell (“Howell”), both former special agents of the FBI, in that capacity took the Deception Detection Training Course provided to special agents of the FBI by members of the CIA. They subsequently were given governmental approval to commercialize privately the CIA Deception Training Course’s methods and content. In 2001 the CIA Course Authors sold that commercial entity to Defendant BIA. Upon information and belief, TBG states that the course was not, and is not, proprietary; it was funded by U.S. taxpayers and has always been in the public domain. BIA then recruited Bettes, Howell, and another principal of TBG, Dennis Matko (“Matko”), to provide the deception detection training for TBG in the private sector. While these men were employed by BIA, BIA prominently advertised that it was offering training in a course developed and used by the CIA to detect deception.
After their employment with BIA was over, Bettes, Howell and Matko joined with former CIA employees, who gave them slides and later copies of those slides prepared by these former CIA employees, to provide training to private industry organizations, separate from BIA. A short period, later Bettes, Howell, and Matko were granted the right to use the former CIA employees’ Deception Detection Training Course and their slides and written materials. Furthermore TBG obtained a Foundational Interview course from the FBI and incorporated a segment, called “Active Listening,” into TBG’s course. Thus TBG’s Deception Training Course was composed of materials from the former CIA and/or FBI employees along with publicly available information and content from sources other than BIA. While some TBG course materials appear very similar to BIA course materials because of the common source of publically available materials presented in the Detection Deception Course by both TBG and BIA, TBG maintains that neither the principals of TBG, Bettes, Howell, and Matko, nor anyone associated with TBG, incorporated any BIA course material nor used any proprietary or confidential information of BIA.
In the instant action TBG sues BIA first for tortious interference with contract
TBG’s second cause of action against BIA is for defamation per se,
Because the Court’s jurisdiction is the threshold issue, the Court addresses BIA’s motion to dismiss first.
Standards of Review
Personal Jurisdiction and Rules 8, 12(b)(2), and 12(b)(6)
A court must find that it has personal jurisdiction over that defendant before it makes any decision on the merits. Sinochem Int’l Co. v. Malaysia Int’l Shipping Corp.,
When a defendant files a motion. to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), the plaintiff bears the burden of demonstrating that the court has jurisdiction over the defendant. Luv N’ Care, Ltd. v. Insta-Mix, Inc.,
Under the federal rules, except where a federal statute provides for broader personal jurisdiction, the district court’s personal jurisdiction is coterminous with that of a court of general jurisdiction of the state in which the district court sits. Submersible Sys., Inc. v. Perforadora Cent., S.A. de C.V.,
Personal jurisdiction can be either specific or general jurisdiction. Mink v. AAAA Develop., LLC.,
Moreover, the Fifth Circuit has established a three-step analysis for determining whether specific jurisdiction exists: ‘“(1) whether the defendant has minimum contacts with the forum state, i.e., whether it purposely directed its activities toward the forum state or purposely availed itself of the privileges of conducting activities there
Once the plaintiff has established that the defendant has minimum contacts with the forum state, the burden shifts to the defendant to show that assertion of jurisdiction would be unfair. Walk Haydel,
The mere fact that a party contracted with a resident of Texas is insufficient to establish minimum contacts necessary to support personal jurisdiction. Moncrief Oil Int’l, Inc. v. OAO Gazprom,
A choice of law provision may be a relevant factor for determining purposeful activity directed toward the forum state, but is not necessarily determinative, and standing alone, it is insufficient to confer jurisdiction. Santander Consumer USA, Inc. v. Shults Ford, Inc.,
Personal jurisdiction can be waived by an enforceable forum selection clause in which the parties consent to personal jurisdiction in a specified forum. Burger King,
Allegations of conspiracy will not establish a prima facie case of personal jurisdiction; a plaintiff must show that each defendant individually, and not as part of a conspiracy, purposely established minimum contacts with Texas that would satisfy due process. Guidry v. U.S. Tobacco,
Whether a court has personal jurisdiction over a nonresident defendant is a question of law for the court. Moncrief Oil Intern. v. OAO Gazprom,
Rule 8(a)
Federal Rule of Civil Procedure 8(a) provides,
(a) Claim for Relief. A pleading that states a claim for relief must contain:
(1) a short and plain statement of the grounds for the court’s jurisdiction, unless the court already has jurisdiction and the claim needs no new jurisdictional support;
(2) a short and plain statement of the claim showing that the pleader is entitled to relief; and
(3) a demand for the relief sought, which may include relief in the alternative or different types of relief.
The purpose of Rule 8(a) is “ ‘to give the defendant fair notice of what the... claim is and the grounds upon which it rests.’ ” Bell Atlantic Corp. v. Twombly,
Rule 12(b)(6)
When a district court reviews a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), it must construe the complaint in favor of the plaintiff and take all well-
“While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations,... a plaintiffs obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.... ” Bell Atlantic Corp. v. Twombly,
In Ashcroft v. Iqbal,
Dismissal under Rule 12(b)(6) is proper not only where the plaintiff fails to plead sufficient facts to support a cognizable legal theory, but also where the plaintiff fails to allege a cognizable legal theory. Kjellvander v. Citicorp,
As noted, on a Rule 12(b)(6) review, although generally the court may not look beyond the pleadings, the Court may examine the complaint, documents attached to the complaint, and documents attached to the motion to dismiss to which the complaint refers and which are central to the plaintiffs claim(s), as well as matters of public record. Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC,
“ ‘[Documents that a defendant attaches to its motion to dismiss are considered part of the pleadings if they are referred to in the plaintiffs complaint and are central to [its] claim.’ ” Collins v. Morgan Stanley Dean Witter,
BIA’s Alternative Motion to Stay
Without citing any legal authority, BIA asks the Court to stay or dismiss the
It has long been established that “federal courts have a strict duty to exercise the jurisdiction that is conferred upon them by Congress.” Quackenbush v. Allstate Insurance Co.,
Abstention from the exercise of federal jurisdiction is the exception, not the rule. “The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in exceptional circumstances where the order to the parties to repair to the state court would clearly serve an important countervailing interest.” County of Allegheny v. Frank Mashuda Co.,360 U.S. 185 , 188-89,79 S.Ct. 1060 ,3 L.Ed.2d 1163 ... (1959). “[I]t was never a doctrine of equity that a federal court should exercise its judicial discretion to dismiss a suit merely because a State court would entertain it.” Alabama Pub. Serv. Comm’n v. Southern R. Co.,341 U.S. 341 , 361,71 S.Ct. 762 ,95 L.Ed. 1002 ... (1953)(Frankfurter, J., concurring in result).
The Supreme Court has identified three categories of circumstances where abstention is permissible: (1) “cases presenting a federal constitutional issue which might be mooted or presented in a different posture by a state court determination of pertinent state law,” (Railroad Commission of Tex. v. Pullman Co.,
Nevertheless dismissal may properly be based on other principles with concerns for “wise judicial administration,” “conservation of judicial resources[,] and comprehensive disposition of litigation,” which have given rise to the rule for actions concurrently pending in state and federal courts: generally, “the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction.” Id.
The first step and a necessary prerequisite in applying the Colorado River doctrine is to determine if the federal and state court actions are parallel or concurrent proceedings. “ ‘Federal and state proceedings are ‘concurrent’ or ‘parallel’ for purposes of abstention when the two proceedings are essentially the same; that is, there is an identity of parties, and the issues and relief sought are the same.’” Mosley v. Baker, No. 10 Civ. 165(NRB),
In the action in this Court and in the New York case, not only are the parties not identical, with only BIA being involved in both, here as a defendant and in New York as a plaintiff, but the causes of action are quite different. The New York litigation will not dispose of all the claims in this federal action. The Court concludes that they are clearly not parallel and concurrent.
Even if the actions were considered to be concurrent, the court must balance the six factors, with no one controlling to determine whether to stay or dismiss the concurrent federal suit in deference to a state action: (1) “the court first assuming jurisdiction over property may exercise that jurisdiction to the exclusion of other courts”; (2) “the inconvenience of the federal forum; (3) “the desirability of avoiding piecemeal litigation”; and (4) “the order in which jurisdiction was obtained by the concurrent forums.” Id. “[T]he decision whether to dismiss a federal action because of parallel state-court does not rest on a mechanical checklist, but on careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction” in the federal suit. Moses H. Cone Memorial Hosp.,
Both actions are in personam and there is no assumption by either this Court or the New York state court of any res or property, so this factor does not favor either. As for the convenience of the federal forum for the parties, “[t]he inconven
Because the two actions are not parallel, because the balancing of the factors demonstrates that this is not an extraordinary case in which a federal action should be dismissed or stayed while the state court action is pending, and because of the presumption that the federal case should continue, the Court concludes that the Colorado River doctrine does not apply.
A final possible source for authority to stay or dismiss this federal case is Landis v. North American Co.,
[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants. How this can best be done calls for the exercise of judgment, which must weigh competing interests and maintain an even balance. True, the suppliant for a stay must make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay for which he prays will work damage to some one else. Only in rare circumstances will a litigant in one cause be compelled to stand aside while a litigant in another settles the rule of law that will define the rights of both. Considerations such as these, however, are counsels of moderation rather than limitations upon power.
Nevertheless because the parties before this Court and before the New York court are not identical, Landis does not authorize staying or dismissing the instant action.
Limited Jurisdictional Discovery before Ruling on the Motion to Dismiss
If the Court finds it lacks both general and specific jurisdiction, TBG asks the Court for an opportunity to conduct discovery to develop jurisdictional facts before the Court rules on BIA’s motion to dismiss.
When a plaintiff requests discovery on personal jurisdiction facts, it must make a “preliminary showing of jurisdiction.” Fielding v. Hubert Burda Media, Inc.,
BIA’s Motion for Dismissal (#8)
BIA represents that it is a Delaware corporation with its principal place of business in Boston, Massachusetts. It is not authorized to do business in the State of Texas and is a “nonresident” as that term is defined in 17.041(2) of the Texas Practice & Remedies Code.
Nevertheless TBG conclusorily claims in its Original Petition at p. 2 (#1 under Notice of Removal) that
BIA has, however, done business in Texas, as defined in § 17.042(1) — (3), Tex. Civ. Prac. & Rem. Code. BIA has contracted to do business, and has done business, with Texas residents, has contacted and hired employees in the State of Texas, and has enjoyed the benefits of doing business in Texas with Texas residents. BIA has committed a tort, in whole or in part, in the State of Texas....
BIA maintains that TBG cannot satisfy its burden of establishing either general or specific jurisdiction over BIA in Texas.
Regarding general jurisdiction, BIA clearly lacks continuous and systematic contacts with, nor has it purposefully availed itself of the benefits and protections of, the State of Texas. It does not maintain an office or any employees, bank accounts, or other business operations in Texas. Affidavit of Amber Wert (#8, Ex. A) at ¶ 5. Between 2011 and 2015 only 0.7% of BIA’s revenues has been obtained in providing services in Texas, and most of that was related to clients located outside of Texas who unilaterally requested that BIA’s training sessions be delivered in Texas venues. Id at ¶¶ 6,7,9. BIA had a commercial relationship with only a single client in Texas, accounting for 0.3% of its revenues. Id at ¶ 7. In two of the last five years, BIA provided no services in Texas and had no other activities in the state. Id at ¶ 6.
As for specific jurisdiction, BIA argues that this dispute has no nexus to Texas, but instead relates to a lawsuit filed by BIA in New York against KPMG, LLP, a Delaware Limited Liability Partnership with headquarters in New Jersey, for breach of a contract that requires all disputes to be filed in New York and governed by New York law. Id at ¶¶ 8,10.
As to any allegation of libelous statements, BIA emphasizes that “the tort of libel is generally held to occur whenever the offending material is circulated.” Tabor, Chhabra & Gibbs, P.A. v. Medical Legal Evaluations, Inc. (“Tabor”),
Furthermore, BIA contends that it is BIA’s New York case against KPMG that gives rise to this dispute. In Tabor,
While some of [plaintiffs] alleged repu-tational injury may be suffered in Texas, Texas is not the focus of the allegedly defamatory statement. Thus there is not a substantial connection between the defendants’ alleged conduct and the state of Texas sufficient to warrant the exercise of specific jurisdiction. See [MokiMac River Expeditions v. Drugg, 221 S.W.3d 569 , 575 (Tex. 2007) ]. The mere fact that it was forseeable that an alleged libelous letter would have some effect in Texas is not a sufficient basis for an assertion of jurisdiction over a nonresident defendant. See [De Prins v. Van Damme,953 S.W.2d 7 , 14 (Tex. App.-Tyler 1997, writ denied), cert. denied,524 U.S. 904 ,118 S.Ct. 2060 ,141 L.Ed.2d 138 (1998).] The record contains no evidence of any marketing efforts directed to Texas by [defendants] in connection with the use of [the plaintiffs] services of the type that creates a nexus with the state of Texas sufficient to warrant the exercise of specific jurisdiction.
The basis of TBG’s defamation claim is the allegations made in the New York suit between BIA and KPMG. The alleged “offending material” was not “circulated” in Texas. Thus there is no nexus between this claim and Texas to warrant the exercise of personal jurisdiction over BIA.
Nor is there any relationship to Texas to support BIA’s claim in the instant suit for intentional interference with contract. The court in Tabor,
In addition, argues BIA, the exercise of personal jurisdiction over BIA by a Texas court would offend traditional notions of fair play and substantial justice. The contractual relationship between BIA and KPMG was centered in New York, where the suit was filed and most of the conduct occurred, and most of the witnesses and documents are in New York, while a New York forüm is more appropriate to enforce an agreement governed by New York law.
In sum, BIA lacks sufficient minimum contacts to be subject to the jurisdiction of a court in the State of Texas, and it would be a violation of due process to subject BIA to litigation in Texas. Instead the Court should dismiss the claims against BIA under Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction over it.
Alternatively, argues BIA, claims against BIA should be dismissed under Rule 12(b)(6) because TBG failed to state a claim upon which relief can be granted. The only illegal conduct of which TBG complains is BIA’s filing the New York lawsuit against its former customer, KPMG, for breach of a series of agreements that prevented any third party from providing training to KPMG that incorporated BIA’s material. TBG claims in the instant suit that BIA’s suit against KPMG in New York constitutes tortious interference with contract, prospective contract, and defamation per se. The result, contends BIA, is that TBG fails to state a claim for which relief can be granted for several reasons.
First, the filing of a lawsuit is absolutely privileged and cannot be the basis of civil liability. As the court in Front v. Khali,
Commencing with this Court’s 1897 decision in Youmans v. Smith,153 N.Y. 214 ,47 N.E. 265 (1897), we have held that absolute immunity from liability for defamation exists for oral or written statements made by attorneys in connection with a proceeding before a court “when such words and writings are material and pertinent to the questions involved” (id. at 219, 47 N.E. 265 ). There we stated that to allow such statements to be a basis for a defamation action “would be an impediment to justice, because it would hamper the search for truth and prevent making inquiries with that freedom and boldness which the welfare of society requires” (id. at 220,47 N.E. 265 ). We also noted that where an attorney’s statements are “so needlessly defamatory as to warrant the inference of express malice,” the privilege has been abused and “protection withdrawn” (id.). Nearly a century later in Park Knoll Assoc. v. Schmidt,59 N.Y.2d 205 ,464 N.Y.S.2d 424 ,451 N.E.2d 182 (1983), this Court held that relevant statements made in judicial or quasi-judicial proceedings are afforded absolute protection so that those discharging a public function may speak freely to zealously represent their clients without fear of reprisal or financial hazard (see id. at 209,464 N.Y.S.2d 424 ,451 N.E.2d 182 ). The privilege attaches to such statements irrespective of an attorney’s motive for making them (see Wiener v. Weintraub,22 N.Y.2d 330 , 331,292 N.Y.S.2d 667 ,239 N.E.2d 540 [1968]).
Texas law is similar. See, e.g., James v. Brown,
In addition, TBG fails to state a claim to recover damages for a claim for tortious interference with contract, the elements of which are “the existence of a valid contract between [the plaintiff] and a third party, the defendant’s knowledge of that contract, the defendant’s intentional procurement of the third party’s breach of that contract without justification, and damages.” Notaro v. Performance Team,
Applying these elements here, BIA argues that TBG has not alleged any conduct by BIA that caused KPMG to breach any contract with TBG nor that KPMG has refused to enter into any contract with TBG because of BIA’s conduct. Nor has TBG alleged that it suffered any damages as a result of BIA’s conduct. Finally, the
TBG’s intentional interference claim also fails because TBG cannot show that BIA’s actions were not justified. It is black letter law that the exercise of one’s own legal rights is sufficient justification to defeat a claim for tortious interference. White Plains Coat & Apron Co., Inc. v. Cintas Corp.,
BIA contends that TBG fails to state a claim for defamation per se under New York law. As noted, to state a claim for defamation per se requires the publication of an untrue statement to (1) charge a person with a serious crime; (2) to injure another in his or her trade, business or profession; (3) to .claim that the plaintiff has a loathsome disease; or (4) to impute unchastity to a woman. Liberman v. Gelstein,
BIA contends that TBG has not alleged sufficient facts to support a claim for defamation per se.
TBG objects to the allegation that KPMG breached its contract with BIA by “permitting BAR Group to provide training sessions to KPMG employees ‘incorporating’ Foundational Interviewing Skills Materials and/or Strategic Information Collection Materials... provided pursuant to those Agreements.” Pl.’s Orig. Petition (#1) at 6, ¶ IV. The allegation that KPMG breached its contract with BIA does not allege any wrongdoing or improper conduct by TBG, and it is not a defamatory statement. The claim that TBG’s training incorporated BIA material in the New York complaint merely tracks the language in the relevant provisions of the controlling agreements that were purportedly breached and to which TBG was not a party. Today a suit claiming breach of contract is not a remarkable or scandalous event and does not constitute defamation per se. Thus TBG’s claims should be dismissed under Rule 12(b)(6).
Alternatively, BIA requests a stay pending resolution of the earlier filed New York suit, which may moot this action. A copy of the New York petition is attached as Exhibit 1 to the Affidavit of Amber Wert, attached to this motion. A federal district court has wide discretion in deciding whether to stay a case before it. McKnight v. Blanchard,
TBG’s Opposition (#12)
TBG and BIA are direct competitors offering inter alia seminars and training programs for auditors and other professionals on how to spot deception in others. #12-2, Howell Affid. ¶ 3. The basic principles of this training were developed by employees of the CIA and are in the public domain as well as the subject of Spy the Lie: Former CIA Officers Tell You how to Detect Deception by Philip Houston, et al. (St. Martin’s Press 2013). The former BIA employees, who are now employees of TBG, each had a non-competition and a non-disclosure agreement with BIA, but BIA has not sued them or TBG for breach of those agreements. Instead BIA sued its former client, KPMG, because in 2015 KPMG hired TBG, instead of BIA, to provide training to its employees.
TBG accuses BIA .of having a tortious, vindictive scheme to put its former employees and TBG out of business by means of a sham, baseless, retaliatory suit against KPMG in New York. BIA aims to interfere with TBG’s relationship with KPMG and to preclude any other business that has ever been a client of BIA from hiring KPMG, for fear it will also be sued by BIA because it dared to compete legally and legitimately against BIA. BIA seeks to make this litigation more difficult, expensive, and time-consuming by suing TBG in New York, a jurisdiction with almost no connection to this cause of action.
TBG argues unpersuasively that BIA has continuous, systematic, substantial minimum contacts with Texas for this Court to have general jurisdiction over this case or that this suit arises out of and is related to defendant’s contact with the forum. TBG lists examples of minimum contacts that BIA omitted. The Court observes that the asserted contacts are often limited to a single employee or are distant in time or are so vague as to offer little connection to the State of Texas. “Vague and over-generalized assertions that give no indication as to the extent, duration, or frequency of contacts with the forum state are insufficient to support general jurisdiction.” Clemons v. WPRJ, LLC,
Examining these alleged contacts in toto, the Court finds that there is insufficient detail about the number of people involved, frequency, and duration to find that they are “continuous and systematic,” or even “substantial” enough to warrant the imposition of general personal jurisdiction over BIA, or whether instead these contacts were brief, sporadic, and attenuated. These conclusory statements do not establish that BIA would reasonably have expected to be sued in Texas, no less that it conducted regular business in Texas. The Court observes how minimal BIA’s contacts with Texas are, compared with those in Helicópteros and other cases cited by the Court, which were still insufficient to support personal jurisdiction in Texas over the nonresident defendants. The Court concludes that TBG fails to satisfy the burden of establishing general personal jurisdiction in Texas over BIA.
TBG also argues that the Court can assert specific jurisdiction over BIA because in addition to the listed contacts, BIA entered into a long-term, continuing relationship with Robert Bettes, a Texas resident. Their employment agreement was entered into in 2007 and continued through 2009 (Attachments 1 and 2 to Bettes’ Affid. (#12-1)), had no time limit, argues TBG, and would still be a continuing relationship with a Texas resident if Bettes had not voluntarily left BIA in 2009. The Court finds that the very fact that Bettes chose to leave within two years, a very short period, undermines TBG’s assertion of continuing obligations and a long-term relationship with a Texas resident as support for personal specific jurisdiction. Moreover, Bettes is the sole Texas-resident employee with whom TBG has asserted to have a relationship. Furthermore, this action is not limited to, and certainly not focused upon, the acts of Bettes.
TBG contends that there is a sufficient nexus between BIA’s contacts with Texas and this lawsuit, which asserts that (1) BIA tortiously interfered with TBG’s contract with KPMG and with its prospective contracts with KPMG and other companies with which BIA previously or presently contracted and (2) defamation. TBG claims that BIA interfered with TBG’s business by filing a sham, meritless lawsuit against KPMG, now TBG’s client. TBG claims that essential to the sham lawsuit, which it claims forms the basis of the instant suit, is that BIA’s Texas employee, Bettes, was given access by BIA in Texas to BIA’s purported proprietary information and taught BIA training sessions primarily in Texas to KPMG and others. Now BIA charges Bettes and others with incorporating the materials taught to BIA clients primarily in Texas into TBG’s training programs for KPMG and claims that hiring TBG is therefore a breach of contract by KPMG. Bettes and others left BIA, formed a competing company, and entered into a contract with BIA’s former client, KPMG. This case has many more contacts with the State of Texas than with any other state, insists TBG.
Last, BIA insists that it did not defame TBG in Texas, so the defamation claims have no nexus to Texas. TBG claims that without obtaining discovery it cannot know
In response BIA reiterates that TBG’s cause of action for tortious interference with contract fails as a matter of law because the statements made in its petition are absolutely privileged. Claiming that this assertion was made to get around a key provision of the contract between KPMG and BIA, TBG responds that it is not the statements that are targeted, but the fact that the lawsuit, as a whole, is a sham.
NON-EXCLUSIVITY.
During the term of this Agreement, KPMG may engage the services of any individual or entity that competes with [BIA] or offers services similar to those offered by [BIA], and any such engagement shall not be considered a breach of this Agreement.
Despite the clear and unambiguous language of this provision, BIA, with the intent to harm TBG, still filed its meritless suit against KPMG for hiring TBG.
BIA objects that TBG does not adequately plead a claim for tortious interference because it does not assert any conduct of BIA that caused KPMG to breach any contract and because it does not allege any damages as a result of such conduct. TBG disagrees, citing a wholly conclusory statement without any factual support in its Original Petition at p. 7 (“BIA’s lawsuit against KPMG is a willful and transparent attempt to interfere with the existing contract and/or future contracts between TBG and KPMG and to cause damage to TBG. BIA’s acts have caused damage to TBG for which BIA is liable.”). TBG now states that it has suffered at least $180,000 to date as a result of BIA’s actions. Bettes Affid., ¶ 16; Howell Affid. ¶ 8; Matko Affid. ¶ 11.
Last, BIA again insists that TBG’s cause of action for tortious interference fails because BIA was justified in asserting its legal rights against KPMG. TBG responds that BIA has failed to cite to legal authority as support for the proposition that one is justified in filing a meritless and sham lawsuit. Regardless, that determination is for the finder of fact and should not be decided on a Rule 12(b)(6) motion. As for stating a claim for defamation for which relief can be granted, BIA claims that its statements in its lawsuit against KPMG relating to TBG do not assert any wrongdoing by TBG and therefore cannot be defamatory, and that it was only tracking the language of the contract, a neutral assertion. TBG responds that BIA is ignoring that TBG pleads that three employees of TBG were former BIA employees, that its instructional materials are proprietary and were learned by these three while employed by BIA, and that TBG incorporated BIA’s proprietary materials in its training programs to KPMG. Instead of neutral assertions, these are claims that members of TBG appropriated BIA’s confidential and proprietary work for use in their competing businesses. The fact that BIA has not sued TBG or its former employees demonstrates that these claims are false.
BAI’s request that the Court stay this case until the New York action against KPMG is resolved should not be granted, argues TBG. Not only is the outcome predictable given the express language in the contract between KPMG and BIA, that it is not a breach of contract for KPMG to hire competing third parties to offer similar services, but the outcome of the New York suit does not dispose of this case in any way. Even if BIA prevails in trial in New York, it would not show that the sole reason for, and intent behind, filing that suit was to injure TBG and prevent TBG
TBG states that if the Court finds it lacks both general and specific jurisdiction, TBG requests an opportunity to conduct discovery to develop jurisdiction facts before the Court rules on BIA’s motion to dismiss.
BIA’s Reply (#13)
Claiming that TBG’s theory of personal jurisdiction is “skewed,” directly contrary to the modern view of personal jurisdiction, and not recognized by any Circuit Courts of Appeals, BIA contends that TBG (1) has ignored recent Supreme Court decisions regarding minimum contacts necessary to subject a nonresident corporation to the general jurisdiction of a state court, (2) has based its theory of jurisdiction almost completely on events that occurred in 2009 or before, (3) does not demonstrate that its claims arise out of any action by BIA in Texas, necessary to establish specific jurisdiction, and (4) fails to show sufficient contacts to establish systematic and continuous contacts of BIA with Texas for general jurisdiction. Instead TBG asserts that because BIA had contact with Texas before 2009, it is subject to the jurisdiction of a federal court in Texas for this lawsuit filed by TBG solely in retaliation for the suit BIA filed in New York against a third party in late 2015.
BIA responds that TBG has conceded that it filed the suit in Texas only because BIA filed its suit against KPMG in New York. Citing #12 at 4 (“[I]t is not the specific allegations made in New York that are the basis of this lawsuit, but the fact that a sham lawsuit was brought at all.”). BIA maintains that the instant suit’s purpose is to impede BIA’s right to pursue its contractual rights, that its claims in the New York suit are well founded, and that BIA cannot be held liable to TBG merely for filing a lawsuit, regardless of the strength of its merits. BIA points out that TBG failed to address the absolute privilege protecting the filing of a lawsuit to vindicate contractual rights, that TBG conceded that its defamation claim is based on the fact that the lawsuit was filed and does not depend on the allegations made by BIA in Texas, and that KPMG has not breached its contract with TBG. TBG’s concession is fatal to both its defamation claim and its tortious interference with future business relationships claim, neither of which is pleaded to the level required by Rule 8.
BIA challenges many factual allegations in TBG’s Response as untrue and as not supported by any competent evidence, or as contrary to the undisputed evidence, or in dispute, and lists them in Appendix A to #13. BIA has submitted competent and unchallenged proof that the claims asserted by TBG against BIA do not arise out of any specific conduct of BIA in Texas and that BIA lacks sufficient contacts with the State of Texas to subject BIA to the general jurisdiction of Texas courts. It is TBG’s burden to prove that BIA is subject to jurisdiction in Texas courts, and not BIA’s to prove it is not. Luv N’ Care,
In its motion, BIA argued, and TBG did not contest, that BIA’s presence in Texas over the last few years (1) has been minimal, (2) has been predominantly the result of decisions made by its customers who are not Texas residents, but who have occasionally asked BIA to give one-day training seminars at locations in Tex
TBG claims this Court has specific personal jurisdiction over BIA based on its employment relationship with Bettes, a Texas resident, from 2007-09. BIA emphasizes, correctly, that TBG causes of action have nothing to do with Bettes’ employment nearly ten years ago, and therefore do not support specific jurisdiction. As noted, TBG has admitted that it filed this action because it believes the New York suit is a sham and that BIA’s decision to file a breach of contract suit against KPMG in 2015 is unrelated to the residence of Bettes in 2007.
As for general jurisdiction, not only has BIA lacked any significant presence in Texas since 2009, but, as opined in Goodyear Dunlop Tires Operations, SA v. Brown,
In addition in Daimler AG v. Bauman, — U.S. -,
TBG now responds to BIA’s motion to dismiss the tortious interference cause of action by claiming that in contract negotiations with KPMG, TBG was forced to give discounts of $180,000. BIA observes that there could be a number of reasons why KPMG was able to obtain a more favorable contract now than before, but even assuming that TBG could read KPMG’s corporate mind and discover why KPMG sought those monetary terms, it is very doubtful that “discounts” constitute damages recoverable from BIA.
TBG does not respond to the element of tortious interference requiring defendant to intentionally procure the third party’s breach of the contract without justification. Notaro,
Describing TBG’s claim of tortious interference with future contracts as “as paradigm of vagueness and conclusion,” BIA insists it is insufficient for a number of reasons: (1) there is no factual allegation that BIA’s conduct actually caused any interference with potential business relationships; (2) TBG has not cited any authority that filing a breach of contract suit gives a non-party to the contract a cause of action sounding in tort against the party that filed the suit
Should the Court find that dismissal in not appropriate, BIA reiterates its request for a stay of this case until the New York case is resolved. This Court, in the interests of comity, should not seize the authority to rule on the merits of a claim not before it. Moreover, if this Court finds that BIA’s New York case is a sham, KPMG would argue collateral estoppel or res judi-cata in the New York case, leading to an appeal in New York over whether a Texas federal court can properly rule on the merits of a New York state claim pending in a New York state court. Last, judicial efficiency supports the proposition that a New York state court is in a better position to make rulings on the substantive law of New York.
TBG’s Sur-reply (#16)
With leave from Judge Stacy (#15), TBG filed a sur-reply arguing that the Court should not consider the affidavits of Howell and Matko, attached to the affidavit of Robert Bettes, in the Appendix to BIA’s Reply (#12), because these documents are subject to a confidentiality
In response to BIA’s assertion that the claim asserted by TBG “against BIA has nothing to do with the employment of Mr. Bettes almost a decade ago,” TBG disagrees and maintains that BIA’s contacts with Bettes and the State of Texas are not only related, but integral, to the causes of action asserted by TBG here. To keep TBG from competing against it, BIA has sued a major former client because Bettes and others are also former employees of BIA and BIA wants to keep Bettes from contracting with KPMG or any other company. BIA hired Bettes in Texas, shared its seminar and teaching materials with Bettes in Texas, required Bettes to office in Texas, sent Bettes to teach a number of seminars in Texas, and required Bettes to help recruit BIA employees and independent contractors in Texas.
TBG again contends that if it has not established general jurisdiction over BIA in Texas, it should be allowed limited discovery to ascertain jurisdictional facts since 2009 if the Court finds that earlier years are too distant. TBG asks the Court to recognize that BIA admitted that it continued to work in Texas from 2011 through 2015 and to give KPMG seminars at undisclosed locations through 2015.
Arguing that BIA wrongly contends that TBG’s cause of action for tortious interfer
TBG also insists that it. has stated a claim for tortious interference with prospective business relationships in alleging that the pending sham lawsuit against KPMG made it impossible for TBG to negotiate contracts with new clients. Since TBG has alleged that in the New York lawsuit the members of TBG who were formerly employed by BIA have improperly incorporated BIA’s proprietary materials into its teaching materials, no new client will risk being a party to the claimed improper actions of TBG. Thus it has stated all the elements of such a claim: (1) there is a reasonable probability that TBG could have contracted with a number of other companies; (2) the filing of the lawsuit against KPMG, while not illegal, is an abuse of process; (3) BIA would clearly know and intend that suing its former client for hiring TBG would interfere with TBG’s ability to do business; and (4) TBG has suffered actual harm.
Next TBG insists it has stated a claim for defamation. TBG now claims that it has never been TBG’s contention that BIA committed defamation by filing a sham lawsuit. It claims that its defamation claim is that BIA communicated outside of the lawsuit with KPMG to claim the TBG misappropriated and used its proprietary and confidential information.
Finally TBG opposes a stay as premature because KPMG has filed a motion in the New York case to abate that suit and it has been argued and taken under advisement, long before BIA filed its motion for stay. Moreover a stay is nonsensical because TBG is not a party to the New York action and does not appear to be amenable to service in New York, so the New York Court would have to decide what is before this court, i.e., whether TBG incorporated into its training sessions KPMG BIA’s Strategic Information Collection Materials without having TBG before the court. The New York'judge in a hearing in New York (transcript Ex. A to #16 at p. 13, 11. 4-7) has declared, “If that is an issue the Texas court is going to decide, I don’t want to decide it. I am not going to make a decision that is going to effect [sic] a company that is not in this lawsuit.”
Finally, TBG points out that BIA has not presented any admissible evidence to dispute TBG’s factual allegations, but only statements of counsel and unsworn testimony of witnesses.
Also with leave of Judge Stacy, BIA’s “last reply” asserts that TBG’s Sur-Reply fails to address any of the substantive jurisdictional issues set forth previously by BIA, but makes new, ineffective arguments, belatedly requests discovery, and rehashes its old arguments.
BIA insists that a single factual statement about Bettes’ breach of his confidentiality agreement with BIA does not subject BIA to the personal jurisdiction of Texas courts as a continuing contractual obligation to the resident of the forum state. BIA has not brought any claim for relief against Bettes, who is not a party to this action and the propriety of whose conduct is not before the Court, and there is no mention of Bettes and his confidentiality agreement in the Original Petition. Specific jurisdiction requires that the lawsuit arise out of or be related to the defendant’s contact with the forum. AllChem,
BIA insists that additional discovery is both unnecessary and unduly burdensome. TBG has not made a preliminary showing of jurisdiction, nor identified the discovery needed, what it would uncover, or how the discovery would support its claim that BIA is subject to the personal jurisdiction of Texas courts. The Court agrees here, too.
The arguments on whether TBG has stated a claim are merely rehashes of earlier submissions. The one new claim, that BIA’s suit against KPMG in New York is an abuse of process, does not meet the elements of well established Texas law regarding such a claim: “(1) that the defendant made an illegal, improper, perverted use of the process; (2) that the defendant had an ulterior motive or purpose in exercising such illegal, perverted, or improper use of process; and (3) that damage resulted to the plaintiff from the irregularity.” Detenbeck v. Koester,
TBG has not pleaded that BIA improperly used any process issued in the New York action, but only that BIA filed and is maintaining the action. TBG’s last-minute attempt to change its theory of recovery does not cure the incurable defects in its pleading.
TBG also fails in its attempt to save its defamation claim by alleging as defamation per se that “BIA intended to harm TBG in its business and its reputation, to expose TBG to contempt, ridicule and financial
As for a stay of this action, BIA highlights the fact that even though KPMG’s motion to dismiss has been pending for months in the New York Court, that judge has not stayed the case nor limited discovery, and has indicated that she would not do anything that might prejudice a nonparty to the suit. While TBG’s submission of a partial transcript of that hearing suggests that TBG has interests in the New York suit that need to be protected, BIA disagrees and states that the New York judge can resolve the contract action between BIA and KPMG without finding any wrongdoing by TBG. More to the point, TBG can move to intervene in that suit to protect its interests; instead it is using the existence of two suits to force BIA to litigate in two courts.
Court’s Decision
This Court has not held a hearing and has restricted its personal jurisdiction review to the affidavits and discovery materials submitted as attachments to the motion and the briefs during the quite extensive dispute by the parties. Thus TBG must present a prima fade case that this Court has personal jurisdiction over BIA. The Court construes all disputed and uncontro-verted facts in favor of TBG. Nevertheless, there is little in the way of factual allegations and many vague and conclusory statements in its briefs. After a careful review the Court concludes that TBG has failed to satisfy its burden to show that this Court has personal jurisdiction over the instant suit.
The Court agrees with BIA that BIA lacks continuous and systematic contacts with Texas and that it has not purposefully availed itself of the benefits and protections of Texas to warrant personal jurisdiction over it in that state. Even eight to ten years ago when its had it most contacts with Texas, during the short two-year employment of Bettes from 2007-2009, he was the sole BIA employee in Texas, Bettes’ office in his home was the sole BIA office in Texas, and his was the only paycheck that BIA specifically alleges was sent to a Texas bank. The short, occasional seminars BIA offered in Texas at the request of nonresident clients over years are not substantial, no less continuous and systematic contacts of which BIA purposefully availed itself of the benefits and protections of Texas laws. Compared with the far greater number and durability of the contacts in Helicoperos and other cases cited by the Court which were determined to be insufficient to support personal jurisdiction in Texas, these are woefully inadequate for such a purpose. See pp. 1-12 & n.8 of this Opinion and Order.
A court’s exercise of specific jurisdiction is appropriate only when the non-resident defendant’s contacts with the forum state arise from, or are directly related to each cause of action. Helicopteros,
Regarding TGB’s request for limited discovery of jurisdictional facts before the Court rules on BIA’s motion to dismiss, the Court finds that TGB has not met the “preliminary showing of jurisdic-: tion.” Fielding,
TBG has also filed a motion for leave to amend, well after the personal jurisdiction issue was raised on April 4, 2016 and then extensively briefed, giving TBG clear notice of a potential fatal deficiency, and only on the last day that the docket control schedule permitted the filing of an amended complaint. Discovery was still open until January 30, 2017, but TBG apparently failed to garner any new jurisdictional facts in that almost nine-month period. The Court denies the request for leave to amend based on futility and undue delay. TBG’s proposed First Amended Complaint (Ex. to #18) does not provide any new jurisdictional facts nor state a prima facie case of personal jurisdiction over BIA in Texas and thus does not cure the deficiency. In fact, the motion clearly states, “The purpose of the amendment is, primarily, to comply with federal formatting and pleading requirements,” which seemingly ignored the personal jurisdiction issue despite the dispute. #18 at p.l. “Where a complaint, as amended, would be subject to dismissal, leave to amend need not be granted.” DeLoach v. Woodley,
In sum, the Court concludes that it lacks personal jurisdiction over BIA, and for that reason this case must be dismissed without prejudice.
Because the Court lacks personal jurisdiction over BIA, it does not reach the motion to dismiss under Rule 12(b)(6). Accordingly, for the reasons state above, the Court
ORDERS that BIA’s motion to dismiss for lack of personal jurisdiction over BIA under Rule 12(b)(2) is GRANTED.
Notes
. The BAR Group, LLC (“TGB”) is a Delaware Limited Liability Company with its principal place of business in Harris County, Texas. All of the circuit courts of appeals that have addressed the citizenship of a limited liability company for diversity purposes have concluded that “ 'like limited partnerships and other unincorporated associations or entities, the citizenship of an LLC is determined by the citizenship of all its members.’ ” Greenville Imaging, LLC v. Washington Hosp. Corp.,
KPMG, which is not a party here, but is the defendant in BIA's suit against it in New York, is a Delaware limited liability with its headquarters in New Jersey.
. Under Texas law, to prevail on a claim for tortious interference with contract, the plaintiff must establish “(1) the existence of a contract subject to interference, (2) willful and intentional interference, (3) that proximately causes damage, and (4) actual damage or loss.” Engenium Solutions, Inc. v. Symphonic Technologies, Inc.,
. To prevail on a claim under Texas law for tortious interference with prospective business relations or prospective contract, the plaintiff must prove that "(1) there was a reasonable probability that the parties would have entered into a contractual relationship; (2) the defendant committed a malicious and intentional act that prevented the relationship from occurring, with the purpose of harming the plaintiff; (3) the defendant lacked privilege or justification to do the act; and (4) actual harm or damage resulted from the defendant's interference.” Stewart Glass & Mirror, Inc. v. U.S. Auto Glass Discount Centers, Inc.,
."To prevail on a defamation claim under Texas law, the plaintiff must prove that the defendant (1) published a statement; (2) that defamed the plaintiff; (3) while either acting with actual malice (if the plaintiff was a public official or a public figure) or with negligence (if the plaintiff was a private individual) regarding the truth of the statement.’ " Charalambopoulos v. Grammar, Civ. A. No. 3:14-CV-2424-D,
Defamation per se involves a statement that is so obviously hurtful to a plaintiff’s reputation that the jury may presume general damages, including loss of reputation and mental anguish.” Id. at *16, citing Hancock v. Variyam,
. "Absent any dispute as to the relevant facts, the issue of whether personal jurisdiction may be exercised over a nonresident defendant is a question of law....” Ruston Gas Turbines, Inc. v. Donaldson Co., 9 F.3d 415, 418 (5th Cir. 1993). Where the facts are disputed, the party seeking to invoke the court's jurisdiction bears the burden of establishing sufficient contacts with the forum state by the nonresident defendant to invoke the court’s jurisdiction. Bullion v. Gillespie,
. As the Fifth Circuit explained in Walk Haydel & Associates, Inc. v. Coastal Power Production Co.,
Ultimately, the plaintiff must show by a preponderance of the evidence that jurisdiction is proper. Often, the determination of whether this standard is met is resolved attrial along with the merits. This is especially likely when the jurisdiction issue is intertwined with the merits and therefore can be determined based on jury fact findings. In this situation it is often “preferable that [the jurisdictional] determination be made at trial, where a plaintiff may present his case in a coherent, orderly fashion and without the risk of prejudicing his case on the merits.” But this court has said that after a pretrial evidentiary hearing confined to the jurisdictional issue, where both sides have the opportunity to present their cases fully, the district court can decide whether the plaintiff has established jurisdiction by a preponderance of the evidence, [footnotes omitted]
The panel further opined, id. at 241.
If the court determines that it will receive only affidavits or affidavits plus discovery materials, these very limitations dictate that a plaintiff must make only a prima facie showing of jurisdictional facts through the submitted materials in order to avoid a defendant’s motion to dismiss. Any greater burden such as proof by a preponderance of the evidence would permit a defendant to obtain a dismissal simply by controverting the facts established by a plaintiff through his own affidavit and supporting materials.
. Section 17.042 provides in relevant part,
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.
. In Johnston, the Fifth Circuit discussed how extremely difficult it is to establish general jurisdiction over a nonresident defendant.
. Purposeful availment requires a defendant to seek some benefit, advantage or profit by "availing” itself of the jurisdiction. Michiana Easy Livin’ Country, Inc. v. Holten,
. The litigation must also “result from the alleged injuries that 'arise out of or relate’ to those activities.” Guardian Royal Exch. Assurance Ltd. v. English China Clays, P.L.C.,
. Quoted in Moses H. Cone Memorial Hosp. v. Mercury Constr.
. A copy of BIA's complaint filed in the Supreme Court of New York against KPMG is attached to the Affidavit of Amber Wert. Ex. A (#8-1).
. "[0]nce a plaintiff makes out a prima facie case of tortious interference, a defendant can avoid liability by establishing some type of privilege or justification for its actions, such as the exercise of its own rights or its good faith assertion of rights it believes it has, even if that belief is mistaken.” U.S. Enercorp, Ltd. v. SDC Montana Bakken Exploration, LLC,
Under New York law, "[t]he elements of a claim of tortious interference with contract are ;the existence of a valid contract between the plaintiff and a third party, defendant’s knowledge of that contract, defendant's intentional procurement of the third party’s breach of the contract without justification, actual breach of contract, and damages therefrom.” Berman v. Sugo LLC,
. Section 558 states, "To create liability for defamation there must be (a) a false and defamatory statement concerning another; (b) an unprivileged publication to a third party; (c) fault amounting at least to negligence on the part of the publisher; and (d) either ac-tionability of the statement irrespective of special harm or the existence of special harm caused by the publication.”
. Defamation per se is an exception to the requirement that a plaintiff must prove special harm. Pure Power Boot Camp, at 550.
. This case is not on point because it deals with staying a prisoner’s civil case until he is released from prison, not staying a federal case to allow an identical or similar state court case with the same parties to go forward.
. Among the defenses and privileges to defamation claims under common law and statutes is the defense of truth. The Texas Supreme Court has
interpreted [Texas Civil Practice and Remedies Code § 73.005] to require defendants to prove the publication was substantially true. Turner v. KTRK Television, Inc.,38 S.W.3d 103 , 115 (Tex. 2000). Moreover statements that are not verifiable as false cannot form the basis of a defamation claim. Milkovich v. Lorain Journal Co.,497 U.S. 1 , 21-22,110 S.Ct. 2695 ,111 L.Ed.2d 1 (1990).... Further the common law has recognized a judicial proceedings privilege since at least 1772 for parties, witnesses, lawyers, judges, and jurors.
Neely v. Wilson,
"Truth, even substantial truth, is a complete defense to defamation.” Vincent v. Comerica Bank,
Moreover, to BIA’s correct assertion that statements made in a pleading in a lawsuit are absolutely privileged as a matter of law, TBG’s response is that “it is not the specific assertions in the lawsuit that are the prob
"The issue of whether an alleged defamatory matter is related to a proposed or existing judicial proceeding is a legal question to be determined by the court. Communications subject to this privilege 'cannot constitute the basis of a civil action’ and may not form a basis for civil liability.” Aldous v. Bruss,
. The Court agrees with BIA that the two cases TBG cites for the proposition that the Court may look back at least seven years for contacts do not support that proposition: Wilson v. Belin,
. TBG concedes that it has not found a case factually identical to his scenario, but contends that "BIA cannot plausibly deny that a lawsuit of any nature filed by a plaintiff for the sole or primary purpose of harming a competing company — even though the competition is legal and legitimate — falls squarely within the elements of tortious interference with contract and with prospective business relationships.” BIA bears the burden of proof on its affirmative defense of privilege or justification, but they are not relevant to whether TBG had adequately pleaded these claims.
. In Burger King,
Jurisdiction... may not be avoided merely because the defendant did not physically enter the forum state. Although territorial presence frequently will enhance a potential defendant’s affiliation with a State and reinforce the reasonable foreseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. 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.
In accord, Searcy v. Parex Resources, Inc.,