X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Click here for the full text of this decision FACTS:James Meader purchased three water treatment units made by AquaDyn Technologies, a Mississippi corporation headquartered in Georgia, from Mike Scott, who worked for Sentinel, a Texas company. Scott advised Meader that the units, which were bought as an investment, would provide a guaranteed 15-percent return. Using forms Scott gave him, Meader transferred funds from an individual retirement account into a Self-Directed Individual Retirement Account (SDIRA). IRA Resources Inc., on behalf of Eldorado Bank, was the custodian of the SDIRA. Both financial institutions were California companies, and neither had offices outside of that state. IRA Resources forwarded Meader’s $48,000 check to AquaDyne for payment on the water treatment units. Later, claiming AquaDyn units were securities that required registration with the Texas State Securities Board, Meader sued IRA Resources, Eldorado Bank and California Bank & Trust, the successor in interest to Eldorado Bank. Meader’s claims were on his own and other Texas residents’ behalf, and alleged that the financial institutions failed to properly investigate the legitimacy of AquaDyn’s water treatment units as an investment. As the basis for general jurisdiction, Meader claimed that all or a substantial part of the events giving rise to his claims occurred in Texas, the transaction giving rise to the cause of action occurred in Texas, the financial institutions had agents in Texas and Meader was a Texas resident. He alleged causes of action for violations of Texas Securities Act Article 581-33, what he called statutory stock fraud, common-law fraud, negligent misrepresentation and negligence. In support of specific jurisdiction, Meader stated that Scott was an agent for IRA Resources and AquaDyn, Scott sold the units to Meader in Texas, Scott sold the financial institutions’ custodial services, and, as a result, the financial institutions had contracted with Meader and others. The financial institutions filed a special appearance motion, which the trial court granted. Meader appeals. HOLDING:Affirmed. The court goes over the Meader’s assertion that minimum contacts were met when Meader signed IRA Resources’ forms in Texas and that Scott was IRA Resources’ agent. The court notes, however, that the provision of forms is the only evidence Meader advances in support of an agency relationship. Scott made no representation that he was IRA Resources’ agent or that he was acting in any capacity other than as Meader’s financial advisor. As for the forms themselves, the court finds that the evidence establishes it was Scott who provided the forms to Meader, completed them and then sold the AquaDyn units; there is no evidence that the financial institutions participated in the sale or that they directed any actions toward a Texas resident. Then, the court looks at the completed forms to see what kind of, if any, relationship they established with Meader. The court agrees that a single contract may or may not be sufficient to establish specific jurisdiction, but if it is to support specific jurisdiction, the contractual relationship must have a substantial connection with the forum. After examining the forms, the court concludes that they indicate that IRA Resources’ services will be performed in California, pursuant to instructions received from a Texas resident and pursuant to the resident’s investment decisions. Overall, IRA Resources’ actions related to the forms were “too random, fortuitous or attenuated” to support specific jurisdiction, the court states. The court then turns to the assertion of general jurisdiction and finds that assertion lacking, too. There is no indication that either IRA Resources or Eldorad 1. has ever been licensed or qualified to do business in Texas; 2. has any employees, offices or bank accounts in Texas; 3. has a mailing address or a telephone number in Texas; 4. pays taxes in Texas; 5. owns real or personal property in Texas; 6. advertises in Texas; or 7. has a registered agent for service of process in Texas. OPINION:Guzman, J.; Edelman, Seymore and Guzman, JJ.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 3 articles* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.