You Don’t Have To Su ...

You Don’t Have To Sue The Plaintiffs At Home, But You Can’t Stay Here

October 20, 2020 | by Caroline B. Smith

Plaintiff Failed To Establish Defendants’ Minimum Contacts In Breach Of Contract Case

The Fifth Circuit recently affirmed the dismissal of a case for lack of personal jurisdiction, concluding that the case was “Florida’s problem. Not Texas’s.”  In that case, the plaintiff had been hired to work on electrical utility lines in Florida.  Sayers Constr., L.L.C. v. Timberline Constr., Inc., 19-51099, 2020 WL 5848636, at *1 (5th Cir. Oct. 2, 2020).  It hired the defendants, a Utah Corporation and a South Dakota corporation, as subcontractors on the project.  Id.  The subcontractors picked up their work orders from the plaintiff at its Florida offices, performed their work in Florida, and then mailed their invoices to the plaintiff’s Texas offices.

When the plaintiff quit timely paying its invoices, the subcontractors quit performing work and filed an arbitration demand and won.  Id.  Later, the plaintiff filed suit in federal district court in Texas, seeking to vacate the arbitration award.  Id.   The subcontractor-defendants filed a motion to dismiss on multiple grounds, and the district court dismissed the case for lack of personal jurisdiction.  Id.

On appeal, the case turned on whether the subcontractor defendants had sufficient minimum contacts with Texas.  Id. at *2.  The court explained that while the place the contract is to be performed is the “touchstone” of the analysis, the court also undertakes an assessment of the parties’ history of negotiations, the terms of the agreement, and the parties’ course of dealing as well as potential future consequences.  Id.

Because the place of performance was Florida, the plaintiff was forced to rely on other factors.  Specifically, the plaintiff pointed to the fact that one defendant solicited a business relationship with the defendant in Texas; that the subcontractors negotiated with the defendant, which had a Texas office; that the subcontractors mailed invoices to the Texas office; and the parties’ agreement contained a Texas choice-of-law provision. Id. 

The court held that any solicitation by a subcontractor would establish a relationship between it and the defendant and not it and Texas.  Further, the court explained that mailing invoices to Texas and engaging in communications with a resident of the Texas were insufficient to establish jurisdiction.  And finally, the court found that the agreement, though it contained a Texas choice-of-law provision, the agreement did not anticipate that disputes would be heard in Texas, so the agreement weighed against a finding of personal jurisdiction being proper in Texas.  Finally, the court observed that parties’ course of dealings were centered in Florida and not Texas.  Id.   at *3.  The court concluded by suggesting that Florida, the place of contractual performance, was the appropriate court to resolve the parties’ dispute. Id.

Practitioners should be mindful of the court’s presumption, if not preference, that breach of contract claims be resolved in a forum in the state of contractual performance.