Case 4:16-cv-00773-ALM Document 42 Filed 07/12/17 Page 1 of 11 PageID #: 631
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`United States District Court
`EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
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`THE CLEMENT GROUP, LLC.,
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`v.
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`ETD SERVICES, LLC., D/B/A THE
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`DAVITZ GROUP;
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`E. EARL DAVIS, II;
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`TARA DAVIS,
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`v.
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`BILL’S BOOKKEEPING SERVICES, LLC.
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`Civil Action No. 4:16-cv-00773
`Judge Mazzant
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`MEMORANDUM OPINION AND ORDER
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`Pending before the Court is Third Party Defendant’s Motion to Dismiss for Lack of
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`Personal Jurisdiction (Dkt. #22). After reviewing the pleadings, the Court finds the motion should
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`be denied.
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`BACKGROUND
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`The Clement Group, LLC (“Clement”), is an Alabama-based company operating in
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`Montgomery, Alabama (Dkt. #10 at p. 11). Clement’s members are Alabama citizens (Dkt. #10 at
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`p. 12). ETD Services, LLC d/b/a The Davitz Group (“ETD”), is a Texas-based company operating
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`in McKinney, Texas (Dkt. #10 at p. 10). ETD’s sole member is a Texas citizen (Dkt. #10 at p. 12).
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`Bill’s Bookkeeping Services, LLC (“BBS”) is an Alabama-based company operating in
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`Montgomery, Alabama (Dkt. #10 at p. 11). BBS’s members are Alabama citizens (Dkt. #10 at p.
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`12).
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`Both Clement and ETD operate as construction companies (Dkt. #10). On May 3, 2013,
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`Clement and ETD agreed to become partners as part of the United States Small Business
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`1
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`Case 4:16-cv-00773-ALM Document 42 Filed 07/12/17 Page 2 of 11 PageID #: 632
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`Association’s Mentor/ Protégé Program (the “SBA Mentor Program”) (Dkt. #10 at p. 17). Under
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`this program, ETD, the protégé, sought to gain business insight and experience in providing
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`contacting services to federal government agencies in construction and renovation projects on
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`military installations (Dkt. #10 at p. 17). The program allowed joint ventures between Clement
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`and ETD to bid for federal contracts for which the companies individually would otherwise not
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`have been eligible to bid (Dkt. #10 at p. 17).
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`On or about May 2014, ETD and Clement formed a joint venture known as ETD-TCG,
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`LLC (Dkt. #10 at p. 18). On July 17, 2014, ETD and Clement entered into a Joint Venture
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`Agreement to bid for projects involving construction services for the United States Army Corp of
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`Engineers (the “USACE”), Norfolk District (Dkt. #10 at p. 18). On August 12, 2014 and
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`December 18, 2014, ETD-TCG, LLC entered into two addenda to the Joint Venture Agreement to
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`provide construction services for the USACE, Mobile District (Dkt. #10 at p. 18). On January 20,
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`2015, ETD-TCG, LLC entered into another addendum to the Joint Venture Agreement to provide
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`design-build construction services to the USACE, Louisville District (collectively, the “Joint
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`Ventures”) (Dkt. #10 at p. 19).
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`Prior to Clement and ETD forming ETD-TCG, LLC, BBS performed bookkeeping services
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`for Clement (Dkt. #22, Exhibit 1 at ¶ 10). BBS managed a “pooling arrangement” in which
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`participants contributed a percentage of their revenue from construction projects to a general fund.
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`Participants could use the fund to pay their overhead expenses as well as direct and indirect costs
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`(Dkt. #10 at p. 15). ETD alleges it was required to participate in the “pooling arrangement” as
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`part of the Joint Ventures (Dkt. #10 at p. 16).
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`According to ETD’s managing member, Earl Davis, the “pooling arrangement” included
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`all of ETD’s project in “any location and particularly its projects in Texas.” (Dkt. #27, Davis
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`2
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`Case 4:16-cv-00773-ALM Document 42 Filed 07/12/17 Page 3 of 11 PageID #: 633
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`Decl. ¶ 11). Davis states that BBs provided “significant project management oversight for all the
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`construction projects in which ETD was engaged throughout Texas and the United States”
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`(Dkt. #27, Davis Decl. ¶ 12). The project oversight included oversight of the bidding
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`opportunities, preparation of bids, management of project budgets, management of contract
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`acquisition and execution for subcontractors, job costs and profit estimation, and payment of bonds
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`for projects in Texas and elsewhere (Dkt. #27, Davis Decl. ¶ 13–15). Davis further states that BBS
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`provided and organized marketing efforts for the participants of the “pooling arrangement” for
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`areas including Texas (Dkt. #27, Davis Decl. ¶ 13). Davis states that BBS was responsible for bid
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`solicitation of construction projects in Fort Hood in Kileen, Texas, the Veterans Administration
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`facility in Dallas, Texas and Fort Sam Houston in San Antonio, Texas (Dkt. #27, Davis Decl. ¶ 14).
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`According to Davis, BBS maintained relationships with the United States Small Business
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`Association in Fort Worth, Texas for the purpose of managing construction contracts that fell
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`within the oversight of that Small Business Association (Dkt. #27, Davis Decl. ¶ 15).
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`ETD alleges that “from the beginning of the operation of the Joint Ventures” ETD
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`expressed concerns to Clement that “all did not seem appropriate with respect to the allocations
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`for costs and expenses of the Joint Ventures, the profits and losses of the Joint Ventures.”
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`(Dkt. #10 at p. 19). ETD alleges it received limited financial reports and that BBS and Clement
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`ignored its requests for project information and pay requests (Dkt. #10 at p. 19–20). Specifically,
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`ETD alleges that in September 2015, it sought bonding coverage for a construction project in
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`Arkansas from Baldwin Cox (Dkt. #10 at p. 20). ETD alleges that as part of its bond application,
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`it provided Baldwin Cox a set of financial records prepared by BBS (Dkt. #10 at p 20). ETD
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`alleges that Baldwin Cox found the financial records reflected a $1.1 million distribution to ETD’s
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`Case 4:16-cv-00773-ALM Document 42 Filed 07/12/17 Page 4 of 11 PageID #: 634
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`members (Dkt. #10 at p. 20). ETD alleges that during that same period, BBS advised Earl Davis
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`that ETD’s financial records reflected at $600,000 loss (Dkt. #10 at p. 20).
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`ETD alleges it continued to ask BBS and Clement about this apparent discrepancy and
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`BBS and Clement refused to respond to ETD. ETD alleges that, on information and belief,
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`Clement and BBS charged ETD-TCG, LLC excessive consulting fees (Dkt. #10 at p. 20). ETD
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`alleges that Clement and BBS were unjustly enriched by portions of ETD-TCG, LLC’s assets to
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`which they were not entitled, that Clement and BBS misdirected funds that should have been paid
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`to ETD-TCG, LLC, and that BBS’s representations regarding the “pooling arrangement” were
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`false, misleading, and deceptive (Dkt. #10 at pp. 27–28).
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`On October 7, 2016, Clement brought suit against ETD, alleging breach of contract, breach
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`of fiduciary duty, defamation, conversion, unjust enrichment and fraud (Dkt. #1). Clement alleged
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`ETD breached the Joint Venture Agreement and withdrew funds from ETD-TCG, LLC accounts
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`without Clement’s approval (Dkt. #1)
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`On December 26, 2016, ETD filed a First Amended Original Answer, Affirmative
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`Defenses, and Counter-Complaint (Dkt. #10). ETD brought counter-claims against Clement for
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`breach of contract, breach of fiduciary duty, unjust enrichment, common law fraud, and statutory
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`fraud under the Texas Deceptive Trade Practices Act (“DTPA”) (Dkt. #10). ETD’s Counter-
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`Complaint included a Third-Party Complaint against BBS alleging unjust enrichment, common
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`law fraud, and statutory fraud under the DTPA (Dkt. #10). 1
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`On March 15, 2017, BBS filed the pending Motion to Dismiss for Lack of Personal
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`Jurisdiction (Dkt. #22). On April 7, 2017, ETD filed a response (Dkt. #27). On April 14, 2017,
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`BBS filed a reply (Dkt. #28).
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`1 The Court granted ETD’s motion for leave to re-plead its common law fraud claim.
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`Case 4:16-cv-00773-ALM Document 42 Filed 07/12/17 Page 5 of 11 PageID #: 635
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`Personal Jurisdiction
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`LEGAL STANDARD
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`Federal Rule of Civil Procedure 12(b)(2) requires a court to dismiss a claim if the court
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`does not have personal jurisdiction over the defendant. Fed. R. Civ. P. 12(b)(2). After a non-
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`resident defendant files a motion to dismiss for lack of personal jurisdiction, the party seeking to
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`invoke the court’s jurisdiction must “present sufficient facts as to make out only a prima facie case
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`supporting jurisdiction.” Alpine View Co. v. Atlas Copco AB, 205 F.3d 208, 215 (5th Cir.
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`2000). When considering the motion to dismiss, the court must accept as true the plaintiff’s
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`uncontroverted allegations and resolve factual conflicts in favor of the plaintiff. Id.
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`A federal court may exercise personal jurisdiction over a nonresident defendant if (1) the
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`forum state’s long-arm statute confers personal jurisdiction over that defendant, and (2) the
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`exercise of personal jurisdiction comports with the due process clause of the Fourteenth
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`Amendment. Int’l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 212
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`(5th Cir. 2016). Because the Texas long-arm statute extends as far as constitutional due process
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`permits, a court only needs to determine whether a suit in Texas is consistent with the due process
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`clause of the Fourteenth Amendment. Id.
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`The due process clause requires that a court exercise personal jurisdiction over a
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`nonresident defendant only if the defendant has “certain minimum contacts with [the forum state]
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`such that the maintenance of the suit does not offend traditional notions of fair play and substantial
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`justice.” Id. (citing Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). Minimum contacts
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`with a forum state can be satisfied by contacts that give rise to either general jurisdiction or specific
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`jurisdiction. Wilson v. Belin, 20 F.3d 644, 647 (5th Cir. 1994).
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`Case 4:16-cv-00773-ALM Document 42 Filed 07/12/17 Page 6 of 11 PageID #: 636
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`General Jurisdiction
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`General jurisdiction occurs when “a State exercises personal jurisdiction over a defendant
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`in a suit not arising out of or related to the defendant’s contacts with the forum.” Helicopteros
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`Nacionales de Colom., S.A. v. Hall, 466 U.S. 408, 414 n.9 (1984). General jurisdiction exists only
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`when the defendant’s contacts with the State constitute “continuous and systematic” general
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`contacts with the forum. Id. at 416. “For an individual, the paradigm forum for the exercise of
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`general jurisdiction is the individual’s domicile; for a corporation, it is an equivalent place, one in
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`which the corporation is fairly regarded as at home.” Daimler AG v. Bauman, 134 S. Ct. 746, 760
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`(2014) (citing Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 924 (2011)). The
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`inquiry is not whether a corporation’s “in-forum contacts can be said to be in some sense
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`‘continuous and systematic,’ it is whether that corporation’s affiliations with the State are so
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`‘continuous and systematic’ as to render [it] essentially at home in the forum State.” Id. at 761
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`(citing Goodyear, 564 U.S. at 919).
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`A corporation is fairly regarded as at home in its place of incorporation and principal place
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`of business. Id. at 760. General jurisdiction “calls for an appraisal of a corporation’s activities in
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`their entirety, nationwide and worldwide. A corporation that operates in many places can scarcely
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`be deemed at home in all of them.” Id. at 762 n.20. Other courts have held that
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`the Daimler “essentially at home” standard applies to unincorporated associations. See Waldman
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`v. Palestine Liberation Org., 835 F.3d 317, 332 (2d Cir. 2016) (“Daimler’s reasoning was based
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`on an analogy to general jurisdiction over individuals, and there is no reason to invent a different
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`test for general personal jurisdiction depending on whether the defendant is an individual, a
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`corporation, or another entity”); Livnat v. Palestinian Auth., 82 F. Supp. 3d 19, 29 (D.D.C. 2015).
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`Case 4:16-cv-00773-ALM Document 42 Filed 07/12/17 Page 7 of 11 PageID #: 637
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`ETD bears the burden of producing sufficient facts to support “a prima facie” case
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`supporting this Court’s jurisdiction over BBS. BBS operates an office in Alabama. BBS is an
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`Alabama corporation with Alabama members. BBS’s employees have not traveled to Texas for
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`any of the transactions in dispute in this case. ETD made no argument that this Court should
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`exercise general jurisdiction over BBS in its response, except to state “[BBS] is properly subject
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`to personal jurisdiction in Texas under the precepts of general jurisdiction and specific
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`jurisdiction” (Dkt. #27 at p. 4). That conclusion was not supported by any specific facts as to how
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`BBS’s actions could amount to the “continuous and systematic” actions required by Goodyear or
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`Daimler in order to be “at home” in Texas. There are no facts, presented by ETD or otherwise, to
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`support a prima facie case that BBS is “at home” in Texas. The Court therefore does not have
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`general jurisdiction over BBS.
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`Specific Jurisdiction
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`The Fifth Circuit follows a three-step analysis in determining whether a court has specific
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`personal jurisdiction: “(1) whether the defendant has minimum contacts with the forum state, i.e.,
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`whether it purposely directed its activities toward the forum state or purposefully availed itself of
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`the privileges of conducting activities there; (2) whether the plaintiff’s cause of action arises out
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`of or results from the defendant’s forum-related contacts; and (3) whether the exercise of personal
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`jurisdiction is fair and reasonable.” McFadin v. Gerber, 587 F.3d 753, 759 (5th Cir. 2009)
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`(quoting Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 271 (5th Cir. 2006)). “The
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`‘minimum contacts’ inquiry is fact intensive and no one element is decisive; rather the touchstone
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`is whether the defendant’s conduct shows that it ‘reasonably anticipates being haled into
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`court.’” Id. (quoting Luv N’ Care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 470 (5th Cir. 2006)). Even
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`a single act by a defendant may establish specific jurisdiction if the act in the forum state is
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`substantially related to the suit. See Moncrief Oil Int’l v. OAO Gazprom, 481 F.3d 309, 311 (5th
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`Cir. 2007).
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`Once a plaintiff establishes that the defendant had minimum contacts with the forum state
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`sufficient to permit specific jurisdiction, the burden shifts to the defendant to prove that the
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`exercise of jurisdiction is not fair or reasonable. McFadin, 587 F.3d at 759. In this inquiry, the
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`Court examines five factors: (1) the burden on the nonresident defendant; (2) the forum state’s
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`interests; (3) the plaintiff’s interest in securing relief; (4) the interest of the interstate judicial
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`system in the efficient administration of justice; and (5) the shared interest of the several states in
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`furthering fundamental social policies. Burger King v. Rudzewicz, 471 U.S. 462, 477 (1985). “It is
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`rare to say the assertion of jurisdiction is unfair after minimum contacts have been
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`shown.” McFadin, 587 F.3d at 760 (quoting Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 215
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`(5th Cir. 1999)).
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`Minimum Contacts
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`ETD alleges that BBS provided bookkeeping services for ETD’s Texas-area projects
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`(Dkt. #27, Davis Decl. at ¶ 9). ETD also alleges that BBS managed an accounting “pooling
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`arrangement” that required ETD to contribute its revenue to an account managed by BBS
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`(Dkt. #27, Davis Decl. at ¶ 11). This “pooling arrangement” included all of ETD’s projects in
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`Texas (Dkt. #27, Davis Decl. at ¶ 11). ETD alleges that as part of the “pooling arrangement,” BBS
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`performed management services for ETD’s projects (Dkt. #27, Davis Decl. at ¶ 15). Part of that
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`project management included solicitation and preparation of bids for ETD projects in Texas
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`(Dkt. #27, Davis Decl. at ¶ 12). Correspondence between BBS and ETD confirm that BBS
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`solicited bids for six Texas projects on behalf of ETD and sought to solicit more (Dkt. #27 at p. 7):
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`(Dkt. #27, Exhibit 6). ETD also alleges that BBS provided marketing efforts in Texas, among
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`other places, for the participants of the “pooling arrangement,” including ETD (Dkt. #27, Davis
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`Decl. at ¶ 13). ETD presented evidence that BBS frequently held meetings with ETD and others
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`to provide proposals, marketing materials, and project opportunities for construction projects
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`(Dkt. #27, Exhibit 3). ETD alleges that BBS received a payment for each project completed by
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`ETD, including Texas projects, in the amount of ten percent of the project profit (Dkt. #27,
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`Davis Decl. at ¶ 20). Each time BBS reached out to a Texas company to solicit bids on behalf of
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`ETD, BBS stood to make a profit.
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`The solicitation, marketing, and management of projects in Texas on behalf of ETD are
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`deliberate actions extending into Texas that satisfy the minimum contacts requirement of specific
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`jurisdiction analysis.
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`Causes of Action in Relation to Minimum Contacts
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`ETD brings causes of action against BBS for unjust enrichment, common law fraud, and
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`statutory fraud. ETD alleges that its claims against BBS arise out of the financial management of
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`the BBS’s “pooling arrangement.” ETD alleges that the “capture of profits and allocation of
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`excessive fees to BBS and other participants of the pooling arrangement are the essence of ETD’s
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`complaint” (Dkt. #27 at p. 10). ETD also alleges the “ultimate effect of the pooling arrangement
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`brokered and managed by BBS was to control the cash flow of ETD’s construction projects,
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`including its projects in Texas” (Dkt. #27 at p. 8).
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`The Supreme Court recently reiterated that in order to establish personal jurisdiction, the
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`claims brought must specifically relate to the defendant’s minimum contacts in the forum state.
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`Bristol-Myers Squibb Co. v. Sup. Ct. of California, 137 S.Ct. 1773 (2017). Here, ETD’s unjust
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`enrichment claim and statutory fraud claim relate to the manner in which BBS managed the
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`“pooling arrangement.” ETD alleges BBS wrongfully withheld funds belonging to ETD or ETD-
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`Case 4:16-cv-00773-ALM Document 42 Filed 07/12/17 Page 10 of 11 PageID #: 640
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`TCG, LLC (Dkt. #10 at p. 27). ETD alleges BBS’s representations regarding the “pooling
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`arrangement” were false, misleading, and deceptive (Dkt. #29 at pp. 28–29). BBS managed the
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`“pooling arrangement” by marketing and soliciting bids for the participants, in exchange for ten
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`percent of the participant’s profits. Some of those solicitations were to Texas companies on behalf
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`of ETD. BBS also provided management of project budgets, management of contract acquisition
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`and execution for subcontractors, job costs and profit estimation, and payment of bonds for
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`projects in Texas and elsewhere (Dkt. #27, Davis Decl. ¶ 13–15). According to Davis, BBS
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`maintained relationships with the United States Small Business Association in Fort Worth, Texas
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`for the purpose of managing construction contracts that fell within the oversight of that Small
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`Business Association (Dkt. #27, Davis Decl. ¶ 15). BBS’s management of the “pooling
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`arrangement” is the basis for ETD’s unjust enrichment and fraud claims. Therefore, ETD’s causes
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`of action arise from BBS’s Texas-related contacts. ETD has presented a prima facie case
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`supporting the Court’s specific jurisdiction over BBS.
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`Fair and Reasonable Personal Jurisdiction
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`Lastly, the Court addresses whether the assertion of personal jurisdiction would be fair and
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`reasonable. It is rare to say that the assertion of jurisdiction is unfair once minimum contacts have
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`been established. McFadin, 587 F.3d at 760. Because minimum contacts have been established,
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`and the Court finds ETD’s causes of action relate to those minimum contacts, the burden shifts to
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`BBS to prove the Court’s exercise of jurisdiction is not fair or reasonable. BBS, however, did not
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`make any argument to the Court that the exercise of jurisdiction would not be fair or reasonable.
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`Further, BBS should have reasonably anticipated being haled into a Texas court due to its
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`connections with Texas, through the solicitation and management of ETD contracts in Texas. The
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`Court finds that asserting personal jurisdiction over BBS would be fair and reasonable.
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`CONCLUSION
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`It is therefore ORDERED that Third Party Defendant’s Motion to Dismiss for Lack of
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`Personal Jurisdiction (Dkt. #22) is hereby DENIED.
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