Filed: Mar. 31, 2016
Latest Update: Mar. 02, 2020
Summary: Case: 14-20552 Document: 00513447273 Page: 1 Date Filed: 03/31/2016 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED No. 14-20552 March 31, 2016 Lyle W. Cayce Clerk INTERNATIONAL ENERGY VENTURES MANAGEMENT, L.L.C., Plaintiff - Appellant v. UNITED ENERGY GROUP, LIMITED; SEAN MUELLER, Defendants - Appellees Appeal from the United States District Court for the Southern District of Texas Before WIENER, SOUTHWICK, and GRAVES, Circuit Judge
Summary: Case: 14-20552 Document: 00513447273 Page: 1 Date Filed: 03/31/2016 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED No. 14-20552 March 31, 2016 Lyle W. Cayce Clerk INTERNATIONAL ENERGY VENTURES MANAGEMENT, L.L.C., Plaintiff - Appellant v. UNITED ENERGY GROUP, LIMITED; SEAN MUELLER, Defendants - Appellees Appeal from the United States District Court for the Southern District of Texas Before WIENER, SOUTHWICK, and GRAVES, Circuit Judges..
More
Case: 14-20552 Document: 00513447273 Page: 1 Date Filed: 03/31/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
No. 14-20552 March 31, 2016
Lyle W. Cayce
Clerk
INTERNATIONAL ENERGY VENTURES MANAGEMENT, L.L.C.,
Plaintiff - Appellant
v.
UNITED ENERGY GROUP, LIMITED; SEAN MUELLER,
Defendants - Appellees
Appeal from the United States District Court
for the Southern District of Texas
Before WIENER, SOUTHWICK, and GRAVES, Circuit Judges.
WIENER, Circuit Judge:
This panel originally issued an opinion in this case on August 21, 2015. 1
We now withdraw that opinion in its entirety and substitute the following in its
place.
Plaintiff-Appellant International Energy Ventures Management, L.L.C.
(“IEVM”) appeals the district court’s (1) denial of its motion to remand,
(2) grant of a motion by Defendant-Appellee Sean Mueller (“Mueller”) to
dismiss for failure to state a claim, and (3) grant of a motion by Defendant-
1 Int’l Energy Ventures Mgmt., LLC v. United Energy Grp., Ltd., 800 F.3d 143 (5th Cir.
2015).
Case: 14-20552 Document: 00513447273 Page: 2 Date Filed: 03/31/2016
No. 14-20552
Appellee United Energy Group, Limited (“UEG”) for lack of personal
jurisdiction and for insufficient service of process.
I.
FACTS & PROCEEDINGS
A. FACTS
These facts are drawn from IEVM’s allegations, which we must accept
as true. In July 2010, BP announced that it wanted to sell its Pakistan
subsidiaries and those subsidiaries’ assets, which included oil and gas fields.
IEVM had expertise regarding the assets in Pakistan, and one of its members
mentioned the sale of those assets to Mueller, a broker and investment banker.
Soon after, Mueller contacted BP, stating that IEVM had retained him and
that it was interested in acquiring BP’s assets in Pakistan. Using a slide
presentation that IEVM created and he rebranded, Mueller approached
investors. He told those investors, as well, that IEVM had retained him with
regard to the acquisition of BP’s assets.
An associate of Mueller translated the presentation into Chinese and
presented it to UEG, a Chinese petroleum company. In September 2010, UEG
sent a letter of interest, drafted by Mueller, to BP. The letter mentioned that
IEVM was the expert that had introduced UEG to the sale. Through Mueller,
UEG also sent IEVM a proposed compensation agreement for IEVM’s services.
Under the final agreement between IEVM and UEG, IEVM contracted to
provide consulting services to UEG during its acquisition of BP’s assets in
Pakistan. In consideration, UEG contracted to pay IEVM $750,000 per year for
its services and its expenses. Subsequently, in consideration for services not
covered by the compensation agreement, UEG agreed to pay IEVM and
Mueller a commission of six percent of the acquisition price of the assets and,
in addition, agreed to employ IEVM’s members after the acquisition.
2
Case: 14-20552 Document: 00513447273 Page: 3 Date Filed: 03/31/2016
No. 14-20552
In November 2010, Mueller informed IEVM that BP had accepted UEG’s
offer to acquire the assets for $775 million. In January 2011, UEG confirmed
its agreement with IEVM. IEVM performed its obligations to UEG under the
compensation agreement until September 2011, when the sale of the BP assets
to UEG closed. Throughout the remainder of 2011, IEVM attempted to collect
from UEG under their agreement. In March 2012, UEG requested that IEVM
provide further services to UEG, but IEVM refused to do so unless UEG
acknowledged that IEVM had not been paid and unless UEG indemnified
IEVM for liability arising from its past services. UEG did so, and also paid
IEVM for the services rendered after March 2012. It has not paid IEVM for
services rendered before then or the six percent commission.
B. PROCEEDINGS
IEVM sued UEG and Mueller in Texas court. IEVM’s petition asserted
causes of action for breach of contract, promissory estoppel, and quantum
meruit. Its petition also asserted a cause of action for fraud “because [UEG and
Mueller] never intended to pay IEVM its consulting fees or its finder’s fee
equity, and thereby deceived IEVM into working on the BP Pakistan project
without compensation.”
Mueller and UEG removed, asserting that Mueller had been improperly
joined to defeat subject matter jurisdiction based on diversity. Mueller then
moved to dismiss for failure to state a claim under Federal Rule of Civil
Procedure 12(b)(6), and simultaneously, UEG moved to dismiss for lack of
personal jurisdiction under Rule 12(b)(2) and for insufficient service of process
under Rule 12(b)(5). Soon thereafter, IEVM moved to remand. IEVM also
requested leave to amend its petition, but it did not attach a proposed
amendment.
Without explanation, the district court denied IEVM’s motion to remand
in a one-page order. IEVM then moved to compel arbitration and to stay the
3
Case: 14-20552 Document: 00513447273 Page: 4 Date Filed: 03/31/2016
No. 14-20552
litigation. The district court initially granted the motion in another one-page
order, but it later withdrew that order. It then granted both Mueller’s and
UEG’s motions to dismiss. In so doing, it stated that Mueller “has 60 days to
seek and effect proper service of process on UEG,” before the dismissal would
“become[ ] final.” 2 IEVM timely filed its notice of appeal. Thereafter, IEVM
filed a certificate of service in the district court and a motion to supplement the
record on appeal, which was granted.
On appeal, IEVM challenges the district court’s decisions to (1) deny
IEVM’s motion to remand, (2) grant Mueller’s motion to dismiss for failure to
state a claim, and (3) grant UEG’s motion to dismiss for lack of personal
jurisdiction. We consider these challenges sequentially.
II.
ANALYSIS
A. DENIAL OF IEVM’S MOTION TO REMAND
In denying IEVM’s motion to remand, the district court determined that
IEVM had improperly joined Mueller for the purpose of defeating subject
matter jurisdiction based on diversity. 3 In so doing, the district court
explained: “There are no facts pled that tie Mueller to the dispute that [IEVM]
asserts against UEG save his role with or in behalf of IEVM.” 4 We review the
denial of a motion to remand de novo. 5
Under the federal removal statute, a civil action may be removed from a
state court to a federal court on the basis of diversity. This is so because the
2Int’l Energy Ventures Mgmt. LLC v. United Energy Grp., Ltd.., No. 4:13-CV-2754,
2014 WL 3732821, at *3 (S.D. Tex. July 25, 2014).
3 Int’l Energy Ventures, 2014 WL 3732821, at *2.
4 Id.
5 Scarlott v. Nissan N. Am., Inc.,
771 F.3d 883, 887 (5th Cir. 2014).
4
Case: 14-20552 Document: 00513447273 Page: 5 Date Filed: 03/31/2016
No. 14-20552
federal court has original subject matter jurisdiction over such cases. 6 The only
caveat is that, when a properly joined defendant is a resident of the same state
as the plaintiff, removal is improper. 7 In the instant action, UEG and Mueller
removed the action on the basis that there was complete diversity of the parties
because IEVM, a resident of Texas, sued UEG, a resident of Bermuda, and
even though IEVM also sued Mueller, a resident of Texas, Mueller was
improperly joined.
A defendant is improperly joined if the moving party establishes that
(1) the plaintiff has stated a claim against a diverse defendant that he
fraudulently alleges is nondiverse, or (2) the plaintiff has not stated a claim
against a defendant that he properly alleges is nondiverse. 8 Because Mueller
is, in fact, nondiverse, only the latter option is relevant. As the parties
attempting to remove IEVM’s action, UEG and Mueller have the burden of
establishing that IEVM has failed to state a claim against Mueller. 9 In doing
so, they must demonstrate “that there is no possibility of recovery by the
plaintiff against [a nondiverse] defendant, which stated differently means that
there is no reasonable basis for the district court to predict that the plaintiff
might be able to recover against [a nondiverse] defendant.” 10 At the heart of
this appeal lies the parties’ dispute whether, in determining if IEVM might
recover against Mueller, we should analyze its claims under the Texas pleading
standard or the federal pleading standard.
6 See 28 U.S.C. § 1441(a).
7 See id. § 1441(b)(2).
8Smallwood v. Ill. Cent. R.R. Co.,
385 F.3d 568, 573 (5th Cir. 2004) (en banc), cert.
denied
544 U.S. 992 (2005) (internal quotation marks and citation omitted).
9 Gasch v. Hartford Acc. & Indem. Co., 491 F.3d 278, 281 (5th Cir. 2007).
10 Smallwood, 385 F.3d at 573.
5
Case: 14-20552 Document: 00513447273 Page: 6 Date Filed: 03/31/2016
No. 14-20552
1. THE APPLICABLE PLEADING STANDARD
When deciding whether a nondiverse defendant has been improperly
joined because the plaintiff has failed to state a claim against him, the court
must apply the analysis articulated in our en banc opinion in Smallwood v.
Illinois Central Railroad Co.: [W]hether the defendant has demonstrated that
there is no possibility of recovery by the plaintiff against an in-state
defendant . . . .” 11 In Smallwood, we recognized that “[t]here ha[d] been some
uncertainty over the proper means for predicting whether a plaintiff ha[d] a
reasonable basis of recovery under state law.” 12 The Smallwood opinion
declared that “[a] court may resolve the issue in one of two ways,” the first of
which is at issue here: “The court may conduct a Rule 12(b)(6)-type analysis,
looking initially at the allegations of the complaint to determine whether the
complaint states a claim under state law against the in-state defendant,”
elaborating that “if a plaintiff can survive a Rule 12(b)(6) challenge, there is no
improper joinder.” 13 “[T]he focus of the inquiry must be on the joinder, not the
merits of the plaintiff’s case.” 14
It is well-established, of course, that the Rule 12(b)(6) analysis
necessarily incorporates the federal pleading standard articulated in Bell
Atlantic Corp. v. Twombly: “To pass muster under Rule 12(b)(6), [a] complaint
must have contained ‘enough facts to state a claim to relief that is plausible on
its face.’” 15
11 Id. (internal quotation marks and citation omitted).
12 Id.
13 Id.
14
Id.
15 Reece v. U.S. Bank Nat’l Ass’n,
762 F.3d 422, 424 (5th Cir. 2014) (quoting Bell Atl.
Corp. v. Twombly,
550 U.S. 544, 547 (U.S. 2007)). This standard is derived from Federal Rule
of Civil Procedure 8.
Twombly, 550 U.S. at 557 (“The need at the pleading stage for
6
Case: 14-20552 Document: 00513447273 Page: 7 Date Filed: 03/31/2016
No. 14-20552
Despite this, several of our unpublished opinions have inadvertently
confused, or perhaps merely overlooked, that directive of the Smallwood
opinion by assuming that the state pleading standard governs. In the earliest
of these unpublished decisions, De La Hoya v. Coldwell Banker Mexico, Inc., 16
a post-Smallwood panel of this court did not actually adopt the Texas pleading
standard as much as it conflated it with the federal standard. 17 After reciting
both standards, the De La Hoya opinion applied both of “those liberal pleading
standards” as if they were the same. 18
In the next of these unpublished opinions, Akerblom v. Ezra Holdings
Ltd., 19 another panel of this court applied the Texas pleading standard, but
without explaining its decision to do so. In the latest of these unpublished, post-
Smallwood decisions, Michels v. Safeco Insurance Co. of Indiana, 20 yet another
panel of this court, after reciting the need for the Rule 12(b)(6)-type analysis,
nonetheless proclaimed: “[T]he district court correctly stated that it first had
to examine whether the [plaintiffs] sufficiently pleaded a [claim] under the
allegations plausibly suggesting (not merely consistent with) agreement reflects the
threshold requirement of Rule 8(a)(2) that the ‘plain statement’ possess enough heft to
‘sho[w] that the pleader is entitled to relief.’”).
16 125 F. App’x 533 (5th Cir. 2005) (unpublished).
17 Id. at 537 (“[W]e must determine whether what plaintiffs did plead was
sufficient . . . . See Lovick v. Ritemoney Ltd.,
378 F.3d 433, 438 (5th Cir. 2004) (stating that,
under Rule 8(a), a complaint suffices if it gives the defendant ‘fair notice of what the plaintiff’s
claim is and the grounds upon which it rests’) (internal quotation marks omitted); Penley v.
Westbrook,
146 S.W.3d 220, 232 (Tex. Ct. App.2004) (‘Texas follows a ‘fair notice’ pleading
standard, which looks to whether the opposing party can ascertain from the pleading the
nature and basic issues of the controversy and what testimony will be relevant at trial.’)”).
18 Id.
19 509 F. App’x 340 (5th Cir. 2013) (unpublished).
20 544 F. App’x 535 (5th Cir. 2013) (unpublished).
7
Case: 14-20552 Document: 00513447273 Page: 8 Date Filed: 03/31/2016
No. 14-20552
Texas fair notice pleading standard.” 21 The Michels opinion supported this
approach with a citation to the Smallwood opinion.
The De La Hoya, Ackerblom, and Michels opinions do not articulate any
reason for applying the state pleading standard. To the extent that they hold
the state pleading standard must be applied, we believe such a holding is
neither consistent with our precedent in the Smallwood opinion nor, as
unpublished decisions, do they constitute precedent. Yet, because they are
inconsistent with our Smallwood opinion, they have also engendered confusion
in our district courts. As one district court explained:
[A]lthough the Smallwood court referenced “a
Rule 12(b)(6) challenge” as a guideline for determining
improper joinder, the Fifth Circuit has issued two
subsequent unpublished opinions [Akerblom and
Michels] holding that Texas’ notice pleading
standard—not the more particularized “plausible
claim” standard articulated in cases analyzing Rule
12(b)(6)—is the appropriate standard of review for
evaluating whether a plaintiff has fairly stated
potentially viable claims against an in-state
defendant. 22
To add to the confusion, the De La Hoya, Ackerblom, and Michels
opinions are inconsistent with many other unpublished, post-Smallwood
21 Id. at 538.
22 King v. Jarrett, No. A–15–CV–00491–LY–ML,
2015 WL 5794021, at *9 (W.D. Tex.
Oct. 1, 2015); see Holmes v. Acceptance Cas. Ins. Co.,
942 F. Supp. 2d 637, 645 (E.D. Tex.
2013) (“Based on the court’s research, the United States Court of Appeals for the Fifth Circuit
has not resolved in a published decision the issue of whether to apply the federal
12(b)(6) standard or the more lenient Texas ‘fair notice’ standard when evaluating the
sufficiency of factual allegations for the purpose of determining improper joinder.
Nonetheless, in Akerblom v. Ezra Holdings Ltd., an unpublished case, the appeals court
applied Texas pleading standards in an analysis of improper joinder. District courts in Texas
have differed regarding which standard to apply. It appears, however, that the majority of
district courts which have addressed this issue favor application of the state pleading
standard.” (citations omitted)).
8
Case: 14-20552 Document: 00513447273 Page: 9 Date Filed: 03/31/2016
No. 14-20552
opinions, which apply the federal pleading standard. 23 To resolve this
uncertainty, we merely reiterate Smallwood’s instruction.
Although the Smallwood opinion requires this, so do the principles
underlying it. At bottom, the improper-joinder analysis in the context of
removal and remand is solely about determining the federal court’s
jurisdiction. That is it. As state courts never consider the scope of such
jurisdiction, this analysis applies to federal courts exclusively. When
determining the scope of its own jurisdiction, a federal court does so without
reference to state law, much less state law governing pleadings. 24
Thus, in this context, defining the test for improper joinder must begin
with the scope of diversity jurisdiction itself, to wit: If there is at least one
nondiverse defendant, there is no federal diversity jurisdiction; if there is no
nondiverse defendant, there is federal diversity jurisdiction. So, in a case that
has been removed to federal court on the basis of diversity, the determinative
question is whether—under federal law—a nondiverse defendant was
improperly joined.
For the specific purposes of improper joinder, a nondiverse defendant has
been improperly joined if the plaintiff has failed to state a claim against that
defendant on which relief may be granted. Conversely, if the plaintiff has
stated a claim against a nondiverse defendant on which relief may be granted,
a federal court is without jurisdiction—more precisely, without diversity
23 See, e.g., Trang v. Bean, 600 F. App’x 191, 193 (5th Cir. 2015) (unpublished)
(applying Iqbal and Twombly); Rojas v. Wells Fargo Bank, N.A., 571 F. App’x 274, 277–78
(5th Cir. 2014) (unpublished) (applying Twombly); Kemp v. CTL Distribution, Inc., 440 F.
App’x 240, 247 (5th Cir. 2011) (unpublished) (applying Twombly).
24 As discussed below, when determining the merits of a claim over which it has
jurisdiction, the federal court does so with regard to state law when those claims arise under
state law. Improper joinder is a matter of jurisdiction, not merits.
9
Case: 14-20552 Document: 00513447273 Page: 10 Date Filed: 03/31/2016
No. 14-20552
jurisdiction—over that claim and, by extension, over any claims. It follows,
then, that if the plaintiff has proffered a claim against a nondiverse defendant
on which the federal court may not grant relief, that court only has jurisdiction
over claims asserted against the diverse defendants. 25 The federal court may
not resolve the claim against a nondiverse defendant on the merits.
Our properly parsed precedent therefore requires that decisions about
removal must be made on the basis of federal law, not state law. As we
observed decades ago in Paxton v. Weaver, a court “need not decide niceties of
[state] procedure, since although state substantive law determines the nature
of rights and liabilities asserted, [removal] is a question of federal law.” 26 Thus,
“[f]ederal courts must apply [a] separate and independent test so as to carry
out the intent to restrict removal.” 27 Paxton concluded that “mak[ing] state
procedural rules determinative would be to add undue confusion to a field that
already ‘luxuriates in a riotous uncertainty.’” 28 In its opinion in Grubbs v.
General Electric Credit Corp., the Supreme Court reiterated that “[w]hile, of
course, [a state] is free to establish such rules of practice for her own courts as
she chooses, the removal statutes and decisions of this Court are intended to
25 As the claim or claims against the nondiverse defendant must be dismissed without
prejudice, the plaintiff is not barred by res judicata from refiling those claims in state court
if he so desires. But, if he does so, the state court is nevertheless free to make its own
determination whether the plaintiff has stated claims on which relief may be granted. If the
federal court were to apply the state pleading standard instead of its own, its decision that a
plaintiff had not stated a claim on which relief may be granted would only constitute a
holding as to its jurisdiction, not as to the merits of the claim. That said, it is not clear
whether the state court would nevertheless defer to the federal court’s determination. Of
course, applying the federal pleading standard avoids any confusion and any possibility that
the state court would defer to it.
26 Paxton v. Weaver, 553 F.2d 936, 940–41 (5th Cir. 1977).
27 Id.
28 Id. (quoting Harper v. Sonnabend,
182 F. Supp. 594, 595 (S.D.N.Y.1960)).
10
Case: 14-20552 Document: 00513447273 Page: 11 Date Filed: 03/31/2016
No. 14-20552
have uniform nationwide application.” 29 It stated that federal law “must be
construed as setting up its own criteria, irrespective of local law, for
determining in what instances suits are to be removed from the state to the
federal courts.” 30
In fact, our pre-Smallwood opinions expressly required use of the
federal, not a state, pleading standard when testing for improper joinder. (This
background precedent, against which the dispute in Smallwood was decided,
binds us because the Smallwood opinion did nothing to displace it.) In Bobby
Jones Garden Apartments, Inc. v. Suleski, we held that, to determine whether
“there [was] a reasonably good chance that [the state] would hold [the
nondiverse defendant] to some liability,” 31 a federal court must “look to the
original state court pleading” and “read it through the Federal, not [state],
lenses of Conley v. Gibson.” 32 The opinion then recited the “the fifty-year-old,
frequently quoted Conley v. Gibson pleading standard for Rule 8.” 33 After
“[c]omparing the [state substantive law] with the Conley reading of [the]
complaint,” this court was “satisfied that a reasonable possibility exists” that
29 Grubbs v. Gen. Elec. Credit Corp., 405 U.S. 699, 705 (1972) (emphasis added).
30 Id. (quoting Shamrock Oil Corp. v. Sheets,
313 U.S. 100, 104 (1941)).
31 391 F.2d 172, 177 (5th Cir. 1968).
32Id. (emphasis added) (citation omitted) (quoting Conley v. Gibson, 355 U.S. 41, 44
(1957) abrogated by Bell Atl. Corp. v. Twombly,
550 U.S. 544 (2007)); Crespo v. Coldwell
Banker Mortg., 599 F. App’x 868, 873 (11th Cir. 2014) (unpublished) (“Although we apply
state substantive law for purposes of the [improper] joinder rule, we must read the complaint
through ‘Federal, not [state], lenses.’”(quoting Bobby Jones Garden Apartments,
Inc., 391
F.2d at 177).
33 5 FED. PRAC. & PROC. CIV. § 1216 (3d ed.).
11
Case: 14-20552 Document: 00513447273 Page: 12 Date Filed: 03/31/2016
No. 14-20552
the plaintiff would be entitled to relief under the federal pleading standard in
Conley. 34
This reliance on Conley is determinative here. Although Rule 8 and—in
specific circumstances—Rule 9 provide the statutory component of the federal
pleading standard, Rule 12(b)(6) provides the one and only method for testing
whether that standard has been met. Thus, the jurisprudential component of
the standard has been developed in the context of the Conley opinion and
others interpreting Rule 12(b)(6), not Rule 8 and 9. Accordingly, the so-called
Rule 12(b)(6)-type analysis, which incorporates both components, is shorthand
for the federal pleading standard itself. Although the Conley opinion verbalized
this federal pleading standard (and this Rule 12(b)(6)-type analysis) as it
existed at the time that the dispute in Smallwood was decided, that standard
(or that analysis) has since been supplanted by the one promulgated by the
Supreme Court in in the Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal
opinions.
As the Iqbal opinion explained, the decision in Twombly “was based on
[the] interpretation and application of Rule 8,” 35 which “in turn governs the
pleading standard ‘in all civil actions and proceedings in the United States
district courts.’” 36 Stated differently: “Twombly expounded the [federal]
pleading standard for ‘all civil actions . . . .’” 37 This truism is widely
34Bobby Jones Garden Apartments, Inc., 391 F.2d at 178 (citing the heightened federal
pleading standard in Federal Rule of Civil Procedure 9).
35 Ashcroft v. Iqbal, 556 U.S. 662, 684 (2009).
36 Id. (quoting FED. R. CIV. P. 1).
37 Id.
12
Case: 14-20552 Document: 00513447273 Page: 13 Date Filed: 03/31/2016
No. 14-20552
recognized. 38 The Iqbal opinion also reiterated that the federal pleading
standard is the Rule 12(b)(6)-type analysis, observing that one of the “[t]wo
working principles [that] underlie our decision in Twombly” is that “only a
complaint that states a plausible claim for relief [under Rule 8] survives a
motion to dismiss [under Rule 12(b)(6)] . . . .” 39
The Smallwood opinion instructs us to apply the Rule 12(b)(6)-type
analysis, which must mean the entirety of that analysis. 40 Because that
analysis is inseparable from the federal pleading standard, this is an
instruction to apply the federal pleading standard. Again, our precedent makes
this clear. In Travis v. Irby, we considered whether to test a plaintiff’s claim
against a putative nondiverse defendant under (1) the federal pleading
standard in Conley or (2) the improper-joinder standard that had been
articulated, in many different ways, in our earlier opinions. The Travis opinion
noted that the improper-joinder standard that our court had been using was
not only identical to the federal pleading standard stated in Conley but was
derived from it. 41 Perhaps most tellingly, neither Travis nor Smallwood
385 FED. PRAC. & PROC. CIV. § 1221 (“The requirements for pleading set forth in
Federal Rule [of Civil Procedure] 8(a) apply to all actions in the federal courts.”).
39 Iqbal, 566 U.S. at 679.
40Even if we were to assume arguendo that we could pick and choose which parts of
the Rule 12(b)(6)-type analysis we should use in the improper-joinder context, it is nowhere
made clear how we would or could do that.
41 Travis v. Irby, 326 F.3d 644, 647 (5th Cir. 2003). Travis began by explaining that
“[n]either our circuit nor other circuits have been clear in describing the [improper] joinder
standard” and that “[t]he test has been stated by this court in various terms, even within the
same opinion.”
Id. After conducting a comprehensive review of those myriad standards,
Travis observed that “[o]ur cases have also noted the similarity of the test for [improper]
joinder and the test for a Rule 12(b)(6) motion alleging failure to state a claim.”
Id. at 648. It
then compared (1) the Rule 12(b)(6)-type analysis in Conley (“The court should not dismiss
the claim unless the plaintiff would not be entitled to relief under any set of facts or any
possible theory that he could prove consistent with the allegations in the complaint”) to (2) the
improper-joinder standard in this court’s previous decisions (“After all disputed questions of
13
Case: 14-20552 Document: 00513447273 Page: 14 Date Filed: 03/31/2016
No. 14-20552
referenced, much less relied on, any state pleading standard. We simply cannot
read these opinions as requiring that a state pleading standard be used in the
Rule 12(b)(6)-type analysis, much less in lieu of it. 42
Further still, the Smallwood opinion, read in its entirety, supports this.
As discussed above, the opinion begins by noting that we had previously
“recognized two ways to establish improper joinder: ‘(1) actual fraud in the
pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a
cause of action against the nondiverse party in state court.’” 43 After quoting
these two “ways,” the Smallwood opinion then delivers the test to be used
henceforth under the second “way”:
[W]e explained in Travis v. Irby that the test for
[improper] joinder is whether the defendant has
demonstrated that there is no possibility of recovery
fact and all ambiguities in the controlling state law are resolved in favor of the nonremoving
party, the court determines whether that party has any possibility of recovery against the
party whose joinder is questioned”). Id. (quotations marks omitted) (emphasis and
alterations in original). The Travis panel determined that the improper-joinder standard
“appears adopted from the Rule 12(b)(6) standard under which the central issue is whether,
in the light most favorable to the plaintiff, the complaint states a valid claim for relief.’”
Id.
(quotations omitted).
42 Although the Travis opinion clarified that the federal pleading standard in the
Conley opinion and the improper-joinder standard are one and the same, we do not read the
Travis opinion as intending to replace the latter with the former. As a practical matter, it did
not much matter—at least not until the federal pleading standard in the Conley opinion was
supplanted by that in the Twombly and Iqbal opinions. If any ambiguity still remains, it can
be resolved by considering whether our Smallwood opinion requires courts to apply the
federal pleading standard itself—whatever it may be currently—or the distinct improper-
joinder standard that the Travis opinion considered identical to the former federal pleading
standard noted in the Conley opinion. Reading the Smallwood opinion in conjunction with
the Travis opinion, we are convinced that Smallwood mandates that we apply the federal
pleading standard as it currently exists. The Smallwood opinion plainly instructs us to
conduct “a Rule 12(b)(6)-type analysis,” not the Rule 12(b)(6)-type analysis as contained in
the Conley opinion. As Travis explained, the improper-joinder standard that had been used
by this court was derived from the federal pleading standard embodied in the Rule 12(b)(6)-
type analysis. Read together, the Travis and Smallwood opinions clarify that those standards
are the same.
43 Smallwood, 385 F.3d at 573 (quoting
Travis, 326 F.3d at 646–47).
14
Case: 14-20552 Document: 00513447273 Page: 15 Date Filed: 03/31/2016
No. 14-20552
by the plaintiff against an in-state defendant, which
stated differently means that there is no reasonable
basis for the district court to predict that the plaintiff
might be able to recover against an in-state defendant.
To reduce possible confusion, we adopt this phrasing
of the required proof and reject all others, whether the
others appear to describe the same standard or not. 44
Again, as there is no “actual fraud” at issue here, we address only the second
“way.”
The Smallwood opinion states that a moving party must show “inability
of the plaintiff to establish a cause of action against the nondiverse party in
state court.” 45 But this must not be read to imply that a state pleading standard
applies. As a preliminary matter, this is quoted from the Travis opinion and is
included merely as an illustration of this court’s position that improper joinder
might be proved in one of two “ways.” There is nothing to indicate that, by
including it, the Smallwood opinion meant for it to be the test for improper
joinder under either of these “ways.” To the contrary, the Smallwood opinion
unequivocally announced its own test for improper joinder under the second
“way” immediately thereafter. 46 It forcefully “adopt[ed] [its own] phrasing of
the required proof and reject[ed] all others . . . .” in the very next sentence. 47
The Smallwood opinion’s phrasing of the test does not include that “in state
court” language from the Travis opinion. It merely provides: “[T]here is no
reasonable basis for the district court to predict that the plaintiff might be able
to recover against an in-state defendant.” 48 Our post-Smallwood decisions
44 Id. (footnote omitted) (emphasis added).
45 Id. (emphasis added).
46
Id.
47 Id.
48
Id.
15
Case: 14-20552 Document: 00513447273 Page: 16 Date Filed: 03/31/2016
No. 14-20552
reflect this. For instance, our opinion in McDonal v. Abbott Labs quoted the
opinion in Travis for the proposition that there are two “ways” in which there
may be improper joinder 49 but went on to quote the Smallwood opinion, not
the Travis opinion, for the test under the second “way.” 50
In concluding that a plaintiff has not stated a claim against a nondiverse
defendant under a Rule 12(b)(6)-type analysis in this context, the federal court
49McDonal v. Abbott Labs., 408 F.3d 177, 183 (5th Cir. 2005) (quoting
Travis, 326
F.3d at 647). Notably, Smallwood also restates these same alternatives.
50 Id. (“Under this second prong, we examine ‘whether the defendant has
demonstrated that there is no possibility of recovery by the plaintiff against an in-state
defendant, which stated differently means that there is no reasonable basis for the district
court to predict that the plaintiff might be able to recover against an in-state defendant.’”
(quoting
Smallwood, 385 F.3d at 573)).
Even if the Smallwood opinion had intended to adopt the quotation from the Travis
opinion as the test for improper joinder under the second “way,” it offers no guidance as to
whether the federal or a state pleading standard should apply. It neither states that a federal
court must consider the viability of the claim in state court applying the state pleading
standard, nor that a federal court must consider the viability of such a claim in state court
applying the federal pleading standard. The reference to “state court” merely means under
state law. This simply acknowledges Erie’s division of labor between state substantive law
and federal procedural law. The “law of a State that would be controlling in an action upon
the same claim by the same parties in a State court” only applies in federal court if
disregarding such a law would “significantly affect the result of a litigation.” Guar. Trust Co.
of N.Y. v. York, 326 U.S. 99, 109 (1945)(emphasis added). This language, which is very close
to the “in state court” language from the Travis opinion quoted in the Smallwood opinion,
merely provides that a state law—such as a state pleading standard—applies only if it is
substantive.
In the typical diversity case, the federal court applies the federal pleading standard
embodied in the Rule 12(b)(6)-type analysis to test the sufficiency of a plaintiff’s state law
claims. Even though the Rule 12(b)(6)-type analysis might have a substantive effect—that is,
the claims against the defendant might be dismissed with prejudice—it is still a procedural
law. In the context of improper joinder, however, application of the Rule 12(b)(6)-type
analysis has no substantive effect. This is because any claim against an improperly joined
nondiverse defendant must be dismissed without prejudice. Such an analysis only “provides
an alternative forum for the adjudication of state-created rights, but it does not carry with it
generation of rules of substantive law.” Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415,
426 (1996). It changes the procedure, not the outcome. The plaintiff’s state law claims against
the diverse defendants will be resolved in federal court; if his state law claims against the
nondiverse defendant are resolved at all, they will be resolved separately in state court.
16
Case: 14-20552 Document: 00513447273 Page: 17 Date Filed: 03/31/2016
No. 14-20552
decides only that it has jurisdiction over the plaintiff’s claims against the
diverse defendants—not that the plaintiff does not have a claim at all against
the nondiverse defendant. This is because the federal court never has diversity
jurisdiction over a claim against a nondiverse defendant. Nothing in our
Smallwood opinion even approaches a clear statement that we should—much
less must—apply the state pleading standard. This is made crystal clear by
Smallwood’s unconditional directive to employ the Rule 12(b)(6)-type analysis,
which is part and parcel with the federal pleading standard. 51
Immediately after stating the test for improper joinder, i.e., “that there
is no reasonable basis for the district court to predict that the plaintiff might
be able to recover against an in-state defendant,” Smallwood expressly
specifies the required analysis for that test. Smallwood’s directive that “[a]
court may conduct a Rule 12(b)(6)-type analysis” is not a mere suggestion or
option. Taken in context, the Smallwood opinion’s use of “may” is permissive
to only an expressly limited extent:
There has also been some uncertainty over the
proper means for predicting whether a plaintiff has a
reasonable basis of recovery under state law.[ 52] A
court may resolve the issue in one of two ways. The
court may [either] conduct a Rule 12(b)(6)-type
analysis . . . [or], in its discretion, pierce the pleadings
and conduct a summary inquiry. 53
Certainly a court may choose to use either one of these two analyses, but it
must use one and only one of them, not neither or both. Because the second
51 Smallwood, 385 F.3d at 573 (“The court may conduct a Rule 12(b)(6)-type analysis,
looking initially at the allegations of the complaint to determine whether the complaint states
a claim under state law against the in-state defendant.”).
52 Significantly, it uses the same phrasing it adopted above, not that which refers to a
“cause of action” or “state court.”
53 Id. (emphasis added).
17
Case: 14-20552 Document: 00513447273 Page: 18 Date Filed: 03/31/2016
No. 14-20552
one—piercing the veil—is obviously inapplicable here, we must use the first.
And overarching this truism is the realization that both tests are federal tests.
In resolving the dispute in Smallwood, we—en banc—unambiguously
undertook to resolve the “uncertainty over the proper means for predicting
whether a plaintiff has a reasonable basis of recovery under state law.” 54 And,
in fact, we did just that.
As subsequent opinions have noted, “this court’s decision in
Smallwood . . . resolv[ed] issues surrounding removal based on improper
joinder” and “provides the procedural framework for deciding whether remand
[is] required.” 55 We have routinely relied on our Smallwood opinion as the
authoritative source of our improper-joinder analysis. We have never
suggested—much less held—that the analysis we offered there was dicta. 56
54 Id. at 571 (“Today we decide a narrow but not unimportant question regarding
diversity jurisdiction in federal courts and the application of the doctrine of ‘improper
joinder.’ This is the first time this Court en banc has addressed the issue of improper joinder,
although a number of panels of this Court have previously addressed it.” (footnote omitted)).
55 Holder v. Abbott Labs., Inc., 444 F.3d 383, 387 (5th Cir. 2006).
56 See, e.g., Mumfrey v. CVS Pharmacy, Inc., 719 F.3d 392, 401 (5th Cir. 2013) (“This
Court’s en banc opinion in Smallwood sets out a procedure for determining whether a
nondiverse defendant was improperly joined.”); Cuevas v. BAC Home Loans Servicing, LP,
648 F.3d 242, 249 (5th Cir. 2011) (relying on Smallwood for the improper-joinder analysis);
In re 1994 Exxon Chem. Fire,
558 F.3d 378, 385 (5th Cir. 2009) (same); Campbell v. Stone
Ins., Inc.,
509 F.3d 665, 669–70 (5th Cir. 2007) (same); Gasch v. Hartford Acc. & Indem. Co.,
491 F.3d 278, 283 (5th Cir. 2007) (“[I]nformed by our en banc holding in Smallwood . . . , we
conclude that joinder was proper in this case.” (footnote omitted)); Rico v. Flores,
481 F.3d
234, 239 (5th Cir. 2007) (“The test established by our circuit [in Smallwood] is ‘whether the
defendant has demonstrated that there is no possibility of recovery by the plaintiff against
an in-state defendant, which stated differently means that there is no reasonable basis for
the district court to predict that the plaintiff might be able to recover against an in-state
defendant.’” (quoting
Smallwood, 385 F.3d at 573)); Larroquette v. Cardinal Health 200, Inc.,
466 F.3d 373, 376 (5th Cir. 2006) (“[W]e have recognized [in Smallwood] two tests for
establishing improper joinder . . . .”); Salazar v. Allstate Tex. Lloyd’s, Inc.,
455 F.3d 571, 574
(5th Cir. 2006) (relying on Smallwood for the improper-joinder analysis); Holder v. Abbott
Labs., Inc.,
444 F.3d 383, 387 (5th Cir. 2006) (“This court’s decision in
Smallwood . . . resolv[ed] issues surrounding removal based on improper joinder . . . . The
Smallwood decision provides the procedural framework for deciding whether remand was
18
Case: 14-20552 Document: 00513447273 Page: 19 Date Filed: 03/31/2016
No. 14-20552
And, because Smallwood requires us to use the Rule 12(b)(6)-type analysis, we
have no choice but to apply the federal pleading standard embodied in that
analysis.
Our precedent is clear: A federal court must apply the federal pleading
standard. And there are good practical reasons for federal courts to use a
federal test, chief among which is that our district courts are intimately
familiar with that test. They are able to apply it uniformly, and we are able to
review their applications of it uniformly. Conversely, identifying and applying
the appropriate state pleading standard is not something that federal courts
are accustomed to doing. At best, it is incredibly time consuming; at worst,
there is good reason to think that federal courts might get it wrong (or apply it
in name only, while actually applying the federal pleading standard with which
we are familiar). 57 Significantly, by uniformly applying the federal pleading
standard, we ensure that the scope of federal subject matter jurisdiction does
not differ serendipitously from state to state and district to district, because of
nothing more than an accident of geography. We will thus avoid any differences
required.” (footnote omitted)); Guillory v. PPG Indus., Inc., 434 F.3d 303, 308-09 (5th Cir.
2005) (“[W]e . . . determine whether the magistrate judge’s improper joinder inquiry in this
case comports with our recent en banc decision in Smallwood . . . . Here, it is undisputed that
[the plaintiffs] can satisfy a Rule 12(b)(6)-type inquiry . . . .”); Hawthorne Land Co. v.
Occidental Chem. Corp.,
431 F.3d 221, 224 (5th Cir. 2005) (“Joinder is improper if ‘there is
no reasonable basis for the district court to predict that the plaintiff might be able to recover
against an in-state defendant,’ so that a plaintiff must be able to survive a hypothetical Rule
12(b)(6) challenge to the claim to effect remand.” (quoting
Smallwood, 485 F.3d at 573));
McDonal v. Abbott Labs.,
408 F.3d 177, 183 (5th Cir. 2005) (“We recognize that the district
court proceeded without the benefit of Smallwood’s clarification of the improper joinder
doctrine. Therefore we proceed to discuss these thorny issues in the context of the
circumstances presented to the district court, yet with the illumination of Smallwood and
subsequent case law construing it.”). And none of these published opinions appear to rely on
or reference a state pleading standard.
57Smallwood, 385 F.3d at 574 (noting that the Rule 12(b)(6)-type analysis requires “a
simple and quick exposure of the chances of the claim against the in-state defendant alleged
to be improperly joined”).
19
Case: 14-20552 Document: 00513447273 Page: 20 Date Filed: 03/31/2016
No. 14-20552
attributable to nothing more than the whim and fancy of the laws in our three
states.
2. APPLYING THAT STANDARD
Having determined that the federal pleading standard is applicable, we
must now measure IEVM’s claims against Mueller under that standard to
determine whether Mueller was improperly joined. Specifically, we must
consider whether IEVM pleaded “enough facts to state a claim to relief that is
plausible on its face.” 58
IEVM contends that it has stated the following causes of action against
Mueller under Texas law: breach of contract, promissory estoppel, quantum
meruit, and fraud. IEVM has not alleged that Mueller contracted with it;
instead, IEVM has merely stated that Mueller held himself out to be retained
by IEVM. Neither has IEVM alleged that Mueller was responsible for the
compensation agreement by which UEG would pay IEVM or that Mueller
would pay IEVM under that agreement. Instead, IEVM alleges only that
Mueller sent UEG’s proposed agreement to IEVM. Finally, IEVM alleges that
it made efforts to recover from UEG, but makes no mention that it sought to
recover from UEG. Given these allegations, we hold that IEVM’s claims
against Mueller do not survive a Rule 12(b)(6)-type analysis and, therefore,
were not properly joined.
Specifically, a claim under Texas law for breach of contract is not stated
because IEVM never alleges the existence of a contract between it and
Mueller. 59 A claim against Mueller for promissory estoppel has not been stated
58 Twombly, 550 U.S. at 570.
59 See B & W Supply, Inc. v. Beckman, 305 S.W.3d 10, 16 (Tex. App.–Houston [1st
Dist.] 2009, pet. denied) (“The essential elements of a breach of contract claim are (1) the
existence of a valid contract; (2) performance or tendered performance by the plaintiff;
20
Case: 14-20552 Document: 00513447273 Page: 21 Date Filed: 03/31/2016
No. 14-20552
because IEVM has not alleged that Mueller promised it anything, but instead
alleged that Mueller relayed a promise to IEVM on behalf of UEG. 60 Likewise,
a claim against Muller for quantum meruit has not been stated because the
complaint does not assert that IEVM provided any valuable services to
Mueller. 61 Last, a claim of fraud has not been stated. 62 IEVM alleges, in a
conclusional manner, that “based on the foregoing IEVM alleges a cause of
action for fraud because [UEG and Mueller] never intended to pay IEVM its
consulting fees or its finder[‘]s fee equity, and thereby deceived IEVM into
working on the BP Pakistan project without compensation.” This is clearly not
enough to meet the heightened federal pleading standard for fraud. 63
Accordingly, we affirm the district court’s denial of IEVM’s motion to remand
because IEVM has not stated any claim against Mueller that survives a Rule
12(b)(6)-type analysis. In so doing, it effectively dismissed the claims against
Mueller without prejudice.
B. GRANT OF MUELLER’S MOTION TO DISMISS
When, as here, a court determines that a nondiverse party has been
improperly joined to defeat diversity, that party must be dismissed without
(3) breach of the contract by the defendant; and (4) damages sustained as a result of the
breach.”).
60 See English v. Fischer, 660 S.W.2d 521, 524 (Tex. 1983) (“The requisites of
promissory estoppel are: (1) a promise, (2) foreseeability of reliance thereon by the promisor,
and (3) substantial reliance by the promisee to his detriment.”).
61 See Heldenfels Bros. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992) (“To
recover under the doctrine of quantum meruit, a plaintiff must establish that: 1) valuable
services and/or materials were furnished; 2) to the party sought to be charged, 3) which were
accepted by the party sought to be charged, and 4) under such circumstances as reasonably
notified the recipient that the plaintiff, in performing, expected to be paid by the recipient.”).
62 See Hayden, 2011 WL 240388, at *7.
63See FED. R. CIV. P. 9(b) (“In alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and
other conditions of a person's mind may be alleged generally.”).
21
Case: 14-20552 Document: 00513447273 Page: 22 Date Filed: 03/31/2016
No. 14-20552
prejudice. If subject matter jurisdiction is based on diversity, a court never has
jurisdiction over a nondiverse party. “[T]he presence in the action of a single
plaintiff from the same State as a single defendant deprives the district court
of original diversity jurisdiction over the entire action.” 64
Therefore, as long as a nondiverse party remains joined, the only issue
the court may consider is that of jurisdiction itself. This is because “a federal
court always has jurisdiction to determine its own jurisdiction.” 65 This limited
authority permits the court to grant a motion to remand if a nondiverse party
is properly joined. It also permits the court to deny such a motion if a party is
improperly joined and, in so doing, to dismiss the party that has been
improperly joined. But in each instance, “the focus of the inquiry must be on
the joinder, not the merits of the plaintiff’s case.” 66 In considering whether a
nondiverse party was improperly joined under Smallwood, the court is only
considering jurisdiction.
The Smallwood inquiry just considers whether the claims against the
nondiverse party would have survived if jurisdiction were not a bar, not
whether such claims did survive. If the claims would not have survived,
Smallwood only instructs that a court not consider them in determining
jurisdiction. If such claims would have survived, the Smallwood decision
instructs us to consider them in determining jurisdiction. To repeat, the
Smallwood inquiry—including its Rule 12(b)(6)-type analysis—is used to
resolve the issue of jurisdiction, not merits.
64 Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553 (2005).
65 United States v. Ruiz, 536 U.S. 622, 622 (2002) (emphasis added).
66 Smallwood, 385 F.3d at 573.
22
Case: 14-20552 Document: 00513447273 Page: 23 Date Filed: 03/31/2016
No. 14-20552
Thus, the only ground for dismissing any improperly joined, nondiverse
party is lack of subject matter jurisdiction. (To dismiss on any other basis
would require the presence of jurisdiction that does not exist.) The court has
ample authority to dismiss for lack of jurisdiction under the Federal Rules of
Civil Procedure, 67 which “apply to a civil action after it is removed from a state
court.” 68 Unlike the typical dismissal under Rule 12(b)(6), for instance, which
“operates as an adjudication on the merits,” a dismissal for lack of jurisdiction
under Rule 12(b)(1), for instance, does not. 69 Therefore, the dismissal of a
nondiverse party over whom the court does not have jurisdiction must be a
dismissal without prejudice in every instance.
After denying IEVM’s motion to remand (on the basis that Mueller was
improperly joined), the district court nonetheless granted Mueller’s Rule
12(b)(6) motion to dismiss, which “operate[d] as an adjudication on the
merits.” 70 As we have discussed, the district court did not have jurisdiction to
do so. As discussed above, once it determined that Mueller was improperly
joined, the district court effectively dismissed IEVM’s claims against him
without prejudice. We therefore remand to the district court with instructions
to vacate its grant of Mueller’s motion to dismiss his claims with prejudice:
That motion should have been denied as moot.
67 FED. R. CIV. P. 12(h)(3) (“If the court determines at any time that it lacks subject-
matter jurisdiction, the court must dismiss the action.”); FED. R. CIV. P. 12(b)(1) (“[A] party
may assert the following defenses by motion: . . . lack of subject-matter jurisdiction."). The
court also has ample authority to sever or drop the claims against a party. See FED. R. CIV.
P. 21.
68 FED. R. CIV. P. 81(c)(1).
69FED. R. CIV. P. 41(b) (“[A] dismissal under [Rule 41(b)] and any dismissal not under
[Rule 41]—except one for lack of jurisdiction, improper venue, or failure to join a party under
Rule 19—operates as an adjudication on the merits.").
70 FED. R. CIV. P. 41(b).
23
Case: 14-20552 Document: 00513447273 Page: 24 Date Filed: 03/31/2016
No. 14-20552
C. GRANT OF UEG’S MOTION TO DISMISS
IEVM brought the instant action to recover payment allegedly owed
under an unwritten agreement that UEG would pay IEVM for its consulting
services on the BP deal. However, after that deal closed, IEVM performed
services for UEG under a supplemental agreement. In that agreement, UEG
acknowledged IEVM’s previous services and that UEG had not yet paid IEVM
for those services. The supplemental agreement also indicates that, since the
BP deal closed, “UEG ha[d] reason to believe the reserves associated with such
properties are significantly less than what it had believed them to be[.]” In
consideration for further IEVM services, UEG agreed to pay IEVM as outlined
in the supplemental agreement. It also agreed to release IEVM from, and
indemnify it for, any liability arising out of the BP deal. The supplemental
agreement stated that it was governed by Texas law and that any controversies
would be settled by arbitration in Texas. It included a merger clause, but noted
that it “does not supersede, but is a supplement to, the agreement with respect
to the prior work completed by [IEVM] for UEG.”
IEVM advances two distinct reasons that the district court had personal
jurisdiction over UEG. IEVM first contends that the supplemental agreement
extends to the original, unwritten agreement between it and UEG, and that its
arbitration provision therefore signifies implied consent to jurisdiction in
Texas for any cause of action related to the former agreement. And, second,
IEVM asserts that UEG has sufficient contacts with Texas that personal
jurisdiction over UEG would comport with traditional notions of fair play and
substantial justice. The district court addressed only the first of IEVM’s
arguments and determined that the supplemental agreement did not act as a
24
Case: 14-20552 Document: 00513447273 Page: 25 Date Filed: 03/31/2016
No. 14-20552
waiver of personal jurisdiction as to claims arising from the earlier
agreement. 71
As a preliminary matter, “[a] district court’s dismissal of a suit for
lack of personal jurisdiction where the facts are not disputed is a question of
law, which is reviewed de novo.” 72 The plaintiff has the burden of establishing
that the court has personal jurisdiction. 73 When, as here, the district court does
not search beyond the pleadings, “that burden requires only that the [plaintiff]
make a prima facie showing.” 74 “We must accept the plaintiff’s uncontroverted
allegations, and resolve in his favor all conflicts between the facts contained in
the parties’ affidavits and other documentation.” 75
We begin by considering whether the arbitration clause in the
supplemental agreement applies to the parties’ original, unwritten agreement
and, if so, whether it confers personal jurisdiction. “Whether a contract is
ambiguous is a question of law for the court to decide by looking at the contract
as a whole in light of the circumstances present when the contract was
71 See Int’l Energy Ventures, 2014 WL 3732821, at *3 (“While the agreement
acknowledged that past services had been provided by IEVM, for which IEVM had not been
paid, it does not establish Texas as the forum for litigating claims for past services. This is
so because, although UEG acknowledged by agreement a past debt due IEVM, it does not
promise to pay the debt. There is no agreement to pay, therefore, reference in the agreement
to Texas law as the governing law, arbitration and a Texas forum, do not apply to past
services.”).
72 Herman v. Cataphora, Inc., 730 F.3d 460, 464 (5th Cir. 2013).
73 Id. The plaintiff has the burden of demonstrating specific jurisdiction for each claim
asserted against the nonresident defendant. Dontos v. Vendomation NZ Ltd., 582 F. App’x
338, 342 (5th Cir. 2014) (unpublished) (per curiam). Because IEVM bases all of its claims on
identical factual allegations, we perform a singular, joint analysis.
74 Id.
75 Monkton Ins. Servs. Ltd. v. Ritter,
768 F.3d 429, 431 (5th Cir. 2014) (quoting Revell
v. Lidov,
317 F.3d 467, 469 (5th Cir. 2002)) (internal quotation marks omitted).
25
Case: 14-20552 Document: 00513447273 Page: 26 Date Filed: 03/31/2016
No. 14-20552
entered.” 76 “A contract is unambiguous if it can be given a definite or certain
legal meaning.” 77 We need not decide, however, whether the plain language of
the supplemental agreement indicates that it is a supplement to the original
unwritten, agreement because we hold that, even assuming it does so indicate,
there was no consent.
In setting forth its argument to the contrary, IEVM analogizes an
arbitration clause to a forum-selection clause. 78 UEG counters that an
arbitration clause renders jurisdiction to the court for the limited purpose of
compelling arbitration. We agree. “When a party agrees to arbitrate in a
particular state, via explicit or implicit consent, the district courts of the
agreed-upon state may exercise personal jurisdiction over the parties for the
limited purpose of compelling arbitration.” 79 Thus, UEG’s agreement to
arbitrate in Texas does not necessarily constitute consent to the personal
jurisdiction of Texas courts to adjudicate its claims in the first instance.
Nevertheless, the district court could possibly have had personal
jurisdiction over UEG by virtue of the ordinary personal jurisdiction analysis.
“A federal court may exercise personal jurisdiction over a nonresident
defendant if (1) the forum state’s long-arm statute confers personal jurisdiction
over that defendant, and (2) the exercise of personal jurisdiction comports with
76Nat’l Union Fire Ins. Co. of Pittsburgh v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.
1995) (per curiam).
77 J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003).
78See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 & n.14 (1985) (noting that
personal jurisdiction may be waived by forum selection clauses that are “freely negotiated”
and are not “unreasonable and unjust” (internal quotation marks and citation omitted)).
79Armstrong v. Assocs. Int’l Holdings Corp., 242 F. App’x 955, 957 (5th Cir.
2007) (unpublished) (per curiam); see also Encompass Power Servs. v. Eng’g & Constr. Co.,
224 F. App’x 329, 331 (5th Cir. 2007) (unpublished) (per curiam).
26
Case: 14-20552 Document: 00513447273 Page: 27 Date Filed: 03/31/2016
No. 14-20552
the [d]ue [p]rocess clause of the Fourteenth Amendment.” 80 Because the Texas
long-arm statute extends as far as constitutional due process permits, we
simply need to determine whether a suit in Texas is consistent with the due
process clause of the Fourteenth Amendment. 81
The due process clause requires that a court exercise personal
jurisdiction over a nonresident defendant only if the defendant has “certain
minimum contacts with [the forum state] such that the maintenance of the suit
does not offend traditional notions of fair play and substantial justice.” 82 The
court may assert specific personal jurisdiction 83 over a nonresident defendant
whose contacts with the forum state are singular or sporadic only if the cause
of action asserted arises out of or is related to those contacts. 84 Conversely,
there are not sufficient contacts with a forum state “when [the defendant] does
not have a physical presence in the state; it did not conduct business in the
state; and the contract underlying the business transaction at issue in the
lawsuit was not signed in the state and did not call for performance in the
state.” 85 This inquiry “focuses on the relationship among the defendant, the
forum, and the litigation.” 86 In other words, personal jurisdiction is proper only
80 McFadin v. Gerber, 587 F.3d 753, 759 (5th Cir. 2009).
81 Pervasive Software, Inc. v. Lexware GMBH & Co. KG, 688 F.3d 214, 220 (5th Cir.
2012).
82 Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
IEVM does not assert that the court has general personal jurisdiction over UEG;
83
and therefore, we do not perform a general jurisdiction analysis. The court may have general
jurisdiction over a nonresident defendant where the defendant’s business contacts with the
forum state are continuous and systematic. McFadin, 587 F.3d at 759.
84 McFadin, 587 F.3d at 759; Daimler AG v. Bauman,
134 S. Ct. 746, 754 (2014).
85 Monkton, 768 F.3d at 433.
86 Walden v. Fiore, 134 S. Ct. 1115, 1121 (2014) (internal quotation and citations
omitted).
27
Case: 14-20552 Document: 00513447273 Page: 28 Date Filed: 03/31/2016
No. 14-20552
when the relationship arises “out of contacts that the defendant . . . creates
with the forum state,” and not the defendant’s contacts with the plaintiff or
third parties. 87
IEVM argues that there is personal jurisdiction because (1) UEG hired
agents in Texas, including IEVM, (2) UEG principals traveled to Texas to close
the BP deal, and (3) UEG entered into an agreement with IEVM that includes
a Texas choice-of-law clause. These contacts, however, are not related to this
action. The contacts arose from UEG’s acquisition of BP’s assets and are
therefore unrelated to “the relationship among the [UEG], the forum, and the
litigation” over the unwritten, original agreement between UEG and IEVM. 88
UEG had no presence in Texas as a result of the unwritten, original
agreement because (1) UEG did not negotiate the agreement in Texas, (2) UEG
did not travel to Texas because of that agreement, and (3) the unwritten
agreement did not require performance in Texas. Instead, the unwritten,
original agreement was between Chinese and Texas entities regarding services
performed in Pakistan. That IEVM happened to provide those consulting
services from Texas is not sufficient to establish jurisdiction. 89
The unwritten, original agreement is not sufficient to subject UEG to
jurisdiction in Texas. IEVM has failed to show that UEG had minimum
contacts with Texas stemming from the unwritten, original agreement.
Accordingly, we affirm the district court’s grant of UEG’s motion to dismiss for
lack of personal jurisdiction under Rule 12(b)(2).
87 Id. at 1122 (internal quotation and citations omitted).
88 Id. at 1121 (internal quotation and citations omitted).
89 E.g., Montcrief Oil Int’l, Inc. v. OAO Gazprom, 481 F.3d 309, 312 (5th Cir. 2007) (“a
plaintiff’s unilateral activities in Texas do not constitute minimum contacts where the
defendant did not perform any of its obligations in Texas, the contract did not require
performance in Texas, and the contract is centered outside of Texas”).
28
Case: 14-20552 Document: 00513447273 Page: 29 Date Filed: 03/31/2016
No. 14-20552
III.
CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s denial of
IEVM’s motion to remand and the grant of UEG’s motion to dismiss for lack of
jurisdiction, and REMAND to the district court with instructions to VACATE
its grant of Mueller’s motion to dismiss for failure to state a claim. Because the
court lacks subject matter jurisdiction over Mueller and personal jurisdiction
over UEG, each of the claims must be dismissed without prejudice.
29
