Texas District Court Lacked Personal Jurisdiction to Vacate an Arbitration Award in Florida, Fifth Circuit Holds

In Sayers Constr., LLC v. Timberline Constr., Inc., No 19-51099 (5th Cir. Oct. 2, 2020), the panel affirms dismissal of a vacatur action on the ground that it would not comport with Due Process to review a Florida arbitration award in Texas.

Plaintiff Sayers filed suit in the Western District of Texas to vacate an arbitration award entered in a breach of contract proceeding, a contract performed in Florida. The district court dismissed the suit for lack of personal jurisdiction over the subcontractors.  

The Fifth Circuit observes that “this case turns on whether a federal (not state) court in Texas can exercise power over out-of-State defendants. But the distinction does not matter because, in general, federal courts can exert power only over out-of-State defendants that are ‘subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located.’ Fed. R. Civ. P. 4(k)(1)(A).” The Texas long-arm statute (Tex. Civ. Prac. & Rem. Code § 17.042.) stretches the length of Due Process.

Here, the panel finds a lack of minimum contacts between the subcontractors and the State of Texas, in particular a lack of “purposeful availment” of the forum. “[T]he place of contractual performance was Florida—not Texas.” The plaintiff asserted four possible connections: “(1) Timberline solicited a business relationship with Sayers in Texas; (2) Timberline and High Voltage contracted with Sayers, which has an office in Texas; (3) Timberline and High Voltage mailed invoices to Sayers’s office in Texas; and (4) the parties’ contract has a Texas choice-of-law clause.” The panel finds these insufficient.

Regarding (1), “two individuals—Dan Reid and Tom Duffy—solicited Sayers for employment in Texas. Sayers said no. Then Reid and Duffy went to work for Timberline. And when Timberline solicited Sayers for the Florida project, Sayers said yes. Reid and Duffy are irrelevant because the ‘unilateral activity of a third party’ cannot establish minimum contacts on behalf of a corporate defendant.”

Regarding (2) and (3), communications into Texas “are particularly insufficient to satisfy the Due Process Clause when all of the work is performed outside the forum State.”

Finally, the choice-of-law clause (4) “the choice-of-law clause in the Master Services Agreement does not suggest the parties expected to resolve their disputes in Texas. That’s because the same Agreement also required that arbitration take place in accordance with the AAA’s venue-selection rules—i.e., as close as possible to the project in Florida. So to the extent the Agreement is probative of the parties’ expectations regarding venue, it cuts against finding personal jurisdiction in Texas.”

The panel concludes that “this is Florida’s problem. Not Texas’s.”