Televentures, Inc. v. International Game Technology and IGT

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-99-00116-CV

TeleVentures, Inc., Appellant

v.

International Game Technology and IGT, Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 250TH JUDICIAL DISTRICT

NO. 98-03071, HONORABLE ERNEST C. GARCIA, JUDGE PRESIDING

This is an appeal arising from the district court's sustaining appellees' special

appearance. (1) The sole issue on appeal is whether Texas courts can assert in personam jurisdiction

over a Nevada corporation in a suit concerning termination of its relationship with a Texas

corporation. Appellees International Game Technology and IGT specially appeared challenging

the district court's personal jurisdiction. The district court sustained their special appearance and

dismissed appellant TeleVentures, Inc.'s suit for want of jurisdiction. We will affirm.

BACKGROUND

In early 1995, Chris Tyson, the president and principal owner of TeleVentures,

Inc. ("TeleVentures"), contacted IGT, a manufacturer of slot machines, to discuss his concept for

"in-room gaming." (2) Tyson's first contact with IGT was by telephone from Tyson's office in

Texas to IGT's office in Reno, Nevada. Tyson followed his call with a personal visit to IGT's

Reno office. IGT is a Nevada corporation with its principal place of business in Nevada. It

neither does business nor is authorized to do business in Texas. It has no agents, offices, or

property in Texas and is not a party to any contract requiring acts to be performed in Texas. IGT

has not directly hired any employees in Texas nor has it asked others such as TeleVentures to hire

employees in Texas. The same is true of IGT's parent corporation, International Game

Technology. (3) Ultimately, TeleVentures and IGT signed two letters of intent. At the time the

letters of intent were signed, TeleVentures was a Texas corporation with its principal place of

business in Austin. (4)

After IGT expressed an initial interest in the in-room gaming concept, other

meetings followed, always in Nevada. IGT and TeleVentures concluded that there were two ways

to connect hotel televisions to IGT's gaming technology. Tyson had previously developed one

of these alternatives with the assistance of U.S. West Marketing Resources Group Inc. ("U.S.

West"), a Colorado corporation. The process consisted of attaching an IGT game board to a U.S.

West switch, which would in turn be attached to an On Command Video ("OCV") switch. (5) The

second concept, developed by IGT during its relationship with TeleVentures, involved directly

attaching an IGT game board to an OCV switch, thus eliminating the need for the intermediate

use of the U.S. West switch.

U.S. West demonstrated its technology to IGT and TeleVentures at its offices in

Colorado in September 1995. While in Colorado, IGT and TeleVentures signed the first of two

letters of intent. The letter provided that IGT and TeleVentures would develop an in-room

gaming system; the two would "work together using their best efforts to develop and install the

System by combining the existing and future technology and equipment of TeleVentures with the

existing and future technology of IGT"; they would "mutually agree upon a hotel property

designated as a test location in which to install and evaluate the performance of the system"; the

test would be conducted and the results evaluated; and if both agreed that those results were

satisfactory, they would enter into a formal agreement to develop, market, or install the system

on a commercial basis. Following the September letter, IGT and TeleVentures signed the second

letter of intent "wherein a mutually beneficial business relationship is contemplated between

Hospitality Network, Ltd., a Texas limited partnership, (6) and a newly formed partnership [to be

called Game Ventures] consisting of IGT, a Nevada corporation ("IGT") and TeleVentures, Inc.,

a Texas corporation." This letter was prepared by TeleVentures in its Austin office and mailed

to Nevada, where it was signed by IGT.

After considering the two alternatives for linking IGT's devices to hotel room

television sets, IGT decided, for reasons of cost, convenience, and security, that the direct-

attachment system was the better choice. IGT made this decision after the first few meetings with

TeleVentures but continued to work with TeleVentures because TeleVentures had "the concept"

of in-room gaming, "an understanding of in-room television," and a personal connection with

Hospitality Network, which had a "good understanding of in-room television in the hotel

business."

Although IGT had anticipated that some of the technology and equipment for the

concept would be provided by TeleVentures, IGT's decision not to use the U.S. West system

resulted in IGT's dealing directly with OCV because for reasons not indicated in the record, OCV

refused to work with TeleVentures. Additionally, IGT did not share any information regarding

its gaming technology with TeleVentures. As a result, TeleVentures did not contribute further

to the development of the direct-attachment system. However, TeleVentures, on its own

initiative, began to explore a third alternative, the "game cube," that could be used in hotels not

wired with the OCV system. IGT was aware of TeleVentures' work but never incorporated the

game cube into its development plans.

During their relationship, IGT and TeleVentures communicated via personal visits,

facsimiles, letters, and telephone calls. TeleVentures' employees traveled to Nevada; however,

no IGT employees or representatives came to Texas. The record reflects at least seventy written

communications to and from Texas consisting of development updates, travel arrangements,

meeting schedules, and even a Christmas card. Decisions regarding how the project was to move

forward were made during the calls, visits, and written communications. TeleVentures prepared

and forwarded a proposed draft of a partnership and operating agreement to IGT in Nevada, but

IGT never signed them.

TeleVentures established offices and a payroll in Austin, Texas, and created several

marketing devices: (1) a study of potential test sites and marketplaces for the system; (2) an

updated business plan introducing the name "CasinoVision"; (3) brochures, a logo, and other

marketing material to promote "CasinoVision"; and (4) at IGT's request, a "Business Summary."

TeleVentures asked IGT for a videotape that TeleVentures could implant onto a CD ROM, which

could be used to demonstrate "hotel in-room gaming using a remote control like in a hotel room."

All TeleVentures' activities were performed in Texas.

In March 1996, IGT connected one of its gaming boards to an OCV switch and

conducted a mini-demonstration in Nevada. IGT and TeleVentures also planned to travel to

Aruba to conduct a hotel test of the in-room gaming system. The trip never occurred, and in June

1996, IGT announced its decision to discontinue pursuing the idea of in-room gaming with

TeleVentures. The parties attempted to rework their arrangement, but the effort was abandoned

on January 9, 1997 when IGT sent a final letter unilaterally terminating any relations with

TeleVentures (the "termination letter").

TeleVentures filed this suit against IGT accusing IGT of breach of contract, breach

of fiduciary duties, fraud in the inducement of the letters of intent, fraudulent concealment,

negligent misrepresentation, and tortious interference. IGT specially appeared challenging the

district court's personal jurisdiction. See Tex. R. Civ. P. 120a. The district court sustained

IGT's challenge. TeleVentures appeals.

DISCUSSION

In its sole issue on appeal, TeleVentures claims that the district court erred in

sustaining IGT's special appearance and dismissing the suit for lack of in personam jurisdiction

because: (1) IGT purposefully directed activities into Texas; (2) this lawsuit arises from and

relates directly to such activities and torts committed in this state; and (3) the district court's

exercise of jurisdiction over IGT does not offend traditional notions of fair play and substantial

justice. TeleVentures argues that IGT entered into a contract with a Texas corporation knowing

that the majority of TeleVentures' work was to be done in Texas, and through IGT's constant

contact with TeleVentures by phone calls, letters, facsimiles, and personal visits, IGT was aware

of and approved the work done in Texas. TeleVentures also argues that IGT, through

TeleVentures, recruited Texas residents located in Texas for performance of their joint objectives.

TeleVentures further asserts that its causes of action, which include breach of contract, breach of

fiduciary duties, fraud in the inducement, fraudulent concealment, negligent misrepresentation,

and tortious interference arise from and are related to IGT's contacts with Texas because: (1) the

breach of contract and breach of fiduciary duties involve a contract that was to be partially

performed in Texas; (2) the breach of contract, breach of fiduciary duties, fraud in the

inducement, fraudulent concealment, negligent misrepresentation, and tortious interference

occurred in Texas when IGT sent the termination letter to TeleVentures in Texas; and (3) the

causes of action for fraud in the inducement, negligent misrepresentation, and tortious interference

are based, in part, upon statements IGT made in communications to TeleVentures in Texas with

the intent of inducing TeleVentures to enter into the two letters of intent. Finally, TeleVentures

asserts that the assumption of jurisdiction in Texas does not offend notions of fair play and

substantial justice because IGT is a multi-million dollar conglomerate that does business

throughout the world. Thus, litigation in Texas would not be excessively burdensome to IGT,

in contrast to the burden that litigation in Nevada would impose on TeleVentures, a start-up

company with little or no revenue.

Burden of Proof and Standard of Review

In interposing a special appearance, the nonresident defendant challenging personal

jurisdiction bears the burden of proof to negate all bases of personal jurisdiction alleged by the

plaintiff. See Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C. , 815 S.W.2d

223 , 231 n.13 (Tex. 1991) (citing Zac Smith & Co. v. Otis Elevator Co. , 734 S.W.2d 662, 664

(Tex. 1987); Siskind v. Villa Found. for Educ., Inc. 642 S.W.2d 434, 438 (Tex. 1982));

Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 203 (Tex. 1985).

The district court filed findings of fact and a conclusion of law. (7)

See Tex. R. Civ.

P. 296-297. TeleVentures asserts that the "findings of fact are not findings at all, but rather, legal

conclusions." The parties do not dispute the material facts before the district court in any

significant degree. We agree with TeleVentures that the district court's "findings" and

"conclusion" are, in actuality, all conclusions of law and we will consider them as such. We

review the trial court's conclusions of law de novo . See Piazza v. City of Granger, 909 S.W.2d

529, 532 (Tex. App.--Austin 1995, no writ). Conclusions of law will not be reversed unless they

are erroneous as a matter of law. See id. (citing Westech Eng'g, Inc. v. Clearwater Constructors,

Inc., 835 S.W.2d 190, 196 (Tex. App.--Austin 1992, no writ)).

Jurisdiction

A Texas court may exercise personal jurisdiction over a nonresident defendant if:

(1) jurisdiction is authorized by the Texas long-arm statute, (8) and (2) the exercise of jurisdiction

is consistent with federal and state due process standards. See Guardian Royal, 815 S.W.2d at

226 ; Transportacion Especial Autorizada, S.A. v. Seguros Comercial America, S.A. , 978 S.W.2d

716, 719 (Tex. App.--Austin 1998, no pet.). The long-arm statute allows Texas courts jurisdiction

to the full extent permitted by the United States Constitution. See Guardian Royal , 815 S.W.2d

at 226 . Thus, the only limitations on Texas courts in asserting personal jurisdiction over a

nonresident defendant are those imposed by the Due Process Clause of the Fourteenth

Amendment. See Helicopteros Nacionales de Colombia v. Hall , 466 U.S. 408, 413-14 (1984).

Due process requires a showing that the nonresident defendant has purposefully established

"minimum contacts" with Texas and that the maintenance of the suit does not offend "traditional

notions of fair play and substantial justice." See International Shoe Co. v. Washington , 326 U.S.

310, 316 (1945); Guardian Royal , 815 S.W.2d at 230-31 .

Although the jurisdiction of Texas courts is always dependent on the defendant's

having some minimum contacts with Texas, the requisite extent of those contacts varies depending

on the type of in personam jurisdiction sought to be imposed. Thus, the United States Supreme

Court has refined the minimum-contacts analysis into specific and general jurisdiction. See

Guardian Royal , 815 S.W.2d at 227 (citing Helicopteros , 466 U.S. at 414-16 ).

To establish specific jurisdiction, the cause of action must arise out of or relate to

the nonresident defendant's contact with the forum state and the conduct must have resulted from

that defendant's purposeful conduct, not the unilateral conduct of the plaintiff or others. See id.

(citing Helicopteros , 466 U.S. at 414 n.8, 417; World-Wide Volkswagen Corp. v. Woodson , 444

U.S. 286, 293-94, 298 (1980)). "Furthermore, the nonresident defendant's activities must have

been 'purposefully directed' to the forum and the litigation must result from alleged injuries that

'arise out of or relate to' those activities." Id. at 228 (citing Burger King Corp. v. Rudzewicz ,

471 U.S. 462, 472 (1985); Zac Smith & Co. , 734 S.W.2d at 663 ). Thus, in analyzing minimum

contacts for purposes of Texas courts' specific jurisdiction, we focus on the relationship among

the nonresident defendant, the forum, and the litigation. See id. (citing Helicopteros , 466 U.S.

at 414 ; Schlobohm v. Schapiro , 784 S.W.2d 355, 357 (Tex. 1990)).

An assertion of general jurisdiction compels a more demanding minimum-contacts

analysis and requires a showing of substantial activities within the forum state. See id. (citing

Schlobohm , 784 S.W.2d at 357 ). The cause of action need not arise from or relate to the

nonresident defendant's purposeful conduct within the forum state, but there must be "continuous

and systematic contacts" between the nonresident defendant and the forum state. See id. (citing

Helicopteros , 466 U.S. at 414-16 ; Schlobohm , 784 S.W.2d at 357 ). In the present case, the

parties agree that the district court does not have general jurisdiction over IGT; therefore, we will

address only specific jurisdiction.

To ensure compliance with the federal constitutional requirements of due process,

the Texas Supreme Court has developed what it terms a "formula" for determining jurisdiction.

See generally Guardian Royal , 815 S.W.2d at 229-31 . (9) Initially, the nonresident defendant must

have purposefully established minimum contacts with Texas, and when, as here, specific

jurisdiction is asserted, the cause of action must arise out of or relate to these contacts. See id.

at 230 . Also, the action or conduct of the nonresident defendant purposefully directed toward

Texas must give rise to a "substantial connection between" Texas and the nonresident. See id.

Second, the assumption of jurisdiction by Texas must comport with fair play and substantial

justice. See id. at 230-31 (citing Burger King , 471 U.S. at 477 ; Zac Smith & Co. , 734 S.W.2d

at 664 ).

Minimum Contacts

We must first decide whether TeleVentures' causes of action arise out of or relate

to IGT's contacts with Texas. The nonresident defendant must have purposely availed itself of

the privilege of conducting activities within the forum state, thus invoking the benefits and

protection of its laws. See Burger King, 471 U.S. at 474-75 . The purposeful-availment

requirement ensures that a nonresident defendant will not be haled into a foreign jurisdiction based

solely on random, fortuitous, or attenuated contacts or unilateral activity of another party or a

third person. See id. at 475 . A nonresident defendant must have fair warning that a particular

activity may subject it to the jurisdiction of a foreign sovereign. See id. at 472 . Isolated contacts

with the forum state or its residents are not sufficient for a court to assume personal jurisdiction

over a nonresident defendant. See id. at 475 . In assessing IGT's contacts with Texas, we will

look first to the letters of intent.

Letters of Intent

TeleVentures argues that personal jurisdiction is established because its suit

concerns agreements (the letters of intent) made between TeleVentures, a Texas corporation, and

IGT that were to be partially performed in Texas. However, merely contracting with a Texas

corporation does not satisfy the minimum-contacts requirement. See Burger King , 471 U.S. at

478 ; Magnolia Gas Co. v. Knight Equip. & Mfg. Corp., 994 S.W.2d 684, 691 (Tex. App.--San

Antonio 1998, no pet.). Instead, courts must apply a "highly realistic" approach that recognizes

that a "contract . . . [is] ordinarily but an intermediate step serving to tie up prior business

negotiations with future consequences which themselves are the real object of the business

transaction." Burger King, 471 U.S. at 478 . Prior negotiations, contemplated future

consequences, the terms of the contract, and the parties' actual course of dealing must be

evaluated in determining whether the defendant purposefully established minimum contacts within

the forum. See id . at 478-79. Likewise, partial performance of a contract in Texas is "not the

sine qua non of personal jurisdiction." Magnolia Gas Co., 994 S.W.2d at 692 ; see also U-Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760, 763 (Tex. 1977) (finding no personal

jurisdiction even though plaintiff's cause of action was connected with contractual obligations that

were partially performable in Texas).

The crux of both letters of intent is the agreement by TeleVentures and IGT to

develop an "in-room gaming system." The first letter refers only to TeleVentures and IGT. The

second letter refers to "a newly formed partnership" between TeleVentures and IGT that "shall

be called 'Game Ventures'" and will establish a "beneficial business relationship" with Hospitality

Network. The system to be developed by TeleVentures and IGT, as Game Ventures, is the same

as referenced in the earlier letter. Neither letter indicates a place of performance nor gives any

guidance with regard to the state in which either TeleVentures or IGT will perform any obligation

arising from the letters. The second letter does not disclose the state in which the new Game

Ventures partnership is to be formed or domiciled. IGT acknowledges that it anticipated

TeleVentures would contribute to the technological development of the system. However, once

the decision was made to use the direct attachment system, TeleVentures did not participate in the

further development of that system for two reasons: (1) OCV would not participate if

TeleVentures was present at any discussions between itself and IGT; and (2) IGT did not give

TeleVentures its gaming board information, which was necessary to develop the in-room gaming

system. As a result, TeleVentures' contributions were limited to its unilateral decisions to develop

the game cube and various marketing tools.

Although IGT had knowledge of the game cube, IGT neither required nor requested

it. IGT had decided to use the direct-attachment system. In addition, IGT did not use the game

cube. The focus of the analysis must be on the actions of IGT, not TeleVentures, and the contacts

that give rise to jurisdiction must come from IGT's purposeful conduct, not the one-sided activity

of TeleVentures. See Helicopteros , 466 U.S. at 417 ; World-Wide Volkswagen , 444 U.S. at 292 .

TeleVentures' independent action in developing the game cube is not sufficient to confer

jurisdiction over IGT. See Barnstone v. Congregation Am. Echad, 574 F.2d 286, 288-89 (5th

Cir. 1978) (dismissing case for lack of jurisdiction because contract with Texas architect to design

and oversee construction of synagogue was wholly performable in Maine, negotiations took place

through mail, and only connection with Texas was unilateral activity of architect in preparing

sketches for building at architect's office in Texas). For the most part, TeleVentures' act of

developing various marketing tools was also unilateral. While a "Business Summary" was

prepared at IGT's request, such request does not establish jurisdiction. According to Tyson, the

business summary was designed to serve as a marketing tool and to solicit and attract interest from

third-party investors. The letters of intent each contemplate that a subsequent agreement

regarding marketing would be prepared after successful testing of the in-room gaming system.

The preparation of the business summary was no more than a part of the ongoing communications

between TeleVentures and IGT and was not required by either letter agreement. See Magnolia

Gas Co. , 994 S.W.2d at 692 (no minimum contacts where defendant "neither required nor

bargained for" work to be done in Texas). Simply asking TeleVentures to produce a business

summary does not establish a "substantial connection" between IGT and Texas. See Guardian

Royal , 815 S.W.2d at 230 (requiring substantial connection between non-resident and forum

state).

The unexecuted proposed formal partnership agreement prepared by TeleVentures

provided for performance in Nevada. TeleVentures changed its state of incorporation from Texas

to Nevada during its relationship with IGT. The terms of the letters of intent and the history of

the parties' negotiations do not reveal purposeful conduct by IGT sufficient to subject it to the

jurisdiction of the Texas district court.

Numerous Contacts & Recruiting Texas Employees

TeleVentures argues that the numerous and repeated contacts between it and IGT

by telephone, mail, and facsimile establish the requisite minimum contacts by IGT. In a

minimum-contacts analysis, it is not the number, but rather the quality and nature of the

nonresident's contacts with Texas that are important. See Guardian Royal , 815 S.W.2d at 230

n.11 (citing Texas Commerce Bank v. Interpol '80 Ltd. , 703 S.W.2d 765, 772 (Tex. App.--Corpus

Christi 1985, no writ)); Memorial Hosp. Sys. v. Fisher Ins., 835 S.W.2d 645, 650 (Tex.

App.--Houston [14th Dist.] 1992, no writ). After reviewing the communications between the

parties contained in the record, we conclude that they are not sufficiently related to the cause of

action. They consist for the most part of development updates and travel arrangements. While

IGT admits that decisions regarding the project were made while in communication with

TeleVentures, these contacts are insufficient to establish in personam jurisdiction. Minimum

contacts may not be satisfied by merely engaging in communications with a Texas corporation

during performance of a contract. See Magnolia Gas Co., 994 S.W.2d at 691 (citing Gundle

Lining Constr. Corp. v. Adams County Asphalt, Inc., 85 F.3d 201, 205-08 (5th Cir. 1996)). The

exchange of communications between TeleVentures and IGT in the course of developing and

carrying out the contract is in itself insufficient to constitute purposeful availment of the benefits

and protections of Texas law. See Holt Oil & Gas Corp. v. Harvey, 801 F.2d 773, 778 (5th Cir.

1986) (citing Patterson v. Dietze, Inc., 764 F.2d 1145, 1147 (5th Cir.1985)) (numerous telephone

calls from defendant to forum during course of performance insufficient to support specific

jurisdiction).

TeleVentures also posits that Texas has jurisdiction over IGT because the

termination letter, which it argues breached the agreement created by the letters of intent, was sent

into Texas from without the state. TeleVentures cites no authority for this proposition. The

breach, if any, was not created by the termination letter; rather, if there was a breach, it occurred

when and where IGT ceased its performance of the contract. See Methodist Hosps. v. Corporate

Communicators, Inc. , 806 S.W.2d 879, 882 (Tex. App.--Dallas 1991, writ denied) (breach of

contract occurs when party fails or refuses to perform); see also Restatement (Second) of

Contracts § 235(2) (when performance is due, any non-performance is breach). The termination

letter gives TeleVentures notice that IGT will no longer pursue the concept of in-room gaming and

will proceed no further with TeleVentures. Considering that (1) contracting with a Texas resident

is not enough to confer jurisdiction; (10) and (2) communications between the resident and non-resident during performance of a contract will not confer jurisdiction, (11) we hold that the mailing

of a notice that IGT will no longer pursue in-room gaming is likewise not sufficient to establish

jurisdiction.

TeleVentures' argument that IGT recruited Texas residents for employment is not

substantiated by the record. The fact that TeleVentures hired employees to help it develop the in-room gaming concept does not satisfy the long-arm statute condition that IGT recruit Texas

residents through an intermediary located in Texas. See Tex. Civ. Prac. & Rem. Code § 17.042.

Tortious Acts

TeleVentures argues that IGT's alleged fraudulent and negligent misrepresentations

made by way of phone calls, letters, and facsimiles constitute tortious acts committed by IGT in

Texas. TeleVentures directs us to the decisions of several state and federal courts to support its

position. We do not find these cases persuasive. In each, the communication itself was the

specific conduct that constituted the tortious act. In Calder v. Jones, 465 U.S. 783 (1984), the

National Enquirer published an allegedly libelous story concerning the California activities of a

California resident. See 465 U.S. at 784-85 . The defendants were Florida residents, one a

reporter for and the other the president of the Enquirer . See id. at 785-86 . Most of the research

and writing of the article was done in Florida. See id. at 785 . The Calder court held that the

defendants, who between them wrote and edited the article, could anticipate being haled into a

California court when the article was published, as California was the state in which the subject

of the article resided and where the Enquirer had its largest circulation. See id. at 789-90 . The

article itself was the basis of the injury and the cause of action.

McGee v. International Life Insurance Co. , 355 U.S. 220 (1957), involved the

mailing of a reinsurance certificate to a California resident, Franklin, by a Texas insurance

company. See 355 U.S. at 221 . The certificate was an offer by the Texas company to insure

Franklin in accordance with an insurance contract Franklin held with an Arizona insurance

company whose insurance obligations had been assumed by the Texas company. See id. Franklin

accepted the offer and from then until his death mailed premiums from California to Texas. See

id. at 221-22 . California jurisdiction was proper because the contract itself had a substantial

connection with that state and California had "a manifest interest in providing effective means of

redress for its residents when their insurers refuse to pay claims." Id. at 223 . That "manifest

interest" is largely a creature of regulatory law and is not applicable to the facts before us. (12)

Rowland & Rowland v. Texas Employers Indemnity Co. , 973 S.W.2d 432 (Tex.

App.--Austin 1998, no pet.), centered on a single letter written by the nonresident defendant, a

Tennessee law firm, to the plaintiff, a Texas indemnity company. See 973 S.W.2d at 434 . The

Texas company, relying on representations in the letter that the Tennessee firm would protect its

interest in a wrongful death suit pending in Tennessee, did not intervene in the Tennessee

litigation. See id. At the conclusion of the suit, the law firm distributed the entire recovery to

the wrongful death claimants to the exclusion of the Texas company, which then sued the

Tennessee firm in Texas for negligent misrepresentation. See id. Texas jurisdiction was upheld

on two bases: the letter itself constituted a purposeful contact directed to Texas with the intent that

its representations be relied upon, and the Tennessee law firm unilaterally decided to distribute

all of the proceeds to the wrongful death claimants and their lawyers, all of whom were residents

of Texas. See id. at 435-36 .

In Memorial Hospital System v. Fisher Insurance Agency, Inc. , 835 S.W.2d 645

(Tex. App.--Houston [14th Dist.] 1992, no writ), the plaintiff hospital telephoned the defendant,

a Mississippi insurance agency, to verify workers' compensation insurance coverage prior to

admitting an injured worker. See 835 S.W.2d at 648. Relying on the Mississippi agency's

affirmative response, the hospital admitted and treated the worker. See id. When it discovered

that there was in fact no coverage, the hospital brought suit in Texas against the Mississippi

agency. See id. The court of appeals affirmed jurisdiction in Texas because the specific

representation in the call was relied upon in Texas. See id. Both Rowland & Rowland and

Memorial Hospital System demonstrate allegedly tortious conduct in a specific communication

intended to be relied upon within the state of Texas. While TeleVentures directs us to a quantity

of communications between it and IGT, it fails to point to any specific representation that

constitutes an allegedly tortious act, as distinguished from general, ongoing communications

during the performance of a contract. See Guardian Royal , 815 S.W.2d at 230 n.11 (quality, not

quantity, determines sufficiency of nonresident's contacts with Texas); Magnolia Gas Co. , 994

S.W.2d at 691 (minimum contacts not satisfied by merely engaging in communications during

performance of contract).

Finally, in Brown v. Flowers Industries, Inc., 688 F.2d 328 (5th Cir. 1982), Brown

alleged that he lost the chance to obtain a loan because of a defamatory statement made in a

telephone call made by Karlis, an Indiana resident, from his office in Indiana to the United States

Attorney in Mississippi. See 688 F.2d at 330-31 . The Mississippi court had jurisdiction over

Karlis because, in the specific call initiated by Karlis, he allegedly committed an intentional tort,

the injurious effect of which was felt in Mississippi and was foreseeable at the time of the call.

See id. at 334 .

In the record before us, we find no communication by IGT directed to and intended

to be relied upon by TeleVentures in Texas that, if false, gives rise to any cause of action alleged

by TeleVentures.

CONCLUSION

We hold that IGT did not conduct purposeful activities in Texas in its dealings with

TeleVentures. The record reveals much activity in Texas by TeleVentures but no activity of

substance by IGT. IGT's Texas contacts were incidental and immaterial to the purpose of the

contract, the development of an in-room gaming system, and were not instigated by IGT. We

overrule TeleVentures' issue. (13)

We hold that the district court properly found it could not exercise in personam

jurisdiction over IGT and affirm the district court's order sustaining IGT's special appearance and

dismissing TeleVentures' suit for lack of personal jurisdiction.

Lee Yeakel, Justice

Before Chief Justice Aboussie, Justices B. A. Smith and Yeakel

Affirmed

Filed: February 25, 2000

Publish

1. In its brief, TeleVentures states that it is appealing pursuant to Tex. Civ. Prac. & Rem.

Code Ann. § 51.014 (a)(7) (West Supp. 2000) (appeal may be brought from interlocutory order

granting or denying special appearance). However, the district court's "Order" dismisses the

entire case: "IT IS . . . ORDERED by the Court that [appellees'] special appearance motion is

hereby sustained, and that this cause is dismissed for want of jurisdiction with prejudice for

refiling same in Texas." We will address the appeal as one from a final order of the district court.

2. For purposes of this case, "in-room gaming" is a concept where a hotel guest would be

able to gamble and play games such as blackjack, slots, or poker on the television set in the

guest's hotel room.

3. This suit arises from IGT's dealings with TeleVentures. International Game Technology

was sued on alter ego theories based on its relationship with IGT. Their interests do not diverge.

We will refer to appellees jointly as "IGT."

4. During the events preceding this suit, TeleVentures merged with a Nevada corporation

of the same name. TeleVentures thus became a Nevada corporation but maintained its principal

place of business in Austin, Texas.

5. On Command Video is a California corporation that IGT testified could bring "secure

and undistorted data from IGT's devices to hotel rooms."

6. Hospitality Network, Ltd. is a provider of interactive hotel television services.

7. The district court made five "findings of fact":

1. Neither IGT nor International Game Technology have maintained

continuous or systematic contacts with the State of Texas;

2. The liability of IGT and International Game Technology alleged by

[TeleVentures] does not arise from, nor is it related to, activity by those

companies conducted in Texas;

3. The injuries alleged in [TeleVentures'] pleadings do no[t] arise from, nor

are they related to, activities of IGT or International Game Technology

purposefully directed to the State of Texas;

4. The contact[s] of IGT and International Game Technology with the State

of Texas were minimal and fortuitous and not a result of their purposefully

conducted activities with the State of Texas; and

5. The exercise of personal jurisdiction over IGT [and] International Game

Technology in the State of Texas would not comport with traditional

notions of fair play and substantial justice;

and one "conclusion of law":

The courts of the State of Texas may not, consistent with the Constitution

of the United States, exercise personal jurisdiction over IGT and International

Game Technology.

8. See Tex. Civ. Prac. & Rem. Code Ann. §§ 17.041 -.045 (West 1997). The long-arm

statute provides a non-exclusive enumeration of acts by a nonresident that constitute doing

business in Texas: "(1) contract[ing] by mail or otherwise with a Texas resident and either party

is to perform the contract in whole or in part in [Texas]; (2) commit[ting] a tort in whole or in

part in [Texas]; or (3) recruit[ing] Texas residents, directly or through an intermediary located

in [Texas], for employment inside or outside of [Texas]." Id. § 17.042; see also Guardian Royal

Exch. Assurance, Ltd. v. English China Clays, P.L.C. , 815 S.W.2d 223, 226 (Tex. 1991);

Schlobohm v. Schapiro , 784 S.W.2d 355, 357 (Tex. 1990).

9. This formula was first expressed by the supreme court in O'Brien v. Lanpar Co. , 399

S.W.2d 340 (Tex. 1966), when the court adopted the Washington Supreme Court's articulation

in Tyee Construction Co. v. Dulien Steel Products, Inc. , 381 P.2d 245 (Wash. 1963). The

formula has been reviewed and modified as the United States Supreme Court has examined,

developed, and refined the permissible reach of federal due process. See Guardian Royal , 815

S.W.2d at 230 ; Schlobohm , 784 S.W.2d at 358 .

10. See, e.g., Burger King Corp. v. Rudzewicz , 471 U.S. 462, 478 (1985).

11. See, e.g., Magnolia Gas Co. , 994 S.W.2d at 691 .

12. The Texas Supreme Court has specifically discussed McGee in such a context. See

Guardian Royal , 815 S.W.2d at 229 n.8.

13. Because we hold that IGT did not have the requisite minimum contacts with Texas to

be subject to the jurisdiction of the district court, we need not address the second inquiry of the

jurisdictional formula--whether the assertion of personal jurisdiction would comport with fair play

and substantial justice. See Guardian Royal , 815 S.W.2d at 231 .

e will address the appeal as one from a final order of the district court.

2. For purposes of this case, "in-room gaming" is a concept where a hotel guest would be

able to gamble and play games such as blackjack, slots, or poker on the television set in the

guest's hotel room.

3. This suit arises from IGT's dealings with TeleVentures. International Game Technology

was sued on alter ego theories based on its relationship with IGT. Their interests do not diverge.

We will refer to appellees jointly as "IGT."

4. During the events preceding this suit, TeleVentures merged with a Nevada corporation

of the same name. TeleVentures thus became a Nevada corporation but maintained its principal

place of business in Austin, Texas.

5. On Command Video is a California corporation that IGT testified could bring "secure

and undistorted data from IGT's devices to hotel rooms."

6. Hospitality Network, Ltd. is a provider of interactive hotel television services.

7. The district court made five "f