John T. Preston and C Change Investments, LLC v. Emjo Investments, Ltd. and H.J. Von Der Goltz

ACCEPTED

01-15-00390-CV

FIRST COURT OF APPEALS

HOUSTON, TEXAS

6/12/2015 9:25:40 PM

CHRISTOPHER PRINE

CLERK

No. 01-15-00390-CV

_______________________________________________________________

FILED IN

1st COURT OF APPEALS

IN THE FIRST COURT OF APPEALS HOUSTON, TEXAS

HOUSTON, TEXAS 6/12/2015 9:25:40 PM

_______________________________________________________________

CHRISTOPHER A. PRINE

Clerk

JOHN T. PRESTON and C CHANGE INVESTMENTS, LLC,

Appellants,

v.

EMJO INVESTMENTS, LTD. and H.J. VON DER GOLTZ,

Appellees.

_______________________________________________________________

On Appeal from the 215th District Court of Harris County, Texas,

Hon. Elaine H. Palmer, presiding

Trial Court Cause No. 2011-44058

____________________________________________________________________

BRIEF OF APPELLANT JOHN T. PRESTON

____________________________________________________________________

Jane Langdell Robinson

Texas Bar No. 24062970

Monica Uddin

Texas Bar No. 24075195

Jamie A. Aycock

Texas Bar No. 24050241

AHMAD, ZAVITSANOS, ANAIPAKOS,

ALAVI & MENSING

1221 McKinney Street, Ste. 3460

Houston, Texas 77010

Telephone: (713) 655-1101

Facsimile: (713) 655-0062

jrobinson@azalaw.com

muddin@azalaw.com

Counsel for Appellant

Oral Argument Requested

No. 01-14-00703-CV

JOHN T. PRESTON and C CHANGE INVESTMENTS, LLC,

Appellant,

v.

EMJO INVESTMENTS, LTD. and H.J. VON DER GOLTZ,

Appellees.

IDENTITY OF PARTIES AND COUNSEL

Appellants: John T. Preston and C Change Investments, LLC

Trial counsel for Sean Gorman, Texas Bar No. 08218100

appellants: sgorman@azalaw.com

Jamie A. Aycock, Texas Bar No. 24050241

jamieaycock@azalaw.com

AHMAD, ZAVITSANOS, ANAIPAKOS, ALAVI & MENSING

1221 McKinney St., Ste. 3460, Houston, Texas 77010

Telephone: (713) 655-1101; Facsimile: (713) 655-0062

Appellate counsel Jane Langdell Robinson, Texas Bar No. 24062970

for appellants: jrobinson@azalaw.com

Monica Uddin, Texas Bar No. 24075195

muddin@azalaw.com

AHMAD, ZAVITSANOS, ANAIPAKOS, ALAVI & MENSING

1221 McKinney St., Ste. 3460, Houston, Texas 77010

Telephone: (713) 655-1101; Facsimile: (713) 655-0062

2

Appellees: Emjo Investments, Ltd.

H.J. von der Goltz

Trial counsel for F. Eric Fryar, Texas Bar No. 07495770

appellees: eric@fryarlawfirm.com

Matthew Buschi, Texas Bar No. 24064982

mbuschi@fryarlawfirm.com

Christina Richardson, Texas Bar No. 24070495

crichardson@fryarlawfirm.com

Fryar Law Firm, P.C.

1001 Texas Ave., 14th Floor, Houston, Texas 77002

Telephone: (281) 715-6396; Facsimile: (281) 715-6397

Trial and appellate Kelley M. Keller, Texas Bar No. 11198240

counsel for kkeller@ellison-keller.com

appellees: Tracey N. Ellison, Texas Bar No. 15054720

tellison@ellison-keller.com

ELLISON KELLER

5120 Woodway Dr., Ste. 6019, Houston, Texas 77056

Telephone: 713-266-8200; Fax: 713-266-8201

3

TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL .........................................................2

TABLE OF CONTENTS ........................................................................................4

INDEX OF AUTHORITIES ...................................................................................7

INDEX OF RECORD REFERENCES ................................................................10

STATEMENT OF THE CASE .............................................................................11

STATEMENT ON ORAL ARGUMENT ............................................................12

ISSUE PRESENTED .............................................................................................12

I.  INTRODUCTION ..................................................................................13

II.  STATEMENT OF FACTS ....................................................................14

A.    The lawsuit arises out of a failed coal gasification startup. .....................14

B.    The bankruptcy court dismisses all but two causes of action. .................16

C.    Only two claims remain against Preston. .................................................18

D.    Appellees do not allege a single act taken in Texas by Preston, much less

any act in Texas that is connected to their surviving misrepresentation

claims........................................................................................................18

E.    Preston does no individual business and maintains no presence in

Texas. .......................................................................................................23

1.   Preston does not do business in Texas in his individual capacity. ....23

2.   Preston does not maintain any presence in Texas..............................25

F.    After two years and jurisdictional discovery, Appellees fail to allege a

single act by Preston in Texas that gives rise to their surviving claims,

and fail to show systematic and continuous Texas contacts that render

Preston “at home” in Texas. .....................................................................25

III.  SUMMARY OF THE ARGUMENT ....................................................30

IV.  STANDARD OF REVIEW ...................................................................33

A.    De novo review applies. ...........................................................................33

B.    Jurisdiction over nonresidents requires allegations or proof of purposeful

availment. .................................................................................................34

4

1. The plaintiff bears the initial burden to plead allegations showing

jurisdiction over the defendant. ........................................................34

2.   The long-arm statute is limited by due process considerations. ........34

3. When the plaintiff fails to meet its initial burden of alleging sufficient

purposeful minimum contacts, the fact that the defendant is a

nonresident defeats personal jurisdiction. ........................................35

V.  ARGUMENT ..........................................................................................38

A.    Appellees failed to meet their initial burden of pleading facts to show that

Preston is subject to personal jurisdiction in Texas. ................................38

B.    Because Appellees do not allege that any of Preston’s alleged contacts

with Texas give rise the surviving claims and no evidence suggests any

link, there is no specific jurisdiction as a matter of law...........................40

1. Specific jurisdiction requires that the alleged jurisdictional contacts

give rise to the plaintiff’s alleged injury...........................................42

2.  There are no allegations in the intervenors’ petition that could give

rise to specific jurisdiction over Preston...........................................44

3.  There are no allegations or evidence in Appellees’ special

appearance briefing that could give rise to specific jurisdiction over

Preston. .............................................................................................45

4.  Appellees’ claim that Preston “could reasonably foresee that NC12

and its shareholders and investors would suffer direct economic

injury” because of his alleged misrepresentations is not a basis for

specific jurisdiction as a matter of law. ............................................53

C.    Because Preston’s alleged contacts with Texas are not substantial,

continuous, or systematic, there is no general jurisdiction as a matter of

law. ...........................................................................................................54

1.  General jurisdiction requires the defendant to have substantial,

continuous, and systematic contacts with Texas. .............................54

2.  The sporadic contacts with Texas in a representative capacity that

Appellees allege are nothing like the substantial, continuous, and

systematic contacts required to establish general jurisdiction..........56

5

3.  Preston lacks any substantial, continuous, or systematic contact that

would render him at “at home” in Texas. .........................................68

VI.  CONCLUSION AND PRAYER ...........................................................70

6

INDEX OF AUTHORITIES

Cases

Access Telecom, Inc. v. MCI Telecom. Corp.,

197 F.3d 694 (5th Cir. 1999) ...............................................................................69

All Star Enter., Inc. v. Buchanan,

298 S.W.3d 404 (Tex. App.—Houston [14th Dist.] 2009, no pet)............... 36, 59

Am. Type Culture Collection, Inc. v. Coleman,

83 S.W.3d 801 (Tex. 2002) ..................................................................................57

Ashdon, Inc. v. Gary Brown & Assocs., Inc.,

260 S.W.3d 101 (Tex. App.—Houston [1st Dist.] 2008, no pet.) .......................69

BMC Software Belgium, N.V. v. Marchand,

83 S.W.3d 789 (Tex. 2002) ............................................................... 33, 43, 46, 54

Frank A. Smith Sales, Inc. v. Atl. Aero, Inc.,

31 S.W.3d 742 (Tex. App.—Corpus Christi 2000, no pet.) ................................39

Garza v. Alviar,

395 S.W.2d 821(Tex. 1965) .................................................................................68

Glencoe Capital Partners II, L.P. v. Gernsbacher,

269 S.W.3d 157 (Tex. App.—Fort Worth 2008, no pet.) ....................................43

Goodyear Dunlop Tires Operations, S.A. v. Brown,

131 S. Ct. 2846, 180 L. Ed. 2d 796 (2011) ............................................. 34, 42, 55

Guardian Royal Exch. Assur., Ltd. v. English China Clays,

P.L.C., 815 S.W.2d 223 (Tex. 1991) .......................................... 51, 55, 62, 64, 65

Helicopteros Nacionales de Colombia, S.A. v. Hall,

466 U.S. 408, 104 S. Ct. 1868 (1984) ............................. 51, 52, 62, 64, 65, 69, 70

Hoffmann v. Dandurand,

180 S.W.3d 340 (Tex. App.—Dallas 2005, no pet.) .................................... 58, 59

7

Howell v. Hilton Hotels Corp.,

84 S.W.3d 708 (Tex. App.—Houston [1st Dist.] 2002, pet. denied) ..................67

International Shoe Co. v. Washington,

326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945) ................................................35

Johnston v. Multidata Sys. Intern. Corp.,

523 F.3d 602 (5th Cir. 2008) ...............................................................................70

Kelly v. Gen. Interior Const., Inc.,

301 S.W.3d 653 (Tex. 2010) ........................................................................ passim

Kulko v. Cal. Super. Ct.,

436 U.S. 84, 98 S. Ct. 1690 (1978) ......................................................... 62, 64, 65

Michiana Easy Livin’ Country, Inc. v. Holten,

168 S.W.3d 777 (Tex. 2005) ................................................................... 35, 36, 54

Moki Mac River Expeditions v. Drugg,

221 S.W.3d 569 (Tex. 2007) ............................................................. 34, 35, 37, 42

Nat'l Indus. Sand Ass’n v. Gibson,

897 S.W.2d 769 (Tex. 1995) ................................................................................44

Perkins v. Benguet Consol. Mining Co.,

42 U.S. 437, 72 S. Ct. 413 (1952) ................................................................ 69, 70

PHC-Minden, L.P. v. Kimberly-Clark Corp.,

235 S.W.3d 163 (Tex. 2007) ........................................................................ passim

Retamco Operating, Inc. v. Republic Drilling Co.,

278 S.W.3d 333 (Tex. 2009) ......................................................................... 35, 43

Seiferth v. Helicopteros Atuneros, Inc.,

472 F.3d 266 (5th Cir. 2006) ...............................................................................43

Serv. Corp. Intern. v. Guerra,

348 S.W.3d 221 (Tex. 2011) ................................................................................68

8

Shaffer v. Heitner,

433 U.S. 186, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977) ................................ 45, 57

Siskind v. Villa Found. for Educ., Inc.,

642 S.W.2d 434 (Tex. 1982) ................................................................... 40, 44, 58

Stuart v. Spademan,

772 F.2d 1185 (5th Cir. 1985) .............................................................................58

Tryco Enter., Inc. v. Robinson,

390 S.W.3d 497 (Tex. App.—Houston [1st Dist.] 2012, pet. dism’d) ................60

Vosko v. Chase Manhattan Bank, N.A.,

909 S.W.2d 95 (Tex. App.—Houston [14th Dist.] 1995, writ denied) ........ 40, 59

Washington DC Party Shuttle, LLC v. IGuide Tours,

406 S.W.3d 723 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) ....... 38, 58

Waterman Steamship Corp. v. Ruiz,

355 S.W.3d 387 (Tex. App.—Houston [1st Dist.] 2011, pet. denied) ... 39, 43, 69

Wright v. Sage Eng’g, Inc.,

137 S.W.3d 238 (Tex. App.—Houston [1st Dist.] 2004, pet. denied) ................58

Statutes

TEX. CIV. PRAC. & REM. CODE § 17.042 ..................................................................35

Rules

TEX. R. CIV. P. 45 .....................................................................................................41

TEX. R. CIV. P. 120a .......................................................................................... 41, 67

Other

4 Wright & Miller, FEDERAL PRACTICE & PROCEDURE § 1067.5 ............................55

9

INDEX OF RECORD REFERENCES

CR Clerk’s Record filed May 21, 2015

Citation to documents included in the Appendix are noted by “Tab #.”

10

STATEMENT OF THE CASE

Nature of Case: This is a case alleging “common law and statutory

securities fraud” by investors in a failed technology

startup.

Course of Proceedings: The intervenors, including Appellees, intervened in

an original petition against Preston and other

defendants. Preston specially appeared and asserted

that he was not subject to personal jurisdiction in

Texas because he is a nonresident, and does not have

sufficient minimum contacts with Texas for the

exercise of personal jurisdiction.

Because the claims involved a corporation, NC12,

Inc., that subsequently declared bankruptcy,

defendants removed the case to bankruptcy court.

The bankruptcy court dismissed or abated all the

claims in the original petition and all the claims in

the intervenors’ petition but two: fraud and

conspiracy to commit fraud with respect to alleged

misrepresentations regarding the value of NC12

shares. The bankruptcy court remanded these

remaining two claims to the district court.

Trial Court Disposition: Of the intervenors, only Appellees opposed Preston’s

special appearance. Preston filed his special

appearance on September 28, 2011. The court

denied the special appearance on November 17,

2014. Preston appeals from that order.

11

STATEMENT ON ORAL ARGUMENT

If upheld, the trial court’s ruling will significantly broaden the reach of

Texas long-arm jurisdiction over foreign defendants. The trial court’s ruling

departed considerably from existing precedent by asserting jurisdiction over a

nonresident not alleged to have conducted any activity in Texas giving rise to the

claims in the lawsuit, and whose only alleged contacts with Texas consists of

periodic business trips on behalf of other entities over the last 25 years. This is an

important issue and Appellant believes oral argument could assist the panel in

considering it. Appellant therefore requests oral argument.

ISSUE PRESENTED

Sole issue: The trial court erred by denying Preston’s special appearance because

Appellees failed to plead sufficient allegations to establish personal jurisdiction

and because Preston is not subject to specific or general jurisdiction in Texas.

12

I. INTRODUCTION

This lawsuit was brought by disgruntled investors in a failed technology

startup in an attempt to recover their investments from the now-bankrupt

company’s directors and officers. The investors’ claims related almost exclusively

to harms to the company, and when the bankruptcy court dismissed these claims as

belonging to the bankruptcy trustee, the investors were left with a detailed petition

that has little to do with the surviving claims, and nothing to do with any action

taking place in Texas.

It is difficult to see how Texas courts have any interest in this case, much

less personal jurisdiction over Preston. There is no allegation that Preston took any

action in Texas connected in any way to the surviving claims. Preston is a

Massachusetts resident who has never conducted business in Texas in his personal

capacity, and none of the intervenors (the only plaintiffs remaining in this lawsuit)

are Texas residents either. The only Texas contacts Appellees allege concern

Preston’s mere status as a board member in Nevada corporations with offices in

Texas, and Preston’s periodic business trips to Texas on behalf of a variety of other

entities.

There are no facts that could give rise to specific jurisdiction because there

are no allegations that any of the surviving claims arise from or relate to any action

by Preston in Texas. There is no basis for general jurisdiction because almost all

13

of Preston’s alleged contacts with Texas took place in his representative capacity

and still come nowhere close to the continuous and systematic contacts with Texas

that would render Preston at home here.

The mere fact that a startup with some Texas operations went out of business

does not warrant the exercise of personal jurisdiction over a Massachusetts resident

in a fraud suit brought by nonresident investors who do not allege he did anything

in Texas that gives rise to their claims. The trial court’s order overruling Preston’s

special appearance runs contrary to both Texas and federal law limiting the

exercise of personal jurisdiction over nonresidents. It should be reversed.

II. STATEMENT OF FACTS1

A. The lawsuit arises out of a failed coal gasification startup.

This suit arises out of a developmental technology intended to produce

synthetic natural gas and other fuels from coal, also known as coal gasification.

CR 114–16 (Tab 2).2 A Nevada corporation, Texas Syngas, Inc. (“TSI”), acquired

the technology and began seeking investors in 2007. CR 116 (Tab 2). In 2009

another Nevada corporation, NC12, Inc. (“NC12”), acquired the technology from

TSI. CR 122 ¶ 63 (Tab 2). Despite extensive efforts and the partial development

1

Sections II.A and II.B are the same in this brief and C Change’s appellant’s brief.

2

Certain of the plaintiffs’ and intervenors’ allegations are recited in this statement of facts for the

Court’s background, but Preston does not concede any of the plaintiffs’ or intervenors’

allegations.

14

of a test reactor in Massachusetts, NC12 did not succeed. CR 118–19, 127–29

(Tab 2); CR 138; CR 208 (Tab 3).

As often happens when businesses fail, litigation ensued. The original

plaintiffs, primarily NC12 shareholders, sued several of NC12’s directors and

officers on July 26, 2011, including directors Michael Sydow, Christoph Henkel,

and John Preston. CR 6. NC12 declared bankruptcy in October 2011. CR 208

(Tab 3).

In November 2011, several NC12 investors, including Appellees, intervened

in the lawsuit. CR 102–08 (Tab 2). The intervenors had invested variously in

convertible notes and shares of TSI and NC12. CR 104–08 (Tab 2). When NC12

acquired the gasification technology and attracted more investment, the

intervenors’ TSI shares and notes converted into NC12 shares. Accordingly, all of

the intervenors3 are now shareholders in NC12. Id.

Both the original plaintiffs’ and the intervenors’ petitions attacked the

defendants’ management of TSI and NC12. See CR 28–37; CR 129–33 (Tab 2).

The original plaintiffs alleged breach of fiduciary duty and conversion claims. CR

35–37. The intervenors alleged four causes of action: (1) breach of fiduciary duty

against Sydow, Henkel, and Preston; (2) shareholder oppression by Sydow,

3

One possible exception is appellee H.J. von der Goltz. It is unclear whether von der Goltz is an

NC12 shareholder or simply a creditor. CR 105 ¶ 5 (Tab 2) (“all Intervenors are currently

common shareholders of NC12, Inc.”); CR 108 ¶ 23 (Tab 2) (stating only that von der Goltz

holds an NC12 promissory note).

15

Henkel, and Preston; (3) “Knowing Participation/Civil Conspiracy” against all 10

defendants; and (4) “Securities Fraud—Common Law Fraud and Statutory4 Fraud”

against Sydow and Preston. CR 109–10, 129–33 (Tab 2).

B. The bankruptcy court dismisses all but two causes of action.

The defendants removed the case to the bankruptcy court on December 15,

2011 on the grounds that the plaintiffs’ and intervenors’ claims alleging

mismanagement of TSI / NC12 belonged to the bankruptcy estate. CR 198–205.

The intervenors moved to remand the case to state court. CR 206–07 (Tab 3).

On August 31, 2012, Bankruptcy Judge Marvin Isgur granted in part and

denied in part the motions to remand, significantly limiting the claims that remain

in this case. CR 207, 237 (Tab 3). Judge Isgur dismissed all of the original

plaintiffs’ and intervenors’ claims relating to harms to TSI5 and NC12, holding that

these claims belonged to the bankruptcy estate. See CR 198–205. Judge Isgur

reasoned that any claims based on the defendants’ alleged asset-stripping, self-

dealing, dilution of corporate value, and misappropriation of corporate assets

4

Although the title of the cause of action refers to “Statutory Fraud,” the intervenors do not

reference any statute. See CR 132–33 (Tab 2).

5

The bankruptcy court order treats NC12 as TSI’s successor and thus refers to them collectively

as NC12. CR 211 (“NC12 began as a Texas limited liability company named Texas Syngas,

LLC.”), CR 212 (“Texas Syngas was reorganized as a new Nevada corporation, Texas Syngas,

Inc., in May 2006.”), CR 214 (“Also in 2009, Texas Syngas became NC12.”) (Tab 3).

16

stemmed from harm to NC12 and, accordingly, may only be asserted by the

bankruptcy trustee on behalf of the bankruptcy estate. CR 237 (Tab 3).

The bankruptcy court dismissed or abated all of the original plaintiffs’

claims. CR 237, 225–27, 234–35 (Tab 3). As a result, none of the original

plaintiffs’ claims were remanded to state court and those claims are not at issue

here. CR 237 (Tab 3).

With respect to the intervenors’ claims, the bankruptcy court held that the

intervenors’ shareholder oppression and breach of fiduciary duty claims belonged

to the estate and therefore dismissed those claims. CR 221–27, 237 (Tab 3). The

court also dismissed the intervenors’ conspiracy claim to the extent it related to the

dismissed causes of action. CR 235–37 (Tab 3). This left only causes of action for

fraud and conspiracy to commit fraud. CR 237 (Tab 3). In remanding the fraud

and conspiracy claims, the court instructed:

Because the Intervenors are shareholders, their fraud claim is

based on the alleged difference between the price they paid in

reliance on the alleged misrepresentations and the actual value of

NC12’s shares at the time of their investment. The Intervenors

may not recover damages for the difference between the price

they paid for the shares and what the shares would have been

worth if not for the alleged post-purchase misconduct in the

operation of the corporation.

CR 228 (Tab 3) (emphasis added).

17

C. Only two claims remain against Preston.

The only remaining causes of action against Preston are “Securities Fraud—

Common Law Fraud and Statutory6 Fraud” asserted against Preston and Sydow,

and “Knowing Participation/Civil Conspiracy,”7 asserted against all 10 defendants.

CR 237 (Tab 3); CR 132–33 ¶¶ 89–90 (Tab 2). Significantly, these claims survive

only to the extent they deal with the alleged misrepresentation of NC12’s value at

the time of the intervenors’ investment (hereinafter, the “surviving claims” or

“misrepresentation claims”). CR 228 (Tab 3). The last alleged investment by any

intervenor occurred in August 2010. CR 104–08, 105 ¶ 8 (Tab 2).

D. Appellees do not allege a single act taken in Texas by Preston, much less

any act in Texas that is connected to their surviving misrepresentation

claims.

The only basis for jurisdiction over Preston in the intervenors’ petition are

the generic allegations that “Preston has engaged in business in Texas” and “the

tortious conduct alleged herein occurred in or was directed at the State of Texas.”

CR 110 ¶ 33, 114 ¶ 44 (Tab 2).

The intervenors explicitly plead that Preston is a Massachusetts resident who

is employed in Cambridge, Massachusetts. CR 110 ¶ 33 (Tab 2). Yet in their

6

Although the title of the cause of action refers to “Statutory Fraud,” the intervenors do not

reference any statute. See CR 132–33 (Tab 2).

7

Judge Isgur’s Order also mentions “Intervenors’ aiding and abetting claims” relating to fraud.

CR 237 (Tab 3). Since the intervenors did not plead an aiding and abetting claim (see CR 129–

33 (Tab 2)), it is treated here as part of the conspiracy claim.

18

petition, the intervenors fail to allege any act performed by Preston in Texas, much

less an act involving the intervenors’ surviving misrepresentation claims. This is

perhaps unsurprising, as none of the intervenors are Texas residents who might

have relied on misrepresentations in Texas. See CR 105–08 (Tab 2) (showing

intervenors reside in Luxembourg, Guatemala, the British Virgin Islands, Panama,

Germany, New York, the Bahamas, Montana, Tennessee, the Cayman Islands, and

Florida, but not Texas).

The few allegations in the intervenors’ petition that relate to Preston say

nothing to indicate a Texas connection, as shown below:

 In fall 2007, Preston “approached the shareholders of Atomic

Ordered Materials (AOM), another company in which Preston was

involved” and “brought Sydow and Collins to an AOM

shareholders’ meeting,” where Sydow presented the [TSI]

technology and “solicited investments in that company.” CR 116 ¶

51 (Tab 2).

The intervenors do not allege that any of Preston’s representations to AOM8 or its

shareholders were made in Texas.

 After the AOM meeting, Preston “approached” intervenor von der

Goltz, who had been in attendance. CR 117 ¶ 52 (Tab 2). Preston

“informed von der Goltz that [Preston] had negotiated a $100

million pre-money investment valuation for [TSI] and was trying

to raise $12 million to build a demonstration reactor . . . .” Id.

8

The intervenors do not allege any other facts regarding AOM whatsoever, much less allege that

AOM is a Texas entity or has offices in Texas.

19

 “Preston represented that the value of the technology was in excess

of $100 million but suggested that von der Goltz meet with Collins

and Sydow to negotiate a discounted valuation to put together an

initial investor group for the $12 million needed. Preston

represented that he was assisting [TSI], but never disclosed that he

owned or controlled any equity interest in [TSI].” Id.

The intervenors do not allege that Preston’s representations to von der Goltz were

made or relied on in Texas. Nor is there any basis to make such an inference. Von

der Goltz is a Florida resident. CR 108 ¶ 23 (Tab 2).

 “In November 2007, von der Goltz met with Collins and Sydow in

Houston. Collins and Sydow agreed to accept new investors based

on a pre-money valuation of $78 million and a post-money

valuation of $90 million.” CR 117 ¶ 52 (Tab 2).

 Von der Goltz “brought the opportunity to friends, family, and

business associates, who ultimately invested $11.75 million . . . .

Among this group were the Shareholder Intervenors. Sydow and

Preston represented to the Shareholder Intervenors, both directly

and through Mr. von der Goltz, that the value of the technology

exceeded $100 million and that the money being raised would be

used primarily for building the demonstration reactor.” CR 117 ¶

53 (Tab 2).

The intervenors do not allege that Preston attended the November 2007 Houston,

Texas meeting or even that any misrepresentation was made to von der Goltz at

this meeting. There are no allegations, or basis for any inference, that any Preston

representation was made or relied on in Texas—whether directly or “through von

der Goltz.” Neither Preston nor any intervenor, including the Shareholder

Intervenors, are residents of Texas. CR 105–08 (Tab 2). None of the intervenors’

20

detailed allegations include any suggestion that any of the alleged representations

or “promises” were made in Texas:

 Preston made various representations in 2008 to “[TSI]

shareholders” that the value of the company was now $300 million

as a result of a gas utility contract; representations regarding new

financing, and representations regarding the company’s purchase

of Fall River, Massachusetts property. CR 118 ¶ 55 (Tab 2).

 Preston and Sydow “had no intention of using shareholder money

as represented to the shareholders,” squandered shareholder

money, and engaged in self-dealing. CR 119 ¶ 58 (Tab 2).

 “Despite his numerous promises and despite being compensated to

do so Preston failed to raise additional funds for [TSI] in 2009, and

by mid-year [TSI] desperately needed funding.” CR 120 ¶ 60 (Tab

2).

Moreover, these alleged representations, as the intervenors themselves plead, were

addressed to TSI’s shareholders and were thus made after their investment in TSI.

These allegations are thus relevant only to the intervenors’ dismissed claims

concerning the management of TSI, not their surviving misrepresentation claims.

See CR 223–28 (Tab 3).

 “Preston and Sydow again turned to Mr. von der Goltz for

assistance.” CR 120 ¶ 60 (Tab 2). Von der Goltz raised $6.1

million in investment from the Note Holder Intervenors. Id.

“Preston and Sydow, both directly and through their statements to

von der Golz, represented to the Note Holder Intervenors that

[TSI] was worth $300 million as of 2009, based on the value of the

technology and the [gas utility] and Turkish contracts. However,

Preston and Sydow failed to disclose that the [gas utility] contract

had been canceled.” CR 121 ¶ 61 (Tab 2).

21

 “Preston and Sydow also represented [to the Note Holder

Intervenors] that the money would be used primarily to build the

test reactor; however, their later conduct and misuse of the funds

demonstrate that they had no intention of using the money for that

purpose.” Id.

The intervenors do not allege that any Preston representation to any Note Holder

Intervenor or to von der Goltz (or to anyone) was made or relied on in Texas. And

any representations regarding the ultimate use of the solicited investment funds are

beyond the scope of the surviving claims. CR 223–28 (Tab 3).

Similarly, every subsequent reference to Preston in the remaining 14 pages

of the intervenors’ petition concerns political infighting on the TSI / NC12 board

of directors, alleged mismanagement and asset-stripping of the entity, and alleged

self-dealing. CR 121–29 (Tab 2). These allegations only relate to the fiduciary

duty, shareholder oppression, and shareholder fraud claims that have been

dismissed from this matter. The remaining references to Preston do not support

any surviving claim against him. See CR 223–28 (Tab 3). And still, none of the

remaining allegations state or suggest any action taken by Preston in Texas.

In sum, not a single allegation in the intervenors’ petition—the only petition

containing any live claims—connects Preston to Texas.

22

E. Preston does no individual business and maintains no presence in Texas.

Preston filed a special appearance on September 28, 2011 objecting to the

court’s exercise of personal jurisdiction over him.9 CR 74 (Tab 1).

1. Preston does not do business in Texas in his individual capacity.

Preston is a resident of Massachusetts and is employed in Massachusetts.

CR 86–87 ¶¶ 3, 8 (Tab 1); CR 110 ¶ 33 (Tab 2). He has not been a resident of

Texas for the last 60 years.10 In the last 60 years, Preston has not travelled to or

visited Texas in his individual capacity. CR 86 ¶ 4 (Tab 1).

In the last 30 years, Preston has visited Texas exclusively on behalf of

entities for whom he served as a director, principal, or managing partner, including

a Delaware nonprofit, Molten Metal Technologies, Inc. (“MMT”), Quantum

Catalytics, LLC (“Quantum”), C Change Investments, LLC (“C Change”), NC12,

and Transformative Energy & Materials Capital, Inc. (“TEM Capital”), or on

behalf of the Massachusetts Institute of Technology (“MIT”), where he was a

faculty member and Director of Technology and Licensing, and retains an

appointment. See CR 87 ¶¶ 5–6 (Tab 1); CR 330–31, 356 at 63:18–23 (Tab 4); CR

672–73 ¶¶ 3–8 (Tab 6); CR 118 ¶ 53 (Tab 2). Preston served as a director of two

9

Preston’s special appearance was filed before the intervenors filed their petition. CR 74 (Tab

1); CR 102 (Tab 2).

10

Preston, who was 61 years old at the time of his affidavit executed in 2011, resided in Texas

for less than one year when he was an infant. See CR 86 ¶ 4 (Tab 1); CR 672 (Tab 6) (showing

date of birth).

23

Texas entities, one from 2004–2006 and the other from 2012–2014 and has

otherwise never been a director, officer, or employee of a Texas person or

company. CR 330, 388 (Tab 4); CR 87 ¶ 8 (Tab 1).

While Preston was an officer of TSI and NC12, both Nevada corporations

with a Texas office, Preston participated in board meetings from Massachusetts,

Switzerland, or Germany, but never Texas.11 See CR 86–87 ¶¶ 2, 7 (Tab 1); CR

325, 328 (Tab 4).

Preston has never done business in Texas in his individual capacity. CR 86

¶ 4 (Tab 1). Preston has never maintained an office in Texas, or employed any

person who either resides or regularly travels to Texas in connection with his or

her business. CR 87 ¶¶ 8, 9 (Tab 1). Preston has never engaged in routine sales or

other profit-making activities in Texas. Id. ¶ 8. Preston owns no private Texas

businesses. Id. In his individual capacity, Preston has never entered into any

contracts in Texas or with Texas residents, contracts calling for performance in

Texas, or contracts with mandatory venue provision in Texas, other than contracts

with his defense counsel. Id.

Because Preston does not do business in Texas, he does not maintain a

registered agent in Texas and is not required to do so. Id. As he does not work or

11

There are no allegations that Preston made any misrepresentation, or any action in furtherance

of any conspiracy to make any misrepresentation, while participating in any board meetings.

24

own property in Texas, Preston has never personally incurred or paid any taxes in

Texas, nor filed a personal tax return in Texas. CR 87 ¶ 9 (Tab 1).

2. Preston does not maintain any presence in Texas.

As Preston’s Texas ties consist exclusively of his status as director of

predominantly foreign entities and business trips to Texas in his representative

capacity, Preston has no presence in Texas. He has never maintained an office or

any other facility, telephone listing, post office box, or mailing address in Texas.

CR 87 ¶ 9 (Tab 1). Preston has never rented, owned, or possessed any real

property or personal property in Texas. Id. He does not hold a mortgage or other

lien on any real or personal property in Texas. Id. He does not have any

investments or assets in Texas. Id. Preston has never taken out a loan in Texas or

guaranteed any debt owed to a Texas resident. Id.

F. After two years and jurisdictional discovery, Appellees fail to allege a single

act by Preston in Texas that gives rise to their surviving claims, and fail to

show systematic and continuous Texas contacts that render Preston “at

home” in Texas.

The intervenors had two years and the opportunity to conduct jurisdictional

discovery between the bankruptcy court’s remand order and the hearing on

Preston’s special appearance. CR 102 (Tab 2); CR 206 (Tab 3); CR 613. Yet they

never amended their petition to add any allegations connecting any aspect of their

surviving claims to Texas. This is because no such connection exists.

25

To evade this problem, Appellees concocted a tornado of smoke and

innuendo in response to Preston’s special appearance. They doggedly conflate the

two distinct types of personal jurisdiction (specific and general), jumble allegations

about dismissed claims in discussing surviving claims, confuse individual with

representative actions by Preston, and mix diverse assertions of Preston’s

tangential links to Texas: business trips for other entities, decade-old business calls

with original plaintiff and former TSI director Collins, a personal check, and a

convoluted story about a 2012 Texas corporation that is allegedly an alter-ego of

Preston’s, allegedly created to pursue claims against Collins in a different lawsuit.

These attenuated links to Texas have nothing to do with any of the surviving

claims, and fall far short of establishing the continuous contact with Texas that is

otherwise required to support general personal jurisdiction.

Appellees alleged the following forum contacts by Preston:

(a) Director of foreign entities. Preston served as a director of

three foreign entities which registered to do business in Texas.

CR 287 (“MMT”), CR 281 (Texas Syngas, Inc. (“TSI”)), CR

284 (NC12) (Tab 4).

There are no allegations that Preston did anything in Texas in

connection with these entities that gives rise to any of the

intervenors’ claims.

(b) Business trips to Texas. In the past 25 years, Preston has

allegedly made the following brief business trips to Texas:

26

o 1990s: Five board meetings in Texas for a Delaware

nonprofit and three board meetings for MMT. CR 87 ¶ 5

(Tab 1).

o 1990s: Approximately three business trips for MMT.12

CR 408 ¶ 4, CR 409 ¶ 12, CR 260 (Tab 4).

o 2004: Three trips on behalf of Quantum. CR 409 ¶¶ 6–8

(Tab 4); CR 673 ¶ 8 (Tab 6).

o 2008–11: Five one-day trips on behalf of C Change.13

CR 319 at 25:3–28:21, 335–38, 343–48 (Tab 4); CR

672–73 ¶¶ 5–6 (Tab 6).

o 2009–10: One trip on behalf of C Change or MIT. CR

262, 323 at 49:13-24 (Tab 4).

o 2010: One trip on behalf of NC12 to testify in Sydow’s

divorce proceeding. CR 352–70, 339–42 (Tab 4).

o 2011: One two-day trip on behalf of TEM Capital for a

foreclosure sale and to inspect a cement plant. CR 349–

50 (Tab 4); CR 673 ¶ 7 (Tab 6).14

There is no allegation that any of these trips relate to the claims

in this lawsuit.

(c) 2004: Phone calls and mail. Collins claims that in 2004,

Preston telephoned him and shipped him “records regarding

12

It is not clear from the record whether these trips are distinct from those on which Preston

attended MMT board meetings. CR 87 ¶ 5 (Tab 1).

13

Preston initially mistakenly identified these trips as on behalf TEM Capital, and submitted a

correction in a subsequent declaration. See CR 87 ¶ 5; CR 330–31 (Tab 4); CR 672 ¶ 5 (Tab 6).

Former C Change director Russell Read testified C Change “effectively merged” into TEM

Capital in 2011. CR 320 at 31:5–10 (Tab 4).

14

In their special appearance briefing, Appellees refer to, but attach no evidence regarding,

allegations made by nonparty EMC Cement, BV in an unrelated 2014 lawsuit suggesting that

Preston made two other visits to Texas in August 2010 and January 2011 with C Change or TEM

Capital. See CR 263–64 (Tab 4) (failing to attach EMC complaint).

27

MMT and its patented technology” following Preston’s 2004

business trips to meet with Collins. CR 409 ¶ 9 (Tab 4). These

trips and communications concerned catalytic energy

processing (“CEP”) technology patents belonging to Quantum.

Id. ¶¶ 5–8; CR 673 ¶ 8 (Tab 6).

There are no allegations linking these communications to the

claims in the lawsuit.

(d) 2006: Alleged address at TSI office for foreign entity Metal

Catalyst Ventures. Preston was listed as a director of Nevada

corporation Metal Catalyst Ventures, Inc. in June 2006. CR 315

(Tab 4). Preston’s “address” was the same as TSI’s. See id.; CR

281 (Tab 4). Preston did not prepare the document. CR 315

(Tab 4); CR 673 ¶ 9 (Tab 6).

The intervenors allege no other facts regarding Metal Catalyst

Ventures, and there are no allegations linking Metal Catalyst

Ventures to the surviving claims.

(e) 2008: Personal check to foreign entity BOS, Inc. In 2008,

Preston allegedly wrote a personal check to BOS, Inc., a Turks

and Caicos corporation with, allegedly, an office and bank

account in Texas. CR 387 (Tab 4); CR 25 ¶ 2. In 2010, BOS,

Inc. wired Preston back the same sum. CR 384 (Tab 4).

There are no allegations linking these payments to the claims in

the lawsuit.

(f) 2012: Alleged purchase of claims in unrelated Kaiser

Litigation via alleged alter ego JK Claims. JK Claims was

formed by Quantum to purchase the plaintiffs’ claims in Cause

No. 2007-38533, Jeffrey B. Kaiser v. Texas Syngas LLC,

Michael A. Collins, Michael D. Sydow and M. Sameer Ahmed,

in the 152nd District Court of Harris County, Texas (the

“Kaiser Litigation”).15 CR 432, 495 at 57:2–3, 498 at 66:19–

15

Kaiser brought suit on behalf of himself and “all similarly situated” members of Texas Syngas

LLC. CR 432 (Tab 5). Quantum, a member of Texas Syngas LLC, had intervened in the Kaiser

Litigation. CR 452 (Tab 5).

28

67:20 (Tab 5). After Kaiser filed for bankruptcy, JK Claims

purchased the Kaiser Litigation claims from the bankruptcy

estate with the approval of the bankruptcy trustee. CR 534–41,

545–47 (Tab 5).

In a supplemental response to the special appearance, Appellees

assert that JK Claims is Preston’s alter ego and that JK Claims’

contacts with Texas should be imputed to Preston. CR 414

(Tab 5). Appellees’ own evidence shows that Quantum, not

Preston, is the sole owner of JK Claims. CR 495 at 57:2–3, 498

at 66:19–67:20 (Tab 5). See also CR 673 ¶ 10. Yet Appellees

never allege that Quantum is an alter ego of Preston.

There are no allegations linking these actions to the claims in

the lawsuit. Most significantly, all alleged JK Claims actions

took place after this lawsuit was filed and are therefore outside

of the relevant jurisdictional period, as discussed below.

Almost none of these tenuous forum contacts are pleaded in the intervenors’

petition. See section II.D, supra. None have anything to do with any alleged

misrepresentation to TSI or NC12 investors, and none demonstrate continuous and

systematic contacts that would establish that Preston is “at home” in the state of

Texas.

After briefing and argument, however, the trial court denied Preston’s

special appearance. CR 674–75 (Tab 7). Preston timely appealed to this Court.

CR 678–80; CR 681–83.

29

III. SUMMARY OF THE ARGUMENT

There is no basis for asserting personal jurisdiction over Preston. Appellees,

neither of whom reside in Texas, bring claims of fraud and conspiracy to commit

fraud in relation to representations about TSI / NC12’s value. Appellees do not

allege that any representations were made or relied on in Texas. The petition does

not contain a single allegation that places Preston in Texas or describes any act that

Preston is alleged to have done in Texas, much less any act in Texas that gives rise

to the claims in this case. Appellees have never amended their petition to include

such allegations because no such facts exist.

Appellees failed to meet their burden to plead sufficient allegations to

establish personal jurisdiction over Preston. It is the plaintiff’s initial burden to

plead sufficient allegations to allege personal jurisdiction over a defendant.

Because Appellees have failed to do so, Preston needed only to establish that he

does not reside in Texas to negate personal jurisdiction. There is no dispute:

Preston resides in Massachusetts and is not a Texas resident. The trial court erred

in overruling Preston’s special appearance on this basis alone.

Appellees’ special appearance evidence supports neither specific nor

general jurisdiction. Texas courts can exercise personal jurisdiction over a

nonresident only if the plaintiff’s claims arise out of the defendant’s contacts with

the forum (specific jurisdiction) or if the defendant has continuous and systematic

30

contacts with the forum (general jurisdiction). Though it is not clear from their

briefing below, Appellees appear to argue that there is both specific and general

jurisdiction over Preston. See CR 270 (Tab 4). Appellees are wrong on both

counts.

There is no specific jurisdiction because Appellees fail to link any

alleged action by Preston giving rise to their claims to Texas. Appellees

contend there is specific jurisdiction over Preston because “[t]he acts and events

complained of in this litigation all arise directly from Preston’s activities as a

director of and fund raiser for TSI and NC12 – both Texas companies” and

because “[i]n raiding funds for TSI and NC12, through fraudulent

misrepresentations and then denuding the companies of their assets, Preston . . .

could reasonably foresee that NC12 and its shareholders and investors would suffer

direct economic injury.” CR 269–70 (Tab 4).

The mere fact that Preston was a director of a corporation with a Texas

office while allegedly making misrepresentations to nonresident investors outside

of Texas is insufficient to establish that any alleged misrepresentation relates to

Preston’s contacts with Texas. The “reasonable foreseeability” test has been

rejected by the Texas Supreme Court. And Appellees’ “denuding” claims are not

germane: the bankruptcy court dismissed all claims relating to harms to TSI and

NC12. The only surviving claims regard alleged misrepresentations made by

31

Preston in connection with the value of TSI / NC12 at the time of the intervenors’

investment, and conspiracy to commit those misrepresentations. For jurisdictional

purposes, the relevant location for fraudulent misrepresentation is the place where

the misrepresentation was made.

There are no allegations that Preston committed any acts giving rise to these

claims in Texas, either in the petition or in Appellees’ voluminous briefing below.

As a matter of black-letter law, there is no specific jurisdiction over Preston.

There is no general jurisdiction because all of Preston’s forum contacts

were in his representational capacity and still do not amount to continuous

and systematic contacts with Texas. Preston is a Massachusetts resident who

lives and works in Massachusetts. Other than periodically traveling to Texas on

business trips on behalf of foreign entities, Preston has no Texas ties at all.

Preston’s contacts with Texas on behalf of corporations do not subject him to

general jurisdiction absent a showing either that these contacts themselves were

tortious or that the corporations were his alter ego. While Appellees claim one

corporation, JK Claims, is Preston’s alter ego, JK Claims’ alleged contacts with

Texas began in June 2012—one year after the Appellees filed their suit—and are

thus outside of the relevant period to determine jurisdictional contacts. There is no

evidence of any purposeful contacts with Texas so substantial that it would render

32

Preston “at home” in the state of Texas. There is no general jurisdiction over

Preston as a matter of law.

For all of these reasons, the trial court erred in overruling Preston’s special

appearance.

IV. STANDARD OF REVIEW16

A. De novo review applies.

Whether a court can exercise personal jurisdiction over a nonresident

defendant is a question of law reviewed de novo by this Court. Kelly v. Gen.

Interior Const., Inc., 301 S.W.3d 653, 657 (Tex. 2010) (Tab 8). When, as here, a

trial court does not issue findings of fact and conclusion of law with its special

appearance ruling, this Court implies all the facts necessary to support the

judgment as long as those facts are supported by the evidence. Id.; CR 678–80;

CR 684–86. The appellant can challenge the sufficiency of the evidence to support

the implied facts. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794

(Tex. 2002) (Tab 9).

16

Section IV is the same in both this brief and C Change’s appellant’s brief, excluding Section

IV.B.4 of C Change’s brief.

33

B. Jurisdiction over nonresidents requires allegations or proof of purposeful

availment.

1. The plaintiff bears the initial burden to plead allegations showing

jurisdiction over the defendant.

In suits involving a challenge to personal jurisdiction, the Texas Supreme

Court has “consistently held that the plaintiff bears the initial burden to plead

sufficient allegations to bring the nonresident defendant within the reach of

Texas’s long-arm statute.” Kelly, 301 S.W.3d at 658 (Tab 8). “When the pleading

is wholly devoid of jurisdictional facts, the plaintiff should amend the pleading to

include the necessary factual allegations.” Id. at 659.

2. The long-arm statute is limited by due process considerations.

The exercise of personal jurisdiction “exposes defendants to the State’s

coercive power” and therefore it must comply with the Fourteenth Amendment’s

due process clause. Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct.

2846, 2850, 180 L. Ed. 2d 796 (2011). “A nonresident defendant is subject to the

personal jurisdiction of Texas courts if (1) the Texas long-arm statute authorizes

the exercise of jurisdiction, and (2) the exercise of jurisdiction does not violate

federal and state constitutional due process guarantees.” Kelly, 301 S.W.3d at 657

(Tab 8). The critical inquiry is whether the exercise of jurisdiction comports with

due process because the Texas long-arm statute reaches “as far as the federal

constitutional requirements of due process will allow.” Id. (quoting Moki Mac

34

River Expeditions v. Drugg, 221 S.W.3d 569, 575 (Tex. 2007); TEX. CIV. PRAC. &

REM. CODE § 17.042. Because the due process requirement arises out of federal

constitutional law, the Texas Supreme Court relies on precedent from the United

States Supreme Court and other federal courts in evaluating the exercise of

personal jurisdiction. PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d

163, 166 (Tex. 2007) (Tab 10).

The exercise of personal jurisdiction over a nonresident defendant is

consistent with due process when the defendant “has established minimum

contacts with the forum state, and the exercise of jurisdiction comports with

traditional notions of fair play and substantial justice.” Kelly, 301 S.W.3d at 657

(Tab 8) (quoting Moki Mac, 221 S.W.3d at 575 and International Shoe Co. v.

Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945).

3. When the plaintiff fails to meet its initial burden of alleging sufficient

purposeful minimum contacts, the fact that the defendant is a

nonresident defeats personal jurisdiction.

A defendant establishes minimum contacts with a state “when it

purposefully avails itself of the privilege of conducting activities within the forum

state, thus invoking the benefits and protections of its laws.” Kelly, 301 S.W.3d at

657–58 (Tab 8) (quoting Retamco Operating, Inc. v. Republic Drilling Co., 278

S.W.3d 333, 338 (Tex. 2009). There are “three parts to a ‘purposeful availment’

inquiry.” Moki Mac, 221 S.W.3d at 575 (quoting Michiana Easy Livin’ Country,

35

Inc. v. Holten, 168 S.W.3d 777, 784–85 (Tex. 2005)). First, only the defendant’s

contacts with the forum are relevant, “not the unilateral activity of another party or

a third person.” Id. Second, the contacts relied on “must be purposeful rather than

random, fortuitous, or attenuated.” Id. And third, the “defendant must seek some

benefit, advantage, or profit by ‘availing’ itself of the jurisdiction.” Id. (quoting

Michiana, 168 S.W.3d at 785).

It is not enough, however, merely to take any purposeful action in Texas.

The defendant’s actions must satisfy the requirements of either general or specific

jurisdiction. All Star Enter., Inc. v. Buchanan, 298 S.W.3d 404, 412 (Tex. App.—

Houston [14th Dist.] 2009, no pet.) (“There are two types of personal jurisdiction:

specific and general.”); PHC-Minden, 235 S.W.3d at 166 (United States Supreme

Court has “adopted the terms ‘specific’ and ‘general’ to describe the differing

types of personal jurisdiction”) (Tab 10). Specific jurisdiction is “based on

contacts arising from the dispute at issue,” while general jurisdiction is “predicated

on a party’s ‘continuous and systematic’ contacts with the forum.” PHC-Minden,

235 S.W.3d at 165 (Tab 10).

The plaintiff has the initial burden of pleading that a nonresident defendant

made purposeful minimum contacts with the state. Kelly, 301 S.W.3d at 658 (Tab

8). For the minimum contacts analysis, the plaintiff must allege that its claims

arose out of or are substantially related to the defendant’s contacts with Texas, or

36

that the defendant has continuous and systematic contacts with the state. Id.; Moki

Mac, 221 S.W.3d at 585; PHC-Minden, 235 S.W.3d at 165 (Tab 10).

Only if the plaintiffs meet the initial burden—by making specific allegations

sufficient to establish general or specific jurisdiction—must the defendant respond

by negating all grounds of jurisdiction. Kelly, 301 S.W.3d at 658 (Tab 8).

“Because the plaintiff defines the scope and nature of the lawsuit, the defendant’s

corresponding burden to negate jurisdiction is tied to the allegations in the

plaintiff’s pleading.” Id.

When the plaintiffs do not meet their burden of alleging purposeful

minimum contacts, the defendant need only submit an affidavit stating that it is not

a Texas resident to defeat personal jurisdiction. Id. at 658–59 (“If the plaintiff fails

to plead facts bringing the defendant within reach of the long-arm statute (i.e., for a

tort claim, that the defendant committed tortious acts in Texas), the defendant need

only prove that it does not live in Texas to negate jurisdiction.”).

Even where the plaintiffs do allege purposeful minimum contacts, the

defendant can negate jurisdiction either factually or legally. Id. at 659. Factually,

it can present evidence that it has no contacts with Texas, thus disproving the

plaintiff’s allegations. Id. The plaintiff “risks dismissal of its lawsuit if it cannot

present the trial court with evidence establishing personal jurisdiction.” Id.

Legally, “the defendant can show that even if the plaintiff’s alleged facts are true,

37

the evidence is legally insufficient to establish jurisdiction.” Id. In other words,

the defendant prevails if it shows the claims do not arise from the contacts or that

its contacts with the state are not continuous and systematic. Id.; PHC-Minden,

235 S.W.3d at 165 (Tab 10).

V. ARGUMENT

Sole issue: The trial court erred by denying Preston’s special appearance because

Appellees failed to plead sufficient allegations to establish personal jurisdiction

and because Preston is not subject to specific or general jurisdiction in Texas.

A. Appellees failed to meet their initial burden of pleading facts to show that

Preston is subject to personal jurisdiction in Texas.

Though it was not addressed in the intervenors’ petition and not clear from

their briefing, Appellees have claimed that Preston is subject both to specific and

general personal jurisdiction in Texas court. CR 269–70 (Tab 4). The allegations

in the petition and evidence offered in Appellees’ responses to Preston’s special

appearance,17 however, were insufficient to establish either.

In their petition, the intervenors failed to allege that Preston committed any

act in Texas, much less any act that gave rise to their claims. As discussed in detail

above, while the intervenors pleaded generally that Preston misrepresented the

value of TSI/NC12 to potential investors and “all Defendants conspired to commit

17

Appellees also argued that even though Preston supported his special appearance with a sworn

affidavit attesting to every material fact, the special appearance was not verified. CR 264–65

(Tab 4). This argument has been explicitly rejected by this court. Washington DC Party Shuttle,

LLC v. iGuide Tours, LLC, 406 S.W.3d 723, 731 (Tex. App.—Houston [14th Dist.] 2013, pet.

denied) (en banc).

38

fraud,” not a single allegation connects any misrepresentation or act in furtherance

of any conspiracy to Texas. See CR 132 ¶ 89 (Tab 2); section II.D, supra. None

of the intervenors are even Texas residents. CR 105–08 (Tab 2).

Instead, the only pleaded basis for personal jurisdiction over Preston are the

generic allegations that “Preston has engaged in business in Texas” and “[p]ersonal

jurisdiction over all defendants is proper in the state of Texas because NC12 is

headquartered in Houston, Texas and the tortious conduct alleged herein occurred

in or was directed at the State of Texas.” CR 110 ¶ 33, 114 ¶ 44 (Tab 2). This

type of generalization is insufficient to meet the pleading burden. Waterman

Steamship Corp. v. Ruiz, 355 S.W.3d 387, 398, 403–04 (Tex. App.—Houston [1st

Dist.] 2011, pet. denied). See also Frank A. Smith Sales, Inc. v. Atl. Aero, Inc., 31

S.W.3d 742, 747 (Tex. App.—Corpus Christi 2000, no pet.) (The “third-party

petition stated only that [the defendant] had committed acts of negligence, without

specifying what those negligent acts were, or where they occurred. Therefore, [the]

petition fell well short of pleading sufficient allegations to show jurisdiction in

Texas.”). The intervenors failed to plead any facts showing that Preston in fact

engaged in business, or committed any tort, in Texas. Indeed, the petition fails to

allege a single action taken by Preston in Texas. See, e.g., CR 114–33 (Tab 2).

Because the intervenors failed to plead facts showing that Preston made

misrepresentations or conspired to make misrepresentations in Texas, or any facts

39

showing that Preston had any continuous and systematic contacts with this state,

Preston needed only prove that he is not a Texas resident to defeat personal

jurisdiction. See Kelly v. Gen. Interior Const., Inc., 301 S.W.3d 653, 658–59 (Tex.

2010) (Tab 8) (“If the plaintiff fails to plead facts bringing the defendant within

reach of the long-arm statute (i.e., for a tort claim, that the defendant committed

tortious acts in Texas), the defendant need only prove that it does not live in Texas

to negate jurisdiction.”); Vosko v. Chase Manhattan Bank, N.A., 909 S.W.2d 95, 99

(Tex. App.—Houston [14th Dist.] 1995, writ denied) (citing Siskind v. Villa

Found. for Educ., Inc., 642 S.W.2d 434, 437–38 (Tex. 1982)) (When “the plaintiff

does not allege that the defendant performed a specific act in Texas, the

defendant's evidence that he is a nonresident is enough to carry his burden of

proof.”).

Preston’s unrefuted affidavit establishes he is a Massachusetts resident and

not a Texas resident. CR 87 ¶ 5 (Tab 1). The intervenors affirmatively plead that

Preston is a Massachusetts resident. CR 110 ¶ 33 (Tab 2). The trial court erred by

denying Preston’s special appearance on this basis alone.

B. Because Appellees do not allege that any of Preston’s alleged contacts with

Texas give rise the surviving claims and no evidence suggests any link, there

is no specific jurisdiction as a matter of law.

Although nearly two years passed between the bankruptcy court’s order

dismissing all other causes of action and Appellees’ two briefs in opposition to

40

Preston’s special appearance, Appellees never amended their petition to include

any jurisdictional facts relating to the claims remanded by the bankruptcy court.

CR 237 (Tab 3); CR 257 (Tab 4); CR 413 (Tab 5). See also Kelly, 301 S.W.3d at

659 n.6 (Tab 8) (If “the plaintiff’s evidence does not fall within the scope of the

factual allegations in the pleading, then the plaintiff should amend the pleading for

consistency.”). Appellees tried to overcome their failure to plead jurisdictional

facts by including more detail in their response and supplemental response

opposing Preston’s special appearance, but the evidence considered by trial court

in addition to the petition must comply with the requirements of Rule 120a, and

even then, it “merely supports or undermines the allegations in the pleadings.” Id.

at 658 n.4; TEX. R. CIV. P. 120a, 45(a) (defining pleadings as petitions and

answers).

Regardless, there is no allegation, much less any evidence, that Preston’s

alleged misrepresentations of TSI / NC12’s value to investors, or any act in

furtherance of his alleged conspiracy to commit these misrepresentations, were

made in Texas. The intervenors do not make any such allegation in their petition

or in their response or supplemental response to Preston’s special appearance.

Rather, Appellees assert that there is specific jurisdiction over Preston

because: “[t]he acts and events complained of in this litigation [] arise directly

from Preston’s activities as a director of and fundraiser for TSI and NC12 – both

41

Texas companies” and because “[i]n raiding funds for TSI and NC12, through

fraudulent misrepresentations and then denuding the companies of their assets,

Preston . . . could reasonably foresee that NC12 and its shareholders and investors

would suffer direct economic injury.” CR 269–70 (Tab 4).

Appellees mistake the law. Preston’s mere status as a director of even a

“Texas corporation” would be insufficient to support Texas jurisdiction for

misrepresentation claims that were not made or relied on in Texas. The

“reasonable foreseeability” analysis for personal jurisdiction has been explicitly

rejected by the Texas Supreme Court. All claims relating to the “denuding” of

corporate assets have been dismissed by the bankruptcy court. There is no

allegation, much less any evidence, that any of Preston’s contacts with Texas give

rise to the surviving claims. There is no specific jurisdiction as a matter of law.

1. Specific jurisdiction requires that the alleged jurisdictional contacts

give rise to the plaintiff’s alleged injury.

Specific jurisdiction exists when the defendant purposefully avails himself

of conducting activities in the forum and “the cause of action arises from or is

related to those contacts or activities.” Kelly, 301 S.W.3d at 658 (Tab 8). See also

Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 576 (Tex. 2007) (“liability

must have arisen from or related to those contacts.”). Specific jurisdiction depends

on an “activity or an occurrence that takes place in the forum State and is therefore

subject to the State’s regulation.” Goodyear Dunlop Tires Operations, S.A. v.

42

Brown, 131 S. Ct. 2846, 2851, 180 L. Ed. 2d 796 (2011) (citation omitted). In a

specific jurisdiction analysis, the court thus focuses on “the relationship among the

defendant, the forum[,] and the litigation.” Kelly, 301 S.W.3d at 658 (Tab 8)

(quoting Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338

(Tex. 2009)) (alteration in original).

Jurisdiction for each claim must stand on its own merits. Id. at 660.

(performing claim-by-claim analysis to determine whether each claim arose out of

alleged forum contacts); Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266,

274–75 (5th Cir. 2006) (specific jurisdiction is a claim-specific inquiry). This is

especially significant here, as all of the original plaintiffs’ claims, and the

intervenors’ shareholder oppression, fiduciary duty, and related conspiracy claims,

have been dismissed. CR 237 (Tab 3).

For a tort claim, the plaintiff must plead that the defendant committed a

tortious act in Texas. Waterman Steamship, 355 S.W.3d at 403. For

misrepresentation claims, the relevant location for jurisdiction is the place where

the misrepresentation was made. BMC Software Belgium, N.V. v. Marchand, 83

S.W.3d 789, 796–97 (Tex. 2002) (Tab 9); Kelly, 301 S.W.3d at 660 (Tab 8);

Glencoe Capital Partners II, L.P. v. Gernsbacher, 269 S.W.3d 157, 167 (Tex.

App.—Fort Worth 2008, no pet.). “[D]ue process will not permit the plaintiff to

use insignificant acts in the forum to assert jurisdiction over all co-conspirators.”

43

Nat’l Indus. Sand Ass’n v. Gibson, 897 S.W.2d 769, 773 (Tex. 1995) (quoting

Siskind v. Villa Found. for Educ., Inc., 642 S.W.2d 434, 438 (Tex. 1982)). Nor can

the acts of co-conspirators be imputed to a nonresident defendant for the purposes

of personal jurisdiction. See id.

2. There are no allegations in the intervenors’ petition that could give

rise to specific jurisdiction over Preston.

As discussed at length above, there is no allegation in the intervenors’

petition that Preston’s alleged misrepresentations of NC12’s value to investors, or

any act in furtherance of his alleged conspiracy to commit these

misrepresentations, occurred in Texas.

Appellees do not attempt to remedy this problem in their special appearance

briefing or the evidence attached thereto. Rather, Appellees compile a list of

Preston’s alleged business trips and director positions on behalf of a variety of

entities over the last 25 years. See, e.g., CR 260–64, 269 (Tab 4). Appellees make

no attempt to link any of Preston’s alleged forum contacts to Preston’s alleged

misrepresentations of the value of TSI / NC12 to potential investors, or to any

conspiracy to commit such a misrepresentation.

44

3. There are no allegations or evidence in Appellees’ special

appearance briefing that could give rise to specific jurisdiction over

Preston.

Appellees refer to the same set of alleged forum contacts to support both

specific and general jurisdiction over Preston. CR 260–64, 269 (Tab 4). See

section II.F, supra. Each is examined in turn below.

a) Service as a director of foreign entities.

Appellees assert generally that their claims against Preston “arise directly

from Preston’s activities as a director of and fundraiser for TSI and NC12 – both

Texas companies.”18 CR 269–79 (Tab 4). The United States Supreme Court has

held that service as a director of a corporation, by itself, does not create personal

jurisdiction over that director—even when the corporation is organized in the

forum state. Shaffer v. Heitner, 433 U.S. 186, 215–16, 97 S. Ct. 2569, 53 L. Ed. 2d

683 (1977) (in shareholder derivative suit against Delaware corporation’s directors

and officers alleging that defendants “misus[ed] their power,” Delaware court did

not have personal jurisdiction over defendants because plaintiffs did not allege any

acts by the defendants in Delaware, and service as a director did not show that

defendants purposefully availed themselves of conducting activities in Delaware).

18

Appellees also refer generally to Preston’s status as director of Nevada corporation MMT as

supporting personal jurisdiction. CR 260–61, 269–70 (Tab 4). There is no allegation and no

basis whatsoever to link Preston’s service as director of Nevada corporation MMT in the 1990s

to any claim in this matter. See id.; CR 287–89 (Tab 4); CR 132 ¶ 89 (Tab 2).

45

There is even less of a basis to claim that Preston’s service as a director of a

Nevada corporation with an office in Texas created personal jurisdiction over him.

This is because the real locus of Appellees’ harm is the place where the

misrepresentations were made. BMC Software, 83 S.W.3d at 796–97 (Tab 9)

(“Here, Marchand alleges that his fraud and negligent misrepresentation claims

arise from the alleged Watson–Ordelheide conversation in Texas. But they do not.

The nature of the claims demonstrate that they can only arise from BMCB’s

contact with Marchand, which all occurred outside of Texas. … BMCB made no

representations to Marchand in Texas, and he did not rely to his detriment on the

conversation in Texas.”) (citation omitted). See also Kelly, 301 S.W.3d at 660

(Tab 8) (in order to establish specific jurisdiction for fraud, the plaintiff must

allege that the fraudulent acts occurred in Texas).

BMC Software involved an alleged fraudulent misrepresentation made in

Europe. 83 S.W.3d at 796–97 (Tab 9). The plaintiff claimed that jurisdiction was

proper in Texas because the defendant’s officers met in Texas and, during that

meeting, planned to defraud the plaintiff. Id. at 796. The Texas Supreme Court

disagreed, however, noting that even if the defendant’s officers discussed the plan

to defraud the plaintiff in Texas, it was the misrepresentations themselves—made

in Europe—that gave rise to the cause of action. Id. at 796–97.

46

Here, Appellees have neither pleaded nor offered evidence to show that any

of the alleged misrepresentations giving rise to their claims took place in Texas.

See sections II.D, II.F, supra. Further, there is no allegation or evidence that

Preston ever even did business out of the TSI or NC12 Texas office. Preston

participated in board meetings from Massachusetts, Switzerland, or Germany,

never Texas. See CR 86–87 ¶¶ 2, 7 (Tab 1); CR 325, 328 (Tab 4). Appellees do

not allege that Preston made any representation or undertook any action supporting

any conspiracy while participating in these board meetings.

Preston is not subject to specific jurisdiction on the bare fact of his status as

director for corporations with Texas offices.

b) Business trips to Texas.

Appellees spill much ink describing the business trips Preston took in a

representative capacity over the last 25 years. CR 260–64 (Tab 4). For the most

part, these trips fall well before or well after the relevant window for investment

into TSI or NC12, making it impossible that they give rise to the Appellees’

remaining claims. Most significant, however, is Appellees’ conspicuous failure to

allege any connection between a single one of these business trips and the alleged

misrepresentations or conspiracy.

Board meetings and business trips in the 1990s. Appellees never allege that

Preston’s 1990s-era Texas business trips give rise to their claims. CR 87 ¶ 5 (Tab

47

1); CR 260 (Tab 4). Nor could they. Appellees themselves state that MMT’s

business in Texas concerned a waste recycling project using MMT’s catalytic

extraction processing (“CEP”) technology, not potential investors in TSI or NC12.

CR 260–61, 408–09 (Tab 4). TSI would not be formed until 2006, or do business

in Texas until 2008. CR 281 (Tab 4). Preston’s MMT business trips do not form a

basis for specific jurisdiction.

Business trips with Quantum in 2004. Appellees never claim that Preston’s

alleged three business trips to Texas in 2004 to meet with Collins19 give rise to

their claims that Preston allegedly misrepresented the value of NC12 to potential

investors. CR 408–09, 261 (Tab 4). Indeed, TSI still would not exist for another

two years or do business for another four. CR 281 (Tab 4). Preston’s Quantum

business trips do not form a basis for specific jurisdiction.

Business trips with C Change between 2008–2011. Appellees never allege

that any of Preston’s business trips with C Change related in any way to

misrepresentations to investors about the value of TSI / NC12. CR 262–64, 319 at

25:3–28:21, 323 at 49:13-24, 335–38, 343–48 (Tab 4); CR 672–73 ¶¶ 5–6 (Tab 6).

Appellees do not claim that Preston’s 2008 meeting in Houston with Collins

and Sydow related to any alleged misrepresentations to investors. CR 262, 269,

19

Collins is not an intervenor, but an original plaintiff and former TSI/NC12 director whose

fiduciary duty and conversion claims against Preston were dismissed and abated by the

bankruptcy court. CR 234–37 (Tab 3).

48

319 at 25:3–28:21, 339–42 (Tab 4). With respect to the meeting in 2009 or early

2010, Preston’s C Change colleague Russell Read testified that he and Preston20

travelled to Texas during that period for one meeting with Russian technology

partners for the formation of a joint venture MIT was exploring with the Russian

government. CR 323 at 49:13–50:4 (Tab 4). Preston gave evidence of four other

approximately one-day trips for C Change between 2009–2011.21 There is no

evidence, nor even any allegation, that any of these trips related in any way to the

Appellees’ surviving claims.

Business trip to testify regarding NC12 in divorce proceeding. Preston

traveled to Texas in October 2010 to testify in Sydow’s divorce proceeding. CR

339–42 (Tab 4). Preston testified exclusively about NC12 assets and financial

operation. See CR 352–70 (Tab 4). But there can be no connection between any

alleged post-August 2010 contacts with Texas and misrepresentations to potential

investors in NC12, including this testimony, because August 2010 is the last

alleged investment giving rise to the surviving claims, and there is no allegation or

20

Preston does not recall this trip. CR 673 ¶ 6 (Tab 6). Read discusses the matter in context

with his work with Preston at C Change. CR 323 at 49:13-24 (Tab 4). While it is not clear from

the record whether this alleged trip occurred on behalf of MIT or C Change, either way, there is

no evidence that it related in any way to Appellees’ surviving claims.

21

Preston’s flight records establish these trips occurred April 2–3, 2009 (Houston) (CR 335–38),

May 3–4, 2009 (Houston) (CR 343–44), December 30–31, 2010 (Dallas) (CR 347–48), and

March 16–17, 2011 (Austin) (CR 345–46) (Tab 4). See also CR 672–73 ¶¶ 5–6 (Tab 6). As the

intervenors affirmatively plead, the last intervenor’s investment was in August 2010. CR 104–

08 (Tab 2). Preston thus could not have made any relevant misrepresentations nor furthered the

alleged conspiracy to misrepresent NC12’s value to the intervenors on the latter two trips.

49

evidence that this or any post-August 2010 Preston contact relates in any way to

any conspiracy claim. CR 104–08 (Tab 2). Indeed, Appellees never allege any

link between this trip to Texas and any surviving claim. CR 269 (Tab 4).

Preston’s October 6, 2010 trip to Texas to give testimony in Sydow’s divorce

proceeding does not give rise to specific jurisdiction.

Business trip with TEM Capital. Appellees never allege that Preston’s May

2–4, 2011 business trip to Texas to attend a foreclosure sale and cement plant

inspection for TEM Capital relates in any way to their surviving claims. See CR

673 ¶ 7 (Tab 6); 263–64, 269, 349–50 (Tab 4); CR 414, 427 (Tab 5); CR 673 ¶ 7

(Tab 6). Again, the last relevant investment occurred nearly a year before, and no

evidence suggests this trip was related to any conspiracy to defraud NC12’s

investors regarding the value of NC12’s shares. CR 104–08 (Tab 2).

In sum, not a single one of Preston’s business trips give rise to the

Appellees’ surviving claims. Thus, not a single one supports specific jurisdiction.

c) 2004: Phone calls and mail to Collins.

As discussed above, Preston’s 2004 business trips to Texas to meet with

Collins did not relate to the surviving claims. As Collin himself states, Preston’s

subsequent telephone calls and shipment of records related to the same purposes as

his business trips: the commercial development of the CEP technology, not plans

50

to mislead investors of TSI two years later about the value of TSI. CR 409 ¶ 9

(Tab 4). These alleged contacts do not provide a basis for specific jurisdiction.

d) 2006: Metal Catalyst Ventures’ designation of address as

TSI address.

A 2006 Nevada state record shows someone named Linda Kulik listed

Preston as a director of Nevada corporation Metal Catalyst Ventures, Inc. CR 315

(Tab 4). Kulik listed TSI’s Houston address as Preston’s address. See id.; CR 281

(Tab 4). Appellees allege no other facts regarding Metal Catalyst Ventures, not

even in their briefing. See CR 262 (Tab 4). Appellees never allege any link

between Metal Catalyst Ventures to the claims in the lawsuit, nor do they provide

any evidence that Preston actually resided at or did business at TSI’s address. See

section II.D, II.F, supra.

Preston submitted an unrefuted affidavit stating that he never served as a

director of Metal Catalyst Ventures and never listed the TSI address as his own.

CR 673 ¶ 9. (Tab 6). Preston has never maintained an office in Texas. CR 87 ¶ 8

(Tab 1). This is not a purposeful minimum contact supporting jurisdiction over

Preston because it is not a contact by Preston. See Guardian Royal Exch. Assur.,

Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 227 (Tex. 1991) (“the

contact must have resulted from the nonresident defendant's purposeful conduct

and not the unilateral activity of the plaintiff or others”). See also Helicopteros

Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 417, 104 S. Ct. 1868, 1873

51

(1984) (the “unilateral activity of another party or a third person is not an

appropriate consideration when determining whether a defendant has sufficient

contacts with a forum State to justify an assertion of jurisdiction.”). This alleged

“contact” provides no basis for specific jurisdiction over Preston.

e) 2008: Personal check.

In 2008, Preston allegedly wrote a personal check to BOS, Inc., a Turks and

Caicos corporation with an alleged bank account in Texas. CR 387 (Tab 4); CR 25

¶ 2. Two years later, BOS, Inc. wired Preston back the same sum. CR 384 (Tab

4). There is no indication that Preston purposefully availed himself of any Texas-

related benefits by writing a personal check to a foreign entity, or that this

transaction has any relationship to the litigation. See Helicopteros, 466 U.S. at

416–17 (“Common sense and everyday experience suggest that, absent unusual

circumstances, the bank on which a check is drawn is generally of little

consequence to the payee and is a matter left to the discretion of the drawer.”)

(footnote omitted). The BOS, Inc. payments are not a minimum contact with

Texas and do not give rise to specific jurisdiction.

f) 2012: Alleged alter-ego JK Claims’ purchase of litigation

claims in the Kaiser Litigation.

Appellees’ fantastical story of Preston secretly purchasing the claims in the

Kaiser Litigation through alleged alter-ego JK Claims still does not relate in any

way to any potential misrepresentation to investors of NC12—the last of which

52

invested two years prior—or give any conceivable support to a conspiracy to

defraud potential investors in NC12. CR 414–24 (Tab 5).

The Kaiser Litigation concerned disputes between the members of Texas

Syngas LLC, not misrepresentations to potential investors in TSI or NC12 of TSI

or NC12’s value. CR 432–40 (Tab 5). The first action intervenors allege relating

to JK Claims, an application to reserve its name, occurred in June 2012, two years

after the last investor invested in NC12. CR 527, 414–24 (Tab 5). Even if taken as

true—which they should not be—the intervenors’ conspiracy theories regarding JK

Claims have nothing to do with the claims at issue in this matter and do not form a

basis for specific jurisdiction.

In sum, none of Preston’s alleged contacts with Texas relate to the claims in

this case. Appellees’ allegations and evidence do not support the exercise of

specific jurisdiction. Kelly, 301 S.W.3d at 659 (Tab 8).

4. Appellees’ claim that Preston “could reasonably foresee that NC12

and its shareholders and investors would suffer direct economic

injury” because of his alleged misrepresentations is not a basis for

specific jurisdiction as a matter of law.

Appellees claim that Preston is subject to specific jurisdiction because “[i]n

raiding funds for TSI and NC12, through fraudulent misrepresentations and then

denuding the companies of their assets, Preston . . . could reasonably foresee that

NC12 and its shareholders and investors would suffer direct economic injury.” CR

269 (Tab 4). This argument echoes the intervenors’ general allegation in the

53

petition that there is personal jurisdiction because tortious conduct “was directed at

the State of Texas.” CR 114 ¶ 44 (Tab 2).

The Texas Supreme Court has unequivocally rejected the notion that

jurisdiction can arise purely because actions caused harm to Texas residents or

because a tort is “directed” at Texas residents. Michiana Easy Livin’ Country, Inc.

v. Holten, 168 S.W.3d 777, 788–92 (Tex. 2005) (surveying case law and

constitutional considerations). And in this case, because there are no claims

belonging to the original plaintiffs, and no intervenor is a Texas resident (including

Appellees), the only conceivable Texas harm Appellees allege is harm to NC12, a

Nevada corporation—but the bankruptcy court dismissed those claims.

There is thus no basis in the pleadings, the evidence, or the law for specific

jurisdiction over Preston.

C. Because Preston’s alleged contacts with Texas are not substantial,

continuous, or systematic, there is no general jurisdiction as a matter of law.

1. General jurisdiction requires the defendant to have substantial,

continuous, and systematic contacts with Texas.

General jurisdiction exists “when a defendant’s contacts in a forum are

continuous and systematic so that the forum may exercise personal jurisdiction

over the defendant even if the cause of action did not arise from or relate to

activities conducted within the forum state.” BMC Software Belgium, N.V. v.

Marchand, 83 S.W.3d 789, 796 (Tex. 2002) (Tab 9). For general jurisdiction, the

54

plaintiff must show the nonresident defendant engaged in “substantial activities” in

Texas. Guardian Royal Exch. Assur., Ltd. v. English China Clays, PLC, 815

S.W.2d 223, 230 (Tex. 1991).

A general jurisdiction inquiry “involves a ‘more demanding minimum

contacts analysis’” than a specific jurisdiction inquiry, with a “substantially higher

threshold.” PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 168

(Tex. 2007) (Tab 10). “Usually, ‘the defendant must be engaged in longstanding

business in the forum state, such as marketing or shipping products, or performing

services or maintaining one or more offices there; activities that are less extensive

than that will not qualify for general in personam jurisdiction.’” Id. (quoting 4

Wright & Miller, FEDERAL PRACTICE & PROCEDURE § 1067.5).

The defendant’s activities must be so extensive that it is essentially at home

in the state, and therefore should be subject to suit there for any claim—regardless

of where the claim occurred—as a resident would be. Goodyear Dunlop Tires

Operations, S.A. v. Brown, 131 S. Ct. 2846, 2853–54, 180 L. Ed. 2d 796 (2011)

(“For an individual, the paradigm forum for the exercise of general jurisdiction is

the individual’s domicile; for a corporation, it is an equivalent place, one in which

the corporation is fairly regarded as at home.”). As general jurisdiction is “dispute-

blind,” the alleged actions underlying the lawsuit “should not be the focus in

assessing continuous and systematic contacts—contacts on which jurisdiction over

55

any claim,” not just the one at issue, may be based. PHC-Minden, 235 S.W.3d at

169 (Tab 10). The relevant period for consideration of forum contacts for general

jurisdiction ends at the time the suit is filed. Id.

Because it is so easy to let case-specific facts improperly weight a general

jurisdiction analysis, the Texas Supreme Court has suggested a test that “properly

frames the issue”: would the nonresident’s contacts with Texas “support

jurisdiction even for a hypothetical cause of action arising from its sale of a

product in Germany that injured a German citizen?” Id. (citation omitted). In

other words: are Preston’s Texas activities in Texas so pervasive that he should be

sued in Texas in a case where none of the operative facts relate to Texas? The

answer here is no.

2. The sporadic contacts with Texas in a representative capacity that

Appellees allege are nothing like the substantial, continuous, and

systematic contacts required to establish general jurisdiction.

Appellees refer to the same set of alleged forum contacts to support both

specific and general jurisdiction over Preston. CR 260–64, 269 (Tab 4); section

II.F, supra. The vast majority of alleged contacts cannot be considered contacts

for purposes of establishing general jurisdiction over Preston, either because they

do not demonstrate that Preston availed himself of the privilege of conducting

activities in Texas (service as a director of a foreign entity) or they were made in a

representative capacity (business travel). Each is examined again in turn below in

56

the context of general jurisdiction. See Am. Type Culture Collection, Inc. v.

Coleman, 83 S.W.3d 801, 809 (Tex. 2002) (for general jurisdiction, all alleged

forum contacts in the relevant time period must be “carefully investigated,

compiled, sorted, and analyzed for proof of a pattern of continuing and systematic

activity.”). The quality, not quantity, of the contacts is relevant, and the relevant

period ends at the date of filing of the suit—here, July 26, 2011. Id.; CR 6.

a) Director of foreign entities.

The mere fact of service as a director of corporations which reside in Texas,

without more, is insufficient as a matter of law to create general jurisdiction over

Preston in Texas. Shaffer v. Heitner, 433 U.S. 186, 215–16, 97 S. Ct. 2569, 53 L.

Ed. 2d 683 (1977) (fact that defendants were directors and officers of Delaware

corporation did not demonstrate that they had purposefully availed themselves of

the privilege of conducting activities in Delaware in a way that would justify

bringing them before a Delaware tribunal).

Preston participated in TSI and NC12 board meetings from Massachusetts,

Switzerland, or Germany, never Texas. See CR 86–87 ¶¶ 2, 7 (Tab 1); CR 325,

328 (Tab 4). Indeed, Appellees allege no acts taken by Preston in Texas in

connection with his service as a director for TSI and NC12, or any other entity.

Even if they had, as discussed in detail below, any such acts would not be

sufficient to subject him to general jurisdiction in Texas as an individual because

57

he did not do them in his individual capacity. Wright v. Sage Eng’g, Inc., 137

S.W.3d 238, 250 (Tex. App.—Houston [1st Dist.] 2004, pet. denied).22

b) Business trips to Texas.

Preston’s contacts with Texas in his representative capacity do not qualify as

contacts for general jurisdiction because there is no allegation that these contacts

involved tortious activities or that the entities were Preston’s alter ego. Under

Texas law, corporations are presumed to be separate entities from their directors,

officers, and shareholders. See Washington DC Party Shuttle, LLC v. IGuide

Tours, 406 S.W.3d 723, 738–39 (Tex. App.—Houston [14th Dist.] 2013, pet.

denied). An individual's transaction of business within the state solely as a

corporate officer does not create personal jurisdiction over that individual though

the state may have personam jurisdiction over the corporation. Stuart v.

Spademan, 772 F.2d 1185, 1197 (5th Cir. 1985). An individual’s representative

contacts are not their own absent other evidence that the contact was independently

tortious, or proof sufficient to pierce the corporate veil. Siskind v. Villa Found. for

Educ., Inc., 642 S.W.2d 434, 438 (Tex. 1982); Hoffmann v. Dandurand, 180

S.W.3d 340, 347 (Tex. App.—Dallas 2005, no pet.).

22

This rule is sometimes referred to as the fiduciary shield doctrine. Id. Appellees cite Wright

for the proposition that Preston’s acts as a director can create personal jurisdiction if it is those

acts which give rise to the lawsuit. CR 270 (Tab 4). However, that is only true in the case of

specific jurisdiction, not general jurisdiction, as the Wright court explicitly noted. 137 S.W.3d at

250. As already discussed above, Appellees do not allege any acts by Preston in Texas—in his

capacity as a director or otherwise—that relate to the claims in this case.

58

This Court has held that general jurisdiction over an individual may not be

based on jurisdiction over an entity with which an individual is associated unless

the entity is his or her alter ego. Vosko v. Chase Manhattan Bank, N.A., 909

S.W.2d 95, 99 (Tex. App.—Houston [14th Dist.] 1995, writ denied). See also

Hoffmann, 180 S.W.3d at 347. The alter ego doctrine applies only when there is

such unity between the corporation and the individual that the separateness of the

corporation has ceased. Vosko, 909 S.W.2d at 99. Courts consider evidence such

as (1) the payment of alleged corporate debts with personal checks or other

comingling of personal and corporate funds; (2) representations that the individual

will financially back the corporation; (3) diversion of company profits to the

individual for personal use; (4) inadequate capitalization; (5) other failures to keep

corporate and personal assets separate. Hoffmann, 180 S.W.3d at 347.

Because personal jurisdiction involves due-process considerations that may

not be overridden by statutes or case law, jurisdictional veil-piercing and

substantive veil-piercing involve different elements of proof. All Star Enter., 298

S.W.3d at 422; PHC-Minden, 235 S.W.3d at 174 (Tab 10). For jurisdictional

purposes, the factors considered must relate to the actor’s forum contacts. See

PHC Minden, 235 S.W.3d at 174 (Tab 10) (observing that common veil-piercing

factors such undercapitalization and common names between entities do “not

59

affect whether each has sufficient contacts with the forum for jurisdictional

purposes.”).

Notably, while Appellees occasionally suggest Preston “controls” certain

entities, with the exception of JK Claims (discussed below), Appellees never allege

nor present any evidence that the various entities Preston represented in his

contacts with Texas were Preston’s alter ego. Mere status as an officer, director or

majority shareholder of an entity alone is insufficient to support a finding of alter

ego. Tryco Enter., Inc. v. Robinson, 390 S.W.3d 497, 525 (Tex. App.—Houston

[1st Dist.] 2012, pet. dism’d). Yet nearly all of Preston’s alleged Texas contacts

relate to business trips to Texas on behalf of entities for whom Preston was a

director or manager:

Business trips with a nonprofit and MMT in the 1990s. Appellees never

allege the nonprofit or MMT were alter-egos of Preston’s, or that Preston

committed any torts on his trips that would give rise to jurisdiction over Preston in

his personal capacity. CR 288–89 (Tab 4); CR 87 ¶ 5 (Tab 1). Preston’s 1990s-era

Texas trips or Texas-related projects on behalf of the nonprofit and MMT do not

constitute contacts supporting general jurisdiction over Preston as a matter of law.

60

Business trips with C Change between 2008–2011.23 With C Change,

Preston allegedly visited Texas in November 2008 with Read to attend a meeting

with Collins and Sydow; in “2009 or early 2010” with Read regarding a joint

venture with MIT and Russian technology partners; and four other times between

2009–2011 for one-day business trips. CR 319 at 25:3–28:21, 323 at 49:13-24,

335–48 (Tab 4); CR 672–73 ¶¶ 5–6 (Tab 6). Appellees do not dispute that Preston

took these trips in his representative capacity on behalf of C Change. CR 262–64

(Tab 4). Nor do Appellees allege that C Change is an alter ego of Preston’s, or that

Preston committed fraud or any other tort in the course of his contacts with Texas

through C Change. Preston’s Texas trips on behalf of C Change between do not

constitute contacts supporting general jurisdiction as a matter of law.

Business trip in 2010 to testify regarding NC12 in divorce proceeding. It is

undisputed that Preston traveled to Texas on October 6, 2010 to testify about

NC12’s assets and operations in Sydow’s divorce proceeding. CR 331–70 (Tab 4).

While Appellees complain that the hearing transcript does not say “corporate

representative,” it is indisputable that Preston’s testimony exclusively concerned

NC12 assets and NC12’s financial operation. See CR 357 (discussing purpose of

Preston’s testimony as whether Sydow or NC12 owned a particular asset, or

23

Preston’s alleged 2004 contacts with Collins are discussed together in the next subsection. See

section V.C.2(c), infra.

61

whether Sydow was receiving money from NC12). The transcript contains no

questions whatsoever regarding Preston’s personal relationship with Sydow—or

indeed, anything other than NC12 financial operations and NC12 assets. CR 331–

70 (Tab 4).

Even if Preston had testified in his personal capacity, it would not be

evidence of purposeful availment of the benefits of acting in Texas. Preston did

not file for divorce in Texas, Sydow did. See Guardian Royal Exch. Assur., Ltd. v.

English China Clays, P.L.C., 815 S.W.2d 223, 227 (Tex. 1991) (“the contact must

have resulted from the nonresident defendant's purposeful conduct and not the

unilateral activity of the plaintiff or others”). See also Helicopteros Nacionales de

Colombia, S.A. v. Hall, 466 U.S. 408, 417–18, 104 S. Ct. 1868, 1873 (1984) (the

“unilateral activity of another party or a third person is not an appropriate

consideration when determining whether a defendant has sufficient contacts with a

forum State to justify an assertion of jurisdiction.”); Kulko v. Cal. Super. Ct., 436

U.S. 84, 93, 98 S. Ct. 1690, 1697 (1978) (holding it arbitrary to subject one parent

to suit in any state where other parent chooses to spend time while having custody

of child).

One isolated trip to give testimony in a divorce proceeding is no evidence of

any continuous and systematic relationship with Texas. Preston’s October 6, 2010

business trip does not support general jurisdiction.

62

Business trip with TEM Capital. Again, there is no dispute that Preston

made his May 2–4, 2011 trip to Texas to attend a foreclosure sale and inspect a

cement plant in connection with that sale as a representative of TEM Capital. CR

673 ¶ 7 (Tab 6); CR 349–51 (Tab 4). And again, there is simply no allegation,

much less any evidence, that TEM Capital is an alter ego of Preston’s or that

Preston did anything tortious on his trip that would support individual jurisdiction

over him.

In sum, not a single one of Preston’s business trips support general

jurisdiction over Preston individually.

c) 2004: Business trips, phone calls, and shipment of records

with Quantum.

While Collins disputes whether Preston acted as a representative of

Quantum during their 2004 interactions,24 there is no dispute that these 2004

contacts pertained to the development of MMT’s patented CEP technology. CR

408–09 ¶¶ 3–9 (Tab 4); CR 673 ¶¶ 6–8 (Tab 6). The intervenors affirmatively

assert that Quantum, not Preston, acquired MMT’s CEP technology in 1999 and

that Quantum, not Preston, licensed the CEP patents CR 115–16 ¶¶ 48, 50 (Tab 2).

24

Preston’s sworn declaration states that all his interactions with Collins during this time period

were as a representative of Quantum. CR 673 ¶ 8 (Tab 6). Collins claims he believed Preston to

be operating in his personal capacity, rather than as a representative of Quantum during these

2004 meetings and communications. CR 408–09 ¶¶ 3–9, 11 (Tab 4).

63

While intervenors allege Quantum is “controlled” by Preston, there are no

allegations or evidence that Quantum is Preston’s alter ago. See, e.g., CR 115 ¶ 48

(Tab 2); CR 673 ¶ 10 (Tab 6) (Preston is one of 21 shareholders of Quantum).

There are no allegations or evidence, for example, that Preston comingled his

funds with Quantum, or personally diverted Quantum’s assets, or used Quantum’s

corporate form for his personal benefit. Despite Collins’ claims about his beliefs,

there is no evidence Preston was acting in anything other than his representative

capacity in his dealings with Collins in 2004, and there are no allegations that

Preston committed any tortious acts in the course of these 2004 dealings.

Moreover, none of the alleged 2004 contacts indicate Preston purposefully

availed himself of the privileges of acting within Texas. Even if Preston were

acting in his individual capacity, nothing indicates that Collins’ state of residence

was anything but incidental. Collins, not Preston, chose to reside in Texas. See

Guardian Royal Exch., 815 S.W.2d at 227; Helicopteros, 466 U.S. at 417–18;

Kulko, 436 U.S. at 93.

Even if these limited 2004 contacts—three trips, some telephone calls, and

one shipment of technical records—were included in a general jurisdiction

analysis, they hardly support the continuous and systematic contacts necessary to

give rise to general jurisdiction. See Helicopteros, 466 U.S. at 417–18.

64

d) 2006: Metal Catalyst Ventures’ designation of business

address at TSI address

The fact that an unrelated individual listed TSI’s Texas office address as

Preston’s address on a Nevada document regarding a Nevada corporation is not

minimum contact with Texas, much less one that would support general

jurisdiction. CR 315, 281 (Tab 4); CR 673 ¶ 9 (Tab 6). See Guardian Royal

Exch., 815 S.W.2d at 227; Helicopteros, 466 U.S. at 417–18; Kulko, 436 U.S. at

93.

e) 2008: Personal check

Appellees present no evidence regarding the context surrounding the

personal check Preston allegedly wrote to BOS, Inc., a Turks and Caicos

corporation. CR 387 (Tab 4); CR 25 ¶ 2. Certainly, they present no explanation as

to why Preston would know the foreign entity had a Texas bank account, or how

Preston could be said to have purposefully availed himself of benefits of doing

business in Texas by writing a check to such an entity. Guardian Royal Exch., 815

S.W.2d at 227; Helicopteros, 466 U.S. at 417–18; Kulko, 436 U.S. at 93. This is

not the type of purposeful, continuous, and systemic contact with Texas that gives

rise to general jurisdiction.

65

f) 2012: Alleged alter-ego JK Claims’ purchase of litigation

claims in the Kaiser Litigation

As a matter of law, Preston’s alleged Texas contacts in connection with JK

Claims occur too late to qualify for a general jurisdiction analysis in this case.

PHC-Minden, 235 S.W.3d at 169 (“the relevant period ends at the time suit is

filed.”) (Tab 10). Not only do Appellees fail to establish that JK Claims is an alter

ego of Preston’s, most significantly, they ignore the damning fact that the earliest

of JK Claims’ alleged activities, its application for name reservation with the Texas

Secretary of State, dates back to June 2012. CR 417, 527 (Tab 6). This is over a

year after the original plaintiffs filed suit, and nearly a year after Appellees

themselves filed their suit in intervention. CR 6; CR 102 (Tab 2).

Appellees’ convoluted alter-ego story amounts to nothing more than an

allegation that JK Claims kept poor records. Appellees fail entirely to establish JK

Claims as an alter ego of Preston’s. Preston’s declaration and Sydow’s deposition

testimony are unrefuted and establish that Quantum is the sole owner of JK

Claims. CR 432, 495 at 57:2–3, 498 at 66:19–67:20 (Tab 5); CR 673 ¶ 10 (Tab 6).

Appellees do not allege that Quantum is an alter ego of Preston. Rather, Appellees

simply assert that JK Claims is Preston’s alter ego on the bases that: half of the

funds for the Kaiser claims purchase came “from Boston” and half from Sydow;

certain JK Claims corporate documents are unsigned; and certain JK Claims

66

corporate documents do not reflect the ownership of shares in JK Claims (though

others do). CR 415–24, 529–31 (Tab 5).

There is no evidence that Preston personally supplied any funds for JK

Claims. Rather, Sydow testified the funds came from Quantum. CR 495 at 57:2–

3, 498 at 66:19–67:20 (Tab 5). And failure to comply with corporate formalities is

not a factor in considering whether alter ego exists. Howell v. Hilton Hotels Corp.,

84 S.W.3d 708, 714 (Tex. App.—Houston [1st Dist.] 2002, pet. denied).

There is no evidence that Preston comingled his personal debts or assets

with JK Claims or any of the others indicia of an alter ego entity. There is no

evidence that Preston personally funded the acquisition of the Kaiser litigation and

no evidence that the bankruptcy trustee would have objected if he had.25 There is

no evidence that Preston (or JK Claims or Quantum) did anything improper with

respect to JK Claims’ formation, or its acquisition or management of the Kaiser

claims. TEX. R. CIV. P. 120a(3) (requiring the trial court to consider the pleadings

and the evidence, not speculation and inference).

25

Appellees rely heavily on documents produced in the Kaiser litigation showing discussions

between JK Claims’ counsel and the bankruptcy trustee’s counsel, Gretchen McCord, in

connection with the sale. CR 421–24 (Tab 5) (referencing “Ex. I,” at CR 548–80). While one

half of the source of the funding is unclear, the other half is explicitly from Sydow. CR 564 (Tab

5). If the trustee objected to a defendant in the Kaiser litigation funding JK Claims’ acquisition

of the Kaiser claims, the trustee would have objected to Sydow, who was also a defendant in the

Kaiser litigation. CR 432 (Tab 5).

67

Therefore, even if the alleged JK Claims activity were not too late to support

jurisdiction of a matter of law, there would still be insufficient evidence to support

any finding that JK Claims was Preston’s alter ego. Serv. Corp. Intern. v. Guerra,

348 S.W.3d 221, 228 (Tex. 2011) (evidence is legally insufficient if there is there

is a complete absence of evidence of a vital fact, or the evidence offered to prove a

vital fact is no more than a mere scintilla); Garza v. Alviar, 395 S.W.2d 821, 823

(Tex. 1965) (evidence is factually insufficient if it is so weak that the finding

should be set aside).

3. Preston lacks any substantial, continuous, or systematic contact that

would render him at “at home” in Texas.

Standing against these tenuous Texas contacts are the following facts:

Preston has not lived in Texas since his infancy; has never done business in Texas

in his individual capacity; has never maintained an office in Texas; has never

engaged in any routine sales or other profit-making activities in Texas; does not

rent, own, or possess any real or personal property in Texas; has never taken out a

loan in Texas or guaranteed a debt owed to a Texas resident; does not maintain a

telephone, post office box, or other address in Texas; does not employ any persons

who live in or regularly travel to Texas for work; and has never incurred or paid

taxes in Texas. CR 86–89 ¶¶ 2–14, 74–85 (Tab 1). An out-of-state defendant who

merely does business with Texas businesses or customers will not be subject to

general jurisdiction if he does not have a lasting physical presence in the state.

68

Access Telecom, Inc. v. MCI Telecom. Corp., 197 F.3d 694, 717 (5th Cir. 1999).

Preston indisputably does not.

The Texas and United States Supreme Courts have made clear that brief,

sporadic trips to a forum state are insufficient to create general jurisdiction,

particularly when they are made in a representative capacity. PHC-Minden, 235

S.W.3d at 170 (Tab 9); Ashdon, Inc. v. Gary Brown & Assocs., Inc., 260 S.W.3d

101, 113 (Tex. App.—Houston [1st Dist.] 2008, no pet.) (Florida business owner’s

20+ sales meetings in Texas over 13-year period insufficient to establish general

jurisdiction); Waterman Steamship, 355 S.W.3d at 406 (18 port calls over a seven-

year period “is better characterized as sporadic rather than ‘continuous and

systematic’ contacts”).

In Helicopteros, the United States Supreme Court overturned the Texas

Supreme Court, holding that because Helicol lacked any place of business in

Texas, lacked a license to do business in Texas, took only sporadic trips to Texas

through its CEO and employees, purchased products in Texas, and accepted checks

drawn on Texas bank accounts, Helicol’s Texas contacts were insufficient for

general personal jurisdiction. Helicopteros, 466 U.S. at 416–19.

By contrast, in Perkins v. Benguet Consol. Mining Co., the nonresident

defendant’s mining properties were located in the Philippines, but its operations

were stopped by the Japanese occupation of the islands. 42 U.S. 437, 446–49, 72

69

S. Ct. 413, 419–20 (1952). During the occupation, the president and general

manager returned to his home in Ohio and operated his business from there. See

id. The United States Supreme Court determined that the company’s Ohio contacts

supported a finding of general jurisdiction because the company’s president and

general manager maintained an Ohio office, maintained company files in Ohio,

corresponded from Ohio, drew and distributed salary checks from his Ohio office,

used two Ohio bank accounts for company funds, had an Ohio bank act as transfer

agent for the company’s stock, held directors’ meetings in Ohio, and supervised

company Philippines property from Ohio. Id.

Preston’s brief, sporadic, and representative contacts with Texas do not

approach the level of forum contacts in Helicopteros, much less those in Perkins.

Preston’s forum contacts are not so substantial that Preston “should have

reasonably expected to be sued in Texas on any matter, however remote” from

those contacts. Johnston v. Multidata Sys. Intern. Corp., 523 F.3d 602, 613 (5th

Cir. 2008). There is no basis for general jurisdiction over Preston as a matter of

law.

VI. CONCLUSION AND PRAYER

Appellees, disgruntled out-of-state investors in TSI and NC12, have not

demonstrated why Texas courts should entertain their claims seeking to recover

their lost investment against a Massachusetts resident who is not alleged to have

70

done anything in Texas connected to their claims. Appellees failed to meet their

initial pleading burden, and there is no basis for the exercise of specific or general

jurisdiction. Therefore, Preston requests that this Court reverse the trial court’s

order overruling his special appearance, render a judgment granting his special

appearance, and order that he be dismissed from the lawsuit.

Respectfully submitted,

AHMAD, ZAVITSANOS, ANAIPAKOS,

ALAVI & MENSING, P.C.

By: /s/ Jane Langdell Robinson

Jane Langdell Robinson

Texas Bar No. 24062970

Monica Uddin

Texas Bar No. 24075195

Jamie A. Aycock

Texas Bar No. 24050241

1221 McKinney Street, Suite 3460

Houston, Texas 77010

Telephone: 713-655-1101

Fax: 713-655-0062

ATTORNEYS FOR APPELLANT

JOHN T. PRESTON

71

CERTIFICATE OF COMPLIANCE

I certify that this brief complies with the typeface and word-count

requirements set forth in the Rules of Appellate Procedure. This brief has been

prepared, using Microsoft Word, in 14-point Times New Roman font for the text

and 12-point Times New Roman font for any footnotes. This brief contains 14,507

words, as determined by the word count feature of the word processing program

used to prepare this document, excluding those portions exempted by TEX. R. APP.

P. 9.4(i)(1).

/s/ Jane Langdell Robinson

Jane Langdell Robinson

72

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of this document was served on

all counsel of record in this case, identified below, on June 12, 2015, by the

electronic filing manager and/or via email:

Kelley M. Keller F. Eric Fryar

State Bar No. 11198240 State Bar No. 07495770

kkeller@ellison-keller.com eric@fryarlawfirm.com

Tracey N. Ellison Matthew Buschi

State Bar No. 15054720 State Bar No. 24064982

ELLISON KELLER mbuschi@fryarlawfirm.com

5120 Woodway Dr., Suite 6019 Christina Richardson

Houston, Texas 77056 FRYAR LAW FIRM, P.C.

Telephone: 713-266-8200 State Bar No. 24070495

Fax: 713-266-8201 912 Prairie, Suite 100

Attorneys for Appellees Emjo Houston, Texas 77002-3145

Investments, Ltd. and Fax: 281-605-1888

H.J. von der Goltz Attorneys for all Intervenors/

Plaintiffs

Asher Griffin

Chris Sileo

Sean Flammer

SCOTT, DOUGLASS &

MCCONNICO, LLP

600 Congress Ave., Ste 1500

Austin, Texas 78701-2589

Fax: 512-474-0731

Attorneys for Appellees Chalsys,

MET, and Lo

/s/ Jane Langdell Robinson

Jane Langdell Robinson

4834-5746-0004, v. 7

73

Filed 11 September 28 P2:44

Chris Daniel - District Clerk

Harris County

ED101J016518693

By: jeanetta spencer

CAUSE NO. 2011-44058

MICHAEL COLLINS. ELLEN COLLINS. § IN THE DISTRICT COURT OF

BOS, TNC.. ENVEN, INC., §

METAL CATALYST VENTURES, INC., §

FALL RNER REALTY. LTD. , §

M. SAMEER AHMED, AND §

TSBC SOUTH TEXAS INVESTORS. L.P., ~

§

Plaintiffs, §

§

v. § HARRIS COUNTY, TEXAS

~

MICHAEL SYDOW, JOHN T. PRESTON. §

CHRISTOPH HENKEL. C. CHANGE §

INVESTMENTS. LLC, SONIA LO. CHALSYS ~

CAPITAL PARTNERS, L.L.P., §

BRILLIANT NOVELTY , LL.C.. §

and MELIORA ENERGY §

TECHNOLOGTES, S.A.R.L., §

§

Defendants. § 2 15™ JUDICIAL DISTRICT

DEFENDANT JOHN T. PRESTO 'S AMENDED SPECIAL APPEARANCE AND,

SUBJECT THERETO, ORIGINAL ANSWER

Pursuant to Texas Rule of Civil Procedure 120a. Defendant John T. Preston (''Preston")

files this Amended Special Appearance, and Subject Thereto, Original Answer. objecting to this

Court's personal jurisdiction over him, and in support states as foll ows:

PRESTON'S SPECIAL APPEARANCE

1. Plaintiffs have sued eight defendants in Texas even though there is no basis for

personal jurisdiction over all of them. Specifically. Preston does not belong in this la wsuit

because he has not had contact with the state of Texas in his individual capacity in the past 60

years. nor has he ever done husiness in Texas in his indi vidual capacity. Preston· s limi ted

contacts with Texas have been made on behalf of companies for which he is a director. T he

contacts of these companies cannot be imputed to Preston to subject him to personal jurisdiction

74

in Texas. Thus, Preston does not have the requisite minimum contacts required by Texas and

fe deral law to exercise personal jurisdiction over him. Similarly, because Preston has had no

contact with Texas in the past 60 years, subjecting him to the jurisdiction of a Texas court would

not comport with notions of fair play and justice. There fore. Preston respectfull y requests that

this Court fmd that asserting jurisdiction over him in Texas is improper and dismiss all claims

againsl him.

Argument and Authorities

I. Texas law requires that the exercise of personal jurisdiction be consistent with

t'ederaJ due process.

2. A Texas court may only exercise pet sonaljudsdiction over a defendant if it would

be consistent with Cederal constitutional requirements of due process. Guardian Royal Exch.

Assurance. Ltd. v. English China Clays, P.L. C. , 8 15 S.W.2d 223, 226 (Tex. 199 1). The Texas

long-aJm statute authorizes the exercise of j urisdiction over nonresidents who are "doing

business" in Texas, but this statute can only reach as far as the federal constitutional

requirements of due process will a llow. TEX. CIV. PRAC. & REM. CODE§ 1 7.042 ~ Guardian

Royal. 815 S .W.2d at 226 . Thus, Texas courts must look to due process requirements to

determine if personaljul'isdiction is proper. Guardian Royal, 8 15 S. W.2d at 226.

3. Personal jurisdiction is consistent with due process if 1) the defendant has

purposely established ·'minimum contacts, with Texas: and 2) the exercise of personal

jurisdiction comports with " fair play and substantial justice." Nat '[Indus. SOJzd Ass 'n v. Gibson.

897 S.W.2d 769, 772 (Tex. 1995); Guardian Royal, 815 S.W.2d at 226.

48 12-3575·8602. v. I

75

II. Preston does not have the requisite minimum contact., with Texas to give rise to

personal jurisdiction.

4. The essential goal of the minimum contacts test is to protect the defendant.

Schlobohm v. Schapiro. 784 S.W.2d 355, 357 (Tex. 1990). Thus. the defendant's minimum

contacts must constitute a "substantial connection" between lhe defendant and Texas. Guardian

Royal, 8 15 S .W.2d at 23 1. A defendant is not subject to ju1·isdiction if his Texas contacts are

random. fortuitous or attenuated. Am. Type Culture Collection. Inc. v. Colenum . 83 S.W.3d 801.

806 (Tex. 2002). Instead. to be subject to personal jurisdiction the defcnd<mt must have

sufficient minimum contacts with Texas such thm he could reasonably anticipate lhat his

activities would subject him to the jurisdiction of a Texas com·L Nat'/ Indus. Sand Ass'n. 897

S.W .2d at 772.

5. Moreover. an indi vidual defendant's contacts with Texas on behalf of a

corporation or company cannot be the basis for personal juiisdiction over the person. absent a

showing that the company is the alter ego of the individual defe ndant. Stuart v. Spademan, 772

F.2d 1185, 11 97 (5th Cir. 1985) (applying Texas law in a diver ity action a nd refusing to impute

the company 's jurisdictional contacts with Texas to the individual defendant who was president

of the company); Leon Ltd. v. Albuquerque Commons P 'ship , 862 S.W.2d 693. 708 (Tex. App.-

El Paso 1993. no writ) (holding there was no personal j mi sdiction over individual defendant after

fi nding that the corporation was not his alter ego. and thus. jurisdiction over him could not be

predicated upon jmisdiction over the corporation).

6. If a defendant has had purposeful minimum contacts with Texas. then he can be

subject to specific or general jurisdiction. Guardian Royal. 8 15 S.W.2d at 227-28. Specific

j urisdiction arises when: l) the defendant '·purposefully avails" himself of conducting activities

in Texas; and 2) the cause of action "mises from or is related to those contacts or activilies."

4812-3575·8602. v. I

76

Kelly v. Gen. Interior Constr.. Inc.. 301 S.W.3d 653, 658 (Tex. 2010). General jurisdiction

arises if the defendant's contacts with Texas are so "continuous and systematic" that the

defendant can fair) y be said to be present in Texas. /d. at 227.

A. Because PJaintiffs do not alle ge that Preston has bad any contacts with Texas.

Preston ne gates all bases for personal jurisdiction by establishing that he is a nonresident

of Texas.

7. The plaintiff has the initial burden of pleading sufficient allegations to bti ng the

nomesident defendant within the pi'Ovisions of the Texas long-ann statute. C-Loc Retention Sys.,

Inc. v. Hendrix. 993 S.W .2d 473.476 (Tex. App.- Houston [1 4th Dist.]l 999, no pet.); Frank A.

Srnith Sales, /11c. v. Atlantic Aero. Inc.• 3 1 S.W.3d 742. 747 (Tex. App.-Corpus Clu-isti 2000. no

pet.) (holding that because the petition staled only that defendant had committed acts of

negligence, without specifying where the acts occurred or alleging that they were committed in

Texas. the petition ·•fell well short of pleading sufficient allegations to show j urisdiction in

Texas..).

8. At his special appearance. the defendant bears the blU'den of negating all bases of

personal jurisdict ion. C-Loc Retention Sys., Inc., 993 S.W.2d at 476 (citing Nat'/ Indus. Sand

Ass 'n, 897 S.W .2d at 772). But if the pla intiff does not plead that the defendant committed any

act in Texas, the defend::Ult can negate all base of personal jurisdiction by presenting evidence

that he is a nonresident. C-Loc Retention Sys .. Inc.. 993 S.W.2d at 476; Hotel Partners v. KPMG

Peat Mearwick, 847 S.W.2d 630, 634 (Tex. App.- Dallas 1993, w1·it denied).

9. In their First Amended Petition (''Petition"), Plainti ffs do not plead that Pl'eston

committed any acts in Texas nor do they make any specific allegations that Preston engaged in

business in Texas. Instead. in the Statement of Facts. Plaintiffs state that Preston "wrote a check

to BOS" and that BOS later re tumed this amount to Preston. See First Am. Pe t. ~~ 25. Plaintiff

4812-3575·8602. v. I

77

BOS. Inc. is a Turks and Caicos corporation. See First Am. Pet. <J[ 2. Thus. Plaintiffs merely

allege that Preston transacted with a foreign corporation and do not allege that this activity

occurred in Texas. Thu s, this act cannot constitute "doing business" in Texas. TEx. C IV. PRAC.

& REM. CODE§ 17.042.

10. Plaintiffs also allege that Preston ··engineered the trans fer of assets and liabilities"

from Texas Syngas. Inc. ("TSI") lo NC12. Inc . See First Am. Pet. ~[ 28. TSI is a Nevada

corporation . See Fitst Am. Pet. ~[21. NC12, lnc . is al so a Nevada corporation. Exh. A, Preston

Aff. at 2. Thus, Plaintiffs only allege that Preston t1·ansl'en ed assets hetween two Nevada

corporations - an act tl1at also does not involve Texas. much less constitute "doing business" in

Texas.

11. Plaintiffs allege that Pteston removed Plaintiff Michael Collins as a director of

NC1 2, Inc. and that he. along with other defendants, "systematically strip[ped] NC 12 of its assets

and transfer[ed] the assets" to a company in Luxembourg. See First A m. Pet. <J[ 30. Plaintiffs

present no evidence or allegations that these acts occmTed in Texas or that Preston ~ommiHed

any of these acts in Texas.

12. Moreover. Plaintiffs summari ly state in the " Part ies" and "Jmisdiction" sections

of the Petition that the Preston and the other defendant have engaged in or done business in

Texas. without providing any basis for this statement or alleging any acts that constitute business

in Texas. See Fil'st Am. Pet. <Jl~l 9, 16.

13. To meet their burden of pleading a sufficient basis for personal jurisdiction.

Plaintiffs must allege Preston conunitted a specific act in Texas. See Siskind v. Villa Found. for

Educ., Inc .. 642 S.W.2d 434 (Tex. 1982) (finding no personal jmisdiction over nonresident

defendants bec~use there were no al legations of specific acts in Texas). Thus, Plaintjffs' pet.ltion

4812-3575-8602. V. I

78

falls ''well short of pleading sufficient allegat ions to show jurisdiction in Texas." Frank A. Smith

Sales, Inc., 31 S.W.3d at 747.

14. Because Plaintiffs have not pled that Preston commiued an y act in Texas, P1·eston

can negate all hases of personal jurisdiction by presenting evidence that he is a nonresident of

Texas. C-Loc Retention Sys., Inc. , 993 S.W.2d at 476 ~ Temperature Sys., Inc. v. Bill Pepper.

Inc., 854 S.W .2d 669.673 (Tex. App. -Dallas 1993, writ dism' d by agr.) (holding that proof that

a defendant is a nomesident is sufficient to meet the defendant' s burden of negating jurisd iction

when a plaintiff pleads onl y conclusory jmisdictional allegations in the peti tion).

15. Preston is indeed a nonresident of Texas~ he is a resident of Massachusetts. Exh.

A. Presion Aff. at 3. Thus, Preston has negated all bases for personal jurisdiclion and has

sat isfied his burden regarding his special appearance. Temperature Sys., Inc., 854 S.W.2d at

673. Th is Court should therefot•e grant Preston's special appearance and dismiss all clai ms

against him.

B. Preston has not purposely availed himself of conducting activities in Texas to give

rise to specific jurisdiction.

16. Even if Plaintiffs had alleged that Preston committed acts in Texas, he is no t

subject to specific jurisdiction because he has not purposefully avaj led himself of conducting

activities in Texas. Specific jurisd iction ari ses when: 1) the defendant " purposefull y avail s'·

himself of conducting activities in Texas ~ and 2) the cause of action •·arises from or is related to

those contacts or activities." Kelly. 301 S.W .3d at 658.

17. Preston has never done business in Texas in his individual capac ity. Exh. A,

Preston AlT. at 4. He has not travelled to or visited Texas in hi s individual capacity in the past 60

years. ld.

4812-3575-8602. v. I

79

18. Preston has only had limited contacts with Texas. and aJl of these contacts were

made in his representative capacity and on behalf of a company for which he was a board

member, director or a principaL /d. at 5. 6. Specifically, Preston visited Texas approximately 8

times 20 years ago. as a representative board me mber for two different compan ies. /d. at 5. In

the 1ate 1980's. Preston attended no more than 5 board meet ings in Texas as a representative and

boa1·d member of a nonprofit organization. /d. at 5. In the early 1990's. Preston attended no

mo t·e than 3 board meetings in Texas as a representative of a Delaware company of which he

was a boatd member. /d. at 5.

19. In the past 5 years, Preston has visited Texas a very limited number of times. and

again only as a representative and on behalf of a company for which he was a director or

principal. Jcl. at 6. Preston visited Texas approximately 3 times in the past 5 years on behalf of

TEM Capital. a company for which he is managing partner. /d. at 6. These visits consisted of

touring facilities in which TEM Capital invests. ld. at 6. Preston 's only other acti vity in Texas

has been to appear as a witness in Michael Sydow 's divorce proceedings in 2010. ld. at 6. He

appeared as a rept·esentative or NC 12, Inc. and testified regarding an asset (a building) owned by

NC 12, Inc. /d. at 6.

20. Preston's contacts with Texas on behalf of these companies cannot be the basis

for personal jurisdiction over him absent a showing that these companies are his alter egos.

Stuart, 772 F.2d at 1197; Leon Ltd., 862 S.W.2d at 708. PlainWTs do not, and cannot, aJlege that

any of the companies that Preston has travelled to Texas on behalf of are his alter egos. Thus.

none of the visits or contacts with Texas that Preston has had with Texas in the past 60 years can

be athibuted lo him for jw·isdictionaJ purposes.

4812-3575-8602. V. I

80

2 1. Other than these limited contacts with Texas on behalf of these companies,

Preston has had no o ther contacts with Texas. Preston has never maintained an office in Texas,

and has never employed any person or company located in Texas. /d. at 8. Preston has never

been engaged in routine sales or other pro fit making activities in Texas. /d. Preston does not

maintain a registered agent on whom service of process can be made in Texas. ld. Other than

engaging defense counsel in the present action. Preston has never entered inlo any contracls in

Texas: with any Texas residents, any contracts calling fm per[ormllllce in Texas, or a11y contracts

that contain a mandatory venue provision in Texas. /d.

22. Preston does not rent. own, or possess any real or personal property in Texas. nor

does he hold a mortgage or other lien on any real or personal property in Texas. /d. at 9.

Preston does not have any investments in Texas, and he has never taken out a loan in Texas or

guaranteed any debt owed to a Texas resident. /d.

23. Preston docs not maintain a telephone listing. post office box. or registered

address in Texas . Id. at 10. Preston does not employ any persons who reside in Texas, or who

regularly travel to Texas in connection with their individual business. /d. at ll. Preston has

never incuned or paid any taxes in Texas. /d. at 12.

24. Except for this lawsuit. Preston has never been a party to litjgation in any state or

federal court in Texas. !d. at 13. Preston has never committed a tort in whole or in part in

Texas. ld. at 14.

25. Because Preston has had no contacts with Texas in the past 60 years that can he

attributed to him personally, Preston c~umot plausibly be found to have •·purposefully availed"

himself of conducting activities in Texas. Moreover. because Preston has not had contact with

Texas in his individual capacity, Pl aintiffs' alleged causes of action could not "arise from or be

4812-3575-8602. v. I

81

related to.. ~my contacts Preston had with Texas. Thus. Preston cannot be subject to specific

j urisdiction in Texas.

C. Preston has not had any contacts with Texas to give rise to general jurisdiction.

26. Because Preston has had no contact with Texas in the past 60 years. he similarl y

does not have ·'continuous and systematic" contacts with Texas that would subject hjm to general

j w·isdiction. Grwrdicm Royal. 815 S.W.2d at 227. To assert general j w·isdiction over a

defendant. usually the defendant must be engaged in longstanding business in Texas. such as

regularly marketing or shipping products to Texas or maintaining one or more offices here.

PHC-Minden. L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163. 168 (Tex. 2007). Less extensive

activities will not qualify for general jurisdiction. /d. As stated in paragraphs 17 - 24 above.

Preston has had no contact wilh Texas in the past 60 years ; thus, there is no basis for general

jurisdiction.

27. Moreover. Preston has not. had sufficient minimum contacts with Texas such that

he could reasonably anticipate being subject to the jmi scliction of a Texas court. Nat 'l lndus.

Sand Ass 'rl. 897 S.W.2d at 772. Due to a complete lack of contact with Texas in the past 60

years. Preston is not subject to either specific or general personal jmisdiction, and hi s special

appearance should be granted. Nat '! Indus. Sand Ass'n, 897 S.W.2d at 776 (conditionally

granting wlit of mandamus and holding that trial court. abused its discretion in denying a

defendant's special appearance where the defendant lacked the minimum contacts necessary for

the nial com1 to exercise either specific or general personal ju1isdiction).

III. Exercising jurisdiction over Preston would not comport with fair play a11d justice.

28. Because of Preston's lack of contact with Texas. exercising personal jurisdiction

over him would not comport " with traditional noti ons of fajr play and substant ial justice."

4812-3575·8602. v. I

82

Guardian Royal. 8 15 S.W.2d at 228. Only after a court determines that a nomesident defendant

has purposefully established minimum contacts with the forum state - and Preston has not -

then the Court evaluates these contacts in light of other factors to determine whether the

assertion of personal jurisdiction comports with fair play and justice. /d. These factors include:

I ) the burden on the defendant. 2) the interests of the forum state in adjudicating the dispute. 3)

the plaintiffs interest in obtaining convenient and effective relief. 4) the interstate j udicial

system's interest in obtaining the most effic ient resolution of controversies, and 5) the shared

interest of the several States in fm1hering fundam ental substantive social policies. /d.

29. In addition to Preston not having minimum contacts with Texas. these 5 factors

also dictate against the exercise of jmisdiction over Preston. As lO the first factor. the burden to

Preston in defendin g this case is substantial. Preston would be l'equired to travel to Texas to

attend cout1 proceedings and stay there. perhaps for extended periods of time. Exh. A, Preston

Aff. at 15. The costs and time associated with such travel <U"e considerable. I d.

30. As to fac tors 2 and 3. Texas has little interest in providing a forum to litigate any

alleged injuries that occurred outside of Texas (First Am. Pet. ~[<Jl 25, 28, 30, 3 1), and further,

evidence in this litigation related to Preston is likely outside the subpoena power of a Texas

court, which would greatly compromise Plaintiffs' ability to obtain convenient and effective

relief. Lonza AG v. Blum, 70 S.W.3d 1&4. 193 (Tex.. App.- S<m Anton io 2001 , pet. denied)

(holding that the exel'cise of long-arm jurisdict ion would not comport with fair play and justice

after noting that evidence existed outside the subpoena power of the court ). Al so, any interests

of factors 4 and 5 do not outweigh the mandate from factors I, 2, and 3 to not exercise

j urisdiction over Pres ton.

48 12-3575· 8602. v. I

83

3 1. Thus, this Court would offend traditional notions of fair play and substantial

justice if it asserted jurisdiction over Preston, and further, would deprive Preston of due process.

As such, Plaintiffs' claims against Preston should be dismissed. Guardian Royal, 815 S.W.2d at

233 (finding that it would offend traditional notions of fair play and justice to subject a

nomesident defendant to personal jurisdiction in Texas because it would be burdensome for the

defendant to submit to a foreign judicial system when the alleged acts occmTed outside of

Texas).

SUBJECT TO SPECIAL APPEARANCE, PRESTON'S ORIGINAL ANSWER

Defendant John T. Preston, subject to and without waiver of his special appearance, files

this Original Answer to Plaintiffs' First Amende-d Oliginal Petition and shows the Court as

follows:

General Denial

Preston denies generally every a11egation contained in Plaintiffs' petition and demands

strict proof of the allegations in accordance with the Texas Rule of Civil Procedure and the

Texas Constitution. Preston reserves the right to plead further and with greater patticularity as

this case progresses.

THEREFORE, Defendant John T. Preston respectfully requests that the Court dismiss

Plaintiffs' claims against him, assess all costs against Plaintiffs. and grant him such other and

fm1her relief as is just and proper.

481:!-3575-8602. V. J

84

Respectfully submitted,

Is/ Arnir Alavi

Amir Alavi

State Bar No. 00793239

Ashley Frankson

State Bar No. 24059776

AHMAD, ZAVITSANOS, ANAIPAKOS, ALAVI &

MENSJNGP.C

3460 One Houston Center

1221 McKinney Street

Houston, Texas 77010

Telephone: (713) 655-1101

Telecopier: (713) 655-0062

ATTORNEYS FOR DEFENDANTS

MICHAEL SYDOW, JOHN T. PRESTON, C

CHANGE INVESTMENTS, LLC and BRILLIANT

NOVELTY, LLC

CERTIFICATE OF SERVICE

I hereby certify that on this 28th day of September, 2011, I sent by facsimile transmission,

by first class mail, postage prepaid, or by email, a true and correct copy of the above and

foregoing document to counsel as follows:

Randall 0 . SetTels

Clyde J. ''Jay" Jackson, ill

800 Commerce Street

Houston , Texas 77002

Facsimile: 713-225-0827

Brent C. Pen y

800 Commerce Street

Houston, Texas 77002

Facsimile: 713-237-0415

Asher Griffin

ChJ.is Sileo

Scott, Douglass & McConnico, L.L.P.

600 Congress Avenue, Suite 1500

Austin, Texas 78701-2589

Facsimile: 512-474-0731

Is/ Amir Alavi

Amir Alavi

4812-3575-8602, v. 1

85

CAUSE NO. 2011-44058

MlCilAEL COLLINS, ELLEN COLLiNS, § fN THE DISTRICT COURT OF

BOS, INC., ENVEN, INC., §

METAL C/\TALYSTVENTUR ES, INC., §

FAT.L RIVER REALTY, LTD., §

M. SAMEER AHMED, AND §

TSBC SOUTH TEXAS INVESTORS, L.P.. §

§

Plaintiffs, §

.. . .

;~

~.!! v.

§

§ IlARRIS COUNTY, TEXAS

~0 A

N t) .... ':/

Qi 'E M f: MICHAEL SYDOW, JOHN T. PRESTON, §

~cS ~ ~ CHRISTOPH HENKEL, C. CHANGE §

-[...:~~~ INVESTMENTS, LLC, SONlA LO, CHALSYS §

~ ·~ ~~~ CAPITAL PARTNERS, L.L.P., §

-oo..., l; BI:ULLlANT NOVELTY, L.L.C., §

Cll .~ ·c

-

'0 0 ·~ and MEL! ORA ENERGY

U)-

§

~ ...... .

ii:5~~~ TECHNOLOUIES, S.A.R.L., §

§

Defendants. § 715T11 .I UO IClAL DISTRICT

AFFIDAVIT OF .JOHN T. PRESTON

STATE OF MASSACHUSETTS §

§

COUNTY OF MIDDLESEX §

BEFORE ME, the undersigned ofticial, on tlus day personally appeared John T. Pre.ston,

who is personally known to me, and who fi rst being sworn by me, according to Jaw, upon his

oath deposed and stated the following:

1. My name is John T. Preston. 1 am over the age of2 J. 1 have never been

convicted of a felony or crime involving moral turpitude. I am of sow1d

mind and am fu lly compelem to make this affidavit.

2. I am a Director of NC12, Inc, a Nevada corporation. l have personal

knowledge of all of the facts stated herein, and they are all true and correct

now, and for all applicable time rrames involving the Plaintills'

allegations in thi s c.:ase.

3. I am a resident of Massachusetts. I am not a Texa~ resident.

4. I have never done business in Texas in my individual capacity. ln the past

sixty years, I have not travell ed to or visited Texas in my indivi dual

capacity. As a11 infant, I lived in Texas for less than one year.

EXHIBIT A

86

5. 1 visited Texas a limited number of times approximately twenty years ago,

and each of these visits was made in my representative capacity and on

behalf of a company for which I was a board member. Specifically, in the

1990's, J attended no more than tive board meetings in Texas us a

representative and hoard member of a nonprofit organization. Also in the

1990's, I attended no more Lhan three board meetings in Texas as a

representative of a Delaware con.lpany of which T was a board member.

These visits were not made by me in my individual c ~ac ity, hut a~ a

reprc.-;entative and board member of these companies.

G. In the past approxirnately five years, I have visited Texas a very limited

number of times, and again on ly as a representative and on behalf of a

company for whi ch I was a director or plincipal. 1 visi ted Texas

appl'oxl matcly three rimes in the past five years on behalf of TEM Capital.

a oompany for which J om managing partner. These visits consisted of

touring facilit ies in which TEM Capital invests. My only other activity in

Texas has been to appear as a witness in Michud Sydow's divorce

proceedings in 2010. I appeared as a representative of NC12, lnc. and

testi fied regarding an asset (a building) owned by NC12, Inc.

7. Any buard meetings J have attended related to NC12, Inc. have occurred

in Massachusetts.

8. J am employed outside of Texas. have never maintained an o t1icc in

Texas, and have never been employed by a•lY person or company located

in Texas. 1 have never been engaged in routine sales or other profit

making activities in Texas, '-!nd Tdo no£ own any private Texas business. I

am not required to nor do I maintain a registered agent on whom scrvioe of

process can be made in Texas. Other than engaging defense counsel in the

present action, I have never entered into any contracts individually in

Texas: with any Texas residents, any contracts call ing for pcrformuncc in

Texas, or any contracts with a mandatory venue provision in Texas.

9. I do not rent, own, or possess any real or personal prop~rty in Texas, nor

do I hold a mortgage or other lien on any real or personal property in

Texas. J do nut have any investments or assets in Texas, and I have never

taken out a loan in Texas or guaranteed any debt owed to a Texas resident.

I0. I do not maintain '-In indi vidual telephone listing, post office box, or

registered address in Texas.

II . I do not employ nny persons who reside in Texas, or who •·cgularly travel

to Texas in cormection with their individm1l business.

4!Wl 7!.41 09S4, v. l

87

12_. .I ·_b<)ve .never personally incurr~d or pCli:d any ta;xt.'S. in Te~as. or filed a

persomu tax1~turn in T.eX'as.

13. :Except tot. this lawsuit, 1 baye nevet been ·a party to 1itigat\on in oi1y state

or fedetal court hi T(}xas.

14. .I havez ne~er ootnmitte{} a tort in whole or in part in Tex..a.s.

.15, If tbts lilWSlJit Wel1e allowed to qotltinue. in r~xa.s, I WO:tlld be. fot=ced to

t!flvel ro Texas and ·stay there_, perhB:ps fot exit';!ntlw peri-ods <.tftitn:e. The

.cqsts and time a~ociated with $UCh traveJ are. <?Ons1d'9t.a'ble. As a r~ult,

there· wouid be nwnerous practieal and logistkal problems associated wlfh

dcf¢;ildlng :Plaintiffs' clainis ·i·n Texas. Dncle,t · the :circumstances~ tl1e

¢outinued pro-secution of P.htinti.;f:fs' clai·ms again~t .me in T~x~ will b:e.

r~nd,t,rly- bu~'QensQme, extremely <Uffic~H. 'very Ome C'Ql1St'ft11ing, ~n<,i

e1\pensive.

Fvrther, a.ffhrnt sayeth :oot.

SwQrn tQ and .S}lb~cri,ped hefor.e lt\e this&_ day 9f September, 201 L

4829·l54l-0954, v. ~

88

Filed 11 November 11 A 11 :27

Chris Daniel - District Clerk

Harris County

ED101J016589121

By: Kyndria Perkins

Cause o. 20 l l-44058

MICHAEL COLLJNS, ET AL ., § IN THE DISTRICT COURT

PLAINTIFFS, §

§

vs. § OF HARRIS COUNTY, TEXAS

§

MICHAEL SYDOW, ET AL , §

DEFENDANTS. § 2 15th JUDICIAL DISTRICT

AKILA FINANCE, S.A.; BOSQUES DEL MOLINO, § IN THE DISTRICT COURT

S.A.; CENTRANS ENERGY SERVICES, INC .; §

CHESTER MESTER HOLDINGS, LTD.; DELTEC §

BANK & TRUST, LTD.; EMJO INVESTMENTS, §

LTD.; WTLLIAM END; EVANS & PETREE 401K §

PLAN; FIRST BAY INTERTRADE, GM PARTNERS, §

MARAIR CORP.; W .L. NICHOL, IV; §

PANORAMA INVESTMENT, LTD.; PCO l §

VERMOEGENS VERW. ; ALEJANDRO SANTO §

DOMINGO; SINCHI INVESTMENT; VENTURI §

GLOBAL INVESTMENTS, LTD , and H.J. VON DER §

GOLTZ, §

TNTERVENORSIPLAINTIFFS, §

§

vs. § OF HARRIS COUNTY, TEXAS

§

MICHAEL SYDOW; JOHN PRESTON; CHRISTOPH §

HENKEL; C CHANGE INVESTMENTS, L.L.C.; §

CHALSYS CAPITAL PARTNERS, L.L.P.; SONIA §

LO;. BRILLIANT NOVELTY, L.L.C.; OSCURA, INC .; ss

MELIORA ENERGY TECHNOLOGIES, S.a.r.l; and §

FALL RIVER REALTY, LTD. , §

DEF ENDANTS. § 2 15th JUDICIAL DISTRICT

ORIGINAL PETITION IN INTERVENTION

TO THE HONORABLE DISTRICT COURT:

COME NOW Intervenors Akila Finance, S.A., Bosques del .M olino, S.A., Centrans

Energy Services, Inc., Chester Mester Holdings, Ltd., Deltec Bank & Trust, Ltd., Emjo

Investments, Ltd., William End, Evans and Petree 40 I K Plan, First Bay Intertrade, GM Partners,

Marair Corporation, W.L. Nichol, IV, Panorama Investment, Ltd., PC 0 1 Yennoegens Yerw.,

ORIGl'NAl. P l-7JTT'ION I N TNTI:.IWF.NTION l of 3 ~

102

Alejandro Santo Domingo, Sinchj lnvestment, Venturi Global Investments, Ltd., and H.J. von

der Goltz, and file this Original Petition in Intervention to intervene as parties plajntiff in this

action. and in support thereof, would show the Court the following

l. Nature of Thjs Action

I. This is a fraud and shareholder oppression action. Intervenors are minority shareholders

ofNC 12, Inc .• a Nevada corporation headquartered in Houston, Texas. Intervenors assert claims

and seek remedies based solely on their indi vidual ri ghts. J't now appears that the entire corporate

enterprise of NC 12 was a massive fraudulent scheme perpetrated by John Preston, Michael

Sydow, and others who conspired with them. The story begins with a multi-million dollar

research facility and a technology portfolio created with investor dollars by a110ther Preston

company in the 1990s. When that company failed and went bankrupt, its investors lost

everythjng. Preston purchased the assets out of the bankruptcy for a fraction of their value and

sold some of the acquired intellectual property later to NC 12' s corporate predecessor- a

company founded by Sydow and Michael Collins and later controlled by Sydow and Preston.

2. Between late 2007 and early 20 10, Intervenors invested more than $11 mi lli on in NC12

and its corporate predecessor, Texas Syngas. This money was squandered and misappropriated

by Sydow and Preston. When the NC 12 Board of Directors attempted to stop the

mismanagement and theft. Defendants proceeded to elimina te all independent oversight on the

board of directors by removi ng Mr. H.J. von der Goltz and Dr. Aydin Mudeni soglu as directors.

Defendants then divested the corporation of its principal assets: the research faci lity worth

millions of dollars and the patented technology worth hundreds of millions of dollars. These

assets were sold for a fraction of their true worth to ent1ties in which Defendants had personal

interests. NC12 became a defunct shell and is now in bankruptcy.

?. of .H

103

3. Thus, the story ends much as it began. The shareholders are left with nothjng but a

bankrupt and empty shell. Preston and Sydow abused their control over the corporation,

misappropriated the bulk of the vaJue in the company for their own benefit. and Sydow, Preston,

and their co-conspirators wind up with ownership of the technology and physical facilities. The

shareholders, however, have notrung to show for their millions of dollars other tha n ownership of

diluted stock in a worthless., bankrupt shell. Intervenors seek equitable relief from the Court as a

result of Defendants' oppressive conduct, who consthute the controlling

This text is long and has been trimmed here. Open the source document for the complete record.