SE Texas Record

Friday, August 23, 2019

Court: Non-resident defendants lack jurisdiction in international agreement dispute

State Court

By Charmaine Little | Aug 7, 2019


Texas Fourteenth Court of Appeals Justice Margaret “Meg” Poissant | txcourts.gov

HOUSTON -- A holdings company took issue with a lower court sustaining objections in its lawsuit, but a three-judge panel for the Texas 14th Court of Appeals sided with the lower court and affirmed sustaining the objection Aug. 1.

Justice Margaret “Meg” Poissant wrote the opinion. Chief Justice Kem Frost and Justice Charles A. Spain concurred.

Watamar Holding SA had sued SFM Holdings SA, Solly Lawi and Albert Lawi in Harris County District Court. Watamar then filed the appeal after the court sustained the nonresident defendants’ objections to jurisdiction and special appearances and dismissing the nonresident defendants for want of jurisdiction. It was noted that Watamar is based in the Republic of Panama, and bought a 10 percent interest in the Mirelis group, including SFM Holdings., a Swiss company, in 1981. The Lawis are also Canadian citizens who live in Geneva, Switzerland .

These three defendants argued jurisdiction in the case. They also filed a brief to back their special appearances, and then objected to Watamar’s response, stating that one of the exhibits he presented didn’t follow Rule 1009(a) of the Texas Rules of Evidence. This came after Watamar did not properly serve a copy of the 1998 agreement (which was written in French) and failed to offer an affidavit from a qualified translator that could guarantee the accuracy of the agreement.

The lower court sustained the objection and the appeals court affirmed.

The 14th Court of Appeals the lower court does not have specific jurisdiction over SFM. “The record evidence shows that there is no direct or even close connection between SFM and the Texas properties at issue in this case,” said the court. It pointed out that SFM is the full owner of Mirelis Investment Properties Inc., which is based in Canada. Plus, none of the evidence shows that SFM has a loan from a U.S. bank or that it has ever taken out a loan from a financial institution in the U.S.

The court also said it lacked specific jurisdiction over Solly and Albert Lawi.

Also, neither of the non-resident defendants fall under personal jurisdiction via the alter ego doctrine, which Watamar hoped would help determine jurisdiction.

Watamar sued in light of a 1998 agreement that was signed in Geneva. It called for the sale of Watamar’s 10 percent holding interest in the Mirelis Group in two parts – selling its financial interest in Mirelis Group Finance and selling its interest in Mirelis Group-held participations in real estate investments. That would be conditional on venue only “at the discretion of the arbitral tribunal,” according to the court. 

Matters became complicated after the parties could not agree on the value of Watamar’s 10 percent stake in Mirelis Group real estate investments. It called for an arbitration in 2005. At that point, only 29 real properties were sold.

 Arbitration lasted five years, and Watamar was ultimately given monetary compensation for 16 of the properties that were sold. It was also given a pro rata percentage of 10 percent for the interest in the 13 properties that were unsold. The property at the basis of this lawsuit is one of the 13 properties, the Ashford Willowbrook property in Houston, that had not been sold yet. After a second arbitration, Watamar was awarded $27,640 for the property based on its 2.764 percent interest.

Watamar then sued for the correct financial information related to its real estate investments in Texas and to implement its rights for the Harris County property. It sued for breach of contract, breach of fiduciary duty and unjust enrichment. He also alleged “the vicarious liability theories of aiding and abetting breach of fiduciary duty, civil conspiracy to breach fiduciary duty, joint venture, and piercing the corporate veil,” according to the lawsuit. Watamar also sought attorney fees.

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