SOUTH CHINA MANAGEMENT LLC LB LLC LB LLC v. LIN (2026)

OPINION

This is a wrongful termination case in which appellee Julie Lin sued appellants under Sabine Pilot. Appellants (1) South China Management, LLC (“SCM”), (2) LB Buckhead LLC, (3) LB Cherry Creek LLC, and (4) Thomas Rickard Wahlstedt appeal the denial of their special appearance. We hold that the trial court may not exercise personal jurisdiction over LB Buckhead, LB Cherry Creek, and Wahlstedt, and we render judgment in part dismissing Lin's wrongful termination claim against those three appellants. However, we also conclude that the trial court may exercise personal jurisdiction over SCM and did not err in denying SCM's special appearance. We affirm the trial court's order in that limited regard.

Background

SCM, through several affiliates, operates restaurants in Texas and other states. Wahlstedt is a restauranteur who owns a financial interest in SCM. Lin alleged that appellants hired her as the wine and beverage director for all their restaurants. According to Lin's live petition, appellants terminated her employment after she refused their demands that she “commit commercial bribery and fabricate documents.” Lin alleged that appellants “communicated [their] illegal demands ․ by telephone and emails to Ms. Lin in Texas, directing her to commit the crimes in and from Texas.” Lin sued appellants for wrongful termination.¹ She asserted no other claims.

Appellants—all nonresidents—filed a special appearance, arguing that they are not subject to personal jurisdiction in Texas. The trial court denied the special appearance, and appellants appealed.

Analysis

A. Personal Jurisdiction

A defendant's amenability to personal jurisdiction in Texas presents a question of law that we review de novo. Old Republic Nat'l Title Ins. Co. v. Bell, 549 S.W.3d 550, 558 (Tex. 2018). Our analysis begins with some familiar standards. “A court must have personal jurisdiction over a defendant to issue a binding judgment.” LG Chem Am., Inc. v. Morgan, 670 S.W.3d 341, 346 (Tex. 2023). Texas courts exercise personal jurisdiction over litigants by reference to the Texas long-arm statute and federal constitutional due-process guarantees. See id.

“Our long-arm statute reaches as far as the federal constitutional requirements for due process will allow,” Spir Star AG v. Kimich, 310 S.W.3d 868, 872 (Tex. 2010), so Texas courts may exercise personal jurisdiction over foreign defendants “having such ‘contacts’ with the forum [s]tate that ‘the maintenance of the suit’ is ‘reasonable[ ] in the context of our federal system of government’ and ‘does not offend traditional notions of fair play and substantial justice.’ ” Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 592 U.S. 351, 358, 141 S.Ct. 1017, 209 L.Ed.2d 225 (2021) (quoting Int'l Shoe Co. v. State of Wash., Off. of Unemployment Comp. & Placement, 326 U.S. 310, 316-17, 66 S.Ct. 154, 90 L.Ed. 95 (1945)). This minimum-contacts inquiry is a forum-by-forum or sovereign-by-sovereign analysis that examines the nature and extent of the defendant's relationship to the forum to determine whether the defendant is amenable to general or specific jurisdiction. See State v. Volkswagen Aktiengesellschaft, 669 S.W.3d 399, 412 (Tex. 2023).

There are “two kinds of personal jurisdiction: general (sometimes called all-purpose) jurisdiction and specific (sometimes called case-linked) jurisdiction.” Ford Motor Co., 592 U.S. at 358, 141 S.Ct. 1017. Although appellants challenge both general and specific jurisdiction, Lin relies only on specific jurisdiction, and so we cabin our analysis accordingly. For this reason, we do not address appellants’ first issue regarding general jurisdiction.

Courts possess specific jurisdiction over a nonresident defendant when (1) the defendant engages in some act by which it purposefully avails itself of the privilege of conducting activities within the forum state and (2) the plaintiff's claims arise out of or relate to those forum contacts. Volkswagen, 669 S.W.3d at 412-13. This kind of personal jurisdiction involves a “claim-by-claim” analysis that focuses on the relationship between the defendant, the forum state, and the operative facts of the litigation. Moncrief Oil Int'l Inc. v. OAO Gazprom, 414 S.W.3d 142, 150 (Tex. 2013). To support an exercise of specific jurisdiction, there must be a substantial connection between the defendant's forum contacts and the operative facts of the litigation. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 585 (Tex. 2007). “The ‘operative facts’ of the litigation are those facts the trial court will focus on to prove the nonresident defendant's liability.” Fjell Tech. Grp. v. Unitech Int'l, Inc., No. 14-14-00255-CV, 2015 WL 457805, at *6 (Tex. App.—Houston [14th Dist.] Feb. 3, 2015, pet. denied) (mem. op.).

A nonresident defendant may challenge a Texas court's personal jurisdiction over it by filing a special appearance. Tex. R. Civ. P. 120a. In a challenge to personal jurisdiction, the plaintiff and the defendant bear shifting burdens of proof. TV Azteca v. Ruiz, 490 S.W.3d 29, 36 n.4 (Tex. 2016). The plaintiff bears the initial burden of pleading sufficient facts to bring a nonresident defendant within the reach of the Texas long-arm statute. Id.; see also Tex. Civ. Prac. & Rem. Code § 17.042; Perna v. Hogan, 162 S.W.3d 648, 653 (Tex. App.—Houston [14th Dist.] 2005, no pet.). If the plaintiff meets her initial burden to plead allegations sufficient to confer personal jurisdiction, the burden shifts to the defendant to negate all jurisdictional bases alleged. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 793 (Tex. 2002).

A defendant can negate jurisdiction on either a factual or a legal basis. Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 659 (Tex. 2010). “Factually, the defendant can present evidence that it has no contacts with Texas, effectively disproving the plaintiff's allegations,” id., or that the claim does not arise out of the defendant's Texas contacts. Moncrief Oil, 414 S.W.3d at 150 (“ ‘[T]he Due Process Clause prohibits the exercise of jurisdiction over any claim that does not arise out of or result from the defendant's forum contacts.’ ”) (quoting Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 275 (5th Cir. 2006)). Or, the defendant can show that, even if the plaintiff's alleged facts are true, the evidence is legally insufficient to establish jurisdiction. Kelly, 301 S.W.3d at 659. If the defendant meets its burden of negating all alleged bases of personal jurisdiction, then the plaintiff must respond with evidence “establishing the requisite link with Texas.” Id. at 660.

“When, as here, the trial court does not issue findings of fact and conclusions of law, we imply all relevant facts necessary to support the judgment that are supported by evidence.” Moncrief Oil, 414 S.W.3d at 150. “If the parties present conflicting evidence that raises a fact issue, we will resolve the dispute by upholding the trial court's determination.” TV Azteca, 490 S.W.3d at 36 n.4.

B. Application

In their second issue, appellants challenge the trial court's exercise of specific personal jurisdiction over them. We address the relevant evidence as it pertains to each named appellant.

1. LB Cherry Creek, LB Buckhead, and Wahlstedt

In her original petition, Lin named “South China Management,” “Le Colonial,” “Le Bilboquet,” and Thomas Rickard Wahlstedt as defendants. Appellants answered and asserted their belief that Lin intended to sue South China Management, LLC (which is appellant SCM), an Illinois limited liability company; an affiliate of SCM named Le Colonial Texas, LLC, a Texas limited liability company; two other affiliates of SCM named LB Cherry Creek LLC, a Colorado limited liability company using the trade name Le Bilboquet, and LB Buckhead LLC, a Georgia limited liability company using the trade name Le Bilboquet; and Wahlstedt. Lin then filed an amended petition, naming SCM, LB Buckhead, LB Cherry Creek, and Wahlstedt as defendants. Lin did not name Le Colonial Texas, LLC as a defendant. Lin collectively referred to all named defendants as “Defendants.”

Lin alleged that: “Defendants hired Ms. Lin;” “Defendants expected Ms. Lin to be based in Houston;” “Defendants requested Ms. Lin to commit commercial bribery and fabricate documents in Texas in violation of federal and Texas alcoholic beverage laws;” “Defendants abruptly terminated Ms. Lin when she refused to participate in the violations;” and “Defendants’ liability arises out of or is related to activities in Texas.” These allegations, when considered together and liberally construed, assert that each named defendant committed a tort in Texas, which is all that is required under the long-arm statute. See Brigade Elecs. (UK) Ltd. v. Dehaney, No. 01-20-00044-CV, 2020 WL 7391709, at *8 (Tex. App.—Houston [1st Dist.] Dec. 17, 2020, no pet.) (mem. op.) (specifically naming each defendant in petition and thereafter referring to all of them collectively as “Defendants,” together with assertion that defendants committed torts in Texas, was all that was required under the Texas long-arm statute); Carey v. State, No. 04-09-00809-CV, 2010 WL 2838631, at *1, 4 (Tex. App.—San Antonio July 21, 2010, pet. denied) (mem. op.) (same). Therefore, Lin shifted the burden to appellants to negate all asserted bases of jurisdiction. See Kelly, 301 S.W.3d at 658.

In their special appearance, appellants challenged specific jurisdiction. They argued that a court's exercise of specific jurisdiction over a party must be based on a substantial connection between the defendant's forum contacts and the operative facts of the litigation. Moki Mac River Expeditions, 221 S.W.3d at 585. They suggested that such a connection was lacking because Lin had not alleged any basis supporting jurisdiction over appellants.

In evidence attached to their special appearance, appellants asserted that only SCM and no other person or entity hired Lin to perform any work. Specifically, Chris Hesterberg, the chief financial officer of SCM, stated in a declaration that SCM hired Lin as a wine and mixology director, that SCM paid Lin, and that Lin did not sign any employment agreement with any other entity, nor did any other entity hire Lin to perform any work. SCM attached a copy of its employment contract with Lin, which states that Lin was an employee of SCM. According to the contract, Lin's “home base” was Le Colonial restaurant in Houston. Additionally, Wahlstedt stated in a declaration that he indirectly owns an interest in SCM, but does not personally own any entity that employed Lin.

On appeal, appellants assert that the trial court lacks specific jurisdiction over them because there exists no substantial connection between their Texas contacts and the operative facts of the litigation. See Moncrief Oil, 414 S.W.3d at 150 (there can be no personal jurisdiction over a claim that does not arise out of or result from the defendant's forum contacts). We agree as to LB Buckhead, LB Cherry Creek, and Wahlstedt.

For a nonresident defendant's forum contacts to support an exercise of specific jurisdiction, there must be a substantial connection between those contacts and the operative facts of the litigation. Moki Mac River Expeditions, 221 S.W.3d at 585. As this court has observed, the “operative facts” of the litigation are those facts the trial court will focus on to prove the nonresident defendant's liability. Fjell Tech. Grp., 2015 WL 457805, at *6. This court and others have held that the employment relationship is the source of the duty in wrongful discharge torts such as Sabine Pilot. See Physio GP, Inc. v. Naifeh, 306 S.W.3d 886, 888 (Tex. App.—Houston [14th Dist.] 2010, no pet.); see also Rossi v. CAE Inc., No. 05-18-01258-CV, 2020 WL 2847286, at *10 (Tex. App.—Dallas June 2, 2020, pet. denied) (mem. op.). The employment relationship exists only between the employer and employee, not between two employees, even when one of those employees is a supervisor or even the owner. Physio GP, 306 S.W.3d at 888. Thus, one operative fact in a Sabine Pilot claim is the existence of an employment relationship between the plaintiff and the defendant. Rossi, 2020 WL 2847286, at *10 (“To prevail on a claim under the Sabine Pilot doctrine, the plaintiff must prove an employer-employee relationship between herself and the defendant.”).

The record establishes that LB Buckhead, LB Cherry Creek, and Wahlstedt were not Lin's employers; rather, SCM was Lin's employer. In response to appellants’ declarations, Lin filed her own declaration asserting that “Defendants,” collectively, hired her. But then she also acknowledged that her “initial agreement was with South China Management, who operated the Le Colonial restaurants.” She contended that, subsequently, “Defendants offered and added the Le Bilboquet restaurants to [her] responsibilities.” But whether additional restaurants were her “responsibilit[y]” does not bear on the identity of her employer; this contention does not create a fact question as to which defendant actually employed her. She offered no non-conclusory, factual evidence to refute appellants’ evidence on this point, which established that SCM was the only defendant that hired and paid Lin, and that Lin did not sign any employment agreement with any other entity.

A Texas court has specific jurisdiction over a defendant whose purposeful forum contacts give rise to the plaintiff's claim. Schott Glas v. Adame, 178 S.W.3d 307, 312-13 (Tex. App.—Houston [14th Dist.] 2005, pet. denied). Because no party other than Lin's employer, SCM, may be liable for wrongful termination, no substantial connection exists between the operative facts of this litigation and any of the alleged Texas contacts made by LB Buckhead, LB Cherry Creek, or Wahlstedt. See Bell, 549 S.W.3d at 559-60 (specific jurisdiction exists when the defendant's purposeful contacts are “substantially connected to the operative facts of the litigation or form the basis of the cause of action”). As non-employers, the alleged Texas contacts of LB Buckhead, LB Cherry Creek, and Wahlstedt do not give rise to Lin's Sabine Pilot claim. Lin's claim arises out of her employment relationship with SCM.

In an apparent effort to impute forum contacts by SCM to LB Buckhead, LB Cherry Creek, and Wahlstedt, Lin argued in both her amended petition and her response to appellants’ special appearance that “Mr. Wahlstedt does not observe the formalities required to operate distinctly from the other Defendants. For example, Mr. Wahlstedt and the other Defendants do not register the assumed names under which they represent themselves to employees and the public, interchanging the names Le Colonial and Le Bilboquet among themselves.” Lin averred the same in her declaration, which she attached to her special-appearance response.

We construe these contentions as an attempt to plead and prove alter ego. Texas law presumes that two separate corporations are distinct entities. BMC Software, 83 S.W.3d at 798.² This presumption, however, may be rebutted so that one entity's forum contacts may be imputed to another entity. PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 173, 175 (Tex. 2007). For example, when affiliated entities—such as a parent company and its subsidiary—are shown to be alter egos or in an agency relationship, one entity's forum contacts may be imputed to the other. Id.; see also BMC Software, 83 S.W.3d at 798. To “fuse” the separate entities for jurisdictional purposes, a plaintiff must prove that one entity controls the internal business operations and affairs of the other. PHC-Minden, 235 S.W.3d at 175. The degree of control, however, “must be greater than that normally associated with common ownership and directorship.” Id. at 172-73. The evidence must show that the two entities ceased to be separate so that the corporate fiction should be disregarded to prevent fraud or injustice. BMC Software, 83 S.W.3d at 799.

Here, the assertions in Lin's declaration—that appellants do not register the assumed names under which they represent themselves to employees and the public and that appellants “interchang[e]” the restaurant names Le Colonial and Le Bilboquet—do not show a degree of control greater than that generally associated with common ownership. E.g., Info. Servs. Grp., Inc. v. Vollbracht, No. 05-21-00004-CV, 2021 WL 5049052, at *3 (Tex. App.—Dallas Nov. 1, 2021, no pet.) (mem. op.) (fact that two related entities share a common name is not evidence that one controlled the other to the extent that the two entities should be “fused” for jurisdictional purposes); TMX Fin. Holdings, Inc. v. Wellshire Fin. Servs., LLC, 515 S.W.3d 1, 8-9 (Tex. App.—Houston [1st Dist.] 2016, pet. dism'd) (recognizing that “common ownership[,] even when combined with common corporate officers, does not demonstrate that a parent and subsidiary are alter egos”); Wolf v. Summers-Wood, L.P., 214 S.W.3d 783, 790 (Tex. App.—Dallas 2007, no pet.) (concluding that, while plaintiffs alleged generally that individual defendants used defendant LLC as a sham to perpetrate a fraud, plaintiffs did not plead or offer evidence of facts establishing how individual defendants purportedly used corporate form of LLC to perpetrate a fraud or how corporate form was a sham or fiction). Thus, Lin's evidence, even if true, does not establish the level of control necessary to justify imputing to SCM any Texas contacts of LB Buckhead, LB Cherry Creek, and Wahlstedt.

Accordingly, we hold that the trial court erred in determining it had personal jurisdiction over LB Buckhead, LB Cherry Creek, and Wahlstedt. We sustain in part appellants’ second issue.

2. SCM

We turn now to whether the evidence shows that the court may exercise specific jurisdiction over SCM.

“The touchstone of jurisdictional due process is purposeful availment.” Volkswagen, 669 S.W.3d at 413 (internal quotations omitted). At its core, the purposeful-availment analysis determines whether a nonresident's conduct and connection to a forum are “such that it could reasonably anticipate being haled into court there.” Id. (internal quotations omitted). Whether a nonresident defendant has “purposefully availed itself of the privilege of conducting activities in Texas” is guided by three considerations:

• Only the defendant's contacts with the forum are relevant, not the unilateral activity of another party or a third person;

• The contacts relied upon must be purposeful, not random, fortuitous, or attenuated; and

• The defendant must seek some benefit, advantage, or profit by availing itself of Texas's jurisdiction.

Id. at 413-14 (internal quotations omitted). “This analysis assesses the quality and nature of the contacts, not the quantity.” Moncrief Oil, 414 S.W.3d at 152.

Lin asserted that she was required to base her employment in Houston, which was “not [her] unilateral choice.” Her employer—SCM—“purposely placed [Lin] in Houston to do the work from Houston.” Lin alleged that SCM “requested [her] to violate the laws in and from Houston.”

Operating a Texas restaurant and employing Texas residents to work there constitute purposeful contacts with Texas. SCM, by placing Lin in Houston and directing her work there, benefitted and profited from Lin's work. See Weeks Marine, Inc. v. Carlos, No. 01-21-00015-CV, 2021 WL 4897714, at *6 (Tex. App.—Houston [1st Dist.] Oct. 21, 2021, pet. denied) (mem. op.) (jurisdictional evidence supported a finding that nonresident defendant purposefully availed itself of privilege of conducting activities in Texas when it recruited Texas resident for employment; resident would travel for work for defendant but then “return home” to Texas, where defendant “always paid” him). Thus, we conclude that the evidence established the purposeful availment prong of the specific jurisdiction inquiry.

As discussed above, we have also determined that SCM's purposeful Texas contacts bear a substantial connection to Lin's Sabine Pilot claim. Her claim arises out of her Texas employment with SCM.

SCM argues that it directed its actions and made the challenged decisions from Illinois, where it is headquartered. At most, SCM argues, it “directed a tort” at Lin in Texas, which is insufficient to confer personal jurisdiction. See Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 790-92 (Tex. 2005) (holding that allegation or evidence that nonresident defendant directed a tort at a Texas resident was insufficient to support specific jurisdiction); see also Bell, 549 S.W.3d at 565 (“Moreover, we have explicitly rejected an approach to specific jurisdiction that turns upon where a defendant ‘directed a tort’ rather than on the defendant's contacts.”).

This is not a situation where an out-of-state defendant is alleged merely to have directed a tort at Texas. Lin alleged, and SCM does not dispute, that it operates a restaurant in Texas and employed Lin to work there. Lin also alleged that SCM asked her to violate the law (both state and federal) in Texas and then fired her when she refused. This is not an instance where the alleged tort was committed elsewhere that merely produced an effect on a plaintiff who happened to live in Texas; rather, SCM required Lin to work in Texas and allegedly desired her to engage in criminal activity from Texas. See Moncrief Oil, 414 S.W.3d at 157; see also, e.g., Walden v. Fiore, 571 U.S. 277, 290, 134 S.Ct. 1115, 188 L.Ed.2d 12 (2014) (“The proper question is not where the plaintiff experienced a meaningful injury or effect but whether the defendant's conduct connects him to the forum in a meaningful way.”).

In requiring Lin to base her employment from Texas and allegedly directing Lin to engage in a criminal act in Texas, SCM could reasonably anticipate being haled into court in Texas. See SNP Schneider-Neureither & Partner AG v. Wood, No. 05-18-00576-CV, 2019 WL 2521723, at *9 (Tex. App.—Dallas June 19, 2019, no pet.) (mem. op.) (“[P]laintiffs’ wrongful termination claim is based on SNP Germany's purported directive to its Texas-based subsidiary to engage in a criminal act. In giving this directive, SNP Germany purposefully established minimum contacts with Texas such that it could reasonably anticipate being haled into court there.”); see also Max Protetch, Inc. v. Herrin, 340 S.W.3d 878, 887 (Tex. App.—Houston [14th Dist.] 2011, no pet.) (holding defendant who voluntarily came to Texas and purposefully conducted business with Texas resident “crossed a bright line and purposefully availed itself of the privilege of conducting business in Texas”).

We therefore conclude that Lin's claim for wrongful termination arises directly from SCM's purposeful contacts with Texas—employing Lin in Texas, allegedly asking her to commit a crime in Texas, and then terminating her Texas employment.³ See Sarjak Container Lines Singapore PTE Ltd. v. Semons, No. 01-21-00508-CV, 2023 WL 3235939, at *14 (Tex. App.—Houston [1st Dist.] May 4, 2023, no pet.) (mem. op.) (defendant's communications with plaintiff concerning plaintiff's employment and her refusal to collect tariffs, which led to her termination, were substantially related to plaintiff's retaliation claim); see also Moki Mac River Expeditions, 221 S.W.3d at 585 (holding that, “for a nonresident defendant's forum contacts to support an exercise of specific jurisdiction, there must be a substantial connection between those contacts and the operative facts of the litigation”); BMC Software, 83 S.W.3d at 796 (holding specific jurisdiction is established if defendant's alleged liability arises from or is related to activity conducted within forum).

We overrule in part appellants’ second issue.⁴

Conclusion

We reverse in part the trial court's order and render judgment dismissing Lin's claim against LB Buckhead, LB Cherry Creek, and Wahlstedt. We affirm the order as regards SCM, and we remand for further proceedings consistent with this opinion.

FOOTNOTES

1.   Although Lin's employment was at-will, which means her employer could terminate her role at will and for any reason, the supreme court recognized a narrow exception in Sabine Pilot Service, Inc. v. Hauck, 687 S.W.2d 733, 735 (Tex. 1985). To prevail on her wrongful termination claim under the Sabine Pilot exception to the employment-at-will doctrine, Lin must prove that (1) she refused to perform an illegal act and (2) this refusal was the only reason she was terminated. See Safeshred, Inc. v. Martinez, 365 S.W.3d 655, 659 (Tex. 2012).

2.   Corporations are also presumptively distinct from their individual owners. See Whitener as Tr. of Charles Cleveland Whitener, III Marital Tr. v. Origin Bank, No. 14-22-00235-CV, 2023 WL 1169025, at *5 (Tex. App.—Houston [14th Dist.] Jan. 31, 2023, no pet.) (mem. op.); Cappuccitti v. Gulf Indus. Prods., Inc., 222 S.W.3d 468, 482 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (“a corporation is an entity separate from its officers and owners”).

3.   We note that at least one of our sister courts has rejected an invitation to extend Michiana to a direction of criminal conduct within the forum state, as opposed to merely directing tortious conduct toward someone in the forum state. See SNP Schneider-Neureither, 2019 WL 2521723, at *9 (“We are not persuaded that Michiana and its progeny preclude the assertion of jurisdiction based on a nonresident defendant's direction of criminal conduct within the forum.”).

4.   Appellants do not argue that a Texas court exercising personal jurisdiction over them would offend traditional notions of fair play and substantial justice. Accordingly, we need not address this aspect of personal jurisdiction.

Kevin Jewell, Justice