Victory for McPherson Estate, Liebreich and Dandar & Dandar in Texas Breach Case

United States Court of Appeals for the Fifth Circuit


(Informal summaris in English - German and French - PDF files of these 3 rulings No. 02-40783 / No. 02-40786 / No. 02-40964)


Revised July 25, 2003
No. 02-40783

United States Court of Appeals
Fifth Circuit


July 22, 2003

Charles R. Fulbruge III





DELL LIEBREICH, Individually and
as personal representative of
the Estate of Lisa McPherson,

Defendant - Appellant,


consolidated with
No. 02-40786





DELL LIEBREICH, as personal
representative of the Estate
of Lisa McPherson,

Defendant - Appellee,

consolidated with
No. 02-40964





DELL LIEBREICH, as personal
representative of the Estate
of Lisa McPherson,

Defendant - Appellant.


Appeal from the United States District Court
for the Eastern District of Texas

Before KING, Chief Judge, and DAVIS and BENAVIDES, Circuit Judges.
BENAVIDES, Circuit Judge:

This consolidated appeal arises from a breach of contract suit instigated by
Plaintiff-Appellee-Cross-Appellant Religious Technologies Center (RTC) against
the estate of Lisa McPherson (the Estate). [1] We find the district court lacked
personal jurisdiction over the Estate, and we herein vacate the judgment of he
district court. [2]


A. The Florida Wrongful Death Action

In 1997, the Estate of Lisa McPherson filed a wrongful death action in state
court in Tampa, Florida against various corporations and individuals affiliated
with the Church of Scientology. Among those named in the complaint were the
Church of Scientology, Flag Service Organization, Inc. (a corporation
associated/affiliated with the Church of Scientology), and several individual
Scientologists. Upon being served with the complaint, and ostensibly as a cost-
saving measure, Defendant Flag Service Organization (Flag) proposed to the
Estate that they enter into an agreement to limit the number of Scientology-
related corporate entities and individuals that would be named in the suit. The
Estate and Flag consequently entered into a contract in which the Estate agreed
to forego adding certain enumerated corporate defendants, and Flag agreed to
forego encumbering its assets.

In 1999, the Estate moved the Florida court to add David Miscavige (the
"worldwide ecclesiastical leader of Scientology") to the list of named
defendants in its wrongful death action. Miscavige is the Chairman of the Board
of RTC, a Scientology corporation, and while RTC was listed among the parties
which the Estate was contractually bound to exclude from its action, the Estate
sought to add Miscavige under the theory that it was not contractually precluded
from adding Miscavige in his personal capacity. The Florida court was presented
with the defendant-limiting contract between the Estate and Flag, and entered an
interlocutory ruling that the contract did not prohibit the Estate from adding
Miscavige as a defendant in his personal capacity. [3]

No appeal from the order in which the court permitted the Estate to add
Miscavige in his personal capacity was attempted, nor was an appeal necessary in
that on June 16, 2000, the Florida court granted Miscavige's motion to dismiss
the complaint with respect to him due to insufficient service of process.
Miscavige also sought attorneys' fees, and the Florida court denied Miscavige's
motion with respect to fees. Miscavige appealed the fee issue to the Florida
appellate court. The Florida appellate court affirmed the trial court's ruling
on the issue of attorneys' fees.

B. The Breach of Contract Action

While Miscavige's appeal of the attorneys' fee issue was still pending, RTC
filed suit against the Estate for breach of the Estate-Flag defendant- limiting
contract, and against Liebreich personally for tortiously interfering with the
contract between the Estate and Flag. RTC filed in United States District Court
in the Eastern District of Texas under a diversity of citizenship jurisdictional
theory. RTC claimed standing as a third-party beneficiary of the Estate-Flag

On the Estate's motion, the district court dismissed the tortious interference
count against Liebreich for failing to state a claim. However, the district
court denied the Estate's motion to dismiss RTC's breach of contract claim. [4]

The district court next entertained the parties' dispositive motions. The
district court denied the Estate's motion for summary judgment, finding that it
embodied only points of law which had already been addressed and rejected by the
district court in passing upon the Estate's motion to dismiss. The district
court also denied RTC's motion for partial summary judgment on the issue of
liability, finding that the contract was ambiguous on the question of whether
the contract precluded suit against Miscavige in his personal capacity, and
consequently material facts were in dispute concerning liability.

RTC moved the district court to reconsider its motion for partial summary
judgment. In support of its motion to reconsider, RTC attached extrinsic
evidence which purported to demonstrate that the contracting parties intended
Miscavige to be protected from suit in his personal capacity. In light of this
evidence, the district court reconsidered its previous ruling and granted
summary judgment in favor of RTC on the issue of liability.

The case then proceeded to trial on the issue of damages. The Estate proposed to
offer the testimony of Liebreich to dispute the foreseeability of the damages
incurred by RTC, under the theory that prior to adding Miscavige--the sole act
of breach--Liebreich reasonably relied on the Florida court's order permitting
Liebreich to add Miscavige, but the district court determined the evidence to be
irrelevant and excluded it. RTC, on the other hand, was permitted by the
district court to provide testimony concerning attorneys' fees incurred by RTC
in moving to have Miscavige dismissed for want of service of process, and in
aiding Miscavige in his quest to recover attorneys' fees from the Florida trial
and appellate courts.

At the close of testimony, the Estate moved for a directed verdict asserting
that RTC had failed to meet its burden at trial. The district court denied the
motion from the bench. The Estate offered a proposed jury instruction regarding
the prevailing market rate for attorneys' fees in Tampa, but the district court
rejected the instruction. The jury returned a verdict for $258,697.10.

C. Post-Trial Motions

Upon completion of the trial the Estate filed a Rule 59 motion for a new trial,
asserting, again, that the district court erred in failing to dismiss the action
prior to trial and reasserting its previously adjudicated arguments that the
district court lacked both personal and subject matter jurisdiction, that venue
was improper, that the Estate enjoyed a litigation privilege immunity, that RTC
lacked standing, and so forth. The Estate also chose to use its Rule 59 motion
for a new trial to reassert its opposition to the district court's previous
evidentiary rulings, jury instruction rulings, and the ruling denying a directed
verdict. The district court summarily denied the Rule 59 motion. The Estate
filed a notice of appeal.

RTC, on the other hand, moved to recover its costs and fees as a prevailing
party pursuant to the Estate-Flag contract. RTC petitioned the district court
for an award of $549, 015.84 in costs and fees for the litigation of this
single-issue breach of contract case. The district court reduced the award to

RTC also moved the district court to impose sanctions pursuant to 28 U.S.C.
1927 on the Estate's counsel, citing vexatiously repetitive motions and filings
on the part of the Estate. The Estate responded with its own 1927 motion for
sanctions. The district court declined to sanction RTC's counsel, but the court
did impose sanctions against the Estate's counsel for 30% of the attorneys' fees
awarded, which totaled $98, 296.00. The Estate's counsel, Thomas and Kennan
Dandar, (the Dandars) filed a second, separate, appeal of the imposition of
1927 sanctions against them.

Finally, RTC filed a cross-appeal challenging the district court's decision to
grant Liebreich's 12(b)(6) motion to dismiss the tortious interference claim.
The three appeals have been consolidated and are pending now before this Court.


This Court reviews de novo the district court's determination regarding personal
jurisdiction. Central Freight Lines Inc. v. APA Transport Corp., 322 F.3d 376,
380 (5th Cir.2003). To determine whether a federal district court sitting in
diversity has personal jurisdiction over a nonresident defendant, the district
court considers first whether exercising jurisdiction over the defendant
comports with due process, and if due process is met, the district court turns
to the extraterritorial jurisdictional rules of the state in which it sits to
determine whether personal jurisdiction is conferred. Interfirst Bank Clifton v.
, 844 F.2d 279, 282 (5th Cir.1988); Schlobohm v. Schapiro, 784 S.W.2d
355, 356 (Tex.1990). Because the Texas Long Arm Statute is coextensive with the
confines of due process, questions of personal jurisdiction in Texas are
generally analyzed entirely within the framework of the Constitutional
constraints of Due Process. See Texas Long Arm Statute, Tex.Civ.Prac. & Rem.Code
. 17.041 (Vernon 2001) et. seq.; Gessmann v. Stephens, 51 S.W.3d 329, 335
(Tex.App.2001); Fernandez, 844 F.2d at 282.

However, exercising personal jurisdiction over an estate which is probated in a
foreign district presents particular jurisdictional problems. Usually when a
court exercises jurisdiction over either a foreign or domestic estate the
jurisdiction is in rem that is, the court has jurisdiction over the property
itself. Here, however, there is no question that the district court lacked in
jurisdiction over the Estate. Instead, the contention here is that
Liebreich, as the personal representative of the Estate, created in personam
jurisdiction over the Estate. There are two ways in which Liebreich might have
brought the Estate into the reach of the district court, and both avenues have
been presented to this Court. First, the district court found general
jurisdiction over the Estate via Liebreich. Moreover, RTC argues that Liebreich
created specific jurisdiction over the Estate. However, neither general nor
specific jurisdiction existed over the Estate.

A. General Jurisdiction

The district court correctly found that it had general personal jurisdiction
over Liebreich as a resident of Texas. However, the district court impermissibly
imputed that general personal jurisdiction to the Estate. The district court
stated that, "[t]here can be no doubt that as a resident of the State of Texas,
Ms. Liebreich has had sufficient contacts with the state to confer general
jurisdiction over her in this matter, both in her individual and representative
capacities." Thus, the district court concluded that the general jurisdiction
which a Texas court has over a Texas resident applies equally to a foreign
estate whose representative lives in Texas. However, the district court is in
error on this point.

General jurisdiction exists where a "defendant's contacts with the forum state
are substantial and continuous and systematic but unrelated to the instant cause
of action." Central Freight Lines, 322 F.3d at 381 (internal quotations
omitted); Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 104
S.Ct. 1868, 80 L.Ed.2d 404 (1984). The residency of a defendant in the forum
state routinely creates such systematic and continuous contact. In the instant
case, however, the defendant in question is not a resident of Texas. As a
creature of the Florida probate regime, the Estate resides in Florida. Thus, for
an estate probated in a foreign jurisdiction to establish the type of continuous
and systematic contact necessary for general jurisdiction, the representative of
the Estate must have made those contacts in her representative capacity, on
behalf of the Estate. It is not sufficient that the personal representative
herself lives in Texas.

Here, despite the fact that Liebreich conducted some Estate business from her
home in Texas, she did not establish systematic and continuous contact with
Texas on behalf of the Estate such that general jurisdiction over the Estate was
conferred. RTC argues that on behalf of the Estate Liebreich signed a retainer
letter in Texas, received and distributed property from the Estate in Texas, and
participated in decisions concerning the Florida litigation while she was in
Texas. However, these sporadic Estate-related activities cannot be described as
a part of a systematic and continuous stream of activities tying the Estate to
Texas. None of the activities individually constitutes a substantial or
meaningful contact with Texas, Texas law, or Texas residents, and certainly
considered in toto they fail to amount to continuous and systematic contact with
Texas such that general jurisdiction is created. Compare, Central Freight Lines,
322 F.3d at 381(finding that general jurisdiction was lacking over corporate
defendant, despite the fact that the defendant, "routinely arranges and receives
interline shipments to and from Texas and apparently sends sales people to the
state on a regular basis to develop business, negotiate contracts, and service
national accounts ...."); see also, Wilson v. Belin, 20 F.3d 644, 649-51 (5th
Cir.1994) (finding no general personal jurisdiction over the defendant, despite
the fact that defendant engaged in at least one professional legal project a
year in Texas over the previous three years). Consequently, the district court
erred in concluding that it had general personal jurisdiction over the Estate.

B. Specific Jurisdiction

Although the district court relied on general personal jurisdiction over the
Estate, RTC suggests that the district court also had specific jurisdiction over
the Estate. Specific jurisdiction may be found when a foreign defendant "has
'purposefully directed' his activities at residents of the forum, and the
litigation results from alleged injuries that 'arise out of or relate to' those
activities." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174,
85 L.Ed.2d 528 (1985)(citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770,
774, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984) and Helicopteros Nacionales, 466 U.S.
at 414, 104 S.Ct. 1868(internal citations omitted)). A single act may support
specific jurisdiction where the act is directed at residents of the forum, and
the cause of action relates to the act. Burger King Corp., 471 U.S. at 476 n.
18, 105 S.Ct. 2174 (citing McGee v. International Life Insurance Co., 355 U.S.
220, 223, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957)).

In the specific jurisdiction rubric, only those acts which relate to the
formation of the contract and the subsequent breach are relevant. In support of
its argument that specific jurisdiction exists, RTC points to the fact that
Liebreich participated in negotiations concerning the Estate-Flag contract while
in Texas, and the fact that Liebreich signed the Estate-Flag contract while in
Texas. However, neither of these acts were directed at residents of the forum
state, or at the forum state itself. While it is well established that "with
respect to interstate contractual obligations ... parties who reach out beyond
one state and create ... obligations with citizens of another state are subject
to regulation and sanctions in the other State for the consequences of their
activities," here, while contracting in the stead of a Florida resident,
Liebreich reached out from Texas to residents of Florida (Flag) and California
(RTC). Burger King, 471 U.S. at 473, 105 S.Ct. 2174. Therefore, the Estate did
not direct its activities at the forum state.

Moreover, the physical location of Liebreich at the time she signed the
agreement and participated in negotiations on behalf of the Estate is not
especially relevant in the analysis. [5] The Supreme Court has rejected a
formalistic rendering of minimum contact, opting instead to look at the degree
that a nonresident defendant has reached out and availed himself of the foreign
venue. Here, in forming the contract, the Estate availed itself of the State of
Florida and contracted exclusively with non-Texas residents. The Estate did not
reach out to Texas, nor did it direct its contract-related activities toward
Texas. It did not contract with Texas residents nor did it avail itself of Texas
law in the formation of the contract. Therefore, the fact that Liebreich signed
the contract in Texas does not, alone, support specific jurisdiction.

In sum, the district court lacked personal jurisdiction over the Estate.
Liebreich's general jurisdiction cannot be imputed to the Estate, and the Estate
did not establish minimum contacts relating to the breach action with the forum
jurisdiction sufficient to support specific jurisdiction. Therefore, the
district court erred in failing to dismiss the action against the Estate for
want of jurisdiction.


For the foregoing reasons the judgment of the district court is vacated and the
case is remanded for proceedings consistent with the renderings herein.

Footnotes as moved to end of file:

[1]. RTC's motion to file a supplemental memorandum of law is granted.

[2]. All three of the appeals at bar stem from rulings entered by the district
court in the course of adjudicating the breach of contract claim, and
consequently, the issue of personal jurisdiction is dispositive of all the
issues presented to the Court in this appeal. Consequently, we confine our
analysis to the question of personal jurisdiction.

[3]. The order itself appears to be conditional. In ruling from the bench, the
court stated, "[a]ll right. Subject to my ruling on the insufficiency of service
of process issue, I will go ahead and rule that the 1997 agreement does not bar
the plaintiff from trying to bring in Mr. Miscavige as an individual outside his
capacity as an officer of RTC."

[4]. The Estate moved to dismiss the breach claim for want of jurisdiction
(subject matter and personal), for lack of capacity to be sued in Texas, for
lack of standing, and for improper venue. The Estate also asked the district
court to dismiss the action based on multiple abstention doctrines, a theory of
litigation privilege, the doctrine of law of the case, and the Constitutional
requirements of the Full Faith and Credit Clause. Finally, in rounding out its
rather omnibus motion, the Estate asserted the defenses of waiver and estoppel.
The district court rejected each of these theories of dismissal.

[5]. Additionally, the presence of Liebreich in Texas lacks the significance
that it might otherwise have, had she been acting on her own behalf, as she was
at the time representing an entity whose "physical presence" was in Florida.



Addenum - 21 Augustus 2003

This ruling was quickly appealed by Religious Technology Center (Scientology), which petitioned for an en banc rehearing by the entire Fifth Circuit (the above having been decided by a panel of three judges). They actually demanded sanctions against Ken despite losing the case. On 19 Aug 2003, they lost this one, too. As the docket entries show, all cult motions were denied as of today.

To Life and Death of Lisa McPherson