Texas Business Court Decision – August 19, 2025
No. 25-BC01B-006 Riverside Strategic Capital Fund I, L.P., et al v. CLG Investments, LLC, et al. (First Division, Judge Whitehill) 25-bc01b-0006-riverside-strategic-capital-fund-i-v-clg-investments-2025-tex-bus-33.pdf
Civil case – Jurisdiction. (This written opinion explains the Court’s grant of the out-of-state defendants’ special appearances on July 17, 2025.) The Riverside plaintiffs sued over thirty defendants in the 298th Judicial District Court in Dallas County, alleging that they had been defrauded in connection with an initial $50 million investment in True Health Group (THG) in 2017. As part of its investment, Riverside entered into a Securities Purchase Agreement (SPA) with defendants that contained representations regarding THG’s compliance with applicable health law; Riverside alleges these representations were false, resulting in THG’s bankruptcy and a loss of more than $84 million due to defendants’ fraud. A subset of defendants removed to the Business Court.
In the complaint, Riverside alleged that THG and its predecessor did business in Texas with Texas hospitals; that defendants knew of THG’s Texas business, and that they had designated CLG Investments as their agent and attorney-in-fact regarding the SPA (while CLG is a Delaware limited liability company, its principal place of business is Frisco, Texas). Nineteen of the defendants (the out-of-state defendants or OSDs) filed special appearances to determine whether the Business Court had personal jurisdiction over them; they alleged they were not Texas citizens, did not reside in Texas when the SPA was signed, and each made his or her investment from their home state; all but four of the OSDs affirmed they did no business in Texas in 2017.
After a lengthy discussion of minimum contacts case law in Texas, and the parties’ burdens of proof when jurisdiction is challenged, the court holds:
(1) Under Kelly v. General Interior Construction and Steward Health Care Sys. LLC v. Saidara, plaintiffs’ failure to plead specific, non-conclusory jurisdictional allegations for any OSD is an independent reason to grant the special appearance; the complaint simply stated the court has personal jurisdiction and that the defendants engaged in business in Texas without any of the kind of specific factual allegations required by Kelly; Riverside’s arguments and evidence opposing the special appearance do not save it, as the court considers only allegations in the complaint – not allegations in a response to the appearances – and considers additional evidence only to the extent it supports or undermines those allegations; a complaint wholly devoid of jurisdictional facts should be replaced by an amended petition; since the complaint here was not amended, the additional evidence submitted with the briefing will not be considered;
(2) even if the court were to consider the additional allegations and evidence, they failed to demonstrate any OSD had sufficient minimal contacts with Texas to establish specific jurisdiction: (a) the OSDs’ investment in a Texas-headquartered company was insufficient because the case arises from Riverside’s investment and the SPA, and not from the OSDs’ investment in THG; (b) the claim that designating CLG as their Texas agent established jurisdiction fails because there is no evidence that CLG ever took any actions in Texas related to the alleged misrepresentation; (c) Riverside failed to establish personal jurisdiction over the four OSDs who did Texas business in 2017 because none of them were Texas residents when the alleged fraud occurred with the SPA signing, came to Texas in connection with the SPA, or made personal misrepresentations concerning the SPA; (d) the defendants did not consent to jurisdiction in Texas based on a Texas venue clause in their LLC agreement with THG, as this case arises under the SPA (which has a Delaware venue provision) and not under that LLC agreement; and (e) the OSDs did not waive any challenge to personal jurisdiction by generally appearing in another case involving Trustee litigation as a foreign defendant does not waive its right to object to personal jurisdiction or consent to jurisdiction in Texas by having defended other lawsuits in Texas; this case is not a continuation of the other litigation, as the parties are different and different claims are involved (and that other case arose out of the THG LLC agreement and not the SPA and the LLC agreement contained a mandatory venue provision).