Unreported / Non-Citable
Background
RD Heritage Group sued LOLA Energy II, LLC for breach of a November 2019 Development Agreement. Under that agreement, LOLA2 would identify oil and gas assets for development while RD Heritage would source funding, with profits split 80/20 if successful. The agreement contained a forum selection clause providing that disputes would be litigated in Harris County, Texas. The Development Agreement also included an exclusivity provision requiring that any investment LOLA2 obtained through RD Heritage’s referrals fall under the 80/20 arrangement.
When LOLA2 identified an opportunity to acquire oil and gas assets from Key EM Energy (KEM) in western Pennsylvania, RD Heritage connected LOLA2 with Summit Partners as a potential source of financing. However, the parties later transferred LOLA2’s rights to acquire KEM to Muddy Creek Energy Investments—an entity majority-owned by James Crockard, who served as president and CEO of LOLA2. Muddy Creek subsequently obtained $90 million in debt financing from Summit (the same source RD Heritage had introduced) and completed the KEM acquisition in March 2021.
RD Heritage invoked its contractual right to a 20% interest in the KEM venture through the exclusivity provision. When it received no positive response, RD Heritage sued LOLA2. Eighteen months later, RD Heritage amended its petition to add as defendants seven other parties, including Crockard individually and various LOLA-affiliated entities. RD Heritage argued these non-signatories were bound by the forum selection clause through alter ego theory, contending that Crockard controlled LOLA2 as its alter ego and that the other corporate defendants were Crockard’s alter egos.
The Court’s Holding
The First Court of Appeals reversed the trial court’s denial of the appellants’ special appearance and rendered judgment dismissing RD Heritage’s claims against them for lack of personal jurisdiction. The court held that Texas courts lacked both general and specific jurisdiction over the non-signatory defendants.
On specific jurisdiction, the court found that RD Heritage alleged no acts by any appellant occurring in Texas. All alleged misconduct—negotiation and execution of the Walk Away Agreement transferring KEM acquisition rights from LOLA2 to Muddy Creek—occurred solely in Pennsylvania. Because RD Heritage is based in Nevada, any harm from the alleged misconduct would not be felt in Texas. This uncontroverted evidence negated RD Heritage’s assertion of specific jurisdiction.
Critically, the court rejected the alter ego theory that would have extended jurisdiction to the non-signatories. While Texas law presumes corporate separateness and requires the plaintiff to affirmatively prove an alter ego relationship, RD Heritage failed to meet this burden. Although Crockard held about 10% indirect minority interest in LOLA2 and served as its president, CEO, and board member, these facts alone do not establish atypical control. The court held that executing and approving contracts—even significant ones like the Walk Away Agreement—represents ordinary duties of a corporate president and CEO, not evidence that Crockard used LOLA2 for personal purposes. Since RD Heritage did not prove Crockard was LOLA2’s alter ego, it could not invoke reverse-piercing theory to bind the other corporate appellants to the forum selection clause.
Key Takeaways
- Officers and directors performing ordinary executive functions—such as negotiating and executing contracts—do not demonstrate “atypical control” required to establish alter ego liability, even when those contracts are significant.
- Texas law presumes corporate separateness and places the burden on the plaintiff to affirmatively prove alter ego relationships with clear evidence of abuse, fraud, evasion of obligations, or misuse of the corporate form.
- Forum selection clauses do not automatically bind non-signatories merely because they are related entities or share common management; alter ego status must be independently proven.
- Personal jurisdiction over non-signatories cannot be asserted when all alleged tortious conduct occurred outside Texas and the plaintiff has no connection to the forum state.
Why It Matters
This decision reinforces important limits on piercing corporate veils for jurisdictional purposes and clarifies that corporate separateness remains the default rule. Plaintiffs cannot bootstrap jurisdiction over non-signatories by alleging they are related to signatories without proving actual alter ego relationships involving abuse or fraud. The opinion makes clear that ordinary corporate governance—even aggressive business decisions like transferring valuable opportunities to related entities—does not constitute the type of unity and misuse required to disregard corporate form. This protects officers and executives from personal liability and jurisdictional exposure simply by virtue of their management roles.
The decision also demonstrates that courts will not extend contractual forum selection clauses beyond their signatories without compelling evidence of alter ego relationships or other traditional non-signatory liability theories. For businesses with multistate operations and related entities, the ruling clarifies that structural separateness provides meaningful protection, provided the corporate form is respected and legitimate business purposes underlie the entity structure. Trial courts denying special appearances in similar circumstances may face reversal absent proof that defendants engaged in fraud, evasion of existing obligations, or other abuse that justifies disregarding corporate form.