Appeals Court Affirms Trial Court Dismissal of $1.7M Coverage Case

Court Standard for Personal Jurisdiction

The coverage dispute began when the company Shambaugh & Son LP requested that Steadfast Insurance Co. reimburse it for pre-suit expenses incurred in responding to a subpoena. Steadfast declined coverage pursuant to policy language and Shambaugh filed a insurance coverage lawsuit. Steadfast filed motions to dismiss for lack of personal jurisdiction and to transfer venue to a court with personal jurisdiction. The Western District of Texas dismissed the case entirely, and Shambaugh appealed to the Fifth Circuit.

In addition to the substantive arguments before the Fifth Circuit concerning personal jurisdiction, there were also procedural arguments concerning Shambaugh’s failure to timely raise arguments in the lower court resulting in a forfeiture of these arguments. The substantive issue was whether Steadfast Insurance Company is subject to specific jurisdiction in Texas where the procurement and enforcement of the Policies at issue occurred almost entirely in another region of the country. The court concluded that Shambaugh waived certain jurisdictional arguments and that Steadfast’s contacts with Texas were either too attenuated or too unrelated to the litigation to justify the exercise of personal jurisdiction over Steadfast.

In a unanimous decision, the Fifth Circuit concluded that Shambaugh forfeited certain arguments by failing to raise them before the district court and that all remaining arguments lack merit. In particular, the court agreed with Steadfast’s arguments that the procurement and enforcement of the policies occurred outside of Texas and rejected Shambaugh’s arguments that Steadfast’s Texas connections, participation in unrelated litigation in Texas, the policy’s nationwide coverage provision, or the fact that some of the underlying MDL cases were filed in or connected to Texas were sufficient to make Steadfast subject to personal jurisdiction in Texas.