An analysis of Lawton Candle v. BG Personnel LP and Texas Rule of Civil Procedure 108.
In a recent case, Lawton Candle v. BG Personnel LP, the Dallas Court of Appeals overturned a default judgment against an Oklahoma LLC because the Plaintiff relied on service of process having been made upon the defendant’s Oklahoma registered agent. 690 S.W.3d 122, 124 (Tex. App.-Dallas 2024, no pet.). The Court held that such service could not support a default judgment as a matter of law because it was not an “expressly permitted” method of service. Id., 126. My belief is that the Court’s conclusion is not correct.
Background
The Texas Business & Commerce Code (the “Code”) requires out-of-state entities that operate in Texas to register with the Texas Secretary of State (TxSOS) and designate a registered agent for service of legal process in Texas.[1] If a “foreign entity” (which term includes out-of-state entities) fails to designate or maintain a registered agent, the Code establishes that the Texas Secretary of State is an agent for receiving process for that entity.
Lawton Candle concluded that service on the Secretary of State under Section 5.251 of the Code is the only method consistent with Chapter 5 for serving an out-of-state filing entity that fails to register in Texas. But that decision is not faithful to Chapter 5’s plain language. Further, the opinion contradicts a Texas Supreme Court opinion that addresses an alternative method of service under Rule 108, which expressly and fully adopts service methods available under Rule 106, as confirmed by several Texas appeals courts. Moreover, the opinion is not well-founded on long-standing practice and principles concerning the sufficiency of notice and in personam jurisdiction developed in interstate cases. The same issue is directly addressed by a prior, well-reasoned opinion (unpublished) issued by the Austin Court of Appeals, which in my opinion, provides the correct answer. Consol. Am. Indus., Inc. v. Greit-Amberoaks, L.P., No. 03- 07- 00173-CV, 2008 WL 5210925, at *1 (Tex. App. Dec. 12, 2008, no pet.) (mem. op).
Therefore, the validity or breadth of Lawton Candle is certainly questionable. I argue here that its holding should be limited to the parties and facts that were involved in that litigation. Failure to assert and prove service under Rule 108 may have been a mistake by the plaintiff in that case.[2] Lawton Candle did not evaluate service under Rule 108. Id. This blog argues that Rule 108 expressly authorizes a Texas plaintiff to serve an out-of-state entity defendant through its registered agent if both the persons that delivered and received the process were authorized by law (without limitation to Texas law) to do so.
The Lawton Candle Court stated, “[the Plaintiff] has not identified any provision in the Business Organizations Code or other authority, and we are aware of none, that expressly permits a foreign entity to designate a registered agent who is not located in the State of Texas as its agent for purposes of service of process.” Lawton Candle, at 126. But the Court did not consider Rule 108’s incorporation of all service methods available under Rule 106, including service on registered agents, and did not consider Oklahoma law as the requisite source of authority for the Oklahoma registered agent’s designation or whether that authority applies to receipt of process from other states.[3]
A Critique of Lawton Candle
In Paramount Pipe, 749 S.W.2d 491 (Tex. 1988), the Texas Supreme Court ruled that service of out-of-state defendants under Rule 108 is a valid service alternative to the then-existing long arm statute. Paramount Pipe & Supply Co., Inc. v. Muhr, 749 S.W.2d 491, 495–96 (Tex.1988). That statute (which remains valid) is also triggered by a defendant’s failure to register with the Texas Secretary of State and designate a registered agent.
The Lawton Candle Court failed (or did not have the occasion) to consider that Section 5.251 of the Code is only another long-arm statute, to which the Paramount Pipe holding concerning Rule 108 applies. Pursuant to Paramount Pipe and Chapter 5 of the Code, Section 5.251 is not an exclusive means of serving an entity that fails to register in Texas. Surprisingly, the holding in Lawton Candle directly contradicts Paramount Pipe to extend a benefit (i.e., the reduction of available service methods) to out-of-state companies solely because they failed to comply with Texas law by registering with the TxSOS. In addition to contradicting Paramount Pipe, Lawton Candle’s holding contradicts the express language of Chapter 5 of the Code, the statute that it analyzed.
A full reading of Chapter 5’s plain language makes clear that Section 5.251 allows for service on the TxSOS after a foreign entity fails to register under Chapter 9 of the Code as an additional option for obtaining service–and not an exclusive one. Analyzing Chapter 5 of the Code requires harmonization of two provisions that immediately follow Section 5.251 (authorizing service on the Secretary of State), which are Section 5.255 and Section 5.256. Both provisions show conclusively that service under Section 5.251 is not an exclusive method for serving foreign filing entities that fail to register in Texas.
First, Section 5.255 specifies the certain officers of entities that are “as a matter of law” agents for domestic and foreign filing entities; for example, it expressly states that members of foreign LLCs are process agents (the Lawton Candle court mentions this provision’s application to domestic entities and omits the fact it expressly applies to foreign entities). Tex. Bus. Orgs. Code. Second, Section 5.256 expressly states that Chapter 5 (including Section 5.251) is not an exclusive means for obtaining service and plainly references the existence of “other law” contemplated by the Legislature by which domestic and “foreign filing entities” can be served, stating “[t]his chapter does not preclude other means of service of process, notice, or demand on a domestic or foreign entity as provided by other law.” Tex. Bus. Orgs. Code. Accordingly, Lawton Candle’s conclusion that service on the Secretary of State is the only method consistent with Chapter 5 for serving an out-of-state filing entity that fails to register in Texas is not faithful to Chapter 5’s plain language.
The express intent of Chapter 5 is clearly only to broaden available options for service of process and not to have any limiting effect. The Lawton Candle Court appears to have somehow concluded the opposite. This requires the implied conclusion that, by providing a method for serving a foreign entity that fails to register as required by Chapter 9 of the Code, the Legislature somehow revoked all other possible service options (which options were not analyzed in the opinion). But the Legislature did not do any such thing. If that is indeed what the Lawton Candle Court concluded, then its holding is directly contrary to the express language of Chapter 5 of the Code and other applicable Texas law, including Paramount Pipe.
Importantly, the holding in Lawton Candle is inconsistent with a prior and well-reasoned opinion of the Austin Court of Appeals in Consol. Am. Indus., Inc. v. Greit-Amberoaks, L.P., No. 03- 07- 00173-CV, 2008 WL 5210925, at *1 (Tex. App. Dec. 12, 2008, no pet.) (mem. op). The Court evaluated service under TRCP 108 and found that service of process upon the defendant’s domestic registered agent in Nevada supported a default judgment against the defendant. Id. The Court expressly considered whether service of service was under Rule 108 was appropriate, stating, “[a]bsent an indication of [the person who received service]’s status as an agent for Consolidated or his authority to receive service on behalf of Consolidated or its registered agent, service would be invalid.” Accordingly, the Austin Court of Appeals clearly found that service of process through the Nevada registered agent under TRCP sustained the default judgment. Id.
Further, a review of Rule 108a governing service of process outside of the United States demonstrates that the holding in Lawton Candle should be viewed as limited to that case and without any application to service under Rule 108 (which, again, the Supreme Court held to be a valid alternative to service under the then-existing long-arm statute in Paramount Pipe). Rule 108a authorizes service abroad, “as prescribed by the foreign country’s law for service in that country in an action in its courts of general jurisdiction.” If the holding of Lawton Candle were given broad application, it could be construed to prohibit a Texas plaintiff from serving a New Mexico defendant (e.g., concerning a contract dispute) by serving its New Mexico registered agent—even if it wrongly failed to register to do business in Texas—but to allow that same plaintiff to serve a corporate defendant in Mexico by service upon its Mexico registered agent (assuming similar registered agency laws and processes in Mexico). To construe Lawton Canlde that broadly would ignore the fact that Rule 108a allows service on foreign persons consistent with foreign laws and that Rule 108 clearly is intended to do the same with respect to Texas’s sister states. That is clearly not the framework established by Texas law.
Lawton Candle did not address the fact that Rule 108 can be used in conjunction with a registered agency created under the law of another state to substantiate service. Importantly, Section 5.256 of the Code specifically states Chapter 5 does not preclude other means of service of process pursuant to “other law.” When the Texas Rules of Procedure refer to persons “authorized by law” to make service under Rule 108, via Rule 106, that reference is not limited to Texas law. Similarly, there is no basis for concluding that Chapter 5’s reference to “other law” excludes a registered agency created under the statutory law of a sister state. In fact, due regard for the scope of authority of registered agents created by the law of sister states in determining who is a process agent for an out-of-state entity or individual may be required by the Full Faith and Credit Clause of the U.S. Constitution. U.S. Const. art. IV, § 1. See also, e.g., Carroll v. Lanza, 349 U.S. 408 (1955) (a statute is a “public Act” within the meaning of the full faith and credit clause).
Service Under Rule 108 (Via Rule 106)
Rule 108 “is a valid procedural alternative to service under the long-arm statute” but it does not by itself “confer jurisdiction over non-resident defendants.” Paramount Pipe & Supply Co., Inc. v. Muhr, 749 S.W.2d 491, 495–96 (Tex. 1988); Smith v. Dainichi Kinzoku Kogyo Co., Ltd., 680 F. Supp. 847, 849 (W.D. Tex. 1988) (upholding service on corporate defendants in Japan through the mail under rule 108 because “[n]othing in the language of Section 17.044(a) requires a party to use substituted service, rather, it is an alternative to the methods for service on non-residents allowed under Tex.R.Civ.P. 108.”). Further, Rule 108 “allows a plaintiff to avoid the “doing business” requirements of the Texas Long-Arm Statute. Deininger v. Deininger, 677 F. Supp. 486, 490 (N.D. Tex. 1988) (service was in Pennsylvania). Rule 108 authorizes service by any disinterested person competent to make an oath of the fact in the same manner as provided in Rule 106. World Distributors, Inc. v. Knox, 968 SW 2d 474 (Tex. App.—El Paso 1998, no pet.).
The Texas Supreme Court has held that Rule 108, which applies to out-of-state defendants, extends Texas in personam jurisdiction to the federal “constitutional limits.” U-Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760, at 762 n. 1 (Tex. 1977). Like Rule 4(h) of the Federal Rules of Civil Procedure, this provision authorizes service of process on the domestic (home-state) registered agents of out-of-state defendants. Rule 106 allows for personal service on entity defendants (which by statute includes their registered agents) and Rule 108 authorizes service in the same manner as Rule 106. Multiple Texas appellate courts have held that Rule 108 fully incorporates Rule 106. Furst v. Smith, 176 S.W.3d 864, 869 (Tex. App.-Houston [1st Dist.] 2005, no pet.); World Distribs., Inc. v. Knox, 968 S.W.2d 474, 479 (Tex. App.-El Paso 1998, no pet.); Indus. Models, Inc. v. SNF, Inc., NO. 02-13-00281-CV (Tex. App.—Ft. Worth, Jul. 24, 2014) (mem. op.). Rule 106 is the general rule of the TRCP that provides various methods for serving defendants in Texas, and by Texas statutes requiring agents for service of process, Rule 106 supports service on those defendants by service on their registered agents. Rule 103 allows service by any person “authorized by law,” which under Rule 108 (via Rule 106) applies to persons authorized by the law of sister states. Accordingly, the Texas Rules of Civil Procedure and Texas statutory service of process provisions that refer to “other law” are not limited to Texas law.
Rule 108 authorizes service of process on out-of-state defendants by personal service in “the same manner as Rule 106 authorizes service” on in-state defendants. Rule 106 does not expressly mention business entities or registered agents, but when paired with a registered agency created under Chapter 5 of the Code, Rule 106 authorizes plaintiffs to make personal service on defendants by service on the registered agents of Texas entities. In turn, Rule 108 authorizes service on out-of-state defendants in the same manner as Rule 106. Therefore, if a Texas plaintiff makes service on an out-of-state entity defendant through its domestic registered agent within the scope of a valid agency created under the law of another state—that service is expressly authorized pursuant to Rules 108 and 106.
Rule 108 was enacted to enable service of process to the limits of the constitution to facilitate service on out-of-state defendants and make them subject to service in the same manner as Texas defendants allowed by Rule 106. Neither Rule 108 nor Rule 106 limits its application to individuals, and Rule 106 supports personal service on registered agents. If Lawton Candle means that Rule 108 does not support service on an out-of-state defendant by service on its home-state registered agent, then my conclusion is that its holding is invalid under the Supreme Court’s holding in Paramount Pipe, under Chapter 5 of the Code, and under Rule 108.
Florida Law as an Example Concerning the Authority of Registered Agents to Receive out-of-State Process
Coupled with TRCP 108, Sections 48.062 and 605.0113 of the Florida Statutes would provide all the authority necessary to serve a Florida LLC with process concerning a Texas court proceeding by service on the LLC’s Florida registered agent. Florida law simply provides that “[p]rocess against a limited liability company, domestic or foreign, may be served on the registered agent designated by the limited liability company under chapter 605.” § 48.062, Fla. Statutes.[4] In turn, Section 605.0113 requires Florida LLCs to maintain a registered agent for the service of process. Fla. Statutes.[5]
Like Texas law, Florida law does not constrain the authority of Florida registered agents to acceptance of service of process only from Florida proceedings. Doing so would upend the service of process regime used daily in interstate litigation. In fact, the Florida statute states a simple and clear duty of registered agents: “[t]o forward to the limited liability company or registered foreign limited liability company, at the address most recently supplied to the agent by the company or foreign limited liability company, a process, notice, or demand pertaining to the company or foreign limited liability company which is served on or received by the agent.” § 605.0113(3) Fla. Statutes.
Moreover, under Florida law, there is no “connexity” requirement between the facts of the case and the territory of Florida required to support service of process. White v. Pepsico, Inc., 568 So.2d 886 (Fla.1990) (holding that Pepsico, a foreign corporate defendant, could be served with process of a Florida lawsuit through their Florida registered agent, even though the facts of the lawsuit occurred in the Bahamas). Under Florida law, service of process and personal jurisdiction are viewed as “two distinct” although related concepts. Borden v. East-European Ins. Co., 921 So. 2d 587, 591 (Fla. 2006). Whereas personal jurisdiction requires that a defendant have minimum contacts with the forum, service or process addresses the means of notifying a party of a legal claim. Id. Texas law is consistent with Florida law on this point.
Home-state registered agents for defendants in out-of-state proceedings are regularly served with process in Federal courts, which is expressly authorized by Federal Rule 4(h).[6] Federal procedural law supports the notion that the authority of domestic registered agents is not restricted from receiving process from other jurisdictions.[7] Perhaps in part because of their role as agents in federal interstate litigation, statutes requiring the appointment of registered agents generally do not limit their statutory duty to receive process to proceedings only from their home jurisdiction, and neither does Texas nor Florida law.
Federal Rule of Civil Procedure 4(h) even makes explicit reference to this general authority of registered agents to receive out-of-state process as follows:
“Unless federal law provides otherwise… a domestic or foreign corporation, or a partnership or other unincorporated association that is subject to suit under a common name, must be served:
- in a judicial district of the United States:
(A) in the manner prescribed by Rule 4(e)(1) for serving an individual; or
(B) by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process […].
Several federal courts in other districts have found service proper when delivered to Florida-registered agents of Florida LLCs because Florida law requires them to have registered agents.[8] The point is not that federal law provides the rules concerning how a Texas or Florida summons can be served. Rather, the point is that other courts have found that Florida law does not restrict the jurisdictions from which Florida-registered agents can receive service of process.
Conclusion
My conclusion is that if a registered agent is authorized by the law of a foreign entity’s home state to receive service of process for that foreign entity, then such service of process is authorized expressly by Rule 108 because Rule 106 authorizes personal service on Texas entities by service on their registered agents and Rule 108 authorizes service on out-of-state defendants in the same manner. That said, a Texas plaintiff may wisely seek to use another service method if available. Plaintiffs might find obstacles to proving valid service to support a default judgment, for example, Lawton Candle and Texas case law requiring strict proof of valid service, which may require proving the relevant facts and the law of the defendant’s home state.
Also, plaintiffs must keep in mind that service of process and personal jurisdiction are related but separate concepts. In addition to a valid method for service of process, which is necessary to show the constitution due process element of notice, a plaintiff must show that a defendant is subject to a court’s jurisdiction because it has the necessary “minimum contacts” with the forum state. Because service of process under rule 108 does not confer in personam jurisdiction, “[t]o pass constitutional muster, [a plaintiff is] required to allege and show (1) that [the defendant] purposefully did some act or consummated some transaction in Texas, (2) that the cause of action arose from or was connected with such act or transaction, and (3) that the assumption of jurisdiction by the trial court will not offend ‘traditional notions of fair play and substantial justice.’” Herbert v. Greater Gulf Coast Enters., Inc., 915 S.W.2d 866, 871 (Tex. App.-Houston [1st Dist..] 1995, no writ).
[1] Chapter 9, Tex. Bus. Comm. Code requires a “foreign entity” that does business in Texas to register with the Texas Secretary of State. Chapter 5, Tex. Bus. Comm. Code, requires foreign entities to designate a registered agent.
[2] See, e.g., World Distributors, Inc. v. Knox, 968 SW 2d 474, 478-479 (Tex. App.—El Paso 1998, no pet.) (in which the Court evaluates Knox’s claim that he attempted service on a non-resident defendant corporation via TxSOS under Rule 108 but, ultimately, notes the record did not support that contention and determines that TxSOS is not a person authorized to serve process under Rule 103).
[3] The Plaintiff in Lawton Candle may have failed to argue or to prove that Oklahoma law authorized the registered agent to receive service.
[4] An online version of the statute is available here: http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0000-0099/0048/Sections/0048.062.html (last accessed March 18, 2025).
[5] An online version of the statute is available here: http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0605/Sections/0605.0113.html (last accessed March 18, 2025).
[6] See, e.g., Graham v. Does, 2024 WL 1654576, Case No. 1:23-CV-00254-DII, (W.D. Texas—Austin, April 16, 2024) (Delaware entity served with Texas lawsuit because Delaware law generally authorized serviced on registered agents); Olaplex, Inc. v. Cespedes, 21-cv-23573-COOKE/DAMIAN (S.D. Fla., Mar. 10, 2022) (corporation served with Florida lawsuit by service on its California registered agent).
[7] As demonstrated herein, federal courts regularly deem service of process on nonresident entities complete by service on registered agents in their home state, including Florida registered agents.
[8] See Kresch v. Miller, Civil Case No. 18-10025 (E.D. Michigan, Southern Division, June 13, 2018); Trithorn Bulk A/S v. Duron Capital LLC, No. 22 Civ. 9628 (JPC) (S.D.N.Y, June 23, 2023); Unite National Retirement Fund v. Ariela, Inc., 643 F.Supp.2d 328 (2008) (S.D.N.Y, June 25, 2008. (Plaintiff served defendant […] by personal service on its Florida registered agent.”); see also Natures Way Marine, LLC v. Everclear of Ohio, Ltd. Civil Action No. 12-0316-CG-M (S.D. Ala. Jan. 18, 2013) (holding that because the plaintiff could not serve a Florida entity with a complaint originating in Alabama on the entity’s Florida registered agent due to non-compliance with the registered agent statute, Florida law authorized alternative methods of service, which the Court found successful).
