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Morris v. H G Spec Inc.

Court of Appeals of Texas, Ninth District, Beaumont

February 28, 2017

WILLIAM MORRIS, AS ADMINISTRATOR OF THE ESTATE OF LARRY MORRIS, Appellant
v.
H G SPEC INC., ET AL, Appellees

          Submitted on February 24, 2016

         On Appeal from the 172nd District Court Jefferson County, Texas Trial Cause No. E-190, 617

          Before McKeithen, C.J., Horton and Johnson, JJ.

          MEMORANDUM OPINION

          LEANNE JOHNSON Justice

         In this interlocutory appeal, Plaintiff William Morris, as administrator of the Estate of Larry Morris (Plaintiff or Appellant), appeals the trial court's orders granting the special appearances of defendants Reliance Worldwide Pty Ltd, GSA Group Pty Ltd, GSA Industries (Aust) Pty Ltd (the Reliance Defendants), and H G Spec, Inc. (H G Spec) (collectively Appellees) and dismissing the claims against Appellees with prejudice.[1] We affirm.

         Background Plaintiff contends that on or about July 22, 2011, Larry Morris was a resident at the EduCare Community Living Corporation - Gulf Coast (EduCare) adult care facility, and he sustained second-degree and third-degree burns from hot water during a bath given by his caregiver. According to Plaintiff, Larry died as a result of his burns. Plaintiff filed suit against EduCare, Decresha Jenkins (Jenkins), Cash Acme, the Reliance Defendants, and H G Spec.[2] In Plaintiff's Fourth Amended Petition (hereinafter "the petition"), the live petition at the time the trial court heard the Appellees' special appearances, [3] Plaintiff asserted that on the alleged date, one of EduCare's employees, Jenkins, was giving Larry Morris a bath, Jenkins turned on the water, and she left Larry Morris unattended. According to the petition, when Jenkins returned, she discovered that Larry Morris had been burned by scalding hot water in the bathtub even though a "scald protector" or Thermostatic Mixing Valve (TMV) allegedly designed, manufactured, and marketed by the Reliance Defendants and H G Spec, had been installed. In the petition, the Plaintiff specifically alleged that EduCare and Jenkins were negligent in caring for Larry Morris, and Plaintiff also alleged negligence and strict liability causes of action against the Reliance Defendants and H G Spec.

         The Reliance Defendants filed separate special appearances, and H G Spec filed a special appearance. The trial court held a hearing on the special appearances. The parties presented arguments to the trial court and relied on documents on file and exhibits admitted at the hearing, but offered no live testimony at the hearing. The trial court granted all four special appearances in separate orders. Plaintiff timely appealed.

         Issues on Appeal

         In his first and second issues, Appellant maintains that the trial court erred in granting H G Spec's special appearance because personal jurisdiction exists as to H G Spec under the theories of both general and specific jurisdiction. In his third issue, Appellant asserts that the trial court erred in granting the Reliance Defendants' special appearances because the trial court had specific jurisdiction over all of the Reliance Defendants.

         Standard of Review and Applicable Law

         Whether a trial court has personal jurisdiction over a defendant is ultimately a question of law that we review de novo. Moncrief Oil Int'l, Inc. v. OAO Gazprom, 414 S.W.3d 142, 150 (Tex. 2013); BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794-95 (Tex. 2002). The plaintiff has the initial burden of pleading sufficient allegations to bring a nonresident defendant within the jurisdiction of a Texas court. Moncrief, 414 S.W.3d at 149; Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 658 (Tex. 2010); Retamco Operating, Inc. v. Republic Drilling, Co., 278 S.W.3d 333, 337 (Tex. 2009). If the plaintiff meets this initial burden, "the burden shifts to the defendant to negate all potential bases for personal jurisdiction the plaintiff pled." Moncrief, 414 S.W.3d at 149; BMC Software, 83 S.W.3d at 793. The defendant may negate the jurisdictional allegations on either a factual basis or a legal basis. Kelly, 301 S.W.3d at 659.

Factually, the defendant can present evidence that it has no contacts with Texas, effectively disproving the plaintiff's allegations. The plaintiff can then respond with its own evidence that affirms its allegations, and it risks dismissal of its lawsuit if it cannot present the trial court with evidence establishing personal jurisdiction. Legally, the defendant can show that even if the plaintiff's alleged facts are true, the evidence is legally insufficient to establish jurisdiction; the defendant's contacts with Texas fall short of purposeful availment; for specific jurisdiction, that the claims do not arise from the contacts; or that traditional notions of fair play and substantial justice are offended by the exercise of jurisdiction.

Id. (footnotes omitted). There being no timely filed findings of fact and conclusions of law, "all facts necessary to support the judgment and supported by the evidence are implied." BMC Software, 83 S.W.3d at 795.[4] If the appellate record includes the reporter's and clerk's records, these implied findings are not conclusive and may be challenged for legal and factual sufficiency in the appellate court. Id.

         A trial court has personal jurisdiction over a nonresident defendant if the exercise of jurisdiction is authorized by statute and is consistent with federal and state constitutional due process guarantees. Moncrief, 414 S.W.3d at 149; Spir Star AG v. Kimich, 310 S.W.3d 868, 872 (Tex. 2010); see also Tex. Civ. Prac. & Rem. Code Ann. § 17.042 (West 2015). The Texas long-arm statute provides that certain acts constitute doing business in Texas, including, but not limited to, the following:

(1)contracts by mail or otherwise with a Texas resident and either party is to perform the contract in whole or in part in this state;
(2) commits a tort in whole or in part in this state; or
(3) recruits Texas residents, directly or through an intermediary located in this state, for employment inside or outside this state.

Tex. Civ. Prac. & Rem. Code Ann. § 17.042. Although an allegation of jurisdiction may satisfy the Texas long-arm statute, the allegation still may not necessarily satisfy the United States Constitution. Moncrief, 414 S.W.3d at 149. Accordingly, even if a court determines the facts satisfy the Texas long-arm statute, a court must also examine the facts to determine if the exercise of personal jurisdiction over the defendant comports with due process. See CSR Ltd. v. Link, 925 S.W.2d 591, 594 (Tex. 1996).

         Asserting personal jurisdiction over a nonresident defendant comports with due process when (1) the nonresident defendant has minimum contacts with the forum state, and (2) asserting jurisdiction comports with traditional notions of fair play and substantial justice. Retamco, 278 S.W.3d at 338. The minimum contacts analysis requires "'some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'" Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 784 (Tex. 2005) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)). The focus is on the defendant's activities and expectations. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002). A defendant's contacts may give rise to either general jurisdiction or specific jurisdiction. See Moncrief, 414 S.W.3d at 150; Zinc Nacional, S.A. v. Bouche Trucking, Inc., 308 S.W.3d 395, 397 (Tex. 2010). Continuous and systematic contacts with Texas may give rise to general jurisdiction, while specific jurisdiction exists when the cause of action arises out of or is related to specific purposeful activities of the defendant in Texas. Moncrief, 414 S.W.3d at 150. "The exercise of personal jurisdiction is proper when the contacts proximately result from actions of the nonresident defendant which create a substantial connection with the forum state." Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex. 1991) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-75 (1985)).

         A trial court has general jurisdiction over a nonresident defendant when the defendant's contacts with the forum are systematic and continuous. Spir Star, 310 S.W.3d at 872. A court has general jurisdiction when the nonresident defendant's affiliations with the State in which suit is brought are so constant and pervasive "'as to render [the nonresident defendant] essentially at home in the forum State.'" Daimler AG v. Bauman, 134 S.Ct. 746, 751 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S.Ct. 2846, 2851 (2011)).

         Specific jurisdiction exists when there is evidence that the defendant purposefully availed itself of the forum's jurisdiction by contacts or activities in the forum state, and the cause of action arises from or is related to those contacts or activities. Retamco, 278 S.W.3d at 338 (citing Burger King, 471 U.S. at 472); BMC Software, 83 S.W.3d at 795-96. Under specific jurisdiction, the focus is on the relationship between the forum, the defendant, and the litigation. Moncrief, 414 S.W.3d at 150; Retamco, 278 S.W.3d at 338. There must be a substantial connection between the defendant's contacts and the operative facts of the litigation. Moncrief, 414 S.W.3d at 156. The contacts must be such that the defendant "should reasonably anticipate being haled into court" in Texas. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). With respect to tort claims, Texas's interest in protecting its citizens against torts is insufficient to automatically exercise personal jurisdiction when the nonresident directs a tort from outside the forum. Michiana, 168 S.W.3d at 790-91. We must analyze the jurisdictional contacts on a "claim-by-claim basis" unless all claims arise from the same forum contacts. Moncrief, 414 S.W.3d at 150-51.

         When considering whether the nonresident purposefully availed itself of the privilege of conducting activities within Texas, we look at three factors: (1) whether the defendant had contacts and activity in and with Texas; (2) whether the contacts relied upon were purposeful rather than random, fortuitous, or attenuated; and, (3) whether the defendant sought some benefit, advantage, or profit by availing itself of the jurisdiction. Id. at 151.

         Plaintiff's Jurisdictional Allegations

         Plaintiff alleged in the petition that H G Spec is "a Canadian company doing business in the State of Texas." Plaintiff made no further jurisdictional allegations in the petition as to H G Spec. Plaintiff alleged that Reliance Worldwide Pty Ltd and GSA Group Pty Ltd are "Australian compan[ies] doing business in the State of Texas[, ]" and that GSA Industries Pty Ltd is "an Australian company[.]" Plaintiff further alleged that the Reliance Defendants "along with other affiliated companies . . . are all the same entity, created with the purpose of falsely portraying GSA Industries (Australia) Pty. Ltd. . . . as disconnected from the sale and distribution of Thermostatic Mixing Valves in the United States in general and Texas specifically." Plaintiff alleged that the Reliance Defendants "had continuous, systematic and sufficient minimum contracts[sic] with Texas, their actions were directed to the State of Texas, and they purposefully availed themselves of the benefit, advantage and profit of this jurisdiction[]" and that "[f]or purposes of the manufacture and distribution of products at issue in this case such as 'scald protectors' or thermostatic mixing valves, these Defendants operated not as separate entities but rather as a single business enterprise."

         Plaintiff also alleged that H G Spec and the Reliance Defendants "acted in concert and with a specific joint intent to create corporate fictions and misleading paper agreements, when in fact the true relationship between [H G Spec and the Reliance Defendants] ha[s] always been one of manufacturer and direct distributor of Reliance products into the United States generally and Texas specifically." According to the Plaintiff, "during a period of time, the Reliance Defendants possessed and exercised actual control of HG Spec's U.S. Sales Manager and network of Manufacturer's Reps, although during that time it also engaged in the subterfuge of having those persons remain related on paper to HG Spec when in fact Reliance was reimbursing HG Spec for the costs of said operations."

         Plaintiff's Causes of Action

         Plaintiff generally alleged that the defendants were negligent. Plaintiff alleged that H G Spec and the Reliance Defendants "are strictly liable to Plaintiff[] for designing, manufacturing, and placing into the stream of commerce the scald preventer, which was unreasonably dangerous for its reasonably foreseeable uses at the time it left the control of the Product Defendants because of design, manufacture and manufacturing defects, which were a producing cause of the occurrence in question." Plaintiff also alleged that one or more of the Reliance Defendants, Cash Acme, and H G Spec were negligent "in the design, manufacture, marketing and distribution of the scald preventer in question[.]"

          Personal Jurisdiction as to H G Spec

         According to the appellate record, during certain periods of time H G Spec was a supplier of certain plumbing products manufactured by others. In Plaintiff's petition, Plaintiff alleged that H G Spec is "doing business in the State of Texas." In its verified special appearance, H G Spec alleged that it is "a corporation organized under the laws of Canada[, ] . . . is not a publically traded company[, ]" . . . and "has its principal place of business in Quebec, Canada." According to the special appearance, "[t]here is no nexus between any act or omission by [H G Spec] in Texas[] and the death of Larry Morris[, ] . . . the allegations against [H G Spec] do not arise out of any contacts between [H G Spec] and Texas[, ] [H G Spec] has not consented to the jurisdiction of a Texas court[, ]" [and] "[m]aintenance of this action against [H G Spec] in Texas would violate traditional notions of fair play and substantial justice[.] With respect to whether sufficient minimum contacts with Texas allow the trial court to exercise jurisdiction over H G Spec, H G Spec asserted the following in its special appearance:

. . . [H G Spec] is a corporation organized under the laws of Canada.
. . . [H G Spec] has its principal place of business in Quebec, Canada.
. . . [H G Spec] has no offices, facilities or other places of business in Texas.
. . . [H G Spec] is not required to and has not maintained an agent for service of process in Texas.
. . . [H G Spec] is not registered to do business in Texas.
. . . [H G Spec] does not maintain a telephone listing in a Texas telephone directory.
. . . [H G Spec] has not contracted by mail or otherwise with a Texas resident with performance either in whole or in part in Texas.
. . . [H G Spec] does not solicit business in Texas.
. . . [H G Spec] does not have any bank accounts in Texas.
. . . [H G Spec] has not paid in taxes in Texas.
. . . [H G Spec] had not made application for or received a loan of money in Texas.
. . . [H G Spec] does not own any real property in Texas.
. . . [H G Spec] has not owned or maintained a warehouse or manufacturing plant within Texas.
. . . [H G Spec] has no members of its Board of Directors who live in Texas.
. . . [H G Spec] does not manufacture products sold in Texas.
. . . [H G Spec] does not distribute products for sale into Texas.
. . . [H G Spec] had no employees located in Texas.
. . . [H G Spec] has not committed any tort, in whole or in part, within ...

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