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Michelin North America, Inc. v. Lopez De Santiago

Court of Appeals of Texas, Eighth District, El Paso

June 27, 2018

MICHELIN NORTH AMERICA, INC. Appellant,
v.
BRENDA ISELA LOPEZ DE SANTIAGO, Individually and as Representative of the ESTATE OF EILEEN ARAMBULA LOPEZ, Deceased, and PEDRO ARAMBULA MERAZ Appellees.

          Appeal from the County Court at Law No. 6 of El Paso County, Texas (TC# 2016-DCV1638)

          Before McClure, C.J., Rodriguez, and Palafox, JJ.

          OPINION

          YVONNE T. RODRIGUEZ, Justice

         The fact pattern in this case involves a variation on a familiar theme in civil procedure textbooks. An out-of-state tire manufacturer targets Texas as a marketplace and sells its products extensively throughout Texas. The Texas resident driver of an automobile purchased in Texas is injured and his Texas resident passengers are hurt or killed after one of the manufacturer's tires allegedly fails in Mexico. Can the tire manufacturer be haled to a Texas court to answer the driver and passengers' product liability charges?

         Michelin North America says no. Conceding that it actively markets its products in Texas, that it intends for its products to end up in Texas, that many of the tires it places into the stream of commerce do in fact end up in the hands of Texas consumers, and that the company makes a substantial amount of money from Texas sales, Michelin nevertheless insists the trial court cannot assert jurisdiction over it based on a simple jurisdictional twist. Michelin only markets new tires in Texas. This case involves a used Michelin tire, placed on the vehicle by a third party following Michelin's initial sale of the tire through distributors to an unknown party.

         Michelin largely frames its argument in terms of the stream of commerce metaphor: because an intervening retail customer removed the tire from the stream of commerce and then sold the tire again on a secondary market before it ended up on the vehicle in question, Michelin asserts that jurisdictional chain is broken for all purposes, and that no specific personal jurisdiction exists over the company in Texas.

         We are unconvinced by Michelin's stream-of-commerce argument and will not today adopt a per se rule holding that intervening retail sales necessarily cut off downstream personal jurisdiction in products liability cases. We agree with Michelin that the plaintiffs' status as Texas residents, standing alone, is not enough to confer personal jurisdiction on Texas courts; there must be a substantial connection between defendant Michelin's allegedly tortious conduct, the injury plaintiffs suffered, and the State of Texas. Walden v. Fiore, 571 U.S. 277, 134 S.Ct. 1115, 1123, 188 L.Ed.2d 12 (2014). Thus, the real question in this case is not whether an intervening retail sale serves as a jurisdictional chokepoint under the stream-of-commerce-plus test. The real question is whether the plaintiff's indirect purchase of a defective product on a secondary market in Texas can sustain specific jurisdiction in a Texas court when most of the tortious conduct and the brunt of the injury related to that product happened outside of Texas.

         We conclude that due process will permit the exercise of specific jurisdiction in this case. Michelin failed to refute the plaintiff's claim that the original tire sale took place in Texas, and the secondary sale here arose from and related to that Texas-based initial sale. The trial court's order is affirmed.

         BACKGROUND

         While the parties largely talk past each other in their pleadings, the facts alleged by each side never directly clash. As such, the jurisdictional facts here are undisputed. We will take them as true for the purposes of deciding this appeal.

         Michelin North America (Michelin) is a tire manufacturer incorporated in New York with its principal base of business in South Carolina. Michelin designs and manufactures tires, but it does not sell tires directly to consumers, nor are there facts in this record to support the inference that Michelin maintains any physical presence in the state of Texas. Instead, Michelin uses distributors to penetrate markets across the United States.

         Michelin uses three distributor companies-Discount Tire Company of Texas, Wal-Mart Stores, and Tire Dealer's Warehouse-to sell new tires directly to consumers in Texas. At least forty-six authorized dealers sell Michelin tires in brick-and-mortar stores in the El Paso area alone. Michelin also runs a web site (www.michelinman.com) accessible to Texas consumers that allows users to directly purchase officially licensed Michelin merchandise, join a mailing list to receive Michelin promotional emails, use a configuration tool to determine which Michelin tires fit a particular vehicle, communicate live with a "Tire Concierge" that assists in finding the right tire, and search for Michelin dealerships. Michelin gathers data in Texas to monitor tire performance; allows Texas individuals to register their tires for product updates; and distributes recall information online, through its distributors, and directly to registered tire users.

         Michelin is also no stranger to this State's courts. From 2001 to 2016, Michelin has filed lawsuits seeking affirmative relief in Texas courts and has answered lawsuits as a defendant in other Texas cases without contesting jurisdiction, including in other cases involving alleged tire failures.

         The particular tire involved in this accident is known as a Uniroyal Tiger Paw Freedom tire. It was designed and developed in 2005 in both Ohio and South Carolina by a Michelin subsidiary company. The Uniroyal Tiger Paw Freedom tire was designed to be used until it reaches a tread depth of 2/32 of an inch and has an expected service life of ten years. Following the design phase, the tire was manufactured during the 11th week of 2005 at a plant in Kitchener, Ontario, Canada. According to the first amended petition in this case, "Defendant MNA [Michelin North America] shipped the subject tire to the State of Texas and delivered the same to its distributor in Texas with the intent of delivering the tire to a retailer for sale in the State of Texas because MNA had directed its business to Texas." We take this to mean that the subject tire was initially transferred to a Texas distributor for sale in the Texas marketplace. Michelin never directly disputed this allegation in its special appearance.

         In 2014, Brenda Isela Lopez de Santiago (Lopez) purchased a used 2002 Honda CR-V SUV from a car dealership in El Paso, Texas. The car came with Uniroyal tires already installed, and they had already been used at the time of purchase. Lopez alleged both in her pleadings and in an affidavit that the subject tire was previously purchased in Texas and that no one at the car dealership ever replaced the tires. Again, Michelin never directly disputed this allegation. Instead, Michelin averred in a special appearance filing that "[u]pon information and belief, the subject tire was purchased used from a third party wholly unrelated to MNA." In construing these pleadings for purposes of appeal, we take this to mean that the parties agree that prior to Lopez's purchase of the SUV, the subject tire was previously sold in Texas and purchased separately from a third party unconnected to Michelin.

         On July 24, 2015, Lopez allowed Pedro Arambula Meraz to drive her CR-V. Lopez, her daughter, and others were passengers. As Arambula Meraz drove on a road in Ciudad Juarez, Chihuahua, Mexico, across the international border from El Paso, the right back tire on the Honda CR-V failed, causing a rollover accident. Lopez was injured in the crash, and her daughter died. Arambula Meraz was also injured.

         Lopez sued both Arambula Meraz and Michelin in a Texas state district court in El Paso. With respect to Michelin, Lopez brought negligence and product liability claims. Arambula Meraz also filed cross-claims against Michelin for negligence and products liability.

         The trial court overruled Michelin's special appearance request. This interlocutory appeal followed.

         DISCUSSION

         Michelin advances a two-pronged attack on the trial court's jurisdiction before this Court. In Issue One, Michelin contends that it is not "at home" in Texas for purposes of claim-blind general jurisdiction, meaning that any legitimate assertion of personal jurisdiction must tie Texas as a forum to the specific claim at bar. In Issue Two, Michelin argues that specific jurisdiction fails because the suspect tire in this case was neither designed nor manufactured in Texas, nor did Michelin directly sell the tire to Lopez. Because Michelin designs, manufacturers, and markets only new tires, and this case involved a used tire purchased by an unidentified intervening retail customer, specific jurisdiction does not exist.

         We agree that no general jurisdiction exists over Michelin. A company can only be considered "at home" either in the state of its incorporation or the state where it is headquartered. Michelin is neither incorporated or headquartered in Texas. However, we disagree that specific jurisdiction is unavailable. We hold that the intervening retail sale of a Michelin tire in Texas does not per se insulate Michelin from personal jurisdiction in Texas, and there is a sufficient nexus between the claim, the defendant, and the State of Texas as a forum to permit the exercise of specific jurisdiction.

         A.

         Applicable Law

         Standard of Review

         The plaintiff and the defendant "bear shifting burdens of proof in a challenge to personal jurisdiction." Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 658 (Tex. 2010). "[T]he plaintiff bears the initial burden to plead sufficient allegations to bring the nonresident defendant within the reach of Texas's long-arm statute." Id. Once the plaintiff satisfies this initial burden, the defendant challenging jurisdiction "bears the burden to negate all bases of personal jurisdiction" and must tie its jurisdictional arguments "to the allegations in the plaintiff's pleading." Id. The defendant can challenge personal jurisdiction "on either a factual or legal basis." Id. at 659. "Factually, the defendant can present evidence that it has no contacts with Texas, effectively disproving the plaintiff's allegations." Id. "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.

         Michelin concedes that it has contacts with Texas, and it did not challenge any of Lopez's allegations regarding the nature of initial or intervening retail sales at all, either through conflicting allegations made in its special appearance filings or by way of contravening affirmative evidence offered at the trial court level. That converts this case from a mixed question of fact and law to a purely legal question. We apply those uncontested jurisdictional facts to the law de novo. Kelly, 301 S.W.3d at 658.

         When, as here, the trial court does not file findings of fact in a special appearance, all questions of fact are presumed to support the judgment. Worford v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990). A reviewing court must affirm if the judgment can be upheld on any legal theory supported by the evidence. Happy Indus. Corp. v. American Specialties, Inc., 983 S.W.2d 844, 847 (Tex.App.--Corpus Christi-Edinburg 1998, writ dism'd w.o.j.).

         Personal Jurisdiction

         Many areas of the law are defined by clear, settled rules and crisp, linear analytical approaches that spring from a common source of judicial understanding-one that is often grounded less in high-minded philosophical debate and more in practical applications and the need of litigants and courts for certainty and consistency. Personal jurisdiction is not one of those areas of law. As we have previously noted, "[s]tating the maxims for personal jurisdiction is often easier than applying them." Semperit Technische Produkte Gesellschaft MBH v. Hennessy, 508 S.W.3d 569, 578 (Tex.App.--El Paso 2016, no pet.). We endeavor to state and apply these maxims as best we can.

         "[A] court must have both subject matter jurisdiction over the controversy and personal jurisdiction over the parties" before it may exercise its power over a legal dispute. Spir Star AG v. Kimich, 310 S.W.3d 868, 871 (Tex. 2010). "Subject matter jurisdiction involves a court's 'power to hear a particular type of suit,' while personal jurisdiction 'concerns the court's power to bind a particular person or party.'" TV Azteca v. Ruiz, 490 S.W.3d 29, 36 (Tex. 2016). This case deals with the trial court's ability to exercise personal jurisdiction.

         A state court may exercise personal jurisdiction over a non-resident defendant so long as that state's long-arm statute permits it, and so long as the jurisdictional exercise is consistent with the due process limitations imposed on state courts by the federal constitution. TV Azteca, 490 S.W.3d at 36. Because the Texas long-arm statute allows state courts to exercise personal jurisdiction over nonresident tortfeasors to the fullest extent permitted by the federal constitution, our jurisdictional analysis rises and falls entirely in tandem with federal due process case law. Id.; see also Tex.Civ.Prac.&Rem.Code Ann. § 17.042 (West 2015)(Texas long-arm statute).

         The Threshold: Minimum Contacts and Notions of Fair Play

         At a federal due process level, personal jurisdiction was initially conceptualized as a function of a defendant's physical presence; a state could not hale a defendant to court unless and until the defendant was present within the forum state's physical borders. Burnham v. Superior Court of Cal., Cty. of Marin, 495 U.S. 604, 611-12, 110 S.Ct. 2105, 2110-11, 109 L.Ed.2d 631 (1990)(Scalia, J., plurality op.); Int'l Shoe Co. v. State of Washington, Off. of Unemployment Compensation & Placement, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). This physical presence approach to jurisdiction later evolved under the Burger and Warren Courts in response to the rise of interstate commerce and the proliferation of corporations-legally fictitious entities that had no physical bodies that could be subjected to jurisdiction. See Burnham, 495 U.S. at 617, 110 S.Ct. at 2114.

         In International Shoe Co., the United States Supreme Court dealt with the issue of corporate "presence" in discussing a state's exercise of extraterritorial jurisdiction over a non-resident corporate defendant. 326 U.S. at 315, 66 S.Ct. at 158. The Court held that due process allowed states to exercise personal jurisdiction over non-resident defendants if a defendant had "certain minimum contacts" with the forum "such that the maintainence of the suit does not offend 'traditional notions of fair play and substantial justice.'" Id. at 316, 66 S.Ct. at 158. Subsequent interpretations of International Shoe have treated this language as creating a test with two prongs: (1) a minimum contacts prong and (2) a fair play/substantial justice prong. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528 (1985).

         "A defendant establishes minimum contacts with a state when it purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws." [Internal quotation marks and citation omitted]. Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex. 2009). "Significant contacts suggest that the defendant has taken advantage of forum-related benefits, while minor ones imply that the forum itself was beside the point." Spir Star AG v. Kimich, 310 S.W.3d 868, 872 (Tex. 2010). "Once it has been decided that a defendant purposefully established minimum contacts within the forum State, these contacts may be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with fair play and substantial justice." [Internal quotation marks and citation omitted]. Burger King, 471 U.S. at 476, 105 S.Ct. at 2184. Fair play/substantial justice factors include (1) the burden on the defendant, (2) the forum state's interest in adjudicating the dispute, (3) the plaintiff's interest in obtaining convenient and effective ...


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