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Grupo Mexico S.A.B. DE C.V. v. Mt. McKinley Insurance Co.

Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg

December 19, 2019

GRUPO MEXICO S.A.B. DE C.V., Appellant,

          On appeal from the 319th District Court of Nueces County, Texas.

          Before Justices Benavides, Longoria, and Perkes


          GREGORY T. PERKES Justice.

         Appellees Mt. McKinley Insurance Company and Everest Reinsurance Company (collectively Mt. McKinley) filed suit in Texas against appellant Grupo Mexico S.A.B. de C.V. (Grupo), a foreign corporation, and two of its subsidiaries, Americas Mining Corporation (AMC) and Asarco, Inc. (Asarco), also foreign corporations. In this interlocutory appeal, Grupo contends the trial court erred in denying its special appearance because: (1) the trial court lacks general jurisdiction over Grupo; (2) the trial court lacks specific jurisdiction over Grupo based on Grupo's contacts; (3) Asarco's contacts cannot be imputed to Grupo under an alter ego theory; and (4) Mt. McKinley's motion to strike Grupo's special appearance was not an otherwise legitimate basis to deny Grupo's special appearance. We affirm.

         I. Background[1]

         In 1999, Grupo, an international mining concern based in Mexico City, acquired Asarco in a leveraged buyout and subsequently formed AMC as a wholly-owned subsidiary to hold its shares of Asarco. Asarco, incorporated in New Jersey and headquartered in Arizona, had been involved in the mining industry, both domestically and internationally, for over a century. However, due to a confluence of factors, including increased debt load after the leveraged buyout, falling copper prices, and mounting environmental and asbestos liabilities, [2] Asarco found itself unable to pay its debts after Grupo's acquisition, including invoices from vendors critical to Asarco's daily operations.

         The exception to Asarco's debt crisis was its controlling interest in the publicly traded Southern Peru Copper Company (SPCC), which remained profitable in the face of low copper prices and contributed significantly to Asarco's operating cash flow. [3] Recognizing SPCC's value and its vulnerability to Asarco's creditors, Grupo sought to transfer Asarco's shares in SPCC to AMC (the "SPCC Transfer"). Grupo was concerned that the SPCC Transfer might be challenged in court as a fraudulent transfer by Asarco's creditors, so it hired outside accounting and law firms to shepherd the deal.

         Inbursa, a banking company in Mexico, agreed to loan AMC $310 million to fund a portion of the transaction; however, as a condition of the financing, Asarco was required to use a portion of the proceeds from the SPCC Transfer to pay $100 million in unsecured Yankee Bonds owned by Inbursa. But Asarco needed to raise an additional $50 million to pay off the Yankee Bonds, and thus began monetizing assets. This included filing a lawsuit against Mt. McKinley and other insurers in Nueces County, Texas, seeking payment under insurance policies for asbestos claims made against Asarco ("Coverage Lawsuit"). Grupo was not a party to that litigation. On March 20, 2003, Asarco and Mt. McKinley entered into a "Settlement Agreement, Release and Policy Buy-Back" whereby Mt. McKinley agreed to pay $12 million in exchange for Asarco's release of all claims against it and the voiding of the insurance policy ("Settlement Agreement"). Under the Settlement Agreement, Asarco agreed to defend and indemnify Mt. McKinley from any claims arising from the settlement. "Asarco" was defined under the Settlement Agreement to include Grupo.

         The SPCC Transfer was completed eleven days later. The structure of the deal allowed Asarco to retire a significant amount of debt, including a $450 million line of revolving credit secured by Grupo, but left Asarco with less cash on hand than before the transfer, and without its most valuable cash-generating asset.

          In 2005, Asarco and several of its wholly owned subsidiaries filed for bankruptcy. Two years later, Asarco initiated an adversary proceeding against Mt. McKinley, seeking to avoid the Settlement Agreement as a constructive fraudulent transfer. See 11 U.S.C. § 548 (stating that the bankruptcy trustee "may avoid any transfer . . . of an interest of the debtor in property . . . if the debtor . . . received less than a reasonably equivalent value in exchange for such transfer . . . and . . . was insolvent on the date that such transfer was made . . . or became insolvent as a result of such transfer"). Mt. McKinley demanded that Grupo defend and indemnify it in the adversary proceeding under the terms of the Settlement Agreement. When Grupo refused, Mt. McKinley filed the underlying suit in Nueces County, Texas against Grupo, Asarco, and AMC, seeking a declaratory judgment of Grupo's obligations under the Settlement Agreement and damages for the amount it incurred in connection with the adversary proceeding.

         AMC and Asarco made general appearances, but Grupo filed a special appearance, challenging Mt. McKinley's allegations of general and specific jurisdiction. See Tex. R. Civ. P. 120a. Mt. McKinley alleged that Asarco's Texas contacts could be imputed to Grupo under an alter ego theory for purposes of establishing both general and specific jurisdiction. Mt. McKinley additionally alleged that Grupo's own contacts with Texas were sufficient to establish specific jurisdiction.

         The trial court initially granted Grupo's special appearance and Mt. McKinley filed an interlocutory appeal. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7); Mt. McKinley Ins. Co. v. Grupo Mexico, S.A.B. de C.V. (Grupo I), No. 13-12-00347-CV, 2013 WL 1683641 (Tex. App.-Corpus Christi-Edinburg Apr. 18, 2013, no pet.) (mem. op.). Based on the record before us, we determined that the trial court did not err in granting the special appearance. Grupo I, 2013 WL 1683641, at *7. We reversed and remanded, however, to allow for additional jurisdictional discovery. Id. at *11. We concluded that the trial court abused its discretion by denying Mt. McKinley's motion for a continuance because Grupo had repeatedly obstructed Mt. McKinley's efforts to obtain even the most basic jurisdictional discovery. Id. at *10.

         On remand, despite protracted discovery disputes, a voluminous jurisdictional record was ultimately produced.[4] Upon reurging, the trial court denied Grupo's special appearance and now Grupo seeks interlocutory review of that decision. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7).

         II. Standard of Review & Applicable Law

         A. Standard of Review

         Whether a trial court may exercise personal jurisdiction over a nonresident defendant is a question of law we review de novo. Searcy v. Parex Res., Inc., 496 S.W.3d 58, 66 (Tex. 2016) (citing Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 805-06 (Tex. 2002)). The plaintiff bears the initial burden of alleging facts that establish the trial court's jurisdiction. Id. (citing Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 337 (Tex. 2009)). The burden then shifts to the defendant to negate all bases for personal jurisdiction that exist in the plaintiff's pleading. Id. (citing Republic Drilling, 278 S.W.3d at 337). "When, as here, the trial court did not issue findings of fact and conclusions of law, all relevant facts that are necessary to support the judgment and supported by evidence are implied." Old Republic Nat'l Title Ins. Co. v. Bell, 549 S.W.3d 550, 558 (Tex. 2018) (citing BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002)).

         B. Personal Jurisdiction

         Under Texas's long-arm statute, Texas courts may exercise personal jurisdiction over a nonresident defendant that "does business" in Texas. See Tex. Civ. Prac. & Rem. Code Ann. §§ 17.041, .042; PHC-Minden, L.P., v. Kimberly-Clark Corp., 235 S.W.3d 163, 166 (Tex. 2007). Because the exercise of personal jurisdiction over a nonresident implicates due process concerns, the Texas long-arm statute reaches only "as far as the federal constitutional requirements of due process will permit." PHC-Minden, 235 S.W.3d at 166 (quoting U-Anchor Adver., Inc. v. Burt, 553 S.W.2d 760, 762 (Tex. 1977)); see Goodyear Dunlop Tires Operations, S.A., v. Brown, 564 U.S. 915, 918 (2011) ("A state court's assertion of jurisdiction exposes defendants to the State's coercive power, and is therefore subject to review for compatibility with the Fourteenth Amendment's Due Process Clause." (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945))). Accordingly, in addition to its own decisions, the Supreme Court of Texas relies on precedent from the United States Supreme Court and other federal courts. PHC-Minden, 235 S.W.3d at 166.

          The exercise of personal jurisdiction satisfies due process if (1) the nonresident defendant established minimum contacts with the forum state and (2) the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. Id. (citing Int'l Shoe, 326 U.S. at 316). When a corporate, nonresident defendant purposefully avails itself of the privileges and benefits of conducting business in a foreign jurisdiction, its contacts are sufficient to confer the forum with personal jurisdiction. Moncrief Oil Int'l, Inc. v. OAO Gazprom, 414 S.W.3d 142, 150 (Tex. 2013) (citing Republic Drilling, 278 S.W.3d at 338)). Only the defendant's purposeful contacts are relevant to the inquiry, unilateral activity of another party or third person, as well as random, isolated, or fortuitous contacts by the defendant, are insufficient to prove the defendant purposefully availed itself. Cornerstone Healthcare Grp. Holding, Inc. v. Nautic Mgmt. VI, LP, 493 S.W.3d 65, 70 (Tex. 2016) (citing Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex. 2005)).

         Once minimum contacts have been established, the exercise of jurisdiction will typically comport with traditional notions of fair play and substantial justice. Spir Star AG v. Kimich, 310 S.W.3d 868, 878 (Tex. 2010) (citing Guardian Royal Exch. Assurance, Ltd. v. English China Clays, PLC, 815 S.W.2d 223, 231 (Tex. 1991)). The defendant must present "a compelling case that the presence of some consideration would render jurisdiction unreasonable." Id. at 879 (quoting Guardian Royal, 815 S.W.2d at 231). Those considerations 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 relief; (4) the international judicial system's interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several nations in furthering fundamental substantive social policies. Id. at 878 (quoting Guardian Royal, 815 S.W.2d at 231).

         There are two types of personal jurisdiction, specific and general. Id. at 71; see generally Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984) (adopting the terms "general" and "specific" to describe the two types of personal jurisdiction). Specific jurisdiction is appropriate when the plaintiff's claim arises from or relates to the defendant's contacts with the forum state. Cornerstone Healthcare, 493 S.W.3d at 71 (citing Spir Star, 310 S.W.3d at 873). Thus, the central inquiry under specific jurisdiction is the relationship between the defendant, the forum state, and the plaintiff's claim. Id. at 71 (citing Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 575-76 (Tex. 2007)).

         General jurisdiction, on the other hand, does not require a nexus between the defendant's in-state contacts and the plaintiff's claim; instead, the focus is solely on the defendant's contacts with the forum. Helicopteros, 466 U.S. at 414 (citing Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952)); PHC-Minden, 235 S.W.3d at 168. Without that connection, however, traditional notions of fair play and substantial justice become tenuous; therefore, to counterbalance that tension, our supreme court has long recognized that general jurisdiction requires "a more demanding minimum contacts analysis than for specific jurisdiction," describing the necessary contacts with Texas as "continuous and systematic" or "substantial activities." CSR, Ltd. v. Link, 925 S.W.2d 591, 595 (Tex. 1996) (citations omitted).

          Until recently, the United States Supreme Court had "given little guidance on the appropriate inquiry for general jurisdiction." PHC-Minden, 235 S.W.3d at 167. Then, in Goodyear Dunlop Tires Operations, S.A., v. Brown, the Court confirmed that general jurisdiction imposes a substantially higher standard than specific jurisdiction, requiring the defendant's contacts with the forum to be so pervasive and constant "as to render [the defendant] essentially at home in the forum state." 564 U.S. 915, 919 (2011). In other words, to establish general jurisdiction over an out-of-state corporate defendant, the defendant's in-state activities must be equivalent to the defendant incorporating or establishing a principal place of business in the forum. Id. at 924.

         A few years later, in Daimler AG v. Bauman, the Supreme Court expounded on what it means to be "essentially at home" by specifically rejecting the idea that maintaining a "substantial, continuous, and systematic course of business" in the forum is sufficient to confer general jurisdiction. 571 U.S. 117, 138 (2014); Old Republic, 549 S.W.3d at 565 (recognizing "essentially at home" as the new standard for general jurisdiction). Although it declined to foreclose the possibility that a forum could exercise general jurisdiction over an out-of-state ...

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