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Continental Alloys & Services (Delaware) LLC v. Yangzhou Chengde Steel Pipe Co., Ltd.

Court of Appeals of Texas, Fourteenth District

January 16, 2020

CONTINENTAL ALLOYS & SERVICES (DELAWARE) LLC AND CONTINENTAL ALLOYS & SERVICES, INC., Appellants
v.
YANGZHOU CHENGDE STEEL PIPE CO., LTD. AND CIEC USAINCORPORATION, Appellees

          On Appeal from the 189th District Court Harris County, Texas Trial Court Cause No. 2015-12653

          Panel consists of Chief Justice Frost and Justices Bourliot and Poissant.

          OPINION

          Kem Thompson Frost, Chief Justice

         A company that purchased allegedly defective steel pipe from a distributor sued the distributor and the Chinese company that manufactured the steel, asserting various claims on its own behalf and as assignee of its purchaser. The trial court granted the distributor's motion to dismiss all claims against the distributor based on an arbitration provision in the contract between the distributor and the company that bought the steel pipe. The trial court later sustained the manufacturer's special appearance and dismissed the claims against the manufacturer for lack of personal jurisdiction. On appeal, the plaintiffs challenge each ruling. Concluding the plaintiffs have not shown that the trial court erred in sustaining the special appearance and that the plaintiffs waived any error in the trial court's granting of the distributor's motion to dismiss, we affirm the trial court's judgment.

         I. Procedural and Factual Background

         Defendant/appellee YangZhou Chengde Steel Pipe Co., Ltd. ("Chengde") manufactures steel pipe, some of which is used by oilfield companies. Chengde, a Chinese company, maintains its principal place of business in China. In July 2013, Chengde entered into two contracts to sell steel pipe to defendant/appellee CIEC USA Incorporation [sic] ("CIEC"), a Texas corporation and distributor of steel products.[1] Each contract required certain specifications for the pipe and required Chengde to perform certain tests on the pipe and to include in the shipping documents an original mill test certificate. Each contract specified that China would be the country of origin of the pipe, and that Chengde would ship the pipe to the Port of Houston, "CIF Houston Port, TX, USA." Under the contracts, title to the pipe passes to CIEC when the pipe is loaded into the vessel at the loading port in China. In each contract, Chengde and CIEC agreed that Chinese law would govern the validity, interpretation, performance, and enforcement of the contract and that all disputes in connection with the contract would be settled by arbitration in Beijing, China.

         On the same day that CIEC entered into the contracts to buy steel pipe from Chengde, CIEC entered into two contracts to sell the steel pipe to "Continental Alloys & Services (DELAWARE) Inc." The name of the buyer in these contracts appears to have been misstated, and there may be some uncertainty as to whether the buyer is appellant/plaintiff Continental Alloys & Services (Delaware) LLC ("Continental LLC") or appellant/plaintiff Continental Alloys & Services, Inc. ("Continental, Inc."). Each of these of these parties is a Delaware entity with its principal place of business in Texas. In this opinion, we shall refer to the Continental entity that entered into the contracts with CIEC as the "Continental Party."

         The Continental Party apparently bought the steel pipe from CIEC to provide the pipe to Baker Hughes, an oilfield service company that had ordered steel pipe from a Continental entity.[2] Each of the two contracts between CIEC and the Continental Party provides that Texas law governs the validity, interpretation, performance, and enforcement of the contract and that all disputes in connection with that contract will be resolved by arbitration in Houston, Texas.

         Continental LLC and Continental, Inc. (collectively the "Continental Parties") allege that the steel pipe Chengde sold to CIEC and that the Continental Party bought from CIEC contained defects, did not conform to industry standards or to Baker Hughes's specifications, and failed the implied warranties of merchantability and fitness for a particular purpose. According to the Continental Parties, after Baker Hughes demanded arbitration of its claims against the Continental Parties, the Continental Parties negotiated a settlement of Baker Hughes's claims against them and assigned to the Continental Parties Baker Hughes's claims against CIEC and Chengde.

         The Continental Parties sued Chengde and CIEC, asserting claims against Chengde for fraud, negligent misrepresentation, breach of express warranty, breach of the implied warranty of merchantability, breach of the implied warranty of fitness for a particular purpose, and indemnity under section 82.002 of the Texas Civil Practice and Remedies Code. The Continental Parties asserted claims against CIEC for breaches of the implied warranty of merchantability and of the implied warranty of fitness for a particular purpose. The Continental Parties brought all claims in their own name, and they asserted all claims except for the indemnity claims "as the assignee of Baker Hughes's claims."

         Shortly after answering the lawsuit, CIEC filed a motion to dismiss all claims against it on the ground that the Continental Parties were required to arbitrate these claims under the arbitration provisions in the contracts between the Continental Party and CIEC. In response, the Continental Parties did not dispute that their own claims against CIEC are subject to arbitration and did not oppose the motion as to these claims. But, as to the Continental Parties' claims as assignee of Baker Hughes, they opposed the motion and argued that these claims are not subject to arbitration. The trial court granted this motion in its entirety and dismissed all of the Continental Parties' claims against CIEC "in favor of binding arbitration."

         Nine months later and before the trial court ruled on Chengde's special appearance, the Continental Parties amended their petition so that they no longer asserted any claims against CIEC. Under the amended pleading, CIEC was no longer a defendant. The trial court later sustained Chengde's amended special appearance and dismissed all claims against Chengde for lack of personal jurisdiction, thus rendering a final judgment.

         II. Issues and Analysis

         On appeal, the Continental Parties raise eight issues. In the first five, they challenge the trial court's order sustaining Chengde's amended special appearance. In their sixth, seventh, and eighth issues, they challenge the trial court's granting of CIEC's motion to dismiss as to the assigned claims. Before we tackle the merits of the appeal, we first address Chengde's motion to dismiss for lack of jurisdiction, which we have taken with the case.

         A. Does this court have appellate jurisdiction in this case?

         If the deadline to file a notice of appeal was extended to 90 days after the trial court signed the judgment, then the Continental Parties timely filed their notice of appeal. See Tex. R. App. P. 26.1. If this deadline was not extended and the deadline was 30 days after the trial court signed the judgment, then the Continental Parties' notice of appeal was late and this court lacks appellate jurisdiction. The Continental Parties did not file a motion for new trial, motion to modify the judgment, or a motion to reinstate under Texas Rule of Civil Procedure 165a. The Continental Parties did timely file a request for findings of fact and conclusions of law as to the trial court's ruling on the special appearance.[3]Therefore, the appellate deadline was extended if findings and conclusions either are required by the Rules of Civil Procedure or properly could be considered by the appellate court. See id. The Rules of Civil Procedure do not require a trial court to issue findings and conclusions as to a special-appearance ruling, so the issue is whether we properly could consider findings and conclusions as to the trial court's special-appearance ruling. See id.

         A request for findings of fact and conclusions of law does not extend the time for perfecting appeal of a judgment rendered as a matter of law because, in that context, findings and conclusions can have no purpose and should not be requested, made, or considered on appeal. IKB Indus. (Nigeria) Ltd. v. Pro-Line Corp, 938 S.W.2d 440, 443 (Tex. 1997). The Supreme Court of Texas has given the following examples of this context: "summary judgment, judgment after directed verdict, judgment non obstante veredicto, default judgment awarding liquidated damages, dismissal for want of prosecution without an evidentiary hearing, dismissal for want of jurisdiction without an evidentiary hearing, dismissal based on the pleadings or special exceptions, and any judgment rendered without an evidentiary hearing." Id. The high court has given the following examples of situations in which the Rules of Civil Procedure do not require findings and conclusions but the appellate court properly could consider them: "default judgment on a claim for unliquidated damages, judgment rendered as sanctions, and any judgment based in any part on an evidentiary hearing." Id.

         The trial court did not conduct an evidentiary hearing on Chengde's amended special appearance. Based on this fact, Chengde asserts that the trial court's special-appearance ruling was not based in any part on an evidentiary hearing, and therefore this court could not properly consider any findings that the trial court might have issued. Though a trial court may hold an evidentiary hearing on a special appearance, the court also may consider stipulations, affidavits, documents, and the results of discovery processes that the parties file with the court. See Tex. R. App. P. 120a (stating that the trial court shall determine a special appearance "on the basis of the pleadings, any stipulations made by and between the parties, such affidavits and attachments as may be filed by the parties, the results of discovery processes, and any oral testimony"); Phillips Dev. & Realty, LLC v. LJA Eng'g, Inc., 499 S.W.3d 78, 85 (Tex. App.-Houston [14th Dist.] 2016, pet. denied). Thus, in a special-appearance context, the absence of an evidentiary hearing does not necessarily mean that the trial court ruled without considering any evidence or ruled as a matter of law based on stipulations. See id. Likewise, the absence of an evidentiary hearing alone does not mean that this court could not properly consider findings and conclusions as to the trial court's special-appearance ruling. See Tex. R. App. P. 120a; Phillips Dev. & Realty, LLC, 499 S.W.3d at 85.

         Chengde also suggests that the trial court made its special-appearance ruling based on stipulated facts, and therefore the trial court ruled as a matter of law based on agreed facts. Though the parties stipulated to various facts relating to Chengde's amended special appearance, Chengde also submitted an affidavit of Xiaowei "Wade" Ge that contained factual statements to which the Continental Parties did not stipulate. And, the Continental Parties also submitted a declaration of Randall Zajicek containing statements to which Chengde did not stipulate. The stipulations contained hundreds of pages of documents, and as to many of these documents, the parties did not stipulate to the substance of the documents or their contents. In sum, the record reflects that the trial court made its special-appearance ruling based in part on stipulations of fact and in part on evidence. So, even though the trial court did not conduct an evidentiary hearing, this case is like the high court's example of "any judgment based in any part on an evidentiary hearing." IKB Indus. (Nigeria) Ltd., 938 S.W.2d at 443. If the trial court had chosen to issue findings of fact and conclusions of law as to the trial court's special-appearance ruling, this court properly could have considered the findings and conclusions. See id.; Goldberg v. Zinn, 2013 WL 2456869, at *6 (Tex. App.- Houston [14th Dist.] June 6, 2013, no pet.) (mem. op.) (holding that request for findings and conclusions extended appellate deadline even though there was no evidentiary hearing, because the trial court ruled based in part on evidence submitted to the court by the parties); Brown v. Pennington, No. 05-14-01349-CV, 2015 WL 3958618, at *4-8 (Tex. App.-Dallas June 30, 2015, no pet.) (considering trial court's findings of fact and conclusions of law regarding a special appearance, in case in which trial court did not conduct an evidentiary hearing but ruling based on documentary evidence filed with the court) (mem. op.).

         We conclude that the request for findings and conclusions extended the deadline to file a notice of appeal and that the Continental Parties timely filed their notice of appeal. See Tex. R. App. P. 26.1; IKB Indus. (Nigeria) Ltd., 938 S.W.2d at 443; Goldberg, 2013 WL 2456869, at *6. We thus have appellate jurisdiction, and we deny Chengde's motion to dismiss for lack of jurisdiction.

         B. Did the trial court err in sustaining Chengde's special appearance?

         In their first five issues, the Continental Parties assert that the trial court erred by sustaining Chengde's amended special appearance. We begin by addressing the applicable legal standards and then consider the jurisdictional evidence, specific jurisdiction, and general jurisdiction.[4]

         1. Standard of Review

         Whether the Continental Parties are subject to personal jurisdiction in Texas is a question of law subject to de novo review. See BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). When, as in today's case, the trial court does not issue findings of fact and conclusions of law, we imply all relevant facts necessary to support the trial court's ruling that are supported by evidence. M&F Worldwide Corp. v. Pepsi-Cola Metro. Bottling Co., Inc., 512 S.W.3d 878, 884-85 (Tex. 2017).

         2. Legal Standards as to the Exercise of Personal Jurisdiction

         The Texas long-arm statute allows a court to exercise personal jurisdiction as far as the federal constitutional requirements of due process will permit. See Tex. Civ. Prac. & Rem. Code Ann. §§ 17.041-.045 (West, Westlaw through 2019 R.S.); BMC Software, 83 S.W.3d at 795. The plaintiff bears the initial burden of pleading allegations sufficient to confer jurisdiction under the Texas long-arm statute. See Moncrief Oil Int'l, Inc. v. OAO Gazprom, 414 S.W.3d 142, 149 (Tex. 2013). The long-arm statute allows the exercise of personal jurisdiction over a nonresident defendant who "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" or who "commits a tort in whole or in part in [Texas]." Tex. Civ. Prac. & Rem. Code § 17.042(1), (2) (West, Westlaw through 2019 R.S.). The Continental Parties satisfied their initial burden by alleging that the Chengde was doing business in Texas within the meaning of subsections (1) and (2) of Texas Civil Practice and Remedies Code section 17.042. See id.; Moncrief Oil Int'l, Inc., 414 S.W.3d at 149. Because the Continental Parties met this initial burden, the burden shifted to Chengde to negate all potential bases for personal jurisdiction the Continental Parties alleged. See Moncrief Oil Int'l, Inc., 414 S.W.3d at 149.

         Personal jurisdiction over a nonresident defendant is constitutional when two conditions are met: (1) the defendant has established minimum contacts with the forum state and (2) the exercise of personal jurisdiction comports with traditional notions of fair play and substantial justice. See BMC Software, 83 S.W.3d at 795. For a defendant to have sufficient contacts with the forum, it is essential that there be some act by which the defendant "purposefully avails" itself of the privilege of conducting activities in 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). In analyzing personal jurisdiction, only the defendant's purposeful contacts with the forum count; personal jurisdiction over a defendant cannot be based on the unilateral activity of another party. Id. at 785. A seller who reaches out beyond one state and creates continuing relationships and obligations with citizens of another state is subject to the personal jurisdiction of the latter in suits based on the seller's activities. Id. By contrast, a defendant should not be subject to a Texas court's jurisdiction based upon random, fortuitous, or attenuated contacts. Id. For there to be purposeful availment, a defendant must seek some benefit, advantage, or profit by "availing" itself of the jurisdiction. Id. A nonresident may purposefully avoid a particular jurisdiction by structuring its transactions so as neither to profit from the forum's laws nor be subject to its jurisdiction. Id.

         Although not determinative, foreseeability is an important consideration in deciding whether the nonresident defendant purposefully has established minimum contacts with Texas. BMC Software, 83 S.W.3d at 795. The concept of foreseeability is implicit in the requirement that there be a substantial connection between the defendant and Texas arising from the defendant's conduct purposefully directed toward Texas. See Guardian Royal Exch. Assur., Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 227 (Tex. 1991).

         Specific jurisdiction exists when the claims in question arise from or relate to the defendant's purposeful contacts with Texas. Am. Type Culture Collection Inc. v. Coleman, 83 S.W.3d 801, 807 (Tex. 2002). In conducting a specific-jurisdiction analysis, we focus on the relationship among the defendant, Texas, and the litigation. See Guardian Royal, 815 S.W.2d at 228. For a nonresident defendant's contacts with Texas to support an exercise of specific jurisdiction, there must be a substantial connection between the defendant's ...


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