General Electric Co. v. California Insurance Guaranty Ass'n

997 S.W.2d 923, 1999 WL 683905

• Court: Court of Appeals of Texas
• Decided: October 21, 1999
• Docket: 09-97-481 CV
• Status: Published

Opinions

OPINION

WALKER, Chief Justice.

This is an appeal from the trial court’s granting of special appearances filed by each of the four appellees. The special appearances complained of the lack of in personam jurisdiction. Appellees consist of the California Insurance Guarantee Association (CIGA), Delaware Insurance Guaranty Association (DIGA), Illinois Insurance Guaranty Fund (IIGF), and the Tennessee Insurance Guaranty Association (TIGA). For simplification we shall refer to appellees collectively as the Guaranty Funds. Initially, appellant, General Electric Company (G.E.) filed an original action seeking a declaratory judgment that appel-lees, among others, be obligated to defend and/or indemnify G.E. against third-party asbestos claims due to the fact that certain of G.E.’s primary insurers had become insolvent. Following the granting of the special appearances, that portion of the lawsuit was severed from the remainder of the litigation and this appeal was prosecuted.

The Guaranty Funds’ special appearances were submitted separately to the trial court. In support of each special appearance, the record before us contains a copy of the enabling legislation from each of the four states and an affidavit from a representative of each states’ guaranty fund. Each of the Guaranty Funds also submitted answers to interrogatories per requests from G.E. An examination of the record before us indicates that G.E. provided no evidence in the form of testimony or affidavits contradicting any of the factual assertions made by each of the Guaranty Funds’ representatives. G.E. did file a variety of sworn pleadings and oppositions to the various special appearances. Generally, however, pleadings are not competent evidence, even if sworn or verified. Laidlaw Waste Systems (Dallas), Inc. v. City of Wilmer, 904 S.W.2d 656, 660 (Tex.1995); Hidalgo v. Surety Sav. & Loan Ass’n, 462 S.W.2d 540, 545 (Tex.1971). As such, we initially observe that the evidence in support of the Guaranty Funds’ special appearances is before us uncontested.

While we have stated that the standard for review of a trial court’s decision regarding a plea to the jurisdiction is that of factual sufficiency, see Cadle v. Graubart, 990 S.W.2d 469, 471 (Tex.App.—Beaumont 1999, no pet.), if a special appearance is based on undisputed or otherwise established facts, an appellate court shall conduct a de novo review of the trial court’s order granting the special appearance. Conner v. ContiCarriers and Terminals, Inc., 944 S.W.2d 405, 411 (Tex.App.—Houston [14th Dist.] 1997, no writ). A careful examination of G.E.’s responsive pleadings in opposition to the special appearances will indeed indicate an alleged assertion of “fact” to the effect that the Guaranty Funds stand in the shoes of their insolvent insurers for all purposes, including in personam jurisdiction. As we will clarify later, this assertion by G.E. is not a fact established of record but a question of law to be determined by the courts.

At this point we emphatically state that the scope of this appeal is limited to the issue of the propriety of exercising personal jurisdiction over the nonresident defendants only. We shall not address the concept of “covered claims” or what persons or entities may or may not be subject to “covered claims.” Based upon the affidavits from their respective representatives, as well as the language of each state’s enabling legislation, we recognize that the Guaranty Funds are unincorporated associations created by statutes promulgated by each Guaranty Fund’s respective state legislature.¹ The apparent purpose for the creation of each of these Guaranty Funds is to provide protection for certain statutorily designated claimants in the event of the insolvency of certain statutorily designated insurers. All fifty states currently have enacted legislation creating property and casualty insurance guaranty associations patterned wholly or in large part after the National Association of Insurance Commissioners “Post-Assessment Property and Liability Insurance Guaranty Association Model Act” (Model Act). This is the extent of our discussion of the historical bases of the Guaranty Funds.

THE LAW OF PERSONAL JURISDICTION

A court may assert personal jurisdiction over a nonresident defendant only if the requirements of both the Due Process Clause of the Fourteenth Amendment to the United States Constitution and the Texas long-arm statute are satisfied. See U.S. Const, amend. XIV, § 1; Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 413-14, 104 S.Ct. 1868, 80 L.Ed.2d 404, 410-11 (1984); CSR Ltd. v. Link, 925 S.W.2d 591, 594 (Tex.1996). The long-arm statute allows a court to exercise personal jurisdiction over a nonresident defendant that does business in Texas. CSR Ltd., 925 S.W.2d at 594. In addition to a discrete list of activities that constitute doing business in Texas, the statute provides that “other acts” by the nonresident can satisfy the requirement. Id.; Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex.1991); Tex. Civ. Pra.c. & Rem. Code Ann. § 17.042 (Vernon 1997). The Texas Supreme Court has repeatedly interpreted this broad statutory language “to reach as far as the federal constitutional requirements of due process will allow.” CSR Ltd., 925 S.W.2d at 594; Guardian Royal, 815 S.W.2d at 226; U-Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760, 762 (Tex.1977). Consequently, the requirements of the Texas long-arm statute are satisfied if the exercise of personal jurisdiction comports with federal due process limitations. CSR Ltd., 925 S.W.2d at 594.

In Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987), we find a very detailed discussion of the scope of due process visa-vis the exercise of personal jurisdiction over a nonresident defendant. We quote liberally from the case:

“[T]he constitutional touchstone” of the determination whether an exercise of personal jurisdiction comports with due process “remains whether the defendant purposefully established ‘minimum contacts’ in the forum State.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985), quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95, 161 A.L.R. 1057 (1945). Most recently we have reaffirmed the oft-quoted reasoning of Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958), that minimum contacts must have a basis in “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, [citation omitted] “Jurisdiction is proper ... where the contacts proximately result from actions by the defendant himself that create a ‘substantial connection’ with the forum state.” [citations omitted]

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The “substantial connection,” [citations omitted] between the defendant and the forum State necessary for a finding of minimum contacts must come about by an action of the defendant purposefully directed toward the forum State, [citations omitted] The placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State. Additional conduct of the defendant may indicate an intent or purpose to serve the market in the forum State, for example, designing the product for the market in the forum State, advertising in the forum State, establishing channels for providing regular advice to customers in the forum State, or marketing the product through a distributor who has agreed to serve as the sales agent in the forum State. But a defendant’s awareness that the stream of commerce may or will sweep the product into the forum State does not convert the mere act of placing the product into the stream into an act purposefully directed toward the forum State.

Asahi Metal Industry Co., 480 U.S. at 108-09, 112, 107 S.Ct. at 1030, 1032, 94 L.Ed.2d at 102, 104. [emphases in original]

In the instant case, there exists no evidence of any actions by any of the Guaranty Funds directed toward Texas. The evidence before us clearly establishes that none of the Guaranty Funds do any business in Texas. They have no offices in Texas; they have no property in Texas; they do not advertise in Texas or otherwise solicit any business in Texas. Indeed, based upon their respective enabling legislation, we find that the Guaranty Funds are not in “business” at all, as that term is generally understood in the world of commercial enterprise. Typical of the evidence before us is contained in the following portion of the affidavit of Lawrence E. Mulryan, Executive Director of the California Insurance Guarantee Association. Mr. Mulryan’s affidavit contains the following facts:

2. CIGA is not an insurance company and is not licensed as an insurance company in Texas or in any other state. CIGA does not issue insurance policies and is not a party to any insurance contract issued by an insolvent insurer. CIGA does not now have and has never had any policyholders. Member insurers of CIGA are not themselves authorized to act on behalf of CIGA. CIGA is not the agent of its member insurers. It does not act on its member insurers behalf, nor does it control the activities of its member insurers with respect to their conduct of them insurance business.

3. Contrary to the allegations of [paragraph] 69 of the Petition, CIGA is not authorized and has not been authorized to do business in Texas.

4. Contrary to the allegations of [paragraph] 69 of the Petition, CIGA has not transacted business within the State of Texas by doing a series of acts in Texas for the purpose of realizing pecuniary benefit, contracting to supply services in Texas, or contracting to insure or insuring, or all of these, for the benefit of persons, property or risks located within Texas, or otherwise.

5. CIGA has taken no voluntary action to avail itself of the privilege of conducting activities in Texas.

6. CIGA has never been incorporated in Texas.

7. CIGA has never appointed an agent for service of process in Texas.

8. CIGA does not have and has never had any agents, officers, employees, assets, bank accounts or property of any kind in Texas.

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10. CIGA has no record of any contract of any nature whatsoever between it and any resident of Texas.

11. CIGA has never directed any advertising to the State of Texas.

12. None of CIGA’s management personnel reside or are domiciled in Texas.

13. CIGA has no employees residing or domiciled in Texas.

14. CIGA maintains no office in the State of Texas.

15. CIGA has no telephone listings or mailing addresses in the State of Texas.

16. CIGA does not pay taxes to the State of Texas.

17. CIGA has not initiated any litigation in the state [sic] of Texas.

18. CIGA has not by any act or deed consented nor has it agreed to consent to jurisdiction in the State of Texas.

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20. CIGA does not own, lease or possess any real or personal property of any kind in the State of Texas.

As alluded to above, the gist of G.E.’s argument in the trial court, and on appeal, is that the Guaranty Funds “stand in the shoes” of the insolvent member insurers for purposes of personal jurisdiction because through the activities of said insurers the Guaranty Funds have engaged in sufficient minimum contacts with Texas to permit the exercise of personal jurisdiction. As authority for this proposition, G.E. relies heavily on Olivier v. Merritt Dredging Co., Inc., 979 F.2d 827 (11th Cir.1992). We find the Olivier court’s analysis of the personal jurisdiction flawed in that, in our opinion, Olivier mistakenly interweaves the personal jurisdiction issue ■with the “covered claims” issue.² At least in the present case, we believe that any findings or decisions made with regard to “covered claims” would be premature, resulting in an advisory opinion. As we appreciate the instant appeal, our only determination is whether the district court was correct in finding it had no personal jurisdiction over the Guaranty Funds. Only when a trial court has personal jurisdiction over the parties, as well as subject-matter jurisdiction, is it thereafter authorized to act on the substantive matters of the litigation before it. In the instant case, the question of who has or does not have “covered claims” based upon the respective guaranty acts is a substantive issue not before us at this time. A close reading of Olivier indicates that the issue was not before the Eleventh Circuit either.

A second flaw we find in Olivier is its rather bold pronouncement, without any supporting authority, that “[a] member of the [guaranty] association, acting within the framework of the Interstate compact³ who becomes insolvent, automatically makes the association the alter ego of that failed member.” Id. at 882. The Eleventh Circuit does not explain the legal or factual basis for this transformation, or why it “automatically” occurs when a member insurer becomes insolvent other than the apparent holding that a guaranty association always “stands in the shoes” of the insolvent insurer as a matter of law.

A more reasoned approach to the personal jurisdiction issue was posited by the Austin Court of Appeals in Texas Property and Cas. Ins. Guar. Ass’n v. Boy Scouts of America, 947 S.W.2d 682 (Tex.App.—Austin 1997, no writ).

In contrasting the above-discussed holding in Olivier, the Court in Boy Scouts cited cases from Florida and California for the proposition that because the statutory obligations of a guaranty association are substantive obligations of supplying limited amounts of funds under limited circumstances and do not amount to a guaranty association’s consent to another state’s personal jurisdiction, a guaranty association stands in the shoes of an insolvent insurer for only “some” limited purposes. Id. at 687 (citing Georgia Insurers Insolvency Pool, 602 So.2d 1264, 1267 (Fla.1992); Pennsylvania Life & Health Ins. Guar. Ass’n, 22 Cal.App.4th 477, 27 Cal.Rptr.2d 507, 513 (1994)). The Austin Court observed that the Florida and California cases reasoned that because guaranty associations’ liabilities are “strictly limited to statutorily defined covered claims,” the obligations of guaranty associations are not necessarily coextensive with the insolvent insurer. Id. As regards the “standing in the shoes” sub-issue of our personal jurisdiction inquiry, this approach recognized by the Austin Court is eminently more reasonable than the somewhat simplistic, slap-dash method of declaring a guaranty association the “agent” or “alter ego” of the insolvent insurer for personal jurisdiction purposes because, apparently, the insolvent insurer participates in the insurance guaranty fund process. We therefore adopt the observations of the Austin Court and also hold that a guaranty association does not “stand in the shoes” of an insolvent insurer for purposes of personal jurisdiction. Based upon this holding as well as the record before us, we find an entire lack of evidence to indicate that the Guaranty Funds have ever had any minimum contacts with the State of Texas. This includes a lack of evidence to indicate contacts that would support either general or specific jurisdiction. See CSR Ltd., 925 S.W.2d at 595.

We recognize that although foreseeability is a factor to consider in a minimum contacts analysis, foreseeability alone will not support personal jurisdiction. Id.; Guardian Royal, 815 S.W.2d at 227. As stated in Asahi, the nonresident defendant must take an action “purposefully directed ” toward the forum state to be subject to the jurisdiction of its courts. Asahi, 480 U.S. at 112, 107 S.Ct. at 1082, 94 L.Ed.2d at 104. In the instant case, assuming as true that the respective Guaranty Funds had knowledge of the out-of-state business practices of the insolvent insurers, the record before us contains no evidence that the Guaranty Funds themselves took any actions “purposefully directed” toward Texas. There is simply no evidence that the Guaranty Funds “intended to serve the Texas market.” CSR Ltd., 925 S.W.2d at 595.

We now turn to the second prong of the personal jurisdiction inquiry, that personal jurisdiction must comport with fair play and substantial justice. See Asahi 480 U.S. at 113, 107 S.Ct. at 1032-33, 94 L.Ed.2d at 105; Guardian Royal, 815 S.W.2d at 231. In this inquiry, it is incumbent that a defendant present a compelling case that the presence of some consideration would render jurisdiction unreasonable. Guardian Royal, 815 S.W.2d at 231. In the instant case, the interests of G.E. and Texas in Texas’s assertion of jurisdiction over the Guaranty Funds is slight. G.E. is merely seeking indemnification and/or a declaratory judgment that G.E.’s insurers are obligated to defend it against third-party asbestos claims. An indemnification claim against a nonresident defendant was recognized by the Court in Asahi as providing the forum state with little interest in such litigation. See Asahi 480 U.S. at 114, 107 S.Ct. at 1033, 94 L.Ed.2d at 106.

Furthermore, G.E. readily admits that some of the third-party claims “have been asserted by persons who were residents of California, Delaware, Illinois and Tennessee at the time of their alleged asbestos exposure.” How are Texas’s interests implicated under this scenario? G.E. further contends that Texas’s interest in the instant lawsuit is significant because “[wjhile this coverage action encompasses asbestos-related claims asserted throughout the United States, the largest number of subject claims have been brought in Texas.” G.E. does not argue all these claims involved Texans. All this factually unsupported statement seems to indicate is that Texas has, once again, become the favorite forum for a multitude of nonresident plaintiffs whose causes of action originated out-of-state. The State’s interest in this specific type of litigation is exceedingly low. See Owens Corning v. Carter, 997 S.W.2d 560, 582-83 (1999).⁴ Considering all of the above, the substantial burden on the Guaranty Funds and the rather slight interests of G.E. and the almost non-existent interests of Texas as the forum state indicates that the exercise of personal jurisdiction of a Texas state district court over the Guaranty Funds would be unreasonable and unfair.

In Texas, a nonresident defendant must negate all bases of personal jurisdiction to prevail in a special appearance. See CSR Ltd., 925 S.W.2d at 596. In applying the two-prong test for personal jurisdiction set out by the United States Supreme Court to the evidence contained in the record before us, we conclude that each of the respective Guaranty Funds has carried its burden to negate all bases of personal jurisdiction. We overrule G.E.’s appellate issues and affirm the orders of the trial court which granted the Guaranty Funds’ special appearances.

AFFIRMED.

1 . See Cal. Ins.Code §§ 1063-1063.16 (West 1997); Del.Code Ann. tit. 18, §§ 4201-23 (1975-1996); 215 III. Comp. Stat. Ann. 5/532-53 (West 1997); Tenn.Code Ann. §§ 56-12-101-56-12-220 (1971-1989).

2 . "Furthermore, Olivier argues that since his claim is a 'covered claim,’ according to the respective statutes, LIGA and SCIGA are deemed insurers to the extent of Midland’s [the insolvent insurer] obligations.... We agree with Olivier’s position.” Id. at 831.

3 . We have scoured the Olivier opinion for the source of the term “Interstate compact” and have been unable to locate its source or origins. If this language is meant to indicate that the Eleventh Circuit believed that all of the various states' guaranty acts are somehow tied together by some sort of "interstate compact," we cannot ascribe to this belief as there has been presented absolutely no evidence or authority to us in support of such a proposition.

4 . (“The Legislature reasonably believed that Texas's resources were better spent on cases having a more substantial relation to Texas, and that Texas residents were being denied access to their own courts because of a backlog of cases the Legislature reasonably believed should be litigated elsewhere. The purpose of Senate Bill 220 was to remove the asbestos exception from section 71.051 [Civil Practice & Remedies Code] and to discourage forum shipping by all out-of-state plaintiffs with claims arising in another state by adopting the borrowing statute. Certainly, these are legitimate state interests.”)