Toyo Seat Co., Ltd. v. Alejandro Garcia

• Court: Court of Appeals of Texas
• Decided: January 23, 2008
• Docket: 04-07-00427-CV
• Status: Published

Opinion

MEMORANDUM OPINION

No. 04-07-00427-CV

TOYO SEAT CO., Ltd., Appellant

v.

Alejandro GARCIA, Appellee

From the 365th Judicial District Court, Zavala County, Texas Trial Court No. 04-09-10971-ZCV-AJA

Honorable Ron G. Carr, Judge Presiding

Opinion by: Phylis J. Speedlin, Justice

Sitting: Alma L. López, Chief Justice

Karen Angelini, Justice

Phylis J. Speedlin, Justice

Delivered and Filed: January 23, 2008

REVERSED AND RENDERED

In this interlocutory appeal, Toyo Seat Co., Ltd. ("Toyo Japan"), a Japanese corporation, appeals the trial court's order overruling and denying its special appearance. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7) (Vernon Supp. 2007). Toyo Japan complains the trial court erred because its contacts with Texas are insufficient to subject it to the jurisdiction of the Texas courts. Because we hold that Toyo Japan has not purposefully established minimum contacts with Texas, we reverse the judgment of the trial court and dismiss the claims against Toyo Japan for lack of personal jurisdiction. Background The underlying lawsuit arises out of a 2003 car accident involving a 1993 Ford Escort. Alejandro Garcia sustained severe permanent injuries when the passenger seat he was sitting in collapsed on impact. Garcia initially sued Ford Motor Company and Mazda Motor Corporation, later joining as defendants both Toyo Seat USA Corporation ("Toyo USA"), a Michigan corporation, and Toyo Japan. Garcia claimed that Toyo USA and Toyo Japan were liable because they designed and manufactured the seat in question. Toyo Japan timely filed a special appearance contesting jurisdiction. All parties agree that Toyo Japan does not have offices, employees, bank accounts, or property in Texas. Garcia, however, opposed the special appearance contending Texas could properly assert jurisdiction over Toyo Japan because it knowingly did design work and supplied component parts "for an automobile to be sold throughout the United States, including Texas" and "because Toyo-Japan and Toyo USA are alter egos and form a functional whole" subjecting Toyo-Japan to jurisdiction in Texas.

Prior to a hearing on the special appearance, Garcia settled his lawsuit with Ford and Mazda. Upon learning of the settlement, Toyo Japan filed a cross-claim against Ford and Mazda. Ultimately, the trial court denied Toyo Japan's special appearance in a written order dated June 15, 2007. This interlocutory appeal followed. Discussion

On appeal, Garcia maintains that the trial court correctly denied Toyo Japan's special appearance for two reasons: (1) Toyo Japan waived its special appearance by filing a cross-claim seeking affirmative relief before securing a ruling on the special appearance; and (2) the evidence shows that Toyo Japan is subject to personal jurisdiction in Texas. We will examine each argument in turn.

I. Waiver of Special Appearance

A party enters a general appearance when it: (1) invokes the judgment of the court on any question other than the court's jurisdiction; (2) recognizes by its acts that an action is properly pending; or (3) seeks affirmative action from the court. Exito Elecs. Co., Ltd. v. Trejo, 142 S.W.3d 302, 304 (Tex. 2004) (per curiam); Dawson-Austin v. Austin, 968 S.W.2d 319, 322 (Tex. 1998) (quoting Moore v. Elektro-Mobil Technik GmbH, 874 S.W.2d 324, 327 (Tex. App.--El Paso 1994, writ denied)). Here, the relevant inquiry is whether Toyo Japan's cross-claim for indemnity amounted to a claim for affirmative action. The Texas Supreme Court has instructed:

To qualify as a claim for affirmative relief, a defensive pleading must allege that the defendant has a cause of action, independent of the plaintiff's claim, on which he could recover benefits, compensation or relief, even though the plaintiff may abandon his cause of action or fail to establish it.

BHP Petroleum Co., Inc. v. Millard, 800 S.W.2d 838, 841 (Tex. 1990) (orig. proceeding) (quoting General Land Office v. Oxy U.S.A., Inc., 789 S.W.2d 569, 570 (Tex. 1990)). Garcia argues that Toyo Japan's cross-claim constitutes an affirmative claim for attorneys' fees and other costs thereby waiving its special appearance. Garcia points to the following language: "Defendant Toyo SEAT CO., LTD. files these cross-claims against FORD MOTOR COMPANY and MAZDA MOTOR CORPORATION for indemnification for costs incurred in defending this suit and for any liability or judgment Plaintiff may obtain against Defendant TOYO SEAT CO., LTD." (emphasis added). We disagree that the cross-claim waives Toyo Japan's special appearance.

In determining whether a pleading is an affirmative claim for relief, we look to the substance of the facts alleged in the motion rather than the name of the pleading or the prayer for relief. Quanto Intern. Co. v. Lloyd, 897 S.W.2d 482, 487 (Tex. App.-Houston [1st Dist.] 1995, no writ). Here, the cross-claim at issue consists of four sentences broadly claiming Toyo Japan is "entitled" to indemnification and contribution from its co-defendants "pursuant to the Texas Civil Practice and Remedies Code." The pleading, however, cites no specific provision of the Texas Civil Practice and Remedies Code as a basis for recovery and contains no "averments of fact upon which affirmative relief could be granted." BHP Petroleum, 800 S.W.2d at 841 (quoting Newman Oil Co. v. Alkek, 614 S.W.2d 653, 655 (Tex. App.--Corpus Christi 1981, writ ref'd n.r.e.)). Instead, the cross-claim resists Garcia's right to recover from Toyo Japan. A claim that merely resists the plaintiff's right to recover does not qualify as a claim for affirmative relief. General Land Office, 789 S.W.2d at 570; Le v. Kilpatrick, 112 S.W.3d 631, 634 (Tex. App.--Tyler 2003, no pet.); Pleasants v. Emmons, 871 S.W.2d 296, 298 (Tex. App.--Eastland 1994, no writ) (claim for indemnity or contribution from third party is not a claim for affirmative relief). Because Toyo Japan's cross-claim did not seek affirmative relief, it did not constitute a waiver of Toyo Japan's special appearance.

II. Special Appearance

Having decided that Toyo Japan did not waive its special appearance, we must now decide whether Toyo Japan is subject to the jurisdiction of the Texas courts.

A. Burden of Proof and Standard of Review

The plaintiff bears the initial burden of pleading allegations sufficient to bring a nonresident defendant within the provisions of the long-arm statute. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 807 (Tex. 2002). Upon filing a special appearance, the nonresident defendant then assumes the burden to negate all the bases of personal jurisdiction alleged by the plaintiff. Id. Whether a court has personal jurisdiction over a defendant is a question of law; however, the trial court frequently must resolve questions of fact before deciding the jurisdictional question. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). On appeal, we review the findings of fact for legal and factual sufficiency. See id. "For legal sufficiency points, if there is more than a scintilla of evidence to support the finding, the no evidence challenge fails." Id. at 795. For factual sufficiency points, we examine all evidence in the record and reverse only when the finding is so against the great weight and preponderance of the evidence as to be manifestly wrong or unjust. Carone v. Retamco Operating, Inc., 138 S.W.3d 1, 7 (Tex. App.--San Antonio 2004, pet. denied); Shapolsky v. Brewton, 56 S.W.3d 120, 128 (Tex. App.--Houston [14th Dist.] 2001, pet. denied). We review the conclusions of law drawn from the findings of fact de novo. BMC Software Belgium, 83 S.W.3d at 794. We must determine whether the conclusions of law drawn from the facts are correct. Zieben v. Platt, 786 S.W.2d 797, 802 (Tex. App.--Houston [14th Dist.] 1990, no writ).

B. Personal Jurisdiction Requirements

Texas courts may exercise "in personam jurisdiction over a nonresident if (1) the Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the exercise of jurisdiction is consistent with federal and state constitutional due-process guarantees." Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007). The Texas long-arm statute enables Texas courts to exercise jurisdiction over a nonresident defendant that "does business" in Texas. ⁽¹⁾ Tex. Civ. Prac. & Rem. Code Ann. § 17.043-.044 (Vernon 1997); BMC Software Belgium, 83 S.W.3d at 795. Similarly, federal due process requirements are met when the nonresident defendant has established minimum contacts with the forum state and the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. Moki Mac River Expeditions, 221 S.W.3d at 575. "Although not determinative, foreseeability is an important consideration in deciding whether the nonresident defendant has purposefully established 'minimum contacts' with the forum state." BMC Software Belgium, 83 S.W.3d at 795. "However, a defendant should not be subject to a foreign court's jurisdiction based upon 'random,' 'fortuitous,' or 'attenuated' contacts." Id. Purposeful availment is the "touchstone of jurisdictional due process," and requires that "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). Ultimately, "the defendant's conduct and connection with the forum" are the most critical jurisdictional considerations. Id. at 789.

A defendant's contacts with a forum can give rise to either general or specific jurisdiction. BMC Software Belgium, 83 S.W.3d at 795-96. "Specific jurisdiction is established if the defendant's alleged liability arises from or is related to an activity conducted within the forum." Id. at 796. For example, specific jurisdiction is established if the defendant committed a tort in whole or in part in Texas. Tex. Civ. Prac. & Rem. Code Ann. § 17.042(2) (Vernon 1997). "In contrast, general jurisdiction is present when a defendant's contacts in a forum are continuous and systematic so that the forum may exercise personal jurisdiction over the defendant even if the cause of action did not arise from or relate to activities conducted within the forum state." BMC Software Belgium, 83 S.W.3d at 796. In this case, Garcia concedes that Toyo Japan is not subject to general jurisdiction; accordingly, we will focus our analysis on whether Texas may properly exercise specific jurisdiction over Toyo Japan.

C. Specific Jurisdiction

Specific jurisdiction is established if the defendant's alleged liability arises out of or is related to an activity conducted by the defendant within the forum state. Moki Mac River Expeditions, 221 S.W.3d at 576. In order to arise out of conduct in the forum, there must be a substantial connection between the contacts or conduct and the operative facts of the litigation. Id. at 585. Therefore, for the trial court to have had specific jurisdiction over Toyo Japan: 1) Toyo Japan must have purposefully made minimum contacts with Texas; and 2) Garcia's causes of action must have arisen from or be related to those contacts. Commonwealth Gen'l Corp. v. York, 177 S.W.3d 923, 925 (Tex. 2005).

1. Minimum Contacts

Garcia first argues that the following factual allegations are sufficient to satisfy the minimum contacts requirements and subject Toyo Japan to personal jurisdiction in Texas: 1) Toyo Japan designed and manufactured the front seats used in the 1993 Ford Escort; 2) Toyo Japan introduced the seat into the stream of commerce; 3) Toyo Japan manufactures seats and seat components for vehicles it knows will be sold in the U.S. and Texas; and 4) Toyo Japan made a deliberate effort to sell seats and seat components for the U.S. market, which includes Texas. In response, Toyo Japan disputes many of the factual allegations but argues that even assuming the factual allegations are true, they do not establish the requisite minimum contacts with Texas. We agree.

Garcia contends the Texas Supreme Court case of Keen v. Ashot Ashkelon, Ltd., 748 S.W.2d 91 (Tex. 1988), controls our disposition of the instant case. In Keen, the court stated, "[a] defendant's delivering of its product into the stream of commerce with the expectation that the product will enter the forum state will ordinarily satisfy the due process requirement of minimum contacts so as to afford that state personal jurisdiction over the defendant." Keen, 748 S.W.2d at 93. Based on Keen, Garcia argues Toyo Japan is amenable to personal jurisdiction in Texas because there is evidence that Toyo Japan delivered its Escort seat into the stream of commerce with a "reasonable expectation" that the product would enter Texas. Since Keen was decided, however, our Texas Supreme Court has on at least two occasions revisited the "minimum contacts" question of in personam jurisdiction. See Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777 (Tex. 2005); see also CMMC v. Salinas, 929 S.W.2d 435 (Tex. 1996). On both occasions, our Supreme Court has made clear that it intends to follow the "additional conduct" standard originally set forth by the United States Supreme Court in Asahi Metal Ind. Co., Ltd. v. Superior Court of California, Solano County, 480 U.S. 102, 112 (1987) (O'Connor, J., plurality opinion). See Michiana, 168 S.W.3d at 786; CMMC, 929 S.W.2d at 437.

Turning first to CMMC, the sole question before the court in that case was whether the Fourteenth Amendment permitted a Texas court to exercise personal jurisdiction over a French corporation simply because the manufacturer knew its product would be shipped to Texas. CMMC, 929 S.W.2d at 436. The court noted that the manufacturer's only contacts with Texas were isolated sales it made of equipment to customers and knowledge that its winepress sold to a New York corporation would be shipped to Texas. Id. at 437. The plaintiff argued that "CMMC's release of its winepress into the stream of commerce with knowledge of the intended destination is sufficient to subject it to personal jurisdiction," citing Keen, among other cases. Id. The Supreme Court disagreed and specifically noted that its previous holding in Keen did not extend the reach of Texas jurisdiction beyond that allowed by the United States Supreme Court. See id. at 439-40 ("If anything, Keen suggests that we would follow Justice O'Connor's formulation of the stream-of-commerce rule in Texas."). The Court clarified:

The "substantial connection" 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. 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.

Id. at 438 (citing Asahi, 480 U.S. at 110-112). "A manufacturer cannot be fairly expected to litigate in every part of the world where its products may end up; its contacts with the forum must be more purposeful . . . before it can be constitutionally subjected to personal jurisdiction." Id. The Court reiterated that "[m]inimum contacts are particularly important when the defendant is from a different country because of the unique and onerous burden placed on a party called upon to defend a suit in a foreign legal system." Id. at 440 (quoting CSR Ltd. v. Link, 925 S.W.2d 591, 595 (Tex. 1996) (original proceeding)).

In Michiana, the Texas Supreme Court again considered "whether a nonresident 'purposefully avails' itself of a forum when it benefits from a major market without doing any of the marketing." See Michiana, 168 S.W.3d at 786. The Court ultimately held that a single product sale arising out of a phone call initiated by the plaintiff from Texas to an Indiana business does not satisfy minimum contacts because the non-resident defendant did not purposefully direct marketing efforts in Texas to solicit sales. Id. at 785-86.

Garcia urges us to follow Keen and argues the evidence establishes Toyo Japan purposely designed the Ford Escort seats to comply with U.S. federal safety regulations with the expectation that the product would enter Texas, thereby purposely availing itself of the benefits of the Texas market as a matter of law. We respectfully disagree. Since Keen, our Supreme Court has clearly stated that in order to exercise personal jurisdiction over a foreign corporation, the trial court must find "an action of the defendant purposefully directed toward the forum State." CMMC, 929 S.W.2d at 438 (quoting Asahi, 480 U.S. at 110-112). The mere act of placing the product into the stream of commerce with "awareness that the stream of commerce may or will sweep the product into the forum State" is not sufficient to demonstrate that a foreign corporation purposefully availed itself of the Texas market. Id.; see also Asahi, 480 U.S. at 110-112. Here, assuming without deciding that all disputed facts are true, the record does not reveal the existence of conduct by Toyo Japan purposefully directed to Texas. In fact, because Toyo Japan's contacts with Texas "are certainly no more and arguably somewhat less" than those in CMMC and Michiana, "the result must be the same[,]" meaning that the due process clause prohibits specific jurisdiction. Michiana, 168 S.W.3d at 787. There is simply no evidence that Toyo Japan sought a benefit, profit, or advantage by availing itself of the Texas market. See id. at 785.

2. Alter Ego Theory

Garcia also argues that "Toyo Japan and Toyo-USA are alter egos and constitute a functional whole. Therefore, Toyo-USA's jurisdictional contacts are attributable to Toyo-Japan." Assuming without deciding that there is evidence to support the theory that the two corporations are alter egos, we hold Toyo USA lacks contacts with Texas that can be attributed to Toyo Japan. Toyo USA is a Michigan corporation and is a wholly owned subsidiary of Toyo Japan. It maintains offices in Michigan, Tennessee, and Kentucky. It maintains no offices in Texas. "Personal jurisdiction may exist over a nonresident defendant if the relationship between the foreign corporation and its parent corporation that does business in Texas is one that would allow the court to impute the parent corporation's 'doing business' to the subsidiary." BMC Software Belgium, 83 S.W.3d at 798 (emphasis added); see also PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 173 (Tex. 2007). Here there is no evidence in the record that Toyo USA had sufficient contacts with Texas.

Conclusion

Because Toyo Japan lacks minimum contacts with Texas, we reverse the judgment of the trial court and render judgment dismissing the claims against Toyo Japan for lack of jurisdiction.

1. Section 17.042 defines "doing business" as: (1) contracting by mail or otherwise with a Texas resident with performance either in whole or in part in Texas; (2) committing a tort in whole or in part in Texas; (3) recruiting Texas residents, directly or through an intermediary located in Texas, for employment inside or outside Texas; and (4) performing any other acts that may constitute doing business. Tex. Civ. Prac. & Rem. Code Ann. § 17.042 (Vernon 1997).