American Type Culture Collection v Coleman

• Decision Date: 18 May 2000
• Citation: 26 S.W.3d 37
• Parties: * NO. 01-99-00045-CV Court of Appeals of Texas, Houston(1st Dist.)
• Court: Texas Court of Appeals

Page 37

26 S.W.3d 37 (Tex.App.-Houston [1st Dist.] 2000)

AMERICAN TYPE CULTURE COLLECTION, INC., Appellant v MARSHALL COLEMAN, ET AL., Appellees^*

NO. 01-99-00045-CV

Court of Appeals of Texas, Houston(1st Dist.).

May 18, 2000.

Opinion Overruling Rehearing Aug. 31, 2000.

On Appeal from the 23rd District Court Brazoria County, Texas Trial Court Cause No. 94-C-1392

[Copyrighted Material Omitted] Panel consists of Justices Cohen, Nuchia, and Duggan.¹

OPINION

Murry B. Cohen, Justice

American Type Culture Collection, Inc. ("ATCC") takes this interlocutory appeal from an order denying its special appearance. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7) (Vernon Supp. 2000). We consider whether a mail-order company that does not advertise locally in, has no physical presence in, and performs all services outside Texas may nonetheless be subject to general personal jurisdiction in Texas when, among other things, Texas is its sixth largest market in the United States. Concluding it can under the evidence presented, we affirm.

I. Factual and Procedural Background

Appellees are veterans of the 1991 Persian Gulf War and some of their family members. Of the nearly 1800 plaintiffs in this case, about 185 live in Texas. Appellees allege ATCC, one of over 80 defendants, sold Iraq dangerous pathogens that were later used in weapons against the appellees who served in that war.

In June 1994, appellees sued the defendants in Brazoria County, Texas on theories of negligence and product liability. ATCC made a special appearance. The defendants removed the case to federal court, where ATCC moved to dismiss for lack of personal jurisdiction, but Judge Kent dismissed the entire case for lack of subject-matter jurisdiction. Coleman v. Alcolac et al., 888 F.Supp. 1388, 1404 (S.D.Tex. 1995) (order granting motion to dismiss for lack of subject-matter jurisdiction and remanding cause to state court).

On remand, ATCC again urged its special appearance. In December 1998, the trial judge denied ATCC's special appearance without filing fact findings or legal conclusions. ATCC appeals, arguing in four points of error that the trial judge erred.

II. Standard of Review and Burden of Proof

The burden of proof was on ATCC to negate all possible grounds for personal jurisdiction. Garner v. Furmanite Australia Pty., Ltd., 966 S.W.2d 798, 802 (Tex. App.--Houston [1st Dist.] 1998, pet. denied). Existence of personal jurisdiction is a question of law, but that determination must sometimes be preceded by the resolution of underlying factual disputes. James v. Illinois Cent. R.R. Co., 965 S.W.2d 594, 596 (Tex. App.--Houston [1st Dist.] 1998, no pet.). When, as here, the trial judge files no fact findings, we presume all factual disputes were resolved to support the judge's order. Garner, 966 S.W.2d at 802. While we generally review for factual sufficiency, we review de novo if the underlying facts are undisputed or otherwise established. C-Loc Retention Sys., Inc. v. Hendrix, 993 S.W.2d 473, 476 (Tex. App.--Houston [14th Dist.] 1999, no pet.). Many of the facts here are undisputed, although the parties place greatly different significance on them.

III. Jurisdictional Test

A court may assert personal jurisdiction over a nonresident defendant only if the requirements of both the Fourteenth Amendment's due process clause² and the Texas long-arm statute³ are satisfied. CSR, Ltd. v. Link, 925 S.W.2d 591, 594 (Tex. 1996) (orig. proceeding). Because the Texas long-arm statute reaches "as far as the federal constitutional requirements of due process will allow," the statute is satisfied if the exercise of personal jurisdiction comports with federal due process. Id.

Federal due process requirements are two-fold. First, the nonresident defendant must have purposefully established such minimum contacts with the forum that it could reasonably anticipate being sued there. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475; 105 S. Ct. 2174, 2183 (1985). If the nonresident defendant has purposefully availed itself of the privileges and benefits of conducting business in a state, it has sufficient contacts to confer personal jurisdiction. Id. Random, fortuitous, or attenuated contacts do not suffice. Id. Neither do unilateral actions by third parties claiming some relationship with the nonresident defendant. Id. It is the quality and nature of the contacts, rather than their number, that is important. Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 230 n.11 (Tex. 1991).

Minimum contacts analysis is further divided into general and specific personal jurisdiction. CSR, Ltd., 925 S.W.2d at 595. The parties agree this is a case of general personal jurisdiction,⁴ which requires ATCC to show its contacts in Texas were not continuous and systematic. Id. To support a finding of general jurisdiction, the defendant's forum activities must have been "substantial," which requires stronger evidence of contacts than for specific personal jurisdiction.⁵ Id.

Second, if the nonresident defendant has purposefully established minimum contacts with the forum, the exercise of jurisdiction must comport with fair play and substantial justice. Burger King Corp., 471 U.S. at 477; 105 S. Ct. at 2184; Guardian Royal, 815 S.W.2d at 231.

IV. Jurisdictional Facts

The following evidence was adduced at the special appearance hearing.

ATCC is a non-profit corporation, organized under the laws of the District of Columbia, and having its principal place of business in Maryland. ATCC serves as a long-term repository and distribution center for living microorganisms, viruses, and cell lines, which it makes available to scientists and researchers around the world. During the 1980s, ATCC sold materials to Iraqi governmental entities, apparently in compliance with then-existing regulations.

ATCC is not authorized by Texas to do business in Texas and has no registered agent for service of process in Texas. It does not have an office or other facilities, any real property, a bank account or telephone listing, or officers, directors, or employees in Texas. Neither does it recruit employees in Texas, unless Texas residents respond to its national employment advertisements. ATCC has no Texas distributors for its biological products. It does not control the research conducted by its customers. The evidence does not show that ATCC pays any taxes in Texas, but an ATCC representative testified that, if ATCC incurs any taxes here, it would be sales taxes for Texas goods ATCC buys.

A. ATCC's Advertising and Sales Methods

ATCC sells its biological materials to customers throughout the United States, including Texas, and in 45 countries. It is basically a mail-order company. Accordingly, all service to Texas is by telephone or mail. ATCC does not make in-person sales visits anywhere. ATCC ships its materials F.O.B. ("free on board"), Rockville, Maryland. ATCC sends its bills from Maryland, and its customers send payments to Maryland.

ATCC advertises only in national and international periodicals. ATCC's biological research materials are listed in catalogues that are sent to customers or prospective customers only upon request. ATCC does not make unsolicited, targeted mailings of its catalogues to prospective Texas customers. ATCC maintains local Maryland and toll-free 800 numbers for customer inquiries.

B. ATCC's Sales to Texas Residents

All Texas sales are made by phone or written order received by ATCC in Maryland. ATCC has sold its products to Texas residents for at least 18 years. The record contains over 2,500 pages of detailed invoice reports for ATCC's Texas customers, dating from 1989 to 1994; many of those companies are repeat customers. ATCC's officer conceded that ATCC's sales to Texas are not sporadic, but are "repetitive" on a monthly basis. When this lawsuit was filed, Texas sales accounted for about 3.5 percent of ATCC's worldwide sales (in the U.S. and 45 countries) and about five percent of its U.S. sales, making Texas ATCC's sixth biggest U.S. sales market and generating about $350,000 annually.

C. Other Services to Texas Residents

ATCC also serves as a repository for researchers seeking microorganism patents. Its patent repository is located in Rockville, Maryland, and those using that service ship their materials there. For the 15 to 20-year period before this lawsuit, approximately 2.7 percent of the 13,000 patent deposits in ATCC's repository came from Texas customers. In connection with these services, ATCC apparently enters into customer safe-deposit agreements. The record contains a few examples of correspondence notifying a Texas customer that its safe-deposit agreements were expiring, explaining how to renew those agreements, and enclosing a renewal contract already signed by ATCC.

The above are not ATCC's only services. For example, ATCC also offers (including to an unspecified number of Texas residents) "applied science" services, such as freeze-drying of microorganisms, microorganism identification, and the like. ATCC also puts on scientific workshops outside Texas. Additionally, ATCC issues quarterly newsletters and laboratory manuals upon request. ATCC does not state how many Texas residents requested these services.

D. ATCC's Purchases from Texas Vendors

ATCC buys supplies and media from approximately 3,000 vendors worldwide. About 33 of these, or around 1.4 percent, are in Texas. ATCC does not state whether the 1.4 percent figure for Texas is high or low compared to its purchases in other states and countries. From 1989 to 1994, ATCC purchased supplies worth about $378,000 from its Texas vendors. Some of these supplies were shipped F.O.B. points in Texas.

E. Specific Contracts with Texas Residents

In 1991, ATCC contracted with the University of Texas Southwestern Medical Center ("UT-SMC") to propagate and test cell lines at ATCC's Maryland facilities. ATCC signed the contract, which contained no choice-of-law...