CMMC v. Salinas

• Decision Date: 18 October 1996
• Docket Number: No. 95-0954,95-0954
• Citation: 929 S.W.2d 435
• Parties: Prod.Liab.Rep. (CCH) P 14,667, 39 Tex. Sup. Ct. J. 1043 CMMC, Petitioner, v. Ambrocio SALINAS, Respondent.
• Court: Texas Supreme Court

Page 435

929 S.W.2d 435

Prod.Liab.Rep. (CCH) P 14,667, 39 Tex. Sup. Ct. J. 1043

CMMC, Petitioner, v. Ambrocio SALINAS, Respondent.

No. 95-0954.

Supreme Court of Texas.

Argued Jan. 16, 1996.

Decided July 12, 1996.

Rehearing Overruled Oct. 18, 1996.

Michael W. Eady, Austin, for Petitioner.

William W. McNeal, Lockhart, for Respondent.

HECHT, Justice, delivered the opinion for a unanimous Court.

The sole question in this case is whether the Fourteenth Amendment permits a state court to take personal jurisdiction over a foreign manufacturer merely because it knew its allegedly defective product would be shipped to that state. We answer no, and thus reverse the judgment of the court of appeals, 903 S.W.2d 138, and affirm the judgment of the trial court.

Hill Country Cellars, a small winery located in Cedar Park, Texas, ordered a winepress from KLR Machines, Incorporated, an independent distributor of equipment used in the wine and juice industries. KLR, in turn, ordered the winepress for Hill Country Cellars from CMMC, a French manufacturer, instructing CMMC to wire the press for electrical use in the United States. KLR quoted the price to Hill Country Cellars in deutch marks, although it would accept payment in U.S. dollars at the current exchange rate. KLR instructed CMMC to arrange with A. Germaine, a freight forwarder paid by KLR, to transport the press from the CMMC's factory in Chalonnes, France, to the ship on which it would travel to the United States, and to arrange for the press to be shipped FOB the port of Houston. CMMC complied and thus knew that the destination of the press was Texas. Hill Country Cellars took title to the winepress in Houston and paid for transportation to its winery. Shortly after it began to use the press, Hill Country Cellars made a warranty claim to KLR. KLR satisfied the claim by having an electrical motor rewound for proper use in the United States, for which it paid $529.57. KLR in turn presented the claim to CMMC, which agreed to credit KLR.

CMMC, a French corporation owned since 1986 by a German manufacturer, sells wine production equipment primarily in Europe. It does not directly market or advertise its equipment in the United States, other than by providing promotional materials to KLR. A buyer may acquire products from CMMC directly or through KLR. CMMC and KLR have no contractual arrangement and share no employees. KLR advertises CMMC products, but CMMC does not specifically authorize or approve the ads. CMMC has sold equipment in the United States, including a direct sale to another winery in Texas. CMMC has never had a place of business, distributor, or representative in Texas, or any other contacts with Texas. Hill Country Cellars never had any direct contact with CMMC.

KLR, a New York corporation with offices in Sebastopol, California, and Bath, New York, has never had offices or employees in Texas. In the ten years preceding this case it made only three or four equipment sales in Texas. It has never had any other contacts with Texas. KLR sells the equipment of numerous manufacturers, only one of which is CMMC. KLR directs its marketing efforts primarily toward California but also advertises in nationally circulated wine industry magazines. KLR advertisements have never pictured the particular press Hill Country Cellars purchased, although it was a KLR ad that led to the sale to Hill Country Cellars.

Ambrocio Salinas, a Hill Country Cellars employee, injured his arm while cleaning the press and filed this lawsuit for damages against CMMC, asserting strict product liability and negligence claims. The district court sustained CMMC's special appearance and dismissed the case for want of personal jurisdiction. The court of appeals reversed and remanded, holding that a Texas court's assertion of personal jurisdiction over CMMC could be based solely on CMMC's knowledge that the winepress would be shipped to Texas, and that this assertion would not offend traditional notions of fair play and substantial justice. 903 S.W.2d 138, 142-145.

We have so frequently and so recently reiterated the constitutional standards for determining personal jurisdiction that we need not restate them yet again here. CSR Ltd. v. Link, 925 S.W.2d 591 (Tex.1996); National Indus. Sand Ass'n v. Gibson, 897 S.W.2d 769, 772 (Tex.1995); In re S.A.V., 837 S.W.2d 80, 85-86 (Tex.1992); Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226-228 (Tex.1991); Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex.1990); Zac Smith & Co. v. Otis Elevator Co., 734 S.W.2d 662, 663-664 (Tex.1987). Our polestar must be, of course, the United States Supreme Court. Asahi Metal Indus. v. Superior Court, 480 U.S. 102, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985); Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Suffice it to say that the rule in these cases is that a state court can take personal jurisdiction over a defendant only if it has some minimum, purposeful contacts with the state, and the exercise of jurisdiction will not offend traditional notions of fair play and substantial justice.

CMMC's only contacts with Texas are that it made isolated sales of equipment to customers here, and that it knew the machine it sold KLR was being shipped here. Salinas argues, and the court of appeals agreed, 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 under our decisions in Keen v. Ashot Ashkelon, Ltd., 748 S.W.2d 91 (Tex.1988), and Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199 (Tex.1985)(per curiam), which follow the rule of World-Wide Volkswagen Corp. v. Woodson, 444 U.S. at 286, 100 S.Ct. at 561-562, and Asahi Metal Industry v. Superior Court, 480 U.S. at 102, 107 S.Ct. at 1026-1027.

In World-Wide Volkswagen, the United States Supreme Court stated a basis for personal jurisdiction that has come to be referred to as the stream-of-commerce doctrine:

[I]f the sale of a product of a manufacturer or a distributor ... is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve, directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owner or to others. The forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivered its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State.

World-Wide Volkswagen, 444 U.S. at 297-298, 100 S.Ct. at 567. Applying this rule, the Court held that a car distributor and a retail dealer, both doing business in New York, did not have minimum contacts with Oklahoma simply because cars they sold ended up in that state.

Seven years later, the Court was unable to agree on the scope of the rule stated in World-Wide Volkswagen. In Asahi, a motorcyclist filed suit in a California court to recover damages for personal injuries. Settlements among the parties left pending only a cross-claim between two defendants: a claim for indemnity by a Taiwanese tire tube manufacturer, Cheng Shin Rubber Industrial Company, against a Japanese manufacturer of the tube's valve assembly, Asahi Metal Industry Company. Cheng Shin argued that the state court had jurisdiction over Asahi because Asahi was aware that its valve assemblies sold to Cheng Shin and others would be incorporated in their products and would end up in the United States, generally, and in California, in particular. Asahi did not design its products specifically for use in California and did not attempt to market them there. Asahi had no other contacts with California.

Justice O'Connor, writing for a four-Member plurality, concluded that Asahi did not have sufficient contacts with California to be subject to personal jurisdiction in state court. Asahi's mere awareness that its products might end up in California was not enough to show that it purposely availed itself of the California market. Regarding the stream-of-commerce doctrine of World-Wide Volkswagen, Justice O'Connor explained:

Since World-Wide Volkswagen, lower courts have been confronted with cases in which the defendant acted by placing a product in the stream of commerce, and the stream eventually swept defendant's product into the forum State, but the defendant did nothing else to purposefully avail itself of the market in the forum State. Some courts have understood the Due Process Clause, as interpreted in World-Wide Volkswagen, to allow an exercise of personal jurisdiction to be based on no more than ...