Components v. Devon Energy Corp..

• Decision Date: 07 April 2011
• Docket Number: No. 14–10–00402–CV.,14–10–00402–CV.
• Parties: MOTOR COMPONENTS, LLC and Bam Enterprises, Inc., Appellant,v.DEVON ENERGY CORPORATION, Appellee.
• Court: Texas Court of Appeals

338 S.W.3d 198

MOTOR COMPONENTS, LLC and Bam Enterprises, Inc., Appellant,

v.DEVON ENERGY CORPORATION, Appellee.

No. 14–10–00402–CV.

Court of Appeals of Texas, Houston (14th Dist.).

April 7, 2011.

David Edwards Wynne, Kenneth R. Wynne, Houston, for appellant.C. Carrick Brooke–Davidson, Austin, Dan Isenhower, Houston, William R. Jones, Dallas, for appellee.Panel consists of Justices SEYMORE, BOYCE, and CHRISTOPHER.

OPINION

TRACY CHRISTOPHER, Justice.

In this interlocutory appeal, Motor Components, LLC and BAM Enterprises, Inc. challenge the denial of their special appearances in a Texas declaratory-judgment action. Because the companies have insufficient contacts with Texas to sustain the trial court's exercise of personal jurisdiction, we reverse the trial court's ruling and remand the case to the trial court for the dismissal and severance of the claims against them.

I. Background

In 1992, Pennzoil Company, a Delaware corporation located in Texas, entered into an Environmental Indemnification Agreement with its subsidiary, Purolator Products Company (“Purolator”), a Delaware corporation located in Oklahoma. Pennzoil agreed to indemnify Purolator for certain costs of remediating Purolator's real property in New York (“the Elmira Facility”) and Michigan (“the Metamora Landfill”). Mark IV Industries, Inc. acquired Purolator in 1994, and parceled it into separate divisions in 1997. Two years later, Mark IV sold one of Purolator's divisions to Arvin Industries, Inc., and sold Purolator itself to CLARCOR, Inc. Also in 1999, Mark IV created a subsidiary, Motor Components, LLC, a Delaware corporation with its principal place of business in New York. Through one or more transactions that are not described in the record, Motor Components became the owner of the Elmira Facility and succeeded to Purolator's rights under the Environmental Indemnification Agreement. Motor Components was sold in 2002 to BAM Enterprises, Inc. (“BAM”), a New York corporation with its principal place of business in New York.

In March 2009, Motor Components asked Pennzoil's successor-in-interest, Devon Energy Company, for authorization to incur certain expenses to determine if further remediation of the Elmira Facility was necessary. Although Devon is a Delaware corporation with its principal place of business in Oklahoma, Devon's in-house counsel is located in Houston; Motor Components's New York counsel therefore sent the correspondence to Devon's attorney in Texas. A second letter followed on August 12, 2009 and a third on December 10, 2009. The parties disagreed regarding the costs that were to be indemnified, and on December 16, 2009, Devon filed a declaratory-judgment action asking a Harris County district court to construe the Environmental Indemnification Agreement. The defendants included not only Motor Components, but also BAM, Mark IV, CLARCOR, and Purolator, among others. Motor Components and BAM filed a joint special appearance, which the trial court denied, and this interlocutory appeal ensued.

II. Issues Presented

In five issues, Motor Components and BAM challenge the denial of their special appearances. In their first issue, they contend there is no basis for exercising personal jurisdiction over BAM, and in their second, they argue they have established that neither Motor Components nor BAM conducts business in Texas. In their third issue, they challenge the adequacy of Devon's jurisdictional allegations. They assert in their fourth issue that personal jurisdiction cannot be sustained on the basis that Motor Components's products can be purchased from third parties via the internet, because the products cannot be purchased from Motor Components's website, and in any event, its products have no connection to this lawsuit. In their fifth issue, they contend that letters from Motor Components's New York counsel to Devon's in-house counsel cannot support the exercise of personal jurisdiction.

III. Standard of Review

We review de novo a trial court's denial of a nonresident defendant's special appearance. Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 657 (Tex.2010). When the trial court issues no findings of fact and conclusions of law, we imply all factual findings supported by the evidence that are necessary to support the trial court's ruling. Id.

IV. Analysis

A Texas trial court may exercise personal jurisdiction over a nonresident defendant when authorized by the Texas long-arm statute unless doing so would violate federal and state constitutional due process guarantees. Id. These guarantees are not violated, however, if 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. Id. “A defendant establishes minimum contacts with a state when it ‘purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws.’ ” Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex.2009) (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958)).

The “purposeful availment” inquiry has three parts. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 575 (Tex.2007). First, only the defendant's contacts with the forum are relevant. Id. Second, the contacts on which jurisdiction depends must be purposeful, rather than random, fortuitous, or attenuated. Id. Third, “the ‘defendant must seek some benefit, advantage or profit by “availing” itself of the jurisdiction.’ ” Id. (quoting Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex.2005)).

A nonresident's contacts can give rise to specific or general jurisdiction. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex.2002) (citing World–Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)). Specific jurisdiction arises when (1) the defendant purposefully avails itself of the privilege of conducting activities in the forum state, and (2) the cause of action arises from or is related to those contacts or activities. Retamco, 278 S.W.3d at 338 (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)). When analyzing specific jurisdiction, we focus on the relationship among the defendant, the forum, and the operative facts of the litigation. Moki Mac, 221 S.W.3d at 575.

Unlike specific jurisdiction, general jurisdiction is “dispute-blind.” PHC–Minden, L.P. v. Kimberly–Clark Corp., 235 S.W.3d 163, 168 (Tex.2007). It may be asserted over any claim, even when there is no connection between the cause of action and the forum state. Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 228 (Tex.1991). General jurisdiction may be exercised only if the nonresident defendant has had continuous and systematic contacts with the forum state over a reasonable number of years before suit was filed. PHC–Minden, 235 S.W.3d at 168–71. Thus, our general-jurisdiction inquiry requires a more demanding minimum-contacts analysis with a substantially higher threshold than that required for specific jurisdiction. Id. at 168.

A. General Jurisdiction

As the basis for general jurisdiction, Devon alleged that Motor Components “has purposefully availed itself of the privileges and benefits of conducting business in Texas by distributing its products through retailers such as NAPA, CarQuest, Pep Boys, O'Reilly Auto Parts, and wholesaler AfterMark, LLC (a Texas company located in Richardson, Texas).” Devon further alleged that BAM is Motor Components's successor-in-interest and “engages in business in Texas through Motor Components.”

For both legal and evidentiary reasons, jurisdiction cannot be sustained on this basis. First, “stream-of-commerce analysis ‘is relevant only to the exercise of specific jurisdiction; it provides no basis for exercising general jurisdiction over a nonresident defendant.’ ” Spir Star AG v. Kimich, 310 S.W.3d 868, 874 (Tex.2010) (quoting Purdue Research Found. v. Sanofi–Synthelabo, S.A., 338 F.3d 773, 788 (7th Cir.2003)). And although Devon produced some evidence that on February 19, 2010—more than two months after Devon filed suit—Motor Components's website contained links to the websites of third-party retail stores in Texas where its products could be purchased, such evidence is not relevant to the jurisdictional inquiry. See PHC–Minden, 235 S.W.3d at 169 (holding that when determining whether a nonresident defendant has continuous and systematic contacts with Texas sufficient to support general jurisdiction, courts examine the defendant's contacts and forum-related activities only up to the time that suit was filed). Second, BAM and Motor Components produced evidence disproving Devon's allegations. Specifically, they produced uncontroverted affidavit testimony that neither company has any presence in Texas; conducts any business activity in Texas; sells any products in Texas; owns property in Texas; employs anyone in Texas; advertises in Texas; maintains an office, mailing address, telephone number, or bank account in Texas; or holds director or shareholder meetings in Texas. In addition, an executive officer of both companies attested that Motor Components sells its products only in New York, and BAM does not make or sell any products at all. We therefore sustain Motor Components and BAM's first through fourth issues with regard to general jurisdiction.

B. Specific Jurisdiction1. Based on Allegations that Defendants are “Successors” to Purolator, a Company with Texas Contacts

Although BAM, Motor Components, and Purolator are distinct entities, it appears to be Devon's position that, at least for the purpose of specific jurisdiction, a contract signatory's contacts with the forum are imputed as a matter of law to one who succeeds to and attempts to exercise the signatory's rights...