Semperit Technische Produkte Gesellschaft M.B.H. v. Hennessy

• Decision Date: 06 April 2016
• Docket Number: No. 08–14–00172–CV,08–14–00172–CV
• Citation: 508 S.W.3d 569
• Parties: SEMPERIT TECHNISCHE PRODUKTE GESELLSCHAFT M.B.H., Appellant, v. Desiree Y. HENNESSY, as Next Friend of Allison D. Smithers, a Minor and Holly S. Vidrine, as Next Friend of Sadie R. Smithers, a Minor, Kimber Rose Hunter, as Next Friend of Cedric Sean Smithers, a Minor, and Cindy Walling, Appellees.
• Court: Texas Court of Appeals

508 S.W.3d 569

SEMPERIT TECHNISCHE PRODUKTE GESELLSCHAFT M.B.H., Appellant,

v.Desiree Y. HENNESSY, as Next Friend of Allison D. Smithers, a Minor and Holly S. Vidrine, as Next Friend of Sadie R. Smithers, a Minor, Kimber Rose Hunter, as Next Friend of Cedric Sean Smithers, a Minor, and Cindy Walling, Appellees.

No. 08–14–00172–CV

Court of Appeals of Texas, El Paso.

April 6, 2016

Bowen Berry, C. H. Hal Brockett, Jr., Clinton J. Echols, Christopher Wayne Weber, Brian Scott Bradley, Clinton J. Echols, Carl H. Green, William Everett Berry Jr.,Jose Luis Garriga for Appellees.

Sherman Vance Wittie, for Appellant.

Before McClure, C.J., Rodriguez, and Hughes, JJ.

OPINION

ANN CRAWFORD McCLURE, Chief Justice

In Spir Star AG v. Kimich¹ , the Texas Supreme Court upheld the exercise of jurisdiction over a German hose manufacturer which had sold one of its hoses to a wholly owned Texas subsidiary, who in turn sold it to a Texas end user, where it was alleged to have failed and caused injury. In this case, we are presented with a similar fact pattern, but for the hose first being sold to a wholly owned New Jersey subsidiary, who then sold it to an Oklahoma distributor, who then resold it into the State of Texas. On the facts of this case, we find these distinctions immaterial and affirm the trial court's decision below which denied the manufacturer's special appearance.

FACTUAL SUMMARY

This case arises out of an accident at a drilling site that took the life of Cedric Scott Smithers on September 10, 2010. Smithers was survived by three minor children, Allison, Sadie, and Cedric Sean, all of whom have appeared through different next friends in the lawsuit below. Cedric Scott was also survived by his mother, Cindy Walling, who has sued individually and behalf of his estate (all collectively referred to as the Smithers).

The accident occurred while workers were using a high pressure hydraulic hose that was attached to a high pressure line. The Smithers allege that the hose failed, causing a pressure release that threw Cedric Scott Smithers into the oil derrick leading to his fatal injuries. The Smithers have sued Cedric Scott's employer, other contractors at the rig, and germane to this appeal, they added Semperit Aktiengesellschaft Holding, (Semperit Holding), Semperit Technische Produkte Gesellschaft M.B.H. (STP), and Semperit Industrial Products, Inc. (SIP). STP filed a special appearance which was denied by the trial court and it is the only Semperit party actually before us, but a brief overview of all three Semperit entities is necessary to understand the issues raised.

Semperit Holding is just that, a holding company that owns all shares of STP. Its website describes itself as a company which: "develops, produces, and sells highly specialised rubber and plastic products for the medical and industrial sectors: examination and surgical gloves, hydraulic and industrial hoses, conveyor belts, escalator handrails, construction profiles, cable car rings, and products for railway superstructures." Semperit Holdings has never answered the suit and it is not a party to this appeal.

One of the companies that it owns, STP, is an Austrian company with home offices in Vienna, Austria. STP manufactures a variety of rubber products including hydraulic and industrial hoses, gloves, and handrails for escalators. It apparently manufactured the hose which was involved in this accident and a date stamp on the remnants of the hose suggests it was made in the early part of 2005. All of STP's manufacturing facilities are outside the United States. The jurisdictional dispute here turns on how the hose found its way to a drilling rig in Upton County, Texas, some five years later.

STP owns 100 percent of the stock of SIP, a New Jersey corporation formed in 1985 with its only office located in New Jersey. SIP was created to sell STP products in the United States. It also sells some products from other Semperit joint ventures, and sold its own line of escalator handrails. But by far the majority of its sales are of STP hydraulic and industrial hoses.

When SIP sells a product to an American customer, it notifies STP who then ships the product directly to the American customer. STP invoices SIP for the item sold. SIP adds a 10 percent mark-up and invoices its customer. The terms for payment will usually result in SIP being paid by its customer before it must remit payment to STP. STP's standard terms and conditions provide that it retains title to the goods until its invoice is paid in full. Based on shipping instructions, STP is aware that its products, including hydraulic hoses, are being sold in Texas.

From 2002 to 2012, STP delivered some $7,179,824 of STP products in Texas.² This sum is less than 1 percent of its worldwide sales and about 3 percent of its United States sales over that same period of time. Of that total, almost two million dollars came from the direct sale of goods from STP to an existing European customer who through merger wound

up with a Texas facility that purchased blowout preventer hoses.

The hose at issue in this lawsuit was sold to SIP who in turn sold it to Mid West Hose & Specialty, Inc. (Mid West). Mid West primarily sells hoses to the oil and gas industry, and it serves ten states through twenty-three offices. It is an Oklahoma company whose main facility is in Oklahoma City. At the time of the sale of this particular hose, it had four offices in Texas. In 2005, about half its sales were to Texas. SIP's president visited Mid West twice per year and once went to its facility in Houston to see what opportunities SIP might have there.

Mid West buys branded hoses from SIP, meaning that before the rubber hose is vulcanized in STP's Austria facility, STP applies Mid West's markings to the hose. Mid West could then resell the hose under its own brand label. The hoses are also stamped with "MSHA" denoting that they comply with federal Mine Safety and Health Administration guidelines for the United States marketplace. Mid West buys this particular type of hose in 40 meter segments that it then cuts to size based on customer specifications. Almost all of the hoses sold to Mid West by SIP were delivered to Mid West's main facility in Oklahoma. Mid West's president believed that 95 percent of the product was delivered there, but the record contains some invoices reflecting STP deliveries to Mid West offices in Houston, Dallas, and Fort Worth.

Based on this course of business, Mid West's president believed that the accident hose was most likely delivered to Mid West in Oklahoma and then shipped by Mid West to its sales office in Odessa, Texas. That location then sold it to O–Tex Pumping, another defendant below. The record is silent as how the hose got from O–Tex Pumping to the drill rig site where the injury occurred.

There is no written agreement between SIP and STP, but rather an "understanding" which dictates the terms of their relationship. Principally SIP sells STP products in the United States. This would include every state, including Texas. SIP sells Semperit products and could not, for instance, decide to carry another hose manufacturer's line. SIP's President directly reports to an employee of STP.³ STP reviews and approves SIP's budget, including salaries and other company costs. STP would approve new hires. Without any written agreement, SIP uses STP's Semperit logo on its correspondence. In 2005, SIP had excess funds from the sale of property which was loaned to another Semperit related entity based on instructions from STP.

STP owns no property in Texas. It does not advertise its products in the United States generally, or Texas specifically. It does send a product catalog to SIP who uses the catalog with its customers. As for its own employees, two officers from STP's medical supply division once attended an annual sales meeting in San Antonio. One STP manager also went to Dallas in 2006 to investigate the market for escalator handrails.

SIP targets customers that can use their products rather than specific geographical regions. It primarily sells to agricultural based companies, but is aware some of its hoses are used in the oil and gas business. It sells hydraulic hoses to at least six Texas customers. Over a several year period, SIP's president had visited its customers in Texas, as well as contacted twenty-five to fifty Texas prospective customers. SIP is also aware that its sales to Mid West in Oklahoma will result in hoses making their way into Texas. SIP appeared in the lawsuit and has not challenged the trial court's jurisdiction.

PROCEDURAL SUMMARY

The Smithers sued the entities in the chain of distribution of the hose, including O–Tex Pumping, Mid West, SIP, and STP. They alleged that STP is in the business of designing, manufacturing, marketing, and distributing high pressure hoses. Based on this premise, they sued STP under negligence, products liability, and breach of warranty theories. Only STP filed a special appearance contesting personal jurisdiction. In response to the special appearance, the Smithers contended in part that the court has jurisdiction over STP under the "stream of commerce" doctrine. Some of the Smithers also alleged that SIP is the alter ego of STP and that any actions of SIP can be attributed to STP for jurisdictional purposes.⁴ Finally, the Smithers noted that SIP's New Jersey corporate charter was forfeited from March 16, 2007 to February 6, 2013. Because SIP entered a general appearance in this lawsuit during that period of time, the Smithers reasoned that it must have been filed by STP as the owner/partner of a defunct corporation, and thus constitutes a general appearance by STP. Overarching all of these arguments, the Smithers contended that the technical data and information needed for their products liability claim resides with STP in Austria, and it would be unfair to require them to attempt to get such information from a non-party in a foreign jurisdiction. The trial court denied the...