Opinion
B312058
12-04-2023
Estate of JOHN KLEINHANS, Deceased. v. JUSHI USA, Defendant and Appellant. MARY KLEINHANS, Individually and as Personal Representative, etc., Plaintiffs and Respondents,
Law Offices of Joseph Klobas, Joseph Klobas; Stiller Law Firm and Ari J. Stiller, for Plaintiff and Appellants. Venable, Mitchell Y. Mirviss, Melissa C. McLaughlin and Elizabeth C. Rinehart, for Defendant and Respondent.
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of California Super. Ct. No BC670098. Peter A. Hernandez, Judge. Affirmed.
Law Offices of Joseph Klobas, Joseph Klobas; Stiller Law Firm and Ari J. Stiller, for Plaintiff and Appellants.
Venable, Mitchell Y. Mirviss, Melissa C. McLaughlin and Elizabeth C. Rinehart, for Defendant and Respondent.
CURREY, P. J.
John and Mary Kleinhans appealed from a judgment entered by the Los Angeles County Superior Court after a bench trial in their products liability action for personal injuries. John Kleinhans (Kleinhans) was injured by inhaling fiberglass fibers while working at a manufacturing company in Texas. The fibers were released from a fiberglass product manufactured by Jushi Group, Ltd. (Group), a company headquartered in China. Group imported its product through the Port of Long Beach and distributed and sold its product in the United States through defendant and respondent Jushi USA Fiberglass Co. Ltd. (Jushi USA). Kleinhans died during the pendency of this appeal.
Group is not a party to this proceeding.
Mary Kleinhans has substituted in as personal representative of the Estate of John Kleinhans; as a result, appellants are Mary Kleinhans in her individual and representative capacities. (Code of Civ. Proc., § 377.30; see Brenner v. Universal Health Services of Rancho Springs, Inc. (2017) 12 Cal.App.5th 589, 605.
Texas law shields nonmanufacturer sellers of a product- such as Jushi USA-from liability for harm caused by the product, unless one of seven exceptions apply. (Tex. Civ. Prac. Rem. Code § 82.003, subd. (a) (section 82.003).) The exceptions relevant here are specified in section 82.003, subdivisions (a)(4) and (a)(7), which attach liability if a plaintiff establishes either that the nonmanufacturer seller exercised substantial control over the content of a warning or instruction accompanying the product (subdivision (a)(4)), or the manufacturer itself is not subject to the jurisdiction of the court (subdivision (a)(7)). Thus, the plaintiffs sought to establish that non-party Group was not subject to specific jurisdiction in California and hence the exception of subdivision (a)(7) applied to its action against Jushi, USA.
All further statutory references are to the Texas Civil Practice and Remedies Code, unless otherwise noted.
After determining Texas law applied to this action, the trial court concluded Jushi USA was immune from liability as the nonmanufacturer seller of the product because the manufacturer, Group, was subject to the jurisdiction of that court. (Section 82.003, subd. (a)(7).) The court also concluded that Jushi USA was immune because it did not exercise substantial control over the content of a warning or instruction accompanying the product. (Section 82.003, subd. (a)(4).)
Appellants argue that the trial court erred in finding specific jurisdiction over Group and in concluding Jushi USA did not exercise substantial control over the product warnings. We affirm.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
1. Parties and Facts Regarding Jurisdiction.
Kleinhans, a resident of Texas, worked for Fibergrate Composite Structures, Inc. (Fibergrate) in Addison, Texas from 2010 to 2015. Fibergrate manufactured products incorporating raw fiberglass, and during his employment, Kleinhans was exposed to fiberglass dust while cutting and sawing raw fiberglass. Kleinhans alleged he suffered personal injuries because of this exposure.
Group, headquartered in Tongxiang City, China, manufactures fiberglass in China that it imports through its California subsidiary, Jushi USA. Jushi USA is a California corporation headquartered in Irwindale, California. From 2011 to 2015, Jushi USA purchased 55 million pounds of fiberglass from Group for resale in California.
All of Group's fiberglass products were imported through the Port of Long Beach. After being unloaded, the raw fiberglass was distributed by truck or rail, or stored at Jushi USA's Irwindale warehouse or two other locations in California. All of the Group-manufactured fiberglass used at Fibergrate came through Long Beach.
Group does not sell directly to United States manufacturers such as Fibergrate. Rather, Group sells its product to Jushi USA, which is the exclusive distributor in the United States of Group's product. Jushi USA had a sub-distributor, Composites One, which also distributed the product to other entities in California, and to Fibergrate.
In general, Jushi USA's sales personnel received purchase orders from customers, and Jushi USA in turn placed orders with Group. According to Brooks Jones, a sales manager for Jushi USA who testified at trial, Jushi USA's procurement office, which handles orders of fiberglass from Group, is in Irwindale. All of Group's fiberglass sold to Fibergrate was sold through Jushi USA. Jones testified to Jushi USA's two-fold activities: a "distribution arm" to out-of-state customers, and a "sales arm" to in-state customers.
Jones never handled any sales to Fibergrate, but instead handled sales to Jushi USA's California customers. Rather, Fibergrate ordered its fiberglass from Group through Billy McKee, Jushi USA's Southwest Regional Sales Manager. McKee was headquartered in Houston, Texas. According to McKee, the fiberglass from Group would have been shipped directly to Fibergrate from Long Beach or would come through the Irwindale warehouse.
Jones and the Jushi USA employees in Irwindale had contact with Group daily, either by phone or email. At least once a year, Jones went to China to meet with Group employees. Engineers, product managers, and accountants from Group visited the Irwindale office.
The Kleinhanses initially commenced an action for injuries based on products liability in Texas on May 13, 2016, against Group and Jushi. After dismissing the Texas action, they filed this action in California on July 26, 2017, alleging negligence and strict liability against Jushi, USA.
Plaintiffs filed a third action in February 2019 against Group based on the same facts as this case. Following removal to federal court, this third action was dismissed in March 2019.
After Jushi USA moved to have Texas law apply, the trial court granted the motion, concluding that "Texas' governmental interests are overwhelmingly greater than California's given the facts of this case."
Appellants do not dispute this ruling.
2. Summary Judgment and Summary Adjudication.
Jushi USA moved for summary judgment and summary adjudication on various grounds, including that Jushi USA did not manufacture the fiberglass product, nor did appellants establish that any of the exceptions to section 82.003 applied. On June 13, 2019, the trial court granted in part and denied in part Jushi USA's motion for summary judgment and summary adjudication.
The court granted the motion except for appellants' claims based on negligence and strict liability (defect). Further, because factual issues remained on the section 82.003 issues, the trial court denied summary judgment on the applicability of the exceptions of subdivision (a).
3. Bench Trial.
The trial court conducted a bifurcated trial, with the first phase consisting of a bench trial commencing on August 23, 2019, to address the applicability of section 82.003. On December 11, 2020, the trial court issued its findings of fact and entered judgment in favor of Jushi USA.
The court entered nonsuit on appellants' other claims based on section 82.003, subdivisions (a)(1), (2), and (3) due to a failure to present evidence. The court also found the exceptions of section 82.003, subdivisions (a)(5) and (6) did not apply. These subsections are not at issue in this appeal.
These rulings disposed of the section 82.003, subdivision (a)(4) issue as the trial court found no evidence that Jushi USA exercised substantial control over the warnings on the exterior of the fiberglass boxes or the two inserts placed inside the boxes (Material Safety Data Sheets and Safe Use Instructions). Instead, Jushi USA passed these warnings along when it shipped the raw fiberglass; the court further ruled Jushi had no independent duty to ensure that product hazards were communicated to employees.
On the applicability of section 82.003 subdivision (a)(7)(B), the court concluded sufficient evidence supported the exercise of specific jurisdiction over Group. The court noted that Jushi USA did not manufacture the fiberglass, but provided orders to Group, the actual manufacturer; customer orders for Group's product were placed in California; the fiberglass was produced in China and placed on container vessels bound for California; after arrival in Long Beach, the fiberglass was housed in warehouses in California or sent directly to customers in California; if sent to Texas, it was either shipped by truck or rail; Jushi USA had daily contact with Group in China; Jones went to China yearly to meet with Group; and Group employees visited Jushi USA. The court concluded that these transactions between Jushi USA and Group were related to appellants' claims because the fiberglass sold to Fibergrate was sold in California through Jushi USA.
The trial court distinguished Bristol Myers Squib Co. v. Superior Court (2017) 582 U.S. 255 [137 S.Ct. 1773, 198 L.Ed.2d 395] (Bristol-Myers), because there, none of the out-of-state injuries were connected to any California sales activity by the manufacturer, while the raw fiberglass received by Fibergrate came by way of transactions with Jushi USA. Lastly, the court found its prior determination that Texas law applied did not conflict with its finding of personal jurisdiction. The court held that the choice of law question focused on governmental analysis, which question "has nothing to do with the jurisdiction of the court to adjudicate the claims," citing Keeton v. Hustler Magazine (1984) 465 U.S. 770, 778 [104 S.Ct. 1473, 79 L.Ed.2d 790].
DISCUSSION
In an inversion of the traditional personal jurisdiction inquiry, appellants principally argue that non-party Group is not subject to personal jurisdiction in California and therefore the exception of section 82.003, subdivision (a)(7)(B) does not shield its subsidiary, Jushi USA. They also contend that Jushi USA had "complete control over the labelling that should have been placed on the fiberglass" and thus the exception of section 82.003, subdivision (a)(4) applies. We disagree.
I. SECTION 82.003.
As noted above, Chapter 82 of the Texas Civil Practice &Remedies Code immunizes a nonmanufacturing seller from products liability claims unless the claimant proves a statutory exemption applies. (George v. SI Group Incorporated (5th Cir. 2022) 36 F.4th 611, 620.) Two exceptions are at issue here. Section 82.003 provides in relevant part that "(a) A seller that did not manufacture a product is not liable for harm caused to the claimant by that product unless the claimant proves: . . . [¶] (4) that: [¶] (A) the seller exercised substantial control over the content of a warning or instruction that accompanied the product; [¶] (B) the warning or instruction was inadequate; and [¶] (C) the claimant's harm resulted from the inadequacy of the warning or instruction; . . . [¶] [or] (7) that the manufacturer of the product is: [¶] (B) not subject to the jurisdiction of the court." The statute is phrased in the disjunctive; thus, a nonmanufacturing seller is shielded from liability if a factfinder concludes plaintiff proved any one exception. (Amazon.com, Inc. v. McMillan (Tex. 2021) 625 S.W.3d 101, 109 [nonmanufacturing seller not liable unless one of the enumerated exceptions applies].)
II. THE EXCEPTION OF SECTION 82.003, SUBDIVISION (A)(7) DOES NOT APPLY.
Traditionally, the jurisdictional argument is raised by a defendant seeking to avoid being hailed into a distant forum with which the defendant has had little interaction. As noted above, however, here appellants contend California lacks personal jurisdiction over Group, the non-party manufacturer, to avoid application of the immunity of section 82.003, subdivision (a)(7)(B). Appellants argue that because Jushi USA's "distribution arm," which accounted for Group's sales to Fibergrate, had minimal contact with California, and was distinct from Jushi USA's in-state "sales arm," the trial court lacked jurisdiction over Group. They emphasize that Group, an alien corporation, engaged in direct sales between itself in China and Fibergrate in Texas; the benefit from the sale occurred in Texas, where the product was ordered and delivered; the product's only contact with California was its delivery in Long Beach; other than the location of Jushi, USA's corporate headquarters in California, there were no relevant forum contacts; rather, Group did not "reach out" from China and exploit a market in California or enter into a contract there such that it should expect to defend a California lawsuit resulting from its business with Fibergrate in Texas; lastly, they contend there is no relationship between the injuries and California-appellants were injured and treated in Texas. We disagree.
A. Standard of Review.
In reviewing a trial court's determination on jurisdiction, we will not disturb the court's factual determinations if they are supported by substantial evidence. (Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 273 (Pavlovich).) Where there is no conflict in the evidence, jurisdiction is purely a question of law, and we engage in an independent review of the record. (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 449 (Vons); Pavlovich, supra, at p. 273.) Where the jurisdictional facts are not disputed, we review the trial court's decision de novo. (LG Chem Ltd. v. Superior Court (2022) 80 Cal.App.5th 348, 359.)
B. Principles of Personal Jurisdiction.
"The Fourteenth Amendment's Due Process Clause limits a state court's power to exercise jurisdiction over a defendant." (Ford Motor Co. v. Montana Eighth Judicial Dist. Court (2021) 592 U.S., [141 S.Ct. 1017, 1024, 209 L.Ed.2d 225] (Ford Motor); accord Bristol-Myers, supra, 582 U.S. at pp. 261-262.) Thus, California courts may exercise personal jurisdiction on any basis consistent with the Constitutions of California and the United States. (Code Civ. Proc., § 410.10.) The exercise of jurisdiction requires the defendant to have "'such minimum contacts with the state that the assertion of jurisdiction does not violate "'traditional notions of fair play and substantial justice.'"'" (Pavlovich, supra, 29 Cal.4th at p. 268.) The "minimum contacts" test evaluates whether the quality and nature of the defendant's activity is such that it is "reasonable" and "fair" to require the defendant to conduct a defense in this state. (Snowney v. Harrah's Entertainment, Inc. (2005) 35 Cal.4th 1054, 1061 (Snowney).)
Personal jurisdiction may be either general or specific. A defendant may be subject to the general jurisdiction of the forum if his or her contacts in the forum state are substantial, continuous, and systematic. (Vons, supra, 14 Cal.4th at p. 445.) "If the nonresident defendant does not have substantial and systematic contacts in the forum sufficient to establish general jurisdiction, he or she still may be subject to the specific jurisdiction of the forum...." (Id. at p. 446.)
"The inquiry whether a forum State may assert specific jurisdiction over a nonresident defendant 'focuses on "the relationship among the defendant, the forum, and the litigation."'" (Walden v. Fiore (2014) 571 U.S. 277, 283-284, [134 S.Ct. 1115, 188 L.Ed.2d 12]; accord Pavlovich, supra, 29 Cal.4th at p. 269.) The specific jurisdiction inquiry considers if: (1) the defendant has purposefully availed himself or herself of forum benefits; (2) the controversy is related to or arises out of the defendant's contacts with the forum; and (3) the assertion of personal jurisdiction would comport with fair play and substantial justice. (Pavlovich, at p. 269; Ford Motor, supra, 592 U.S. At ___ 141 S.Ct. at pp. 1024-1025; Bristol-Myers, supra, 582 U.S. at p. 362.) The case-linked jurisdictional analysis is intensely fact-specific. Indeed, the test for personal jurisdiction is not susceptible to mechanical application; rather, the facts of each case must be weighed to determine whether the requisite affiliating circumstances" are present. (Snowney, supra, 35 Cal.4th at p. 1061.)
In general, when a defendant challenges jurisdiction, the plaintiff has the initial burden of demonstrating facts justifying the exercise of jurisdiction. If the plaintiff meets this initial burden, then the defendant has the burden of demonstrating that the exercise of jurisdiction would be unreasonable. (Snowney, supra, 35 Cal.4th at p. 1062.) Here, because appellants do not contend that Group is subject to California's general jurisdiction, we need only consider whether specific jurisdiction over Group exists. We conclude that it does.
1. Purposeful Availment
The purposeful availment inquiry focuses on the defendant's intentions. This prong is only satisfied when the defendant purposefully and voluntarily directs its activities toward the forum so that it should expect, by the benefit it receives, to be subject to the court's jurisdiction based on its contacts with the forum. (Snowney, supra, 35 Cal.4th at p. 1062.)
By limiting the scope of a forum's jurisdiction in this manner, the purposeful availment requirement ensures that a defendant will not be hailed into a jurisdiction solely because of "random," "fortuitous," or "attenuated" contacts. Instead, the defendant will only be subject to personal jurisdiction if "'"it has clear notice that it is subject to suit there and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the state."'" (Id. at pp. 1062-1063.)
Here, Group purposefully availed itself of California. All its goods were imported into the United States through Long Beach; its distribution and sales subsidiary was in Irwindale; and Group's fiberglass products were sold to manufacturers in California (among other locations). Although McKee, who acted as the salesperson handling Fibergrate, was in Houston, he worked for Jushi USA's regional office and sold Group's products that had been imported through California.
2. Relatedness to Current Controversy.
To satisfy the second prong of the specific jurisdiction analysis, "There must be 'a connection between the forum and the specific claims at issue.' [Citation.] 'If the operative facts of the allegations of the complaint do not relate to the [nonresident]'s contacts in this state, then the cause of action does not arise from that contact such that California courts may exercise specific jurisdiction.'" (Rivelli v. Hemm (2021) 67 Cal.App.5th 380, 399.) "In order for a court to exercise specific jurisdiction over a claim, there must be an 'affiliation between the forum and the underlying controversy, principally, [an] activity or an occurrence that takes place in the forum [s]tate.'" (Bristol-Myers, supra, 582 U.S. at p. 264; see also Ford Motor, supra, 592 U.S. At ___, 141 S.Ct. 1017, 1026 ["the phrase 'relate to' incorporates real limits, as it must to adequately protect defendants foreign to a forum"].)
According to Ford Motor, the first half of the "'arise out of or relate to'" standard "asks about causation; but the back half, after the 'or,' contemplates that some relationships will support jurisdiction without a causal showing." (Id. at p. 1026.) "[T]he phrase 'relate to' incorporates real limits, as it must [ ] adequately protect defendants foreign to a forum. But again, we have never framed the specific jurisdiction inquiry as always requiring proof of causation-i.e., proof that the plaintiff's claim came about because of the defendant's in-state conduct." (Ibid.) As observed in Daimler Trucks North America LLC v. Superior Court (2022) 80 Cal.App.5th 946, Ford Motor "added a new layer to specific jurisdiction caselaw, figuratively putting in bold font the 'or' in "'"must arise out of or relate to the defendant's contacts' . . ."'" The second element of the inquiry is no longer a single, tethered standard and is now to be read in the disjunctive. (Daimler, supra, at p. 956.)
Here, appellants' claims are based on a theory of products liability. Products liability claims can be styled as negligence, failure to warn, strict liability, breach of warranties, and misrepresentation/concealment. (See, e.g., JCW Electrics Inc. v. Garza (Tex. 2008) 257 S.W.3d 701, 703; compare, Preciado v. Freightliner Custom Chassis Corp. (2023) 87 Cal.App.5th 964, 969, fn. 3.) Products liability based on strict liability is premised on a "stream of commerce" model, namely, by placing a defective product into the stream of commerce, the manufacturer is liable for injuries arising from a defective product. (Firestone Steel Prods. Co. v. Barajas (Tex.1996.) 927 S.W.2d 608, 613.)
Strict liability claims are based on the product and, therefore, strict liability claims may be asserted against "innocent sellers" who have no culpable responsibility except for their role as an intermediary seller that merely received a defective product and unknowingly sold it down the stream of commerce. (Oasis Oil Corp v. Koch Ref. Co. L.P. (Tex.Ct.App. (2001) 60 S.W.3d 248, 253.)
Therefore, the jurisdictional inquiry focuses on Group's forum contacts relating to the sales and distribution of an allegedly harmful product in the stream of commerce. Group's activity in this regard is related to appellants' injuries-without that sale and distribution, appellants would not have been harmed. Although Group did not manufacture the fiberglass in California and appellants' injuries occurred in Texas, appellants' injuries arose out of Group's sales and distribution activities within California.
Appellants rely on Bristol-Myers. In Bristol-Myers, the plaintiffs sued in California based on injuries they suffered after taking the prescription drug Plavix. Defendant pharmaceutical company was incorporated in Delaware, headquartered in New York, with operations in New York and New Jersey. The company engaged in some research, sales, and government advocacy activities in California; none of these activities involved Plavix, although Plavix was sold in California. However, the company did not develop Plavix in California, create a marketing strategy for Plavix in California, or manufacture, label, package, or do business in California pertaining to obtaining regulatory approval of the product. The plaintiffs included nonresidents who did not obtain Plavix through a California source, did not ingest Plavix in California, were not injured by Plavix in California, and were not treated for injuries in California. (Bristol-Myers, supra, at pp. 258, 264.) The Court concluded California was not the appropriate forum for those plaintiffs: "What is needed-and what is missing here-is a connection between the forum and the specific claims at issue." (Id. at p. 265.)
Bristol-Myers is distinguishable given Group's substantial contacts in the state and the fact California is the sole conduit through which Group's products are dispersed to other states. The Ford Motor court reminded that jurisdiction was lacking in Bristol-Myers "because the forum State, and the defendant's activities there, lacked any connection to the plaintiffs' claims." (Ford Motor, supra, 592 U.S. At ___, 141 S.Ct. at p. 1031.)
3. Reasonableness.
The reasonableness of specific jurisdiction depends on whether the exercise of jurisdiction "would offend '"traditional notions of fair play and substantial justice."'" (Asahi Metal Indus. Co. v. Superior Court (1987) 480 U.S. 102, [113, 107 S.Ct. 1026, 94 L.Ed.2d 92].) In evaluating reasonableness, we consider the burden on the defendant, the forum State's interest in adjudicating the dispute, the plaintiff's interest in obtaining convenient and effective relief, the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and the shared interest of the states in furthering fundamental substantive social policies. (Burger King v. Rudzewicz (1985) 471 U.S. 462, 476-477, (Burger King).)
Where a defendant has purposefully directed its activities at forum residents, however, a compelling case must be made that the presence of some other considerations would render jurisdiction unreasonable. (Burger King, supra, 471 U.S. at p. 477, italics added.) Plaintiffs have not made such a case.
Because we conclude that Jushi USA is entitled to the benefit of the exception to liability contained in Section 82.003, subdivision (a)(7)(B), we need not consider whether it had substantial control over the package warnings under section 82.003, subdivision (a)(4).
III. JUDICIAL ESTOPPEL.
Appellants argue that Jushi successfully argued Texas law applied to the case, yet takes the supposedly inconsistent position that Group is subject to personal jurisdiction in California. They note that-in arguing for application of Texas law on its nonliability as a distributor-Jushi USA minimized Group's connections to California; while in arguing for personal jurisdiction over Group, Jushi USA emphasized Group's conduct in the state. They suggest that these positions are inconsistent and barred by judicial estoppel, which precludes a party from taking inconsistent positions in judicial proceedings. (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 181.) But the positions are not inconsistent. Questions of personal jurisdiction differ from questions of choice of law. (Thurston v. Fairfield Collectibles of Georgia (2020) 53 Cal.App.5th 1231, 1242.) Thus, Jushi USA's positions on these two issues are not inconsistent and judicial estoppel does not apply.
DISPOSITION
The judgment of the Superior Court is affirmed. Respondent is to recover its costs on appeal.
We concur: MORI, J. ZUKIN, J.