Opinion
No. 04-16-00637-CV
05-10-2017
LAPROBA EL AGUILA SA DE CV, Appellant v. RIVER CITY ROOFING & REMODELING, INC., Appellee
MEMORANDUM OPINION
From the 150th Judicial District Court, Bexar County, Texas
Trial Court No. 2015-CI-21236
Honorable David A. Canales, Judge Presiding Opinion by: Marialyn Barnard, Justice Sitting: Sandee Bryan Marion, Chief Justice Marialyn Barnard, Justice Patricia O. Alvarez, Justice AFFIRMED
This is an interlocutory appeal from the trial court's order denying appellant Laproba El Aguila SA de CV's ("Aguila") special appearance. On appeal, Aguila argues the trial court erred in denying its special appearance because there is no evidence establishing it has sufficient minimum contacts with Texas to establish specific jurisdiction and the exercise of jurisdiction over it does not comport with traditional notions of fair play and substantial justice. We affirm the trial court's order.
BACKGROUND
Aguila is a Mexican corporation that manufactures clay roof tiles at its factory in Leon, Guanajuato, Mexico. It delivers its roof tile products to its customers "ex works," a delivery method in which Aguila makes its products available for pickup by its customers at its Mexico factory. Premium Roof Tiles, LLC ("Premium"), a Texas limited liability company located in Brownwood, purchased some roof tiles from Aguila and subsequently sold the roof tiles to ABC Supply Co. ("ABC Supply"), a Texas corporation located in San Antonio. A week later, ABC Supply sold the roof tiles to appellee River City Roofing & Remodeling, Inc. ("River City Roofing"), who installed the roof tiles on a new house. After the house was completed, the homeowners discovered water had penetrated their home, causing damage to the drywall and stucco. The homeowners subsequently sued the builder and some of the builder's subcontractors, including River City Roofing, alleging it improperly installed the roof's components causing mold contamination.
River City Roofing filed a third party action for indemnity against Aguila, the manufacturer of the roof tiles. See TEX. CIV. PRAC. & REM. CODE § 82.002 (West 2017) (outlining manufacturer's duty to indemnify and hold harmless any seller against loss arising out of product liability action). Aguila filed a special appearance alleging the trial court did not have personal jurisdiction over it because it lacked sufficient contacts with Texas to establish specific jurisdiction. Aguila argued it is a nonresident of Texas, and it does not do any business in Texas, nor does it own or lease any property in Texas. Accordingly, there is no evidence it purposefully availed itself of Texas jurisdiction or that River City Roofing's cause of action arose from or related to its Texas contacts. Aguila further argued that even if there is evidence establishing minimum contacts, the exercise of jurisdiction over it would offend the traditional notions of fair play and substantial justice because of the substantial burden placed on it to defend itself in a foreign country.
In response to Aguila's special appearance, River City Roofing argued Aguila was subject to specific jurisdiction because there is evidence Aguila purposefully availed itself of Texas jurisdiction by placing its products into the stream of commerce with the expectation Texas consumers would purchase them and by advertising its products to the Texas market. River City Roofing also argued there is evidence Aguila's liability arose from its contacts with Premium and ABC Supply. In support of its contentions, River City Roofing attached a number of documents to its response, including: a copy of an Aguila packing slip, showing the roof tiles would be shipped to "ABC San Antonio;" a copy of a webpage from Aguila's website, listing ABC Supply as a distributor of its products; and a letter from Premium's owner, Al Barrera, to the plaintiff homeowners, identifying Premium as a representative for Aguila. In the letter, Barrera states Aguila would be willing to replace the roof tiles and roof tile accessories at no cost so long as the homeowners agreed not to hold Aguila liable for any previous or current damage.
Thereafter, Aguila filed exhibits to support its special appearance. These exhibits included affidavits from Juan Carlos Gomez Velazquez, the Director General of Aguila, and Barrera. In his affidavit, Velazquez stated Aguila is a Mexican corporation that sells its products "ex works" at its Mexico factory. Under this delivery method, customers pick up their orders from Aguila at Aguila's premises, and upon receipt, the customer takes ownership of the products and assumes any of the risks and responsibility associated with the products. With regard to the copy of the packing slip referenced by River City Roofing, Velazquez stated the packing slip references the "ship to" destination because Premium requested each of its orders to be organized by "ship to" destinations to assist it with its delivery process. Velazquez further explained Aguila prepares its packing slips for Premium with the "ship to" destination information, but does not ship and has not shipped any product to San Antonio or any other Texas destination. Velazquez also added ABC Supply was listed as a distributor on its website merely to indicate ABC Supply sold Aguila products.
In his affidavit, Barrera stated he is the authorized representative of Premium, and neither he nor Premium are agents of Aguila. Barrera also described Premium as "an authorized distributor of Aguila's tile products," but added that "Premium is not authorized to act for Aguila." Barrera further explained that when Premium purchases roof tiles from Aguila, it pays the freight to ship the tiles to the United States border and also makes arrangements to ship the product to its customers, such as ABC Supply. With regard to the "ship to" destination references on the packing slips, Barrera confirmed he required Aguila to place the information on the packing slip to assist him in delivering the product to Premium's customers. Barrera added that although Aguila prepares the packing slips, it does not ship any product to Premium's customers. Attached to his affidavit was a copy of Premium's invoice to ABC Supply for the tiles ABC Supply sold to River City Roofing and a copy of Aguila's packing slip for the roof tiles at issue, listing "ABC San Antonio" as the "ship to" destination.
After a hearing on the Aguila's special appearance, the trial court concluded Aguila was subject to jurisdiction, denying its special appearance. This appeal followed.
ANALYSIS
On appeal, Aguila argues the trial court erred in denying its special appearance because there is no evidence it has sufficient minimum contacts with Texas to establish specific jurisdiction. According to Aguila, it lacks sufficient minimum contacts because it did not purposefully avail itself of Texas jurisdiction by placing its products into the stream of commerce and creating a reasonable expectation that its products would be purchased by a Texas consumer. Aguila further contends that it lacks sufficient contacts because neither the plaintiff homeowners' claims nor River City Roofing's claim arises from or relates to its Texas contacts. In the event we determine Aguila's contacts support specific jurisdiction, Aguila alternatively contends the court's exercise of jurisdiction over it does not comport with the traditional notions of fair play and substantial justice.
Standard of Review
"To render a binding judgment, a court must have both subject matter jurisdiction over the controversy and personal jurisdiction over the parties." Spir Star AG v. Kimich, 310 S.W.3d 868, 871 (Tex. 2010). Whether a court has personal jurisdiction over a nonresident defendant is a question of law subject to de novo review. Id.; see M&F Worldwide Corp. v. Pepsi-Cola Metro. Bottling Co., Inc., No. 15-0083, 2017 WL 889938, at *5 (Tex. March 3, 2017); BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). When, as is the case here, the trial court does not issue findings of fact and conclusions of law in support of its ruling, we must infer "'all facts necessary to support the judgment and supported by the evidence. . . .'" BMC Software, 83 S.W.3d at 795.
Applicable Law
A. Personal Jurisdiction
The Texas long-arm statute governs Texas courts' personal jurisdiction over nonresident defendants. M&F Worldwide Corp., 2017 WL 889938, at *5; BMC Software, 83 S.W.3d at 795; see TEX. CIV. PRAC. & REM. CODE §§ 17.041-.045 (West 2017). The statute allows Texas courts to exercise personal jurisdiction over nonresident defendants who do business in Texas. BMC Software, 83 S.W.3d at 795; see TEX. CIV. PRAC. & REM. CODE § 17.042. The statute lists some activities that constitute "doing business;" however, the list of activities is not exclusive. BMC Software, 83 S.W.3d at 795; see TEX. CIV. PRAC. & REM. CODE § 17.042. The Texas Supreme Court has repeatedly held the statute's broad language "extends Texas courts' personal jurisdiction 'as far as the federal constitutional requirements of due process will permit.'" M&F Worldwide Corp., 2017 WL 889938, at *5; BMC Software, 83 S.W.3d at 795.
Federal due process permits Texas courts to assert personal jurisdiction over a nonresident so long as (1) the nonresident defendant has established minimum contacts with the forum state and (2) the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. M&F Worldwide Corp., 2017 WL 889938, at *5; BMC Software, 83 S.W.3d at 795. A nonresident defendant establishes minimum contacts when it purposefully avails itself of the privilege of conducting activities within the forum state, invoking the forum state's benefits and legal protection. M&F Worldwide Corp., 2017 WL 889938, at *6; BMC Software, 83 S.W.3d at 795; Haddad v. Isi Automation Intl., Inc., No. 04-09-00562-CV, 2010 WL 1708275, at *3 (Tex. App.—San Antonio Apr. 28, 2010, no pet.). When making the purposeful availment determination, we look to the following three principles: (1) the nonresident defendant's contacts with the forum state, (2) whether those contacts are purposeful as opposed to random, fortuitous, or attenuated, and (3) whether the nonresident defendant sought a benefit, advantage, or profit by availing itself of the jurisdiction. M&F Worldwide Corp., 2017 WL 889938, at *5; Haddad, 2010 WL 1708275, at *3. "Because of the unique and onerous burden placed upon a party called upon to defend a suit in a foreign legal system, the minimum contacts analysis is particularly important when the defendant is from a different country." BMC Software, 83 S.W.3d at 795.
B. General and Specific Jurisdiction
A nonresident defendant's minimum contacts may give rise to either general jurisdiction or specific jurisdiction. M&F Worldwide Corp., 2017 WL 889938, at *6; BMC Software, 83 S.W.3d at 795. General jurisdiction arises when a defendant's contacts with the forum are so "continuous and systematic" that the exercise of jurisdiction is proper even if the plaintiff's cause of action did not arise from or relate to the defendant's minimum contacts. M&F Worldwide Corp., 2017 WL 889938, at *6; BMC Software, 83 S.W.3d at 796. Pertinent to this case, however, specific jurisdiction is triggered when "(1) the defendant's contacts with the forum state are purposeful, and (2) the cause of action arises from or relates to the defendant's contacts." Spir Star AG, 310 S.W.3d at 873; see M&F Worldwide Corp., 2017 WL 889938, at *6; BMC Software, 83 S.W.3d at 796. In these cases, we focus on the "relationship among the nonresident defendant, the forum, and the litigation." Spir Star AG, 310 S.W.3d at 873; Ho Wah Genting Kintron Sdn Bhd v. Leviton Mfg. Co., 163 S.W.3d 120, 130 (Tex. App.—San Antonio 2005, no pet.).
With regard to the first requirement, the Texas Supreme Court has recognized that "a seller's awareness 'that the stream of commerce may or will sweep the product into the forum State does not convert the mere act of placing the product into the stream into an act purposefully directed toward the forum State.'" Spir Star AG, 310 S.W.3d at 873 (quoting Asahi Metal Indus. Co. v. Superior Court of Calif., 480 U.S. 102, 112 (1987) (plurality opinion)) ; see Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 577-78 (Tex. 2007) ("[T]he mere sale of a product to a Texas resident will not generally suffice to confer specific jurisdiction upon our courts."); Ho Wah Genting Kintron Sdn Bhd, 163 S.W.3d at 130 ("[A] nonresident defendant's mere awareness that its products might end up in the forum state is not enough to show that it purposefully availed itself to the market of that forum state."). There must be some substantial connection between the defendant and the forum state necessary for a finding of minimum contacts. Spir Star AG, 310 S.W.3d at 873; Ho Wah Genting Kintron Sdn Bhd, 163 S.W.3d at 130. This substantial connection must come about by some additional conduct by the nonresident defendant, indicating an intent or purpose to serve the forum market. Ho Wah Genting Kintron Sdn Bhd, 163 S.W.3d at 130-31 (citing Asahi Metal Indus., 480 U.S. at 110-12). Examples of additional conduct may include designing the product for the market in the forum state, advertising in the forum state, providing advice to customers in the forum state regularly, or marketing its product via a distributor, who serves as a sales agent in the forum state. Spir Star AG, 310 S.W.3d at 873. This court has recognized that under the stream of commerce doctrine, a nonresident defendant is subject to specific jurisdiction if it has purposefully availed itself of the privilege of conducting activities in the forum state by selling its product to an independent distributor and creating a reasonable expectation the product will enter the forum state. Ho Wah Genting Kintron Sdn Bhd, 163 S.W.3d at 130.
C. Burden of Proof
"[S]pecial-appearance jurisprudence dictates that the plaintiff and the defendant bear shifting burdens of proof in a challenge to personal jurisdiction." Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 658 (Tex. 2010); see also Abruzzo, LLC v. Walesa, No. 04-12-00747-CV, 2013 WL 1225626, at *2 (Tex. App.—San Antonio March 27, 2013, no pet.). The plaintiff bears the initial burden to plead allegations that would bring the nonresident defendant within the reach of the long-arm statute. Kelly, 301 S.W.3d at 658; Abruzzo, 2013 WL 1225626, at *2. If the plaintiff pleads sufficient jurisdictional allegations, the defendant must then negate all bases of personal jurisdiction alleged by the plaintiff. Kelly, 301 S.W.3d at 658; Abruzzo, 2013 WL 1225626, at *2. The defendant can negate jurisdiction factually or legally. Kelly, 301 S.W.3d at 658; Abruzzo, 2013 WL 1225626, at *2. "Factually, the defendant can present evidence that [she] has no contacts with Texas, effectively disproving the plaintiff's allegations." Kelly, 301 S.W.3d at 658. However, the plaintiff may then submit its own evidence, affirming its allegations; it risks dismissal if it cannot produce evidence establishing personal jurisdiction. Id.; Abruzzo, 2013 WL 1225626, at *2. A defendant may also defeat personal jurisdiction by showing that even if the plaintiff's alleged facts are true, the evidence is legally insufficient, i.e., the defendant's contacts fall short of purposeful availment, or the plaintiff's claims do not arise from the alleged contacts, or traditional notions of fair play and substantial justice would be offended if jurisdiction over the defendant were exercised by the trial court. Kelly, 301 S.W.3d at 658; Abruzzo, 2013 WL 1225626, at *2.
Specific Jurisdiction
In its response to Aguila's special appearance, River City Roofing asserted the trial court had specific jurisdiction over Aguila because there was evidence Aguila purposefully availed itself of Texas jurisdiction under the stream of commerce doctrine and by advertising its tiles to the Texas market. River City Roofing further argued the trial court had specific jurisdiction because its cause of action against Aguila arose out of Aguila's Texas contacts. Aguila, however, argued that although it was aware its products were placed into the stream of commerce, there is no evidence of a substantial connection between itself and Texas to establish purposeful availment and to support a finding of minimum contacts. Aguila further contends there is no evidence it advertised its products to Texas and as a result, it did not purposefully avail itself of Texas jurisdiction. In addition, Aguila argues that neither the plaintiff homeowners' claims nor River City Roofing's claim arose out of or related to Aguila's Texas contacts. We disagree with Aguila.
A. Purposeful Availment
Here, the evidence shows Aguila purposefully availed itself of the privilege of conducting activities in Texas by doing additional conduct beyond merely placing its products into the stream of commerce. Here, the evidence shows Aguila sold its products to Premium with the expectation that its roof tiles would enter Texas. See Ho Wah Genting Kintron Sdn Bhd, 163 S.W.3d at 130 (pointing out that nonresident defendant was aware orders would be delivered to Texas stores constituted evidence of purposeful availment). River City Roofing produced evidence that Aguila was aware the orders placed by Premium would ultimately be delivered to Texas destinations. In each of the orders placed by Premium, Aguila included a packing slip that specified the "ship to" destination of its roof tiles. These "ship to" destination references identified Premium's customers, including ABC Supply. Both Aguila's Director General and Premium's owner confirmed this practice, and there is evidence that Aguila knew ABC Supply sold its roof tiles in Texas.
In addition to this conduct, there is evidence Aguila purposefully availed itself by advertising its products to the Texas market. See Spir Star AG, 310 S.W.3d at 873. Aguila admits that at one point in time, it listed ABC Supply as a place where its roof tiles were sold on its website. Texas customers were able to input their location and find the nearest locations that sold the roof tiles, thereby creating a reasonable expectation that the roof tiles would be sold to the Texas market and establishing Aguila's intent to serve that market. See Jones v. Beech Aircraft, 995 S.W.2d 767, 772-73 (Tex. App—San Antonio 1999, pet. dism'd w.o.j.), abrogated on other grounds by BMC Software, 83 S.W.3d at 789 (noting "interactive" website is a factor to consider in analyzing minimum contacts); see also Spir Star AG, 310 S.W.3d at 877-78 (pointing out website statements which linked nonresident defendant to Texas distributor constituted evidence that nonresident defendant marketed its product to Texas consumers through a Texas distributor).
Finally, there is evidence Aguila purposefully availed itself to Texas jurisdiction by targeting the Texas market via Premium, who held itself out as a distributor of Aguila tiles and negotiated on behalf of Aguila. See Spir Star AG, 310 S.W.3d at 873. River City Roofing produced a letter from Barrera, Premium's owner, to the plaintiff homeowners. In the letter, Barrera, identifies Premium as a representative for Aguila and negotiates terms of a settlement on behalf of Aguila. Barrera states he has hired a roofing inspector to examine the homeowners' roof tiles and would be willing to replace the tiles at no cost in exchange for the homeowners' agreement not to hold Aguila liable for any previous or current damage. See Ho Wah Genting Kintron Sdn Bhd, 163 S.W.3d at 132-33 (pointing out correspondence from individual who worked in Dallas and held himself out as "representative" of nonresident defendant constituted evidence that nonresident defendant's had sufficient contacts with Texas to establish specific jurisdiction). Although Aguila contends that Barrera is not authorized to act as "an agent" for Aguila, Barrera identifies Premium as a "representative" for Aguila in his letter to the plaintiff homeowners and Premium as "an authorized distributor of Aguila's tile products" in his affidavit attached as an exhibit. See id.
Nonetheless, Aguila argues it did not purposefully avail itself and establish sufficient contacts under the stream of commerce doctrine or by advertising to the Texas market. In support of its arguments, Aguila points out that all of its sales take place at its Mexico factory, where its customers assume all the rights and risks associated with shipping the roof tiles to the United States. However, as this court has pointed out before, "the controlling issue under the stream of commerce doctrine is 'reasonable expectation' that the product will be sold in Texas, not the 'right of control.'" Ho Wah Genting Kintron Sdn Bhd, 163 S.W.3d at 131, n.4 (emphasizing "reasonable expectation" as controlling issue as opposed to "right of control"). Furthermore, the fact that title to the tiles passes in Mexico rather than Texas is not persuasive. See Spir Star AG, 310 S.W.3d at 876. Here, the evidence of the packing slips, which identified the ultimate "ship to" destinations of each of Premium's orders, not only shows Aguila was aware of the ultimate destinations of its roof tiles, but also created a reasonable expectation that the roof tiles would be sold in Texas. Id. at 132 (holding reasonable expectation existed when evidence showed Malaysian company was aware orders placed by an independent distributor would ultimately be delivered to Texas destinations). Aguila does not avoid Texas law merely by utilizing an independent distributor, like Premium, which then sells its roof tiles to the Texas market. See Spir Star AG, 310 S.W.3d at 875. Accordingly, we hold there was a substantial connection between Aguila and Texas, sufficient for a finding of minimum contacts, establishing specific jurisdiction. Spir Star AG, 310 S.W.3d at 873; Ho Wah Genting Kintron Sdn Bhd, 163 S.W.3d at 131.
B. Cause of Action Arises From and Relates to Minimum Contacts
Moreover, contrary to Aguila's assertion, we hold the crux of the plaintiff homeowners' claims and River City Roofing's indemnity action arose out of Aguila's Texas contacts. See Spir Star AG, 310 S.W.3d at 878. Here, the plaintiff homeowners' lawsuit concerns faulty roof tiles, which were purchased by River City Roofing. It is undisputed River City Roofing purchased the tiles from ABC Supply, a "ship to" destination identified by Aguila on a packing slip for Premium. Similarly, River City Roofing's indemnity action, which involves an allegation of products liability concerning Aguila's roof tiles, relates to these same Texas contacts — ABC Supply and Premium.
Fair Play and Substantial Justice
Having held that Aguila purposefully availed itself to the Texas forum and the claims against it arose out of Aguila's Texas contacts, thereby establishing sufficient minimum contacts with Texas to establish specific jurisdiction, we must next consider whether the exercise of personal jurisdiction over it comports with the traditional notions of fair play and substantial justice. See M&F Worldwide Corp., 2017 WL 889938, at *5; BMC Software, 83 S.W.3d at 795. In making this determination, we consider a number of factors, such as: (1) the burden on the defendant; (2) the interests of the forum state in adjudicating the dispute; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of several states in furthering fundamental, substantial social policies. Spir Star AG, 310 S.W.3d at 878 (citing Guardian Royal Exch. Assurance Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex. 1991)). "Only in rare cases [] will the exercise of jurisdiction not comport with fair play and substantial justice when the nonresident defendant has purposefully established minimum contacts with the forum state." Id. (quoting Guardian Royal, 815 S.W.2d at 231). To defeat jurisdiction, a nonresident defendant must present a compelling case that factors exist so as to make jurisdiction would be unreasonable. Id.
Here, Aguila argues the exercise of jurisdiction over it does not comport with the traditional notions of fair play and substantial justice because it places an undue burden on itself to adjudicate a dispute that arose out of an occasional product sale. To support this contention, Aguila generally asserts it would be in the best interest of the judicial system for the claims against it to ultimately be dismissed. After reviewing the factors above, we do not agree Aguila has presented a compelling case that would render jurisdiction unreasonable. See id. There is nothing in the record to indicate litigation in Texas would be excessively burdensome to Aguila, and the interests of Texas in adjudicating the dispute and interests of River City Roofing in obtaining a convenient and effective relief weigh in favor of jurisdiction in Texas. See El Puerto De Liverpool, S.A. De C.V. v. Servi Mundo Llantero S.A. De C.V., 82 S.W.3d 622 (Tex. App—Corpus Christi—San Antonio 2002, pet. dism'd w.o.j.) (holding El Puerto failed to discharge burden because nothing in record showing litigation would be burdensome). Accordingly, we conclude requiring Aguila to defend itself in Texas would not offend the traditional notions of fair play and substantial justice.
CONCLUSION
Based on the forgoing, we hold there was sufficient evidence to establish Aguila has minimum contacts with Texas and the exercise of jurisdiction would not offend the traditional notions of fair play and substantial justice. Accordingly, we affirm the trial court's order denying Aguila's special appearance.
Marialyn Barnard, Justice