The State of Texas v. Volkswagen Aktiengesellschaft ( 2023 )

Supreme Court of Texas
══════════
No. 21-0130
══════════
The State of Texas,
Petitioner,
v.
Volkswagen Aktiengesellschaft,
Respondent
═══════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Third District of Texas
═══════════════════════════════════════
~ consolidated for oral argument with ~
══════════
No. 21-0133
══════════
The State of Texas,
Petitioner,
v.
Audi Aktiengesellschaft,
Respondent
═══════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Third District of Texas
═══════════════════════════════════════
JUSTICE HUDDLE, joined by Chief Justice Hecht and Justice
Bland, dissenting.
This Court has long held that a nonresident manufacturer’s
placement of goods into the stream of commerce with awareness those
goods will eventually enter Texas is, alone, insufficient to justify the
exercise of personal jurisdiction over it. We have instead held—
consistent with U.S. Supreme Court precedent—that federal
due-process protections require additional conduct evidencing the
defendant’s purposeful targeting of the Texas market. This “plus factor”
requirement may be satisfied by a foreign defendant’s design of a
Texas-specific product, advertisements in Texas, solicitation of business
in Texas, or by its exercise of control over the means and details of the
distribution system that brought goods into Texas. But while our
precedents allow for variation in the form the plus factor may take, we
have been steadfast in requiring that one exist and in holding that, in
its absence, jurisdiction does not.
Today the Court departs from these precedents by permitting the
exercise of jurisdiction over two German manufacturers1 without any
evidence of their (as opposed to their affiliated U.S. distributor’s)
Texas-specific contacts satisfying the plus-factor requirement. My
disagreement with the Court boils down to two points. First, while the
Court recognizes that the record does not support imputing VW
America’s (the U.S. distributor’s) Texas contacts to the German
1 We refer to these corporations, Volkswagen Aktiengesellschaft (VW
Germany) and its subsidiary Audi Aktiengesellschaft (Audi Germany),
collectively as the “German manufacturers.”
2
manufacturers under either an alter-ego or veil-piercing theory, it relies
on an agency theory to accomplish the same result. The Court
acknowledges, as it must, that the German manufacturers lack any
physical presence in Texas and that there is no evidence of any Texas
contacts by the German manufacturers themselves that justify exercising
jurisdiction over them. So it resorts instead to an agency theory, arguing
that the contacts of VW America and local VW and Audi dealerships
should be deemed contacts of the German manufacturers because the
Importer Agreements gave the German manufacturers a right to initiate
recalls and VW America a corresponding contractual obligation to
perform them. But these contractual rights and obligations do not
justify the exercise of jurisdiction here. An agency relationship requires
more than a right to instruct another to perform a task—the principal
must also control the means and details of the process by which the
agent accomplishes the task. Here, there is no evidence that the
German manufacturers exerted the requisite level of control over the
means and details of the recall process to create an agency relationship
that would justify haling them into Texas courts.
The second point of disagreement with the Court relates to what
constitutes targeting of Texas. The Court holds that in directing VW
America to conduct a nationwide recall, the German manufacturers
targeted Texas. Yet the U.S. Supreme Court’s plurality opinion in
Nicastro—which this Court has twice endorsed—makes clear that a
defendant’s intent to serve the U.S. market as a whole does not
necessarily amount to targeting each of the fifty states. Rather, we have
required Texas-specific availment, which is absent here.
3
Under today’s holding, any foreign manufacturer directing its
U.S. distributor to conduct a nationwide recall will be subject to personal
jurisdiction in Texas courts, regardless of whether it targeted Texas.
Such a rule eviscerates the plus-factor requirement and dilutes our
personal-jurisdiction framework to the very stream-of-commerce theory
our precedents reject. While I sympathize with the State’s and the
Court’s desire to hold the German manufacturers to account—in Texas
courts—for their admitted misconduct, the assertion of personal
jurisdiction over them in this case constitutes a departure from our
precedents that I cannot endorse. I respectfully dissent.
I. Personal Jurisdiction Framework
Texas courts may exercise personal jurisdiction over a
nonresident defendant when (1) our long-arm statute authorizes it and
(2) doing so comports with federal and state constitutional due-process
guarantees. Old Republic Nat’l Title Ins. Co. v. Bell, 549 S.W.3d 550,
558 (Tex. 2018). But because Texas’s long-arm statute extends
jurisdiction as far as the federal constitutional requirements will allow,
it is really the “federal due process requirements [that] shape the
contours of Texas courts’ jurisdictional reach.” Searcy v. Parex Res., Inc.,
496 S.W.3d 58, 66 (Tex. 2016). Accordingly, we rely on federal
precedents, in addition to our own, in assessing whether a court has
personal jurisdiction over a defendant. BMC Software Belg., N.V. v.
Marchand, 83 S.W.3d 789, 795 (Tex. 2002).
The assertion of personal jurisdiction over a nonresident
defendant is constitutional when two criteria are met: (1) the defendant
has established “minimum contacts” with the forum state, and (2) the
4
exercise of jurisdiction does not offend “traditional notions of fair play
and substantial justice.” TV Azteca, S.A.B. de C.V. v. Ruiz, 490 S.W.3d
29, 36 (Tex. 2016) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310,
316 (1945)). Here, the German manufacturers conceded at oral
argument that their jurisdictional challenge relates only to the
minimum-contacts portion of the personal-jurisdiction test. We thus
focus our analysis on whether the requisite contacts have been
established.
A defendant’s contacts with a forum state may give rise to either
general or specific jurisdiction. Old Republic, 549 S.W.3d at 559. The
general-jurisdiction test is a “high bar,” Searcy, 496 S.W.3d at 72, as the
defendant’s affiliations with the forum state must be “so ‘continuous and
systematic’ as to render [it] essentially at home in the forum State.”2 TV
Azteca, 490 S.W.3d at 37 (alteration in original) (quoting Daimler AG v.
Bauman, 571 U.S. 117, 127 (2014)). Specific jurisdiction, on the other
hand, extends to “defendants less intimately connected with a State”
and encompasses a “narrower class of claims.” Ford Motor Co. v. Mont.
Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1024 (2021). The question in this
case is whether Texas can exercise specific personal jurisdiction over the
German manufacturers.
A court may exercise specific jurisdiction when (1) the defendant
purposefully avails itself of the privilege of conducting activities in the
forum state and (2) the suit arises out of or relates to those contacts with
the forum. Luciano v. SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 8–9
2 The State does not contend that the German manufacturers are
subject to general jurisdiction in Texas.
5
(Tex. 2021). The German manufacturers concede that the relatedness
prong is not in dispute here, leaving only a question on purposeful
availment, which we have called “[t]he ‘touchstone’ of a minimum-
contacts analysis.” Cornerstone Healthcare Grp. Holding, Inc. v. Nautic
Mgmt. VI, L.P., 493 S.W.3d 65, 70 (Tex. 2016) (quoting Michiana Easy
Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 784 (Tex. 2005)).
The purposeful-availment analysis is guided by three main
principles, which bear repeating. See Michiana, 168 S.W.3d at 785.
First, only the defendant’s contacts with the forum are relevant—the
unilateral activity of a third party is not. Moki Mac River Expeditions
v. Drugg, 221 S.W.3d 569, 575 (Tex. 2007). Second, the defendant’s
contacts must actually be “purposeful” as opposed to “random,
fortuitous, or attenuated.” Id. And lastly, the defendant must seek some
benefit, advantage, or profit by availing itself of the jurisdiction.
Michiana, 168 S.W.3d at 785.
II. Analysis
A. The State does not assert a theory that supports imputing
VW America’s or the local dealers’ contacts to the German
manufacturers.
As the German manufacturers point out in their briefing, “VW
America has not challenged the trial court’s personal jurisdiction over
it.” Nor could VW America credibly contest personal jurisdiction given
the nature and quality of its Texas-specific contacts. VW America has
“complete and exclusive decision-making authority” over which of the
cars it purchased from the German manufacturers “w[ould] be exported
to Texas, marketed in Texas, or sold to Texas dealerships.” By selling
thousands of these cars directly to the local franchise dealers in Texas,
6
as well as distributing the recall software installed by the local dealers,
VW America undoubtedly has purposefully availed itself of the Texas
market. But neither VW America’s purposeful availment of Texas nor
the Texas presence of VW and Audi dealers supports the Court’s
conclusion that the German manufacturers are subject to jurisdiction in
Texas.
The Court acknowledges, as it must, the longstanding principle
that “parent and subsidiary corporations are presumed to be separate
from one another.” Ante at 30; see BMC Software, 83 S.W.3d at 798
(quoting Bell Oil & Gas Co. v. Allied Chem. Corp., 431 S.W.2d 336, 339
(Tex. 1968)); Lucas v. Tex. Indus., Inc., 696 S.W.2d 372, 376 (Tex. 1984).
Accordingly, Texas courts generally do not impute the contacts of a
subsidiary doing business in the state to its parent. See Cornerstone,
493 S.W.3d at 72 (“[S]o long as a parent and subsidiary maintain
separate and distinct corporate entities, the presence of one in a forum
state may not be attributed to the other.” (quoting PHC–Minden, L.P. v.
Kimberly–Clark Corp., 235 S.W.3d 163, 172 (Tex. 2007))). Instead, we
analyze each defendant’s contacts with the forum separately. See
Luciano, 625 S.W.3d at 9 (“When assessing minimum contacts, we look
only to the defendant’s contacts with the forum . . . .”).
Texas courts have, however, recognized two circumstances in
which a court assessing whether personal jurisdiction exists may impute
one entity’s contacts to another. First, a court may impute the contacts
of a corporation doing business in Texas to another corporation if it is
the alter ego of the other. See BMC Software, 83 S.W.3d at 798
(explaining that the alter-ego theory permits a court to exercise personal
7
jurisdiction over a foreign corporation “if the relationship between the
foreign corporation and its parent corporation that does business in
Texas is one that would allow the court to impute the parent
corporation’s ‘doing business’ to the subsidiary” (quoting Hargrave v.
Fibreboard Corp., 710 F.2d 1154, 1159 (5th Cir. 1983))). Second, a court
may impute the contacts of an agent to its principal if the requisite
agency relationship is established. See Stocksy United v. Morris,
592 S.W.3d 538, 547 (Tex. App.—Houston [1st Dist.] 2019, no pet.)
(“Under Texas law, an agency-based theory of imputed contacts may
serve as the basis for the exercise of personal jurisdiction over a foreign
defendant.”); Coleman v. Klöckner & Co. AG, 180 S.W.3d 577, 588 (Tex.
App.—Houston [14th Dist.] 2005, no pet.) (“An agent’s contacts can be
imputed to the principal for purposes of the jurisdictional inquiry.”).
These distinct but similar concepts have been referred to together as the
“imputed-contacts theories.” Cap. Fin. & Com. AG v. Sinopec Overseas
Oil & Gas, Ltd., 260 S.W.3d 67, 85 (Tex. App.—Houston [1st Dist.] 2008,
no pet.); see also Greenfield Energy, Inc. v. Duprey, 252 S.W.3d 721, 736
(Tex. App.—Houston [14th Dist.] 2008, no pet.) (“We conclude that the
contacts of the Primera entities may not be imputed to CL Financial or
Duprey under an alter ego or agency theory.”).3
3 Federal courts have articulated the exceptions in a similar way. See,
e.g., Maurice Pierce & Assocs., Inc. v. Computerage, Inc., 608 F. Supp. 173, 176
(N.D. Tex. 1985) (“Two theories have been employed by the courts in
determining whether the business activities of one corporate entity may be
imputed to a related corporate entity for purposes of personal jurisdiction.
These theories are (1) the ‘agency’ theory and (2) the ‘control’ or the ‘alter-ego’
theory.” (citations omitted)).
8
We have been careful, however, to require that a party seeking to
establish that an entity is an alter ego or an agent of another adduce
robust supporting evidence, lest these exceptions swallow the general
rule that forbids imputing one entity’s contacts to the other. See, e.g.,
Cap. Fin. & Com., 260 S.W.3d at 83 (“[T]he trial court would have to
indulge a prohibited presumption—that an agency relationship exists—
in order to exercise personal jurisdiction based on Capital Finance’s
allegations . . . .”); Greenfield Energy, 252 S.W.3d at 733–34 (concluding
no agency relationship existed to support the imputation of contacts
because there was no evidence of control, actual or apparent authority,
or ratification); Coleman, 180 S.W.3d at 588 (“[A]gency will not be
presumed, and the party asserting the relationship has the burden of
proving it.”); Schultz v. Rural/Metro Corp. of N.M.–Tex., 956 S.W.2d
757, 761 (Tex. App.—Houston [14th Dist.] 1997, no pet.) (holding that
conclusory statements contained in affidavits are “incompetent” to
establish an agency relationship).
1. All agree that neither VW America’s Texas contacts
nor the local dealers’ Texas presence can be imputed
to the German manufacturers under an alter-ego
theory.
The alter-ego exception permits a court to impute a subsidiary’s
contacts to its parent when “the parent corporation exerts such
domination and control over its subsidiary ‘that they do not in reality
constitute separate and distinct corporate entities but are one and the
same corporation for purposes of jurisdiction.’” BMC Software,
83 S.W.3d at 798 (quoting Hargrave, 710 F.2d at 1159). Alter-ego status
has monumental legal consequences and, accordingly, is not casually
9
proven. All agree that this exception does not apply here. Indeed, the
State has expressly disclaimed any reliance on a jurisdictional
veil-piercing (i.e., alter-ego) theory as a basis to impute the contacts of
VW America or the local dealerships to the German manufacturers. The
Court thus correctly acknowledges, as it must, that it cannot “disregard
corporate separateness or fuse the intermediaries with the German
manufacturers based on alter ego or any other veil-piercing theory.”
Ante at 31. In doing so, it necessarily acknowledges that the record lacks
evidence that the German manufacturers controlled VW America
generally. On this much, we agree. Yet despite conceding there is not
even arguable evidence of that degree of control, the Court nevertheless
concludes there is evidence that the German manufacturers controlled
the details and means of VW America’s recall campaign to a degree
sufficient to render VW America a mere agent or passthrough bereft of
influence, so that the subsidiary’s contacts can nevertheless be
attributed to the German manufacturers. I disagree for the reasons
discussed below.
2. No record evidence supports imputing VW America’s
or the local dealers’ Texas contacts to the German
manufacturers under an agency theory.
The Court maintains that the question in this case is “whether
the manufacturers’ contacts with Texas . . . satisfy constitutional
requisites to exercising specific personal jurisdiction.” Id. at 3 (emphasis
added). While the Court takes pains to say it does not impute contacts
to justify the exercise of jurisdiction, see id. at 56 n.144, it relies on
agency principles to do exactly that. The Court concludes “the German
manufacturers used the dealerships as their ‘boots on the ground’ for
10
after-sale recall- and service-campaign purposes.” Id. at 29. Our
courts—as well as a long line of federal cases4—make clear that agency
is a “theory of imputed contacts” in the personal-jurisdiction context.
Cap. Fin. & Com., 260 S.W.3d at 85. The Court’s agency analysis thus
by its very nature imputes the contacts of others to the German
manufacturers in holding that Texas can maintain jurisdiction over
them. That is the agency exception’s raison d’être.
Imputing VW America’s or the local dealers’ contacts to the
German manufacturers under an agency theory requires consideration
of Texas’s substantive agency law.5 Our law makes clear that the key
inquiry to determine whether an agency relationship has been
established concerns the contours of the right to control and the degree
to which it is exercised. Greenfield Energy, 252 S.W.3d at 733(“[W]hether one describes the theory for imputing one corporation’s
contacts to another as a theory of agency or alter ego, the critical test
remains that of the right or exercise of control.”). Under Texas law, “[f]or
4 See, e.g., Trs. of Purdue Univ. v. STMicroelectronics N.V., No. 6:21-cv-
727-ADA, 2022 WL 1242475, at *5 (W.D. Tex. Apr. 27, 2022) (“Minimum
contacts can also be imputed from one entity to another if an agency
relationship exists between them.”); Wapp Tech Ltd. P’ship v. Micro Focus Int’l,
PLC, 406 F. Supp. 3d 585, 594–95 (E.D. Tex. 2019) (“For purposes of specific
personal jurisdiction, the contacts of a third-party may be imputed to the
defendant under either an agency or alter ego theory.” (quoting Celgard, LLC
v. SK Innovation Co., 792 F.3d 1373, 1379 (Fed. Cir. 2015))); Garcia v. Peterson,
319 F. Supp. 3d 863, 887 (S.D. Tex. 2018) (“Under Texas law, an agent’s
contacts can be imputed to its principal for personal jurisdiction purposes.”).
5 See In re Hydroxycut Mktg. & Sales Pracs. Litig., 810 F. Supp. 2d 1100,
1107 (S.D. Cal. 2011) (“[W]hen determining whether contacts of a subsidiary
may be imputed to the parent for purposes of personal jurisdiction, [federal]
courts look to the choice-of-law rules of the forum state to decide which state’s
substantive law on alter ego or agency applies.”).
11
an agency relationship to allow for imputation of contacts, the evidence
must establish that the principal has both the right: (1) to assign the
agent’s task; and (2) to control the means and details of the process by
which the agent will accomplish that task.” In re Toyota Hybrid Brake
Litig., No. 4:20-CV-127, 2021 WL 2805455, at *5 (E.D. Tex. July 6, 2021)
(internal quotations omitted); see also Dipprey v. Double Diamond, Inc.,
637 S.W.3d 784, 804 (Tex. App.—Eastland 2021, no pet.) (explaining
that a principal must control “not only the right to assign tasks, but also
the right to dictate the means and details of the process by which an
agent will accomplish the task”). Courts will not presume the existence
of an agency relationship; rather, a party alleging the existence of such
a relationship bears the burden of proving it. Exxon Mobil Corp. v.
Rincones, 520 S.W.3d 572, 589 (Tex. 2017).
The Court ultimately concludes that the German manufacturers
exercised the necessary degree of control over the means and details by
which VW America and the local dealerships executed the recall to give
rise to an agency relationship. To arrive at that conclusion, the Court
relies heavily on the terms of the contracts between VW America and
the German manufacturers. In the Court’s view, those two 1995
Importer Agreements “grant the German manufacturers control over
both VW America and its network of dealerships, including those in
Texas, for purposes of carrying out recall and service campaigns.” Ante
at 28. It says that these agreements required VW America to carry out
the recall campaign “and directly compel local . . . dealerships” to do the
same. Id. at 28–29. Seeking to downplay VW America’s role in directing
and executing the recall, the Court quotes the distributor’s corporate
12
representative’s reference to VW America as a mere “passthrough”
entity to which VW Germany provided information about recall and
service campaigns. Id. at 29.
I cannot agree that the record evidence supports a finding that
the German manufacturers controlled the means and details of VW
America’s and the local dealers’ execution of the recall so as to give rise
to an agency relationship. To begin, the “General Principles” section of
the Importer Agreements explicitly disclaims such a relationship. The
VW Germany Importer Agreement states:
[VW America] shall carry on all business pursuant to this
Agreement as an independent entrepreneur on its own
behalf and for its own account. [VW America] is not an
agent or representative of [VW Germany] and shall not act
or purport to act for the account of or on behalf of [VW
Germany].
(Emphasis added.) While explicit disclaimers of an agency relationship
are not dispositive, Texas courts consider such language strong evidence
that the parties intended to preserve an independent status. 6 See
Stocksy, 592 S.W.3d at 548 (rejecting agency-based theory of imputed
contacts where the agreement “expressly provide[d] that Curette
work[ed] as an independent contractor” and there was no evidence to the
6 Federal courts applying Texas law have relied on similar contractual
provisions in concluding an agency relationship did not exist. See, e.g.,
RealPage Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 521 F. Supp. 3d
645, 685 (N.D. Tex. 2021) (noting a written agreement expressly providing for
an independent-contractor relationship is “determinative of the parties’
relationship” absent evidence that (1) the agreement was a sham, (2) the hiring
party exercised control in a manner inconsistent with the contract’s provisions,
or (3) the parties amended the contract (quoting Northwinds Abatement, Inc.
v. Emps. Ins. of Wausau, 258 F.3d 345, 351 (5th Cir. 2001))).
13
contrary); Trokamed GmbH v. Vieira, No. 01-17-00485-CV, 2018 WL
2436610, at *8 (Tex. App.—Houston [1st Dist.] May 31, 2018, no pet.)
(declining to impute contacts under an agency theory where a
“distribution agreement reflect[ed] the parties’ express agreement that
Blue Endo would preserve its independent status”). Giving credence to
the parties’ own characterization of their relationship honors our
commitment to enforcing the terms of a contract as written. See Waste
Mgmt. of Tex., Inc. v. Stevenson, 622 S.W.3d 273, 290 (Tex. 2021) (Boyd,
J., concurring) (stating “[o]ur long-standing and oft-repeated
commitment to upholding the freedom of contract demands respect for
the parties’ express agreement” absent “conclusive, ‘persistent’ evidence
of actual control” (quoting Newspapers, Inc. v. Love, 380 S.W.2d 582, 592
(Tex. 1964))). And the Court’s conclusion that an agency relationship
exists between the German manufacturers and the local dealerships
stands on even weaker footing given that the dealerships were not
parties to the Importer Agreements. See Pioneer Hi-Bred Int’l, Inc. v.
Talley, 493 S.W.2d 602, 605–06 (Tex. App.—Amarillo 1973, no writ)
(concluding an agency relationship did not exist between two parties
where they “had no contractual relationship”). The Court discards this
contractual provision entirely.
Even if we were to look behind the explicit disclaimer of an agency
relationship, the terms of the Importer Agreement themselves do not
support a conclusion that the German manufacturers controlled “the
means and details” by which VW America or the local dealerships
conducted business. See In re Toyota Hybrid, 2021 WL 2805455, at *5.
The agreements did not grant the German manufacturers day-to-day
14
control over VW America’s or the local dealers’ operations.7 See
Greenfield Energy, 252 S.W.3d at 731–32, 734 (rejecting agency-based
theory of imputed contacts where the parent corporation did not control
“day-to-day operations” of its subsidiary). For instance, the Importer
Agreements required VW America to “exhaust fully all market
opportunities” in the U.S., leaving VW America with the discretion to
sell as many or as few cars in Texas as it wanted.8 In other words,
whether or how to target Texas was a decision the German
manufacturers did not make themselves; it was a decision they left for
VW America. A distribution system in which the distributor retains
control over such marketing decisions—common in the car industry and
others—falls far short of the mark. It does not reflect the requisite
degree of control by the German manufacturers that is necessary to
deem VW America a mere agent and thus exercise jurisdiction over the
7 In fact, Texas law actually prohibits car manufacturers like the
German manufacturers from controlling dealerships. See TEX. OCC. CODE
§ 2301.476(c)(2) (prohibiting manufacturers from “directly or indirectly . . .
operat[ing] or control[ling]” car dealerships in Texas); id. § 2301.003(b) (stating
contractual provisions inconsistent with Chapter 2301 are “unenforceable”).
8 Many Texas courts have relied on the lack of control over a distribution
system in concluding the relationship between a manufacturer and a
distributor is not an agency relationship. See, e.g., Skylift, Inc. v. Nash, No. 09-
19-00389-CV, 2020 WL 1879655, at *7 (Tex. App.—Beaumont Apr. 16, 2020,
no pet.) (holding no agency relationship existed between a manufacturer and a
distributor where “[t]here was no evidence that [the manufacturer] controlled
. . . where the distributors sold the products”); Elk River, Inc. v. Garrison Tool
& Die, Ltd., 222 S.W.3d 772, 782 (Tex. App.—Dallas 2007, pet. denied)
(declining to impute contacts under an agency theory where the manufacturer
“had no control over [the distributor’s] distribution”); Happy Indus. Corp. v.
Am. Specialties, Inc., 983 S.W.2d 844, 852–53 (Tex. App.—Corpus Christi–
Edinburg 1998, pet. dism’d w.o.j.) (concluding same). The Court does not
engage with these authorities.
15
German manufacturers.9 See Anchia v. DaimlerChrysler AG,
230 S.W.3d 493, 501 (Tex. App.—Dallas 2007, pet. denied) (holding
Texas could not exercise personal jurisdiction over a German car
manufacturer where the manufacturer did not exercise “control with
respect to sales of Mercedes-Benz vehicles . . . in the United States” or
“control over any Mercedes-Benz retail dealer in Texas”).
The contractual provisions in the Importer Agreements relating
to post-sale recall and service campaigns do not change my conclusion.
The Court’s two purported smoking guns are generic provisions that
require VW America to (1) perform warranty repairs “in accordance with
[the German manufacturers’] instructions, guidelines and/or
procedures” and (2) “cause [the local dealerships] to perform campaign
inspections.” But contractual provisions requiring VW America to follow
general guidelines and procedures in carrying out the recall campaign
can hardly be said to grant the German manufacturers control over the
means and details of that campaign. See Smith v. Foodmaker, Inc.,
928 S.W.2d 683, 687 (Tex. App.—Fort Worth 1996, no writ) (declining to
find an agency relationship between a franchisor and franchisee where
the franchisee “was required to follow certain corporate standards” but
otherwise retained control over day-to-day operations). To be sure, these
9 The Court faults my analysis for “focus[ing] on initial vehicle sales and
related provisions of the Importer Agreements while neglecting the after-sale
recall and service campaigns and the contract provisions governing them.”
Ante at 47. While the contract provisions relating to post-sale activity, which
I discuss next, are certainly relevant to the control inquiry, we cannot divorce
them from the provisions governing initial vehicle sales. After all, the only
reason a recall would affect vehicles in Texas is because VW America initially—
and independently—decided to sell cars here.
16
provisions enable the German manufacturers to initiate a recall or
service campaign (which may be required under federal law). But
merely having the right to assign a task and providing general
instructions about how to carry it out does not indicate the existence of
control required to create an agency relationship. See Ross v. Tex. One
P’ship, 796 S.W.2d 206, 212 (Tex. App.—Dallas 1990) (rejecting agency
relationship and noting “[t]he fact that additional information would
have to be conveyed . . . before the tasks could be carried out does not
imply that [the purported principal] would exercise control over the
details of the assigned jobs”), writ denied per curiam, 806 S.W.2d 222(Tex. 1991).
Ultimately, the Court’s analysis ignores an obvious business
reality: a parent corporation will always “control, direct, and supervise
the subsidiaries to some extent.” See IDS Life Ins. Co. v. SunAmerica
Life Ins. Co., 136 F.3d 537, 540 (7th Cir. 1998) (Posner, C.J.). Just as
we have held that “[a]ppropriate parental involvement” through the
“articulation of general policies,” standing alone, does not establish the
degree of control necessary to fuse two corporations together under an
alter-ego theory, see PHC–Minden, 235 S.W.3d at 176 (quoting 16 JAMES
WM. MOORE, MOORE’S FEDERAL PRACTICE § 108.42[3][b] (3d ed. 2007)),
the German manufacturers’ articulation of “certain corporate
standards” in carrying out the recall campaign is, in itself, insufficient
to establish the degree of control needed for an agency relationship.10
See Smith, 928 S.W.2d at 687.
10Under the Court’s formulation, an agency relationship may exist any
time a manufacturer sets general parameters to protect the integrity of its
17
The record bears out the fact that the German manufacturers did
not control the means and details by which VW America executed the
recall campaign. To be sure, the German manufacturers uploaded the
recall software to a server in Germany. Yet, as the court of appeals
correctly noted, VW America retained responsibility for distributing the
software updates to local dealers across the United States, including
Texas. See ___ S.W.3d ___, 2020 WL 7640037, at *5 (Tex. App.—Austin
2020). And the means and details by which VW America distributed the
software update to Texas resulted from its own decision to target the
Texas market for car sales in the first instance, not from any decision
the German manufacturers made. The German manufacturers’ mere
knowledge that the software would end up in Texas because of VW
America’s prior, independent decision to establish a dealer network and
sell cars here is not itself sufficient to hale them into Texas courts. See
TV Azteca, 490 S.W.3d at 46 (“A product 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.’” (emphasis added)
(quoting CSR Ltd. v. Link, 925 S.W.2d 591, 595 (Tex. 1996))); see also
Zinc Nacional, S.A. v. Bouché Trucking, Inc., 308 S.W.3d 395, 397 (Tex.
2010) (“The fact that a seller knows his goods will end up in the forum
brand. Cf. Theos & Sons, Inc. v. Mack Trucks, Inc., 729 N.E.2d 1113, 1120
(Mass. 2000) (concluding requirement that a dealer perform work “in
accordance with [the manufacturer’s] policies and standards” did not create an
agency relationship but was “merely reflective of the ordinary desire of
manufacturers to set sufficient minimum performance and quality standards
to protect the good name of their trademark”).
18
state does not support jurisdiction when the seller made no attempt to
market its goods there.”). What ultimately matters is that once the
German manufacturers developed the software and uploaded it in
Germany, their work was at an end because VW America retained the
discretion to determine the details about where and how to carry out the
recall. The fact that the German manufacturers provided VW America
a list of VINs that reflected some of the cars were in Texas reflects no
more than their mere knowledge that the recall would, in part, be
carried out here. It does not amount to targeting Texas. Nor does it
demonstrate their control over the means and details of how VW
America and the local dealers would go about executing the recall.
With respect to communicating about the recall, it was also VW
America—not the German manufacturers—that exercised control over
the means and details. VW Germany’s corporate representative
testified that it was VW America’s “responsibility to draft customer
letters,” and VW Germany stated in interrogatory answers that the
German manufacturers “played no role . . . in communications with
dealers regarding the implementation of the software updates.” While
the German manufacturers sent VW America a technical description for
use in the recall campaign, VW America itself used it to draft step-by-
step instructions for the dealers, which the German manufacturers
merely reviewed and approved for accuracy. This involvement by the
German manufacturers is precisely the type of quality control one would
expect from a manufacturer with institutional knowledge concerning
the technical aspects of its product. It simply does not amount to
exercising control over the means and details of the recall campaign. See
19
Nears v. Holiday Hosp. Franchising, Inc., 295 S.W.3d 787, 796 (Tex.
App.—Texarkana 2009, no pet.) (“Quality control standards . . . should
not be construed to create an agency relationship.”).
If the strong weight of authorities that counsel against
recognizing an agency relationship were not enough, one would expect
that the Court would heed the State’s own admissions to the same effect.
Just a few months ago, the State asserted in its summary-judgment
briefing that it was not the German manufacturers but, rather, VW
America that not only “arranged, managed, promoted, [and] advertised”
but also “directed” the recalls at Texas dealerships. State’s Motion for
Partial Summary Judgment at 10, Texas v. Volkswagen Grp. of Am.,
Inc., No. D-1-GN-15-004513 (200th Dist. Ct., Travis County, Tex. Dec.
12, 2022). In other words, when trying to establish personal jurisdiction
over the German manufacturers, the State characterizes VW America
as a mere passthrough under the German manufacturers’ proverbial
thumbs. But when it comes to demonstrating VW America’s liability,
the State contends VW America itself—not the German
manufacturers—called the shots. The State cannot have it both ways.
In the absence of evidence to support an alter-ego or agency
finding, the question of whether we can assert personal jurisdiction over
the German manufacturers requires consideration of only their contacts
with Texas, not those of VW America or the local dealers. To hold
otherwise—and displace corporate formalities so hastily—would
prevent nonresident defendants from “structur[ing] their primary
conduct with some minimum assurance as to where that conduct will
and will not render them liable to suit.” World-Wide Volkswagen Corp.
20
v. Woodson, 444 U.S. 286, 297 (1980). Guarding against this is
particularly important here given the German manufacturers’ status as
foreign defendants. See BMC Software, 83 S.W.3d at 795 (noting “the
unique and onerous burden placed on a party called upon to defend a
suit in a foreign legal system” makes the minimum-contacts analysis
“particularly important” for an international defendant); see also Asahi
Metal Indus. Co. v. Super. Ct., 480 U.S. 102, 115 (1987) (“Great care and
reserve should be exercised when extending our notions of personal
jurisdiction into the international field.” (quoting United States v. First
Nat’l City Bank, 379 U.S. 378, 404 (1965) (Harlan, J., dissenting))).
B. The German manufacturers have not purposefully
targeted the Texas market through their own conduct.
As discussed above, neither of the imputed-contacts theories
applies here, so only the German manufacturers’ contacts are relevant
to determining whether Texas courts can exercise personal jurisdiction
over them. The Court concludes that the German manufacturers
established contacts with Texas through their own conduct by
“directing” VW America “to carry out the recall and service campaigns”
throughout the United States. Ante at 23–24. It concludes the German
manufacturers’ contacts are themselves sufficient to give rise to
jurisdiction, but that conclusion rests on a misreading of our Court’s
recent personal-jurisdiction cases. Spir Star and Luciano, on which the
Court relies most heavily, require evidence of purposeful targeting
specific to the Texas market, which is absent here.
The Court notes that Spir Star involved an agreement between a
manufacturer and an independent distributor that agreed to serve as
the manufacturer’s sales agent in Texas. Id. at 27. We held in that case
21
that the German manufacturer was subject to personal jurisdiction in
Texas because it “specifically target[ed] Texas as a market for its
products,” even though the manufacturer’s “sales [were] conducted
through a Texas distributor or affiliate.” Spir Star AG v. Kimich,
310 S.W.3d 868, 874 (Tex. 2010) (emphasis added). The Court briefly
glosses the facts of Spir Star, noting that a foreign manufacturer
“marketed its product through an independent” Texas distributor, and
inexplicably concludes that “the same result obtains” here. Ante
at 27–28. But the Court’s cursory reading of Spir Star never grapples
with the facts we relied on to support the exercise of personal
jurisdiction based on the German manufacturer’s direct purposeful
availment of Texas in that case:
• the German manufacturer’s “whole board [of directors]”
decided that Houston would be the best place to set up a
distributorship for its energy-related products “because of
the immediate vicinity of all the refineries”;
• the German manufacturer’s leadership traveled to
Houston to set up the distributorship and later signed the
Texas entity’s formation documents there; and
• the same person served as president of both the German
manufacturer and the Texas distributor and spent “half
the year working in Houston.”
310 S.W.3d at 871, 877.
Not one of the direct Texas-specific contacts we relied on in Spir
Star is present in this case. The German manufacturers did not create
a “Texas distributor or affiliate.” Id. at 874. Indeed, VW America is a
New Jersey corporation headquartered in Virginia. The German
manufacturers did not send any of their employees to Texas to set up or
operate their U.S. distributorship or to cultivate business in Texas. See
22
LG Elecs., Inc. v. Lovers Tradition II, LP, No. 05-19-01304-CV,
2020 WL 4281965, at *19 (Tex. App.—Dallas July 27, 2020, pet. dism’d
by agr.) (holding a foreign manufacturer that sold its products to a U.S.
distributor was not subject to personal jurisdiction in Texas because
“unlike in Spir Star, there [was] no indication in the record that [the
manufacturer], its principals, or representatives came specifically to
Texas”). And, unlike in Spir Star, the German manufacturers here
maintain completely separate management, boards of directors, and
employees from their U.S. distributor, VW America. See Elk River,
222 S.W.3d at 782 (declining to exercise personal jurisdiction over a
manufacturer where, among other things, it did not share management
with its distributor). The lesson to be drawn from Spir Star is that the
plus-factor requirement is satisfied when a foreign manufacturer
intentionally targets the Texas market by creating a Texas entity that
would serve as a distributor in Texas and sends its own employees to
work toward its goal of exploiting the Texas energy market.11
310 S.W.3d at 871. The facts in this case bear no resemblance to Spir
Star. The record shows there was no purposeful availment of Texas by
the German manufacturers because, unlike in Spir Star, the German
manufacturers themselves had no direct contacts with Texas.
11 The Court describes the German manufacturers’ conduct here as
“[a]nalogous” to the conduct in Spir Star and Luciano, ante at 28, while
acknowledging that the facts in those cases “differ from the German
manufacturers’ contacts in this case.” Id. at 51. But here, there is no fact that
even comes close to serving as an analogous Texas contact. Texas courts have
distinguished Spir Star on the same basis. See LG Elecs., 2020 WL 4281965,
at *19 (noting that, unlike in Spir Star, there was no evidence that the
defendant established a Texas distributor to take advantage of the Texas
market).
23
The Court also relies heavily on our recent decision in Luciano.
But Luciano merely reaffirmed Spir Star’s key holding: a nonresident
manufacturer is not shielded from suit in Texas by using a “Texas
distributor or affiliate” to “specifically target[] Texas as a market for its
products.” Luciano, 625 S.W.3d at 11–12 (emphasis added) (quoting
Spir Star, 310 S.W.3d at 874). And yet the Court co-opts Luciano to
support its holding, ignoring that Luciano involved numerous direct
Texas-specific contacts that are simply absent here. The Connecticut
manufacturer in that case
• purposefully acquired and used a “Texas distribution
center,” which it frequently contacted and “made
arrangements for some of its products to be stored there”
before being sent to customers;
• retained a commission-based “sales agent” and “sold
through him for a period of time . . . in the State of Texas”;
and
• sent the sales agent to the plaintiffs’ home in Texas “to
investigate the alleged failure of its product by conducting
testing and taking photographs on behalf of” the
manufacturer.
Luciano, 625 S.W.3d at 10–12.
The facts of this case align with Luciano no more than with Spir
Star. The German manufacturers here never created a Texas
distribution center. The German manufacturers did not own any
dealerships or have any sales agents acting on their behalf in Texas, nor
did they set Texas-specific sales objectives for VW America. And unlike
Luciano, where the manufacturer deployed its sales agent to Texas to
assess the damage in the plaintiffs’ home, the German manufacturers
never sent any employees to Texas to carry out the recall campaign.
24
The Court sidesteps the glaring absence of analogous Texas
contacts in this case and, despite the differences between this case and
Spir Star and Luciano, concludes that the German manufacturers
purposefully targeted the Texas market by engaging in conduct that was
a necessary precursor to VW America’s Texas contacts. The Court finds
the exercise of jurisdiction proper because the German manufacturers
• “developed the tampering software”;
• “caused the . . . software to be uploaded to ‘mirror servers’”;
and
• “had the sole authority to initiate and direct after-sale
recall and service campaigns.”
Ante at 22. Because all of this happened in Germany, it is no basis for
asserting it constitutes purposeful availment of Texas. The German
manufacturers indisputably developed the tampering software used in
the recall campaign in Germany. And they uploaded it to a server in
Germany. None of this conduct can be said to have targeted Texas. Only
later did VW America access the software in the U.S. and distribute it to
the local dealers throughout the entire U.S. market, including Texas.
And VW America did this only because VW America had decided to place
dealerships in Texas in the first instance. These facts do not support a
conclusion that the German manufacturers “purposefully targeted the
Texas market.” See Luciano, 625 S.W.3d at 18; see also TV Azteca,
490 S.W.3d at 46 (endorsing the U.S. Supreme Court’s plurality opinion
in Nicastro that a defendant is subject to personal jurisdiction “only
where the defendant can be said to have targeted the forum” (quoting J.
McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 882 (2011) (plurality
op.))).
25
The Court cites no authority to support its conclusion that a
foreign car manufacturer is subject to personal jurisdiction in a state in
which its U.S. distributor does not reside merely because the foreign
manufacturer directed its U.S. distributor to conduct a nationwide
recall. Indeed, the only federal court to consider this precise issue
explicitly rejects that conclusion. See Thornton v. Bayerische Motoren
Werke AG, 439 F. Supp. 3d 1303, 1311 (N.D. Ala. 2020).
The claims in Thornton arose from injuries the plaintiff,
Thornton, suffered in a car accident. Id. at 1306. She sued BMW AG, a
German entity, and BMW NA, its “indirect subsidiary” and “exclusive
distributor for new vehicles in the United States,” id. at 1308, claiming
her injuries were exacerbated by her car’s defective driver-side front
airbag. BMW had previously issued a recall on passenger-side front
airbags but did not issue a recall for the driver-side airbag until several
months after Thornton’s accident. Id. at 1307. Thornton argued that
the court could assert personal jurisdiction over BMW AG because (1) it
“does business in the United States, including Alabama, as BMW
Group” and BMW Group “marketed and sold vehicles” in the state; (2) it
“made the decision as to how and when to issue a recall” and “thus
exert[ed] continued control over all of the vehicles subject to the recall
in the State of Alabama”; and (3) it was “the alter ego of BMW NA.” Id.
at 1310–12.
The court summarily rejected Thornton’s arguments. It first
concluded that BMW Group served as a name for the group of BMW
AG’s subsidiaries, including BMW NA, and it could not simply assume
that BMW AG does business as any of those subsidiaries. See id.
26
at 1310–11; accord BMC Software, 83 S.W.3d at 798 (explaining that a
court generally cannot impute a corporation’s “doing business” in Texas
to its parent or subsidiary since “Texas law presumes that two separate
corporations are indeed distinct entities”). The court noted that even if
BMW AG was doing business as BMW Group, there was insufficient
evidence to show it “specifically target[ed] Alabama” as opposed to
targeting the U.S. market as a whole. Thornton, 439 F. Supp. 3d at
1311; see also Rickman v. BMW of N. Am. LLC, 538 F. Supp. 3d 429, 439
(D.N.J. 2021) (holding a New Jersey court could not assert personal
jurisdiction over a company that developed deceptive recall software in
Germany where it had only exhibited “general efforts to target [the] U.S.
market”). The court next held that BMW AG’s alleged control over the
nationwide recall did not support the exercise of jurisdiction over it in
Alabama. Thornton, 439 F. Supp. 3d at 1311. Finally, the court rejected
Thornton’s alter-ego theory. Id. at 1312 (“[T]he evidence submitted by
Thornton does not establish that BMW AG does business as BMW
Group, much less that by purportedly doing so, BMW AG has complete
control and domination over BMW NA’s finances, policies, and business
practices.”). At every turn and in every respect, Thornton forecloses the
State’s arguments in this case.
In short, the authorities on which the Court relies can be said to
support the exercise of jurisdiction in this case only if one ignores the
substantial direct Texas-specific contacts of the nonresident defendants
in those cases. No such contacts evidencing purposeful availment of
Texas exist here.
27
C. The German manufacturers did not target Texas by
targeting the U.S. as a whole.
The Court also gravely misinterprets Nicastro, a far better analog
to this case than Spir Star or Luciano. Nicastro involved a foreign
manufacturer selling its products through a U.S. distributor. And like
here, once the manufacturer sold its products to the U.S. distributor, it
did not control their distribution within the United States. Nicastro,
564 U.S. at 878. After the plaintiff injured himself using one of the
manufacturer’s machines in New Jersey, he sued in New Jersey state
court. Id. The New Jersey Supreme Court held that New Jersey could
exercise jurisdiction over the foreign manufacturer in part because the
manufacturer knew its products might end up there by way of its
distributor’s nationwide distribution system. Id. at 879.
The U.S. Supreme Court reversed. Id. at 887. In doing so, Justice
Kennedy’s plurality opinion recognized two key principles. First,
“personal jurisdiction requires a forum-by-forum, or sovereign-by-
sovereign, analysis.” Id. at 884. Second, and as a corollary to the first,
“a defendant may . . . be subject to the jurisdiction of the courts of the
United States but not of any particular State.” Id. Justice Kennedy
noted the relative rarity of that scenario given that foreign defendants
“often target or concentrate on particular States,” thus “subjecting them
to specific jurisdiction in those forums.” Id. at 885. Applying those
principles, the plurality concluded that the New Jersey Supreme Court
erred in holding that it could maintain personal jurisdiction over the
foreign manufacturer. Id. at 886. The manufacturer may have
(1) targeted the U.S. market generally, thus subjecting itself “to the
jurisdiction of the courts of the United States”; or (2) “target[ed] or
28
concentrate[d] on particular States” by attending trade shows in select
states, though not New Jersey, thus “subjecting [it] to specific
jurisdiction in those forums.” Id. at 884–86. But neither of those facts
permitted New Jersey to exercise personal jurisdiction over the
manufacturer. See id. at 886. The same is true with respect to Texas
here.
The Court purports to apply the principles enunciated in Justice
Kennedy’s Nicastro opinion but concludes that this case is different from
Nicastro in ways that support the exercise of personal jurisdiction. The
Court says that while Nicastro “repudiated the . . . aggregation of
nationwide contacts and attribution of those contacts to a particular
state based on the foreign manufacturer’s desire to penetrate the entire
U.S. market,” this case is different because the German manufacturers
“seek to negate forum contacts based on their similar contacts
elsewhere.” Ante at 39. But that is a strawman that mischaracterizes
the German manufacturers’ position. They do not claim they can avoid
jurisdiction in Texas because of their purposeful contacts with other
states. They argue, rather, that this Court’s precedents require a
defendant to engage in specific conduct evincing purposeful targeting of
Texas, regardless of the nature and extent of their contacts with other
states. The German manufacturers note they have been subject to
personal jurisdiction in federal court and in other states, like Virginia
and California, only to contrast their purposeful contacts with those
jurisdictions and the lack thereof in Texas. For instance, VW Germany’s
employees specifically traveled to Virginia to carry out the recall
scheme. See In re Volkswagen “Clean Diesel” Litig., No. CL-2016-9917,
29
2018 WL 4850155, at *3–4 (Va. Cir. Ct. Oct. 4, 2018) (order denying
motion to dismiss) (noting the “strongest allegations” in favor of
maintaining personal jurisdiction over the German manufacturers was
that they sent their employees to Virginia and “created the false
advertising content” at VW America’s “corporate headquarters in
Fairfax”).
The Court next claims that Nicastro is “further inapposite
because, here, the German manufacturers’ conduct rises above mere
foreseeability.” Ante at 39. The Court says that by directing VW
America to carry out the nationwide recall campaign for “specifically
identified vehicles,” the German manufacturers “intentionally reached
into this market with certainty that the fraudulent campaigns would be
carried out” here. Id. at 41. I cannot agree that the German
manufacturers “intentionally reached” into Texas by providing VW
America with a list that included the VIN for every vehicle to be recalled
in the United States.12 See Admar Int’l, Inc. v. Eastrock, L.L.C., 18 F.4th
12 We recognized a similar principle in another special-appearance case
last term. There, a Texas plumbing installer and homebuilder sued a pipe
manufacturer and an engineering firm after installing plastic pipes in
thousands of Texas homes, resulting in water damage. In re Christianson Air
Conditioning & Plumbing, LLC, 639 S.W.3d 671, 674–75 (Tex. 2022). Jana,
the engineering firm, contested personal jurisdiction, and the plaintiffs sought
discovery relating to Jana’s “studies, tests, investigations, and assessments” of
how the plastic pipe performed “in field conditions in Texas.” Id. at 675. We
cautioned that these topics would be discoverable only if essential to prove
specific jurisdiction and that, in turn, they would support jurisdiction only to
the extent they “are tied to Jana’s intent to target the market in Texas.” Id. at
680 (emphasis added). We further explained that “mere general awareness of
a range of conditions within which a product must operate does not itself show
a purpose to serve all markets in which those conditions exist.” Id. (emphasis
added). Likewise, the German manufacturers’ “general awareness” that VW
30
783, 787 (5th Cir. 2021) (rejecting a “greater includes the lesser” theory
and reaffirming the need for specific targeting of the forum state). The
list neither organized the information by state nor identified any specific
vehicles as being in Texas. Of course, like the Court’s characterization
of the manufacturer in Nicastro, the German manufacturers “might
have foreseen—and even hoped” that some of the cars they sold to VW
America had made their way into Texas, just as it knew its cars would
likely make their way to every state. Ante at 40. But the German
manufacturers’ mere knowledge that some of its cars were in Texas does
not amount to purposeful availment. See Luciano, 625 S.W.3d at 13
(“‘[M]ere knowledge’ that a product is ‘to be sold and used in Texas,’ does
not—without more—show purposeful availment.” (quoting CMMC v.
Salinas, 929 S.W.2d 435, 439 (Tex. 1996))); Searcy, 496 S.W.3d at 69
(“Even if a nonresident defendant knows that the effects of its actions
will be felt by a resident plaintiff, that knowledge alone is insufficient to
confer personal jurisdiction over the nonresident.”).
I recognize the Court is not bound by Justice Kennedy’s plurality
opinion in Nicastro. See Ainsworth v. Moffett Eng’g, Ltd., 716 F.3d 174,
178 (5th Cir. 2013) (“The reasoning of a Supreme Court opinion that
does not command a majority vote is not binding precedent.”). But we
have twice cited it with approval and indicated that we require
purposeful targeting of Texas, which—as Nicastro explains—is distinct
from targeting the U.S. market as a whole. See Luciano, 625 S.W.3d at
America sold vehicles to every state in the United States does not demonstrate
the German manufacturers’ targeting of every market in which those cars are
located.
31
13 (citing the plurality opinion in Nicastro for the proposition that the
“exercise of jurisdiction is permitted . . . only when the defendant
targets the forum”); TV Azteca, 490 S.W.3d at 46 (quoting the Nicastro
plurality’s statement that a defendant is subject to personal jurisdiction
“only where the defendant can be said to have targeted the forum”). And
our courts have faithfully applied the Nicastro rule. See, e.g., 2020 WL
7640037, at *5 (“[I]n determining whether a state court can exercise
jurisdiction over a foreign defendant, only the defendant’s purposeful
contacts with the state, not with the United States, are relevant.”);
Skylift, 2020 WL 1879655, at *7 (“While Skylift sells its products
throughout the United States, a nationwide distributorship, without
more, is insufficient to confer specific jurisdiction over a manufacturer
as a matter of due process.”).
If the Court wishes to repudiate the Nicastro plurality opinion, it
should do so explicitly and make Texas law clear. See 2020 WL 7640037,
at *11 (Triana, J., dissenting) (“I would not adopt the Nicastro plurality’s
reasoning in this case . . . .”); Ainsworth, 716 F.3d at 178 (applying
Justice Breyer’s concurring opinion in Nicastro based on the Marks rule,
which counsels lower courts to consider “the holding of the Court . . . as
that position taken by those Members who concurred in the judgments
on the narrowest grounds” (quoting Marks v. United States, 430 U.S.
188, 193 (1977) (internal quotation omitted))). Instead, it misreads
Nicastro and muddies our personal-jurisdiction jurisprudence by
announcing a new rule: any defendant that conducts a nationwide recall
is subject to personal jurisdiction in Texas courts, even when none of the
defendant’s conduct targets Texas. I cannot endorse this clear departure
32
from our own precedents. See Grapevine Excavation, Inc. v. Md. Lloyds,
35 S.W.3d 1, 5 (Tex. 2000) (“Adhering to precedent fosters efficiency,
fairness, and legitimacy. More practically, it results in predictability in
the law, which allows people to rationally order their conduct and
affairs.” (citations omitted)).
I sympathize with the Court’s desire to hold the German
manufacturers responsible for their admitted fraud.13 But, as discussed
in the next section, eroding constitutional protections set by
well-established personal-jurisdiction precedents is not the answer. See
Michiana, 168 S.W.3d at 791 (noting that “[j]urisdiction cannot turn on
whether a defendant denies wrongdoing”); see also Am. Tel. & Tel. Co.
v. Compagnie Bruxelles Lambert, 94 F.3d 586, 591 (9th Cir. 1996)
(“[L]iability is not to be conflated with amenability to suit in a particular
forum.”).
D. The intentional nature of the German manufacturers’
conduct does not support the exercise of jurisdiction given
the lack of purposeful targeting of Texas.
The Court asserts that the fact that the German manufacturers’
conduct was intentionally tortious “heightens the quality of their
contacts with this forum” such that the German manufacturers fall
within Texas’s jurisdiction. Ante at 42. In doing so, it relies primarily
on a single line of dicta in the same Nicastro plurality opinion it
painstakingly seeks to distinguish. Justice Kennedy noted “[t]here may
13 The German manufacturers have already paid handsomely for
concocting this scheme. The Court notes Dieselgate has cost them over
$20 billion. A significant amount of this has been allocated to the State
($209 million), Texas dealers ($92 million), and Texas consumers
($1.45 billion).
33
be exceptions [to the purposeful-availment standard] in cases involving
an intentional tort.” Nicastro, 564 U.S. at 877–78 (emphasis added).
That case, of course, did not involve an intentional tort. Id. at 878. And
I am not inclined to alter the purposeful-availment standard based on a
pontification about an exception the U.S. Supreme Court may someday
recognize when this Court has explicitly held that Texas’s interest in
protecting against torts does not change the purposeful-availment
analysis. See Moncrief Oil Int’l, Inc. v. OAO Gazprom, 414 S.W.3d 142,
152 (Tex. 2013) (stating “a forum’s interest in protecting against torts
. . . cannot displace the purposeful availment inquiry”); see also
Michiana, 168 S.W.3d at 792 (rejecting the notion that “specific
jurisdiction turns on whether a defendant’s contacts were tortious
rather than the contacts themselves”).
The Court also relies on Keeton v. Hustler Magazine, Inc.,
465 U.S. 770 (1984), in which the plaintiff, Keeton, claimed to have been
libeled by a publisher that distributed a magazine nationwide. Id. at
772. Although she resided in New York, Keeton sued in New Hampshire
because it was the only state where her suit would not have been
time-barred. Id. at 773. The publisher’s only contacts with New
Hampshire were monthly sales of “some 10 to 15,000 copies” of the
magazine, which comprised “only a small portion” of the copies
circulated in the U.S. Id. at 772, 775. The First Circuit held that these
contacts were too attenuated to assert personal jurisdiction over the
publisher in New Hampshire. Id. at 773.
The Supreme Court reversed, holding that New Hampshire could
exercise personal jurisdiction over the publisher. Id. The Court
34
concluded that Hustler “continuously and deliberately exploited the
New Hampshire market” by selling its magazines in the state and thus
could “reasonably anticipate being haled into court there in a libel action
based on the contents of its magazine.” Id. at 781. In doing so, the Court
rejected the court of appeals’ reliance on the fact that such a small
proportion of the total magazine sales occurred in New Hampshire. See
id. at 773.
The Court analogizes the “some 10 to 15,000 copies” sold by
Hustler Magazine in New Hampshire to the thousands of Volkswagen
and Audi vehicles that made their way to Texas through the stream of
commerce, noting that Hustler did not differentiate the New Hampshire
magazine sales from the larger number of sales in other states. See ante
at 35–36. The Court bolsters its point by citing Luciano, where we
glossed Hustler for the proposition that “the contacts an entity forms
with one jurisdiction do not negate its purposeful contacts with another.”
Id. at 34 (quoting Luciano, 625 S.W.3d at 10). Accordingly, the Court
concludes that Texas can maintain personal jurisdiction over the
German manufacturers “[e]ven if the German manufacturers were not
subjectively focused on Texas to the exclusion of other jurisdictions.” Id.
at 36.
The Court’s analysis ignores a critical distinction between Hustler
and this case: the defendant in Hustler consciously “chose to enter the
New Hampshire market” and facilitate thousands of direct sales of its
magazine in the state, just like it did in other states. 465 U.S. at 779.
This case does not involve any direct sales by the German
manufacturers to Texas. Hustler thus has little application here, where
35
the German manufacturers targeted the U.S. market as a whole and the
sales to Texas (and, later, a nationwide recall) were carried out by a
separate entity, which has acknowledged it is subject to jurisdiction in
Texas.
III. Conclusion
Our precedents establish that a defendant may be subject to
specific personal jurisdiction in Texas only if it purposefully targeted the
Texas market. All agree that the German manufacturers directed their
activity toward the U.S. as a whole. But the Court wrongly concludes
that is sufficient to prove the German manufacturers targeted Texas in
particular.
The Court’s divergence from well-established personal-
jurisdiction precedents will have significant ramifications for consumers
in our state. A manufacturer wishing to sell its product in Texas can
avoid personal jurisdiction in Texas courts by structuring its business in
a way that avoids purposeful targeting of Texas. But should the same
manufacturer wish to take post-sale action relating to the same product,
it faces a catch-22: (1) direct its U.S. distributor to carry out a recall, and
thus subject itself to personal jurisdiction under the Court’s new rule; or
(2) decide not to order a recall for fear of being subject to jurisdiction in
Texas courts. The Court’s new rule creates a perverse incentive for a
manufacturer that knows it should address a product concern to instead
roll the dice on Texans’ safety.
I conclude the court of appeals correctly held, consistent with U.S.
Supreme Court precedents and our own cases, that the German
manufacturers’ conduct is insufficient to assert personal jurisdiction
36
over them in Texas. Accordingly, I would affirm the court of appeals’
judgment. Because the Court does otherwise, I respectfully dissent.
Rebeca A. Huddle
Justice
OPINION FILED: May 5, 2023
37