American Refrigeration Company, Inc. v. Tranter, Inc. ( 2016 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-15-00265-CV
AMERICAN REFRIGERATION APPELLANT
COMPANY, INC.
V.
TRANTER, INC. APPELLEE
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FROM THE 30TH DISTRICT COURT OF WICHITA COUNTY
TRIAL COURT NO. 180,092-A
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MEMORANDUM OPINION1
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This case arises from a broken heat exchanger manufactured by Appellee
Tranter, Inc. (Tranter) and installed as part of the ice rink refrigeration system in
Dartmouth College’s Thompson Arena in Hanover, New Hampshire. Appellant
American Refrigeration Company, Inc. (ARC), a Massachusetts corporation with
1
See Tex. R. App. P. 47.4.
its headquarters and principal place of business in Andover, Massachusetts,
appeals from the trial court’s order denying its special appearance. See Tex.
Civ. Prac. & Rem. Code Ann. § 51.014(a)(7) (West Supp. 2016) (authorizing an
interlocutory appeal from the denial of a special appearance). In one issue, ARC
argues that the trial court erred in denying its special appearance because it
lacked sufficient minimum contacts with the State of Texas that would enable
Texas to assert personal jurisdiction over it. We reverse and render.
I. Background
In March 2011, Dartmouth and ARC entered into an agreement under
which ARC agreed to install an ice rink refrigeration system in Thompson Arena.
Dartmouth retained Refrigeration Engineering Company (REC), a company
based in Massachusetts, to perform the design work on the project. REC’s plans
specified that the Tranter heat exchanger was to be used. ARC placed a
purchase order for the heat exchanger with North Atlantic Refrigeration, a
company located in Massachusetts.
According to ARC, North Atlantic Refrigeration ordered the heat exchanger
from Refrigeration Valves and Systems Corporation (RVS), a Texas corporation
located in Bryan, Texas; Tranter, however, contends that ARC ordered the heat
exchanger from RVS. RVS requested that Tranter manufacture the heat
exchanger according to certain specifications. Tranter’s principal place of
business is in Wichita County, Texas, and Tranter designed and manufactured
the heat exchanger there. In June 2011, Tranter shipped the heat exchanger to
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RVS in Bryan, Texas, and RVS, in turn, shipped the heat exchanger to New
Hampshire. ARC installed the refrigeration system, which included the heat
exchanger, in Thompson Arena in August 2011.
In June 2012, the refrigeration system failed. After an investigation,
Dartmouth concluded that the system failed as a result of defects in the heat
exchanger and shipped the heat exchanger to Tranter for evaluation. Tranter
and ARC concluded that contamination introduced into the heat exchanger
during maintenance at Dartmouth had damaged the heat exchanger. Unsatisfied
by these conclusions, the Trustees of Dartmouth College sent a demand letter to
Tranter, ARC, and RVS in November 2013, claiming damages in excess of
$880,000.
In December 2013, Tranter brought a declaratory judgment action in
Wichita County, Texas, against ARC, RVS, and the Trustees of Dartmouth
College. Tranter prayed for the following declarations:
1. That the Agreement signed between [Tranter] and [RVS]
set out the intentions, rights, obligations, and remedies of the parties
to the contract.
2. Pursuant to the TERMS & CONDITIONS OF SALE,
Tranter shall not be liable to any Defendant for any consequential,
indirect, special[,] or punitive damages including but not limited to
lost profits or additional damages.
3. [Tranter] and [ARC] did not enter into a contract.
4. [Tranter] and . . . [the] Trustees of Dartmouth College did
not enter into a contract.
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5. At the time the Heat Transfer system was shipped from
Tranter to [RVS], it was free from defects in material or
workmanship.
6. No warranty existed, either express or implied from Tranter
to Dartmouth on the subject exchanger.
7. When the exchanger was shipped from Tranter to RVS in
Bryan, it was free from defects.
8. When the exchanger and system were installed, there were
no defects and it operated as intended.
9. The exchanger operated for approximately one year
without any of the issues occurring as alleged by Dartmouth.
10. The damage to the exchanger was caused by foreign
material being introduced to the system when renovations were
being done to the arena, approximately one year after the system
was installed.
11. [Tranter] is entitled to reasonable and necessary
attorney’s fees pursuant to Chapter 37 of the Texas Civil Practice
and Remedies Code.
ARC filed a special appearance, alleging that it was not a Texas resident,
that it did not have minimum contacts with Texas giving rise to either specific or
general jurisdiction, and that the exercise of jurisdiction over ARC would not
comport with traditional notions of fair play and substantial justice. ARC attached
to its special appearance an affidavit from its president, Michael Sirois. Sirois
averred that ARC is incorporated in Massachusetts; that ARC’s company
headquarters and principal place of business is in Andover, Massachusetts; that
ARC has no business operations, personnel, or registered agent in Texas; and
that ARC has not performed any projects in Texas since the formation of the
company in 1996. He further averred that REC—not ARC—performed the
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design work on the Thompson Arena project, that REC’s design plans and
specifications called for the Tranter heat exchanger, that REC selected the
Tranter heat exchanger, that ARC contacted North Atlantic Refrigeration in order
to obtain the heat exchanger, that ARC placed the purchase order for the heat
exchanger with North Atlantic Refrigeration, that ARC did not directly contact
RVS or Tranter to obtain the heat exchanger, that ARC did not negotiate any
contracts or sign any contracts with any company or person in Texas regarding
this project, and that ARC had no contact with Tranter until after problems with
the heat exchanger arose in June 2012.
Tranter filed a response to ARC’s special appearance, contending that the
trial court had both general and specific jurisdiction over ARC and that the trial
court’s assumption of jurisdiction over ARC did not deprive ARC of due process.
Tranter attached to its response (1) an affidavit from RVS’s president, Virgil
Jordan, (2) an “Agreement & Order Acknowledgement” for the heat exchanger
listing RVS as the seller, ARC as the customer, and North Atlantic Refrigeration
as the “representative,” (3) a list of sixty-three orders that ARC had placed with
RVS from 2004 through 2015 and for which ARC paid a total of $890,000, and
(4) the demand letter from the Trustees of Dartmouth College. Jordan stated in
his affidavit that ARC approached and contacted RVS in Texas to purchase the
heat exchanger, that ARC placed the order with RVS for the heat exchanger, and
that ARC paid RVS approximately $68,142 for the heat exchanger. He further
stated that “[a]ccording to the Agreement & Order Acknowledgment, the package
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was F.O.B., Texas[,] otherwise known as free on board. As such, ownership of
the heat exchanger was transferred from RVS to its customer [ARC] here in
Bryan, Texas.” Jordan also stated that ARC has been doing business in Texas
with RVS regularly since 2004 and that ARC placed sixty-three orders with RVS
in Texas from 2004 through 2015 for which ARC paid a total of $890,000.
Jordan claimed that in each of the transactions, ownership of the product was
transferred to ARC in Texas and that “[e]ach sale was pursuant to a written
contract that was entered into in the State of Texas and each contract was
performed within the State of Texas.”
After a hearing, the trial court signed an order stating that the trial court
had jurisdiction over ARC and denied ARC’s special appearance. The trial court
did not make any findings of fact or conclusions of law. ARC has appealed.
II. Burden of Pleading and Standard of Review
The plaintiff bears the initial burden of pleading sufficient allegations to
bring a nonresident defendant within the provisions of the Texas long-arm
statute. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007);
TravelJungle v. Am. Airlines, Inc., 212 S.W.3d 841, 845 (Tex. App.—Fort Worth
2006, no pet.). To determine whether the plaintiff satisfied its pleading burden
and to determine the basis for jurisdiction alleged by the plaintiff, a court
considers the allegations in the plaintiff’s petition as well as those in its response
to the defendant’s special appearance. Wikert v. Year One, Inc., 320 S.W.3d
522, 524 (Tex. App.—Dallas 2010, no pet.) (citing Tex. R. Civ. P. 120a(3);
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Flanagan v. Royal Body Care, Inc., 232 S.W.3d 369, 374 (Tex. App.—Dallas
2007, pet. denied)). Upon filing a special appearance, the nonresident defendant
assumes the burden of negating all bases of personal jurisdiction alleged by the
plaintiff. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 807 (Tex.
2002), cert. denied, 537 U.S. 1191 (2003). In other words, the defendant must
disprove the existence of minimum contacts sufficient to establish personal
jurisdiction over it—general, specific, or both—as alleged by the plaintiff. See id.
Absent allegations of any specific, purposeful act through which the defendant
can be said to have sought a benefit by availing itself of the jurisdiction, evidence
that a defendant is a nonresident is sufficient to meet its burden. Michiana Easy
Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex. 2005); Glencoe Capital
Partners II, L.P. v. Gernsbacher, 269 S.W.3d 157, 163 (Tex. App.—Fort Worth
2008, no pet.).
Whether a trial court has personal jurisdiction over a defendant is a
question of law, which we review de novo. Moki Mac, 221 S.W.3d at 574;
TravelJungle, 212 S.W.3d at 845. In determining whether the nonresident
defendant sufficiently negated the pleaded bases for personal jurisdiction, the
trial court frequently must resolve questions of fact. BMC Software Belg., N.V. v.
Marchand, 83 S.W.3d 789, 794 (Tex. 2002). While we review de novo the trial
court’s legal conclusion that personal jurisdiction exists, any findings of fact
supporting the conclusion are reviewed for factual and legal sufficiency. See id.
When, as here, the trial court does not make findings of fact and conclusions of
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law in support of its ruling, “all facts necessary to support the judgment and
supported by the evidence are implied.” Id. at 795. Although the trial court held
a hearing on ARC’s special appearance and considered the special appearance,
Tranter’s response, the evidence, and the argument of counsel, there is no
reporter’s record. Therefore, we will presume that the special appearance
hearing was nonevidentiary and that the trial court considered only the evidence
filed with the clerk. See Michiana, 168 S.W.3d at 782; Gordon & Doner, P.A. v.
Joros, 287 S.W.3d 325, 330 (Tex. App.—Fort Worth 2009, no pet.).
III. Personal Jurisdiction
A. Applicable Law
A Texas court may assert personal jurisdiction over a nonresident
defendant only if the requirements of due process under the Fourteenth
Amendment and the Texas long-arm statute are satisfied. U.S. Const. amend.
XIV, § 1; Tex. Civ. Prac. & Rem. Code Ann. §§ 17.041–.045 (West 2015);
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 413–14,
104 S. Ct. 1868, 1871–72 (1984); Moki Mac, 221 S.W.3d at 574.
The Texas long-arm statute governs Texas courts’ exercise of jurisdiction
over nonresident defendants. Tex. Civ. Prac. & Rem. Code Ann. §§ 17.041–
.045; BMC Software, 83 S.W.3d at 795; TravelJungle, 212 S.W.3d at 845. That
statute permits Texas courts to exercise jurisdiction over a nonresident defendant
who “does business” in Texas. Tex. Civ. Prac. & Rem. Code Ann. § 17.042;
BMC Software, 83 S.W.3d at 795; TravelJungle, 212 S.W.3d at 845. The statute
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lists some activities that constitute “doing business” in Texas, including
contracting by mail or otherwise with a Texas resident when either party is to
perform the contract in whole or in part in Texas. Tex. Civ. Prac. & Rem. Code
Ann. § 17.042(1); Moki Mac, 221 S.W.3d at 574. The list of activities set forth in
section 17.042 is not exclusive, however. BMC Software, 83 S.W.3d at 795;
TravelJungle, 212 S.W.3d at 845.
Because the long-arm statute reaches “as far as the federal constitutional
requirements for due process will allow,” a Texas court may exercise jurisdiction
over a nonresident if doing so “comports with federal due process limitations.”
TV Azteca v. Ruiz, 490 S.W.3d 29, 36 (Tex. 2016) (quoting Spir Star AG v.
Kimich, 310 S.W.3d 868, 871 (Tex. 2010)). Therefore, in determining whether
such requirements have been met, we rely on precedent from the United States
Supreme Court and other federal courts, as well as our own state’s decisions.
BMC Software, 83 S.W.3d at 795; TravelJungle, 212 S.W.3d at 845–46. Due
process is satisfied when (1) the 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. Int’l Shoe Co. v. Washington,
326 U.S. 310, 316, 66 S. Ct. 154, 158 (1945); TV Azteca, 490 S.W.3d at 36;
TravelJungle, 212 S.W.3d at 846.
1. Minimum Contacts
“Minimum contacts are sufficient for personal jurisdiction when the
nonresident defendant ‘purposefully avails itself of the privilege of conducting
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activities within the forum State, thus invoking the benefits and protections of its
laws.’” Moki Mac, 221 S.W.3d at 575 (quoting Hanson v. Denckla, 357 U.S. 235,
253, 78 S. Ct. 1228, 1240 (1958)); Michiana, 168 S.W.3d at 784. A nonresident
defendant who has “purposefully availed” himself of the privileges of conducting
business in a foreign jurisdiction has sufficient minimum contacts with the forum
to confer personal jurisdiction on a court in that forum. Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 474–76, 105 S. Ct. 2174, 2183–84 (1985); Moki Mac,
221 S.W.3d at 575. The “touchstone” of jurisdictional due process is “purposeful
availment.” Michiana, 168 S.W.3d at 784. It is essential in each case that there
be some act by which the defendant purposefully availed itself of the privilege of
conducting activities within the forum state, thus invoking the benefits and
protections of its laws. Id. (citing Hanson, 357 U.S. at 253, 78 S. Ct. at 1240).
There are at least three aspects to the “purposeful availment” inquiry: first,
only the defendant’s contacts with the forum are relevant, not the unilateral
activity of another party or third person; second, the contacts with the forum must
be purposeful rather than random, isolated, or fortuitous; and third, the
“defendant must seek some benefit, advantage[,] or profit by ‘availing’ itself of the
jurisdiction.” Moki Mac, 221 S.W.3d at 575 (quoting Michiana, 168 S.W.3d at
785). The defendant’s actions must justify a conclusion that it could reasonably
anticipate being called into the courts of the forum state. Retamco Operating,
Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex. 2009). “[T]he minimum-
contacts analysis is focused on the quality and nature of the defendant’s
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contacts, rather than their number.” Id. at 339 (citing Am. Type Culture
Collection, 83 S.W.3d at 806).
2. Specific and General Jurisdiction
Personal jurisdiction exists if the nonresident defendant’s minimum
contacts give rise to either specific jurisdiction or general jurisdiction.
Helicopteros Nacionales de Colombia, 466 U.S. at 413–14, 104 S. Ct. at 1872;
TV Azteca, 490 S.W.3d at 37; TravelJungle, 212 S.W.3d at 846. Specific
jurisdiction is present if the nonresident defendant’s alleged liability arises from or
is related to an activity conducted within the forum. Moki Mac, 221 S.W.3d at
576; TravelJungle, 212 S.W.3d at 846–47. In other words, “there must be a
substantial connection between those contacts and the operative facts of the
litigation.” Moki Mac, 221 S.W.3d at 585. When a plaintiff asserts that a trial
court has specific jurisdiction over a nonresident defendant, the minimum
contacts analysis focuses on the relationship among the defendant, the forum,
and the litigation. Id. at 575–76; Guardian Royal Exch. Assurance, Ltd. v.
English China Clays, P.L.C., 815 S.W.2d 223, 228 (Tex. 1991); TravelJungle,
212 S.W.3d at 847.
A trial court has general jurisdiction over a nonresident defendant when
that defendant’s contacts in a forum are continuous and systematic so that the
forum may exercise personal jurisdiction over the defendant even if the cause of
action did not arise from or relate to activities conducted within the forum state.
Moki Mac, 221 S.W.3d at 575; TravelJungle, 212 S.W.3d at 846. General
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jurisdiction requires a more demanding minimum-contacts analysis than specific
jurisdiction. See Am. Type Culture Collection, 83 S.W.3d at 807 (citing Guardian
Royal Exch., 815 S.W.2d at 228).
B. Specific Jurisdiction Analysis
ARC contends that the evidence proves that it is not subject to specific
jurisdiction. Tranter alleged in its response to ARC’s special appearance and
argues on appeal that ARC approached RVS in Texas and placed the order for
the heat exchanger, thereby entering into a contract with RVS for the
manufacture, purchase, and delivery of the heat exchanger in Texas. These
allegations are supported by Jordan’s affidavit. Tranter argues that because the
contract between RVS and ARC was performed in Texas, ARC purposefully
availed itself of the privilege of doing business in Texas and there is a substantial
connection between ARC’s Texas contacts (ordering the heat exchanger) and
the operative facts of Tranter’s suit—(1) whether the heat exchanger was
damaged when it was manufactured in Texas and (2) whether Tranter made
warranties regarding the heat exchanger pursuant to the order.
Through Sirois’s affidavit testimony, ARC established that it is not a Texas
resident, has no business operations or personnel in Texas, has no registered
agent in Texas, has not performed any projects in Texas since ARC’s formation,
and did not have any contacts with Tranter prior to the heat exchanger’s failure in
June 2012. ARC also points out that REC specified that the Tranter heat
exchanger was to be used, that ARC did not contact Tranter or RVS to procure
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the heat exchanger, that ARC contacted North Atlantic Refrigeration to obtain the
heat exchanger, and that ARC did not negotiate or sign any contracts regarding
the project with any Texas company or resident. These allegations are
supported by Sirois’s affidavit, but because the trial court did not make findings of
fact and conclusions of law in support of its ruling, “all facts necessary to support
the judgment and supported by the evidence are implied.” BMC Software,
83 S.W.3d at 795. Here, Tranter’s evidence of the “Agreement & Order
Acknowledgement” listing ARC as the customer and RVS as the seller supports
the conclusion that ARC entered into a contract with RVS in Texas for the
purchase of the heat exchanger.
The contract between ARC and RVS satisfies the requirement of the
Texas long-arm statute that ARC was “doing business” in Texas by entering into
a contract with RVS, a Texas resident, to be performed in whole or in part in
Texas. See Tex. Civ. Prac. & Rem. Code Ann. § 17.042(1). But the Texas long-
arm statute reaches only “as far as the federal constitutional requirements of due
process will allow.” Moki Mac, 221 S.W.3d at 575 (quoting Guardian Royal
Exch., 815 S.W.2d at 226). The exercise of jurisdiction by a Texas court over
ARC must still meet the minimum contacts requirement of federal due process.
See, e.g., id. at 575–88 (holding negligence and misrepresentation claims based
on sending brochures and release forms to Texas residents that satisfied doing-
business requirement of statute were nevertheless insufficient to establish
jurisdiction absent minimum contacts).
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Merely contracting with a Texas resident is insufficient to establish the
minimum contacts necessary to support the exercise of specific jurisdiction over
the nonresident defendant. See Burger King, 471 U.S. at 478, 105 S. Ct. at
2185 (stating that an individual’s contract with an out-of-state party cannot by
itself establish sufficient minimum contacts in the other party’s home forum);
TeleVentures, Inc. v. Int’l Game Tech., 12 S.W.3d 900, 908–09 (Tex. App.—
Austin 2000, pet. denied) (stating that merely contracting with a Texas
corporation does not satisfy the minimum-contacts requirement); Magnolia Gas
Co. v. Knight Equip. & Mfg. Corp., 994 S.W.2d 684, 691–92 (Tex. App.—San
Antonio 1998, no pet.) (stating that neither contracting with a Texas corporation
nor the partial performance of a contract in Texas is sufficient to establish
personal jurisdiction), disapproved of on other grounds by BMC Software,
83 S.W.3d at 794 & n.1. There is nothing in the record to suggest that ARC
sought some benefit, advantage, or profit by availing itself of Texas’s jurisdiction.
ARC purchased the heat exchanger from RVS, a Texas resident that shipped the
heat exchanger F.O.B. Texas to New Hampshire. RVS’s act of shipping the
goods F.O.B. Texas does not, by itself, give a Texas court jurisdiction over ARC.
See Sun–X Int’l Co. v. Witt, 413 S.W.2d 761, 768 (Tex. Civ. App.—Texarkana
1967, writ ref’d n.r.e.) (finding no personal jurisdiction where seller shipped goods
F.O.B. Houston). Merely purchasing goods from, and sending payments to,
Texas does not constitute sufficient minimum contacts for the exercise of specific
jurisdiction. See, e.g., U-Anchor Advert., Inc. v. Burt, 553 S.W.2d 760, 763 (Tex.
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1977) (concluding that defendant who prepared and mailed checks to forum state
did not have sufficient minimum contacts with the forum), cert. denied, 434 U.S.
1063 (1978); Magnolia Gas Co., 994 S.W.2d at 691 (“Furthermore, payments
sent to the forum state are not determinative.”); see also Stuart v. Spademan,
772 F.2d 1185, 1194 (5th Cir. 1985) (“Spademan’s mailing of payments to the
plaintiffs in Texas can hardly be termed significant in terms of determining
purposeful availment of the benefits of the forum state’s laws.”).
We hold that there is insufficient evidence of the minimum contacts
necessary to conclude that ARC purposefully availed itself of the privilege of
conducting activities within Texas. Thus, ARC’s contacts with Texas do not
support specific jurisdiction over ARC in Texas.
C. General Jurisdiction Analysis
ARC also contends that the evidence proves that it is not subject to
general jurisdiction. Tranter alleged that ARC regularly does business in Texas
because it “systematically developed an ongoing business relationship with RVS,
a Texas company whose principal place of business is in Bryan, Texas, by
regularly and continuously entering into contracts with RVS for the purpose of
purchasing goods and services in Texas.” Tranter points to the sixty-three orders
that ARC had placed with RVS from 2004 through 2015 and for which ARC paid
RVS more than $890,000 as evidence of ARC’s ongoing business relationship
with RVS.
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ARC points out that each of these orders lists North Atlantic Refrigeration
or other companies as “company representatives” of ARC. But even if we
assume that ARC made each of these purchases itself, “purchases from Texas
vendors will not alone support the exercise of general jurisdiction.” Am. Type
Culture Collection, 83 S.W.3d at 808. In Helicopteros, the Supreme Court held
that “mere purchases, even if occurring at regular intervals, are not enough to
warrant a State’s assertion of in personam jurisdiction over a nonresident
corporation in a cause of action not related to those purchase transactions.”
466 U.S. at 418, 104 S. Ct. at 1874. Thus, ARC’s purchases from RVS do not
support general jurisdiction over ARC in Texas. See id.; PHC-Minden, L.P. v.
Kimberly-Clark Corp., 235 S.W.3d 163, 171 (Tex. 2007); Am. Type Culture
Collection, 83 S.W.3d at 808.
Accordingly, we sustain ARC’s sole issue.2
IV. Conclusion
Having sustained ARC’s sole issue, we reverse the trial court’s order
denying ARC’s special appearance and render judgment dismissing Tranter’s
claims against ARC for lack of personal jurisdiction. See Tex. R. App. P. 43.2(c),
43.3.
2
We need not address the question of whether the assertion of personal
jurisdiction over ARC would offend traditional notions of fair play and substantial
justice. See Tex. R. App. P. 47.1; Furtek & Assocs., L.L.C. v. Maxus Healthcare
Partners, LLC, No. 02-15-00309-CV, 2016 WL 1600850, at *8 (Tex. App.—Fort
Worth May 26, 2016, no pet.) (mem. op.).
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/s/ Anne Gardner
ANNE GARDNER
JUSTICE
PANEL: DAUPHINOT, GARDNER, and MEIER, JJ.
DELIVERED: October 13, 2016
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