Amneal Pharmaceuticals, Inc., and Amneal Pharmaceuticals LLC v. County of Dallas ( 2024 )

Affirmed in Part, Reversed and Rendered in Part, and Opinion filed April 30,
2024.
In the
Fourteenth Court of Appeals
NO. 14-23-00202-CV
NO. 14-23-00203-CV
AMNEAL PHARMACEUTICALS, INC., AND AMNEAL
PHARMACEUTICALS LLC, Appellants
V.
COUNTY OF DALLAS, Appellee
and
AMNEAL PHARMACEUTICALS, INC., AND AMNEAL
PHARMACEUTICALS LLC, Appellants
V.
COUNTY OF BEXAR, Appellee
On Appeal from the 152nd District Court
Harris County, Texas
Trial Court Cause Nos. 2018-77098 and 2018-77066
OPINION
In separate actions, two Texas counties sued multiple companies that
allegedly manufacture, distribute, or sell opioids. Non-resident drug manufacturer
Amneal Pharmaceuticals, LLC, (Amneal) and holding company Amneal
Pharmaceuticals, Inc., (API) have appealed the denial of their special appearances,
and we consider the cases together. We conclude that Amneal’s Texas contacts
satisfy the requirements of the “stream-of-commerce-plus” test for purposeful
availment and the Counties’ claims are related to those contacts. Litigating those
claims in Texas comports with traditional notions of fair play and substantial justice.
On the other hand, API lacks Texas contacts of its own, and the Counties failed to
show that API is Amneal’s alter ego so as to impute Amneal’s contacts to it. Thus,
we affirm the denial of Amneal’s special appearance, reverse the denial of API’s
special appearance, and render judgment dismissing API without prejudice.
I. BACKGROUND
Dallas County and Bexar County sued a number of companies in the
pharmaceutical industry for allegedly oversupplying opioids, directly or indirectly
increasing the demand for them, and failing to maintain effective controls against
diversion, thereby creating a public-health crisis. The Counties assert claims that the
defendants negligently or intentionally created a public nuisance; committed
common-law fraud, negligence, and gross negligence; violated the Texas Controlled
Substances Act; and participated in a civil conspiracy.
Defendants Amneal and API (the Amneal Parties) are both Delaware
companies with their respective principal places of business in New Jersey. Each
filed verified special appearances in the cases, and the Counties filed a joint response
to each. The trial court denied the special appearances, and Amneal and API brought
these interlocutory appeals.
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II. ISSUES PRESENTED
In their first two issues, the Amneal Parties argue that the trial court erred in
denying Amneal’s special appearance because (a) it did not purposefully avail itself
of the privilege of doing business in Texas, (b) the Counties’ claims do not arise out
of or relate to Amneal’s alleged contacts with Texas, and (c) the exercise of personal
jurisdiction over Amneal does not comport with traditional notions of fair play and
substantial justice. In their third and fourth issues, the Amneal Parties challenge the
denial of API’s special appearance because (a) API does not have its own contacts
with Texas, (b) the Counties failed to prove that API is Amneal’s alter ego, and
(c) the exercise of personal jurisdiction over API does not comport with traditional
notions of fair play and substantial justice.
III. STANDARD OF REVIEW
The plaintiff bears the initial burden to plead facts bringing a nonresident
defendant within reach of the Texas long-arm statute.1 BMC Software Belg., N.V. v.
Marchand, 83 S.W.3d 789, 793 (Tex. 2002). The defendant may then challenge
personal jurisdiction by filing a special appearance. See TEX. R. CIV. P. 120a. To
prevail, the defendant must negate all bases of personal jurisdiction alleged. Kelly v.
Gen. Interior Constr., Inc., 301 S.W.3d 653, 658 (Tex. 2010). The defendant can
defeat jurisdiction on legal or factual grounds. Id. at 659. To defeat jurisdiction on
factual grounds, the defendant can present evidence contradicting the plaintiff’s
factual allegations that support personal jurisdiction, and the plaintiff can respond
with its own evidence. Id. To defeat jurisdiction on a legal basis, the defendant can
show that the facts as alleged are insufficient to establish personal jurisdiction. Id.
1
See TEX. CIV. PRAC. & REM. CODE §§ 178.041–.045.
3
Whether a court has personal jurisdiction over a defendant is a question of
law, which we review de novo. LG Chem Am., Inc. v. Morgan, 670 S.W.3d 341, 346
(Tex. 2023). However, jurisdiction may depend on the resolution of questions of
fact. BMC Software, 83 S.W.3d at 794. If the trial court does not issue findings of
fact and conclusions of law, we imply all facts that are supported by the evidence
and necessary to support the trial court’s ruling. Id. at 795. If the appellate record
includes the reporter’s and clerk’s records, then the implied factual findings can be
challenged for legal and factual sufficiency. Id. We review the trial court’s legal
conclusions de novo, but if the trial court’s ruling on the special appearance is
correct, the erroneous conclusion of law is not reversible error. Id. at 794.
IV. PERSONAL JURISDICTION
Texas courts have personal jurisdiction over a nonresident defendant when the
Texas long-arm statute provides for it, and the exercise of jurisdiction is consistent
with federal and state due-process guarantees. Spir Star AG v. Kimich, 310 S.W.3d
868, 872 (Tex. 2010). The long-arm statute authorizes Texas courts to exercise
personal jurisdiction over a nonresident defendant “doing business” in this state. See
TEX. CIV. PRAC. & REM. CODE § 17.042. The statute reaches “as far as the federal
constitutional requirements of due process will allow.” Guardian Royal Exch.
Assur., Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex. 1991). To
exercise personal jurisdiction over a nonresident defendant, due process requires that
the defendant have certain minimum contacts with the forum state “such that the
maintenance of the suit does not offend ‘traditional notions of fair play and
substantial justice.’” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154,
90 L. Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S. Ct. 339,
85 L. Ed. 278 (1940)).
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A. Minimum Contacts
The “constitutional touchstone” of personal jurisdiction over a nonresident is
“whether the defendant purposefully established ‘minimum contacts’ in the forum
State.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S. Ct. 2174, 85 L.
Ed. 2d 528 (1985) (quoting Int’l Shoe Co., 326 U.S. at 316). The “minimum-contacts
test is intended to ensure that the defendant could ‘reasonably anticipate’ being sued
in the forum’s courts.” TV Azteca v. Ruiz, 490 S.W.3d 29, 46 (Tex. 2016) (quoting
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 62
L. Ed. 2d 490 (1980)).
A nonresident defendant’s contacts with the forum state may give rise to
general or specific jurisdiction. Moki Mac River Expeditions v. Drugg, 221 S.W.3d
569, 575 (Tex. 2007). A trial court may exercise general jurisdiction over a
nonresident defendant that has continuous and systematic contacts with the forum
state, regardless of whether the defendant’s alleged liability arises from those
contacts. Id. (citing BMC Software, 83 S.W.3d at 796). The Counties have not
alleged that Amneal and API are subject to general jurisdiction in Texas.
To exercise specific jurisdiction, (1) the defendant must have engaged in some
act by which it “purposefully avails itself of the privilege of conducting activities
within the forum State,” and (2) the plaintiff’s claims must “arise out of or relate to”
those forum contacts. Ford Motor Co. v. Montana Eighth Judicial Dist. Court, 592
U.S. 351, 359, 141 S. Ct. 1017, 209 L. Ed. 2d 225 (2021). Where, as here, the
plaintiff alleges specific jurisdiction, we focus our minimum-contacts analysis on
the relationship among the defendant, the forum, and the litigation. Moki Mac, 221
S.W.3d at 576. “Specific jurisdiction is established on a claim-by-claim basis unless
all the asserted claims arise from the same forum contacts.” Cent. Petroleum Ltd. v.
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Geoscience Res. Recovery, LLC, 543 S.W.3d 901, 911 (Tex. App.—Houston [14th
Dist.] 2018, pet. denied).
1. Purposeful Availment
In determining whether a defendant’s contacts amount to purposeful
availment, (1) only the defendant’s contacts with the forum are relevant, not another
person’s unilateral activity; (2) the contacts must be purposeful rather than random,
fortuitous, or attenuated; and (3) the defendant must seek some benefit, advantage,
or profit by availing itself of the forum state. Moki Mac, 221 S.W.3d at 575.
A nonresident manufacturer or distributor seeking to serve a given state’s
market may subject itself to personal jurisdiction without entering the forum state
“by sending its goods rather than its agents.” J. McIntyre Mach., Ltd. v. Nicastro,
564 U.S. 873, 882, 131 S. Ct. 2780, 180 L. Ed. 2d 765 (2011) (plurality op.). But,
merely placing a product into the stream of commerce is not sufficient, even if the
nonresident defendant knows or can foresee that the product will end up in the forum
state. Luciano v. SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 13 (Tex. 2021).
When the defendant “has no knowledge, care, or control over where a product ends
up,” Texas courts require additional conduct––a “plus factor”––to establish
purposeful availment. State v. Volkswagen Aktiengesellschaft, 669 S.W.3d 399, 417
(Tex. 2023). This additional conduct must evince “an intent or purpose to serve the
market in the forum State.” Moki Mac, 221 S.W.3d at 577 (quoting Asahi Metal
Indus. Co. v. Superior Court of Cal., Solano Cty., 480 U.S. 102, 112, 107 S. Ct.
1026, 94 L. Ed. 2d 92 (1987) (plurality op.)). To determine whether the defendant’s
conduct is sufficient to sustain the trial court’s exercise of specific jurisdiction, we
consider both “[t]he defendant’s conduct and the economic realities of the market
the defendant seeks to serve.” Luciano, 625 S.W.3d at 13 (quoting Nicastro, 564
U.S. at 885).
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2. Relatedness
For the purpose of specific jurisdiction, the plaintiff’s claims “arise out of or
relate to” the nonresident defendant’s contacts with the forum if there is a substantial
connection” between those contacts and the operative facts of the litigation. Morgan,
670 S.W.3d at 347. Stated differently, there must be an “‘affiliatio[n] between the
forum and the underlying controversy,’ principally, [an] activity or an occurrence
that takes place in the forum State and is therefore subject to the State’s regulation.”
Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919, 131 S. Ct.
2846, 180 L. Ed. 2d 796 (2011) (quoting von Mehren & Trautman, Jurisdiction to
Adjudicate: A Suggested Analysis, 79 HARV. L. REV. 1121, 1136 (1966)) (first
alteration in original). A causal relationship is not required; the claims are
sufficiently related to the defendant’s forum contacts if, for example, the defendant
“serves a market for a product in a State and that product causes injury in the State
to one of its residents.” Ford, 592 U.S. at 355.
B. Traditional Notions of Fair Play and Substantial Justice
If the minimum-contacts requirement is satisfied, only rarely will the exercise
of jurisdiction fail to comport with traditional notions of fair play and substantial
justice. Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 154 (Tex. 2013).
If the defendant is the resident of another state within the United States, the factors
we consider in this part of the analysis include (1) the burden on the defendant,
(2) the forum state’s interests 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
several States’ shared interest in furthering fundamental substantive social policies.”
Guardian, 815 S.W.2d at 228.
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V. AMNEAL
In their first two issues, the Amneal Parties contend that Amneal lacked Texas
contacts sufficient to support personal jurisdiction; that its alleged contacts with
Texas are not related to the Counties’ claims; and that the exercise of personal
jurisdiction does not comport with traditional notions of fair play and substantial
justice. We address each in turn.
A. Minimum Contacts
Amneal begins by asserting that it was undisputed in the trial court that it “has
not manufactured, sold, or distributed opioid-containing products inside the State of
Texas.” But the Amneal Parties seem to use “inside Texas” or “within Texas” as a
sort of term of art referring only to intrastate activity and excluding interstate
activity. For example, when Amneal’s corporate representative Andrew Boyer was
asked, “Do you have employees or contracted persons whose job duties include
marketing or selling opioid-containing medications manufactured by Amneal to
group purchasing organizations located in Texas,” he answered, “I don’t have any
generic employees in Texas selling to Texas, opioids or any other product.” When
opposing counsel clarified that he was not asking where the Amneal employees were
located, Boyer answered “I don’t know that we have any contracts that we’re selling
contracts in Texas to GPOs that are controlled substances.”
But the minimum-contacts inquiry is not so restricted, for a nonresident
manufacturer or distributor seeking to serve a given state’s market may become
subject to jurisdiction there without ever entering the forum state. Nicastro, 564 U.S.
at 882. The defendant’s transmission of goods into the forum state permits the
exercise of jurisdiction if the defendant targeted the forum. Id.8
To determine if the transmission of goods supports specific jurisdiction, we
consider both “[t]he defendant’s conduct and the economic realities of the market
the defendant seeks to serve.” Luciano, 625 S.W.3d at 13 (quoting Nicastro, 564
U.S. at 885). “The principal inquiry in cases of this sort is whether the defendant’s
activities manifest an intention to submit to the power of a sovereign.” Nicastro, 564
U.S. at 882. We therefore begin by looking at the Texas opioid market and determine
whether Amneal’s actions manifest the intention to serve that market and to submit
to the authority of the State of Texas.
To explain how the opioid market is served, the Counties presented evidence
from Dr. Robert B. Handfield, who is an expert in supply-chain management and
has researched and taught graduate classes on the topic for over thirty-three years.
He is the author of several books on the subject, including two that deal specifically
with biopharmaceutical supply-chain management. He has also served as the supply-
chain consultant to Cardinal Health, one of Amneal’s three largest customers, who
collectively comprise 90% of Amneal’s sales. According to Dr. Handfield, drug
manufacturers typically sell and distribute their products to a
“wholesaler/distributor”––“the Big Three” being McKesson Corporation,
AmerisouceBergen, and Cardinal Health––or to a chain pharmacy that serves as its
own distributor, such as Walgreens or CVS. From there, the drugs are sold or
delivered to a retail pharmacy, which sells and dispenses the drug to the patient.
Because most pharmacies carry only a small inventory of a wide range of
drugs, they rely on wholesalers or distributors like those named above to supply and
deliver on a “just-in-time” basis. To meet that need, pharmaceutical wholesalers and
distributors use a nationwide network of over 200 regional distribution centers
owned and operated by wholesalers and chain pharmacies. These distribution centers
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are able to serve the local pharmacies in their respective geographical areas in the
shortest time and for the least cost.
Amneal largely disclaimed any knowledge about the pharmaceutical supply
chain. Although Boyer testified that ninety percent of its sales are to three
distributors––McKesson, AmerisourceBergen, and Cardinal Health––he said that
Amneal representatives call on them, respectively, in Bern, Switzerland; London,
England; and Foxboro, Massachusetts, after which Amneal ships products to the
location the customer specifies. Boyer denied knowing much about Amneal’s
products after they left the factory. He testified that he does not know how someone
from a customer’s distribution site would place an order. He stated that he does not
know why “the Big Three” have multiple distribution centers around the country,
and he is not aware that anyone at Amneal knows what geographic areas those
distribution centers serve: “What they do, how they do it, why they do it, I don’t
know.” But, Dr. Handfield pointed out that Amneal’s co-CEO Chintu Patel is a
pharmacist and a former senior-level manager for Eckerd Pharmacy, and thus,
Amneal would know that pharmaceutical distribution areas serve the nearby
geographical area. Amneal accordingly would know that drugs shipped to Texas
were primarily dispensed in Texas, and perhaps in neighboring states as well.
As expected, Amneal’s prescription drugs, including opioids, are in fact sold
in Texas using this supply-chain network. We know this because drug manufacturers
and distributors report transactions of controlled substances to the Drug Enforcement
Administration (DEA) by using the “Automation of Reports and Consolidated
Orders System” (ARCOS). ARCOS data from 2006 to 2014 is publicly available,
and according to the Counties’ experts who analyzed this data, hundreds of millions
of dosage units of Amneal opioids were shipped to Texas during that time. These
were sent to the regional distribution centers of “the Big Three” as well as to those
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of chain pharmacies such as Walgreens and CVS and to those of chain grocery
stores, such as HEB. Measured by the potency of those opioids in “morphine
milligram equivalents,” the majority of Amneal opioids shipped to regional
distribution centers in Texas were ultimately sent to pharmacies in Texas.
Amneal maintains that this is merely fortuitous and that it just delivered the
drugs where it was told to do so, and that it did not know, care, or control what
happened to its products. But the evidence supports the trial court’s determination
that Amneal intentionally sought to serve the Texas market, and to that end, it
voluntarily submitted to state’s authority. To cite one example, Amneal contracts
directly with H.E.B. Grocery, a Texas company with its headquarters in Bexar
County. H.E.B. has no stores or pharmacies in any state other than Texas, and 100%
of the opioids Amneal sent to H.E.B. were sent to H.E.B.’s distribution center in
Bexar County for distribution and dispensing in Texas.
The Texas market for prescription drugs also includes millions of Texas
residents who receive benefits from the state’s Children’s Health Insurance Program
(CHIP) or state Medicaid. Pharmacists who fill prescriptions for these customers do
not charge them and instead are reimbursed by those programs––but only if the
specific drug that was dispensed is listed on the Texas Drug Code Index. See 1 TEX.
ADMIN. CODE § 354.1831. A drug company that wants a product to be included in
the Index must apply to the Texas Health and Human Services Commission to add
the drug. Id. § 354.1921. Boyer testified that Amneal voluntarily applies to have all
of its drugs included in the Index, because otherwise, “our customers that we sell to,
our distributors, will not do business with us.”
Boyer explained that Amneal’s customers assume “that if you’re going to bid
for a product on their formulary that you will have the necessary regulatory
applications filled out.” And “the necessary regulatory applications” include the
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application to the Texas Health and Human Services Commission to add the product
to the Texas Drug Code Index: “What I know is that any of the customers that we
do business with, that if we don’t get listed on the Texas Drug Code Index they will
not utilize our product.” From Boyer’s testimony, it is clear that if Amneal were not
able to serve the Texas market, it would not have any other market in the United
States: “[I]n order for us to do any business in any state with Walgreens, Walmart,
Rite Aid, CVS, the wholesalers, as a course of business we need to file both federally
as well as with the State of Texas.” Boyer agreed that if Amneal’s products were not
on the Texas Drug Code Index, then Amneal “couldn’t open up the market in any
state” “[i]ncluding the State of Texas.”
To have its products included in the Index, Amneal complied with state
regulations requiring it to provide a certificate of liability insurance, to provide
pricing information, and to identify the manufacturer and the distributor. Moreover,
Amneal itself repeatedly has obtained a Texas license as a wholesale drug
distributor.2
Amneal argues that these conducts should not count, because the company
complies with the regulatory requirements of all of the states. But in the
jurisdictional inquiry, only the defendant’s contacts with the forum state are relevant.
Moki Mac, 221 S.W.3d at 575. And if the claim at issue “arises from the efforts of
the manufacturer or distributor to serve, directly or indirectly, the market for its
product in [several or all] other States, it is not unreasonable to subject it to suit in
one of those States.” Ford, 592 U.S. at 363 (quoting World-Wide Volkswagen, 444
U.S. at 363) (alterations in original). Amneal admits that it voluntarily applies to
2
Although Amneal contends that it has never used such a license, the Counties presented
evidence that Amneal identified itself as the distributor on the label of one of its opioid-containing
drugs.
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have its products included on the Texas Drug Code Index. Amneal’s relationship
with Texas was not created by another; rather its relationship with Texas “arise[s]
out of contacts that the ‘defendant himself’ create[d] with the forum State.” Walden
v. Fiore, 571 U.S. 277, 283, 134 S. Ct. 1115, 188 L. Ed. 2d 12 (2014) (quoting
Burger King, 471 U.S. at 475) (emphasis in original)). Finally, Amneal benefits from
these purposefully created contacts, for none of its customers would contract with
Amneal without them. As a result of these contacts, an average of more than a quarter
million dosage units of Amneal opioids were sold in Texas every day from
December 1, 2010, to November 2, 2022.
We conclude that the evidence supports the trial court’s implied finding that
Amneal’s contacts with Texas satisfy the requirement of purposeful availment.
B. Relatedness
Amneal next contends that there is not a “substantial connection” between
Amneal’s alleged contacts and the operative facts of the litigation because the
litigation does not arise from Amneal’s “in-state conduct.” According to Amneal,
the Counties’ claims are based on false allegations that Amneal marketed and
promoted opioids to the Counties’ physicians and residents.
But the Counties also alleged that its damages were caused in part by
Amneal’s conduct in oversupplying opioids and in failing to maintain effective
systems of control against diversion. The Counties produced evidence that tens of
millions of dosage units of Amneal opioids have been dispensed to Texas residents
who receive Medicaid; that hundreds of thousands of each County’s residents are
enrolled in state Medicaid or CHIP; and that the populations served by these
programs have the highest rates of overdose deaths caused by opioids. The Counties
additionally produced expert evidence that, of the opioids dispensed for non-cancer
chronic pain, 88% of those dispensed in Bexar County and 89% of those dispensed
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in Dallas County were “medically unjustifiable.” They contend that this oversupply
caused increases in accidental overdoses, accidental deaths, harm to those with
opioid-use disorder and to their families, increased health-care costs, diversion of
drugs into criminal markets, and other social ills.
We conclude that the evidence supports the trial court’s determination that
there is a substantial connection between Amneal’s Texas contacts and the operative
facts of the litigation. Because all of the Counties’ claims against Amneal rely on
the same contacts and operative facts, we do not discuss them on a claim-by-claim
basis but reach the same conclusion as to all of the claims.
C. Traditional Notions of Fair Play and Substantial Justice
We next determine whether this is one of the rare instances in which the
exercise of personal jurisdiction would not comport with traditional notions of fair
play and substantial justice, even though the other jurisdictional requirements are
satisfied. To do so, we examine the five factors previously discussed.
The Counties concede that the first factor––the burden on the defendant––
favors Amneal.
Amneal argues that the second factor––the forum state’s interests in
adjudicating the dispute––favors it because it has not purposefully availed itself of
the privilege of conducting activities “within Texas.” We have rejected Amneal’s
purposeful-availment arguments for the reasons stated above. We instead conclude
that this factor favors the Counties, because, inter alia, “Texas has a significant
interest in exercising jurisdiction over controversies arising from injuries a Texas
resident sustains from products that are purposefully brought into the state and
purchased by Texas companies.” Spir Star, 310 S.W.3d at 879.
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The third factor––the plaintiffs’ interest in obtaining convenient and effective
relief also favors the Counties. Not only are their causation and damage witnesses in
Texas, but their cases are part of the multidistrict litigation, In re Texas Opioid
Litigation, MDL No. 2018-63597, in which similar suits by multiple Texas counties
will be heard by the same court. The multi-district litigation began in 2018, so the
trial court already has years of familiarity with such cases.
Amneal argues that the fourth factor––“the interstate judicial system’s interest
in obtaining the most efficient resolution of controversies”––favors it because
Amneal “did not undertake any activities within Texas.” Again, this seems to
reiterate Amneal’s purposeful-availment arguments, which we have rejected.
Amneal also argues that any inefficiencies in beginning the cases anew in a different
jurisdiction were caused by the Counties’ delay in naming Amneal as a defendant.
To this, Amneal adds that the trial court’s familiarity with the issues is limited to
certain inapplicable (and now dismissed) allegations that the defendants promoted
and advertised opioids to physicians. Nevertheless, we agree with the Counties that
the most efficient resolution of the cases can be had by maintaining their status as
part of the existing multidistrict litigation.
No party has addressed the fifth factor, which concerns “the several States’
shared interest in furthering fundamental substantive social policies.” We are
unaware of a difference in the “fundamental substantive social policies” of Texas
and any other state concerning the matters at issue in this case.
After considering the relevant factors, we conclude that the trial court’s
exercise of personal jurisdiction over Amneal comports with traditional notions of
fair play and substantial justice. We overrule Amneal’s first two issues, and we
affirm the trial court’s denial of Amneal’s special appearance.
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VI. API
Dallas County alleged that API is a Delaware corporation with its principal
place of business in New Jersey, and that, on information and belief, API is a
pharmaceutical manufacturer and distributor that is licensed to do business in Texas
and actually does substantial business in Texas, where it distributes pharmaceuticals
to retail pharmacies and institutional providers. To this, Bexar County adds the
allegation that API sells and distributes opioids in Texas “by virtue of being on the
formulary for Texas Medicaid patients.” Aside from these allegations of direct
contacts with Texas, Bexar County also alleges that API is the managing member of
Amneal and financially benefitted from its direction to Amneal to extend the sale
and distribution of pharmaceuticals across the country, including Texas. From such
allegations, both Counties have implied that API is Amneal’s alter ego and seek to
impute Amneal’s Texas contacts to API.
A. API’s Contacts with Texas
In its special appearance, API first addressed the allegations that it has direct
contacts with Texas. Boyer declared that API is a holding company that does not
manufacture and sell prescription medications; that it has not manufactured,
promoted, distributed, or sold any prescription medications inside the State of Texas;
that it has no prescription medications listed on the Texas Medicaid formulary; that
it is not registered with the Secretary of State to do or transact business in Texas;
and that it has never had a regular place of business in Texas. The Counties did not
respond to this part of API’s special appearance and offered no controverting
evidence that API itself has sufficient contacts with Texas to support personal
jurisdiction. We therefore conclude that there is legally insufficient evidence that
API has minimum contacts of its own that support personal jurisdiction.
Consequently, the trial court could exercise jurisdiction over API only if Amneal’s
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contacts can be imputed to API as Amneal’s alter ego. In the Amneal Parties’ third
and fourth issues, they argue that the Counties failed to overcome the presumption
that the two companies are separate and that exercising personal jurisdiction over
API would not comport with traditional notions of fair play and substantial justice.
B. Imputing Amneal’s Contacts to API
Texas law presumes that separate companies are distinct. PHC-Minden, L.P.
v. Kimberly-Clark Corp., 235 S.W.3d 163, 173 (Tex. 2007). To “fuse” a parent and
subsidiary for jurisdictional purposes, the parent must control the internal business
operations and affairs of the subsidiary to a greater extent than that normally
associated with common ownership and directorship. BMC Software, 83 S.W.3d at
799. To treat the two as a single entity, the evidence must show that they have
“cease[d] to be separate.” Id. The party seeking to overcome the presumption of
distinctness bears the burden of proof. Id.
In determining whether to treat the two companies as one for jurisdictional
purposes, courts may consider, inter alia, (1) the amount of the subsidiary’s stock
owned by the parent corporation, (2) the existence of separate headquarters, (3) the
observance of corporate formalities, and (4) the degree of the parent’s control over
the general policy and administration of the subsidiary. PHC-Minden, 235 S.W.3d
at 175 (citing 4A Wright & Miller, FEDERAL PRACTICE & PROCEDURE § 1069.4). But
above all, there must be evidence that the parent exercises “abnormal” or “atypical”
control over the subsidiary. BMC Software, 83 S.W.3d at 800 (“abnormal control”);
All Star Enter., Inc. v. Buchanan, 298 S.W.3d 404, 423 (Tex. App.—Houston [14th
Dist.] 2009, no pet.) (same); PHC-Minden, 235 S.W.3d at 176 (referring to both
“abnormal control” and “atypical control”); TMX Fin. Holdings, Inc. v. Wellshire
Fin. Servs., LLC, 515 S.W.3d 1, 9 (Tex. App.—Houston [1st Dist.] 2016, pet.
dism’d) (same). “The first three factors evaluate whether corporate structure is such
17
that excessive control could occur, while the fourth measures actual control.” TMX
Fin. Holdings, 515 S.W.3d at 8.
To impute Amneal’s contacts to API, the Counties rely on the evidence
discussed below.
1. Extent of Ownership
Regarding the first factor concerning extent of ownership, the Counties rely
on API’s 2021 Form 10-K, in which API stated that it is a holding company whose
principal asset is its 49.6% interest in Amneal. Because API holds only a minority
interest, this factor does not support a determination that API is Amneal’s alter ego.
2. Common Address
Regarding the second factor, the Counties correctly point out that API and
Amneal have the same New Jersey address. But, shared office space is insufficient
to overcome the presumption that the companies are distinct. Their common address
is merely a circumstance that could lead to an abnormal degree of parental control
over a subsidiary, without indicating whether such an abnormal degree of control
was actually exercised. See TMX Fin. Holdings, 515 S.W.3d at 9; All Star, 298
S.W.3d at 423.
3. Observance of Corporate Formalities
As for the third factor, none of the evidence on which the Counties rely
supports their assertion that “the parties do not appear to observe corporate
formalities.” Ultimately, that evidence shows no more than that the names of both
companies begin with “Amneal Pharmaceuticals,” but the fact that two companies
share a common name does not affect the jurisdictional inquiry. PHC-Minden, 235
S.W.3d at 175.
18
The Counties begin by stating that, at their depositions, Boyer and Jennifer
Winterhalter, Amneal’s Vice President of Revenue Management, could not
distinguish between Amneal and API. Boyer and Winterhalter both testified that they
work for “Amneal Pharmaceuticals.” Boyer stated that he is the “[e]xecutive vice
president, chief commercial officer for the generic business of Amneal
Pharmaceuticals,” and Winterhalter testified, “I’m the vice president of revenue
management with Amneal Pharmaceuticals.” When asked to identify more
specifically which Amneal entity was each witness’s employer, neither could
answer.
But as the Counties themselves pointed out in their response to Amneal’s
special appearance, “Amneal Pharmaceuticals” is the registered alternate name for
Amneal Pharmaceuticals, LLC––the operating company that actually manufactures
drugs.3 Consistent with that, Boyer stated in his declarations in support of both
Amneal’s and API’s special appearances that he is “the Executive Vice President,
Chief Commercial Office – Generics of Amneal Pharmaceuticals LLC.” Similarly,
in certifying information for the Texas Drug Code Index, Winterhalter identified
herself as “Vice President, Revenue Management” for “Amneal Pharmaceuticals
LLC.” Indeed, all of Boyer’s and Winterhalter’s references to “Amneal” or “Amneal
Pharmaceuticals” can be traced to Amneal Pharmaceuticals LLC, and none can be
traced to API.4
3
The name is registered in New Jersey, which is Amneal’s principal place of business. A
New Jersey alternate name appears to be analogous to a Texas assumed name or “d/b/a.” Compare
N.J. Stat. § 42:2C-9 with the Texas Assumed Business or Professional Name Act, TEX. BUS. &
COM. CODE § 71.001–.203.
4
For example, Winterhalter testified that “Amneal” had contracts with several companies,
and the Counties introduced the affidavit of expert witness Dr. Pengchong (“Mike”) Yan that
opioids were shipped to Texas locations of each of those companies by “Amneal Pharmaceuticals,
LLC.” There is no evidence that API had contracts with any of the companies.
19
The Counties also represented to the trial court that Winterhalter testified “that
she did not know whether all the subdivisions were just treated as one entity, but all
revenue was treated as ‘Amneal’s’, ‘regardless of which entity it comes from.’” But
the actual exchange (omitting objections) was as follows:
Q: Is there––are there multiple Amneal corporations and
partnerships?
...
A: So I’m aware of multiple Amneal entities. I’m not sure if they’re
corporations or partnerships, or what the legal structure is.
Q: Which Amneal entity do you work for?
A: I honestly couldn’t say. I -- I refer to Amneal as Amneal.
Q: And is that the way Amneal functions, all of the entities,
whatever their corporate status, are considered one entity,
Amneal?
...
A: Yeah, I couldn’t say in all aspects in my area. It’s all revenue,
regardless of which entity it comes from.
Winterhalter does not mention “subdivisions” or state how revenue is treated. There
is no evidence that she manages revenue for API; in fact, there is no evidence that
she performs any function at all for API or has any knowledge of API’s workings.
To the contrary, there is evidence in the record of at least twenty entities that begin
with the word “Amneal,” but there is no evidence that the “multiple Amneal entities”
of which Winterhalter was aware included API. Under the equal-inference rule,
neither we nor the trial court could reasonably infer that any of the witnesses’
references to “Amneal” or “Amneal Pharmaceuticals” refer to API. See All Star, 298
S.W.3d at 423–24 (because the names of a number of affiliated entities began with
the words “Antero Resources,” the equal-inference rule prevented court from
inferring that references to “Antero,” “Antero Resources,” or “Antero Resources
Corp.” referred to “Antero Resources Piceance Corporation”).
20
The Counties identified no other evidence to support an implied finding that
API failed to observe corporate formalities.
4. Extent of Control
As evidence of the fourth and most important factor––the extent to which API
controls Amneal—the Counties again rely on API’s 2021 Form 10-K, in which API
stated, “Although [API] has a minority economic interest in Amneal, it is Amneal’s
sole managing member, having the sole voting power to make all of Amneal’s
business decisions and control its management.” As the Amneal Parties point out,
this statement addresses only the power to control Amneal’s management, not the
actual exercise of control. Moreover, it is not sufficient that one company exerts
commercial and financial control over another, where the formalities of separateness
are maintained. Id. at 422 (discussing Cannon Mfg. Co. v. Cudahy Packing Co., 267
U.S. 333, 45 S. Ct. 250, 69 L. Ed. 634 (1925)). But as we have seen, there is no
evidence to overcome the presumption that corporate formalities were observed.
We agree with the Amneal Parties that the Counties failed to overcome the
presumption that API is a company separate from Amneal and not its alter ego. We
sustain the Amneal Parties’ third issue, and in light of our conclusion that Amneal’s
Texas contacts cannot be imputed to API, we do not reach the Amneal Parties’ fourth
issue, in which they argue that the exercise of personal jurisdiction over API does
not comport with traditional notions of fair play and substantial justice.
VII. CONCLUSION
Amneal’s Texas contacts meet the “stream-of-commerce-plus” test for
purposeful availment. Because the Counties’ claims arise out of or relate to those
contacts and a Texas court’s exercise of personal jurisdiction would not offend
traditional notions of fair play and substantial justice, we affirm the trial court’s
21
denial of Amneal’s special appearance. API, however, does not have sufficient
contacts of its own to support personal jurisdiction, and the Counties failed to
overcome the presumption of separateness so as to impute Amneal’s contacts to API.
Thus, we reverse the denial of API’s special appearance, and we render judgment
dismissing the Counties’ claims against API without prejudice.5
/s/ Tracy Christopher
Chief Justice
Panel consists of Chief Justice Christopher and Justices Wise and Wilson.
5
Although the Amneal Parties prayed for dismissal with prejudice, that disposition would
function as a judgment on the merits. Mossler v. Shields, 818 S.W.2d 752, 754 (Tex. 1991) (per
curiam). But, the merits of the Counties’ claims are not before us. For the reasons stated in Nguyen
v. Desai, 132 S.W.3d 115, 117–19 (Tex. App.—Houston [14th Dist.] 2004, no pet.), dismissal
without prejudice is the appropriate relief, and although that is not the disposition prayed for, we
are authorized to grant “lesser included relief.” Gardner v. U.S. Imaging, Inc., 274 S.W.3d 669,
671 n.1 (Tex. 2008) (per curiam).
22