Grupo Mexico S.A.B. De C v. v. Mt. McKinley Insurance Company and Everest Reinsurance Company

NUMBER 13-17-00134-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
GRUPO MEXICO S.A.B. DE C.V., Appellant,
v.
MT. MCKINLEY INSURANCE COMPANY AND
EVEREST REINSURANCE COMPANY, Appellees.
On appeal from the 319th District Court
of Nueces County, Texas.
MEMORANDUM OPINION
Before Justices Benavides, Longoria, and Perkes
Memorandum Opinion by Justice Perkes
Appellees Mt. McKinley Insurance Company and Everest Reinsurance Company
(collectively Mt. McKinley) filed suit in Texas against appellant Grupo Mexico S.A.B. de
C.V. (Grupo), a foreign corporation, and two of its subsidiaries, Americas Mining
Corporation (AMC) and Asarco, Inc. (Asarco), also foreign corporations. In this
interlocutory appeal, Grupo contends the trial court erred in denying its special
appearance because: (1) the trial court lacks general jurisdiction over Grupo; (2) the trial
court lacks specific jurisdiction over Grupo based on Grupo’s contacts; (3) Asarco’s
contacts cannot be imputed to Grupo under an alter ego theory; and (4) Mt. McKinley’s
motion to strike Grupo’s special appearance was not an otherwise legitimate basis to
deny Grupo’s special appearance. We affirm.
I. BACKGROUND 1
In 1999, Grupo, an international mining concern based in Mexico City, acquired
Asarco in a leveraged buyout and subsequently formed AMC as a wholly-owned
subsidiary to hold its shares of Asarco. Asarco, incorporated in New Jersey and
headquartered in Arizona, had been involved in the mining industry, both domestically
and internationally, for over a century. However, due to a confluence of factors, including
increased debt load after the leveraged buyout, falling copper prices, and mounting
environmental and asbestos liabilities, 2 Asarco found itself unable to pay its debts after
Grupo’s acquisition, including invoices from vendors critical to Asarco’s daily operations.
The exception to Asarco’s debt crisis was its controlling interest in the publicly
traded Southern Peru Copper Company (SPCC), which remained profitable in the face of
low copper prices and contributed significantly to Asarco’s operating cash flow. 3
1 For a detailed background, see Asarco, LLC v. Americas Mining Corp., 396 B.R. 278 (S.D. Tex.
2008).
2 “ASARCO and its subsidiaries were defendants in over 6,000 lawsuits with over 25,000 plaintiffs.”
Asarco, LLC, 396 B.R. at 373.
3“Between 1999 and 2002, SPCC contributed $650 million to ASARCO’s operating cash flow, and
without the stock, ASRCO would have had a negative cash flow.” Asarco, LLC, 396 B.R. at 374.
2
Recognizing SPCC’s value and its vulnerability to Asarco’s creditors, Grupo sought to
transfer Asarco’s shares in SPCC to AMC (the “SPCC Transfer”). Grupo was concerned
that the SPCC Transfer might be challenged in court as a fraudulent transfer by Asarco’s
creditors, so it hired outside accounting and law firms to shepherd the deal.
Inbursa, a banking company in Mexico, agreed to loan AMC $310 million to fund
a portion of the transaction; however, as a condition of the financing, Asarco was required
to use a portion of the proceeds from the SPCC Transfer to pay $100 million in unsecured
Yankee Bonds owned by Inbursa. But Asarco needed to raise an additional $50 million
to pay off the Yankee Bonds, and thus began monetizing assets. This included filing a
lawsuit against Mt. McKinley and other insurers in Nueces County, Texas, seeking
payment under insurance policies for asbestos claims made against Asarco (“Coverage
Lawsuit”). Grupo was not a party to that litigation. On March 20, 2003, Asarco and Mt.
McKinley entered into a “Settlement Agreement, Release and Policy Buy–Back” whereby
Mt. McKinley agreed to pay $12 million in exchange for Asarco’s release of all claims
against it and the voiding of the insurance policy (“Settlement Agreement”). Under the
Settlement Agreement, Asarco agreed to defend and indemnify Mt. McKinley from any
claims arising from the settlement. “Asarco” was defined under the Settlement
Agreement to include Grupo.
The SPCC Transfer was completed eleven days later. The structure of the deal
allowed Asarco to retire a significant amount of debt, including a $450 million line of
revolving credit secured by Grupo, but left Asarco with less cash on hand than before the
transfer, and without its most valuable cash-generating asset.
3
In 2005, Asarco and several of its wholly owned subsidiaries filed for bankruptcy.
Two years later, Asarco initiated an adversary proceeding against Mt. McKinley, seeking
to avoid the Settlement Agreement as a constructive fraudulent transfer. See 11 U.S.C.
§ 548 (stating that the bankruptcy trustee “may avoid any transfer . . . of an interest of the
debtor in property . . . if the debtor . . . received less than a reasonably equivalent value
in exchange for such transfer . . . and . . . was insolvent on the date that such transfer
was made . . . or became insolvent as a result of such transfer”). Mt. McKinley
demanded that Grupo defend and indemnify it in the adversary proceeding under the
terms of the Settlement Agreement. When Grupo refused, Mt. McKinley filed the
underlying suit in Nueces County, Texas against Grupo, Asarco, and AMC, seeking a
declaratory judgment of Grupo’s obligations under the Settlement Agreement and
damages for the amount it incurred in connection with the adversary proceeding.
AMC and Asarco made general appearances, but Grupo filed a special
appearance, challenging Mt. McKinley’s allegations of general and specific jurisdiction.
See TEX. R. CIV. P. 120a. Mt. McKinley alleged that Asarco’s Texas contacts could be
imputed to Grupo under an alter ego theory for purposes of establishing both general and
specific jurisdiction. Mt. McKinley additionally alleged that Grupo’s own contacts with
Texas were sufficient to establish specific jurisdiction.
The trial court initially granted Grupo’s special appearance and Mt. McKinley filed
an interlocutory appeal. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(7); Mt.
McKinley Ins. Co. v. Grupo Mexico, S.A.B. de C.V. (Grupo I), No. 13-12-00347-CV, 2013
WL 1683641 (Tex. App.—Corpus Christi–Edinburg Apr. 18, 2013, no pet.) (mem. op.).
4
Based on the record before us, we determined that the trial court did not err in granting
the special appearance. Grupo I, 2013 WL 1683641, at *7. We reversed and
remanded, however, to allow for additional jurisdictional discovery. Id. at *11. We
concluded that the trial court abused its discretion by denying Mt. McKinley’s motion for
a continuance because Grupo had repeatedly obstructed Mt. McKinley’s efforts to obtain
even the most basic jurisdictional discovery. Id. at *10.
On remand, despite protracted discovery disputes, a voluminous jurisdictional
record was ultimately produced. 4 Upon reurging, the trial court denied Grupo’s special
appearance and now Grupo seeks interlocutory review of that decision. See TEX. CIV.
PRAC. & REM. CODE ANN. § 51.014(a)(7).
II. STANDARD OF REVIEW & APPLICABLE LAW
A. Standard of Review
Whether a trial court may exercise personal jurisdiction over a nonresident
defendant is a question of law we review de novo. Searcy v. Parex Res., Inc., 496
S.W.3d 58, 66 (Tex. 2016) (citing Am. Type Culture Collection, Inc. v. Coleman, 83
S.W.3d 801, 805–06 (Tex. 2002)). The plaintiff bears the initial burden of alleging facts
that establish the trial court’s jurisdiction. Id. (citing Retamco Operating, Inc. v. Republic
Drilling Co., 278 S.W.3d 333, 337 (Tex. 2009)). The burden then shifts to the defendant
4 A significant portion of the discovery produced on remand arises from another adversary
proceeding during Asarco’s bankruptcy in which Asarco sought to avoid the SPCC Transfer as a fraudulent
conveyance. See generally Asarco, LLC, 396 B.R. 278. After a four-week bench trial, United States
District Judge Andrew S. Hanen handed down a 166-page opinion in which he ultimately concluded that
the SPCC Transfer constituted an actual fraudulent conveyance. Id. at 394. As we will explain below,
many of Judge Hanen’s findings and conclusions have no bearing on our jurisdictional analysis in this case.
Nevertheless, the proceeding produced copious amounts of evidence that Mt. McKinley relies upon to
support its jurisdictional allegations.
5
to negate all bases for personal jurisdiction that exist in the plaintiff’s pleading. Id. (citing
Republic Drilling, 278 S.W.3d at 337). “When, as here, the trial court did not issue
findings of fact and conclusions of law, all relevant facts that are necessary to support the
judgment and supported by evidence are implied.” Old Republic Nat’l Title Ins. Co. v.
Bell, 549 S.W.3d 550, 558 (Tex. 2018) (citing BMC Software Belgium, N.V. v. Marchand,
83 S.W.3d 789, 795 (Tex. 2002)).
B. Personal Jurisdiction
Under Texas’s long-arm statute, Texas courts may exercise personal jurisdiction
over a nonresident defendant that “does business” in Texas. See TEX. CIV. PRAC. & REM.
CODE ANN. §§ 17.041, .042; PHC-Minden, L.P., v. Kimberly-Clark Corp., 235 S.W.3d 163,
166 (Tex. 2007). Because the exercise of personal jurisdiction over a nonresident
implicates due process concerns, the Texas long-arm statute reaches only “as far as the
federal constitutional requirements of due process will permit.” PHC-Minden, 235
S.W.3d at 166 (quoting U-Anchor Adver., Inc. v. Burt, 553 S.W.2d 760, 762 (Tex. 1977));
see Goodyear Dunlop Tires Operations, S.A., v. Brown, 564 U.S. 915, 918 (2011) (“A
state court’s assertion of jurisdiction exposes defendants to the State’s coercive power,
and is therefore subject to review for compatibility with the Fourteenth Amendment’s Due
Process Clause.” (citing Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945))).
Accordingly, in addition to its own decisions, the Supreme Court of Texas relies on
precedent from the United States Supreme Court and other federal courts. PHC-
Minden, 235 S.W.3d at 166.
6
The exercise of personal jurisdiction satisfies due process if (1) the nonresident
defendant established minimum contacts with the forum state and (2) the exercise of
jurisdiction comports with traditional notions of fair play and substantial justice. Id. (citing
Int’l Shoe, 326 U.S. at 316). When a corporate, nonresident defendant purposefully
avails itself of the privileges and benefits of conducting business in a foreign jurisdiction,
its contacts are sufficient to confer the forum with personal jurisdiction. Moncrief Oil Int’l,
Inc. v. OAO Gazprom, 414 S.W.3d 142, 150 (Tex. 2013) (citing Republic Drilling, 278
S.W.3d at 338)). Only the defendant’s purposeful contacts are relevant to the inquiry,
unilateral activity of another party or third person, as well as random, isolated, or fortuitous
contacts by the defendant, are insufficient to prove the defendant purposefully availed
itself. Cornerstone Healthcare Grp. Holding, Inc. v. Nautic Mgmt. VI, LP, 493 S.W.3d 65,
70 (Tex. 2016) (citing Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 785
(Tex. 2005)).
Once minimum contacts have been established, the exercise of jurisdiction will
typically comport with traditional notions of fair play and substantial justice. Spir Star AG
v. Kimich, 310 S.W.3d 868, 878 (Tex. 2010) (citing Guardian Royal Exch. Assurance, Ltd.
v. English China Clays, PLC, 815 S.W.2d 223, 231 (Tex. 1991)). The defendant must
present “a compelling case that the presence of some consideration would render
jurisdiction unreasonable.” Id. at 879 (quoting Guardian Royal, 815 S.W.2d at 231).
Those considerations include: (1) the burden on the defendant; (2) the forum state’s
interest in adjudicating the dispute; (3) the plaintiff’s interest in obtaining convenient and
effective relief; (4) the international judicial system’s interest in obtaining the most efficient
7
resolution of controversies; and (5) the shared interest of the several nations in furthering
fundamental substantive social policies. Id. at 878 (quoting Guardian Royal, 815 S.W.2d
at 231).
There are two types of personal jurisdiction, specific and general. Id. at 71; see
generally Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984)
(adopting the terms “general” and “specific” to describe the two types of personal
jurisdiction). Specific jurisdiction is appropriate when the plaintiff’s claim arises from or
relates to the defendant’s contacts with the forum state. Cornerstone Healthcare, 493
S.W.3d at 71 (citing Spir Star, 310 S.W.3d at 873). Thus, the central inquiry under
specific jurisdiction is the relationship between the defendant, the forum state, and the
plaintiff’s claim. Id. at 71 (citing Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569,
575–76 (Tex. 2007)).
General jurisdiction, on the other hand, does not require a nexus between the
defendant’s in-state contacts and the plaintiff’s claim; instead, the focus is solely on the
defendant’s contacts with the forum. Helicopteros, 466 U.S. at 414 (citing Perkins v.
Benguet Consol. Mining Co., 342 U.S. 437 (1952)); PHC-Minden, 235 S.W.3d at 168.
Without that connection, however, traditional notions of fair play and substantial justice
become tenuous; therefore, to counterbalance that tension, our supreme court has long
recognized that general jurisdiction requires “a more demanding minimum contacts
analysis than for specific jurisdiction,” describing the necessary contacts with Texas as
“continuous and systematic” or “substantial activities.” CSR, Ltd. v. Link, 925 S.W.2d
591, 595 (Tex. 1996) (citations omitted).
8
Until recently, the United States Supreme Court had “given little guidance on the
appropriate inquiry for general jurisdiction.” PHC-Minden, 235 S.W.3d at 167. Then, in
Goodyear Dunlop Tires Operations, S.A., v. Brown, the Court confirmed that general
jurisdiction imposes a substantially higher standard than specific jurisdiction, requiring the
defendant’s contacts with the forum to be so pervasive and constant “as to render [the
defendant] essentially at home in the forum state.” 564 U.S. 915, 919 (2011). In other
words, to establish general jurisdiction over an out-of-state corporate defendant, the
defendant’s in-state activities must be equivalent to the defendant incorporating or
establishing a principal place of business in the forum. Id. at 924.
A few years later, in Daimler AG v. Bauman, the Supreme Court expounded on
what it means to be “essentially at home” by specifically rejecting the idea that maintaining
a “substantial, continuous, and systematic course of business” in the forum is sufficient
to confer general jurisdiction. 571 U.S. 117, 138 (2014); Old Republic, 549 S.W.3d at
565 (recognizing “essentially at home” as the new standard for general jurisdiction).
Although it declined to foreclose the possibility that a forum could exercise general
jurisdiction over an out-of-state corporate defendant, the Court acknowledged that it
would require “an exceptional case.” Daimler, 571 U.S. at 139 n.19.
III. ANALYSIS
A. General Jurisdiction
By its first issue, Grupo contends that the trial court’s denial of its special
appearance cannot be sustained on Mt. McKinley’s allegations of general jurisdiction
because they are legally insufficient under Daimler to meet the “essentially at home”
9
standard. See 571 U.S. at 138; Goodyear, 564 U.S. at 919; Old Republic, 549 S.W.3d
at 565. Mt. McKinley imputes Asarco’s contacts to Grupo under an alter ego theory to
establish the trial court’s general jurisdiction over Grupo. It points to Asarco’s general
appearance and our previous comment in Grupo I that “[i]t is undisputed that Asarco and
AMC have continuous and systematic contacts with Texas such that the exercise of
general jurisdiction over those entities is proper.” 2013 WL 1683641 at *5. Mt.
McKinley reasons that if the trial court has general jurisdiction over Asarco, and Asarco’s
contacts are imputed to Grupo under an alter ego theory, then the trial court necessarily
has general jurisdiction over Grupo. We disagree. Even if we assume that all of
Asarco’s in-state contacts can be imputed to Grupo, Mt. McKinley failed to satisfy its initial
burden to plead sufficient facts that demonstrate Grupo, a foreign corporation with
holdings across the United States, Mexico, and Peru, was nonetheless “essentially at
home” in Texas. See Daimler, 571 U.S. at 138; Goodyear, 564 U.S. at 919; Old
Republic, 549 S.W.3d at 565.
Mt. McKinley fails to recognize that Daimler’s new general jurisdiction inquiry “calls
for an appraisal of a corporation’s activities in their entirety, nationwide and worldwide.”
571 U.S. at 139 n.20. Like this case, the plaintiff in Daimler attempted to impute the in-
state contacts of a foreign subsidiary to a foreign parent corporation. Id. at 122–23.
Thus, under Daimler, whether a subsidiary’s imputed contacts render the parent
corporation “essentially at home” in the forum state must be viewed within the larger
context of the parent’s entire business operations. See id. at 139 n.20.
10
The Supreme Court recently applied this principal in BNSF Ry Co. v. Tyrrell,
holding that Montana did not have general jurisdiction over a foreign railroad company
that “has over 2,000 miles of railroad track and employs more than 2,000 workers in
Montana.” 137 S. Ct. 1549, 1554, 1558–59 (2017). The Court concluded that these
contacts were insufficient to render the railroad company “essentially at home” in Montana
because they represented a small fraction of its overall operations across twenty-eight
states. Id.
In this case, Mt. McKinley alleges that Asarco, a foreign corporation, has owned
and operated the “Amarillo Copper Refinery for the past 40-plus years” and “mined or
refined metals in Texas for more than 90 years.” Even if we assume that these contacts
are sufficient to confer Texas with general jurisdiction over Asarco—a conclusion that now
seems exceedingly improbable in light of Daimler—Mt. McKinley also acknowledges in
its petition that Grupo “operates large mining complexes” in Mexico, Peru, and “several
locations” across the United States, all while holding itself out as “one of the major copper
producers in the world.” Thus, Asarco’s refinery in Amarillo represents a fraction of
Grupo’s overall mining operations, which, according to Mt. McKinley’s petition, span three
different countries, including multiple jurisdictions in the United States. As Daimler
instructs, and BNSF reaffirms, “[a] corporation that operates in many places can scarcely
be deemed at home in all of them.” Daimler, 571 U.S. at 139 n.20; BNSF, 137 S. Ct. at
1559.
Further, merely engaging in a substantial, continuous, and systematic course of
business in the forum is no longer sufficient to confer general jurisdiction. Daimler, 571
11
U.S. at 138. As the Goodyear Court explained, a corporation’s affiliations with the forum
must be “so ‘continuous and systematic’ as to render [it] essentially at home in the forum
State.” 564 U.S. at 919 (quoting Int’l Shoe, 326 U.S. at 317). Although it has not had
the occasion to affirmatively define the contours of the “essentially at home” standard, the
Supreme Court has pointed to Perkins v. Benguet Consol. Mining Co., 342 U.S. 437
(1952) as the singular example of an “exceptional case” where a foreign corporation was
“essentially at home” in the forum state. Daimler, 571 U.S. at 139 n.19; Goodyear, 564
U.S. at 925.
In Perkins, a Philippine mining corporation was sued in Ohio, where the
corporation’s president and general manager relocated and maintained the corporate
office after the Japanese occupied the Philippines during World War II. 342 U.S. at 447–
48. During this extended period, the president “carried on in Ohio a continuous and
systematic supervision” of the corporation’s business affairs, “discharg[ing] his duties as
president and general manager” from his Ohio office. Id. at 448. As the Court would
later explain, Ohio’s exercise of general jurisdiction was permissible because “Ohio was
the corporation’s principal, if temporary, place of business.” Keeton v. Hustler Magazine,
Inc., 465 U.S. 770, 779 n.11 (1984).
In this case, Mt. McKinley acknowledges that Grupo “is a Mexican corporation with
its principal place of business in Mexico.” Mt. McKinley has never alleged that Grupo
maintains an office in Texas, let alone a de facto corporate office where it manages all of
its business affairs. See Perkins, 342 U.S. at 447–48. To the contrary, Mt. McKinley
12
alleges that all of Grupo’s affairs, including those of its subsidiaries, are managed and
controlled by German Larrea and Grupo’s Corporate Finance Committee—from Mexico.
Therefore, not only are Mt. McKinley’s allegations insufficient to meet its initial
burden, without more, these allegations effectively negate the trial court’s general
jurisdiction. Grupo cannot be “essentially at home” in every foreign jurisdiction where it
operates, and Mt. McKinley has failed to allege any facts distinguishing Asarco’s Amarillo
refinery from Grupo’s significant operations across several foreign jurisdictions, all of
which are allegedly controlled from Mexico, not Texas. See BNSF, 137 S. Ct. at 1554,
1558–59; Daimler, 571 U.S. at 139 & n.20; Goodyear, 564 U.S. at 919; Perkins, 342 U.S.
at 447–48. In sum, even if we impute all of Asarco’s Texas contacts to Grupo, this case
is far from “exceptional” for purposes of general jurisdiction. 5 See Daimler, 571 U.S. at
139 n.19. We sustain Grupo’s first issue.
B. Whether Grupo’s Contacts with Texas Establish Specific Jurisdiction
Mt. McKinley also alleges that the trial court has specific jurisdiction over Grupo
because Grupo was a party to the Settlement Agreement, which resolved a Texas lawsuit
and gave rise to Mt. McKinley’s claims in this case. We previously held in Grupo I that
even if we assumed that Grupo was a party to the Settlement Agreement, that disputed
fact would be insufficient to confer the trial court with specific jurisdiction because,
5 Mt. McKinley also alleges that Grupo itself: (1) participated in Asarco’s bankruptcy proceeding in
the United States Bankruptcy Court for the Southern District of Texas; (2) guaranteed lease payments for
the use of a Texas rail line by one of its subsidiaries; (3) instituted a lawsuit in a Dallas federal court; and
(4) maintained several bank accounts in Texas. These additional Texas contacts, even in combination
with Asarco’s in-state contacts, fall well short of the “essentially at home” standard. See BNSF Ry Co. v.
Tyrrell, 137 S. Ct. 1549, 1554, 1558–59 (2017); Daimler AG v. Bauman, 571 U.S. 117, 139 & n.20 (2014);
Goodyear Dunlop Tires Operations, S.A., v. Brown, 564 U.S. 915, 919 (2011); Perkins v. Benguet Consol.
Mining Co., 342 U.S. 437, 447–48 (1952).
13
although it resolved a Texas lawsuit, the Settlement Agreement was negotiated and
executed in New Jersey, performance was not required in Texas, and Grupo was not a
party to the Coverage Lawsuit. 2013 WL 1683641 at *7 (citing Cerbone v. Farb, 225
S.W.3d 764, 769–71 (Tex. App.—Houston [1st Dist.] 2007, no pet.)).
On remand, additional discovery revealed that (1) Grupo “was a party and/or
granted releases and indemnities in five other insurance settlements” in the Coverage
Lawsuit, and (2) Grupo directed Asarco to transfer a significant portion of the settlement
proceeds from the Coverage Lawsuit to a Grupo-controlled Texas bank account. By its
second issue, Grupo contends that there are no new jurisdictional facts showing that
Grupo purposefully availed itself of Texas’s jurisdiction by entering into the Settlement
Agreement. 6 We agree.
For the trial court to properly exercise specific jurisdiction in this case, (1) Grupo
must have made minimum contacts with Texas by purposefully availing itself of the
privilege of conducting activities here, and (2) Grupo’s liability must arise from or be
sufficiently related to those contacts. See Moki Mac, 221 S.W.3d at 576 (citing Am. Type
Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002)). Grupo’s alleged
liability in this case arises from its obligations, if any, to defend and indemnify Mt. McKinley
under the terms of the Settlement Agreement. Mt. McKinley contends that Grupo’s
contacts with Texas were more significant than previously known because it “was a party
6 Grupo maintains that Asarco’s in-house counsel, Kevin McCaffery, did not have authority to
execute the Settlement Agreement on Grupo’s behalf. The evidence on this issue is conflicting. For
purposes of this appeal, we conclude under our deferential standard of review that the evidence is sufficient
to support the trial court’s implied finding that McCaffrey was authorized to bind Grupo to the agreement.
See Old Republic, 549 S.W.3d at 558 (Tex. 2018).
14
and/or granted releases and indemnities” in five other settlements arising out of the
Coverage Lawsuit. However, these settlements suffer from the same jurisdictional
infirmities as the Settlement Agreement. The record indicates that these agreements
were negotiated and executed outside of Texas, including four that contain New York
choice-of-law provisions. All of the agreements require the carriers to perform by
tendering payments to out-of-state banks or Asarco’s asbestos attorneys in New Jersey.
Finally, the only performance required in Texas was Asarco’s dismissal of its claims in
the Coverage Lawsuit, a suit to which Grupo was not a party. None of these agreements,
individually or collectively, establish that Grupo itself conducted activities in Texas. See
Cornerstone Healthcare, 493 S.W.3d at 70 (“[O]nly the defendant’s contacts with the
forum are relevant, not the unilateral activity of another party or third person.” (citing
Michiana, 168 S.W.3d at 785)). Therefore, for the same reasons discussed in Grupo I,
the link between Grupo, the Settlement Agreement, and Texas is too attenuated to find
that Grupo purposefully availed itself of the privilege of conducting activities in Texas.
2013 WL 1683641 at *7 (citing Cerbone, 225 S.W.3d at 769–71).
We are also not persuaded that Grupo’s directive that Asarco subsequently
transfer settlement proceeds to a Grupo-controlled Texas bank account establishes
specific jurisdiction. Although this activity constitutes a purposeful contact with Texas,
we fail to see how Grupo’s potential liability under the Settlement Agreement arises from
this after-the-fact contact. See Moki Mac, 221 S.W.3d at 576 (citing Am. Type Culture
Collection, 83 S.W.3d at 806). At best, the eventual deposit of the proceeds in a Texas
bank account is tangentially related to the Settlement Agreement; however, the fact
15
remains that the Settlement Agreement was negotiated and executed in New Jersey, Mt.
McKinley performed by wiring the proceeds between out-of-state banks, and Grupo was
not a party to the Coverage Lawsuit. Therefore, we conclude this contact was not
sufficiently related to Grupo’s potential liability in this case. See id. (citing Am. Type
Culture Collection, 83 S.W.3d at 806). Because the trial court does not have specific
jurisdiction over Grupo based on Grupo’s in-state contacts, we sustain Grupo’s second
issue.
C. Alter Ego: Whether Asarco’s In-State Contacts Can Be Imputed to Grupo to
Establish Specific Jurisdiction
Mt. McKinley also alleges that Asarco’s contacts with Texas—most notably, filing
the Coverage Lawsuit in Texas—should be imputed to Grupo under an alter ego theory.
By its third issue, Grupo contends that the evidence is legally and factually insufficient to
establish an alter ego relationship between Grupo and Asarco. We conclude that (1) the
record contains sufficient evidence from which the trial court could infer an alter ego
relationship, and (2) the addition of these imputed contacts establishes specific
jurisdiction.
1. Waiver
As a preliminary matter, we conclude that Mt. McKinley did not waive this basis for
personal jurisdiction by only discussing alter ego in the context of general jurisdiction, as
Grupo suggests. To the contrary, Mt. McKinley alleges in its pleading that, “[a]t the time
the Settlement Agreement was signed, these subsidiary corporations were not operated
as separate businesses from Grupo Mexico, but as a single business enterprise, a sham,
alter egos, and/or joint ventures, such that their identities should properly be fused in
16
fairness for purposes of assessing both general and specific jurisdiction.” (Emphasis
added). Mt. McKinley goes on to specifically allege that Asarco’s “institution,
maintenance, settlement, and dismissal of the [Coverage] Lawsuit” should be imputed to
Grupo. More pointedly, Mt. McKinley alleges that “[Grupo] itself or through its alter ego
[Asarco] caused the [Coverage Lawsuit] to be instituted against Mt. McKinley and other
insurers, directed its settlement, and caused the Settlement Agreement to be signed
which required performance in Texas.” The Settlement Agreement gave rise to Mt.
McKinley’s claims in this suit; therefore, these allegations can only be properly
characterized as supporting specific jurisdiction, see Cornerstone Healthcare, 493
S.W.3d at 71, not whether Grupo’s activities were otherwise so pervasive and constant
“as to render [Grupo] essentially at home in [Texas].” See Goodyear, 564 U.S. at 919.
Thus, this basis for specific jurisdiction was squarely before the trial court.
2. Jurisdictional Veil-Piercing
When a parent corporation dominates and controls a subsidiary to the extent that
the subsidiary ceases to operate as a distinct and separate corporate entity, a court may
attribute the subsidiary’s in-state contacts to the parent for jurisdictional purposes. PHC-
Minden, 235 S.W.3d at 173 (citing BMC Software, 83 S.W.3d at 798). Because Texas
law presumes that two separate corporations are distinct entities, the party seeking to
attribute one corporation’s actions to another bears the burden of proving otherwise. Id.
(citing BMC Software, 83 S.W.3d at 798).
Jurisdictional and substantive veil-piercing are distinct concepts with different
elements of proof. Id. at 174 (explaining that “personal jurisdiction involves due process
17
concerns that cannot be overridden by statutes or common law.” (citing City of Monroe
Emps. Ret. Sys. v. Bridgestone Corp., 399 F.3d 651, 667–68 (6th Cir. 2005))). For
example, although fraud is necessary to pierce the corporate veil under § 21.223 of the
Texas Business Organizations Code, it “has no place in assessing contacts to determine
jurisdiction.” Id. at 175 (citing TEX. BUS. ORGS. CODE ANN. § 21.223). Similarly,
undercapitalization has been cited by the Texas Supreme Court as a distinct basis for
substantive veil-piercing, Castleberry v. Branscum, 721 S.W.2d 270, 272 n.3 (Tex. 1986)
(citation omitted), that should be disregarded in a jurisdictional analysis. See PHC-
Minden, 235 S.W.3d at 174 (citing Wells Fargo & Co. v. Wells Fargo Express Co., 556
F.2d 406, 425 (9th Cir. 1977)).
Instead, the plaintiff must prove that the parent exercises control over the
subsidiary’s internal business operations and affairs beyond normal parental involvement.
PHC-Minden, 235 S.W.3d at 175 (citing BMC Software, 83 S.W.3d at 799).
“Appropriate, parental involvement includes monitoring the subsidiary’s performance,
supervision of the subsidiary’s finance and capital budget decisions, and articulation of
general policies.” Id. at 176 (quoting 16 JAMES WM. MOORE ET AL., MOORE’S FEDERAL
PRACTICE § 108.42[3][b] (3d ed. 2007). There must be a “plus” factor, “something
beyond the subsidiary’s mere presence within the bosom of the corporate family.” Id.
(quoting Dickson Marine, Inc. v. Panalpina, Inc., 179 F.3d 331, 338 (5th Cir. 1999)). The
parent should “not be involved in its subsidiary’s day-to-day operations.” Zamarron v.
Shinko Wire Co., 125 S.W.3d 132, 142 (Tex. App.—Houston [14th Dist.] 2003, pet.
denied) (citing Dunn v. A/S Em. Z. Svitzer, 885 F. Supp. 980, 988 (S.D. Tex. 1995)).
18
A court should also consider the amount of the subsidiary’s stock owned by the
parent, the existence of separate headquarters, and the observance of corporate
formalities. Id. at 175 (citing 4A CHARLES ALAN W RIGHT & ARTHUR R. MILLER, FEDERAL
PRACTICE & PROCEDURE § 1069.4 (2007)). However, stock ownership or a duplication of
some or all of the directors or officers, without more, does not prove the existence of a
corporate fiction. Id. (citing Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d 571, 573
(Tex. 1975)).
3. Disregarded Evidence
We now turn to the record in this case to determine if there is sufficient evidence
to overcome the presumption under Texas law that Grupo and Asarco are separate
corporate entities. See PHC-Minden, 235 S.W.3d at 173 (citing BMC Software, 83
S.W.3d at 798).
The extensive record in this case establishes that Grupo structured the SPCC
Transfer in a manner that benefited Grupo and left Asarco undercapitalized, a significant
factor in substantive, but not jurisdictional, veil-piercing. See PHC–Minden, 235 S.W.3d
at 174 (citing Wells Fargo Express Co., 556 F.2d at 425); see also Alberto v. Diversified
Group, Inc., 55 F.3d 201, 206 (5th Cir. 1995) (collecting cases recognizing that
undercapitalization is a significant factor in determining substantive veil-piercing.). Prior
to PHC–Minden, our Court and others considered a list of factors when determining
jurisdictional veil-piercing, including undercapitalization and whether each entity was free
to act in its own best interest. El Puerto de Liverpool, S.A. de C.V. v. Servi Mundo
Llantero, S.A. de C.V., 82 S.W.3d 622, 634–35 (Tex. App.—Corpus Christi–Edinburg
19
2002, pet. dism’d w.o.j.); Daimler–Benz Aktiengesellschaft v. Olson, 21 S.W.3d 707, 721
(Tex. App.—Austin 2000, pet. dism’d w.o.j.); Conner v. ContiCarriers & Terminals, Inc.,
944 S.W.2d 405, 419 (Tex. App.—Houston [14th Dist.] 1997, no writ). The record
supports an implied finding on these two factors, but they are no longer relevant to our
jurisdictional inquiry. See PHC–Minden, 235 S.W.3d at 174–75 (discussing the relevant
factors). Similarly, although Judge Hanen found that the SPCC Transfer constituted an
actual fraudulent conveyance, see Asarco, LLC, 396 B.R. at 394, fraud “has no place in
assessing contacts to determine jurisdiction.” PHC–Minden, 235 S.W.3d 175 (citing TEX.
BUS. ORGS. CODE ANN. § 21.223). Therefore, Mt. McKinley’s reliance on this evidence is
misplaced.
4. Evidence of Alter Ego
Instead, we look to the four factors outlined in PHC–Minden: (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. 235 S.W.3d
at 175 (citing 4A W RIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE § 1069.4). As we
noted in Grupo I, it is undisputed that Grupo indirectly owns 100% of Asarco’s stock, but
it is also undisputed that Asarco and Grupo maintain separate headquarters. 2013 WL
1683641, at *5. “Accordingly, application of the first two factors enumerated in PHC–
Minden does not resolve the jurisdictional question.” Id.
It is also undisputed that Grupo exercised a degree of control over Asarco. The
heart of the inquiry, really, is whether Grupo’s control over Asarco extended to Asarco’s
20
internal business operations and affairs. See PHC–Minden, 235 S.W.3d at 175 (citing
BMC Software, 83 S.W.3d at 799); Hargrave, 710 F.2d at 1160. We conclude that the
record is sufficient to support the trial court’s implied finding that Grupo’s control over
Asarco was “atypical” or “abnormal.” See PHC–Minden, 235 S.W.3d at 176; BMC
Software, 83 S.W.3d at 800.
After acquiring Asarco, Grupo replaced Asarco’s directors and officers with Grupo
directors and officers. This fact alone is insufficient to establish an alter ego relationship.
See PHC–Minden, 235 S.W.3d at 175 (citing Gentry, 528 S.W.2d at 573). However,
from the time the Coverage Lawsuit was filed through the execution of the Settlement
Agreement, Daniel Tellechea served as the CFO for Grupo, AMC, and Asarco, yet he did
not “charge ASARCO or [the] other subsidiaries one penny” for his services. His salary
was paid exclusively by another Grupo company created to provide financial and other
services to Grupo subsidiaries. And despite his various titles, Tellechea considered
himself “an employee of Grupo” that reported to German Larrea, Grupo’s chairman and
CEO.
According to Asarco’s general counsel, Douglas McAllister, German ran Asarco
like a sole proprietorship. In that regard, he testified that Grupo exercised “[p]ervasive,
total control” over Asarco’s affairs. As a specific example, McAllister recalled that
Tellechea, who had become Asarco’s president at the time, wanted to increase the
salaries of Asarco’s employees at the end of the year, but could not do so without getting
German’s approval. Instead of salary increases, German authorized a $25 Wal-Mart gift
card as a Christmas bonus for each salaried employee. McAllister further testified:
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We—we didn’t have a board of directors that acted as a—what I thought a
normal company board of directors would act like. They never met.
Everything was handled through unanimous consent usually after the fact.
There was no independent decision-making authority in the Asarco board
of directors. There was no independent decision-making authority in the
management team of Asarco. It was going to German and getting authority
to do what we wanted to do and needed to do.
Kevin McCaffrey, Asarco’s in-house counsel who executed the Settlement
Agreement, testified that “after the Grupo acquisition, there was no decision, whether it
was paper clips or a $100 million insurance settlement, that wasn’t presented to German
Larrea.” McCaffrey also testified that “Grupo had complete control of what Asarco was
doing.”
Leading up to the SPCC Transfer, corporate counsel suggested Asarco form a
three-person restructuring committee and include two independent directors from the
local business community. One of those independent directors, John Patton, testified
that Asarco’s then-president, Genaro Larrea, 7 “operated under very strict control from
Mexico City.” Patton added, “it was clear that he was the sock puppet for Mexico City,
in that his lips moved and their voice was heard.”
Although Asarco was suffering a “liquidity crisis,” unable to pay vendors critical to
its daily operations, Grupo directed Asarco to place the proceeds from the Settlement
Agreement and all of the other buy-back agreements into a specific bank account (the
“GBM Account”) and forbade Asarco’s use of its own funds without Grupo’s approval.
Although the GBM Account was opened in Asarco’s name, the “Home Address” provided
7 Genaro Larrea was German’s brother. In addition to serving as Asarco’s president from the time
the Coverage Lawsuit was filed through the execution of the Settlement Agreement, he also served on the
board of directors for both AMC and Grupo and as vice president and CCO for AMC.
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was Grupo’s corporate office in Mexico City. Moreover, Asarco executed a power of
attorney that granted Grupo officers and directors control over all of Asarco’s “checking
accounts with any bank or financial institution . . . wherever situated.” In practice, Grupo
exercised absolute control over Asarco’s operating capital. For example, George Burns,
Asarco’s vice president of operations, sought permission to use funds in the GBM
Account to purchase fuel. Without fuel, Asarco’s mines would have ceased operating.
We conclude the record supports the trial court’s implied findings that Grupo
disregarded corporate formalities and exercised a degree of control over Asarco that went
beyond normal parental involvement. See PHC-Minden, 235 S.W.3d at 175; BMC
Software, 83 S.W.3d at 799. In light of “[a]ll the relevant facts and circumstances
surrounding the operations of the parent and subsidiary,” see Hargrave, 710 F.2d at 1160,
the evidence is legally and factually sufficient to impute Asarco’s in-state contacts to
Grupo.
5. Purposeful Availment
Asarco filed a general appearance in this case. Importantly, Grupo has never
contested the trial court’s specific jurisdiction over Asarco, only that Asarco’s contacts
should not be imputed to Grupo for jurisdictional purposes. 8 In other words, Grupo does
not dispute that Asarco’s contacts, if imputed to Grupo, would be sufficient to establish
that Grupo had minimum contacts with Texas for purposes of specific jurisdiction.
8 Grupo’s counsel—also Asarco’s counsel—has suggested that in light of Daimler, Asarco would
now challenge the trial court’s general jurisdiction if this case were filed today. But there has been no
intervening law on the separate and distinct question of the trial court’s specific jurisdiction over Asarco.
As we explain below in the context of imputing Asarco’s contacts to Grupo, the trial court clearly had specific
jurisdiction over Asarco when it elected to file its general appearance.
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Nevertheless, having imputed Asarco’s contacts to Grupo, we conclude that Grupo
purposefully availed itself of Texas’s jurisdiction.
Grupo’s choice to file the Coverage Lawsuit in Nueces County, Texas was not a
“random, isolated, or fortuitous” act. See Michiana, 168 S.W.3d at 785. Neither Asarco
nor Mt. McKinley were Texas residents, and it is unclear which, if any, of the other carriers
were Texas residents. It is reasonable to infer that Grupo perceived some strategic
benefit by filing the Coverage Lawsuit in Nueces County, Texas. Regardless, Grupo
sought the benefit and advantage of Texas’s legal system to enforce Asarco’s rights
under the insurance policies, resulting in a $12 million settlement with Mt. McKinley, as
well as five additional settlements with other carriers worth tens of millions of dollars more.
See Michiana, 168 S.W.3d at 785. Grupo’s choice to monetize these assets was an
instrumental part of its plan to execute the SPCC Transfer, a transaction that was
designed to ultimately benefit Grupo. 9 Additionally, by entering into the Settlement
Agreement, it was foreseeable that a dispute concerning that agreement may arise. See
BMC Software, 83 S.W.3d at 795 (explaining that although not determinative,
foreseeability of causing injury is “an important consideration” in deciding whether a
nonresident defendant has purposefully established minimum contacts). Finally, filing
the Coverage Lawsuit in Texas gave rise to Grupo’s potential liability under the Settlement
Agreement; i.e., there is a substantial connection between Grupo’s imputed contacts and
the operative facts in this case. See Moki Mac, 221 S.W.3d at 576 (citing Am. Type
Culture Collection, 83 S.W.3d at 806). Unlike Grupo’s own contacts with Texas, we
9 McCaffrey, Asarco’s in-house counsel, testified that Grupo directed Asarco to monetize its
insurance policies.
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conclude that the addition of Asarco’s imputed contacts are sufficient to confer the trial
court with specific jurisdiction over Grupo.
D. Notions of Fair Play and Substantial Justice
In addition to minimum contacts, the exercise of personal jurisdiction must comport
with traditional notions of fair play and substantial justice. PHC-Minden, 235 S.W.3d at
166 (citing Int’l Shoe, 326 U.S. at 316). These considerations are typically satisfied once
minimum contacts have been established. Spir Star, 310 S.W.3d at 878 (citing Guardian
Royal, 815 S.W.2d at 231). It is the defendant’s burden to present “a compelling case
that the presence of some consideration would render jurisdiction unreasonable,”
including (1) the burden on the defendant, (2) the forum state’s interest in adjudicating
the dispute, (3) the plaintiff’s interest in obtaining convenient and effective relief, (4) the
international judicial system’s interest in obtaining the most efficient resolution of
controversies, and (5) the shared interest of the several nations in furthering fundamental
substantive social policies. Id. at 878–79 (quoting Guardian Royal, 815 S.W.2d at 231).
In this case, Grupo focused exclusively on disputing its minimum contacts.
Because Grupo failed to present “a compelling case that the presence of some
consideration would render jurisdiction unreasonable,” we conclude that exercising
jurisdiction over Grupo would comport with traditional notions of fair play and substantial
justice. See id. at 878 (citing Guardian Royal, 815 S.W.2d at 231); PHC-Minden, 235
S.W.3d at 166 (citing Int’l Shoe, 326 U.S. at 316). Therefore, we overrule Grupo’s third
issue and affirm the trial court’s denial of Grupo’s special appearance.
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E. Motion to Strike
Mt. McKinley filed a motion to strike Grupo’s special appearance as a sanction for
alleged discovery abuses. By its fourth issue, Grupo contends that the trial court
implicitly denied the motion but, out of an abundance of caution, challenges any such
sanction as excessive. See TEX. R. CIV. P. 215.2(b) (requiring that discovery sanctions
be “just”). In response, Mt. McKinley concedes that the trial court implicitly denied its
motion to strike but asserts the merits of its motion as an alternative basis for denying
Grupo’s special appearance. Mt. McKinley was not required to cross-appeal this
alternative ground for denying Grupo’s special appearance. See TEX. R. APP. P. 25.1(c)
(only the “party who seeks to alter the trial court’s judgment or other appealable order
must file a notice of appeal”); Cardwell v. Whataburger Rests. LLC, 484 S.W.3d 426, 428
(Tex. 2016) (per curium). However, having already affirmed the trial court’s order
denying Grupo’s special appearance, we decline to address this issue. See TEX. R. APP.
P. 47.1. (“The court of appeals must hand down a written opinion that is as brief as
practicable but that addresses every issue raised and necessary to final disposition of the
appeal.”).
IV. CONCLUSION
We agree with Grupo that Mt. McKinley failed to establish the trial court’s general
jurisdiction over Grupo or that Grupo’s own contacts were sufficient to confer the trial
court with specific jurisdiction. We disagree, however, that Mt. McKinley cannot impute
Asarco’s Texas contacts to Grupo under an alter ego theory. These imputed contacts
establish the minimum contacts necessary for the trial court to exercise specific
26
jurisdiction over Grupo. Accordingly, the trial court’s order denying Grupo’s special
appearance is affirmed.
GREGORY T. PERKES
Justice
Delivered and filed the
19th day of December, 2019.
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