Far East MacHinery Co. v. Isabel Aranzamendi, Individually and as Wrongful Death Beneficiary of Wilber Dimas, Deceased: Bethany Helen Morales

Reversed and Dismissed and Opinion Filed September 13, 2022
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-21-00267-CV
FAR EAST MACHINERY CO., Appellant
V.
ISABEL ARANZAMENDI, INDIVIDUALLY AND AS WRONGFUL
DEATH BENEFICIARY OF WILBER DIMAS, DECEASED, ET AL.,
Appellees
On Appeal from the County Court at Law No. 5
Dallas County, Texas
Trial Court Cause No. CC-18-05668-E
MEMORANDUM OPINION
Before Justices Myers, Partida-Kipness, and Carlyle
Opinion by Justice Myers
Far East Machinery Co. brings this interlocutory appeal of the trial court’s
order denying its special appearance. See TEX. CIV. PRAC. & REM. CODE ANN. §
51.014(a)(7). Far East Machinery brings one issue on appeal contending the trial
court erred by denying its special appearance. We reverse the trial court’s order and
render judgment dismissing appellees’ claims against Far East Machinery for lack
of jurisdiction.
BACKGROUND
The Accident
In June 2018, a fire and natural gas explosion at a hospital construction site in
Gatesville, Texas, injured and killed several people. Appellees1 allege Far East
Machinery, a Taiwanese corporation, manufactured steel pipe that was used to carry
natural gas at the construction project. Natural gas is odorless. The odorant
mercaptan is added to provide a rotten-egg smell so the gas can be easily detected.
Appellees allege that the pipe manufactured by Far East Machinery had not been
properly treated to resist adsorption or absorption of the odorant. Natural gas
escaped into the construction area, the workers were not aware of it, and there was
a fire and an explosion.
The Sale of the Pipe
On April 22, 2016, Marubeni-Itochu Steel Canada, Inc., a company located in
British Columbia, Canada, ordered pipe from Far East Machinery in Taiwan. The
“Sales Contract” stated Marubeni was the “Buyer” and indicated All-Tex was the
“Client.” Two invoices from Far East Machinery were addressed to Marubeni and
1
Appellees are the plaintiffs and plaintiff intervenors in the case below: Isabel Aranzamendi,
individually and as beneficiary of Wilber Dimas, deceased; Pablo Morales Jaimes and Rosalina de Paz
Puebla, as wrongful death beneficiaries of Filiberto Morales de Paz, deceased; Joel Tovar; Jorge Tovar;
Victor Orozco; Abel Ponce Espinoza; Bethany Helen Morales, individually and as personal representative
of the estate of Filiberto Morales de Paz, deceased; Rocio Guiterrez Diaz Deleon, as next friend of AMG,
a minor; Jose Tovar; Aaron Haveron; Tonya Haveron; Richard Studer; Matthew Aaron; Rebecca Aaron,
individually and on behalf of J.A. and S.A., minor children; Justin Barabas; Shelly Harwell; Vernon
Barabas; Jessica Barabas; Jeffrey Barabas; Annette Romer, individually and on behalf of the estate of
Michael Bruggman; Victor Orozco; Abel Ponce Espinoza; Jacob Rodriguez; Jose Antonio Reyes Torres;
Nancy Shelton; and Matthew Lytle.
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stated “Customer: All-Tex.” The two invoices for the pipe totaled US$22,217.60.
The shipping term for the pipe was “CFR” to the Port of Houston. “CFR” stands for
“Cost of Freight” and means that the seller arranges and pays for the shipping of the
cargo and that title and risk of loss passes when the cargo is loaded onto the ship at
the port of export. In September 2016, the pipe was loaded on a ship in Kaohsiung,
Taiwan and was unloaded at the Port of Houston. The documentation for the sale
and shipment stated the pipe was “Manufactured, tolerance and tested with API 5LB
PSLI satisfactory results in accordance with the requirement of the above material
specification.”
In December 2016 and September 2017, All-Tex received orders for pipe to
be used in the Gatesville hospital project. All-Tex filled the order using some of the
pipe manufactured by Far East Machinery.
The Litigation
After the fire and explosion at the construction site, the victims and their
families brought suit against many defendants involved in the construction project
including All-Tex and Far East Machinery. Appellees alleged causes of action
against Far East Machinery for strict products liability for marketing and
manufacturing defects, negligence, gross negligence, and breach of implied
warranty.
Far East Machinery filed a special appearance asserting it did not do business
in Texas, it lacked minimum contacts with Texas, and that the court’s assumption of
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jurisdiction over it would offend traditional notions of fair play and substantial
justice depriving it of due process. The trial court denied Far East Machinery’s
special appearance.
SPECIAL APPEARANCE
Texas courts may exercise personal jurisdiction over a nonresident defendant
“when the state’s long-arm statute authorizes such jurisdiction and its exercise
comports with due process.” Cornerstone Healthcare Grp. Holding, Inc. v. Nautic
Mgmt. VI, L.P., 493 S.W.3d 65, 70 (Tex. 2016). The Texas long-arm statute
provides in relevant part that “[i]n addition to other acts that may constitute doing
business,” a nonresident does business in Texas if the nonresident contracts by mail
or otherwise with a Texas resident and either party is to perform the contract in whole
or in part in this state, or if the nonresident commits a tort in whole or in part in this
state. CIV. PRAC. § 17.042(1), (2). The statute “provides for personal jurisdiction
that extends to the limits of the United States Constitution, and so federal due process
requirements shape the contours of Texas courts’ jurisdictional reach.” Searcy v.
Parex Res., Inc., 496 S.W.3d 58, 66 (Tex. 2016).
“[W]hether a trial court’s exercise of jurisdiction is consistent with due
process requirements turns on two requirements: (1) the defendant must have
established minimum contacts with the forum state; and (2) the assertion of
jurisdiction cannot offend traditional notions of fair play and substantial justice.” Id.(citing Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). “[S]ufficient
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minimum contacts exist when the nonresident defendant ‘purposefully avails itself
of the privilege of conducting activities within the forum [s]tate, thus invoking the
benefits and protections of its laws.’” Id. at 67 (quoting Hanson v. Denckla, 357
U.S. 235, 253 (1958)). “The nub of the purposeful availment analysis is whether a
nonresident defendant’s conduct in and connection with Texas are such that it could
reasonably anticipate being haled into court here.” Id. at 67. “Purposeful availment
involves contacts that the defendant ‘purposefully directed’ into the forum state.”
Id. (citing Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C.,
815 S.W.2d 223, 228 (Tex. 1991)).
When determining whether a nonresident purposefully availed itself of the
privilege of conducting activities in Texas, we consider three factors: (1) only the
defendant’s contacts with the forum are relevant, not the unilateral activity of
another party or third person; (2) the contacts relied upon must be purposeful rather
than random, isolated, or fortuitous; and (3) the defendant must seek some benefit,
advantage, or profit by availing itself of the jurisdiction. Cornerstone, 493 S.W.3d
at 70–71. This analysis assesses the quality and nature of the contacts, not the
quantity. Moncrief Oil Int’l Inc v. OAO Gazprom, 414 S.W.3d 142, 151 (Tex. 2013).
A defendant will not be haled into a jurisdiction based solely on contacts that are
random, isolated, or fortuitous, or on the unilateral activity of another party or a third
person. Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex.
2005); Guardian Royal Exch., 815 S.W.2d at 226. In addition to minimum contacts,
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due process requires the exercise of personal jurisdiction to comply with traditional
notions of fair play and substantial justice. Moncrief Oil, 414 S.W.3d at 154 (citing
Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex.
2009)).
The plaintiff bears the initial burden of pleading allegations that suffice to
permit a court’s exercise of personal jurisdiction over the nonresident defendant.
Searcy, 496 S.W.3d at 66. Once the plaintiff has met this burden, the defendant then
assumes the burden of negating all potential bases for personal jurisdiction that exist
in the plaintiff’s pleadings. Id. The defendant can negate jurisdiction on either a
factual or legal basis. Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 659 (Tex.
2010). A defendant negates jurisdiction on a factual basis by presenting evidence to
disprove the plaintiff’s jurisdictional allegations. Id. “The plaintiff can then respond
with its own evidence that affirms its allegations, and it risks dismissal of its lawsuit
if it cannot present the trial court with evidence establishing personal jurisdiction.”
Id. (footnotes omitted). A defendant negates jurisdiction on a legal basis by
showing:
[E]ven if the plaintiff’s alleged facts are true, the evidence is legally
insufficient to establish jurisdiction; the defendant’s contacts with
Texas fall short of purposeful availment; for specific jurisdiction, that
the claims do not arise from the contacts; or that traditional notions of
fair play and substantial justice are offended by the exercise of
jurisdiction.
Id.–6–
“Minimum contacts with a forum state give rise to either general or specific
jurisdiction.” Vinmar Overseas Sing. PTE Ltd. v. PTT Int’l Trading PTE Ltd., 538
S.W.3d 126, 131 (Tex. App.—Houston [14th Dist.] 2017, pet. denied); see also KC
Smash 01, LLC v. Gerdes, Hendrichson, Ltd., L.L.P., 384 S.W.3d 389, 392 (Tex.
App.—Dallas 2012, no pet.). “A state court may exercise general jurisdiction only
when a defendant is ‘essentially at home’ in the state.” Ford Motor Co. v. Mont.
Eighth Judicial Dist. Court, 141 S. Ct. 1017, 1024 (2021). An individual is subject
to general jurisdiction in the state where the person is domiciled. Id. (citing Daimler
AG v. Bauman, 571 U.S. 117, 137 (2014)). The equivalent of a domicile for a
corporation are its place of incorporation and its principal place of business. Id.Far East Machinery is a corporation organized under the laws of Taiwan, and
its principal place of business is in Taiwan. Chien Hsing Liu, Far East Machinery’s
deputy manager, testified that Far East Machinery is not registered with the Texas
Secretary of State, has not been authorized to conduct business in Texas, has never
conducted business in Texas, and has not held itself out as doing business in Texas.
Thus, Far East Machinery established it is not “essentially at home” in Texas.
Appellees do not assert that general jurisdiction applies to Far East Machinery, and
we conclude Far East Machinery is not subject to general jurisdiction.
Our inquiry is therefore limited to specific jurisdiction, which is based on
“whether the defendant’s activities in the forum state themselves ‘give rise to the
liabilities sued on.’” Searcy, 496 S.W.3d at 67 (quoting Int’l Shoe, 326 U.S. at 317).
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Specific jurisdiction exists when the plaintiff’s claims “arise out of” or are “related
to” the defendant’s contacts with the forum. Id. (citing Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 414 nn. 8, 9 (1984)). “In sum, specific
personal jurisdiction over a nonresident defendant requires the defendant’s
purposeful availment of the privilege of conducting activities within the forum state,
thus invoking the benefits and protections of its laws. It also requires a ‘substantial
connection’ between those activities and the operative facts of the litigation.” M &
F Worldwide Corp. v. Pepsi-Cola Metro. Bottling Co., 512 S.W.3d 878, 890 (Tex.
2017) (citation omitted). “[T]he defendant’s relationship, not the plaintiff’s
relationship, with the forum state is the proper focus of the specific jurisdiction
analysis; that is, courts must consider the relationship between the defendant, the
forum state, and the litigation.” Searcy, 496 S.W.3d at 67. “The operative facts are
those on which the trial will focus to prove the liability of the defendant who is
challenging jurisdiction.” Leonard v. Salinas Concrete, LP, 470 S.W.3d 178, 188
(Tex. App.—Dallas 2015, no pet.) (quoting Kaye/Bassman Int’l Corp. v. Dhanuka,
418 S.W.3d 352, 357 (Tex. App.—Dallas 2013, no pet.)).
As a question of law, we review de novo whether a trial court has personal
jurisdiction over a nonresident defendant. See Luciano v. SprayFoamPolymers.com,
LLC, 625 S.W.3d 1, 8 (Tex. 2021). Resolving this question of law, though, may
require a court to decide questions of fact. Id. When, as here, the court does not
issue findings of fact for its special-appearance decision, we presume that all factual
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disputes were resolved in favor of the court’s decision, and we imply all relevant
facts necessary to support the judgment that are supported by the evidence, unless
they are challenged on appeal. See id.; M & F Worldwide Corp. v. Pepsi–Cola
Metro. Bottling Co., 512 S.W.3d 878, 885 (Tex. 2017).
ANALYSIS
In its sole issue on appeal, Far East Machinery contends the trial court erred
by denying its special appearance.
Appellees had the burden of pleading sufficient allegations to permit a court’s
exercise of personal jurisdiction over a nonresident defendant. Searcy, 496 S.W.3d
at 66. They met this requirement by pleading Far East Machinery “is engaged in
business in the State of Texas.” See Steward Health Care Sys. LLC v. Saidara, 633
S.W.3d 120, 126, 129 (Tex. App.—Dallas 2021, no pet.) (en banc). The burden then
shifted to Far East Machinery to negate all potential bases for personal jurisdiction
that exist in the plaintiff’s pleadings. Searcy, 496 S.W.3d at 66.
In a products liability case, there is specific personal jurisdiction if the case
meets the stream-of-commerce theory and there is a “plus” factor. The Supreme
Court of Texas has discussed how specific jurisdiction arises in lawsuits involving a
product manufactured by a foreign defendant that causes injury in Texas:
Under our stream-of-commerce-plus precedent, specific jurisdiction
exists if the defendant places goods into the stream of commerce with
the expectation that they will be purchased by consumers in the forum
state. The exercise of jurisdiction is permitted, however, only when the
defendant targets the forum, not when the defendant merely foresees
his product ending up there. In resolving questions of specific
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jurisdiction, we look both to the defendant’s conduct and the economic
realities of the market the defendant seeks to serve.
Luciano, 625 S.W.3d at 13 (citations and internal quotation marks omitted).
“[S]howing that the defendant placed the product in the stream of commerce is not
alone sufficient to establish purposeful availment; some additional conduct or
‘plus factor’—such as design for use in the target market—must also be shown.” In
re Christianson Air Conditioning & Plumbing, LLC, 639 S.W.3d 671, 679 (Tex.
2022) (per curiam) (citing Asahi Metal Indus. Co., Ltd. v. Superior Court of Cal.,
Solano Cty., 480 U.S. 102, 112 (1987));2 see also LG Elecs., Inc. v. Lovers Tradition
2
Justice O’Connor wrote in the plurality portion of the opinion:
Other courts, however, have understood the Due Process Clause to require something
more than that the defendant was aware of its product’s entry into the forum State through
the stream of commerce in order for the State to exert jurisdiction over the defendant. In
the present case, for example, the State Court of Appeal did not read the Due Process
Clause, as interpreted by World-Wide Volkswagen, to allow “mere foreseeability that the
product will enter the forum state [to] be enough by itself to establish jurisdiction over the
distributor and retailer.” App. to Pet. for Cert. B5. In Humble v. Toyota Motor Co., 727
F.2d 709 (8th Cir 1984), an injured car passenger brought suit against Arakawa Auto Body
Company, a Japanese corporation that manufactured car seats for Toyota. Arakawa did no
business in the United States; it had no office, affiliate, subsidiary, or agent in the United
States; it manufactured its component parts outside the United States and delivered them
to Toyota Motor Company in Japan. The Court of Appeals, adopting the reasoning of the
District Court in that case, noted that although it “does not doubt that Arakawa could have
foreseen that its product would find its way into the United States,” it would be “manifestly
unjust” to require Arakawa to defend itself in the United States. Id., at 710–711, quoting
578 F. Supp. 530, 533 (N.D. Iowa 1982). See also Hutson v. Fehr Bros., Inc., 584 F.2d 833(8th Cir. 1978); see generally Max Daetwyler Corp. v. R. Meyer, 762 F.2d 290, 299 (3d
Cir. 1985) (collecting “stream of commerce” cases in which the “manufacturers involved
had made deliberate decisions to market their products in the forum state”).
We now find this latter position to be consonant with the requirements of due process.
The “substantial connection,” Burger King, 471 U.S., at 475,; McGee, 355 U.S., at 223,
between the defendant and the forum State necessary for a finding of minimum contacts
must come about by an action of the defendant purposefully directed toward the forum
State. Burger King, supra, 471 U.S. at 476; Keeton v. Hustler Magazine, Inc., 465 U.S.
770, 774 (1984). The placement of a product into the stream of commerce, without more,
is not an act of the defendant purposefully directed toward the forum State. Additional
conduct of the defendant may indicate an intent or purpose to serve the market in the forum
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II, LP, No. 05-19-01304-CV, 2020 WL 4281965, at *11–14 (Tex. App.—Dallas July
27, 2020, pet. dism’d) (discussing the difference between the rejected “stream of
commerce” theory and the accepted “stream-of-commerce-plus” theory). In Asahi,
Justice O’Connor described the “additional conduct” indicating an intent or purpose
to serve the forum state as including: “designing the product for the market in the
forum State, advertising in the forum State, establishing channels for providing
regular advice to customers in the forum State, or marketing the product through a
distributor who has agreed to serve as the sales agent in the forum State.” Asahi,
480 U.S. at 113.
In this case, Marubeni ordered the pipe from Far East Machinery and
identified its customer as All-Tex. Far East Machinery agreed with Marubeni to ship
State, for example, designing the product for the market in the forum State, advertising in
the forum State, establishing channels for providing regular advice to customers in the
forum State, or marketing the product through a distributor who has agreed to serve as the
sales agent in the forum State. But a defendant’s awareness that the stream of commerce
may or will sweep the product into the forum State does not convert the mere act of placing
the product into the stream into an act purposefully directed toward the forum State.
Assuming, arguendo, that respondents have established Asahi’s awareness that some
of the valves sold to Cheng Shin would be incorporated into tire tubes sold in California,
respondents have not demonstrated any action by Asahi to purposefully avail itself of the
California market. Asahi does not do business in California. It has no office, agents,
employees, or property in California. It does not advertise or otherwise solicit business in
California. It did not create, control, or employ the distribution system that brought its
valves to California. Cf. Hicks v. Kawasaki Heavy Indus tries, 452 F. Supp. 130 (M.D. Pa.
1978). There is no evidence that Asahi designed its product in anticipation of sales in
California. Cf. Rockwell International Corp. v. Costruzioni Aeronautiche Giovanni
Agusta, 553 F. Supp. 328 (E.D. Pa.1982). On the basis of these facts, the exertion of
personal jurisdiction over Asahi by the Superior Court of California exceeds the limits of
due process.
Asahi, 480 U.S. at 111–13 (footnote omitted). Texas follows this analysis. Luciano, 625 S.W.3d at 10.
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the pipe CFR to the Port of Houston. Far East Machinery was aware that All-Tex
was Marubeni’s customer.
Far East Machinery’s deputy manager, Chien Hsing Liu, testified in his
affidavit that Far East Machinery:
is not registered with the Texas Secretary of State, has not been
authorized to conduct business in Texas, and has not held itself out as
doing business in Texas;
has never maintained an office, warehouse, place of business, or any
other real property in the State of Texas;
have never owned, leased, rented, or controlled any personal property
in the State of Texas;
has never had a mailing address, telephone listing or bank account in
the State of Texas;
has never solicited or conducted business in the State of Texas;
has never had any ownership interest in any business that that is based
in or conducts business in the State of Texas;
does not have distribution or sales agreements with any individual or
corporate entity based in the State of Texas;
has never sent any of its officer, agents, servants, or employees to the
State of Texas to solicit or conduct business. I have been to Texas one
time per year, but no business is conducted during these trips;
has never executed a contract in the State of Texas or with a Texas
resident or corporate entity;
does not advertise in the United States or maintain a website targeting
Texas businesses;
has never had a channel for providing regular advice to users or buyers
of products in Texas;
has no business relationship with All-Tex;
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has no knowledge of and does not control how or where the products
are further sold, shipped and distributed within the United States by
All-Tex once the product arrives at the Houston port;
is not informed who All-Tex’s customers are, where the ultimate
customers are located within the United States and whether the pipe’s
application is for gas, oil, or water.
Far East Machinery denied having awareness that the product might be used in Texas
and denied having control over its final destination. However, “‘[r]easonable
expectation,’ and not ‘right of control,’ is the controlling issue under the stream of
commerce doctrine.” Kawasaki Steel, 699 S.W.2d at 201.
In this case, the trial court could find Far East Machinery had a reasonable
expectation that at least some of the pipe would enter Texas and be used in Texas.
The trial court could consider “the economic realities of the market” Far East
Machinery sought to serve. Luciano, 625 S.W.3d at 13. Far East Machinery knew
the pipe was to be shipped to the Port of Houston in Texas, and it knew Marubeni’s
customer was All-Tex, Inc., which has all its offices in Texas. Texas is well known
to be one of the largest oil and gas producers, refiners, and users in the United States,
and thus has a proportional need for pipe to transport those products. Although Far
East Machinery could not be one-hundred percent certain that any of the pipe it
manufactured and had shipped to the Port of Houston for All-Tex would be used in
Texas, it presented no evidence that it had reason to believe the pipe would not be
used in Texas. Based on this evidence, the trial court could find there was a
reasonable expectation that some of the pipe would be used in Texas.
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A reasonable expectation that the product will be used in Texas is not
sufficient to meet the requirements of due process; there must be additional
conduct—a “plus” factor—“evincing ‘an intent or purpose to serve the market in the
forum State.’” Luciano, 625 S.W.3d at 10 (quoting Asahi, 480 U.S. at 112).
Examples of such conduct may include “designing the product for the market in the
forum State, advertising in the forum State, establishing channels for providing
regular advice to customers in the forum State, or marketing the product through a
distributor who has agreed to serve as the sales agent in the forum State.” Asahi,
480 U.S. at 112; see also Luciano, 625 S.W.3d at 10 (“Evidence of such additional
conduct may include advertising in the forum state, soliciting business through sales
persons, or creating, controlling, or employing the distribution system that brought
the product into the forum state.” (citations omitted)).
We next consider whether Far East Machinery met the “plus” factor of
conduct evincing an intent or purpose to serve the Texas market. Appellees alleged
Far East Machinery’s contacts with Texas are:
arranging for the shipping of its products to the Port of Houston;
some or all of the pipe was marked “FEMCO HOUSTON TX” and Far
East Machinery’s deputy manager admitted Far East Machinery
marked the pipe “FEMCO”;
Far East Machinery has a website accessible in Texas advertising that
its products meet certain standards of the American Petroleum Institute,
and Far East Machinery stated on the sales documentation that the pipe
had been tested and met those specifications;
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Far East Machinery has been involved in litigation in federal court in
the Eastern District of Texas; and
Far East Machinery’s deputy manager travels to Texas once a year.
Shipping Product to Texas
Appellees assert that the allegedly defective pipe in this case manufactured by
Far East Machinery was shipped to Texas. The record shows Far East Machinery
did not contract with anyone in Texas; its contract was with Marubeni Canada, and
Marubeni’s Taiwanese office ordered the pipe from Far East Machinery. The record
does not show whether All-Tex asked Marubeni for Far East Machinery’s pipe or
whether Marubeni decided unilaterally to fill the order with Far East Machinery’s
pipe. Although Far East Machinery arranged and paid for the shipping of the pipe
to the Port of Houston, under the CFR shipping term (discussed below), title to the
pipe and risk of loss for the pipe passed in Taiwan, and Far East Machinery’s
responsibility for the pipe ceased when the pipe was loaded onto the ship in Taiwan.
Appellees point to the fact that a significant amount of Far East Machinery’s
product is shipped to the Port of Houston, particularly in 2018, the year of the
accident. Chien Hsing Liu’s affidavit shows the percentage of Far East Machinery’s
product shipped to the United States and the percentage of its product shipped to the
Port of Houston:
Year Percentage of product Percentage of product
shipped to US shipped to Port of
Houston
2016 26% 7.5%
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2017 18% 6.8%
2018 (year of accident) 32% 11%
2019 22% 5.5%
2020 (through Nov. 6) 11% 2.8%
However, the mere fact that up to eleven percent of Far East Machinery’s annual
production was shipped to the Port of Houston is not evidence of actions in Texas or
actions targeting Texas. Mere knowledge that Texas was the intended destination
of the pipe is insufficient to subject Far East Machinery to personal jurisdiction
without evidence that it “took additional steps to serve the Texas Market.” Luciano,
625 S.W.3d at 13 (citing CMMC v. Salinas, 929 S.W.2d 435, 439 (Tex. 1996)); see
also LG Elecs., Inc., 2020 WL 4281965, at *12 (“personal jurisdiction depends not
on whether LGE placed the HVAC systems into the steam of commerce knowing
that they might end up in Texas . . . but instead on whether LGE engaged in any
‘additional conduct’ with Texas sufficient to purposefully avail itself of the benefits
and protections of Texas laws”). Also, the record contains no evidence of the
shipping terms of the other shipments and whether those shipments constitute
contact with Texas by Far East Machinery. Evidence that Far East Machinery sold
pipe that was shipped to the Port of Houston, including the order from Marubeni for
All-Tex, “is not—without more—evidence of its purposeful availment of Texas.”
Luciano, 625 S.W.3d at 13.
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Shipping the Pipes “CFR”
Appellees point out that Far East Machinery shipped the pipe to the Port of
Houston “CFR,” which stands for “cost and freight.” Appellees assert that fact
supports the court’s exercise of jurisdiction over Far East Machinery.
Black’s Law Dictionary defines “cost and freight” shipping:
cost and freight. A mercantile-contract term allocating the rights and
duties of the buyer and the seller of goods with respect to delivery,
payment, and risk of loss, whereby the seller must (1) clear the goods
for export, (2) arrange for transportation by water, and (3) pay the costs
of shipping to the port of destination. ● When the goods are safely
stowed on the receiving ship while docked, the seller’s delivery is
complete; the risk of loss then passes to the buyer. This term is used
only when goods are transported by sea or inland waterway.
Cost and Freight, BLACK’S LAW DICTIONARY (8th ed. 2004).3 The Fifth Circuit has
described CFR shipping thus: “Shipments designated ‘CFR’ require the seller to
pay the costs and freight to transport the goods to the delivery port, but pass title and
risk of loss to the buyer once the goods ‘pass the ship’s rail’ at the port of shipment.”
BP Oil Int’l, Ltd. v. Empresa Estatal Petroleos de Ecuador, 332 F.3d 333, 338 (5th
Cir. 2003).
3
In their brief on appeal, appellees cite this definition of CFR from searates.com:
The seller pays for the carriage of the goods up to the named port of destination. Risk
transfers to buyer when the goods have been loaded on board the ship in the country of
Export. The Shipper is responsible for origin costs including export clearance and freight
costs for carriage to named port. The shipper is not responsible for delivery to the final
destination from the port (generally the buyer’s facilities), or for buying insurance. If the
buyer does require the seller to obtain insurance, the Incoterm CIF should be considered.
CFR should only be used for non-containerized seafreight and inland waterway transport;
for all other modes of transport it should be replaced with CPT.
https://www.searates.com/reference/incoterms/cfr/ (last visited Sept. 13, 2022).
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Under CFR shipping, Far East Machinery arranged and paid for shipping the
pipe to the Port of Houston, and title and the risk of loss passed to All-Tex when the
pipe was loaded on board the ship in Taiwan. See id. Appellees assert the CFR term
meant Far East Machinery “controlled the distribution of their pipes in Texas at least
until they were offloaded at the Port of Houston.” However, appellees have
presented no authority that Far East Machinery had any legal control of the pipe or
duty concerning the pipe after it was loaded on the ship in Taiwan. According to the
definitions of cost-and-freight shipping quoted above, when the pipe was stowed on
the ship in Taiwan, Far East Machinery’s delivery was complete, and title and risk
of loss passed to either Marubeni or All-Tex. Id. Nothing in the record shows Far
East Machinery had any control over the distribution of the pipe after it was stowed
in the ship in Taiwan. Appellees have not cited any authority establishing that Far
East Machinery’s responsibility for the pipe extended beyond the loading of the pipe
onto the ship in Taiwan. The record does not show that Far East Machinery’s
shipping the pipes CFR constituted contact by Far East Machinery with Texas or
evince an intent to serve the Texas market.
Markings on the Pipe
Appellees point out that a photograph of pipe found after the accident showed
the pipe was marked “FEMCO” and “HOUSTON TX.” Far East Machinery
admitted that it marked “FEMCO” on the pipe. The invoices and packing lists state
the “MARKS & NOS.” would be:
–18–
FEMCO
P.O.NO.P1268188
HOUSTON, TX
SIZE:
NET WEIGHT:
GROSS WEIGHT:
NO.
PCS/BUNDLE
MADE IN TAIWAN
R.O.C.
The “P.O. NO.” is the “customer’s” purchase order number, and the
“customer” was All-Tex. The fact that these marks are listed on Far East
Machinery’s invoice and packing list indicate Far East Machinery marked
“HOUSTON TX” on the pipe. The “sales contract” does not state that Marubeni or
All-Tex required any marks on the pipe. Appellees argue Far East Machinery’s
marking the pipe “HOUSTON TX” constituted Far East Machinery targeting the
Texas market.
Appellees cite In re Chinese-Manufactured Drywall Products Liability
Litigation, 753 F.3d 521 (5th Cir. 2014). After Hurricanes Katrina and Rita, there
was a demand for drywall in the affected areas. Id. at 526. Chinese manufacturers
of drywall imported their product to the United States to meet that need. Id.
Numerous homeowners experienced problems with the imported drywall and
brought suit against the Chinese manufacturers. Id. at 526–27. Two related Chinese
companies, TG and TTP known collectively as Taishan, objected to jurisdiction and
filed special appearances. Id. at 527. The Fifth Circuit concluded the exercise of
personal jurisdiction over Taishan would be proper. Id. at 542–43. Appellees point
–19–
to the court’s discussion that Taishan had “specifically altered its products to suit the
forum state by marking its packaging ‘Tampa,’ stamping a Florida phone number on
the packaging, and marking its drywall with a certification that it met or exceeded
American standards.” Id. at 542.
Appellees argue there is similar alteration of products “to suit the forum state”
because Far East Machinery marked the pipe “Houston, TX.” However, there is no
evidence of why Far East Machinery placed those marks on the pipe. The sales
contract did not require the marks. Nothing in the record indicates that All-Tex
required those marks. No evidence shows Far East Machinery marked the pipes
“Houston TX” “to suit the forum state.” See id. In In re Chinese Manufactured
Drywall, however, the evidence showed Taishan “would stamp it for the customer.”
Id. Moreover, the marking and packaging of the drywall was not the main reason
the Fifth Circuit concluded Taishan had targeted Florida. The court pointed out that
“Taishan entered into a sole agency agreement with a Florida company to sell its
products and arranged the shipping of its drywall to Florida.” Id. at 541. In its
concluding paragraph of the discussion of the stream-of-commerce-plus theory, the
court discussed the fact that Taishan had actively sought business in Florida by
entering into a sales agreement with a Florida company to sell its drywall and that it
wished to expand its sales in the United States through the Florida company. Id. at
542. The concluding paragraph summarizing the reasons for finding personal
jurisdiction made no mention of the alteration of the product. See id. Thus, it
–20–
appears the alteration of the product was a lesser reason for finding purposeful
availment. The opinion does not support finding the marking of “Tampa” on the
drywall, standing alone, would have been conduct evincing an intent or purpose to
serve the Florida market.
We conclude the mere fact that the pipes have “Houston, TX” marked on them
is not sufficient to show Far East Machinery “took additional steps to serve the Texas
market.” See Luciano, 625 S.W.3d at 13.
Appellees also cite Donnelly Corp. v. Reitter & Schefenacker GmbH & Co.
KG, 189 F. Supp. 2d 696 (W.D. Mich. 2002), which concerned a patent-infringement
case against a German manufacturer of rear-view mirrors. Some of the mirrors made
by the manufacturer were designed specifically to comply with American federal
regulations and were labeled “USA” to alert Mercedes Benz that the mirrors were
for installation in cars destined for sale in the United States. Id. at 708. However,
the court noted that to comply with J. O’Connor’s version of the stream-of-
commerce theory, which is the version applied in Texas, there would have to be
additional conduct purposely directing the mirrors for sale into a particular American
state. Id. The judge in that case, however, applied Justice Brennan’s version of the
theory, which did not require the additional evidence, and concluded the
manufacturer’s “placement of the accused mirror into the American stream of
commerce was such that Defendant R & S GmbH had to expect that being subject
to suit in Michigan was possible.” Id.–21–
Donnelly is distinguishable for several reasons. The record does not show
marking “Houston TX” on the pipes was done to benefit the purchaser, like the
manufacturer in Donnelly labeling the mirrors “USA” to alert Mercedes that the
mirrors should only be placed in vehicles bound for sale to the United States. See
id. And, the court in Donnelly applied Justice Brennan’s stream of commerce theory,
not Justice O’Connor’s, which is the stream-of-commerce theory applied in Texas.
See Luciano, 625 S.W.3d at 10 (Texas courts follow J. O’Connor’s version of the
stream-of-commerce theory in Asahi).
Appellees mentioned at oral argument Semperit Technische Produkte
Gesellschaft M.B.H. v. Hennessy, 508 S.W.3d 569 (Tex. App.—El Paso 2016, no
pet.). In that case, a European high-pressure hose manufacturer, STP, sold a hose
through its primary distributor in North America to a sub-tier distributor, Mid West,
located in Oklahoma, which targeted Texas customers and sold the hose to a Texas
company. STP manufactured the hose to include Mid West’s markings so Mid West
could sell the hose as its own brand. Id. at 573. The El Paso Court of Appeals stated,
“The branding of the hose for a sub-tier distributor which targets Texas demonstrates
purposeful availment of the Texas marketplace . . . .” Id. at 580. The courts found
the marking of the hose in that case demonstrated purposeful availment. Id. In this
case, there is no evidence that Far East Machinery marked “Houston TX” on the
pipe at the request of All-Tex. The evidence does not support finding that the
–22–
marking on the pipe evinced an intent to serve the Texas market. See Luciano, 625
S.W.3d at 10.
Far East Machinery’s Website
Appellees point to evidence that Far East Machinery has a website advertising
that its pipe meets certain standards of the American Petroleum Institute and the
American Society for Testing Materials. Nothing in the record shows those
standards are unique to Texas. The evidence that the pipe meets certain standards
may show Far East Machinery targets the United States and other countries that
require the same certifications, but it is not evidence that Far East Machinery targets
Texas. See CMMC, 929 S.W.2d at 439 (manufacturer’s wiring product for use in
the United States was not sufficient to subject manufacturer to jurisdiction of Texas
courts).
The portions of Far East Machinery’s website that are in the summary
judgment record do not mention Texas. The only interactivity Far East Machinery’s
website appears to have is a page permitting the reader to leave a written message
for the company. No evidence shows that feature has been utilized by anyone from
Texas or that Far East Machinery has responded to any requests from Texans using
that feature. The website does not allow a customer to place an order from the
website. Nothing shows the website evinces an intent by Far East Machinery to
serve the Texas market. See Luciano, 625 S.W.3d at 10. There also is no substantial
connection between the website and the operative facts of this litigation. See Moki
–23–
Mac, 221 S.W.3d at 585 (for defendant’s contacts to support specific jurisdiction
“there must be a substantial connection between those contacts and the operative
facts of the litigation”).
Far East Machinery’s Previous Litigation in Texas
Appellees also point to evidence that Far East Machinery has been involved
in litigation in the United States and in Texas. Far East Machinery was involved in
litigation in the United States Court of International Trade concerning an
antidumping order issued by the Department of Commerce. See Far E. Machinery
Co., Ltd. v. United States, 699 F. Supp. 309 (U.S. Ct. Int’l Trade 1988); Far E.
Machinery Co., Ltd. v. United States, 688 F. Supp. 610 (U.S. Ct. Int’l Trade 1988).
Appellees inform us that Far East Machinery was also involved in litigation in state
court in California but that there was no opinion from that case because it settled.
These cases do not concern Far East Machinery reaching out to the Texas market or
attempting to serve the Texas market. Nor do they constitute contact with Texas.
Nor is there a substantial connection between than litigation and the operative facts
of the litigation in this case. See Moki Mac, 221 S.W.3d at 585 (for defendant’s
contacts to support specific jurisdiction “there must be a substantial connection
between those contacts and the operative facts of the litigation”).
Appellees also point to evidence that Far East Machinery was a defendant in
a case in the Eastern District of Texas. See Jackson v. U.S. Kids Golf, No. 4:06-cv-
00237; 2006-30124-211, 2009 WL 2589545 (E.D. Tex. Apr. 24, 2009) (verdict and
–24–
settlement summary). In that case, a child was using a U.S. Kids golf club. The club
broke, and the child fell on the shaft puncturing his carotid artery and died. The
child’s parents sued numerous companies, including Far East Machinery, which
allegedly manufactured the steel used for the club’s shaft. The verdict summary
states Far East Machinery “denied the allegations,” which indicates it did not file a
special appearance. Id. The jury found the child was 100 percent negligent and that
there was no defect in the design or manufacture of the club. Id. The judge “entered
judgment in accord with the verdict.” Id. This contact with Texas by Far East
Machinery defending itself in court does not indicate any commercial activity by it
in Texas or any intent to serve the Texas market. Appellees state it shows a tendency
by Far East Machinery’s deputy manager to deceive because, as appellees assert, his
affidavit “was written with great care to avoid mention of this prior lawsuit in Texas”
because the affidavit stated, “Far East Machinery Company, Ltd. has never been
sued in the State of Texas state courts.” Regardless, however, the lawsuit does not
demonstrate that Far East Machinery took any step to serve the Texas market. There
also is no substantial connection between the lawsuits and the operative facts of this
litigation. See Moki Mac, 221 S.W.3d at 585 (for defendant’s contacts to support
specific jurisdiction “there must be a substantial connection between those contacts
and the operative facts of the litigation”).
–25–
Far East Machinery’s Deputy Manager’s Travel to Texas
Appellees also point out that Far East Machinery’s deputy manager, Chien
Hsing Liu, travels to Texas every year. Chien Hsing Liu stated in his affidavit that
Far East Machinery “has never sent any of its officers, agents, servants, or employees
to the State of Texas to solicit or conduct business. I have been to Texas one time
per year, but no business is conducted during these trips.” He answered Far East
Machinery’s answers to interrogatories about the trips and stated he traveled to
Houston in 2016, 2017, and 2019 as the guest of Geneva Trading Co., Shin Okura
Trading Co., Ltd., and Steelcom Pipe International, LLC. He stated he “was
introduced to various clients of these trading companies,” he did not conduct any
business on these trips, and he had never conducted any business with those
companies.
None of this evidence shows Far East Machinery had any contact with All-Tex
or that Far East Machinery tried to serve the Texas Market such as through sales
promotions, market research, or after-sales service to customers. Cf. Kawasaki Steel
Corp. v. Middleton, 699 S.W.2d 199, 201 (Tex. 1985) (per curiam) (“Kawasaki
maintained an office in Houston that provided sales promotion, marketing research,
and after-sales service to Kawasaki’s customers in North America and Mexico.”).
There also is no substantial connection between the deputy manager’s travels to
Texas and the operative facts of this litigation. See Moki Mac, 221 S.W.3d at 585.
–26–
(for defendant’s contacts to support specific jurisdiction “there must be a substantial
connection between those contacts and the operative facts of the litigation”).
Agents Listed on the Bills of Lading
Appellees also assert three bills of lading show Far East Machinery had agents
in Houston to complete delivery of the pipes to All-Tex.
A bill of lading from SK Shipping states the pipe was shipped on the Asia
Emerald II. The pipe was “Laden on Board the Vessel” on September 23, 2016, the
Port of Loading was Kaohsiung, Taiwan, and the Port of discharge was “Houston,
TX.” Section 3 of the bill of lading is headed “Notify party” and then states:
LIVINGSTON INTL, INC. / M.G. MAHER
& CO INC. 801 TRAVIS ST. SUITE
1450 HOUSTON, TX 77002
Nothing in the record indicates who Livingston International was or that it was Far
East Machinery’s agent. In response to appellees’ request for admissions, Far East
Machinery denied it had hired Livingston International “to represent it in connection
with import of the steel pipe.”
Section 9 of SK Shipping’s bill of lading is headed “Marks and Numbers” and
states:
HOUSTON AGENT:
NORTON LILLY INTERNATIONAL
3120 SOUTHWEST FREEWAY SUITE 615
HOUSTON, TX 77098
This document indicates the “Marks and Numbers” included the Houston agent
Norton Lilly International. Nothing indicates who required the Marks and Numbers
–27–
to include “Houston Agent: Norton Lilly International.” The document gives no
indication of the identity of Norton Lilly International’s principal. In response to
appellees’ request for admissions, Far East Machinery denied it had hired Norton
Lilly “to represent it in connection with import of the steel pipe.”
The bill of lading from CYCLE WIDE SHIPPING INC. states:
Frefreight and charges
HOUSTON AGENT:
SEA MARK MANAGEMENT INC., NEW JERSEY
100 LIGHTING WAY, 4TH FLOOR, SECAUCUS NEW JERSEY
07094, U.S.A.
The record contains no evidence of what “Frefreight and charges” are or who Sea
Mark Management’s principal is.
A bill of lading from DAEWOO Logistics Corp. contains contractual
provisions and then lists an agent:
IN ACCEPTING THIS BILL OF LADING, THE SHIPPER, OWNER
AND CONSIGNEE OF THE GOODS AND HOLDER OF THE BILL
OF LADING EXPRESSLY ACCEPT AND AGREE TO ALL ITS
STIPULATIONS EXCEPTIONS AND CONDITIONS, WHETHER
WRITTEN, STAMPED OR PRINTED AS FULLY AS IF SIGNED
BY SUCH SHIPPER, OWNER, CONSIGNEE AND/OR HOLDER.
No agent is authorized to waive any of the provisions of the within
clauses.
RECEIVED from the shipper herein named the goods or packages said
to contain goods . . . in apparent good order and condition . . . to be
transported from the port of loading with liberty to proceed . . . to the
port of discharge . . . .
....
IN WITNESS WHEREOF, THE MASTER OF AGENT OF THE
SAID SHIP HAS SIGNED TO THREE (3) bills of lading, all of this
–28–
tenor and date. ONE of which being accomplished, the others to stand
void . . . .
HOUSTON AGENT:
Blue Water Shipping Co.
17625 El Camino Real — STE 120 Houston, Texas 77058
Again, the record contains no evidence for whom Blue Water Shipping Co. is an
agent. The paragraph above the name “Blue Water Shipping Co.” states “THE
MASTER OF AGENT OF THE SAID SHIP” signed three bills of lading, which
indicates Blue Water Shipping Co. may be the “AGENT OF THE SAID SHIP.”
Nothing indicates Blue Water Shipping Co. is Far East Machinery’s agent.
None of the bills of lading indicate they were prepared by Far East Machinery,
and none of them indicate that Far East Machinery was the principal of the agents
listed on the bills of lading. Appellees assert the agents were “Houston-based
shipping and customs agents.” Appellees do not explain why Far East Machinery
needed shipping and customs agents in Houston. Under the CFR shipping term, Far
East Machinery completed its delivery of the pipe when the cargo was loaded onto
the ship in Taiwan, so Far East Machinery had no responsibility at the Port of
Houston or in Texas for the shipping and customs in Texas and thus had no need of
agents in Houston to expedite getting the pipes through customs and delivered to
Marubeni’s customer, All-Tex. Appellees’ assertion that the listed agents were Far
East Machinery’s agents has no support in the record.
–29–
Cases Cited by the Parties
Appellees cite Luciano v. SprayFoamPolymers, LLC as supporting the
exercise of jurisdiction over Far East Machinery. In Luciano, a Connecticut
manufacturer, SprayFoam, was sued when its product was used in a Texas home.
Luciano, 625 S.W.3d at 6. The supreme court found purposeful availment by
SprayFoam because it had a distribution center in Texas “to handle logistics for its
products in Texas.” Id. at 10. SprayFoam also had an “independent contractor sales
representative,” Preston Nix, in Colorado whose service area included Texas. Id. at
7. SprayFoamPolymers relied on Nix as its sales agent and paid him commissions
on his sales. Id. at 12. As the supreme court said, “Put plainly, his job was to ‘find
customers.’” Id. at 11. The court concluded, “Placing its product into the stream of
commerce in conjunction with its ‘additional conduct’ of soliciting business and
distributing its product in Texas is sufficient to hold that SprayFoam purposefully
availed itself of the Texas market.” Id. at 14; see also id. at 18 (“Here, SprayFoam’s
actionable conduct involved allegedly causing injury in Texas to Texas residents.
Additional conduct that it tapped into the Texas market is evinced by its use of a
Texas distribution center and a Texas sales representative to create a market to sell
to local installers.”). In this case, there is no evidence that Far East Machinery has
a sales representative, a distribution center, or their equivalent targeting Texas.
Appellees also cite Benxi Northern Steel Pipe Co., Ltd. v. Atlas Tubular, L.P.,
No. 13-13-00102-CV, 2013 WL 6573782 (Tex. App.—Corpus Christi–Edinburg
–30–
2013, no pet.) (mem. op.). Benxi was a Chinese steel pipe manufacturer. Id. at *1.
It received an order from another Chinese company, Shanghai, for pipe to be shipped
to the Port of Houston for Shanghai’s customer, CMC Dallas, which was a Texas
corporation. Id. Benxi manufactured the pipe specifically for CMC Dallas’s order.
Id. at *1. Benxi made quality assurances that the pipe was appropriate for purchase
and use in a Texas-centered oil-field application, and Benxi agreed to perform
hydrostatic tests of the pipe to meet certain standards. Id. at *11. CMC Dallas had
encountered testing failures by Benxi in the past. Before placing the orders at issue,
CMC Dallas’s personnel traveled to China and met with Benxi to make sure the pipe
was properly tested. The pipe was shipped to the Port of Houston. The pipe was
not used in a Texas-centered oil field. Instead, CMC Dallas sold the pipe through
other intermediaries before it was finally purchased and installed in an underwater
pipeline off the coast of Alabama. Despite Benxi’s promise that the pipe was tested
and met certain specifications, Benxi had not tested the pipe and it failed, causing
damage. Id. In the subsequent lawsuit, the trial court denied Benxi’s special
appearance, and the court of appeals affirmed, concluding Benxi “purposefully
directed acts towards Texas or purposefully availed itself of the benefits and
protections of Texas law.” Id. at *4.
Benxi is not analogous to the case before us. Benxi manufactured the pipe for
CMC Dallas after it received CMC Dallas’s order; there is no evidence Far East
Machinery manufactured the pipe specifically for Marubeni’s order from All-Tex or
–31–
that it manufactured the pipe after receiving the order. Benxi’s employees met with
CMC Dallas’s employees to assure them the pipe would be properly tested. Id. In
this case, there is no evidence that Far East Machinery’s employees had any contact
with All-Tex. Benxi made “specific quality assurances . . . that the pipe was
hydrostatically tested, met specifications, and was for purchase and use in a
Texas-centered oil field application.” Id. In this case, Far East Machinery made
quality assurances that the pipe met certain specifications of the American Petroleum
Institute, but it made no representations of standards specific to Texas. CMC Dallas
received a Benxi catalog showing Dallas was the “sole point of international sales
to the United States,” id. at *1, but no evidence shows Texas is the sole point of Far
East Machinery’s sales in the United States or that Far East Machinery sent a catalog
to All-Tex or anyone else in Texas. The court in Benxi observed that “[s]ellers who
create ‘continuing relationships and obligations with citizens of another state’ are
subject to jurisdiction based on their activities in the forum state.” Id. at *8 (quoting
Michiana, 168 S.W.3d at 785). The court concluded that Benxi had created such
relationships with Texas citizens by meeting multiple times with CMC Dallas in
China to discuss purchases, sales, quality, testing, and the suspension of CMC
Dallas’s purchases due to Benxi’s lack of testing.” Id. In this case, there is no
evidence of any communication directly between Far East Machinery and All-Tex,
and Chien Hsing Liu testified that Far East Machinery “has no business relationship
with All-Tex.” No evidence shows Far East Machinery created continuing
–32–
relationships and obligations with citizens of Texas by filling the order from
Marubeni and arranging for the pipe to be shipped to the Port of Houston. Benxi is
too dissimilar to be applicable to this case.
Appellees also cite Ford Motor Co. v. Montana Eighth Judicial District
Court, 141 S. Ct. 1017 (2021). Appellees assert, “Just as Ford is liable for defects
in vehicles in a state where Ford never did anything causing the problem, or even
sold the vehicle in question, Far East can be liable for selling its defective pipe
designed for use in Texas, to a Texas company to use in Texas, when it causes
injuries in Texas.” That case is not analogous. The argument before the Supreme
Court involved the “causal link” element of specific jurisdiction, not the “stream of
commerce plus” theory of specific jurisdiction. However, the Supreme Court’s
opinion sets out facts that explain why the Montana Supreme Court concluded the
stream-of-commerce-plus theory was fully met by Ford’s reaching out to and
targeting the Montana automobile market::
The company advertises in the State; “has thirty-six dealerships” there;
“sells automobiles, specifically Ford Explorers[,] and parts” to
Montana residents; and provides them with “certified repair,
replacement, and recall services.”
Id. at 1023 (quoting Ford Motor Co. v. Mont. Eighth Judicial Dist. Court, 443 P.3d
407, 414 (Mont. 2019) (“Ford’s conduct satisfies the more-stringent stream of
commerce plus theory, and we accordingly find it purposefully availed itself of the
privilege of conducting activities in Montana, thereby invoking Montana’s laws.”)).
By contrast, no evidence shows Far East Machinery advertises in Texas, has
–33–
dealerships in Texas, or provides Texas residents with repair, replacement, or recall
services.
Appellees also cite Spir Star AG v. Kimich, 310 S.W.3d 868 (Tex. 2010). Spir
Star AG was a German corporation that manufactured high-pressure hoses. To take
advantage of the American market, Spir Star AG set up a limited partnership in
Texas, Spir Star Limited, to act as its exclusive distributor in North America. Id. at
871. After a hose ruptured injuring Kimich, he brought suit against numerous
defendants including Spir Star AG, which filed a special appearance. Spir Star
argued that its having the distributor-intermediary, Spir Star Limited, prevented the
Texas courts from acquiring jurisdiction over it. The Texas Supreme Court
disagreed and explained how Spir Star AG targeted Texas for its sales using its
distributor, Spir Star Limited. See id. at 875, 877–78. The supreme court found
those facts sufficient to constitute an intent or purpose to serve the market in Texas.
Id. at 878 (“If the foregoing evidence does not indicate an intent or purpose to serve
the market in Texas, it is difficult to imagine what would.” (internal punctuation
omitted)). In this case, there is no evidence that Far East Machinery sought to serve
the Texas market such as through a distributor like Spir Star AG had. See Asahi,
480 U.S. at 112; see also Luciano, 625 S.W.3d at 10 (“Evidence of such additional
conduct may include advertising in the forum state, soliciting business through sales
persons, or creating, controlling, employing the distribution system that brought the
product into the forum state.” (citations omitted)). There is no evidence that All-
–34–
Tex and Far East Machinery had an agreement for All-Tex to serve as its distributor.
Far East Machinery denied a request for admission asking it to admit that it had a
business relationship with All-Tex, and Chien Hsing Liu testified in his affidavit that
“Far East Machinery Co., Ltd. has no business relationship with All-Tex.”
Appellees also point to Semperit Technische Produkte Gesellschaft M.B.H. v.
Hennessy, 508 S.W.3d 569 (Tex. App.—El Paso 2016, no pet.), a case similar to
Spir Star. In that case, a European manufacturer, STP, made high-pressure hoses,
one of which exploded at an oil-drilling site in Texas, injuring the plaintiff. STP had
created a U.S. distributor in New Jersey, SIP, and STP owned all the shares of SIP.
SIP sold STP’s products nationwide; SIP’s employees targeted its customers in
Texas and contacted twenty-five to fifty prospective customers. Id. at 574. SIP sold
the hose that exploded to Mid West, a sub-tier distributor in Oklahoma, which sold
about half its inventory in Texas, including the hose at issue in that case. When STP
manufactured the hose, it applied Mid West’s markings to the hose, which allowed
Mid West to resell the pipe under its own brand label. Id. at 573. The El Paso Court
concluded this evidence showed STP “participated in a distribution network that in
multiple ways delivered STP’s product to Texas end users” and held the Texas courts
could exercise jurisdiction over STP. In Semperit, the El Paso Court found the
“plus” factor was the SIP “distribution network that in fact has resulted in STP
selling millions of goods to Texas customers.” Id. at 579. The court stated, “The
volume of sales elevates this case beyond the ‘random,’ ‘fortuitous’ or attenuated
–35–
contacts alluded to Burger King Corp. v. Rudzewicz, 471 U.S. at 475–76.” The court
also stated that the branding of the hose for Mid West, a sub-tier distributor that
targeted Texas, “demonstrates purposeful availment of the Texas marketplace.” Id.
at 580.
Unlike the distributors in Spir Star and Semperit, no evidence shows All-Tex
was created by or a subsidiary of Far East Machinery, that All-Tex is managed by
an officer of Far East Machinery, that All-Tex’s employees reported to Far East
Machinery, or that All-Tex was the exclusive distributor for Far East Machinery in
Texas. Cf. Spir Star, 310 S.W.3d at 871, 877; Semperit, 508 S.W.3d at 573, 574.
Spir Star’s and Semperit’s conduct evinced an intent to serve the Texas market
through their distributors. In this case, Chien Hsing Liu testified there is no business
relationship between Far East Machinery and All-Tex, and no evidence shows there
is such a relationship between them.
Far East Machinery cites Continental Alloys & Services (Delaware) LLC v.
YangZhou Chengde Steel Pipe Co., 597 S.W.3d 884 (Tex. App.—Houston [14th
Dist.] 2020, pet. denied). In that case, CIEC, an American distributor of pipe,
ordered pipe from YangZhou Chengde Steel Pipe Co. (Chengde). Id. at 888. The
pipe was shipped “CIF,” “cost, insurance, and freight,” which is the same as shipping
CFR except that the seller also contracts for insurance and pays the premium. See
id. at 888, 895. CIEC sold the pipe to Continental Alloys. Id. at 888. Continental
Alloys sued CIEC and Chengde in Texas state court alleging the pipe was defective.
–36–
Id. Chengde filed a special appearance, which the trial court granted and dismissed
all claims against Chengde for lack of personal jurisdiction. Id. at 888, 889. The
court of appeals affirmed. Id. at 897. In that case, Chengde had more connection
with Texas and the Texas distributor CIEC than Far East Machinery had with
All-Tex. There were contracts directly between Chengde and CIEC, id. at 894,
whereas in this case there was no contract between Far East Machinery and All-Tex.
Chengde’s North American sales manager traveled to Texas and met with customers
and potential customers of Chengde including Continental, id. at 893, whereas Far
East Machinery’s deputy manager traveled to Texas but did not conduct business,
and the record does not show he met with representatives of All-Tex or All-Tex’s
customers.
Appellees argue that Continental Alloys is not analogous. They assert in their
brief the case is distinguishable because “in that case, the pipe was legitimately sold
to a third party the manufacturer did not control.” However, there is no evidence in
this case that Far East Machinery controlled Marubeni or All-Tex. Chien Hsing Liu,
Far East Machinery’s deputy manager, testified there was no business relationship
between it and All-Tex. Appellees also assert Continental Alloys is distinguishable
because the shipping term in that case was CIF while it was CFR in this case. As
discussed above, the CFR and CIF shipping terms are identical except for the fact
that with CIF the shipper has to provide and pay for insurance as well as shipping.
Thus, Far East Machinery had fewer responsibilities to Marubeni and All-Tex than
–37–
Chengde had to CIEC. Appellees also assert “there was no evidence in Continental
Alloys that the defective pipe had been ‘designed . . . for the market in Texas,’
whereas here there is such evidence, as well as evidence showing that this design
was used to market the pipe to the Texas market.” (citation omitted) We assume
appellees are asserting that the testing and specifications for the pipe to meet
American Petroleum Institute’s standards constituted Far East Machinery designing
the pipe for the Texas market. As discussed above, nothing in the record shows any
special design was required by Texas that was unique to the Texas market. None of
these facts materially distinguish Continental Alloys from the case before us.
Far East Machinery established that it did not target the Texas market for
selling pipe. Accordingly, Far East Machinery did not purposefully avail itself of
the privilege of conducting activities within Texas, and did not invoke the benefits
and protections of its laws. We conclude the trial court erred by denying Far East
Machinery’s special appearance.
CONCLUSION
We reverse the trial court’s order denying Far East Machinery’s special
appearance. We render judgment dismissing appellees’ claims against Far East
Machinery for lack of jurisdiction.
/Lana Myers//
210267f.p05 LANA MYERS
JUSTICE
–38–
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
Far East Machinery Co., Appellant On Appeal from the County Court at
Law No. 5, Dallas County, Texas
No. 05-21-00267-CV V. Trial Court Cause No. CC-18-05668-
E.
Isabel Aranzamendi, Individually and Opinion delivered by Justice Myers.
as Beneficiary of Wilber Dimas, Justices Partida-Kipness and Carlyle
Deceased, et al., Appellees participating.
In accordance with this Court’s opinion of this date, the trial court’s order
signed April 2, 2021, denying the special appearance filed by appellant Far East
Machinery Co. is REVERSED and judgment is RENDERED dismissing
appellees’ claims against appellant Far East Machinery Co. for lack of jurisdiction.
It is ORDERED that appellant Far East Machinery Co. recover its costs of
this appeal from appellees Isabel Aranzamendi, individually and as beneficiary of
Wilber Dimas, deceased; Pablo Morales Jaimes and Rosalina de Paz Puebla, as wrongful
death beneficiaries of Filiberto Morales de Paz, deceased; Joel Tovar; Jorge Tovar; Victor
Orozco; Abel Ponce Espinoza; Bethany Helen Morales, individually and as personal
representative of the estate of Filiberto Morales de Paz, deceased; Rocio Guiterrez Diaz Deleon,
as next friend of AMG, a minor; Jose Tovar; Aaron Haveron; Tonya Haveron; Richard Studer;
Matthew Aaron; Rebecca Aaron, individually and on behalf of J.A. and S.A., minor children;
Justin Barabas; Shelly Harwell; Vernon Barabas; Jessica Barabas; Jeffrey Barabas; Annette
Romer, individually and on behalf of the estate of Michael Bruggman; Victor Orozco; Abel
Ponce Espinoza; Jacob Rodriguez; Jose Antonio Reyes Torres; Nancy Shelton; and Matthew
Lytle.
This Court’s order signed June 3, 2021, staying the commencement of trial
pending disposition of this appeal is LIFTED.
Judgment entered this 13th day of September, 2022.
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