JANE J. BOYLE, District Judge.
In this subrogation action, Allstate Insurance Company ("Allstate") and Fire Insurance Exchange ("Fire Insurance") (together, "Plaintiffs") allege that Defendant Watts Plumbing Technologies (Taizhou) Co., LTD ("Watts") manufactured defective toilet supply lines that caused water-related damage in a number of insured individuals' homes. Watts, which does business out of its sole facility in China, now moves to (among other things) dismiss the claims against it for lack of personal jurisdiction. Plaintiffs' primary response is that jurisdiction is proper under the stream of commerce doctrine. Because it finds that Plaintiffs fail to make out a prima facie case of personal jurisdiction over Watts, the Court
This is a subrogation action removed from Texas state court on March 4, 2013.
While all three defendants deny liability, only Watts seeks dismissal at this time, primarily arguing that this Court lacks personal jurisdiction. Watts is a Chinese corporation that manufactures various plumbing products, which it sells to distributors and re-sellers (but not directly to consumers) in foreign and domestic markets. (See Doc. 27 Ex. 1, Aff. of Penngfei Zhao ("Zhao Aff."); Doc. 66, App. Supp. Pl.'s Resp. ("Pl.'s App.") at 372.) Since its inception in 2002,
The record reveals that Watts-manufactured products made their way into the United States in two relevant ways. First, various products originating from Watts's facility in China were shipped to businesses in the United States between 2003 and 2011, including fifty-four shipments to companies located in Texas. (Pl.'s App. 494-543.) Many of these shipments were made to Watts's parent company, Watts Regulator Co. ("Watts Regulator"), a separate and distinct entity also involved in the plumbing industry. (See id. at 372, 377, 494-543; Zhao Aff. ¶¶ 19, 22.) Though some contained toilet supply lines, none of these shipments are alleged to have contained the defective products at issue in this case.
Second, the record shows that over a two-and-a-half year period (February 18, 2003 to August 25, 2005) Watts-manufactured plumbing products — including 765,025 toilet supply lines like the ones at issue here — were shipped to a facility in Nashville, Tennessee. (Pl.'s App. 7-9.) That facility was a national distribution center owned by Interline, a publically-traded corporation based in the United States that markets and distributes maintenance, repair, and operations products to customers in the United States and Canada. (Id. at 253, 269, 285, 297-98.) Before reaching Tennessee, the products were purchased by Linx — a small U.S.-based entity involved in (among other things) the resale of products offered by companies in China
On April 16, 2013, Watts filed four motions in response to Allstate's Amended Complaint (doc. 24), and later re-filed these same four motions in response to Fire Insurance's Complaint in Intervention (doc. 43). Watts subsequently withdrew one of its four pairs of motions (doc. 52) — its Motion to Dismiss for Insufficient Service of Process — leaving the Court to resolve the following three pairs of outstanding motions: Motion to Dismiss for Lack of Personal Jurisdiction, Motion to Dismiss for Failure to State a Claim, and Motion for a More Definite Statement.
Briefing on these motions was delayed (docs. 34, 45) so that Magistrate Judge Ramirez could resolve Plaintiffs' Amended Motion for Leave to Conduct Jurisdictional and Claims Discovery (doc. 28). On October 3, 2013, Judge Ramirez issued an Order (doc. 58) denying Plaintiffs' discovery motion, finding that Plaintiffs had failed make a preliminary showing of personal jurisdiction. Plaintiffs objected to Judge Ramirez's Order, which this Court overruled on October 8, 2013 (doc. 62).
On October 25, 2013, Plaintiffs filed joint responses (docs. 65, 67, 68) to Watts's motions. Watts replied on November 8, 2013 (doc. 70), but only with respect to its Motion to Dismiss for Lack of Personal Jurisdiction. Along with its reply, Watts filed a Motion for Leave to File Appendix (doc. 72), which the Court now
Federal Rule of Civil Procedure 12(b)(2) allows for dismissal of an action when a court lacks personal jurisdiction over the defendant. In resolving a Rule 12(b)(2) motion, the Court may consider "affidavits, interrogatories, depositions,
Two preconditions must be satisfied before this Court may assert personal jurisdiction: (1) the defendant must be amenable to service of process under Texas' long-arm statute; and (2) the assertion of jurisdiction over the defendant must comport with the Due Process Clause of the United States Constitution. Jones v. Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1067 (5th Cir.1992). Because Texas' long-arm statute has been held to extend to the limits of due process, only the second jurisdictional precondition must be examined. Id. at 1067-68 (citing, inter alia, Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex.1990)). For personal jurisdiction to comport with due process, the plaintiff must show that: (1) the defendant purposefully availed itself of the benefits and protections of the forum state by establishing "minimum contacts" with that state such that it would reasonably anticipate being haled into court there; and (2) exercising jurisdiction over the defendant would not offend traditional notions of fair play and substantial justice. Id. at 1068 (citations omitted).
The "minimum contacts" prong of the due process analysis can be met through contacts giving rise to either specific or general jurisdiction. Gundle Lining Constr. Corp. v. Adams Cnty. Asphalt, Inc., 85 F.3d 201, 205 (5th Cir.1996). "General personal jurisdiction is found when the nonresident defendant's contacts with the forum state, even if unrelated to the cause of action, are continuous, systematic, and substantial." Marathon Oil Co. v. A.G. Ruhrgas, 182 F.3d 291, 295 (5th Cir.1999) (citation omitted). In contrast, specific personal jurisdiction is established through the defendant's contacts with the forum state arising from, or related to, the cause of action. Gundle, 85 F.3d at 205.
Watts moves to dismiss the claims against it pursuant to Rule 12(b)(2) for lack of personal jurisdiction. Watts argues that the Court lacks specific personal jurisdiction because it did not purposefully direct any activities at Texas, do any business in Texas, "or otherwise have any contact with Texas." (Doc. 27, Mot. 8.) Similarly, Watts contends that general personal jurisdiction is improper because it has not had any, much less continuous and systematic, contacts with Texas. (Id.) Plaintiffs respond that the Court has both specific and general personal jurisdiction over Watts because of its commercial efforts to sell its products to businesses and consumer in Texas. (Doc. 65, Resp. 7-8.) The Court will examine, in turn, Plaintiffs' positions on specific and general personal jurisdiction to determine whether they have met their burden of establishing a prima facie case.
The Fifth Circuit applies a three-step analysis to determine whether specific personal jurisdiction over a defendant exists:
Luv N' Care v. Insta-Mix, Inc., 438 F.3d 465, 469 (5th Cir.2006) (quoting Nuovo Pignone v. STORMAN ASIA M/V, 310 F.3d 374, 378 (5th Cir.2002)).
At step one, Plaintiffs rely on the stream-of-commerce test, which is typically invoked in cases in which "a nonresident defendant, acting outside the forum, places in the stream of commerce a product that ultimately causes harm inside the forum." Goodyear Dunlop Tires Operations, S.A. v. Brown, ___ U.S. ___, 131 S.Ct. 2846, 2855, 180 L.Ed.2d 796 (2011). In the Fifth Circuit, "`mere foreseeability or awareness'" that the accused product will reach the forum state's market is "`a constitutionally sufficient basis for personal jurisdiction if the defendant's product made its way into the forum state while still in the stream of commerce.'" Ainsworth v. Moffett Engineering, Ltd., 716 F.3d 174, 177 (5th Cir.2013) (quoting Luv N' Care, 438 F.3d at 470). However, "the defendant's contacts must be more than random, fortuitous, or attenuated, or of the unilateral activity of another party or third person." Id. at 177 (citation omitted).
Despite Watts's citation to the holding in J. McIntyre Machinery Ltd. v. Nicastro, ___ U.S. ___, 131 S.Ct. 2780, 180 L.Ed.2d 765 (2011) in its original brief, the Fifth Circuit recently found that McIntyre did not abrogate this Circuit's stream of commerce approach. More specifically, Ainsworth held first, that Justice Breyer's concurrence in McIntyre — rather than the more-broadly sweeping plurality — controlled, and second, that the concurrence "was explicitly based on Supreme Court precedent and on McIntyre's specific facts," which involved a single sale in the forum state. Id. at 178-79. Though it noted Breyer's disapproval of a stream-of-commerce approach that would "subject a foreign defendant to jurisdiction so long as it `knows or reasonably should know that its products are distributed through a nationwide distribution system that might lead to those products being sold in any of the fifty states,'" the Fifth Circuit was "not persuaded that" the facts presented in Ainsworth required it to "call upon such a broad power." Id. at 178-79 (quoting McIntyre, 131 S.Ct. at 2793 (Breyer, J., concurring) (emphasis in original)).
Having determined the relevant law, the Court turns now to the facts Plaintiffs offer in support. Plaintiffs primarily point to evidence that — between February 18, 2003 and August 25, 2005 — 765,025 Watts-manufactured toilet supply lines were shipped to Interline's national distribution center in Nashville, Tennessee. (See Pl.'s App. 7-9.) Plaintiffs also submit evidence showing that, around this time period: (i) Watts, Interline and Linx formed a distribution relationship, (ii) Interline had a broad distribution network in the United States and Canada with Texas commanding the second most regional distribution centers of any state, (iii) Texas was the second largest and most populous state in the Union, and (iv) Watts held a certificate of listing with IAPMO and requested to add Interline and Linx to that listing.
Plaintiffs are correct that this case shares some similarities with Ainsworth. In both instances, a foreign manufacturer-defendant — Watts from China (here), Moffett from Ireland (Ainsworth) — sold a relatively large quantity of the accused product — 765,025 toilet supply lines (here), 13,073 forklifts (Ainsworth) — to a distributor with a broad network in the United States — Interline (here), Cargotec (Ainsworth) — and connections to a forum state that has a relatively large number of potential consumers of that product — second most households in Texas (here), fourth most poultry-producers in Mississippi (Ainsworth). But while Plaintiffs essentially base their case on these general facts, the plaintiff in Ainsworth went much further, showing the precise contacts Moffett had in the forum state (203 forklifts sold in Mississippi), the exact benefit it derived from its forum-related contacts (1.55% of Moffett's total sales made in Mississippi), and a close ten-year relationship between the Moffett and its distributor, including an agreement that gave Cargotec exclusive rights to distribute Moffett's products in the United States and a common parent company between the two wholly-owned subsidiaries. Ainsworth, 716 F.3d at 175 & n. 2, 179. Even though Moffett claimed to have no knowledge of any sales in Mississippi, these concrete facts allowed the court to infer that "Moffett could have `reasonably anticipated' being haled into court in Mississippi."
In this case, the Court cannot reasonably infer, from the minimal relevant facts Plaintiffs present, that Watts knowingly benefitted from the Texas market in the sale of its toilet supply lines. For starters, there is no direct proof or allegations that any of Watts's toilet supply lines were ever purchased in Texas, which is arguably reason enough to find jurisdiction lacking.
In addition, the Court has no reasonable basis to conclude that Watts was aware of, or could reasonably foresee, its product being sold in Texas. On top of the deficiencies noted above, the record does not demonstrate a close relationship between manufacturer and distributor that would suggest an understanding of each side's activities. Instead, unlike any of the cases Plaintiffs rely on,
Essentially conceding these shortcomings, Plaintiffs posit that "it is reasonable to assume" a significant number of toilet supply lines were sold in Texas based on the large quantity of product shipped to Tennessee, Interline's high percentage of plumbing-related sales, and Interline's relatively strong presence in Texas. (Resp. 21.) Even drawing all reasonable inferences in their favor,
To illustrate, there is no indication that Interline simply divvied up the toilet supply lines it received at its national distribution center among the regional distribution centers Interline had spread out across the United States and Canada. Rather, through its inventory management system, Interline could have directed the DuraPro toilet supply lines in bulk to certain states and only randomly to others based on the product's demand (see, e.g., Pl.'s App. 260-61; 304-05), which may have varied across states for reasons such as differing product
Lastly, Plaintiffs maintain that Watts's "concerted effort to certify its plumbing products with IAPMO" shows Watts could have reasonably anticipated being haled into court in Texas. (Resp. 23.) But Plaintiffs provide no direct evidence of Watts's motivations to initially acquire its IAPMO certification, and instead rely solely on an IAPMO representative's "opinion" on why a company would generally seek such a certification. (Id. at 23-24.) More importantly, there is no evidence that Watts's relationship with Interline and Linx was part of some concerted effort to reach the U.S. or Texas markets. On the contrary, the record shows that Linx and Interline approached Watts in China, that Interline drove how much product ultimately made it to the United States through the variable orders it placed, and that Watts simply filled the orders relayed to it by Linx before shipping the product F.O.B. to Linx's Shanghai facility.
In sum, there is insufficient evidence for the Court to conclude that Watts "delivered [its toilet supply lines] into the stream of commerce with the expectation that it would be purchased by or used by consumers in [Texas]." Ainsworth, 716 F.3d at 177 (quotation marks and citation omitted). Accordingly, the Court finds that Plaintiffs failed to make out a prima facie case of specific personal jurisdiction over Watts.
Plaintiffs next contend that general personal jurisdiction over Watts is proper because of the large quantity of product it shipped to Texas. (Resp. 8.) Specifically, Plaintiffs' evidence shows that from 2003 to 2011 "Watts made fifty-four shipments... to companies located in the State of Texas." (Id. at 25.) The evidence further indicates that these shipments weighed nearly 2,000,000 pounds in total and often included the description "Flexible Water Connectors." (Pl.'s App. 488-543.) This evidence, according to Plaintiffs, establishes that "Watts has maintained continuous and systematic business contacts with this state by shipping millions of products into Texas on a regular basis." (Resp. 25.) This conclusion is completely unsupported by precedent.
"A court may assert general jurisdiction over foreign (sister-state or foreign-country) corporations to hear any and all claims against them when their affiliations with the State are so `continuous and systematic' as to render them essentially at home in the forum State." Goodyear, 131 S.Ct. at 2851 (2011) (citing International
Here, Watts's fifty-four shipments of products to Texas over an eight-year period — equating to less than seven annual shipments — does not qualify as "continuous and systematic" forum contacts for purposes of general personal jurisdiction. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 418, 104 S.Ct. 1868, 1874, 80 L.Ed.2d 404 (1984) ("[M]ere purchases [in the forum State], even if occurring at regular intervals, are not enough to warrant a State's assertion of [general personal] jurisdiction over a nonresident corporation in a cause of action not related to those purchase transactions."). Simply put, this limited and discrete business Watts conducted does not render the Chinese manufacturer "essentially at home" in this forum. Goodyear, 131 S.Ct. at 2856-57; see also Companion Prop. & Cas. Ins. Co. v. Palermo, 723 F.3d 557, 560 (5th Cir.2013) (finding no general personal jurisdiction where defendants, "although sustained over an appreciable period, transacted only limited and discrete business" in the forum state). Thus, the Court finds that Plaintiffs' failed to make out a prima facie case of general personal jurisdiction over Watts.
In conclusion, Plaintiffs failed to establish Watts's "minimum contacts" with Texas under either the specific or general personal jurisdiction theories. Exercising personal jurisdiction over Watts under these circumstances would violate Due Process. As such, the Court
For the foregoing reasons, the Court