Minimum Contacts for Maximum Recovery

Rather than describing the due process limitation on a state’s exercise of personal jurisdiction, “minimum contacts” may more accurately describe the interpersonal relationships of some of us at Abnormal Use. While relationships and the due process limits on personal jurisdiction may both be equally obtuse, only one can support a blog post. Alas, perhaps we can make some headway with personal jurisdiction.

The Colorado Court of Appeals recently found minimum contacts supporting personal jurisdiction in Etchieson v. Central Purchasing, LLC, No. 09-CA-0218, 2010 WL 1491642 (Colo. Ct. App. Apr. 15, 2010) [PDF]. Etchieson was injured when an electric meter exploded. As happens now in our globalized society, the defective product was manufactured outside of the United States by a Chinese company (“Precision”) with “no offices, employees, or facilities in the United States.” Id. The electric meter was purchased and sold among several companies before reaching the hands of the Plaintiff. Without going through a painful recitation of the facts, perhaps it is sufficient to say that Precision purposefully sold its product in the United States, but Precision did not “aim any advertising exclusively at Colorado and no Precision personnel ever visited Colorado.” Id. The trial court found these contacts insufficient to support exercise of the long-arm statute, but the Court of Appeals reversed.

The Colorado Court of Appeals discussed specific jurisdiction and Supreme Court precedent involving foreign corporations. At the risk of oversimplifying, the court of appeals reasoned that Precision purposefully manufactured its product for the United States market, and, because of that general availing of the broader market, Precision availed itself of the Colorado market. Moreover, specific jurisdiction was reasonable because “in the context of product liability, the limits on personal jurisdiction have been relaxed as trade has . . . globalized . . . and as modern transportation and communication have eased the burden of defending oneself in a distant state . . . .” Id. Therefore, personal jurisdiction is proper.

So what? How is this Plaintiff going to effectuate any judgment that he gets against a foreign company with no domestic assets? It seems a lot of this is driven by Colorado’s apportionment of liability statute, which does not permit recovery against any one tortfeasor in excess of the jury’s finding of liability. Moreover, a jury could consider the liability of any nonparty in the proceeding in its assessment of liability.

No Jurisdiction for Seller of Milk Trailer, Texas Court Finds

Last week saw the release of a somewhat interesting personal jurisdiction case out of Texas. In that case, the seller of a milk truck was found not to have minimum contacts with the State of Texas, and thus, the district court did not have personal jurisdiction over it in the Plaintiff’s products liability action. See Mateer v. Cabool Lease, Inc., No. 2-09-297-CV, 2010 WL 1509691 (
Tex. App. – Fort Worth, April 15, 2010, no pet. h.) (not designated for publication).

The Plaintiff, a milk truck driver, suffered a severe hand injury after a 2006 valve accident while he was pumping milk into his trailer. Following his injury, he sued several entities, including Cabool Lease, Inc. (“Cabool“), the company that had sold the trailer at issue to Plaintiff’s employer, on the grounds that the trailer was defective. In response to the suit, Cabool filed a special appearance under Rule 120a of the Texas Rules of Civil Procedure in order to assert a personal jurisdiction challenge. The trial court sustained Cabool’s special appearance and the Fort Worth Court of Appeals, in an unpublished opinion authored by Justice Sue Walker, affirmed the trial court’s ruling and denied the Plaintiff’s interlocutory appeal.

The basic facts were not in dispute. In 1998, Plaintiff’s employer purchased the trailer at issue from Cabool, based in, of all places, Cabool, Missouri. The court noted that Cabool was a Missouri corporation with its principal place of business in Missouri. It did no business in Texas:

[Cabool] is not a corporate entity formed under the laws of Texas, and it does not maintain a registered agent for service in Texas. [Cabool] has no employees in Texas and does not regularly recruit Texas residents to work for [Cabool]; it does not maintain a place of business in Texas and does not have any offices or other facilities in Texas; it does not own any real or personal property in Texas; it does not maintain any bank accounts or post office boxes in Texas; it does not pay any taxes to any local or state taxing authorities in Texas; it does not market or ship any products to individuals or corporations in Texas; it does not operate a website in order to promote its business; it does not have a telephone number in Texas; it does not send sales or marketing brochures to people or corporations in Texas; it does not have company meetings in Texas; it does not purposefully advertise in or direct marketing efforts to Texas with an intent to solicit business from Texas; it does not advertise in any Texas newspapers; it has never before been involved in a lawsuit in Texas; and it has never had an occasion outside of this lawsuit to call anyone in Texas or receive phone calls from Texas.

Good jurisdictional facts for a defendant, those. Nevertheless, the Plaintiff argued that “ninety percent of [Cabool’s] business ha[d] consisted of leasing and financing equipment such as milk trucks and milk trailers to entities affiliated with [Cabool], such as [Plaintiff's employer],” which, although also a foreign corporation, had significant Texas contacts. Further, Plaintiff pointed to evidence of a significant link between Cabool and his employer. For a number of years, Cabool leased to Plaintiff’s employer trucks and trailers for use in its facilities, including those in Texas, and Cabool continued to lease trailers to Plaintiff’s employer (who made up approximately 90 percent of Cabool’s customer base). Plaintiff also noted that Cabool’s president was also the president of Plaintiff’s employer, suggesting the closeness of the companies.

However, the appellate court found that “the trial court’s implied finding that [Cabool] had no contacts with Texas is supported by the special appearance evidence.” Although Plaintiff’s employer may have had contacts with Texas, it remained a third party, and the acts of a third party could not be attributed to Cabool, despite the fact that the two companies were closely associated. (The court specifically noted that there was no issue of piercing the corporate veil, and thus, Plaintiff’s employer’s contacts with Texas were not relevant to those of Cabool.). Accordingly, Plaintiff was left with no evidence of any contacts that Cabool had with Texas, ending the inquiry.