LG Chem Am., Inc. v. Morgan

670 S.W.3d 341

LG CHEM AMERICA, INC. and LG Chem, Ltd., Petitioners,

v.Tommy MORGAN, Respondent

No. 21-0994

Supreme Court of Texas.

Argued March 22, 2023

OPINION DELIVERED: May 19, 2023

Sean Higgins, Houston, for Petitioners.

Deepak Gupta, Jennifer D. Bennett, Angela J. Nehmens, Neil Sawhney, Craig Eiland, Galveston, Jonathan E. Taylor, for Respondent.

Atty. Gen. W. Kenneth Paxton Jr., Brent Webster, Houston, Judd E. Stone II, Justin Manchester, Lanora Pettit, for Other interested party.

Justice Huddle delivered the opinion of the Court.

This is a products-liability case in which two nonresident defendants contest personal jurisdiction. The plaintiff bought a lithium-ion battery at a store in Texas and was injured when he used it to charge his e-cigarette. The defendants do not dispute they sold and distributed the same batteries to Texas manufacturers. Yet they urge personal jurisdiction is lacking because they did not send the batteries to Texas for resale to individual consumers to use with e-cigarettes; rather, they only expected that the manufacturers would incorporate the batteries into branded consumer products, such as cordless power tools and laptop computers. They argue the plaintiff's claims arise out of the use of the battery in a way they never intended by an individual consumer they never targeted and thus are insufficiently related to the defendants’ Texas contacts to justify haling them into a Texas court.

We hold, consistent with our precedents, that the minimum-contacts analysis requires evaluation of a defendant's contacts with the forum—Texas—as a whole. Where, as here, a defendant purposefully avails itself of the privilege of doing business in Texas by selling and distributing into Texas the very product that injures a plaintiff, personal jurisdiction is not lacking merely because the plaintiff is outside a segment of the market the defendant targeted. Put differently, the relatedness prong of the minimum-contacts analysis does not require that the plaintiff's claims arise out of a set of facts mirroring the defendant's expectations about the course its product would follow after it entered Texas. The trial court and the court of appeals correctly concluded the exercise of personal jurisdiction over the defendants is, on this record, consistent with due process. We therefore affirm the court of appeals’ judgment.

I. Background

Tommy Morgan, a Texas resident, was injured when a lithium-ion battery "exploded" in his pocket. Morgan purchased the battery—referred to by its model number, 18650¹ —from Vapor Sense, a store in Texas, to charge an e-cigarette he bought at the same store. The model 18650 battery that injured Morgan was allegedly manufactured by LG Chem, Ltd., a company headquartered in South Korea. Morgan brought products-liability claims² against LG Chem and its American distributor, LG Chem America, Inc., as well as the manufacturer of the e-cigarette and Vapor Sense.

Morgan's original petition included the following jurisdictional allegations:

• LG Chem "is in the business of ... selling, exporting, importing, distributing and/or otherwise introducing lithium-ion batteries into the stream of commerce" and "was conducting business in the State of Texas in a continuous and systematic manner by marketing and/or selling its manufactured products in the State of Texas."

• LG Chem America "works in conjunction with [LG Chem] in the business of ... selling, exporting, importing, distributing and/or otherwise introducing lithium-ion batteries into the stream of commerce" and "was and continues to conduct business in the State of Texas in a continuous and systematic manner by marketing and/or selling its manufactured products in the State of Texas."

• "[T]he lithium-ion battery that injured [Morgan] was manufactured, marketed, sold, distributed, or otherwise placed into the stream of commerce by [LG Chem America] and/or [LG Chem]."

• "At all relevant times, Defendants were engaged in the business of ... selling and/or otherwise intentionally placing ... batteries into the stream of commerce and directing such products to Texas, including the ... battery that injured [Morgan]."

LG Chem and LG Chem America each filed a special appearance, challenging the court's personal jurisdiction over them. Each supported its special appearance with an employee's affidavit. The affidavits averred that neither LG Chem defendant is incorporated or headquartered in Texas. Neither affidavit denied that LG Chem or LG Chem America directed the sale and distribution of its products, including lithium-ion batteries, to Texas. Instead, the affidavits denied the LG Chem defendants sold or distributed their batteries for use by individual consumers or for e-cigarettes. For example, LG Chem's senior manager, Joon Young Shin, averred that LG Chem "does not distribute, advertise, or sell 18650 cells directly to consumers , and has never authorized any manufacturer, wholesaler, distributor, retailer, or re-seller to distribute, advertise, or sell [LG Chem]’s lithium-ion power cells directly to consumers as standalone batteries " (emphases added). Similarly, LG Chem America's compliance manager, HyunSoo Kim, averred that LG Chem America "has never sold or distributed any power cells meant for e-cigarettes or vaping devices " and "has never authorized any manufacturer, wholesaler, distributor, retailer, or re-seller ... to advertise, distribute, or sell LG brand power cells in Texas, or anywhere else, for use by individual consumers as power cells in e-cigarette or vaping devices " (emphases added).

Morgan responded to both special appearances and conceded that neither LG Chem defendant is at home in Texas for purposes of general personal jurisdiction. But Morgan insisted that both are subject to specific personal jurisdiction. In particular, Morgan asserted that LG Chem "directly targets the Texas market [by] shipping lithium-ion batteries, like the battery at issue here, directly into the State of Texas." In support, Morgan submitted a declaration from his attorney with several attachments. The bulk of the attachments consists of over 2,000 pages of spreadsheets, purportedly reflecting U.S. Customs data from November 2006 through May 2019, showing LG Chem's shipments of thousands of products to Texas companies or through Texas ports. Some, but not all, of these entries seemingly show that LG Chem shipped lithium-ion batteries (and specifically model 18650 batteries) to Texas. Many of those shipments were consigned to LG Chem America, a subsidiary that generates about one-fifteenth of its total revenue in Texas and is responsible for "sales and trading" of LG Chem's products.

In reply, the LG Chem defendants argued they are not subject to specific personal jurisdiction because Morgan has not shown that his claims arise from or are related to any purposeful contacts between the LG Chem defendants and Texas. Neither defendant objected to the spreadsheets or other evidence attached to Morgan's responses. Following a hearing at which no additional evidence was offered, the trial court denied both special appearances.

Both LG Chem defendants filed an interlocutory appeal. See TEX. CIV. PRAC. & REM. CODE § 51.014(a)(7) (allowing an appeal from an order granting or denying a defendant's special appearance). The court of appeals affirmed, concluding that each of Morgan's products-liability claims for the LG Chem battery that allegedly injured him in Texas "arises from or relates to [LG Chem]’s conduct in designing and marketing its batteries for the Texas market, and marketing, selling, and distributing them to customers here." 663 S.W.3d 217, 237 (Tex. App.—Houston [1st Dist.] 2020). With respect to LG Chem America, the court likewise concluded that Morgan's claims "arise out of the [LG Chem] batteries that [LG Chem America] marketed, sold, and distributed to customers in Texas, including Morgan." Id. at 238. The court of appeals reasoned that both LG Chem defendants could reasonably anticipate being haled into a Texas court when an allegedly defective and unreasonably dangerous LG Chem battery that they sold in Texas causes an injury in Texas. Id. at 237, 238–39. The LG Chem defendants filed petitions for review,³ which we granted.

II. Applicable Law

A court must have personal jurisdiction over a defendant to issue a binding judgment. Luciano v. SprayFoamPolymers.com, LLC , 625 S.W.3d 1, 7–8 (Tex. 2021). Texas courts may exercise personal jurisdiction over a nonresident defendant if it is (1) authorized by the Texas long-arm statute, TEX. CIV. PRAC. & REM. CODE §§ 17.041 –.045; and (2) consistent with federal due-process guarantees. Luciano , 625 S.W.3d at 8. The long-arm statute permits courts to exercise jurisdiction over a defendant who "does business in this state," which the Legislature defines to include, among other things, a nonresident defendant who "commits a tort in whole or in part in this state." TEX. CIV. PRAC. & REM. CODE § 17.042(2).

A nonresident defendant may challenge a Texas court's personal jurisdiction over it by filing a special appearance. TEX. R. CIV. P. 120a. The plaintiff bears the initial burden to plead sufficient allegations to bring the nonresident defendant within the reach of the long-arm statute. Kelly v. Gen. Interior Constr., Inc. , 301 S.W.3d 653, 658 (Tex. 2010). The defendant then bears the burden to negate all bases of personal jurisdiction alleged by the plaintiff. Id. The defendant can negate personal jurisdiction on either a factual or legal basis. Id. at 659. It can present evidence that contradicts the plaintiff's factual allegations supporting the assertion of personal jurisdiction, and the plaintiff can then respond with its own evidence supporting its allegations. Id. Or the defendant can show that even if the plaintiff's alleged facts are true, the evidence is legally insufficient to establish personal jurisdiction. Id. Whether a court has personal jurisdiction over a party is a question...