Michelin N. Am., Inc. v. De Santiago

584 S.W.3d 114

MICHELIN NORTH AMERICA, INC., Appellant,

v.Brenda Isela Lopez DE SANTIAGO, Individually and as Representative of the Estate of Eileen Arambula Lopez, Deceased, and Pedro Arambula Meraz, Appellees.

No. 08-17-00119-CV

Court of Appeals of Texas, El Paso.

August 2, 2018

Hon. Debora B. Alsup, Thompson & Knight, L.L.P., 98 San Jacinto Blvd. Suite 1900, Austin, TX 78701, Attorney for Appellant.

Hon. Jeffrey Richter, Hon. Jason P. Hoelscher, Sico, Hoelscher, Harris, & Braugh, LLP, 802 N. Carancahua St., Suite 900, Hon. Gregory L. Gowan, Gowan Elizondo, L.L.P, 555 N. Carancahua, Ste. 1400, Corpus Christi, TX 78401, Attorneys for Appellees.

Before McClure, C.J., Rodriguez, and Palafox, JJ.

OPINION

YVONNE T. RODRIGUEZ, Justice

Appellant, Michelin North America, Inc., has filed a motion for rehearing of our June 27, 2018, decision in this case. We deny Appellant's motion for rehearing, withdraw our opinion dated June 27, 2018, and substitute the following opinion in its place.

The fact pattern in this case involves a variation on a familiar theme in civil procedure textbooks. An out-of-state tire manufacturer targets Texas as a marketplace and sells its products extensively throughout Texas. The Texas resident driver of an automobile purchased in Texas is injured and his Texas resident passengers are hurt or killed after one of the manufacturer's tires allegedly fails in Mexico. Can the tire manufacturer be haled to a Texas court to answer the driver and passengers' product liability charges?

Michelin North America says no. Conceding that it actively markets its products in Texas, that it intends for its products to end up in Texas, that many of the tires it places into the stream of commerce do in fact end up in the hands of Texas consumers, and that the company makes a substantial amount of money from Texas sales, Michelin nevertheless insists the trial court cannot assert jurisdiction over it based on a simple jurisdictional twist. Michelin only markets new tires in Texas. This case involves a used Michelin tire, placed on the vehicle by a third party following Michelin's initial sale of the tire through distributors to an unknown party.

Michelin largely frames its argument in terms of the stream of commerce metaphor: because an intervening retail customer removed the tire from the stream of commerce and then sold the tire again on a secondary market before it ended up on the vehicle in question, Michelin asserts that jurisdictional chain is broken for all purposes, and that no specific personal jurisdiction exists over the company in Texas.

We are unconvinced by Michelin's stream-of-commerce argument and will not today adopt a per se rule holding that intervening retail sales necessarily cut off downstream personal jurisdiction in products liability cases. We agree with Michelin that the plaintiffs' status as Texas residents, standing alone, is not enough to confer personal jurisdiction on Texas courts; there must be a substantial connection between defendant Michelin's allegedly tortious conduct, the injury plaintiffs suffered, and the State of Texas. Walden v. Fiore , 571 U.S. 277, 134 S.Ct. 1115, 1123, 188 L.Ed.2d 12 (2014). Thus, the real question in this case is not whether an intervening retail sale serves as a jurisdictional chokepoint under the stream-of-commerce-plus test. The real question is whether the plaintiff's indirect purchase of an allegedly defective product on a secondary market in Texas can sustain specific jurisdiction in a Texas court when most of the tortious conduct and the brunt of the injury related to that product happened outside of Texas.

We conclude that due process will permit the exercise of specific jurisdiction in this case. Michelin failed to refute the plaintiff's claim that the original tire sale took place in Texas, and the secondary sale here arose from and related to that Texas-based initial sale. The trial court's order is affirmed.

BACKGROUND

While the parties largely talk past each other in their pleadings, the facts alleged by each side never directly clash, and Michelin has not pointed to affirmative evidence in the record—either in its initial briefing or its motion for rehearing—that would contravene the plaintiff's version of events and create a fact question on jurisdiction. See Kelly v. Gen. Interior Constr., Inc. , 301 S.W.3d 653, 659 (Tex. 2010) (once plaintiff pleads sufficient allegations to bring nonresident within reach of Texas' long-arm statute, nonresident defendant has burden to negate the allegations in the pleading on either a legal or factual basis). As such, the jurisdictional question here is legal, not factual, see id. , and we may treat the facts as being undisputed and take them as true for the purposes of deciding this appeal.¹

Michelin North America (Michelin) is a tire manufacturer incorporated in New York with its principal base of business in South Carolina. Michelin designs and manufactures tires, but it does not sell tires directly to consumers, nor are there facts in this record to support the inference that Michelin maintains any physical presence in the state of Texas. Instead, Michelin uses distributors to penetrate markets across the United States.

Michelin uses three distributor companies—Discount Tire Company of Texas, Wal-Mart Stores, and Tire Dealer's Warehouse—to sell new tires directly to consumers in Texas. At least forty-six authorized dealers sell Michelin tires in brick-and-mortar stores in the El Paso area alone. Michelin also runs a web site (www.michelinman.com) accessible to Texas consumers that allows users to directly purchase officially licensed Michelin merchandise, join a mailing list to receive Michelin promotional emails, use a configuration tool to determine which Michelin tires fit a particular vehicle, communicate live with a "Tire Concierge" that assists in finding the right tire, and search for Michelin dealerships. Michelin gathers data in Texas to monitor tire performance; allows Texas individuals to register their tires for product updates; and distributes recall information online, through its distributors, and directly to registered tire users.

Michelin is also no stranger to this State's courts. From 2001 to 2016, Michelin has filed lawsuits seeking affirmative relief in Texas courts and has answered lawsuits as a defendant in other Texas cases without contesting jurisdiction, including in other cases involving alleged tire failures.

The particular tire involved in this accident is known as a Uniroyal Tiger Paw Freedom tire. It was designed and developed in 2005 in both Ohio and South Carolina by a Michelin subsidiary company. Following the design phase, the tire was manufactured during the 11th week of 2005 at a plant in Kitchener, Ontario, Canada. According to the first amended petition in this case, "Defendant MNA [Michelin North America] shipped the subject tire to the State of Texas and delivered the same to its distributor in Texas with the intent of delivering the tire to a retailer for sale in the State of Texas because MNA had directed its business to Texas." We take this to mean that the subject tire was initially transferred to a Texas distributor for sale in the Texas marketplace. Michelin never directly disputed this allegation in its special appearance.

In 2014, Brenda Isela Lopez de Santiago (Lopez) purchased a used 2002 Honda CR-V SUV from a car dealership in El Paso, Texas. The car came with Uniroyal tires already installed, and they had already been used at the time of purchase. On July 24, 2015, Lopez allowed Pedro Arambula Meraz to drive her CR-V. Lopez, her daughter, and others were passengers. As Arambula Meraz drove on a road in Ciudad Juarez, Chihuahua, Mexico, across the international border from El Paso, the right back tire on the Honda CR-V failed, causing a rollover accident. Lopez was injured in the crash, and her daughter died. Arambula Meraz was also injured.

Lopez sued both Arambula Meraz and Michelin in a Texas state district court in El Paso. With respect to Michelin, Lopez brought negligence and product liability claims. Arambula Meraz also filed cross-claims against Michelin for negligence and products liability.

According to the first amended petition in this case, "Defendant MNA [Michelin North America] shipped the subject tire to the State of Texas and delivered the same to its distributor in Texas with the intent of delivering the tire to a retailer for sale in the State of Texas because MNA had directed its business to Texas." We take this to mean that the plaintiffs allege that the subject tire was initially transferred to a Texas distributor for sale in the Texas marketplace. Michelin never directly disputed this allegation in its initial special appearance pleading by alleging, for example, that the initial sale of the tire took place outside the territorial boundaries of the State of Texas. Instead, Michelin averred in its initial special appearance pleading that "[u]pon information and belief, the subject tire was purchased used from a third party wholly unrelated to MNA."² Michelin also did not file any affirmative evidence with its initial special appearance showing that the tire was first sold new outside Texas.

Later, after the plaintiffs filed a reply to the special appearance pleading, Michelin contended in a response that the stream of commerce ends at the point of first retail sale and that the plaintiffs provided no evidence to show the tire was in the stream of commerce because there was no evidence as to where and when the tire was originally purchased new. As with its initial special appearance pleading, Michelin did not attach any affirmative evidence showing that the subject tire was initially sold outside the State of Texas. Michelin did attach a title history from the Texas Department of Motor Vehicles and other documents related to previous transactions for the 2002 Honda CR-V to its response. The Texas Certificates of Title show that on ...