Court Opinion

ID: 9691591
Source: CourtListenerOpinion
Date Created: 2023-08-24 20:42:11.489413+00
Date Added: 2024-06-11T18:19:23.094996
License: Public Domain

KEM THOMPSON FROST, Justice,
dissenting on motion for rehearing.
I respectfully dissent. Given the facts in this record and Texas Supreme Court precedent, the due process pendulum should swing in the other direction. This court should sustain P.V.F., Inc.’s challenge to the trial court’s denial of its special appearance, and this court should remand with instructions to dismiss for lack of personal jurisdiction.
Courts have long rejected the notion that any link to the forum state in a business transaction is sufficient to subject nonresident participants to the jurisdiction of that forum’s courts. See, e.g., Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (stating that an individual’s contract with an out-of-state party cannot by itself establish sufficient minimum contacts in the other party’s home forum); TeleVentures, Inc. v. Int’l Game Tech., 12 S.W.3d 900, 908-09 (Tex.App.—Austin 2000, pet. denied) (merely contracting with a Texas corporation does not satisfy the minimum-contacts requirement); Magnolia Gas Co. v. Knight Equip. & Mfg. Corp., 994 S.W.2d 684, 691-92 (Tex.App.—San Antonio 1998, no pet.) (neither contracting with a Texas corporation nor the partial performance of *328a contract in Texas is sufficient to establish personal jurisdiction). An essential goal of the minimum contacts analysis is to protect the out-of-state defendant. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291-92, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex.1990). This goal would be thwarted if a nonresident were subjected to the jurisdiction of a forum state’s courts based only upon a contract with, or purchase of goods from, a party in the forum state. Therefore, courts must consider whether the defendant “purposefully avail[ed] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). It is at this point that the showing necessary for specific jurisdiction over PVF fails.
PVF, a supplier to the poultry industry, has no offices or facilities outside of Delaware. Almost all of its sales are made to residents of Delaware, Pennsylvania, and Maryland. PVF has never sold any goods in Texas, nor maintained any office or other place of business in Texas. PVF has never solicited business in Texas. PVF has never extracted any profit from Texas. Nothing in the record suggests that PVF has ever taken any action to exploit the Texas marketplace. PVF merely purchased goods (pipe and pipe fittings) from Pro Metals, Inc., a Texas seller, that took the goods from its inventory in Texas and shipped them F.O.B. Houston, to PVF in Delaware. Pro Metals’s act of shipping the goods F.O.B. Houston does not, by itself, give a Texas court jurisdiction over PVF. See Sun-X Int’l Co. v. Witt, 413 S.W.2d 761, 768 (Tex.Civ.App.—Texarkana 1967, writ ref'd n.r.e.) (finding no personal jurisdiction where seller shipped goods F.O.B. Houston).
PVF placed the two telephone orders at issue in this case from its office in Delaware. Although PVF sent payments on other orders to Texas, the record contains no evidence of any agreement by PVF to perform any obligation in Texas. In fact, the trial court expressly rejected Pro Metals’s proposed finding that “Payment for the goods purchased by PVF, was due to be made to Pro Metals in the State of Texas-” PVF did not send any payment on these two telephone orders to Texas, but even if it had, merely purchasing goods from, and sending payments to, Texas do not constitute sufficient minimum contacts for the exercise of either general or specific jurisdiction. See, e.g., U-Anchor Adver., Inc. v. Burt, 553 S.W.2d 760, 763 (Tex.1977) (defendant who prepared and mailed checks to forum state did not have sufficient minimum contacts with the forum); Magnolia Gas Co. v. Knight Equip. & Mfg. Corp., 994 S.W.2d 684, 691 (Tex.App.—San Antonio 1998, no pet.) (“Furthermore, payments sent to the forum state are not determinative.”); Stuart v. Spademan, 772 F.2d 1185, 1194 (5th Cir.1985) (“Spademan’s mailing of payments to the plaintiffs in Texas can hardly be termed significant in terms of determining purposeful availment of the benefits of the forum state’s laws.”).
In U-Anchor, a nonresident entered into a three-year written contract with a Texas resident. U-Anchor, 553 S.W.2d at 761. The plaintiff/advertising company (Texas resident) was to build and erect billboards at certain locations in Oklahoma in exchange for monthly payments from the nonresident defendant. Id. The contract, executed in Oklahoma, expressly required the nonresident defendant to make its payments in Texas. Id. The billboards were constructed in Texas and then delivered to the locations in Oklahoma. Id. The nonresident defendant paid for six or seven months by sending his checks to the plain*329tiff’s office in Texas. Id. When the nonresident purchaser defaulted in payment, the plaintiffiadvertising company sued the nonresident purchaser in Texas. The nonresident successfully challenged the exercise of personal jurisdiction. Id. In affirming the trial court’s decision to sustain the nonresident’s special appearance, the Amarillo court of appeals found that the nonresident unquestionably was “doing business in Texas,” as broadly defined in the Texas long-arm statute, and that the claim arose out of that business; however, the court held that this was not sufficient to subject the nonresident to jurisdiction in Texas. U-Anchor Adver., Inc. v. Burt, 544 S.W.2d 500 (Tex.Civ.App.—Amarillo 1976), aff'd, 558 S.W.2d 760 (Tex.1977).
The Texas Supreme Court affirmed and held the exercise of specific jurisdiction requires more to establish purposeful availment, noting that the nonresident’s “contacts with Texas were not grounded on any expectation or necessity of invoking the benefits and protections of Texas law, nor were they designed to result in profit from a business transaction undertaken in Texas.” U-Anchor, 553 S.W.2d at 768 (emphasis added). The U-Anchor court found the nonresident a passive customer of a Texas corporation, who neither sought, initiated, nor profited from his single and fortuitous contact with Texas. Id. Like PVF, the nonresident purchaser’s only contacts with Texas consisted of purchases and the remission of payments to Texas. Id. Even though the claim arose out of the nonresident’s contacts, due process required dismissal for lack of jurisdiction. Id.
PVF was a “passive customer,” as that term is used in U-Anchor. Because PVF’s contacts are no less attenuated than those in U-Anchor, this court, like the U-Anchor court, should dismiss for lack of jurisdiction. The majority, however, reaches the opposite conclusion, finding that PVF’s activities in Texas are sufficient to support specific jurisdiction based on (1) PVF’s issuance of “thirty separate purchase orders” to Pro Metals in Texas; and (2) Pro Metals’s allegation that PVF “sought and obtained approval to purchase goods from Pro Metals on credit” for resale to others. Under controlling precedent, neither finding is sufficient to support specific jurisdiction.

Issuance of Purchase Orders

In U-Anchor, where the defendant also made several payments to Texas before defaulting, the Texas Supreme Court reached a different conclusion than the majority reaches today, specifically stating that the nonresident defendant had “engaged in no ‘activity’ in Texas, his only ‘activity’ being the preparation and mailing of checks from his place of business in Oklahoma.” U-Anchor, 553 S.W.2d at 763 (emphasis added).
Arguably, the contract in U-Anchor created a stronger nexus to Texas than the purchase orders PVF placed with Pro Metals. The U-Anchor contract was a long-term, three-year agreement establishing a continuing relationship and obligating the nonresident to make 36 payments over time to the Texas plaintiff. U-Anchor, 553 S.W.2d at 761. Here, PVF did not make a long-term commitment to remit payments to Texas, nor does Pro Metals’s claim involve 36 payments; it involves only two.

Purchase of Goods on Credit

The majority also finds PVF’s purchase of goods on credit for resale to others significant in its determination, concluding that “PVF created a continuing relationship and continuing obligations with Pro-Metals for the purpose of earning a profit from its interstate purchasing activity.” The court’s analysis of PVF’s conduct is flawed because, instead of looking at *330whether the nonresident engaged in activities aimed at extracting a profit from Texas or “designed to result in profit from a business transaction undertaken in Texas, ” the court finds that merely “earning a profit from ... interstate purchasing activity” is sufficient for jurisdiction. The majority cites no authority that supports this proposition.
In footnote 13, the majority cites to Southwest Offset, Inc. v. Hudco Publishing Co., Inc., 622 F.2d 149 (6th Cir.1980), for the proposition that “specific jurisdiction has been found over nonresident buyers without requiring that they earned a profit in Texas.” However, in that case, the Fifth Circuit found its own authority controlling, not U-Anchor. Southwest Offset, Inc., 622 F.2d at 151 (citing Prod. Promotions, Inc., v. Cousteau, 495 F.2d 483 (5th Cir.1974)). Unlike the facts in the record now before us, the parties in Southwest had entered into several contracts, all of which were governed by Texas law, and based on this fact, “Hudco [the nonresident], like the defendant in Cousteau, could expect that Texas law might govern the enforcement of their contracts.” In addition, the Fifth Circuit expressly found that the nonresident had taken action “in order to facilitate the manufacturing process” in Texas and thus “did considerably more than [the nonresident] in U-Anchor.” Id. at 152. PVF resembles the nonresident defendant in U-Anchor more than the nonresident defendant in either Cousteau or Southwest.
The key to sustaining jurisdiction in Texas is not that the nonresident defendant made a profit somewhere (or anywhere) but rather that it made a profit from activities in Texas; in other words, the nonresident’s activity must have been calculated to extract profits from the Texas market, thereby creating intentional activity in Texas. U-Anchor, 553 S.W.2d at 764. There is simply no evidence of that here. The majority does not, and cannot, find that PVF conducted any activity aimed at extracting profits from Texas. The record contains nothing that would even suggest that PVF has earned or will earn any profit from Texas markets or Texas residents. A purchase of goods from a Texas resident for incidental use in making a profit beyond Texas borders is not the same thing as extracting profit from Texas. The majority’s failure to appreciate this distinction flaws its entire analysis and results in a finding that is an unprecedented expansion of the supreme court’s holding in U-Anchor. Under the rationale the majority applies today, any nonresident that purchases goods from a Texas supplier would be subject to jurisdiction in Texas even though it sells its goods outside Texas and extracts no profits from Texas markets.
In U-Anchor and in this case, the plaintiff was a Texas company that built or manufactured the goods, at least in part, in Texas. See id. Like the nonresident defendant in U-Anchor, PVF was aware of these facts at the time it ordered the goods. In U-Anchor, as in this case, the payment in the transaction was for the benefit of the Texas resident; the nonresident buyer was not extracting profit from Texas. Id. at 763. In U-Anchor and in this case, the nonresident had made prior payments to the Texas resident. Id. at 761. In U-Anchor, the Texas Supreme Court held that a nonresident was not subject to personal jurisdiction in Texas where he entered into a three-year contract requiring 36 payments in Texas, and where he made six or seven payments in Texas. PVF is a nonresident that occasionally places orders and sends payments to Texas and that is not extracting profit from Texas markets. Under U-Anchor, PVF cannot be subject to personal jurisdiction in this case. See id. at 761-64.
*331Finally, the majority’s reliance on Pro Metals’s allegation that PVF “sought and obtained approval to purchase goods on credit” is misplaced. There is no pleading or evidence of why or at whose instance a credit application was submitted to Pro Metals. In fact, the “credit reference” itself reflects that the information was furnished at Pro Metals’s request, and the trial court specifically rejected Pro Metals’s proposed findings which suggested that PVF initiated the contacts between the parties. No credit application was ever offered into evidence, nor does the record contain the contents or terms of any credit arrangement.
The Texas Supreme Court’s decision in U-Anchor mandates reversal of the trial court’s order denying PVF’s special appearance. The facts in this case are not sufficient to sustain specific jurisdiction.